ASSOCIATED BRITISH PORTS HOLDINGS PLC TRADING UPDATE – SIX MONTHS ENDING 30 JUNE 2003
In keeping with its usual practice, Associated British Ports Holdings PLC is today issuing its trading statement for the six months ending 30 June 2003, prior to the group’s interim results announcement, scheduled for 3 September 2003.
HIGHLIGHTS
The key highlights are as follows:
Underlying pre-tax profit for the six months ending 30 June 2003 is expected to be in line with current market expectations.
Turnover from the core UK ports and transport activities for the six months ending 30 June 2003 is expected to increase by at least 5 per cent compared to the corresponding period of the previous year.
Underlying operating profit from the UK ports and transport activities for the six months ending 30 June 2003 is expected to grow by at least 3 per cent compared to the first half of 2002, supported by new contracts that have been secured over the past three years.
As anticipated, turnover and underlying operating profit from property development activities during the first half of 2003 are expected to be modest because of the phasing of property sales.
New contracts which have been secured over the past three years will underpin growth for the group’s UK ports business during the full year 2003.
PORTS AND TRANSPORT – UK
Business at the UK ports has continued to make progress and growth has been experienced in roll-on/roll-off trade, deep-sea container traffic, vehicle imports and exports, agribulk volumes, forest products 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 six months to 30 June 2003. Along with other transport companies, the group has continued to experience increased insurance costs, albeit at a lower rate than 2002. This, coupled with the increased growth achieved by the group’s lower margin value-added services operations, is expected to have an impact on overall operating margins within the UK ports and transport business. With the exception of these items, operating margins within the core UK ports business are expected to be similar to the first six months of 2002. These factors are anticipated to lead to an increase of at least 3 per cent in underlying operating profit from the UK ports and transport activities compared to the first half of 2002.
During the first six months of 2003, and against the background of an uncertain market, the UK ports business has continued to develop, adding new revenue-related investments totalling more than £12.0 million. These include:-
an agreement with Brittany Ferries to invest £4.3 million, under a 15-year agreement, to enhance the ferry terminal facilities at the Port of Plymouth;
a £2.0 million investment in the Port of Grimsby & Immingham, backed by a 10-year agreement with Sea-Cargo AS, which will create additional space for expansion and development, including the continued growth of Volkswagen Group business;
investments totalling £1.7 million in steel import, storage and distribution facilities at the Port of Cardiff under a five-year agreement with Duferco Ltd and a 10-year agreement in principle with Marshall Maritime Services; and
investments at the Ports of Immingham and Barry, totalling £1.5 million, associated with the forest products industry involving five- and 10-year agreements.
These developments, together with other contracts that are currently being negotiated, 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 12 months and will contribute to the group’s results once they become operational.
The public inquiry into the application to develop the Dibden Terminal deep-sea container port at Southampton finished on schedule last December and the government’s decision is still expected either late this year or in 2004.
The cost-reduction programme announced in 2002 is now almost complete and will result in cost savings of at least £1.5 million during the second half of 2003 and at least £3.0 million per annum from 2004.
PORTS AND TRANSPORT - USA
AMPORTS’ continuing Seaport division has shown further improvement, experiencing vehicle-volume growth of just over 3 per cent in the first five months of this year, primarily as a result of new accounts which came on-stream last year. Following the weakening of the US dollar against the pound sterling, turnover from AMPORTS’ continuing ports and transport operations (which exclude property investment income) is expected to be similar to last year. However, operating profit, which has benefited from reduced overhead costs following last year’s sale of the Aviation division, is expected to show an improvement of at least 30 per cent compared to the first six months of 2002.
ASSOCIATES
Southampton Container Terminals and Tilbury Container Services have continued to experience increased container throughput this year. The Cardiff Bay Partnership has had a stable start to the year. Accordingly, in overall terms, associates are expected to produce an operating profit which will be slightly ahead of the first six months 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 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.
The exact timing of property sales is always difficult to predict and, while the group currently expects a meaningful contribution from property development for the full year, in the first six months of 2003 turnover and operating profit from this business segment are expected to be modest because of the phasing of sales.
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 remains 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 and diverse spread of geographical and cargo risk, leads the group to believe that the new contracts which have been secured over the past three years will underpin growth for the group’s UK ports business in 2003.
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