European Infrastructure Finance Yearbook - Investing In Bonds ...

TRANSPORTATION INFRASTRUCTURE
76 ■ NOVEMBER 2007
Profitability: large portion of operating costs
fixed in nature
Standard & Poor’s forecasts the EBITDA margin
to remain high and above 50% in the coming
years. The yield management strategy, through
higher load factors and efficient pricing policy, is
expected to keep the operating margin high, with
more revenue and yield stability than in the past.
In addition, the DARE plan has resulted in a
lower break-even level, meaning the company is
in a better position to withstand any future
economic downturn or increased competition.
As summarized in table 2, the combined effects of
higher revenues (up 4.7%) and well-controlled
operating expenses (up 3.8%) led to an 11.9%
increase in EBITDA, to €490 million in 2006. The
EBITDA margin reached a record 59% of
revenues in 2006, up from 55% in 2005 and 53%
in 2004.
On the operating expenses side, the main
increases in energy costs (up 25%), maintenance
costs (up 6%), and local taxes (up 7%), were
partially offset by reductions in the cost of
consumables (down 11%), in consultants’ fees
(down 10%), and in employee benefit expenses
(down 15%).
Total revenues for Eurotunnel during the first
half of 2007 reached £252 million, 8% down
from the previous comparable period. Excluding
the effect of the loss of the MUC, revenues have
Table 2 - Eurotunnel Financial Summary
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
increased by 7% on trucks, Eurostar and car
traffic growth; operating costs have decreased 2%
and EBITDA at 56% of revenues rose 15%. If
this trend is maintained for the year, 2007
revenues will exceed forecasts, resulting in higherthan-expected
DSCR. The second half of the year
will however include a proportion of the £88
million restructuring costs.
Outlook by revenue segment
Truck shuttles.
The growth rates in Eurotunnel volume until
2009 are expected to be in line with GDP,
reflecting the company’s yield focus. In the longer
term (post-2009), Standard & Poor’s estimates
that Eurotunnel’s market share will stabilize,
growing by an average rate of approximately 1%
to 2% per year.
The company’s truck shuttle strategy is to give
priority and cheaper prices to regular customers,
who in return agree to forecast daily volumes.
This policy, together with the regained control of
distribution channels, has enabled Eurotunnel to
match capacity with demand. As a result, load
factors on the truck shuttle services have
increased to 71% in 2006 from 59% in 2004;
and revenue increased by 7% in 2006 over 2005,
due to the increase in average prices. The first half
of 2007 maintains strong momentum, with
volumes up 9%, and overall shuttle revenues up
(Mil. € ) 2006/2005 2005/2004
Income statement (Mil. € ) Dec. 31, Dec. 31 Dec. 31, Change Change
2006 2005 2004
Exchange rate (€ /£) 1.462 1.465 1.466
Revenue 830 793 789 37 4
Operating expenses 219 211 213 7 (2)
Employee benefit expenses 122 143 154 (22) (11)
Operating income 490 438 421 51 17
Depreciation 164 208 228 (45) (19)
Current operating income 326 230 193 96 37
Impairment of property, plant and equipment 2,490 475 (2,490) 2,016
Other operating income (expenses) 7 (41) (68) 48 28
Operating profit (loss) 333 (2,301) (350) 2,634 (1,951)
Income from cash and cash equivalents 5 8 8 (2) 0
Cost of servicing debt (gross) 492 497 501 (5) (3)
Net cost of financing and debt service (487) (490) (493) 3 3
Other financial income (charges) (50) (18) 6 (32) (24)
Income tax expense 0 0 0 0 0
Profit (loss) for the year (204) (2,808) (836) 2,604 (1,972)