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October 8, 2002

Princess updates profits forecast
With FTC clearance of merger offers from both Royal Caribbean and Carnival, P&O Princess Cruises has updated its 2002 profit forecast and has also issued a trading update. Both are further indications that the cruise industry is making a successful recovery from the impact of the events of September 11, 2001.

P&O Princess expects to announce its results for the third quarter of 2002 in the week commencing 21 October.

2002 forecast

  • Since announcement of second quarter results in July 2002 analysts' estimates for the group's earnings have increased, with the majority of analysts now forecasting earnings for 2002 in the range of 42-44 cents per share, before merger related costs. P&O Princess expects the actual result for the full year to be at the top end of or above this range, with all four quarters of 2002 likely to show year over year increases in earnings per share
  • 2002 sailings are now almost fully booked
  • For the third quarter, yields for the group as a whole are expectedf to be above the previous forecast, showing a decline on a like for like basis of 5%, with favorable exchange rates reducing the fall to 2% on an absolute basis
  • Group yields for the fourth quarter are expected to show a year over year increase, on a like for like basis, of 2% to 3%. If exchange rates remain broadly unchanged from today's levels, the absolute yield performance will be better than these like for like figures
  • For the year as a whole, the reduction in group yields, on a like for like basis, is expected to be in the range of 4% to 5%. The previous guidance, given at the time of announcing second quarter results, was for a reduction of 5%
  • For the Group as a whole, a reduction in underlying unit costs of 8% is expected for the year compared to the target of 7% indicated at the time of the Q2 results. Higher fuel costs and exchange rate movements are expected to offset partially the underlying reduction in unit costs

    Highlights

  • The group expects to increase its capacity by 24% in 2003, before taking account of any delay to the delivery of Diamond Princess
  • IIn North America, the Princess brand is expected to grow by 12%; in the U.K. the P&O Cruises brand is expected to grow by 22%; and in Germany the AIDA brand is expected to grow by 65%
  • In 2003 the group will also commence the operation of the new contemporary brand, Ocean Village in the United Kingdom and it will be the first full year of operations of the new A'ROSA brand in Germany and of the new Pacific Princess premium product in Australia
  • On September 10, Princess bookings for 2003 sailings as a percentage of available capacity were in line with the position for 2002 sailings at the same time a year earlier. This was despite the inclusion for 2003 of the capacity on Tahitian and Pacific Princess for which the programs had only just been launched
  • With last year's bookings distorted by the events of September 11, Princess bookings for 2003 are now well ahead of the equivalent position in 2002. More relevantly cumulative bookings and the booking pace are in line with what one would expect at this time in a normal year. Pricing on current bookings is slightly below that which prevailed in 2001 prior to the impact of September 11 but well above the position post September 11
  • In the U.K. the group is on track to accommodate the 22% growth in the P&O Cruises brand for 2003 with little yield dilution. At this early stage it is not possible to discern any trends for the new brand, Ocean Village
  • Given the much later booking cycle in Germany, it is difficult at this stage to assess any trends for 2003. AIDA had a good 2002 and appears well placed to continue its growth in 2003, although with some weakness in the winter months. The one ship A'ROSA brand is having a difficult introduction and remains behind our expectations
  • The Pacific Princess premium product has been well received in the Australian market and the Pacific Sky continues to do well
  • The group expects to continue to achieve reductions in underlying unit costs in 2003, with these likely to be more in line with the original business plan of 2% per annum, rather than the 5% achieved in 2001 or the 8% forecast for 2002



P&O Princess Chief Executive Officer, Peter Ratcliffe commented:

"We today released a new profit forecast for 2002 which we are pleased to report is an improvement on our previous guidance. This improvement is a result of both improved revenues and greater unit cost reductions.

"We expect to report increased earnings in each of the five quarters following the events of September 11, 2001; a performance which we believe is matched by few other major companies in the vacation industry.

"Notwithstanding the current economic and political uncertainties we remain positive about our prospects for 2003 and are pleased that our booking pace and pricing appears to have recovered from the impact of September 11.

"We expect that our new ships with their industry leading number of balconies, and our strong brand positions in the three largest vacation markets in the world will have a positive impact on our 2003 performance."

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