Investment: Steady as she goes for ABP

ASSOCIATED British Ports is steering a steady course in the face of turbulent market conditions. In the first half, the UK's largest port operator has been buffeted by a slowdown in its core ports business.

Exports of steel from its terminals in South Wales have plummeted as manufacturers struggled under the weight of the soaring pound. Shipping of animal feeds was also down due to the wet summer. If low-margin oil exports are excluded, the total tonnage handled by ABP's ports in the first six months was slightly below last year.

Indeed the ports' unit results would have been below last year had it not been for the release of a pounds 3.8m provision. Yet the company still managed to increase profits by 11 per cent to pounds 57m on turnover up 33 per cent to pounds 173.3m.

Much of this performance was due to a robust increase in ABP's property operations. Property investment rose by 16.4 per cent in the half, contributing a healthy pounds 7.8m. Last year's radical cost-cutting programme, which saw the departure of 10 per cent of ABP's workforce, also helped to run a tight ship.

Despite this resilient performance, a few clouds are gathering over the second half. The ports division is unlikely to show much of an upturn, given UK manufacturers' dire conditions. In addition the acquisition of American Port Services, the US dock operator bought in May for pounds 106m, will dilute earnings this year and next.

On the positive side, investors can look forward to a pounds 58m share buyback, part of the pounds 100m capital restructuring announced last year. Property will also continue to power ahead and a few disposals should help the cash flow.

ABP shares, down 13.5p to 270.5p yesterday, have fallen a long way in recent months. They are now on 12 times expected 1998 earnings of around pounds 113m. At these levels, they look like good long-term value.