TRADING UPDATE – YEAR ENDING 31 DECEMBER 2001
To continue the flow of information to all investors Associated British Ports Holdings PLC’s trading statement for the year ending 31 December 2001 is issued today prior to the Group’s preliminary results announcement, scheduled for 21 February 2002.
HIGHLIGHTS
The Group’s performance has been strong during 2001. The key highlights are as follows:
Group turnover from continuing operations for the year ending 31 December 2001 is expected to increase by at least 8 per cent.
Underlying Group pre-tax profit for the year ending 31 December 2001 is expected to be at the upper end of current market expectations.
Operating profit of the continuing UK ports and transport activities is expected to grow by at least 7 per cent in the year driven by new business won over the past two years.
PORTS AND TRANSPORT
Turnover from the Group’s UK and USA continuing ports and transport activities is expected to show an increase ahead of the 10 per cent growth in 2000. This turnover growth is anticipated to lead to an increase of at least 6 per cent in operating profit for the continuing ports and transport activities over the year as a whole.
Ports and Transport - UK
Business at the UK ports has continued to develop satisfactorily and growth has been experienced in roll-on/roll-off, containers and vehicle imports. Imports of coal and forest products have also increased.
Highlights in the first half of the year included the opening of the Cardiff Distribution Terminal, the completion of the West Dock development project at Goole and the opening of the £14 million Rotterdam Terminal at Hull to accommodate the world’s largest cruise ferries operated by P&O North Sea Ferries.
The pace of developments has continued in the second half. East Pier Terminal was opened at Troon in July. This new £5 million roll-on/roll-off terminal for P&O Irish Sea’s service to Northern Ireland is backed by a 15-year agreement. Also in July, the Group acquired a cold store facility at Hull with annual sales of over £2 million. During the period the Group took its investment in fertiliser facilities and plant at the ports of Ayr, Garston, Immingham and Swansea to £4.7 million. These facilities for Hydro-Agri (UK), the largest manufacturer of plant-nutrients in the world, all became operational this year.
Humber International Terminal, the deep-water general cargo terminal at Immingham in which the Group has invested almost £35 million, became operational in June 2000 and has performed ahead of expectations, handling 4.2 million tonnes of cargo in the first eleven months of this year.
These developments, together with others announced during this year and throughout last year, are in line with the Group’s strategy to grow existing business and develop new business through rigorously-targeted investment.
Operating profit of the continuing UK ports and transport activities in the year to 31 December 2001 is expected to grow by more than 7 per cent driven by new business won over the past two years. This growth rate, exceeding the growth achieved in the previous year, is expected to be reached notwithstanding the decrease in Corus’s iron ore imports in South Wales, and a reduction in agribulk business as a result of the foot-and-mouth outbreak. The Group does not anticipate that the reorganisation of the provision of pilots in the Humber will have any material effect on the Group’s results for the year.
The public inquiry into the application to develop the Dibden Terminal deep-sea container port at Southampton commenced in November this year and the Group expects to know the Government’s decision in 2003.
Ports and Transport - USA - AMPORTS
Turnover is expected to be higher than last year. This performance includes the benefit of five new vehicle-processing accounts won over the past eighteen months and the recently acquired corporate jet aviation facilities at Gulfport-Biloxi Regional Airport, Mississippi, and in Burlington, Vermont.
AMPORTS USA’s Seaport division has recently won a further new vehicle-processing account for the import of vehicles into the United States. This account will become fully operational during the first half of 2002 adding a further 60,000 units each year to vehicle volumes.
The effect of the terrorist attacks in the United States on the results of AMPORTS USA’s Aviation division has not been significant to the Group. AMPORTS USA’s Seaport division has experienced vehicle volume growth but has also faced processing reductions and competitive price pressures as a result of the general economic slowdown in the United States. Accordingly, operating profit from AMPORTS USA’s ports and transport and property investment activities is expected to be just below last year’s level of £5.7 million.
At the beginning of September 2001, the Group announced that it would sell AMPORTS USA’s Aviation division, subject to the receipt of a satisfactory offer. A number of expressions of interest have already been received in respect of this sale. However, in view of the uncertainty affecting the aviation market following the terrorist attacks in the United States, the Group has decided to defer this process until the first half of 2002.
ASSOCIATES
The reduced contribution to the Group’s results from its interests in the two container-handling businesses, Southampton Container Terminals and Tilbury Container Services, is expected to be compensated for by a first time full year contribution from the Group’s 45 per cent shareholding in the Cardiff Bay Partnership with Norwich Union. Accordingly, in overall terms, associates are expected to produce an operating profit similar to last year.
PROPERTY INVESTMENT AND DEVELOPMENT
The Group’s policy of selling non-operational port-located property and exploiting the potential of the property portfolio continues and as a consequence, as previously reported, sales made last year will result in operating profit from property investment rentals being lower than last year. However, operating profit from property development is expected to be above the 2000 level, reflecting substantial property sales during the year.
Since 1 January 2001, the Group has sold a further £25 million of non-core property assets. This brings the total amount of non-core assets sold since 1 January 2000 to £202 million, including Red Funnel Group.
SHARE REPURCHASES
The £70 million share repurchase programme that the Company announced following last year’s sale of Red Funnel Group has now been completed. The Company has repurchased 17.5 million shares under this programme at an average price of 399 pence each, before costs. Overall, since 1998, the Group has returned £220 million to shareholders through share repurchase programmes at an average price of 319 pence each, before costs.
PROSPECTS
While the general economic outlook is less favourable than in recent years, the core UK ports and transport business has the advantage of many long-term contracts with quality customers. In addition, a number of new contracts have become operational during this year. This leads the Group to remain confident of making further progress in 2002.
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