ABP has plans but few details

The Investment Column

Associated British Ports, captained by long-standing chairman Sir Keith Stuart, has sailed into troubled waters in recent months. Investors have become increasingly fed up with disappointing profits growth and poor returns from new investments. After all, ABP owns most of the UK's biggest and most prosperous trade gateways to the sea and should be cashing in as the economy booms. But yesterday's interim results showed a mere 5 per cent rise in port operating profits to pounds 101m for the six months to June.

The group took the opportunity to unveil plans for a strategic review in an attempt to stave off a shareholder revolt. However ABP's announcement was long on rhetoric and short on details. The group hinted it would look for overseas acquisitions or joint ventures or possibly extend its port activities and start handling distribution operations on behalf of their clients. But nothing is definite and any new plans will not be known until next March at the earliest.

What we do know is that ABP will get out of non-port property developments. It claims that it has been doing so for years. Strange then that its balance sheet shows a recent rise in the amount of port-located properties it holds.

Whatever the result of the strategic review, ABP appears to have ruled out the one measure that would be a sure-fire way to pep up the share price, namely a share buy-back or special dividend. The 17.5p share price fall to 275p reflects investors' disappointment.

That said, shareholders should stick in there. Sir Keith Stuart has recently appointed an outsider, Andrew Smith, to head up the ports division, which should provide an added impetus for change. Meanwhile profits should continue to rise steadily. UBS, the broker, is forecasting full-year profits of pounds 102m, putting the shares on a prospective p/e ratio of 14, where they are supported by a forecast yield of 4.1 per cent. Hold.