INTERIM RESULTS TO 30 JUNE 2004

Eurotunnel, operator of the Channel Tunnel, today reported interim results for the first half of 2004.

Jacques Maillot, Chairman, and Jean-Louis Raymond, Group Chief Executive, said:

"The decline in operational results seen in recent years has continued in the first half of 2004. As our shareholders had feared, Eurotunnel's financial situation is worrying. As indicated on 7 July, we are addressing the fundamental aspects of the company's structure, and the policies it has pursued for several years.

"These results are not ours. However, we have identified the conditions that need to be addressed internally to bring about a recovery: on the one hand, a revival of activity by completely redefining our commercial strategy and tariff structure; and on the other hand, by improving operating margins through a major overhaul of organisation and methods leading to substantial cost reductions. These measures should improve the company's operational situation from 2005 and will provide the indispensable foundations for a less constraining financial base.

"But these measures alone will not be enough. It is essential that Eurotunnel engages in a global dialogue as soon as possible with all its partners, whether public or private, financial or industrial, if it is to achieve recovery."

FINANCIAL RESULT FOR THE SIX MONTHS TO 30 JUNE 2004¹

Turnover

Revenue from Shuttle Services fell by 6% to £137 million at constant exchange rates compared to the first half of 2003. In the passenger car and coach business, higher average yields were not sufficient to compensate for decreased traffic volumes. In the truck business, increased traffic volumes in the first half of 2004 did not compensate for the lower average yields. In the absence of any significant changes to the intensely competitive trading environment during the second half of the year, this trend is likely to continue.

Railways revenue increased slightly due to inflation and remains protected by payments under the Minimum Usage Charge provisions.

Revenue generated from non-transport activities, including retail and UK land sales, increased slightly to £9 million compared to the first half of 2003.

Other income of £8 million largely comprises the release of provisions for large-scale maintenance.

At £269 million, total turnover for the first half of the year was 2% below the same period in 2003.

Operating profit

Operating costs increased by 8% to £137 million at constant exchange rates compared to the same period in 2003. This was principally due to higher cost of sales related to UK land sales, an increase in AGM organisation costs, additional marketing expenditure in the passenger business, increased energy costs, and higher maintenance costs for infrastructure and rolling stock.

Following the impairment charge accounted for at the end of 2003, depreciation charges in the first half of 2004 were £8 million lower than in the same period in 2003. Operating profit at £70 million for the first six months of 2004 was 11% below the first half of 2003.

Net result

Net interest charges in the first half of 2004 were £11 million below the same period in 2003 at constant exchange rates. Following their conversion at the end of 2003, no interest has been incurred in 2004 on Equity Notes. Several small debt repurchases in the second half of 2003 and the first half of 2004 have also reduced interest charges.

The underlying loss of £76 million was reduced slightly compared to the first half of 2003 level at constant exchange rates.

A net exceptional loss of £8 million was incurred in the first half of 2004 relating principally to the refinancing projects and to the retrocession of roads and tracks in the area surrounding the French terminal. This was partly offset by a profit of £2 million generated by the repurchase of debt at a discount to its face value.

The net loss of £82 million for the period compared to a loss of £17 million for the first half of 2003.

Cash flow & interest cover

Cash flow from operating activities was £124 million in the first half of 2004 compared to £138 million for the same period in 2003. This reduction of £14 million results from the reduction in operating margin compared to 2003, partially compensated for by an improvement in working capital.

Net capital expenditure has remained stable at £16 million compared to the same period in 2003. Net cash flow from operating activities after capital expenditure for the first six months of the year was £108 million compared to £122 million in the first half of 2003.

Interest cover for the first half was 105% before capital expenditure (2003: 87%) and 91% after capital expenditure (2003: 77%).

REVIEW OF ACTIVITY IN THE FIRST HALF OF 2004

Eurotunnel Shuttle Services

Truck Shuttles

Eurotunnel carried 646,468 trucks in the first half of 2004, an increase of 2% compared to 2003. The short straits truck market continued its growth into the second quarter, leading to a 4% increase for the first half. Market share for the first half of 2004 deteriorated by one point to 42% compared to the same period in 2003. Average yields were lower than in the first half of 2003, resulting in lower revenues. The market remains intensely competitive.

Passenger Shuttles

The short straits car market contracted by 10% compared to the first half of 2003, and continues to suffer from competition from low-cost airlines. The volume of cars carried by Eurotunnel during the first half fell by 14% to 944,832 vehicles, and Eurotunnel's market share fell by two points to 48%.

Scheduled coach services were significantly reduced due to competition from low-cost airlines. The coach market declined by 4%, with Eurotunnel volumes falling by 14% to 29,834 coaches. Yields increased slightly in the first half compared to the same period in 2003. Market share fell by four points to 33%.

Railways (Eurostar & rail freight)

The Channel Tunnel is also used by other rail services not managed by Eurotunnel – Eurostar for high-speed passenger-only services on London/Paris and London/Brussels routes, and EWS and SNCF for international rail freight services.

Eurostar

Continuing the strong growth achieved since the opening of the first section of the UK high-speed rail link, 3,406,698 Eurostar passengers* travelled through the Channel Tunnel in the first half of 2004, an increase of 20% compared to the first half of 2003.

Rail freight

The volume of rail freight transported through the Channel Tunnel continues to recover with 978,717 tonnes carried in the first half, an increase of 15% compared to the first half of 2003.

Revenues from Eurostar and rail freight services through the Channel Tunnel are protected by the Minimum Usage Charge (MUC) paid to Eurotunnel by the Railways. This arrangement continues until November 2006.

*The passenger number given is for Eurostar passengers who travelled through the Channel Tunnel, and excludes passengers between Paris/Calais and Brussels/Lille.

IMPORTANT EVENTS

An ordinary general meeting of the shareholders of Eurotunnel SA, specially convened by Maitre Chriqui (the "mandataire" appointed by the Paris Commercial Court) and held on 7 April 2004, decided to dismiss all of the Board and to elect six new directors in their place. The new Board appointed Jacques Maillot, Jean- Louis Raymond, and Hervé Huas as, respectively, Chairman, Chief Executive and Deputy Chief Executive of the Group, and of ESA, EPLC, FM and CTG.

As a result of the rejection of all of the resolutions proposed at the Annual General Meeting of Eurotunnel SA, the 2003 accounts were not approved and will be submitted for approval, without modification, to the Annual General Meeting of Eurotunnel SA that considers the accounts for 2004. Furthermore, it was not possible to appoint or to reappoint the statutory and deputy statutory “commissaires aux comptes” of Eurotunnel SA. On 16 April 2004 the Paris Commercial Court made an order appointing “commissaires aux comptes” to Eurotunnel SA until such time as an Annual General Meeting of Eurotunnel SA makes the appointment. The appropriate procedures were followed in the UK to renew the appointment of the auditors of Eurotunnel plc, and on the 21 June, the Secretary of State for Trade and Industry made the appointment.

In a letter addressed to the shareholders on 7 July, the Chairman and the Chief Executive outlined three key corporate objectives: stimulating revenue growth by radically changing the commercial policy, reducing costs, and reaching a sustainable level of debt by putting the Group’s finances on a far healthier footing. The letter summarised the initial findings of the new management, announced a re-organisation of the senior management of the Group, and stated that a long-term plan would be finalised by the end of October.

Get the full results in the attached document below.