AGM Statement

RNS Number : 0169E

Guinness Peat Group PLC

24 May 2012

 



GUINNESS PEAT GROUP PLC

("GPG" or the "Company")

Announcement

Annual General Meeting: Chairman's Presentation

GPG announces that at its Annual General Meeting ("AGM") to be held in Auckland, New Zealand on 24 May 2012 at 9.30 a.m., the Chairman will make the following presentation:

Fellow shareholders, before proceeding to the formal business of the Meeting, I will say a few words about the Company.

In the 2011 financial year and in the months since, the board has continued to focus on the strategy endorsed at the 2011 Annual Meeting.  We have encountered no reason to change that strategy and it is our intention to be very substantially advanced towards conclusion by the end of this year.  We reaffirmed this at our Board meeting yesterday. You have been distributed a significant amount of information about the process and the underlying assets and liabilities already and it is not my intention to repeat this information today. We have also undertaken extensive analysts briefings on the GPG results, Coats results and the pension plan issues to ensure that the market is fully informed about the stock. We will continue to be as transparent as is commercially responsible going forward. This will include immediate advice to the market as any underlying asset is realized.

Cash proceeds representing one third of the starting value of the investment portfolio have been generated to date. In total this represents approximately £246 million.  The flow of announced divestments has been slower in the first quarter of 2012.  I expect that with processes currently underway this flow will pick up over the next two quarters.  At our Board meeting yesterday we also confirmed the originally identified two to three year period for completion of our strategy.

The market continues to apply a significant discount to our reported net asset value despite average realizations to date (excluding dividends) being within 2% of the values ascribed to those assets at 1 January 2011. Where we have thought it prudent to so do, we have made adjustments to impaired assets again in the 2011 Accounts. Clearly the market ascribes uncertainty to the values which will be realized or inherent in assets remaining to be realized or residual and distributed in some manner once those values reach shareholders directly and after deduction for liabilities still to be dealt with and operational costs. The assets which we still hold are affected by the current volatility in equity markets. If we consider that any assets are substantially and in an ongoing sense altered in value this will be reflected in our half year report.

Shareholders should note that the Group's liabilities will be substantially reduced on repayment of the second capital notes tranche later this year. There will be, we intend, a much higher level of clarity at least on the long term effect of the Brunel and Staveley pension schemes during this year as a result of work currently being undertaken in respect of those schemes with the various trustees and actuarial advisors.

As reported to the market last week, Coats' trading conditions in the first quarter of this year remained subdued.  The difficult environment continued into April , specifically in the Industrial Division.  Despite this, management is still optimistic for a recovery in the second half of the year.

The Coats Board expects tough trading conditions to continue beyond 2012 and is continuing to implement changes  in the business as market circumstances dictate.  It continues to invest in components of the business that offer the best growth potential.

A number of shareholders have requested some advice on operating costs.  The operational costs of the business are high, reflecting the historic complexity and methods of the Group and the arrangements put in place to ensure orderly realisation. We have in place a wind down plan which step by step eliminates costs.  Further staff will leave in mid-2012, group companies are being wound up, premises are being exited or downsized as work and lease terms permit, and the pace of such activities increases as assets are sold and legacy issues resolved. The current directors fees are determined from professional advice and recognise the need for some directors to take executive roles on some processes. They represent a very considerable saving over historical practice without the holiday, bonus, and other entitlements which have proven so costly to shareholders over the years.

I have also been asked by a number of shareholders to explain the incentive structures operative in the Company at the present time.  There are no incentive structures in place for directors, other than historical (i.e. pre-2010 options arrangements) which impact Blake Nixon and Ron Brierley.  These are not pitched at a level which is currently an effective incentive and will not be altered or replaced.  The same applies to any historic options to staff.  Staff have retention and redundancy arrangements which are commercially reasonable and which are designed to retain skills needed to complete the Company strategy.  Investment staff are subject to an incentive package designed to reward for asset realisations within the planned timeframe at best return.  To the extent that the Board decides, which it may and has done, to make divestment decisions earlier or at lower value than originally planned, these arrangements carry an implicit time value of money risk for the staff involved.

Our team is currently engaged on active sale processes across a number of assets. We continue our policy of not commenting on such processes until they are complete to protect asset value for ourselves and to be responsible to the other parties who are naturally involved in most cases.

Some of you will be concerned about dividends. It is not our intention to announce a dividend at this time. That matter will be considered alongside other methods of returning value to shareholders. The most efficient means will be chosen at each stage. I am not able today to indicate the timing, method of or amount for future capital returns. Having said that, we have been working on arrangements to commence a share buyback. The Board anticipates that, provided resolution 10 is passed today, it will seek to undertake an on-market buyback.  This would be via a programme over the coming year in accordance with the limits, including price restrictions, set out in that resolution.  A further announcement would be made before any buyback commences. We see this as potentially an ongoing programme as our divestment and cash position allows.

Before moving on to the formal business of the meeting, I would like to thank shareholders for your continued interest in being investors in GPG and for your attendance here today. I am very aware of the frustration of many shareholders that matters are not moving more quickly to a conclusion or that better results in terms of value realisation are not being made. The assets of the company are not readily in a form which allows of a simple process. The structures in which they are entangled and the lack of decisive direction on many critical matters, along with a culture of non-accountability at Board level, have left a difficult legacy. If one takes a group of individually mainly sound assets, some very good assets and a couple of big liabilities, and mixes them with poor structure and control the outcome is very difficult. This is known in corporate finance as the Pat Lam theorem.  We can only play with the cards left behind.

Your Board remains intent on delivering the agreed process.  We continue to apply, as the Italian activist and philosopher Antonio Gramsci put it, "optimism of the will, pessimism of the intellect" to the task ahead. 

Chris Healy

Company Secretary

Guinness Peat Group plc

Tel: [phone]

24 May 2012

Enquiry details are:

New Zealand and Australian media:      Geoff Senescall on:        [phone]

UK media:                                        Kevin Smith on:             [phone]

 

END

 

 

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