ASSOCIATED BRITISH PORTS HOLDINGS PLC TRADING UPDATE – YEAR ENDING 31 DECEMBER 2003
In keeping with its usual practice, Associated British Ports Holdings PLC is today issuing its trading statement for the year ending 31 December 2003, prior to the group’s preliminary results announcement, scheduled for 18 February 2004.
HIGHLIGHTS
The key highlights are as follows:
· Underlying group pre-tax profit for the year ending 31 December 2003 is expected to be in line with current market expectations.
· Turnover from the core UK ports and transport activities for the year ending 31 December 2003 is expected to increase by at least 5 per cent compared with the previous year.
· Underlying operating profit from the UK ports and transport activities for the year ending 31 December 2003 is expected to grow by at least 5 per cent compared with 2002, supported by new contracts that have been secured over the past four years.
PORTS AND TRANSPORT – UK
Business at the UK ports has continued to make progress and growth has been experienced in the first 11 months of this year in roll-on/roll-off trade, deep-sea container traffic, vehicle imports and exports, agribulks, forest products, imported coal and cruise-ship calls. Turnover from the group’s UK ports and transport operations is expected to show an increase of at least 5 per cent in the year to 31 December 2003.
The group’s cost reduction programme announced in 2002 is now substantially complete and will result in cost savings of at least £1.5 million during 2003 and at least £3.0 million per annum from 2004. In 2003, these savings should balance the impact on the group’s margins arising from previously reported increased insurance costs and growth achieved by the group’s lower margin value-added services operation, ABP Connect. Consequently, operating margins within the UK ports and transport business are expected to be similar to 2002.
These factors are anticipated to lead to an increase of at least 5 per cent in underlying operating profit from the UK ports and transport activities compared with 2002. This growth rate represents an improvement over the 3 per cent growth for the full year 2002 and the 4 per cent growth achieved in the first half of this year.
New revenue-related investments that have been added to the group’s UK ports business portfolio during the second half of the year include:-
· at the Port of Hull, investments totalling £1.4 million in timber storage facilities, backed by 10-year agreements with North Sea Lumber (Sales) Limited and Rix Shipping;
· a £1.2 million investment in a roll-on/roll-off facility at the Port of Southampton under a long-term contract with Channel Freight Ferries; and
· a 10-year agreement with Rowlinson Timber to invest £1.0 million in a new timber terminal at the Port of Immingham.
These developments are in line with the group’s strategy to grow existing business and develop new business through rigorously targeted investment. These projects have construction lead times of up to six months and will contribute to the group’s results once they become operational.
The group continues to plan major growth projects on the Humber Estuary and at Dibden, Southampton. The necessary planning consents from the Department of Transport for the development of a shortsea container riverside terminal at the Port of Hull and a roll-on/roll-off riverside terminal at the Port of Immingham are expected to be received in 2004.
The group already has the necessary powers to develop a further coal import riverside terminal at the Port of Immingham. The necessary approvals to develop a further riverside terminal at the Port of Hull will be sought in due course. Following the decision of one of the group’s roll-on/roll-off customers to move from the Port of Immingham at the end of next year, development plans for the coal import and shortsea container terminals are now more advanced than those for a new roll-on/roll-off terminal.
The inspector’s report on the public inquiry into the application to develop Dibden Terminal, the planned deep-sea container port at Southampton, was submitted to Government, on schedule, at the beginning of October.
November saw the publication of the House of Commons’ Transport Select Committee report on UK ports, which recognises the clear need for additional container-port capacity in the UK. The report states that: “Suitable berths are essential in the United Kingdom if it is to retain direct shipping services rather than being served by transhipment from Continental ports.” These findings are consistent with the group’s own view on the urgent need for additional container-port capacity in the UK.
The Government’s decision regarding the application to develop Dibden Terminal is expected in 2004.
In line with the group’s strategy, construction of all of these terminals will only commence when customer commitments to these facilities have been obtained.
PORTS AND TRANSPORT - USA
AMPORTS’ continuing Seaport division has seen vehicle volumes in the first 11 months of this year at a similar level to those experienced in the comparable period of 2002. However, the US dollar revenue earned per vehicle processed has shown some improvement. Turnover from AMPORTS’ continuing ports and transport operations (which excludes property investment income) is expected to be above last year on a local currency basis but, following the weakening of the US dollar against sterling, below last year when reported in sterling. Reported operating profit, which has also benefited from reduced overhead costs following last year’s sale of the Aviation division, is expected to show an improvement of at least 40 per cent compared with 2002.
ASSOCIATES
Southampton Container Terminals and Tilbury Container Services have increased container throughput in the first 11 months of this year by 7 per cent and 19 per cent, respectively. The Cardiff Bay Partnership is expected to have a stable year. Accordingly, in overall terms, associates are expected to produce an operating profit which will be at least 9 per cent ahead of 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. As previously reported, the contrasting level of sales made last year and during the course of this year will result in total operating profit from UK and USA property investment rentals being lower than last year.
As previously reported, the exact timing of property sales is always difficult to predict. The group is currently awaiting planning approval in respect of the sale of 29 acres of land at the Port of Garston. On the basis that this approval falls into next year, the group currently expects operating profit from property development for the full year 2003 to be modest compared with the £12.0 million level achieved in 2002.
NEW ACCOUNTING STANDARDS
Financial Reporting Standard (FRS) 17 – Retirement Benefits was adopted under its transitional arrangements during 2001 and the group will continue to report on this basis during 2003. Under FRS 17, at the end of last year, the group’s main defined benefit scheme had a surplus of assets over liabilities of £33.8 million. This scheme remains in surplus today.
PROSPECTS
While the general economic climate still remains somewhat uncertain, the group’s UK ports business has the advantage of having many long-term contracts with quality customers. This, together with the group’s strong cash flow, diverse spread of geographical and cargo risk and increased growth experienced in the second half of this year, leads the group to believe that the new contracts which have been secured over the past four years will underpin growth for the group’s UK ports business in 2004.
Notes to Editors:
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