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Associated British Ports : H1 results
Savings in exception administrative costs boosted Associated British Ports’ half year results to June 2005. UK ports & transport reported operating profit rose to £74.2m (2004: £26.2m). Underlying UK ports & transport operating profit rose 4% to £74.2m and underlying group pre-tax profits rose 8% to £67m.
Last years’ H1 results were adversely affected by a £44.9m write off (accounted within administrative expenses) in relation to the government’s rejection of a planning application for the development of Dibden Terminal. The charge consisted of the write-off of costs capitalised in relation to the development.
The growth in the port and transport profits was largely due to organic growth in the business, underpinned by long-term contracts that with a broad mix of customers. The company has won six new long-term contracts so far this year.
In the UK business tonnage increased by 5.7% compared to last year. Volumes increased in coal and iron ore imports, agribulk exports and steel products. The small US ports business suffered a decline in operating profits to £1.8m from £2.3m last year due to lower vehicle volumes following the move of a customer to a competing facility. A new contract was recently secured with Toyota to replace the lost business during 2006.
Profits from property investment remained stable at £2.6m while property development profits rose to £5.6m from £0.4m last year reflecting the mix and phasing of sales, which in 2004 were weighted towards the second half of the year.
The company’s strategy is to focus on the UK & US ports and transport operations while disposing of non-core assets. No major acquisitions are planned so growth will depend on general trade volumes and the projects on the Humber which are expected to become operational in 2006.
Prospects still look reasonable. The main risk is a drop in shipping volumes which may be triggered if very high oil prices are sustained.
The share trades at 466.25p, on a prospective PE (2005 earnings) of 15.2x at the upper end of the sector range. The yield is 3.5%.
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