Associated British Ports sees calmer waters ahead after 2% profits rise

Associated British Ports, which operates 21 ports in the UK, said yesterday its spread of risks and new contracts would propel growth in the second half ahead of the first half, despite economic jitters.

ABP, which is headed by group chief executive Bo Lerenius, posted a 2 per cent rise in first half pre-tax profits as a drop in property rental income and property development sales crimped profit growth, although the result was at the top end of market expectations.

Long-term contracts, a geographical spread of ports, strong cashflow and no reliance on a single type of cargo would reduce its risks, said ABP, adding that more than 50 per cent of its UK ports business was underpinned by contracts for the next year.

"All of these things, coupled with the new business we've contracted and we know is coming on stream as we go through the year, lead us to believe that we'll get a higher growth rate in the core UK ports business in the second half than we've had in the first half," said finance director Richard Adam. Its UK ports account for 92 per cent of sales.

The company had underlying pre-tax profits of £67.6m, a touch ahead of analysts's forecasts of £66.9m, for the six months to the end of June, as sales rose by 6 per cent to £213.7m. Shares in ABP fell 7.5p to 396.5p.

Standard Life Investments fund manager, Amanda Forsyth, said: "They've got a good history of either investing the cash sensibly or giving it back to shareholders. They've suggested recently there will be less of a focus on buying back shares.

"The immediate implication being that they do not see any shortage of opportunities to invest that money in their core business at a rate exceeding the cost of capital," Ms Forsyth said.

Mr Adam said the company hoped to achieve market estimates on underlying pre-tax profits for the full-year, pointing out that for the past two years since new senior management came aboard, those expectations had been met.

"We are aware of the expectations and we would hope to be able to achieve that, but again what we can't do at this stage is say absolutely we will get there or beat it because there is a long way to go," Mr Adam said.

ABP has proposed an interim dividend of 6.5p per share, versus 6p last year. Underlying earnings per share were up 5 per cent to 14.9p, helped out by a share buyback.