More on Associated British Ports
Associated British Ports: FY05 results
Associated British Ports (ABP) reported that underlying operating profits (ie before increase in fair value of investment properties and exceptional items) rose 3% to £151.3m in the year to December 2005. Pre-tax profits were up 2% to £132.3m.
The ABP group is provides ship and cargo owners with port facilities and services. The group’s principal subsidiary, Associated British Ports, is the UK’s largest ports group. Its 21 ports handle almost a quarter of the country’s seaborne trade. The group also owns AMPORTS in the USA, which handles vehicle imports and exports and provides auto-processing services.
The group also has property investment and property development activities that are focused within its ports.
Cargo volumes handled by the group’s UK ports increased by 4.3% and together with cost-reduction measures helped drive increased earnings. The company implemented a number of pre-emptive cost cuts to offset the impact of the loss of a major customer, Cobelfret (in October 2004), an exercise that appears to have delivered results.
Despite the weak state of the American car market and a 10% drop in volumes handled, (mainly due to the loss of a large customer) AMPORTS succeeded in improving underlying operating profits by 4.9% to £4.3m. Again, aggressive cost-cutting and the securing of a new contract with Toyota helped drive earnings.
Sales of surplus land (mainly at the Port of Garston) helped boost underlying operating profit in property development by 91.4% to £6.7m.
The growth of the group is tied to general levels of trade within the British Isles but a diversified customer base, many with secure long term contracts means risks to revenues are small. The prime locations of its ports and good service levels means that it is likely to retain its current position. Steady, strategic investments will help boost revenue streams in the medium term while the company’s impressive record in cost control means good translation of sales growth to profit growth.
The share trades at 635p, on a prospective PE (2006 earnings) of 19x, which is at the upper end of the sector range with a yield of 3%.
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