THE INVESTMENT COLUMN : Positive signs as ABP profits rise

Associated British Ports suffered some bad press last year over its accounting policies so the City was keen to run its slide rule over yesterday's results. But there was little in the figures to cause alarm and, in truth, they were something of an anti-climax. Pre-tax profits at the UK's largest ports operator were up 10 per cent to pounds 88.4m in 1995, another solid performance that was accompanied by further bullish comments about the future.

ABP's plans for modernising some of its 22 UK ports will mean a pretty steep capital expenditure programme that will fully utilise the company's cash flow. ABP spent pounds 77m this year on its ports, and 1996 will see development of a new berth in Southampton and a dredging programme to expand capacity.

But the investment should not undermine ABP's ability to continue its history of strong dividend growth, and the fashion for one-off share buy- backs is unlikely to be followed by the company. This year's profits should reach pounds 100m, with another penny added to this year's dividend of 6.5p. Dividend cover, although down to 2.7 from 3 times, remains very comfortable and ABP's record over the past five years of 12 per cent compound growth should continue.

The ABP bank balance in 1996 should also be bolstered by property disposals, including the recent sale of the St Martin's Lane site. About pounds 87m worth of property development is in the balance sheet, and the plan is to sell it. Higher-than-expected redundancy costs of pounds 2.6m in 1995 should also help flatter the pre-tax figures in 1996.

Organic growth remains ABP's most likely route for expansion, and despite the fact that growth is slower than last year, there are still many positive signs.

The downturn in 1995 was particularly acute in the timber trade and the fall in shipments through ABP ports reflected the recession in the construction market. Other areas like car exports were stronger, following ABP deals with key manufacturers, including Honda.

The shares, down 4p at 298p, were around 278p at the start of 1996 and still have a way to go if ABP meets its 4 per cent volume growth forecast.

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