Carnival plc Ordinary US$1.66 (CCL)

Company overview

Carnival was once known as P&O Princess Cruises plc. The core activity is the operation of cruise ships. The Group offers a range of holiday vacation products. It has a portfolio of 13 cruise brands which includes Carnival Cruise Lines, Princess Cruises, P&O Cruises, Cunard Line, Ocean Village and Costa Cruises. These brands operate over 80 ships totalling more than 140,000 lower berths.

HL Comment (21 December 2007)

Carnival is a global cruise company and one of the largest holiday groups in the world. Carnival came into existence via the de-merger of P&O Princess Cruises from the former P&O ferries and ports operator and its subsequent merger with US cruise operator Carnival Corporation. The company, jointly headquartered in both Miami Florida and London, employs around 75,000 staff worldwide and has a current stockmarket value in the region of £4.7 billion. Not only are Carnival shares listed in London as a constituent of the UK’s premier FTSE-100 index, but the shares are also traded on the New York Stock Exchange. In total, the company attracts around seven million guests per year.

The group’s recent fourth quarter results saw good progress being made. Revenues over the fourth quarter increased by 11.2pc to $3.1 billion (against Q4 2006), whilst full year earnings per share rose by 18 US cents to a record $2.95, against $2.77 for 2007. The results proved to be at the higher end of analysts’ forecasts. Stronger pricing on bookings was partially offset by higher than expected fuel costs.

Acting for negative investor concerns, rising fuel costs remain a pressure on costs, whilst the health of the US consumer – the biggest customer segment for the company – provides a broader concern. In addition, volatile currency markets make profit forecasts even more difficult to assess. On the positive side of the equation, the number of consumers yet to try a cruise holiday and the strong word of mouth message then spread by those customers that have is considerable. Furthermore, demographics also work in the company’s favour as older consumers have formed a solid element of the cruise market’s potential sales base. Finally, with many analysts also agreeing that the supply of cruise ships is being increased at a level which does not threaten to flood the marketplace, market consensus is currently positive in tone.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS ($)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
30-11-2007	13,033.00	2,424.00	3.04	12.70	1.80	7.00	1.38	3.60
30-11-2006	11,839.00	2,318.00	2.85	15.80	7.90	2.00	1.03	2.30
30-11-2005	11,094.00	2,325.00	2.80	21.10	1.00	21.00	0.80	1.40
30-11-2004	9,727.00	1,901.00	2.31	23.10	n/a	n/a	0.52	1.00
30-11-2003*	6,718.00	1,223.00	n/a	n/a	n/a	n/a	0.44	1.20

* Prior to 30th November 2004, figures were stated under UK Generally Accepted Accounting Principles (GAAP). Recent figures stated under International Financial Reporting Standards (IFRS).