P&O Ferries spent more than £47m summarily sacking hundreds of seafarers in 2022, helping it cut losses by more than £125m and putting it on a path to profitability, according to accounts due to be published in the coming days.
The dismissal of 786 mainly British seafarers, and their replacement with largely non-European agency staff earning as little as £4.87 an hour, was hugely controversial, drawing criticism from across the political spectrum and threats of a consumer boycott.
The controversy was rekindled last month when Sky News revealed that DP World, P&O‘s Dubai-based parent, considered withdrawing a £1bn investment at its London Gateway port following criticism of P&O by the Transport Secretary Louise Haigh.
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P&O has always maintained the restructuring was necessary to allow it to compete with its rivals on cross-Channel routes, and prevent a total collapse of the company with the loss of more than 2,000 jobs.
In financial statements for P&O Holdings, filed 11 months late and seen by Sky News, the company says the restructuring cost £47.4m including legal fees and consultants, allowing it to cut the overall wage and salary bill by £21.3m.
In a note accompanying the accounts submitted to Companies House, P&O’s directors describe the restructuring as part of a “transformational journey” that will help it return to recording a profit before tax this year.
“The business has been on a transformational journey as it has recovered from the challenges of the global pandemic, Brexit and the impact of disruption caused by the change in the crewing model,” the directors say.
“The group believes that the transformational actions that commenced in 2022 and continue through into 2024 will equip the business to grow profitably when demand rises in the coming years.”
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Brexit and COVID financial distress
The accounts reveal the financial distress in which P&O found itself in 2022.
Having recorded losses of £375m the previous year as it struggled to recover from the pandemic-era decline in passenger numbers and post-Brexit complications, it was in breach of its covenants to external lenders underwriting the construction of new hybrid cross-Channel ferries.
Despite the restructuring costs, revenue increased by £83.3m to £918m in the financial year, but the company still recorded a loss of £249m and was reliant on loans totalling £365m from parent company DP World to remain a going concern.
An additional £70m was made available this year, with 4.5% interest rolled up and not requiring any repayment until 2028 at the earliest.
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The financial statements also reveal that P&O was forced to sell one of the new cross-Channel ferries to a French subsidiary to pay off an external financing loan of £76.9m, and then lease the vessel back from its ultimate owner.
In a statement, P&O Ferries 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.
“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.”