P&O lowers its sights

Shipping group P&O said today it was lowering its growth hopes for its key ports business due to slower UK expansion.

P&O said it now expected full-year organic volume growth to come in at 8-9% against its previous target of 10%.

It said slower growth in the UK and Australia had offset continued strong expansion in China and India.

A spokesman said: “In terms of general consumer expenditure, certainly in the UK, growth has been slower than in the previous year.”

P&O said in March that strong growth in the main ports business helped it to boost pre-tax profits before exceptional items by 65% to £170.2m (€254.9m) in 2004.

The group said today that it did not anticipate any change in market expectations for its pre-tax, pre-exceptional profits in 2005, although there would be a positive £11m (€16.5m) adjustment to allow for the impact of adopting new accounting standards.

It said the trends in its ports business reported in its first quarter trading update had continued.

Improvements in average revenue per unit were leading to operating profit growth exceeding organic volume growth, which was expected to be the case for both the first half and the full year.

In its ferries business, which has been overhauled after reporting trading losses of £15.4 million due to falling passenger numbers and lower on-board spending, no change was expected in the current year result despite higher fuel costs.

A lack of berthing capacity at Calais had led to about 14% of sailings on the Dover-Calais short distance route being lost in the first half, but operations were now back to normal.

Across the business as a whole, trading had been as expected.

It said its review of the ferries business had gone well and results were expected to come through as the year progressed.

P&O responded to the adverse trading conditions, which industry analysts blamed on duty-free changes and low-cost airline growth, by cutting four of its 13 routes and reducing its number of ships from 31 to 23. The moves, announced in September, were set to result in 1,200 job cuts.

Taking account of the Calais berthing problems, P&O said it expected two-thirds of the expected profit improvement for 2005 against 2004 to occur in the second half of the year.