Final Results
Guinness Peat Group PLC
28 February 2005
28 February 2005
Guinness Peat Group plc
("GPG" or "the Company" or "the Group")
PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2004
CHAIRMAN'S STATEMENT
A relatively modest year for GPG in accounting terms with profit down from
£64.0 million to £25.3 million. A rather better result was the
continued overall increase in value of the Company (expressed in terms of market
value of quoted investments and book value elsewhere) of some £87 million which
is probably a more appropriate measure for a company such as GPG.
The reasons for the lower profit are readily identifiable and are worth further
explanation.
1. A fewer number of completed capital transactions.
This is essentially a timing issue with various projected asset sales now
in the pipeline for 2005.
2. Coats' net loss of £5.6 million.
In view of Coats' importance to GPG, a separate report on this investment
is produced on Pages 4 and 5.
3. An "exchange translation" loss of £7.0 million compared with a profit of
£15.9 million in 2003.
Regardless of annual fluctuations, in the longer run, the basket of
currencies in which our portfolio is held, must largely equalise. Since
1991, the net aggregate outcome of currency changes to date is a deficit
of £1 million.
4. A £6 million write-off in the value of Intellect Holdings Ltd.
As foreshadowed in the Interim Report, it has been necessary to take a
provision in respect of what has so far been an unsuccessful investment
and it was decided to write off the book value entirely. We do not believe
it to be all bad, however, and since 30 June, we have contributed an
additional £1.3 million (wisely or not, remains to be seen) in
recapitalising the company. Our holding is now 18%. We have also invested
£6.6 million in a new entity called Tafmo Ltd, an unlisted public company
in which we have a direct 56% interest and Intellect has a further 28%.
Tafmo appears to have good credentials in the development of electronic
payments technology.
5. An "equity accounted" loss of £9.8 million ex Capral Aluminium Ltd.
This is purely accounting fiction as GPG has no entitlement to ex Capral
Aluminium Ltd profits or losses other than dividends received (or, in this
case, not received).
Capral's poor result (which includes the write-off of a "future tax
benefit" of A$27.2 million) is, however, of definite concern to GPG in
respect of its substantial investment in the company. There are distinct
parallels with Coats insofar as a major relocation of the main
manufacturing operations has adversely affected current profitability but
must pay off in the longer term. The market price of the shares has held
up well, reflecting the confidence of GPG and other major shareholders in
the company's future prospects.
The sale of Charter shares was a major contributor to the 2004 result and there
were also useful profits from Solution 6, Reinsurance Australia and Australian
Pharmaceutical Industries.
In 2003 we wrote off the value of our 30% holding in Dawson International but
the company has actually recovered reasonably well and recently repaid £4.0
million of its convertible notes. Also, it has now acquired Dorma Group from
Coats. Dorma has been a problem area in the past but in the Dawson environment
it has every opportunity to succeed, as indeed it should, with its strong brands
in linen and bedwear and an extensive marketing network in the UK.
The "spinoff" by Tower of certain of its Australian operations into a new
listing of Australian Wealth Management Ltd is proceeding to plan. This is the
first significant move by Tower since GPG became involved several years ago and
it is very positive for all concerned. GPG will continue to be the major
shareholder in both companies - AWM, a formidable new entrant in a strongly
growing area of financial services and for Tower, the next phase in the
development of a leaner, more streamlined organisation.
Since balance date, we have sold most of our shareholding in De Vere Group on a
satisfactory basis. After some years of mild confrontation, it was finally a
happy ending all round. For GPG, the successful sale of De Vere's main asset,
The Belfry hotel and golf course, produced the long awaited rerating in the
market value of the shares which we had consistently advocated and De Vere
welcomed the departure of an unwanted activist shareholder.
Turners & Growers (GPG 78%) Stock Exchange listing duly occurred and it is
operating according to projections notwithstanding that New Zealand apple
returns are well down this year for both growers and exporters.
Otherwise, GPG's subsidiaries, associates and major investments are largely
unchanged from the profile in the Interim Report. New holdings in Maryborough
Sugar, Tassal (salmon farming), Tandou (cotton), Farm Pride Foods (eggs),
Newcastle Stock Exchange and Rattoon Holdings (investor in "Tattersalls") have
been noted in the media but all are relatively small scale and too soon at this
stage to make any material impact.
As usual, a simplified GPG Balance Sheet (book value figures) is set out below.
This provides a more useful analysis of GPG as an investor than the conventional
group accounts.
Simplified Balance Sheet at 31 December 2004
£m
Cash at Bank 193
Debtors 14
Coats 222
Nationwide 9
Staveley (UK & USA) -
Canberra Investment Corp. 13
Turners & Growers 44
De Vere Group 33
Capral 20
Tower 35
Share portfolio 133
-------
TOTAL ASSETS 716
Creditors (24)
Note Issues (178)
-------
SHAREHOLDERS' FUNDS £514
=======
CAPITAL AND DIVIDEND
The Board has declared the standard 1p dividend and a 1 for 10 bonus issue (the
12th in succession, multiplying an original 1990 holding 3.14 times).
The share election scheme is available and will operate, in lieu of a cash
dividend, at the rate of 1 new share for each 80 already held.
DIRECTORS
Trevor Beyer has retired as a Director and we thank him for his many years of
valuable service.
No replacement has been made at this stage with the Chairman and Blake Nixon
assuming additional responsibilities in the UK.
Overall, the Directors operate as a cohesive unit with regular Board meetings in
London.
OUTLOOK
The Directors anticipate an exciting and successful year for GPG in 2005.
Ron Brierley
CHAIRMAN
London, 28 February 2005
COATS REPORT
This report records the best (Crafts, cash flow) and the worst (EC, relocation
costs) of Coats since acquisition.
Based on a 3 year plan for the restoration of profitability and at least the
doubling of capital value, we are slightly behind schedule at this stage but 1
January 2005 was a symbolic date when Coats began a new financial year for the
first time as a fully fledged subsidiary of GPG and free of the disruption of
ownership changes.
Acquisition
The period of acquisition which began in 2003 and which proved to be more
difficult and prolonged than anticipated, concluded on 31 December 2004, with
all of the required accounting adjustments completed.
The resultant structure is that GPG owns 100% of Coats Group Ltd which, through
a subsidiary, owns all of Coats Holdings Ltd (formerly Coats plc) other than the
preference shares which are listed on the LSE.
GPG's total cost of acquisition was £226.1 million.
There was initial goodwill on acquisition of £34.1 million but 'fair value'
adjustments have been made at the Coats Group level of £62 million upwards and
£172 million downwards, thus increasing the goodwill component to
£144.1 million which is being amortised on a 20 year basis (2004 charge :
£4.8 million).
GPG's share of Coats' post acquisition net deficit incurred to 31 December 2004
is £3.7 million, so that net equity is now £222.4 million, comprising net
tangible assets of £83.1 million and goodwill of £139.3 million. The overall
Coats financial profile as included in GPG's group accounts
is:
£m
Fixed assets 305
Net current assets 222
Goodwill 139
--------
TOTAL ASSETS 666
Net debt (211)
Provisions (193)
Minorities (40)
--------
SHAREHOLDERS' FUNDS £222
========
Geography
Coats' geographic reach is impressive. It has manufacturing units in 41
countries covering the whole world and is particularly strong in the high growth
areas of India, China and other Far East countries. In November 2004, it opened
a major new plant (80,000 sq.m.) in Shenzhen, China which is indicative of the
trend to larger facilities in lower cost areas. This follows the recent
establishment of similar modern facilities in Mexico and Romania.
Coats' real estate value is substantial but more important is the total
replacement cost of an established network which would be virtually impossible
to replicate.
No other thread producer can match this level of international service.
Relocations
In the decade prior to GPG's arrival, there was a major shift of production
capacity to developing countries but there is still much to be done - more than
we originally estimated would be required.
There are very heavy one-off costs of closing traditional sites but it is
imperative the process continues to completion as it represents an essential
investment for the future.
2005 will be a further period of transition but on a lesser scale than 2004 and
the real benefits will begin to flow in 2006 and beyond.
Cash Flow
Cash flow has proved to be very strong and a sound indicator of basic business
health. To some extent this has been at the expense of profitability with an
emphasis on reducing surplus inventory and tighter debtor control rather than
increased sales. 2004 net cash inflow from operations was £131 million. Cash
generation for essential capital expenditure and debt reduction will continue to
be a priority.
Real Estate
A number of well situated properties are surplus or will be so in the near
future. Disposals to date also include various fringe assets (lochs in Scotland,
a racecourse in India) which had accumulated in Coats' 100 years or more of
existence.
The anticipated proceeds from property sales will, to a large extent, compensate
for the one-off costs of reorganisation.
Crafts
The value and potential of the crafts division of Coats has exceeded
expectations. Initially viewed as a somewhat secondary adjunct to thread
manufacture, that is not the reality. It is a growing and substantial business
in its own right, partly due to a revival in traditional crafts activities,
particularly in the USA.
Crafts was seriously underrated as an asset of the listed Coats plc.
EC
The least welcome aspect of the Coats acquisition is the emergence of "the EC
legacy" - three separate but related proceedings against the company resulting
from a European Commission investigation into trading practices in the European
haberdashery and thread industry in the early 1990's.
One has been determined at an administrative level, resulting in a claim of €30
million and the other two have yet to reach a conclusion.
The €30 million claim relates to hand sewing needles for which total sales in
the relevant period were €3 million and therefore appears grossly
disproportionate, whatever the circumstances at the time.
It should be stressed that the present Board had no involvement in these matters
and is simply objectively dealing with the facts as established.
The next stage of these proceedings is a more formal tribunal hearing at which
the company has much greater rights of advocacy which will be actively pursued.
Full provision has already been made for any anticipated eventual payment so no
adverse impact on profit is foreseen. Unfortunately, it will be 2 to 3 years
before any final resolution is obtained and in the meantime there are continuing
costs and diversion of effort.
On a more positive note, that coincides with the period when Coats'
transformation will become fully effective and the EC matter is something which
must and will be overcome together with other difficult challenges which will no
doubt arise from time to time.
GUINNESS PEAT GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 December 2004 2003
Unaudited Audited
£m £m
Turnover: group and share of joint ventures 737.1 1,085.8
Less: share of joint ventures (204.1) (541.8)
Continuing operations (excluding acquisitions) 533.0 544.0
Acquisitions
Turnover: group and share of joint ventures 654.1 -
Less: share of joint ventures - -
654.1 -
Group turnover - continuing operations 1,187.1 544.0
Group turnover - discontinued operations 7.7 9.0
Group turnover 1,194.8 553.0
Cost of sales (874.5) (423.0)
Gross profit 320.3 130.0
Profit on disposal of investments and other net investment income 64.8 41.8
Net operating expenses (310.2) (104.3)
Operating profit continuing operations (excluding acquisitions) 53.4 66.4
Operating profit acquisitions (excluding joint ventures and associates) 20.8 -
74.2 66.4
Operating profit-discontinued operations 0.7 1.1
Group operating profit 74.9 67.5
Share of operating profit of joint ventures 3.0 24.8
Share of operating loss of associated undertakings (2.2) (0.2)
75.7 92.1
Profit on sale of business continuing operations - 19.0
Profit on sale of subsidiary discontinued operations 1.8 -
Interest payable and similar charges (43.5) (23.4)
Profit on ordinary activities before taxation 34.0 87.7
Tax on profit on ordinary activities (8.0) (21.1)
Profit on ordinary activities after taxation 26.0 66.6
Minority interests (0.7) (2.6)
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 25.3 64.0
Equity dividends (8.8) (6.9)
Retained profit for the year 16.5 57.1
Re-stated*
Earnings per ordinary share basic (pence) 3.07p 8.43p
Earnings per ordinary share diluted (pence) 2.60p 6.16p
Dividends per ordinary share(pence) 1.00p 0.91p
*See note 3
GUINNESS PEAT GROUP PLC
Consolidated Balance Sheet
31 December 2004 2003
Unaudited Audited
£m £m
Fixed assets
Intangible assets:
Goodwill 141.3 1.4
Negative goodwill (8.5) (9.7)
Other 5.1 -
137.9 (8.3)
Tangible assets 399.3 77.1
Investments 208.3 291.5
745.5 360.3
Current assets
Stocks and development work in progress 183.8 28.2
Debtors 339.4 93.2
Investments 27.3 17.5
Cash at bank and in hand 283.7 289.5
834.2 428.4
Creditors: amounts falling due within 1 year
Trade and other creditors (301.5) (126.9)
Convertible subordinated loan notes (6.0) (6.0)
Other borrowings (46.7) (0.8)
(354.2) (133.7)
Net current assets 480.0 294.7
Total assets less current liabilities 1,225.5 655.0
Creditors: amounts falling due after 1 year
Trade and other creditors (3.6) (1.6)
Convertible subordinated loan notes - (6.0)
Capital notes (172.0) (166.5)
Other borrowings (267.2) (22.6)
(442.8) (196.7)
Provisions for liabilities and charges (204.4) (10.6)
NET ASSETS 578.3 447.7
Capital and reserves
Share capital 43.5 34.5
Share premium account 10.6 3.4
Capital redemption reserve 0.5 0.5
Other reserve 304.4 260.6
Profit and loss account 155.4 130.9
EQUITY SHAREHOLDERS' FUNDS 514.4 429.9
Minority interests (equity) 63.9 17.8
CAPITAL EMPLOYED 578.3 447.7
Net asset backing per ordinary share (pence) 59.26 56.70
GUINNESS PEAT GROUP PLC
Consolidated Cash Flow Statement
Year ended 31 December 2004 2003
Unaudited Audited
£m £m
Net cash inflow from operating activities 196.7 102.4
Dividends received from associates and joint ventures 2.7 5.6
Returns on investments and servicing of finance (35.0) (13.2)
Taxation (19.3) (6.0)
Capital expenditure and financial investment (35.5) (51.7)
Acquisitions and disposals 10.7 30.6
Equity dividends paid (2.3) (2.1)
Cash inflow before management of liquid
resources and financing 118.0 65.6
Management of liquid resources 71.6 (158.0)
Financing
Issue of ordinary shares, net of buyback expenses 3.2 (0.2)
(Decrease)/increase in debt (133.3) 98.9
Increase in cash for the year 59.5 6.3
Non-cash transactions:
On 5 July 2004, the Group redeemed the fourth 10p principal amount of the remaining convertible
subordinated loan notes through the payment of £1.0m in cash, with the balance of £5.0m being
satisfied by the issue of Ordinary Shares.
Analysis of Changes in Cash
And Liquid Resources During the Year
Year ended 31 December 2004 2003
Unaudited Audited
£m £m
Opening balance 289.5 113.8
Net cash in flow 59.5 6.3
(Decrease)/increase in liquid resources (71.6) 158.0
Increase/(decrease) in bank overdraft 12.0 (0.5)
Currency translation differences (5.7) 11.9
Closing balance 283.7 289.5
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. 2004 Acquisitions and Disposals
Coats Group Ltd ("Coats") - a joint venture company in which GPG held a 63.97%
economic interest and a 50% voting interest became a subsidiary undertaking on 1
April 2004 when one of the non-GPG directors resigned from its board. On 25 May
2004, following the successful conclusion of GPG's offer for the Coats shares held
by the minority shareholders, Coats became a wholly-owned subsidiary. Coats during
the year contributed a profit of £1,109,000 before taxation and minority interests.
The £226.1 million cost of acquisition in Coats includes subscription for new
capital of £75 million.
In September 2004 the Group acquired a 56% holding in TAFMO Ltd, an Australian
electronics processing company.
In October 2004 Staveley Inc disposed of its non-destructive testing instrumentation
business.
2. The Group's holdings in its significant associate and joint venture
entities
31 December 31 December
2004 2003
Coats (see 1. above) n/a 63.97%
Nationwide Accident Repair Services plc 50.00% 50.00%
Harcourt Hill Estate Ltd 50.00% 50.00%
Dawson International PLC 29.91% 29.91%
Capral Aluminium Ltd 37.25% 34.26%
Green's Foods Ltd 31.91% 28.91%
CPI Group Ltd 21.58% n/a
3. Earnings per share -The calculation of basic earnings per Ordinary share is based on
profit after taxation attributable to shareholders and the weighted average number
of 826,308,514 Ordinary shares in issue during the year. The comparatives for the
year to 31 December 2003 have been adjusted for the Capitalisation Issue which took
place in May 2004.
4. Changes in the issued share capital during the year to 31 December 2004
Ordinary Shares Nominal
of 5p each Value
£m
At 1 January 2004 689,220,175 34.5
Employee options exercised 15,355,603 0.8
Scrip dividend alternative shares issued (14 May 2004) 6,632,381 0.3
Capitalisation issue (24 May 2004) 70,795,434 3.5
Acquisition of subsidiary (25 May 2004) 75,754,914 3.8
Conversion of CLNs (5 July 2004) 11,248,786 0.6
At 31 December 2004 869,007,293 43.5
5. Tax on profit on ordinary activities 2004 2003
£m £m
Current tax credit/(charge):
UK corporation tax at 30% (2003:30%) 0.9 (1.4)
Overseas tax (21.1) (6.7)
Tax attributable to associated undertakings (4.6) (0.1)
Tax attributable to joint ventures (1.5) (6.7)
(26.3) (14.9)
Deferred tax credit/(charge) 18.3 (6.2)
Total tax charge (8.0) (21.1)
6. Dividends
The Directors propose a final ordinary dividend of 1.00 pence per share for the year ended 31
December 2004, payable on 16 May 2005. No interim dividend was declared during the year. The
proposed final dividend is subject to a right for shareholders to elect, instead of the cash
dividend, to receive one new ordinary share for every 80 existing shares held at the
appropriate record date. A final dividend of 0.91 pence (adjusted to reflect the 2004
Capitalisation issue) in respect of the year to 31 December 2003 was paid on 17 May 2004 to
GPG shareholders.
There are local regulatory differences in the countries in which the Company's shares are
listed, which can result in different taxation treatment and timing. This may have a
significant effect on the tax treatment of the dividend for shareholders resident outside the
UK.
The tax treatment of the cash dividend and the scrip dividend alternative, including the
availability of tax credits such as franking credits, will be dealt with more fully in the
Circular which will accompany the Company's Annual Report and Accounts (see note 7 below).
Shareholders are recommended to obtain their own professional advice.
7. Proposed Year End Timetable 2005
The Annual General Meeting of the Company will be held on 11 May 2005.A
circular which will contain details of the Dividend, the Scrip Dividend
Alternative and the 2005 Capitalisation Issue ("the Circular") will be
posted shortly. The Circular, together with the Forms of Election and
Notices of Entitlement to the Scrip Dividend Alternative, will accompany
the 2004 Report & Accounts.
In order to accommodate the different market practices of the London Stock
Exchange ("LSE"), Australian Stock Exchange ("ASX")and New Zealand Stock
Exchange ("NZX"), being those markets on which GPG's shares are quoted and
subject to approval of the Dividend and the Capitalisation Issue by
shareholders, the Stock Events timetable will be as follows*:
Preliminary announcement of results, Dividend and Scrip 28.02.05
Dividend Alternative and Capitalisation Issue
Shares marked ex-dividend (ASX) 07.03.05
Shares marked ex-dividend (UK) 09.03.05
Record date for dividend 11.03.05
Head securities quoted ex-dividend (NZX) 14.03.05
Final date for receipt of Scrip Dividend elections 06.05.05
Final date for receipt of AGM proxies 09.05.05
AGM (11:00 am UK time) 11.05.05
Allotment of Scrip Shares (5:00 pm UK time) 13.05.05
Payment of Cash Dividend** 16.05.05
Update of UK CREST accounts (5:00 am UK) 16.05.05
Dealings commence in Scrip Dividend Shares 16.05.05
Dispatch of Scrip Dividend Share Certificates (UK) and 16.05.05
holding statement (AUS)
Shares marked Ex-Capitalisation and bonus shares traded 16.05.05
on deferred settlement basis (ASX)
Dispatch of FASTER statements in NZ notifying NZ holders of 17.05.05
the change in holdings following the Scrip Dividend allotment
Record date for Capitalisation Issue 20.05.05
Head shares marked Ex-Capitalisation in NZ 23.05.05
Allotment of Capitalisation (5:00 pm UK time) 23.05.05
Last day of deferred settlement trading on ASX 23.05.05
Update of UK CREST accounts (5:00 am UK time) 24.05.05
Shares marked Ex-Capitalisation in UK 24.05.05
Dealings commence in Capitalisation Shares 24.05.05
Post out Capitalisation Shares Certificates (UK) and holding 24.05.05
statements (Australia)
Dispatch of FASTER statements in NZ notifying NZ holders of 31.05.05
change in holdings following the Capitalisation Issue
* Actions take place on all three Exchanges on the date specified unless
otherwise indicated.
** The Cash payment will be made to Shareholders on the Australian and New
Zealand share registers in Australia and New Zealand dollars respectively,
calculated at the rates of exchange ruling at 4:30 pm (UK time) on 9 May 2005.
Shareholders on all three registers will have the opportunity to elect for one
of the other two currencies, and a circular containing further information and a
currency election form will be circulated with the Notice of AGM.
To ensure the integrity of the registers over record dates and 'ex' dates the
three registers will be closed for transmission between the registers at certain
times.
8. Non-Statutory Accounts
This announcement does not constitute full financial statements. The Company's
full financial statements for the year ended 31 December 2004, which are being
prepared in accordance with UK GAAP, are in the process of being audited but
have not yet been signed by the auditors. The financial information for 2003 has
been extracted from the 2003 audited accounts. These accounts have been
delivered to the Registrar of Companies. The report of the auditors on the 2003
accounts was unqualified and did not contain a statement under s237(2) or s237
(3) of the Companies Act 1985
Guinness Peat Group plc
Supplementary information required for Australian Stock
Exchange (ASX) Appendix 4E
Year ended 31 December 2004 2003
Unaudited Audited
£m £m
Retained profits:
Retained profits brought forward 130.9 72.0
Profit attributable to ordinary shareholders 25.3 64.0
Equity dividends (8.8) (6.9)
Scrip dividend alternative 4.6 4.1
Currency translation differences (net) 3.3 0.5
Deferred tax on currency translation differences 0.1 3.5
Buyback of shares - (6.0)
Negative goodwill written back on disposals - (0.3)
Retained profits carried forward 155.4 130.9
Net tangible assets per ordinary share (pence) 43.39 57.79
Additional cash flow information:
Dividends received from associates 2.6 1.9
Dividends received from joint ventures 0.1 3.7
Other dividends received 5.1 7.6
Interest and other income received 18.4 13.2
Interest and other finance costs paid (34.0) (12.9)
Interest capitalised 0.7 0.2
Depreciation 35.6 10.4
Amortisation of intangibles:
Release of negative goodwill (1.2) (1.2)
Amortisation of other intangibles 5.5 -
Total amortisation of intangibles 4.3 (1.2)
The supplementary information should be read in conjunction with the Guinness
Peat Group plc preliminary announcement of results for the year ended 31
December 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
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