Annual Report and Accounts 2013

Our Strategy in Action Financial

To ensure we retain our status as an attractive and competitive business for investors, we must drive sustained long-term shareholder value.

At DP World we actively manage our portfolio and our finances with two principal strategic aims in mind: to maintain the diversity of our network of terminals globally, focusing on maximising financial returns from our business; and to ensure we have a strong balance sheet.

During 2013, we took the opportunity to strategically adjust our portfolio, divesting and monetising some Hong Kong assets and recycling capital into faster growing markets and new developments, including Jebel Ali (UAE), Embraport (Brazil), Rotterdam (the Netherlands) and the DP World London Gateway port (UK), which are all investments for the future.

We undertook two linked transactions in Hong Kong, a relatively mature market, with the first being the divestment of our CT8 terminal. At the same time we entered a strategic partnership with the Hong Kong arm of the Australian headquartered Goodman Group, which develops and manages industrial and commercial business space, to monetise our second Hong Kong terminal, known as CT3, and the giant logistics facility ATL, which is located alongside CT3. We retain a 25% ownership of those two assets as well as retaining management and oversight of CT3.

The transactions were achieved at compelling multiples with the total consideration paid for the two transactions being $742 million, with a net gain of approximately $152 million. The transactions were aligned with our strategic goals and direction, reducing leverage and allowing us to reinvest capital into other markets.

The Hong Kong transactions built on the divestments and monetisations of 2012, which saw us exiting non-core businesses with low returns, small joint ventures and terminals where we had little operational control or were a minority shareholder.

Over the past two years, we have divested approximately 3.9 million TEU capacity, however, our investment pipeline will have added more than 10 million TEU to our global capacity by the end of 2014.

These activities have resulted in us maintaining the shape of our business with around 70% of the cargo we handle destined for or originating from the market our terminals serve (origin and destination cargo), and three quarters of our business in emerging markets, which have greater growth potential than mature markets.

It has also meant that we have significantly reduced our net debt to adjusted EBITDA to 1.7 times, compared with 2.0 times in 2012.

At the same time as maximising the value of our existing portfolio, we maintained a disciplined approach to new investments during 2013. We have stringent investment parameters in place that require a return on capital employed of 15% over the life of any project we invest in.

Our aim is to maintain or increase overall market share by being in the right locations and offering the right products to our customers. When entering or exiting markets, we do so with strict financial criteria and a considered approach. With an already well-diversified network, the focus in 2013 was to grow capacity in existing terminals and developments. And since ours is a long-term business, we make sure we match our debt profile to our long-term objectives, avoiding short-term liabilities and maximising returns for our shareholders today and tomorrow.

key goals and targets

We set challenging financial targets to drive optimised productivity and to deliver sustainable value. Our terminals contribute to our financial performance by:

  • increasing asset utilisation;
  • increasing productivity;
  • reducing costs; and
  • increasing current and new sources of revenue.

By actively managing our global portfolio and ensuring access to the best sources of capital for the long-term, we manage our leverage and investment grade to ensure we remain competitive. By operating our terminals through long-term concessions and strategically investing in value-adding terminals where we have management control, we manage our portfolio by strategically investing and divesting to maximise value for tomorrow and beyond.

"OUR AIM IS TO MAINTAIN OR INCREASE OVERALL MARKET SHARE BY BEING IN THE RIGHT LOCATIONS AND OFFERING THE RIGHT PRODUCTS TO OUR CUSTOMERS. WHEN ENTERING OR EXITING MARKETS, WE DO SO WITH STRICT FINANCIAL CRITERIA AND A CONSIDERED APPROACH."

Yuvraj Narayan CHIEF FINANCIAL officer