P&O/Priness First Half 2000 Earnings

P&O Princess Cruises has reported net income of $127.1 million on revenues of $1.2 billion for the six-month period ended June 30, 2000, compared to net income of $123.8 million on revenues of $980 million for the same period in 1999.

In a conference call, Princess Cruises President Peter Ratcliffe said he anticipated good results for the third quarter and that the company had done well in Alaska and in Europe. Ratcliffe anticipated a more difficult fourth quarter, however, citing competitive pressures in the Caribbean and some weakness in Princess’ transcanal market.

To be demerged from the P&O group of companies, P&O Princess will be listed on the London and New York stock exchanges as of October 23, 2000.


All P&O Princess executives would say, or could say, pending the upcoming listing, is that they were cautiously optimistic about the pricing environment for 2001.

Ratcliffe said he believed that the arrival of the Golden Princess in April will have a positive impact on revenues and costs as will the withdrawal of the Sky Princess from the U.S. market where she was no longer competitive, according to Ratcliffe. The Sky Princess will start sailing in Australia as the Pacific Sky this November.

Ratcliffe also said there were further economies of scale and synergies to be achieved between the four cruise companies in the group in the U.S., the U.K., Germany, and Australia.

German Focus

P&O also announced that it has acquired the remaining 49 percent interest in Aida Cruises for approximately DM 115 million plus a further amount pending 2002-2005 results of Aida and Seetours, which will largely be paid for by shares in the new P&O Princess Cruises.

Ratcliffe said that Aida and Seetours would be integrated as one company and described the German vacation market as the largest and the richest in the world outside of the United States.

P&O Princess is targeting the German market with two newbuildings for Aida. In addition, the Crown Princess will be transferred to the German market in 2002, intended for “older” German passengers, Ratcliffe said. Furthermore, Aida will enter the river cruise business with two newbuildings.

In 2000, Aida accounts for approximately 20 percent of the German cruise market based on passenger count.


Ratcliffe underscored some points which he believed will help the new cruise company succeed:

“We are definitely one of the big three – growing in the U.S. and developing new markets,” he said.

“We are also more global than the other two, with companies in the U.K., Germany, and Australia,” he continued.

‘We also benefit from a collection of excellent consumer brands – Princess, P&O in the U.K., Aida in Germany, and P&O in Australia.

“Furthermore, we have a high-quality fleet.

“And we anticipate driving costs down through economies of scale and synergies.

“Despite the combination of higher fuel costs and lower revenues in 2000, we generated high profits,” Ratcliffe added. ‘We are essentially tax free in all our markets – except for the tonnage tax in the U.K. – and generate returns well in excess of our cost of capital.

“The demerger will enable us to maximize our growth potential throughout the world,” Ratcliffe said. Overall, the new cruise company will boost its total capacity by five percent in 2001 and 12 percent in 2002, according to Ratcliffe.

As of June 30, 2000, the new P&O Princess Cruises had long term debt of 552 million pounds, providing a debt/equity ratio of 36 percent.

P&O Princess Cruises anticipated a five percent tax rate based on the U.K. tonnage tax.


In 2001, Princess will increase its Caribbean capacity to 34 percent from 28 percent in 2000.

Ratcliffe noted that three Grand Princess vessels in the Caribbean will reduce the company’s vulnerability to the seasonality of the so-called exotic trades. (Ratcliffe did not say anything about the deployment of the two Grand-class ships being built in Japan, which are believed destined for the West Coast.)


In a prepared statement, P&O said that operating profit for P&O Cruises was $168.4 million for the first six months of 2000, up eight percent from the same period in 1999. But for increased oil prices, which added $19 million to fuel costs, operating profits would have increased by 20 percent.

Capacity for the first six months of 2000 was 19 percent higher than the same period in 1999, including the Aurora and the Ocean Princess as well as the Aida and the Arkona, in the German market.

For the year, P&O expects net revenue yield to be four percent lower than 1999.

P&O Princess Cruises reported net income of $310.3 million, or $0.46 per share, on revenues of $2.1 billion for 1999, compared to net income of $255.4 million, or $0.38 per share, on revenues of $1.8 billion for 1998.

For the first six months of 2000, P&O Princess Cruises reported gross yields of $297 for the North American market and $225 for Europe and Australia. Net yields were $101 and $110, respectively.

Of the 2000 six-month revenue of $1.2 billion, $881 million derived from North America; $280 million from Europe and Australia. Of the operating income of $168 million, $132 million derived from North America and $36) million from Europe and Australia.

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