For its cruise operations, P&O has reported operating income of 250.7 million pounds, or approximately $398.6 million, on revenues of 1.3 billion pounds, or approximately $2.1 billion, for the year ended Dec. 31, 1999, compared to operating income of 216.1 million pounds, or approximately $343.6 million, on revenues of 1.1 billion pounds, or approximately $1.8 billion, in 1998.

In a prepared statement, Lord Sterling, chairman of P&O, said the demerger plans were moving ahead and were expected to be completed in October.

Although there is no need for new equity, Lord Sterling said, the new company, P&O Princess, may decided to make a small offering in the U.S. to raise its profile with U.S. investors.

According to Lord Sterling, of the P&O Group's net debt approximately 700 million pounds will be allocated to P&O Princess, giving the company a debt/equity ratio of about 60 percent, before any new equity placing in the U.S.

P&O's cruise division had a strong year in 1999, according to Lord Sterling, who stated that the ships sailed 100 percent full. Net revenue yields maintained the high levels achieved in 1998, he stated. New and larger ships enabled the company to reduce unit costs and, as a result, to increase operating income.

Lord Sterling also noted how P&O Princess is the most international of the leading cruise companies with approximately 25 percent of its revenue and income from outside of the U.S.

The reports of discounting in the U.S. market had also been exaggerated in the view of Lord Sterling who said that as a premium operator Princess Cruises tends to attract a more affluent consumer.

Pricing for the summer is in line with the high levels of last year, according to Lord Sterling, who also pointed out that the final quarter of 2000 did not look as strong as last year, due to the significant capacity increase.

"Having said that, we will expect to sail 100 percent full at rates that are close to last year despite increasing our capacity by 23 percent," Lord Sterling said.

Margins

For 1999, P&O's operating income margin was 19 percent, the same as for 1998, compared to 18.8 percent for Royal Caribbean International (RCI) and 27 percent for Carnival Corporation for 1999.

P&O's results also translate into $295.41 in revenue per passenger day in 1999, compared to $226.79 for RCI and $233.99 for Carnival.

Operating income per passenger day was $56.07 for P&O, compared to $42.77 for RCI and $63.15 for Carnival in 1999.