Expect Forth Ports to deliver more

Transformed Laing is shaping up well; Hiscox well placed to weather insurance storms
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The Independent Online

North Sea oil proved a major disappointment to Forth Ports in 2003, but it was the only setback in an excellent year on the docks and along the waterfront.

While oil went through a period of transition as oil majors sold marginal fields and smaller players took time to settle in, the Forth's two container ports, at Tilbury and Grangemouth, moved from strength to strength.

Tilbury saw total tonnage increase 6 per cent thanks to a 14 per cent improvement in containers while Grangemouth enjoyed record container volumes as traffic increased 7 per cent.

Both should do even better over the coming years. At Tilbury a 15-year contract has been signed with the Scandinavian paper maker Stora Enso that involves building a £34 million facility, the largest investment Forth has made for a single contract. Work has already begun on foundations for what will be the first fully automated paper warehouse system in Europe.

The hope is that DFDS, the shipping line that will bring the paper across to Tilbury, will be able to drum up cargoes for the return leg, so Tilbury will gain twice over.

By comparison, the £5 million investment planned at Grangemouth looks small beer but it will mean that capacity there is increased from 120,000 units a year to 200,000.

Property development in Edinburgh has become almost as big an earner as the ports, contributing £25 million to profits last year. The finance director, Wilson Murray, says there is still enough land to last for 15 to 20 years in a growing city surrounded by green belt land and with hardly any other brownfield sites available.

Forth reported pre-tax profits up 17 per cent from £45.4 million to £48.6 million. The final dividend of 24.2p brings the total to 36.3p, up from 33p. The current year should see a gathering of momentum.

This column advised investors to tuck this one away in September at £10.15. The shares closed last night at £11.31 and are worth hanging on to.

Transformed Laing is shaping up well

The former housebuilder John Laing has virtually completed its transformation to an infrastructure developer bidding for public sector projects. So far it is making a better fist of it than Jarvis or Amey.

Figures for 2003 are distorted by past upheavals - housing businesses have been sold and the Australian airports operation has gone, while a portfolio of eight PFI projects was bought from cash-strapped Amey. At the pre-tax level Laing swung from a £14.1m loss to a £21.2m profit in 2003, but the most meaningful figure is a leap in profits at continuing businesses from £1.2m to £16.7m.

Laing is chasing more work and is winning more than its share, especially in the health sector, where the NHS is stepping up investment in hospitals and local authorities in health care facilities. Schools are also a prime target.

Tee chief executive, Andy Friend, sees European governments following Britain's lead and putting more projects into private hands. Road contracts have been won in Norway, Finland and Germany while France is beginning to see the merits of what companies such as Laing can do. "Prospects are good for providers of quality," he says.

Laing has sensibly concentrated on winning contracts where there is a guaranteed stream of income. The one exception is the Chiltern Railway franchise, where profits are growing and more than 90 per cent of the trains run on time.

The 2p final dividend makes a total of 3p, down from 6.8p. Six months ago we said buy at 168.5p and the shares are now 198p. Hold.

Hiscox well placed to weather insurance storms

Terrorism fears and a lull in natural disasters have led to bumper profits for the many insurers that have raised the price of protecting a riskier world.

Hiscox yesterday said profits before tax for the year had more than quadrupled, as claims were low and premiums were high. It says 2004 will be even more bountiful.

Alarms bells have been ringing over how long the run can continue, with rates in some areas starting to fall, but Hiscox says the slowdown is not as sharp as had been predicted and rates are generally holding up. Continued low investment returns mean that insurance losses cannot be offset by stock market gains, forcing insurers to be cautious about what they underwrite. Hiscox also says reinsurers are still demanding high rates, propping up the rates direct insurers charge.

Hiscox is in a stronger position than many rivals, having already set up an operation outside Lloyd's of London. Its growing retail business specialising in wealthy individuals with horses and art collections makes it less exposed to the pitfalls of the volatile Lloyd's market, which can be hit by major catastrophes, so it should be able to keep growing even if its Lloyd's business takes a tumble.

At 163p, Hiscox is trading at about 1.4 times its net tangible assets. Given its earnings potential, it is a worthy hold.