DP WORLD LIMITED ANNOUNCES STRONG PRELIMINARY RESULTS

For the twelve months ended 31 December 2011

 

Reported Results (A) before separately disclosed items unless stated (B) USD million	2011	2010	%  change	Underlying change  (C)
Gross[1] throughput (TEU '000)	54,737	49,588	10%	-
Consolidated[2] throughput (TEU '000)	27,471	27,750	-1%	9%
Revenue	2,978	3,078	-3%	14%
Adjusted EBITDA[3]	1,307	1,240	5%	19%
Adjusted EBITDA margin	43.9%	40.3%	-	42.1%
Profit for the year	532	450	18%	24%
Profit for the year attributable to owners of the Company	459	374	23%	-
Profit for the year after separately disclosed items (D)	751	451	67%	-
Profit for the year attributable to owners of the Company after separately disclosed items	683	375	82%	-
Earnings per Share  (US cents) after separately disclosed items	82 cents	45 cents	82%	-
Dividend per Share (US cents)	24 cents	17 cents[4]		-
A.   Reported results before separately disclosed items include revenue for the Australia terminals until 11 March 2011 and share of profit from equity-accounted investees from those terminals from 12 March 2011. B.   Before separately disclosed items primarily excludes non-recurring items.  Further details can be found in Note 11 of the audited accounts. C.   The underlying change shows what growth rates and margin would have been had the five terminals in Australia continued to be consolidated in DP World's accounts from 12 March 2011 and allows for a better comparison to the prior period. D.   The statutory results include separately disclosed items.  Further details can be found in Note 11 of the audited accounts.

 

Dubai, United Arab Emirates, 29 March, 2012: DP World today announces strong financial results from its global portfolio of marine terminals for the twelve months to 31 December 2011, delivering a better than expected profit attributable to owners of the Company before separately disclosed items of $459 million, 23 % ahead of last year.

 

Adjusted EBITDA3 was $1,307 million with adjusted EBITDA margin of 43.9%. When compared with the prior year, underlying[5] adjusted EBITDA growth was 19%, ahead of underlying revenue growth of 14% and underlying container volume growth of 9%.  We have delivered a sustainable improvement in underlying container revenue per TEU of 5%, increased underlying non-container revenue by 11% and delivered a reduction in our underlying cost per TEU following productivity improvements in parallel with our ongoing discipline around costs.  

 

Each of our three regions has delivered a superior performance when compared with the prior year.  In the Middle East, Europe and Africa region, adjusted EBITDA grew 9% to $861 million, with an adjusted EBITDA margin of 45.7%.  In the Asia Pacific & Indian Subcontinent region, adjusted EBITDA increased 26% to $322 million with a significantly improved adjusted EBITDA margin of 64.5%.  The Americas and Australia region delivered adjusted EBITDA of $203 million or, excluding the deconsolidation of the five Australia terminals, on an underlying basis, delivered adjusted EBITDA growth of 37% and improved adjusted EBITDA margins of 33.1%. 

 

Profit attributable to owners of the Company after separately disclosed items was $683 million.  This delivered earnings per share (EPS) of 82 cents, considerably ahead of the prior year EPS of 45 cents, due to separately disclosed items[6] increasing profit by $225 million.

 

With strong conversion of profitability into cash, gross cash flow from operations increased to $1,159 million with net debt reduced to $3,583 million.  This was partly as a result of our improved financial performance and partly due to the proceeds from the monetisation of 75% of our Australian terminals.  This results in leverage (net debt to adjusted EBITDA) of 2.7 times and provides a solid platform for investing in the future growth of our operations.

 

We continue to invest in our operations to ensure that DP World is well positioned to take advantage of the growth in global trade and meet the requirements of our customers. During 2011 we completed and opened major capacity expansion projects in Dakar (Senegal) and Karachi (Pakistan) and opened a new terminal at Vallarpadam (India).  Despite these new capacity additions, utilisation remains high, above 80% across our portfolio.  High utilisation in Jebel Ali (UAE) is why we will be investing in an additional 1 million TEU of new capacity in 2012 and investing in a new 4 million TEU container terminal which will be operational in 2014.  In addition, we have announced that London Gateway (UK) will be operational in the final quarter of 2013.

 

DP World Group Chairman, Sultan Ahmed bin Sulayem commented;

 

"DP World delivered an excellent improvement in profitability during 2011 reporting profit for the year before separately disclosed items of $532 million.  This improvement in profitability is a reflection of our strategy, which sees us focus on the faster growing emerging markets and more profitable origin and destination and gateway cargo.  This is also a reflection of our ability to meet our customers' needs for the right capacity in the right locations and deliver a world class efficient service to ensure we are the port operator of choice around the world.

 

 "Since the decline in global container volumes in 2009, DP World has worked hard to build a more robust and profitable portfolio.  We have also continued to invest in our business through the downturn.  Our 2011 results reflect this, with a 55% improvement in profit attributable to owners of the Company before separately disclosed items since 2009, as our investments in new terminals mature and we benefit from the inherent operating leverage of our portfolio.

 

"On account of this strong improvement in underlying profit combined with the additional profit from the Australia monetisation, the Board of DP World is recommending an increased dividend distribution to $199 million, or 24 US cents per share.   The Board is confident of the Company's ability to continue to generate cash and support our future growth whilst maintaining a stable dividend payout."

 

DP World Group Chief Executive, Mohammed Sharaf commented;

 

"2011 has been another good year for DP World with the second half of the year delivering a better performance than the first half.  This improved performance was achieved despite a deteriorating global economic backdrop in the second half.

 

"We have benefited from the improvement in global container volumes whilst retaining a very clear focus on generating additional revenue, driving productivity and upholding a disciplined approach to cost management.  This has resulted in an adjusted EBITDA3 of $1,307 million and adjusted EBITDA margin ahead of expectations at a record 43.9%.

 

"We have seen commendable growth throughout our global portfolio and our flagship terminal Jebel Ali (UAE) continues to deliver sustainable EBITDA growth.  We have supplemented this solid domestic performance with stronger growth in major terminals outside the UAE as we continue to invest in our portfolio of growth oriented terminals. 

 

"The global macroeconomic uncertainty has continued into 2012.  With our portfolio focused on the faster growing emerging markets and more stable O&D markets, we continue to see growth across our portfolio in the first two months of the year, with an 11% improvement in gross volume growth. We remain committed to delivering improved operational and financial performance over 2011.

 

"As we look ahead, we remain confident about the long term outlook for our industry.  We believe our continued investment in existing and new terminals around the world will ensure our portfolio is best positioned to meet the expectations of our customers and should allow us to continue to outperform."

 

The Chairman's Statement, Operating and Financial Review and Financial Statements follow from page 4.

 

Investor Inquiries   Fiona Piper DP World Limited Dubai Mobile: +971561778731 UK Mobile: +447919175602 Email: Fiona.piper@dpworld.com

Jasmine Lindsay DP World Limited Direct: +97148080812 Mobile: +971504220405 Email: jasmine.lindsay@dpworld.com

 

Analyst and Investor Meeting in Dubai, UAE and Global Conference Calls

 

There will be a meeting in Dubai and conference calls for debt and equity analysts and investors;

 

1)   Meeting for analysts and investors in Dubai, UAE at 1200 noon on Thursday 29 March at DIFC Conference Centre, The Gate Building 4

 

2)   Conference Call at 1200 noon Dubai time (0900 London) on Thursday 29 March 2012 with CEO Mohammed Sharaf and CFO Yuvraj Narayan

 

3)   Conference Call at 1600 Dubai time (1300 London, 0800 New York) on Thursday 29 March 2012 with CFO Yuvraj Narayan

 

4)   A playback of the call will be available shortly after the 12 noon conference call concludes.  For the dial in details and playback details please contact investor.relations@dpworld.com.

 

The presentation accompanying these conference calls will be available on DP World's website within the investor centre. www.dpworld.com from 0900 UAE time this morning.

Chairman's Statement

2011 has been another good year for DP World, delivering a better than expected improvement in profit attributable to owners of the Company, before separately disclosed items, of $459 million, 23 % ahead of last year.

 

This improvement in profitability is a reflection of our strategy which sees us focus on the faster growing emerging markets and more profitable origin and destination cargo, meeting our customers' needs for the right capacity in the right locations and delivering a world class service to our customers to ensure we are the port operator of choice around the world.

 

Since the decline in global container volumes in 2009, DP World has worked hard to build a more robust and profitable portfolio.  We have continued to invest in our business through the downturn creating a balanced global portfolio of cash generative assets.  Each terminal is managed locally, to better identify and take advantage of the unique growth opportunities of the local market, with the added value of operational leverage and synergies that come from being part of a global network.  Over the last three years, DP World has invested in creating 25% more capacity in new and existing terminal operations, primarily in the faster growing emerging markets. 

 

Since 2009 we have achieved adjusted EBITDA[7] growth of 22% and an improvement in adjusted EBITDA margins from 38% to 43.9% despite a deceleration of the global economy. This has delivered a 55% improvement in profit attributable to owners of the Company before separately disclosed items, as our investments in new terminals mature and we benefit from the inherent operating leverage of our portfolio.

 

Strategy

DP World's strategy is to create, develop and manage the most efficient, safe and secure methods of directing the flow of goods through the critical gateways that drive world trade.  Underpinning our strategy is our focus on delivering profitable and sustainable growth for the owners of the Company through incremental revenue generation, improved logistical and operational efficiencies and cost management driving cash flow and returns.

Our continuing focus is to ensure that our business is well prepared to respond to the immediate needs of our customers, whether that is in reliability, additional capacity at existing ports, reducing turnaround time of vessels or improving the speed of evacuation of containers from the port.    Productivity improvements have been one of the highlights of 2011 with many terminals significantly improving productivity, which in turn further improves DP World customer loyalty and EBITDA margins.

Ours is a long-term industry where concessions are in excess of 30 years and our key top line driver of global trade is expected to continue growing.  As shipping lines plan for the future with larger vessels and new trading routes, port operators must follow suit. 

Our industry continues to see a shortage of the right capacity in the right locations to meet the medium term needs of our customers.  Port operators need to plan ahead to ensure that capacity is available to match changing trends in outsourcing of manufacturing, emerging consumer demand growth and to handle the increasing size of container vessels on order today.  DP World is focused on delivering the right capacity in the right locations, in line with market demand, through the expansion of existing terminals within our portfolio, or developing new terminals.  In 2011, we added over 5 million TEU of additional capacity through new developments and expansions of existing terminals including in India, Africa and China.  Our new port in Vallarpadam (India) opened early in the year and has recently handled the largest vessel ever to call in India.

Our customers are looking for continual improvements in efficiency as containers are moved on larger vessels to take advantage of economies of scale - the more efficient the port, the quicker the turnaround time of the vessel.  Integral to our strategy is investing capital to improve efficiencies around loading and unloading of vessels including new quay cranes.  During 2011 DP World has achieved many new productivity records, including record berth moves per hour in Antwerp (Belgium), Doraleh (Djibouti), Jebel Ali (UAE), Karachi (Pakistan), Mundra (India), and Southampton (UK).

Shipping lines and shippers alike are seeking greater efficiencies across the whole supply chain to improve their competitiveness in the marketplace.  DP World is seeking to smooth the transport of containers to and from our ports through 'beyond the gate' activities.  We have invested in a container train to improve connectivity between the ports and hinterland in the Indian Subcontinent region; we operate a container freight station outside the port gates in Mundra (India) and we have invested in and operate inland depots in Northern Europe and Vancouver (Canada). 

 

Our core business is handling containers and we expect to maintain approximately 80% of our revenues from container related activities.  We also remain focused on terminals that are located in origin and destination and gateway markets with approximately 75% of our volumes coming from the faster growing emerging and frontier markets.  This combination provides us with more stable revenue and cash flow, higher EBITDA margins and provides more resilience during challenging macroeconomic times.

Financial Strategy

DP World's financial policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business.

 

We have a strong balance sheet which provides us with the flexibility to support growth in our existing business, expand capacity in line with market demand and to maximise shareholder value.  We seek to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

 

The balance sheet is actively managed in line with the long-term nature of our global operations and is best suited to a combination of funding through cash flow from operations, long-term debt at the corporate level and project finance at the individual terminal level.  We believe that this should be achieved without leverage (net debt to adjusted EBITDA) exceeding 4 times in the current market environment.

 

DP World delivered strong cash performance during 2011.  Gross cash from operations increased by 5% to $1,159 million and funded capital expenditure of $481 million.  This strong cash flow, coupled with the proceeds of the monetisation in Australia, which has been held as cash for the majority of 2011, resulted in a significant reduction of net debt to $3,583 million.

 

Investment in our Portfolio

Long-term trade growth is forecast to continue and, with larger vessels joining the world fleet, port capacity today remains under pressure with high utilisation rates in some markets and low levels of productivity and efficiency in other markets.

In line with our strategy, DP World is focused on investing for the long-term capacity requirements of our customers, whether it is in developed markets which do not have the efficiencies or capabilities to handle the increasing size of vessels, or in developing markets which have limited container port capacity to meet their growing needs. 

During 2011 we added 5.3 million TEU to our global portfolio with major expansion projects at existing terminals Dakar (Senegal), Karachi (Pakistan) and Qingdao (China) as well as opening a new development in Vallarpadam (India).   Despite the new capacity additions, utilisation remains high, above 80% across our portfolio.

 

During the year we took two very important decisions relating to new capacity.  In October, we announced London Gateway (UK) will open in the final quarter of 2013.  London Gateway, surrounded by a logistics park, will be the closest deep water port to London and the South East, the largest consumer market in the UK.  London Gateway will be capable of handling the world's largest vessels and will have very high levels of productivity delivering a unique service to our customers. 

In December, we announced the development of a new terminal in Jebel Ali (UAE) to be operational in 2014. This is in addition to a 1 million TEU expansion of Jebel Ali's Terminal 2.  In 2011, Jebel Ali (UAE) grew volumes by 12% as it further cemented its position as a leading hub for trading in the Middle East, India and Africa.  The port is now operating at very high levels of utilisation and with current forecasts continuing to show strong growth across the region, additional capacity will be needed if we are to meet the increasing needs of our customers. 

Over the last five years we have invested in capacity for an additional 24 million TEU around the world. When taking into account our pipeline of new developments and major expansions, which will be rolled out in line with market demand, by 2020 we anticipate having global capacity handling in excess of 100 million TEU. We continue to see further opportunities to expand our existing terminal facilities through incremental capacity growth as well as adding new concessions in new locations. 

Dual Listing

On 1 June 2011, DP World Limited was admitted to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's main market for listed securities.   There was no new capital raised as part of the listing on the London Stock Exchange. The aim was to provide an additional platform to invest in DP World shares to help attract a broader range of investors, which we are pleased to say we have achieved despite the challenging stock market backdrop since the listing.

DP World shares now trade on both Nasdaq Dubai and the London Stock Exchange with the shares being fully fungible across both exchanges.

Dividend

 

The Board is recommending a full year dividend of 24 US cents per share (2010: 17 US cents per share[8]).  This comprises an increase of 10% in the underlying dividend to 18.7 US cents per share, supplemented by a special dividend of 5.3 US cents per share reflecting the separately disclosed profit attributable to owners of the Company[9].   This will result in a total dividend distribution of $199 million reflecting continued confidence in our ability to generate cash and support our growth plans whilst maintaining a stable dividend payout.

 

Subject to approval by shareholders, the dividend will be paid on Wednesday 2 May 2012 to shareholders on the relevant register as at the close of business on 10 April 2012.

 

Outlook Statement

 

The global macroeconomic uncertainty has continued into 2012.  With our portfolio focused on the faster growing emerging markets and more stable O&D markets, we continue to see growth across our portfolio in the first two months of the year, with an 11% improvement in gross volume growth. We remain committed to delivering improved operational and financial performance over 2011.

 

As we look ahead, we remain confident about the long term outlook for our industry.  We believe our continued investment in existing and new terminals around the world will ensure our portfolio is best positioned to meet the expectations of our customers and should allow us to continue to outperform.

 

 

Sultan Ahmed Bin Sulayem

Chairman

 

 

Review of Operational and Financial Results

 

On 11 March 2011, DP World and Citi Infrastructure Investors (CII), together with one of CII's major investors, formed a strategic partnership to invest in DP World's five container terminals in Australia.  DP World continues to operate and manage the five marine terminals. The strategic partnership saw DP World monetise 75% of its shares whilst retaining a 25% shareholding in the new joint venture.

 

For the purpose of 2011 financial reporting, our ports in Australia are included, as in previous years, in the Australia and Americas region, with all five container ports consolidated until 11 March 2011.  From 12 March 2011, the five ports are no longer consolidated in our accounts and are accounted for within equity-accounted investees.

 

Our revenue has benefited from the inclusion of a full twelve months of revenues from Callao (Peru) which opened at the end of the first half of 2010, and the inclusion of Paramaribo (Suriname) which joined the portfolio in August 2011, offset by the exclusion of revenue from our five terminals in Australia since 12 March 2011.

 

Our share of profit from equity-accounted investees has benefitted from the inclusion of our five terminals in Australia since 12 March 2011, offset by the exclusion of profit from P&O Trans Australia (POTA) since April 2011 and Marseille (France) since July 2011.

 

As a global business, we are exposed to currency translation on our reported results.  Over the period, the strengthening US dollar had a positive impact on reported adjusted EBITDA.

 

USD million before separately disclosed items Full details on page x onwards	2011	2010	%  change	Underlying change (C)
Consolidated[10] Throughput (TEU '000)	27,471	27,750	-1%	9%
Revenue	2,978	3,078	-3%	14%
Share of profit from equity-accounted  investees	142	140	1%	9%
Adjusted EBITDA [11]	1,307	1,240	5%	19%
Adjusted  EBITDA Margin	43.9%	40.3%	-	42.1%
Profit for the year	532	450	18%	24%
Profit for the year attributable to owners of the Company	459	374	23%	-
C.The underlying change shows what growth rates and margin would have been had the five terminals in Australia continued to be consolidated in DP World's accounts from 12 March 2011 and allows for a better comparison to the prior period.

 

Revenue for our consolidated terminals^[10] in 2011 was $2,978 million.  Containerised revenue accounted for 79% of our total revenue and was $2,355 million for the year.  Non-container revenue was $623 million and accounted for 21% of total revenue. 

 

Had the five terminals in Australia not been deconsolidated from 12 March 2011, underlying[12] revenue growth would have been 14% as underlying volume growth of 9% was supported by a 5% increase in underlying container revenue per TEU from a positive pricing environment and additional ancillary revenue.  Underlying non-container revenue increased 11%.

 

We continue to keep a tight control on our costs and have worked hard to move fixed costs to variable costs over the past three years with 64% of our total costs now variable.  In 2011, our underlying[13] costs increased 10%, while our underlying revenue increased 14%, reflecting this continued focus on cost management.  In addition, we continue to focus on improving terminal efficiencies so that we can handle more containers for the same or lower cost.  In 2011 our underlying cost per TEU at constant currency decreased by 1%.

 

Our portfolio of terminals accounted for as equity-accounted investees has reported a share of profit of $142 million.  Whilst many of our terminals in this portfolio have reported strong growth during 2011, this was offset by the exclusion of a share of profit from POTA which was divested early in 2011.

 

Adjusted EBITDA increased 5% to $1,307 million with an improved adjusted EBITDA margin of 43.9% from 40.3% in the prior year.  Whilst the deconsolidation of the Australian terminals enhanced our adjusted EBITDA margin, excluding the positive benefit from this, underlying adjusted EBITDA margins still improved to 42.1%.  This adjusted EBITDA margin improvement - slightly ahead of our expectations, is driven by a combination of better revenue generation than expected, improved utilisation to 82% and a successful reduction in cost per TEU.

 

Like for like container revenue[14] at constant currency grew 10%, ahead of volume growth of 8%, with container revenue per TEU increasing 2% to $92 as our terminals were able to push through tariff increases and attract more revenue for additional ancillary services.  Like for like adjusted EBITDA at constant currency grew 14% with like for like adjusted EBITDA margins at constant currency of 42.1% following a 2% reduction in cost per TEU.

 

Profit for the year before separately disclosed items of $532 million is 18% ahead of the prior year on account of the higher adjusted EBITDA and lower depreciation and amortisation due to the Australian terminals no longer being included from 12 March 2011.  Profit attributable to owners of the Company after separately disclosed items was $683 million with earnings per share of USD 82 cents.

 

During the year, we have continued to invest in our operations with capital expenditure of $481 million.  Almost 80% of this capital expenditure was invested in the Europe, Middle East and Africa region, primarily London Gateway (UK), Southampton (UK) and Dakar (Senegal). 

 

Review of Regional Trading

 

Europe, Middle East and Africa

 

USD million before separately disclosed items	2011	2010	% Change
Consolidated[15] throughput  (TEU '000)	19,110	17,503	9%
Revenue	1,884	1,742	8%
Share of profit from equity-accounted  investees	14	10	48%
Adjusted EBITDA[16]	861	793	9%
Adjusted EBITDA Margin	45.7%	45.5%

 

The strong results in 2011 in the Europe, Middle East and Africa region have been partially offset by the weaker performance in the Middle East (excluding UAE) as we have continued to see a challenging operating environment following the political unrest in the region.  That said, the Middle East region worked hard to mitigate a greater decline in performance and we have seen an improvement in the second half of the year in both the Middle East and the region as a whole.  There has been focused attention on cost management and improved productivity with notable new productivity records achieved in Southampton (UK) and in Jebel Ali (UAE) during the year.

 

Terminals that contributed to revenue for the region reported an increase to $1,884 million.  Container revenue accounted for 78% and was $1,470 million for the year.  Non-container revenue was $414 million and accounted for 22% of regional revenue.

 

This 8% increase in revenue to $1,884 million was driven by a 9% increase in container volumes and slightly improved container revenue per TEU to $77 as pricing improvements and additional revenue from ancillary services were offset by a change in cargo mix and lower volumes from the Middle East (excluding UAE).  Non-container revenue reported a small increase of 3% to $414 million as the 7% increase in the UAE region non-container cargo was offset by lower non-container cargo in the Middle East (excluding UAE) due to the unrest in the region.

 

Our share of profit from equity-accounted investees increased to $14 million as we continued to see an improvement in the performance of key equity-accounted investees in the Europe and Africa region. 

 

Adjusted EBITDA increased 9% to $861 million with improved adjusted EBITDA margins of 45.7%.  This improvement in adjusted EBITDA is driven by improved revenue generation for container and non-container operations, improved productivity and cost management. 

 

Favourable currency movements benefitted our reported results.  Like for like revenue growth at constant currency[17] was 7%, driven by volume growth of 9% and container revenue growth of 8%.  Container revenue per TEU remained unchanged at $76 million due to the mix of cargo being handled in the region. Like for like non-container revenue at constant currency improved 2%.  Like for like adjusted EBITDA growth at constant currency was 8% with adjusted EBITDA margin at 45.8% as cost per TEU was 2% lower than the prior year.

 

The UAE reported an increase in container volumes of 12% to 13 million TEU in 2011, growing container revenue by 14% as additional revenue came from both stevedoring and ancillary (storage) activities.  In addition, non-container revenue was slightly ahead of expectations growing 7% as infrastructure projects continued into the second half of the year driven by an increase in the import of steel and aluminium. 

 

During 2011, we invested $379 million across the Europe, Middle East and Africa region with the majority invested in infrastructure for London Gateway (UK) which we announced will open in the final quarter of 2013.   Southampton (UK) and Dakar (Senegal) both benefitted from investment in new equipment to ensure they were able to improve efficiencies in the terminals to benefit our customers.  Both terminals have subsequently won new customers and achieved productivity milestones.

 

Asia Pacific and Indian Subcontinent

 

USD million before separately disclosed items	2011	2010	% Change
Consolidated[18] throughput (TEU '000)	5,578	5,470	2%
Revenue	500	461	8%
Share of profit from equity-accounted  investees	117	96	23%
Adjusted EBITDA[19]	322	255	26%
Adjusted EBITDA Margin	64.5%	55.3%

 

The Asia Pacific and Indian Subcontinent region results were positively impacted by the opening of our new terminal in Vallarpadam (India), which replaced the old Cochin terminal, and new expansion capacity in Karachi (Pakistan) and Qingdao (China).    The underlying business has also performed extremely strongly on account of a significant focus on revenue generation and cost management driving adjusted EBITDA margins to 64.5% from 55.3%.                                                                                                                                                                                                                                                             

 

Terminals that contributed to consolidated revenue for the region experienced an increase in revenue to $500 million.  Container revenue accounted for 88% and was $442 million for the year.  Non-container revenue was $58 million and accounted for 12% of regional revenue.

 

This 8% increase in revenue to $500 million was driven by a 2% increase in container volumes and a 6% increase in container revenue per TEU to $79.  We saw a positive pricing environment across the region and ancillary revenue growth primarily from Karachi (Pakistan).  Non-container revenue continued to report strong growth of 22% to $58 million as the container rail business in India continued to grow.

 

Our Asia Pacific and Indian Subcontinent region contributes the majority of the share of profit from equity-accounted investees.  For the full year 2011, the region contributed $117 million, up 23% from 2010.  Whilst a key driver of this improvement was due to additional capacity in Qingdao (China), we have continued to see very strong growth across our portfolio of Asia Pacific terminals and had considerable success driving revenue and managing the cost base in 2011.

 

Adjusted EBITDA increased 26% to $322 million with improved adjusted EBITDA margin of 64.5%.  This improvement in adjusted EBITDA is driven by improved revenue generation for container and non-container operations, increased efficiencies and cost management.   In addition, adjusted EBITDA and adjusted EBITDA margin benefitted from the 23% increase in our share of profit from equity-accounted investees. 

 

Excluding the contribution from new terminals and positive currency movements, like for like revenue growth at constant currency[20] was 10%, driven by an 8% growth in container revenue as container volumes grew 2% and container revenue per TEU increased 6% to $80.  Like for like non-container revenue at constant currency increased 23%.  Like for like adjusted EBITDA at constant currency increased 26% with an adjusted EBITDA margin at 63.3% as cost per TEU was 3% lower than the prior year.

 

$16 million of our capital expenditure was spent in the region during the year, for the most part on maintenance capex, aside from some investment in Vallarpadam (India) which opened at the beginning of 2011.

 

Australia and Americas

 

On 11 March 2011, DP World and Citi Infrastructure Investors (CII), together with one of CII's major investors, formed a strategic partnership to invest in DP World's five container terminals in Australia.  DP World continues to operate and manage the five marine terminals.  The strategic partnership saw DP World monetise 75% of its shares whilst retaining a 25% shareholding in the new joint venture.

 

For the purposes of 2011 financial reporting, our terminals in Australia are included, as in previous years, in the Australia and Americas region with all five container ports consolidated until 11 March 2011. From 12 March 2011, the five terminals are no longer consolidated in our accounts and are accounted for as equity-accounted investees.

 

USD million before separately disclosed items	2011	2010	% Change	Underlying change (c)
Consolidated throughput[21] (TEU '000)	2,782	4,777	-42%	17%
Revenue	594	875	-32%	28%
Share of profit from equity-accounted  investees	10	35	-71%	-40%
Adjusted EBITDA[22]	203	271	-25%	37%
Adjusted EBITDA Margin	34.2%	31.0%	-	33.1%
C. The underlying change shows what growth rates and margin would have been had the five terminals in Australia continued to be consolidated in DP World's accounts from 12 March 2011 and allows for a better comparison to the prior period.

 

The Australia and Americas region has continued to deliver strong underlying growth over the prior year.  The reported results have been impacted by the deconsolidation of the five terminals in Australia but mitigated by the additional revenue from Callao (Peru), which contributed for the full period and strong growth in non-container revenue led by Buenos Aires (Argentina) which saw an increase in wheat exports and opened a new cruise terminal.

 

Revenue for our consolidated terminals in 2011 was $594 million.  Containerised revenue accounted for 75% of our total revenue and was $443 million for the year.  Non-container revenue was $151 million and accounted for 25% of total revenue. 

 

Had our five terminals in Australia not been deconsolidated from 12 March 2011, underlying revenue growth would have been 28% higher than the prior period, driven by an underlying volume growth of 17%.  This volume growth was supported by a 9% increase in underlying container revenue per TEU from a positive pricing environment and additional ancillary revenue.  Underlying non-container revenue increased 32%.

 

Our reported share of profit from equity-accounted investees was $10 million, lower than the same period last year as the inclusion of new profit from our joint venture in Australia was offset by the loss of profit from POTA.  DP World sold its remaining shareholding in P&O Trans Australia (POTA) on 17 April 2011.

 

Adjusted EBITDA was $203 million with adjusted EBITDA margin of 34.2%.  Had the five terminals in Australia not been deconsolidated, underlying adjusted EBITDA would have been 37% ahead of the prior period and underlying adjusted EBITDA margin would have been 33.1%. This increase in adjusted EBITDA was partly attributable to better results across all our terminals in the region and the addition of a full twelve months of Callao (Peru).

 

Like for like revenue[23] at constant currency grew 14% driven by container revenue growth of 13% as volumes grew 9% and container revenue per TEU increased 4% to $164 as our terminals were able to push through tariff increases and attract more revenue for ancillary services.  Like for like at constant currency non-container revenue increased 19%.  Like for like adjusted EBITDA at constant currency increased 19% with adjusted EBITDA margin of 32.4% and cost per TEU 1% lower than the prior year.

 

$84 million of our capital expenditure was spent in the region primarily improving efficiencies at existing operations in the Americas region and investing in a new cruise terminal in Buenos Aires (Argentina) which has helped drive non-container revenues for the region.

 

Depreciation and Amortisation

 

Depreciation and amortisation of $429 million is lower than the prior year due to the terminals in the Australia region no longer being included, mitigated by additional capacity joining the portfolio in the Middle East, Europe and Africa and the Asia Pacific and Indian Subcontinent regions.

 

Net finance costs

 

Net finance costs of $288 million (before separately disclosed items) are slightly lower than expected as we held higher cash balances for the duration of the year. 

 

Higher finance costs of $423 million when compared to $368 million last year are due to slightly higher borrowing costs in some of our subsidiary debt.  This was offset by higher finance income of $135 million when compared with $89 million last year as our cash balances increased to $4,159 million from the proceeds of the Australia transaction on 11 March 2011.

 

Interest cover (adjusted EBITDA and net finance costs) has improved to 4.5 times from 4.4 times in 2010.

 

Taxation

 

DP World is not subject to income tax on its UAE operations.  The tax expense relates to the tax payable on the profit earned by overseas subsidiaries, as adjusted in accordance with the taxation laws and regulations of the countries in which they operate.  For 2011, DP World's income tax expense was $59 million before separately disclosed items.

 

In separately disclosed items, $7 million of income tax expense has been included relating to  the impairment of deferred tax assets in the Middle East, Europe and Africa Region, offset by a tax credit on the impairment of assets in the Australia and Americas region.

 

The effective tax rate before separately disclosed items was 16.0%, a reduction from 16.7% last year as a result of the deconsolidation of the five terminals in Australia.

 

Profit attributable to non-controlling interests (minority interest)

 

Profit attributable to non-controlling interests (minority interest) is slightly lower than the prior year at $73 million reflecting the change in accounting at Sydney and Adelaide (Australia) from 12 March 2011 when we stopped accounting for the Australia terminals as consolidated terminals.

 

The key terminals where we have non-controlling interests are Doraleh (Djibouti), Buenos Aries (Argentina), Karachi (Pakistan) and Southampton (UK).

 

Separately disclosed items

 

In 2011, DP World had $219 million of separately disclosed items.  The $484 million profit on sale / termination of business was primarily offset by $244 million impairment of assets.

 

The $484 million primarily relates to $436 million profit (net of tax) on the monetisation of the Australian terminals and the sale of our interest in POTA, an associate in the Americas and Australia region resulting in a profit (net of tax) of $50 million.

 

The $244 million impairment of net assets in a subsidiary includes $100 million in the Asia Pacific and Indian Subcontinent region representing the difference between the value in use and the carrying amount as at the reporting date primarily due to changes in external factors outside the control of the Group.  In addition it includes $91 million of investments in equity accounted investees classified as assets held for sale in the Middle East, Europe and Africa region and impairment of property plant and equipment in the Australia and Americas region and the Europe, Middle East and Africa region of $30 million and $23 million respectively.

 

The remaining separately disclosed items relate to a provision of $3 million against deferred tax assets in an equity accounted investee in the Middle East, Europe and Africa region, a loss of $11 million on currency options and interest rate swaps relating to the Americas and Australia region and $13 million of deferred tax assets impaired in a subsidiary in the Middle East, Europe and Africa region, which is offset by $6 million of tax credit on impairment of assets in the Australia and Americas region.

 

Capital Expenditure

 

We have continued to adopt a flexible and discretionary approach to our capital expenditure in 2011, investing $481 million over the twelve month period. 

 

Investment in new developments accounted for approximately 50% of our total capital expenditure during the year with the majority focused on our new development at London Gateway (UK) which will open in the fourth quarter of 2013.   Approximately 35% was invested in expansions at Sokhna (Egypt) and Dakar (Senegal).  

 

Alongside these larger capital investment projects, additional capital expenditure was focused on our existing portfolio to ensure that our terminals are improving efficiencies and productivity or investment in revenue generation and cost saving opportunities; Southampton (UK), Jebel Ali (UAE) and CT3 (Hong Kong) all benefitted from investment leading to improved productivity.

 

Balance Sheet

 

In 2011, total assets reduced to $18.8 billion as at 31 December 2011 and total equity reduced to $8.2 billion primarily related to currency translation movement. 

 

The group's investment in net assets of equity-accounted investees as at 31 December 2011 remained flat at $3.5 billion with the addition of the Australia operations mitigated by the sale of our shares in POTA (Australia) and the joint venture that owns Marseille (France).  We invested an additional $12 million in equity-accounted investees including Caucedo (Dominican Republic), Embraport (Brazil) and Rotterdam (Netherlands).

 

Accounts receivable and pre-payments (non-current) have increased to $260 million from $88 million in 2010.  This increase relates to long-term shareholder's loan to two of our equity-accounted investees. 

 

Bank and cash balances increased to $4.2 billion, an increase of $1.6 billion mainly from the monetisation of our investment in Australia in March 2011.

 

Cash flow

 

Gross cash flow from operating activities was $1,159 million, 5% ahead of last year as a result of a better performance from our terminals.  Net cash from investing activities increased to $1,223 million including the proceeds from the monetisation of the Australian assets. 

   

Net Debt

 

As at 31 December 2011 our net debt was $3,583 million.  Net debt is significantly lower than the prior year as the $1,476 million proceeds from the monetisation of investments in Australia, which were received on 11 March 2011, increased bank balances and cash to $4,158 million.  Gross debt decreased from $7,770 million to $7,742 million as subsidiary debt increased in Cochin (India) and Dakar (Senegal) following capital investment in additional capacity, in part offset by the repayment of $197 million of debt across a number of subsidiaries particularly in the Indian Subcontinent.

 

Long-term corporate bonds totalled $3.25 billion made up of $1.75 billion 30 year unsecured MTN due in 2037 and $1.5 billion 10-year unsecured sukuk due in 2017. In addition we have a fully drawn $3 billion syndicate loan facility due in October 2012 and $1.65 billion of debt at the subsidiary level.   As at 31 December 2011 leverage (net debt to adjusted EBITDA) was 2.7 times.

 

On 27 March 2012 DP World announced that it will repay all $3 billion outstanding under the $3 billion syndicate loan facility, due to mature in October 2012, by 10 April 2012, using existing cash balances.  At the same time DP World will cancel $2 billion of this facility. The remaining $1 billion of undrawn facility will be replaced by a new 5-year revolving credit facility of $1 billion.  We are in the final phase of agreeing documentation with the banks that have committed to this new facility and expect it to replace the existing facility shortly.

 

Return on Capital Employed

 

DP World has a portfolio of long-term assets with an average concession life of 40 years.  As at the end of 2011, 25% of our capacity was less than three years old and is therefore some way from delivering maximum potential EBIT.  When calculating return on capital employed (EBIT divided by total assets less current liabilities) for the group, this 25% of immature capacity significantly reduces the overall returns.  In 2011, we reported an improved return on capital employed to 6.0% against 4.4% in 2010.  Subject to the age profile of our portfolio at any one time, we would expect to deliver improved returns on capital employed as terminals mature and generate significantly higher cash flow. 

 

 

Mohammed Sharaf   Chief Executive Officer

Yuvraj Narayan Chief Financial Officer