Buffers of indebtedness absorb Eurotunnel profit

Although a wondrous achievement of human imagination and technological innovation, the Channel Tunnel is a financial disaster area, a yawning black hole sucking in millions of pounds of taxpayers and investors money. However, this week the first tentative steps were taken on the long climb out of penury when Eurotunnel reported its first full-year operating profit, the group producing £57 million before debt interest, against operating losses of £35 million in 1996. The profit is a pittance when set against mountainous net losses of £611 million,

Apart from the constant stress of placating the consortium of banks, which effective own the company, the group is engaged in a pricing struggle with the cross-channel ferry operators who are cutting prices to the bone to protect market share, leaving Eurotunnel little scope to raise prices.

Brokers consider the shares, now at a lowly 65p, to be overvalued with 18p deemed a more realistic level. The advice is to cut and run.