28th August 2008

RESULTS FOR THE HALF YEAR ENDED 30TH JUNE 2008

Financial Highlights

• Group revenue up 21% to £90.1m (2007: £74.4m)

• Underlying1 port operating profit up 38% to £22.8m (2007: £16.5m)

• Port operating profit up 36% to £22.4m (2007: £16.5m)

• Underlying1 profit before tax up 38% to £16.5m (2007: £12.0m)

• Profit before tax £9.0m (2007: £12.0m)

• Underlying1 earnings per share up 12% to 27.5p (2007: 24.5p)

• Basic earnings per share 10.4p (2007: 24.5p)

• 5.4% increase in interim dividend to 16.6p (2007: 15.75p)

Operational Highlights

Ports

• Strong earnings growth - underlying1 port operating profit up 38% on tonnages up 5%

• Strong performance at Tilbury - reflecting benefit of secure contracts, better mix of cargo and tight cost control 

• Scottish Ports - improved performance due to better revenue generation and tight cost control 

• Good performance from Nordic

                -   significant increase in volume of recycled materials at Tilbury facility

                -   contract to provide recycling facilities for Lincolnshire County Council (through JV)

Property

• Approval received for Leith Docks Outline Planning Application on 27th August 2008

                 -   Edinburgh's largest ever expansion

• Planning application for the Hub to be submitted before year end

• Hub scheme to be marketed to strategic partners 

• Property development assets at year end likely to be affected by market conditions

• Reduction in infrastructure spend with focus on securing consents

Energy

• Strategic partnership with Scottish and Southern Energy plc to develop renewable energy projects

  Charles Hammond, Group Chief Executive, said:

"Our ports business performed strongly in the first half of 2008 and we remain confident that the Group will have another successful year.  The security and breadth of our business positions us well for more challenging economic conditions.  New areas of activity in Nordic and energy, coupled with a strong project pipeline, give us exciting opportunities to grow earnings. We remain confident of further planning progress within our property portfolio as we develop long-term value in our property business."  

Enquiries:

Notes to Editors:

Forth Ports PLC owns and operates seven commercial ports in the UK -Tilbury on the Thames, Dundee in the Firth of Tay and five in the Firth of Forth - Leith, Grangemouth, Rosyth, Methil and Burntisland. We also operate out of Chatham in Kent under the Nordic banner.

Within and around the Firths of Forth and Tay, Forth Ports manages and operates an area of 280 square miles of navigable waters, including two specialised marine terminals for oil and gas export and provides other marine services, such as towage and conservancy.

The Group also has significant property interests which it continues to develop as part of its commitment to increase shareholder value.

  CHAIRMAN AND GROUP CHIEF EXECUTIVE'S REPORT

The Group produced a strong first half performance in 2008.  Group revenue increased by 21% to £90.1m (2007 - £74.4m).  Group operating profit amounted to £22.0m compared with £16.0m in 2007. With the benefit of a six month contribution from the Nordic group, underlying2 port operating profit increased by 38% from £16.5m to £22.8m, whilst the property business recorded a modest loss of £0.4m comparable to the first half of 2007 (£0.5m). The focus in property remained on the Leith Docks Outline Planning Application ("LDOPA") where significant progress has been made.  Profit before tax amounted to £9.0m compared with £12.0m in 2007 reflecting a £7.5m reduction in value at Ocean Terminal (2007 - £nil) as a result of a movement in commercial property yields. Basic earnings per share amounted to 10.4p (2007 - 24.5p) with underlying earnings per share3 up 12% at 27.5p (2007 - 24.5p).

The Board has approved an interim dividend up 5.4% to 16.6p per share (2007 - 15.75p). The interim dividend will be paid on 7th November 2008 to shareholders on the register at 10th October 2008.

Review of Ports Business 

The strong growth in our ports business was achieved with good performances in each of the divisions and after absorbing an additional £0.5m of fuel costs in the first half. Revenue increased by 23% to £89.4m (2007 - £72.4m).  Underlying1 operating profit increased by 38% to £22.8m.

Total tonnage increased by 5% to 24.3 million tonnes compared with 23.1 million tonnes in 2007.  Piped cargo tonnages increased by 7% to reach 17.3 million tonnes compared with 16.1 million tonnes in 2007. Dry cargo tonnage remained steady at 7 million tonnes.

Tilbury

Tilbury had a good first half.  Whilst the tonnage through the port was marginally up at 4.1 million tonnes, the port's financial result increased significantly reflecting the benefit of secure contracts, a better mix of cargo and a tight control of costs. The ro-ro traffic continued to expand and saw a 30% increase in unit traffic. Although grain tonnages were slightly lower at 0.3 million tonnes, there was a greater volume of imports which enhanced returns. The short-sea container terminal marginally increased its box numbers and the bulk terminal increased throughputs by nearly 30% in the first half of the year.

Tilbury Container Services Limited increased its volumes by 26% to reach over 179,000 boxes with the addition of several new customers. It also benefited from a temporary transfer of ships from other ports which were congested.  

As of 1st April 2008, four of the port's Finnish customers transferred their business to another of the port's customers, Stanton Grove. This latter company has leased the three Finnish Terminal sheds and other temporary accommodation. The port continues to handle the ship side work for Stanton Grove.  With the increase in rent from the new operation, we expect to improve the financial performance from this asset.

Tilbury has made its final submission in support of its bid to become the East London Logistics Centre for the Olympics. A decision is expected in September.  We have been informed that a number of our customers have been successful at the pre-qualifying stage of bidding for timber and plywood contracts for the Olympics.  

Work is progressing well on the new Cemex grinding and blending facility which remains on course for completion in 2008.  We have agreed to lease a further area for lorry parking to Cemex which should be handed over by the end of this year.

  In February we acquired 65 acres of land just outside the port.  Thurrock Council and Thurrock Thames Gateway Development Corporation are currently reviewing the land uses in the area. We have put forward a strong case to develop the land and have it rezoned for port expansion which will create further employment within the Thames Gateway.  

Nordic

The Nordic business performed well and in line with expectations in the first half of 2008. There was a significant increase in the volume of recycling materials going through the Material Recycling Facility ("MRF") at Tilbury where a second shift was introduced at the beginning of the year and a third shift introduced in the second quarter.  

Nordic's joint venture company in Lincolnshire has won a contract to provide recycling facilities for Lincolnshire County Council. Initially, the recycled material is being passed through the MRF at Tilbury until such time as a new facility can be built in Lincolnshire. The planning application for the new facility is currently with the Council.

We intend to pursue a number of opportunities to expand the Nordic business by investment and/or acquisition over the course of the next few years.

Scottish Ports 

The financial performance improved due to better revenue generation and a tight control of operating costs.  The total throughput amounted to 6 million tonnes (2007 - 6.5 million tonnes). Within this figure, the dry cargo tonnage fell by 0.4 million tonnes to 2.5 million tonnes whilst the piped cargo tonnage reduced marginally to 3.5 million tonnes (2007 - 3.6 million tonnes). The modest reduction in piped cargo was attributable to a longer than expected start up period after the three day strike at INEOS; the dry cargo was affected by the reduction in coal tonnages at Rosyth and Leith.  

Grangemouth

The total throughput at Grangemouth amounted to 4.5 million tonnes, up marginally on 2007. Container volumes reached their highest level ever with a total of around 75,000 boxes handled in the first half of 2008 compared with 64,500 units in 2007, an increase of 16%. Although timber and paper & pulp were up in tonnage terms, the iron and steel tonnages were lower in the first half of 2008 compared with the first half of 2007.

A five year extension to the existing contract has been concluded with INEOS in respect of most of their volume through Grangemouth. 

Leith

Leith handled 0.9 million tonnes compared with 1 million tonnes in the first half of 2007. Coal tonnages were lower by 0.2 million tonnes, however there was an increase in aggregates and new contracts for Bredero Shaw which resulted in the importation of iron ore and steel pipes in the first half of 2008. It is expected that the additional volume for Bredero Shaw will compensate for a reduced coal tonnage in the second half.

Dundee

Dundee tonnages were steady at 0.5 million tonnes. The second new grain drier has been commissioned this month to meet the demands of the increased grain tonnages contracted through the port in the second half of this year.

Rosyth and Fife Ports

It was announced, during the first half, that the Superfast passenger/freight ferry service between Rosyth and Zeebrugge would cease with effect from the middle of September.  This will have no material effect on the port's performance.  Strenuous efforts are being made to find a replacement shipping line for this route. We are currently in discussions with potential operators who may be able to provide an alternative service.

Other customer enquiries for Rosyth are at an advanced stage.

Piped Cargo

Piped cargo tonnages increased to their highest level for four years with throughputs of 12.1 million tonnes at Hound Point (2007 - 11.1 million tonnes) and 1.7 million tonnes at Braefoot Bay (2007 - 1.4 million tonnes).

Property

We continue to make planning and physical progress in our property business. Our work in the first half of 2008 has been focused on the LDOPA which was submitted to City of Edinburgh Council ("CEC") in September 2007.

We are delighted that CEC approved the LDOPA at a meeting of the Planning Committee on 27th August. This is a significant step forward in laying the foundations for the long-term regeneration of Edinburgh's Waterfront. The next steps in the process are a referral of this decision to the Scottish Government and a conclusion of a detailed Section 75 Agreement (contribution to public facilities). As part of this approval, both parties have committed to examining alternative public-private mechanisms for funding infrastructure costs related to the Waterfront such as Tax Incremental Financing. A case for such funding will be made shortly to the Scottish Government. Further details regarding the decision can be found in a separate RNS announcement made yesterday.

We have worked closely with CEC and other consultative bodies to ensure that the views expressed on the planning application have been considered as fully as possible. As one example, we have had extensive discussions with Scottish Natural Heritage ("SNH") concerning the tern colony which is located within the operational port of Leith. Having convened a scientific panel by agreement with SNH, the proposed outcome will reduce the original density of the LDOPA by some 700 units to take account of the habitat requirements of the birds. This has also resulted in a reassessment of where some of the public realm areas within the development should be placed.

Work on the Hub masterplan is now close to completion. It is a mixed use development encompassing the first two villages of the Leith Docks development and will include residential, hotel, commercial and retail space. We expect the planning and design statement to be finalised shortly and a planning application to be lodged before the end of the year. We will then commence the marketing of the scheme as we seek a development partner.

The ASDA supermarket is progressing well on the site at Western Harbour and should be open for business before Christmas. A new bus service has been introduced by Lothian Buses to the Western Harbour development which will enable residents to commute quickly to the city centre. The reclamation area at Western Harbour is almost completely reclaimed and plans are well advanced to start work on the central park area towards the end of the year.  Work is also progressing on schedule on the tram link to the Waterfront from the city centre.

  Work is progressing on the planning application for the new entrance for Ocean Terminal. We have worked with Transport Initiatives Edinburgh to design the new tram plaza area outside the shopping centre. When the tram starts operation in 2011, this should have a very positive effect on footfall in Ocean Terminal.

The UK property market generally, and the residential market in particular, has experienced a further downturn this year. We therefore believe that, despite the positive effect of planning and physical progress on our development assets, there is likely to be a reduction in the market value of these assets (including Ocean Terminal) when they are valued at the year end.  This expectation reflects the belief that there will be a deferral of disposals and that where disposals occur, they will be at lower levels than had been previously assumed. Based on expected house price declines in the current year, land values are generally thought to be down in a range of between 15% and 30%.

The Directors have taken advice on the Market Value of Ocean Terminal from Drivers Jonas, Chartered Surveyors, who are the independent valuers of Ocean Terminal. On that advice, the Directors have reduced the Group's share of the valuation by £7.5m to take account of a movement in the yield since the last full valuation in December 2007. As normal, a formal independent valuation of Ocean Terminal will be carried out by Drivers Jonas at the year end.

In September 2005, we stated that we were pursuing a strategy of maximising asset value rather than realising short-term profits at the expense of this primary aim. This strategy has not changed and we remain firm that there will be no sales of development plots for the next few years. At the same time, we emphasised our belief that a measured approach to infrastructure development spend was required to create a new waterfront destination. Given the current conditions in the property market, we have reassessed the timing and focus of our spend over the next few years and have deferred it by over £40m which should result in a spend of around £30m in the three year period 2008/10.  The focus of our spend in the next two years will be:  securing planning consents, investing in Ocean Terminal and the tram link to the Waterfront and improving the physical environment at Western Harbour.  This approach remains consistent with our strategy of maximising asset value.

Energy

At the end of June, we were pleased to announce the formation of a strategic partnership with Scottish and Southern Energy plc ("SSE") to develop renewable energy projects. The first joint venture company will be formed to build, own and operate four 2 megawatt wind turbines in the Port of Tilbury where planning approval was granted in May. With the benefit of SSE's supplier connections, it is hoped that the four wind turbines will be commissioned and in operation by the second half of 2009 at a total cost of approximately £12m. This green energy will account for over 25% of Tilbury's electricity requirement.

The strategic partnership with SSE will also look at other renewable energy projects of up to 200 megawatts for our extensive property development opportunities at Leith and also within our Scottish Ports, particularly Grangemouth, Dundee and Methil.  These opportunities include multi-fuel plants as well as wind generation opportunities.

Finance 

The three warehouses which constituted the Finnish Terminal asset at Tilbury were leased out in April of this year. As a result, the assets were transferred from operational land and buildings to investment property producing an uplift in value of £24.5m which was put through the Statement of Recognised Income and Expense, increasing the total fair value of investment property to over £221m at 30th June 2008.

  The Directors have received advice from Bidwells, Property Consultants, on the fair value of the Group's investment property. Whilst the commercial property market has seen yields move out since the end of last year, given patterns of demand for port facilities and higher levels of activity within the ports business, the Directors do not believe that there has been a material change in the overall fair value of the investment property between that date and the half year. The properties within this category are nearly all held for the long-term and are an integral part of the ports business.

The net debt at the half year amounted to £213.2m compared with £205.5m at 31st December 2007.  The total banking facilities were increased by £50m during the half year and now stand at £300m. Of this, a revolving credit facility of £100m is due to be repaid on 30th June 2009.  Negotiations have commenced to replace this facility.  The level of gearing at 30th June amounted to 75% (2007 - 77%). Interest cover, measured on net interest payable excluding the effects of the unwinding of the discount on zero coupon loan stock and long-term receivables, was 3.1 times covered (2007 - 3.1 times).

The effective corporation tax rate for the half year is 28.5%. The estimate for the full year is an effective tax rate of more than 100%. This takes account of the decision by the Government to abolish industrial buildings allowances over the next three years which, in itself, will result in an additional tax charge this year of £26.3m to reflect the abolition of this very significant corporation tax allowance.

The actuarial deficit at the half year under IAS 19 (Employee Benefits) amounted to £24.9m compared with a deficit of £6.5m in 2007. The increase in the deficit reflects the change in liability assumptions to reflect the appropriate discount rate, increased price inflation and salary growth levels together with an upward adjustment to the mortality assumption.  The deficit also incorporates the reduction in the fair value of the pension scheme assets at the half year.

The cash inflow generated from operations amounted to £32.1m (2007 - £33.6m). The capital expenditure spend in the first half of 2008 amounted to £14.4m compared with £5.6m in 2007.  The most significant expenditure was £10.8m for the acquisition of the additional land at Tilbury.  Property infrastructure spend in the same period was £2.5m (2007 - £7m).

Prospects 

Our ports business performed strongly in the first half of 2008. We believe that the security and breadth of our business is resilient to more challenging economic conditions. New areas of activity in Nordic and energy, coupled with a strong project pipeline, give us exciting opportunities to grow earnings to generate further value for shareholders. We remain confident of further planning progress within our property portfolio and the building of the physical infrastructure which will continue to support our commitment to the realisation of long-term value from our property business.

Overall we remain confident that the Group should have another successful year. 

Christopher Collins                                                                                Charles Hammond

CHAIRMAN                                                                                       GROUP CHIEF EXECUTIVE

28th August 2008

  CONDENSED CONSOLIDATED INCOME STATEMENT

Details of dividends are shown in Note 16.

All results relate to continuing activities.

  CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

  CONDENSED CONSOLIDATED BALANCE SHEET