Associated British Ports Holdings Plc

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Associated British Ports Holdings Plc

150 Holborn Street
London EC1N 2LR
United Kingdom
Telephone: ( + 44) 20-7430-1177
Fax: ( + 44)20-7430-1384
Web site: http://www.abports.co.uk

Public Company
Incorporated: 1981
Employees: 3,088
Sales: £390.6 million ($583.0 million) (2000)
Stock Exchanges: London
Ticker Symbol: ABP
NAIC: 488310 Port and Harbor Operations

Associated British Ports Holdings Plc (ABPH) is the largest operator of seaports in the United Kingdom. The company also owns docks in the United States and provides port-related services, such as stevedoring and distribution. Created from the privatization of the former British Transport Docks Board in 1983, the company’s core Associated British Ports subsidiary owns 23 ports covering much of the English and Welsh coastlines, including some of the country’s most important ports, such as Southampton, Swansea, Grimsby, Cardiff, and Hull. Other docks held by the company include Barry, Ayr, Barrow, Immingham, Newport, Plymouth, Colchester, Talbot, and Whitby. Altogether, ABP’s ports process more than 127 million tons of cargo per year. The company’s purchase of American Port Services (Amports), a British-owned but U.S.-based business, gave it seaport operations in California, Delaware, Georgia, and Florida. ABPH also runs a property investment and development arm, Grosvenor Waterside Group, which focuses on redevelopment efforts of the company’s unused port-side properties. Other companies under the ABPH umbrella include Northern Cargo Services, a stevedoring company operating in the Port of Hull, which was acquired in 2000; Exxtor Shipping Services, acquired in 1998, based in Immingham; and Amports UK, formed from the 2000 acquisition of the Berkeley Group. ABPH also owns shares in joint ventures, including Southampton Container Terminals (49 percent) with P&O Ports; and Tilbury Container Services, jointly owned by ABP, P&O Ports, and Forth Ports. The company, which trades on the London Stock Exchange, is led by CEO Bo Lerenius. ABPH has been restructuring in order to focus on its core ports and port services operations. This has led to the sell-off of a number of operations in 2000 and 2001, including its Red Funnel ferry service and the aviation management division of Amports, as well as plans to sell off a large part of its £650 million property portfolio.

Privatized Port Owner in the 1980s

British history is practically synonymous with the country’s many seaports. Much of the country’s political and economic power was derived from its fleet of vessels and the docks that served them. By the 20th century, however, as the country’s power at sea was waning, and as it faced increasing competition from the United States and continental Europe, the country’s docks began to slip into difficulties.

These troubles were compounded by the German air strikes of World War II, which razed many of the country’s major ports. After the war, as the country faced the need to reconstruct much of its infrastructure, the government stepped in to take charge of the United Kingdom’s most vital industries. Soon after the end of the war, the government, led by the Labour Party, voted to nationalize the country’s transport-related industries under the British Transport Act of 1947. This legislation created the new British Transport Commission (BTC), itself attached to the Ministry of Transport. The BTC in turn operated through six executive branches, the Docks and Inland Waterways Executive; the London Transport Executive; the Railway Executive, which took over the struggling British Railways; the Road Hauler Executive, governing long-distance road freight transport; the Road Passenger Executive; and the Hotels Executive.

By the late 1950s, it had become clear that placing control of such diverse industries and operations under a single entity had been a mistake. Many of the executives, such as the Railway Executive, were operating under losses. The government sought means of restructuring the BTC, but finally, in 1960, published a White Paper that called for the abolition of the BTC altogether. This move was carried out in 1962, when the BTC was broken up into five new authority bodies: the British Railways Board, the British Transports Docks Board, the British Waterways Board, the London Transport Board, and the Transport Holding Company.

The newly created British Transports Docks Board quickly ran into difficulties. Longstanding resentment among the nation’s dock workers boiled into a six-week strike that crippled the industry in the 1960s. Dock workers were fighting against a number of traditional practices that many considered humiliating. Workers had, in fact, no guarantee of employment and port owners chose their laborers on a casual basis, grouping workers in pens each morning to choose the workforce for the day. These and other practices finally led to the dock workers’ revolt in 1967.

The result of the strike was a victory for the nation’s dock workers. In 1967, the British government passed a new British Dock Labour Scheme (replacing the one that had been instituted during the nationalization drive of 1947). Casual labor was abolished, and instead port owners were bound to employ only registered dock workers. This pool of workers then shared the available work; yet, when there was not enough work to go around, workers were still paid, albeit at a lower scale. Another important feature of the scheme was the lifetime guarantee of employment given to dock workers.

The dock workers’ victory placed British docks under still greater pressure in the 1970s, as more modern—and government-subsidized—ports in Europe began to take business away from the United Kingdom’s ports. At the same time, the growing size of many ships forced shippers to turn to larger ports, such as Rotterdam, Hamburg, and Antwerp, which were equipped to handle the larger payloads of the new generation of ships. The improvement of roads, train networks, and increased air traffic also provided direct competition to shipping and ports alike. By the late 1970s, the British government, under Labour leadership, was forced to consider privatizing a number of the government-controlled industries. The country’s docks were among the first to be eyed for privatization. This process took on still greater steam with the arrival of the Conservative government, led by Margaret Thatcher, to power.

The privatization movement caught up with the British Transport Docks Board at the beginning of the 1980s. In 1982, the board was abolished, and a new body, Associated British Ports (ABP), was prepared for privatization. The newly created ABP was given control of 19 of the country’s ports, including a number of its largest ports, such as Southampton and Cardiff. ABP was then taken public the following year as Associated British Ports Holding Plc (ABPH).

Port Services Leader for the 21st Century

ABPH, led by Sir Keith Stuart as chairman, started strongly and by 1986 was able to make the first of a series of one-for-one scrip issues. In 1987, ABPH branched out, purchasing Gros-venor Square Properties Group for £17 million in stock. The new subsidiary, renamed Grosvenor Waterside Group, gave ABPH an entry into the properties market, with a particular interest in the unused properties around the ports under the company’s control.

ABPH added port services in 1988 with the acquisitions of Teignmouth Quay Company, for £3.4 million, and Essex’s Colchester Dock Transport Company, for £4 million. That same year,ABPH formed a joint venture with Peninsular & Oriental Steam Navigation Company (otherwise known as P&O), called Southampton Container Terminals.ABPH ’s part of the joint-venture was 49 percent.

Despite such success during the 1980s, the company’s profits remained under heavy pressure, particularly because of the payroll guarantees of the Dock Labour Scheme. At the same time, new vehicles, machinery, and other equipment were providing the company’s European continent competitors with more efficient, less labor intensive operations, which enabled these ports to undercut ABPH’s prices.

ABPH finally found relief in 1989, when the Thatcher-led government at last abolished the Dock Labour Scheme. As ABPH reduced its payroll and modernized its facilities, the company’s profits began to grow again. In that year,ABPH acquired new port services operations with the acquisitions of Whitby Port Services and Slaters Transport, for £2.1 million. A more important acquisition came that same year, when the company paid £26.7 million in cash and shares for the Red Funnel Group, which added that company’s tugboat services and car ferry operations.

ABPH now operated ports and provided ports services and had diversified into tugboat and car ferry services, as well as into property acquisition and development. This latter division was causing the company headaches, however, as the collapse of the British building market had left it with a large and underperforming portfolio. By 1992, the company was forced to write off some £62 million against its property portfolio, leading it to a net loss for the year of £36. 6 million.

Yet ABPH was back in the black a year later. The company had been able to expand its portfolio of ports, after the 1992 Ports Privatization Act enabled it to acquire the ports in Whitby, Teignmouth, and Colchester. The company also launched a number of new investment initiatives, including a five-year, £150 million revamp of its top port, Southampton. Meanwhile,ABPH continued to boost its port services operations, acquiring a 49 percent share of Tilbury Container Services.

Company Perspectives:

ABP is the UK’s leading ports business, providing innovative and high-quality port facilities and services to shippers and cargo owners. We work in close partnership with our customers, responding quickly to meet their requirements and offering business solutions to their demands and problems.

In the mid-1990s, ABPH continued its drive to modernize its stable of 22 ports, spending more than £76 million in 1996 alone. The company was also redeveloping its property portfolio as the U.K. building market returned to health, and in the mid-1990s announced its intention to shed most of its non-port locations. Despite the return to health of the British economy, ABPH’s own profits were lagging behind. In 1997, after appointing a new managing director, Andrew Smith, the company called in outside consultants for a strategic review. The result was a new strategy, based on organic growth, international acquisitions, and expansion of its services to existing customers, including the possibility of entering the distribution market.

Part of the company’s expansion came in 1997, with the £12 million purchase of Ipswich Port. The following year, ABPH grew further, extending its services wing with the acquisition of Exxtor Group Shipping Services, for £15.6 million, adding that company’s roll-on, roll-off terminal at Immingham Port. This purchase fit in with the company-announced intention to acquire still more of the terminals, owned by shipping and other companies, operating at its ports.

In 1998, also, ABPH made a still more ambitious acquisition, paying more than £108 million to acquire American Port Services (Amports). That British company, which had been formed in 1988 to operate car terminals at the port of Benicia, California, had gone public with a listing on the London exchange in 1995, before adding new port terminals in Delaware, Georgia, and Florida. Amports then branched out into aviation facilities management, acquiring management contracts for a number of small airports in Teterboro, New Jersey; Gulfport, Mississippi; Farmingdale, New York; and a heliport in New York City.

The Amports purchase quickly turned sour. A strike at General Motors caused a huge drop in business, which was further hit by declining revenues from the hard-pressed Asian markets; before long, it had become apparent that ABPH had grossly overpaid for the acquisition. The misstep forced the resignation of Managing Director Smith in February. Keith Stuart too was to pay a price for the difficulties surrounding the Amports, which cost the company to write down the value of its U.S. subsidiary by some £80 million in 1999. The longtime chairman and guiding force of the company announced his intention to retire to the position of non-executive chairman in 2000. Instead of a direct replacement for either Smith or Stuart, the company opted instead to create the position of chief executive officer for Bo Lerenius.

Lerenius worked to streamline the company, returning its focus back to its core ports and port services operations. In 2000, the company announced the sale of its Red Funnel subsidiary to JP Morgan International Capital Corporation for £71 million. The company also announced its intention to sell off still more of its property portfolio. At the same time, ABPH moved to boost its port and cargo services holdings, buying Northern Cargo Services for £1.6 million and the Berkeley Group for £9.5 million. The latter company was then renamed Amports UK.

After fighting off a takeover attempt by Japanese group Nomura, which offered more than £1 billion for ABPH, the company continued its streamlining operation in 2001. In September of that year, the company announced its intention to sell off the aviation division of its still struggling U.S. subsidiary. This move prompted speculation that the company might sell off the rest of Amports and exit the United States altogether. The United Kingdom appeared a better target for ABPH’s growth, although the company ran into a hurdle when its plans to expand the Southampton port ran into opposition from environmentalists at the end of 2001. Meanwhile, ABPH’s revenues and profits were on the rise, topping £390 million and £135 million, respectively, in 2000. As the U.K. ports industry seemed to be preparing to enter a round of consolidation, ABPH, which continued to control more than 25 percent of the U.K.’s port activity, seemed likely to remain dominant in that market for the new century.

Key Dates:

1947:: The British Transport Act nationalizes ports and places them under the newly created British Transport Commission (BTC), attached to the Ministry of Transport.
1960:: The British government publishes a White Paper recommending the breakup of the BTC.
1962:: The BTC is dismantled and the British Transport Docks Board is created to control the nation’s ports.
1967:: Dock workers’ strikes and other unrest lead to the passage of the National Docks Labour Scheme, which guaranteed lifelong employment to dock workers.
1982:: The British government privatizes 19 ports as British Transport Docks Board is reformed into Associated British Ports.
1983:: The Associated British Ports goes public as Associated British Ports Holding Plc.
1987:: The company acquires Grosvenor Square Properties Group and begins property acquisition and development activities.
1988:: The company acquires Teignmouth Quay Company and Colchester Dock Transport Company, forming the Southampton Container Terminals joint venture.
1989:: The Dock Labour Scheme is abolished, and the company acquires the Red Funnel Group and Whitby Port Services and Slaters Transport.
1992:: The company acquires ports in Whitby, Teignmouth, and Colchester.
1997:: The Ipswich Port is acquired.
1998:: The company acquires Exxtor Group Shipping Services and its roll-on, roll-off terminal at Imming-ham, and also enters U.S. market with £108 million purchase of American Port Services, a car terminal and aviation facilities management business based in England but operating in the United States.
1999:: The company is forced to write down the value of Amports by £80 million as a result of a General Motors strike and other difficulties.
2000:: ABPH sells Red Funnel for £71 million as part of a company refocus on core ports and ports services businesses.
2001:: ABPH announces its intention to sell off Amports aviation operations.

Principal Subsidiaries

ABP Research & Consultancy Limited; American Port Services PLC; American Port Services Inc. (USA); AMPORTS Cargo Services Limited; AMPORTS Vehicle Terminals Limited; Associated British Ports; Exxtor Shipping Services Limited; Gros-venor Waterside Group PLC; Grosvenor Waterside (Holdings) Limited; Grosvenor Waterside Developments Limited; Grosvenor Waterside Investments Limited; Ipswich Port Limited; Northern Cargo Services Limited; Slaters Transport Limited; Southampton Container Terminals Limited (49%); Southampton Free Trade Zone Limited; The Cardiff Bay Partnership (45%); Teignmouth Quay Company Limited; Tilbury Container Services Limited (33%); Whitby Port Services Limited.

Principal Competitors

Forth Ports Plc; Hutchison Whampoa Limited; The Mersey Docks and Harbour Company; Powell Duffryn plc; Peninsular & Oriental Steam Navigation Company Plc; Stevedoring Services of America Inc.