Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
P&O Ferries has received hundreds of millions of pounds in loans from its Dubai-based owner DP World as the embattled company struggles to recover from years of crisis.
New filings have revealed how the UK ferry company has turned to its sole shareholder for support as it struggled through several turbulent years, including the Covid-19 pandemic, Brexit’s impact on freight and passenger flows, and disruption following its controversial sacking of about 800 crew.
P&O sparked a political firestorm in March 2022 when it summarily dismissed the UK workers, some by video call, and replaced them with cheaper agency staff, justifying the move by saying drastic action was needed to stem its losses.
The crew restructuring cost the company £47.3mn, according to 2022 annual accounts filed to Companies House that are yet to be published but have been seen by the Financial Times.
This contributed to a loss after tax of £249mn in 2022, down from £376mn a year earlier.
P&O was also “in breach of covenants with respect to its external debt” at the end of 2022, the accounts said.
The covenant breach, which first occurred in October 2021, constituted a default on the company’s external bank debt and continued until the loans were repaid in 2023 and 2024.
With P&O’s finances under strain and its management under political pressure for its response to the crisis, DP World stepped in with a series of loans. It substantially increased a shareholder loan in 2022, from £130mn to £295mn. Since then it has further extended it to £365mn, of which £330mn is currently drawn.
In April this year, DP World put in place a new “temporary” loan of £76.9mn, which P&O expects to repay through the sale of its ship the Spirit of Britain.
To help support its balance sheet further, the accounts show that P&O in 2022 transferred the financing obligations for ships under construction to a French subsidiary of DP World, before chartering these ships back.
“Through 2022 and into 2023 and 2024, the business has been on a transformational journey,” the accounts said. “The business has benefited from the support of its shareholder to manage through the period and while there remain challenges ahead, the business is now better placed to deliver and grow.”
P&O was bought by DP World in 2019 but has been owned by companies linked to the Dubai government for nearly 20 years.
The sackings of the UK crew remain politically contentious in the UK.
The company’s more flexible crewing model uses international agency workers who are not paid the UK minimum wage. These seafarers receive a basic wage of about £2.90 an hour, which rises to £4.87 after including guaranteed overtime, bonuses and holiday pay, P&O’s chief executive Peter Hebblethwaite told MPs this year.
Downing Street last month was forced to distance itself from transport secretary Louise Haigh’s criticism of P&O, which she branded a “cowboy operator”, amid fears that DP World could shelve a £1bn investment into its main London port.
In a statement, P&O said: “Our 2022 financial accounts show the challenges faced by the business at that time, and why the business needed to transform into a competitive operator with a sustainable long-term future.”
It added: “P&O Ferries has taken steps to adjust to new market conditions, matching our capacity to demand, and adopting a more flexible operating model that enables us to better serve our customers.”
