More on Associated British Ports
Associated British Ports
Associated British Ports increased turnover 9.5% to £439m in 2004 driven primarilly by a 4.2% volume growth in the UK. Its 21 UK ports generate 85% of profits, associates (Southampton Container Terminals and Tilbury Container Services) contribute a further 6% with the rest split roughly equally between property development and investment.
Associated British Ports reported a 9.5% growth in turnover to £439.5m driven primarily by a 4.2% growth in UK volumes (to 129.3m tonnes) although an exceptional charge of £44.9m caused operating profits to drop by 30% to £113.4m. This charge consists of a £41.6m write-off of costs capitalised in relation to the development of Dibden Terminal together with a £3.3m provision for related commitments and was caused by the rejection of a planning application in April.
Associated British Ports’ core UK ports and transport business contributed £142.2m in operating profits, an improvement of 3 per cent on the previous year. The much smaller ports and transport business in the USA increased its contribution by 48% to £3.7m (2003: £2.5m). Profit from property investment activities decreased to £5.6m (2003: £6.6m), reflecting sales made in 2003 and during the course of 2004, while the conclusion of a number of disposals during the second half of the year increased profit from property development to £4m (2003: £3.2m). Associated British Ports also spent £7m on cost-reduction initiatives.
The core business benefited from growth in roll-on/roll-off trade, deep-sea container traffic, vehicle exports, coal imports, and cruise-ship call volumes.
The UK ports business is the primary driver of performance, Associated British Ports is the largest private port operator of ports in the UK and is well set to benefit from increases in trade. Many customers are tied in with long-term contracts, which means that departures of customers (such as Cobelfret this year) will be the exception, rather than the rule. Associated British Ports has signed 17 new contracts with major clients this year. Expansion projects ( Associated British Ports has invested £80m this year and further investments are in the pipeline) will improve capacity and drive earnings in the medium term. Cost savings are expected to boost earnings by £4.5m annually and new contracts will offset the loss of Cobelfret’s business from the beginning of 2005. Overall, Associated British Ports’ prospects look reasonable, the only major concern being the possible impact of a further rise in oil prices.
Associated British Ports shares trade at 483p, on a prospective PE of 15.5×, at the upper end of the sector range. The yield is 3.3%
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