Interim Results

Guinness Peat Group PLC 30 August 2006 Guinness Peat Group plc ("GPG" or "the Company" or "the Group") PRELIMINARY RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 CHAIRMAN'S STATEMENT GPG has made quite good progress so far this year. There has been nothing spectacular nor any major transactions but plenty of positive activity, directed, as always, to building long term value. The accounting profit of £33 million to 30 June is satisfactory but appears better than it actually is because of the high component of currency gains. These relate primarily to the two issues of Capital Notes denominated in New Zealand dollars and are certainly real but, as we have stated previously, forex profits and losses are ultimately expected to be neutral for GPG. The history of the Notes is that the original issue of NZ$250 million in 2001 was hedged at £70 million until 2003 when we received a cash payment of £21 million with a corresponding increase in the principal amount owed to £91 million. The second issue of NZ$215 million (£79 million at the time) was not hedged and we subsequently incurred losses of £14 million as the aggregate repayment commitment rose, as a consequence of currency fluctuations, to £184 million at 31 December 2005. The slide in the value of the New Zealand dollar in 2006 has reversed the trend and we have more than recouped previous losses with a gain of £31 million to 30 June (partly offset by losses of £6 million on cash balances). At 30 August, the position is relatively unchanged and the Board is deciding upon an appropriate forex strategy for the rest of the year. A detailed analysis of the Coats contribution of £13 million is contained in the Coats half year announcement which is available at www.coats.com or a printed copy can be obtained on request at any of GPG's offices. The essential features of the Coats result are - • Profit on sale of properties £11 million. Although categorised as "non recurring", this is consistent with GPG's role in identifying and realising surplus assets to the best advantage. • A 66% reduction in crafts profit. This is mainly due to de-stocking by North American retailers and is considered to be a temporary decline such as is inevitable from time to time in what is basically a strong and well established business. • Industrial thread sales increased by 3% and profit by 34%. This is regarded as a more permanent improvement and a very encouraging indication that the huge reorganisation expenditure of recent years is finally having an impact on the bottom line. Even some previously entrenched hard core loss areas in Europe and USA have become modestly profitable for the first time. • Exchange losses of £6 million. Coats reports in US dollars but on a day to day basis, operates in more than 50 different currencies worldwide, which can have a somewhat volatile effect but should balance out eventually. Since 30 June, our former joint venture company, Nationwide Accident Repair Services has listed on the London AIM market with the consequence that our holding has reduced to 31.34%. The sale of shares showed a profit of £5 million with an unrealised surplus on the residual of £18 million, at current market value. GPG's financial position is very sound as shown in the simplified balance sheet below - SIMPLIFIED BALANCE SHEET AT 30 JUNE 2006 £m Cash at Bank 203 Debtors 22 Coats 246 Nationwide 7 Canberra Investment Corp 18 Turners & Growers 40 Capral 53 Tower 81 Australian Wealth Management 107 Share Portfolio 277 ____ Total Assets 1,054 Creditors (64) Note Issues (152) ____ SHAREHOLDERS' FUNDS £ 838 The outlook for GPG continues to be very favourable. Ron Brierley Chairman 30 August 2006 Consolidated Income Statement Unaudited Audited Unaudited 6 months to Year to 6 months to 30 June 31 December 30 June 2005 2005 2006 Restated ** Restated ** £m £m £m Continuing Operations Revenue 680 565 1,195 Cost of sales (467) (381) (825) Gross profit 213 184 370 Profit on disposal of investments and other net investment income 18 50 77 Distribution costs (88) (85) (179) Administrative expenses (85) (72) (150) Operating profit 58 77 118 Share of profit of joint ventures - 5 4 Share of profit/(loss) of associated 2 (2) (1) undertakings Profit on sale of business - continuing - 1 1 operations Finance costs (20) (22) (43) Profit before taxation from continuing 40 59 79 operations Tax on profit from continuing operations (10) (5) (23) Profit for the period from continuing 30 54 56 operations Discontinued Operations Gain/(loss) on discontinued operations 1 (1) 44 Profit for the period 31 53 100 Attributable to: EQUITY HOLDERS OF THE COMPANY 33 52 100 Minority interests (2) 1 - 31 53 100 Earnings per Ordinary Share from continuing and discontinued operations: Basic (pence) 2.95p 4.93p 9.41p Earnings per Ordinary Share from continuing operations: Basic (pence) 2.89p 5.05p 5.29p ** Restated to reflect changes in accounting policy - see note 1b. Consolidated Balance Sheet Unaudited Audited Unaudited 30 June 31 December 30 June 2005 2005 2006 Restated ** Restated ** £m £m £m NON-CURRENT ASSETS Intangible assets 204 165 221 Property, plant and equipment 388 341 426 Investments in associates 23 85 62 Investments in joint ventures 24 24 26 Available-for-sale investments 410 284 287 Deferred tax assets 5 7 4 Pension surpluses 36 - 33 Trade and other receivables 15 26 15 1,105 932 1,074 CURRENT ASSETS Inventories 254 248 241 Trade and other receivables 302 266 274 Trading investments 27 13 30 Available-for-sale investments 3 - 2 Cash and cash equivalents 244 246 253 830 773 800 Non-current assets classified as held for 3 105 18 sale TOTAL ASSETS 1,938 1,810 1,892 CURRENT LIABILITIES Trade and other payables 260 220 283 Current income tax liabilities 6 24 5 Capital notes 82 - 99 Other borrowings 128 101 113 Provisions 91 98 90 567 443 590 NET CURRENT ASSETS 263 330 210 NON-CURRENT LIABILITIES Trade and other payables 20 9 24 Deferred tax liabilities 16 10 8 Capital notes 70 178 84 Other borrowings 198 277 217 Retirement benefit obligations: Funded schemes 29 58 29 Unfunded schemes 65 56 66 Provisions 41 29 45 439 617 473 Liabilities directly associated with non-current assets classified as held for - 83 - sale TOTAL LIABILITIES 1,006 1,143 1,063 NET ASSETS 932 667 829 Consolidated Balance Sheet - continued Unaudited Audited Unaudited 30 June 31 December 30 June 2005 2005 2006 Restated ** Restated ** £m £m £m EQUITY Share capital 57 48 49 Share premium account 60 12 16 Translation reserve (16) 13 12 Unrealised gains reserve 184 118 118 Other reserves 305 301 306 Retained earnings 248 122 219 EQUITY SHAREHOLDERS' FUNDS 838 614 720 Minority interests 94 53 109 TOTAL EQUITY 932 667 829 Net asset backing per share * Pence 73.24 57.85 66.87 Australian cents 182.34 136.03 156.50 New Zealand cents 222.03 149.02 168.56 * The net asset backing per share for June 2005 and December 2005 has been adjusted for the 2006 Capitalisation Issue. ** Restated to reflect changes in accounting policy - see note 1b. Blake Nixon, Director Approved by the Board on 30 August 2006 Consolidated Statement of Recognised Income and Expense Unaudited Audited Unaudited 6 months to Year to 6 months to 30 June 31 December 30 June 2005 2005 2006 Restated ** Restated ** £m £m £m Gains on revaluation of available-for-sale investments 64 16 46 Gains on cash flow hedges 3 - 3 Exchange differences on translation of foreign (28) 22 22 operations Actuarial gains on defined benefit pension schemes - - 49 Net income recognised directly in equity 39 38 120 Transfers Transferred to profit or loss on sale of available-for-sale investments 3 (28) (57) Transferred to profit or loss on sale of cash flow (1) - - hedges Profit for the period 31 53 100 Total recognised income and expense for the period 72 63 163 Attributable to: Equity holders of the Company 74 62 163 Minority interests (2) 1 - 72 63 163 ** Restated to reflect changes in accounting policy - see note 1b. Reconciliation of Consolidated Movements in Equity Shareholders' Funds 6 months ended 30 June 2006 Share Share premium Translation Unrealised Other Retained capital account reserve gains reserves earnings Total reserve £m £m £m £m £m £m £m Balance as at 31 December 2005 As previously stated 49 16 14 118 306 217 720 Prior year adjustment (note - - (2) - - 2 - 1b) As restated 49 16 12 118 306 219 720 Total recognised income and expense for the period - - (28) 66 3 33 74 Dividends (note 10) - - - - - (10) (10) Capitalisation issue of 5 - - - (5) - - shares Share placement 3 44 - - - - 47 Scrip dividend alternative - - - - - 6 6 Share based payments - - - - 1 - 1 Balance as at 30 June 2006 57 60 (16) 184 305 248 838 Consolidated Cash Flow Statement Unaudited Unaudited Audited 6 months to 6 months to Year to 30 June 30 June 31 December 2006 2005 2005 £m £m £m Cash (outflow)/inflow from operating activities Net cash (outflow)/inflow from operating activities (4) 44 227 Interest paid (23) (21) (42) Taxation paid (9) (20) (25) Net cash (absorbed in)/generated by operating activities (36) 3 160 Cash inflow/(outflow) from investing activities Dividends received from associates and joint ventures 4 2 7 Capital expenditure and financial investment (11) (43) (60) Acquisitions and disposals 2 (39) (81) Net cash absorbed in investing activities (5) (80) (134) Cash inflow/(outflow) from financing activities Issue of ordinary shares 48 - 1 Equity dividends paid to Company's shareholders (4) (4) (4) Dividends paid to minority interests (2) (3) (6) Increase/(decrease) in debt 23 36 (58) Net cash generated by/(absorbed in) financing activities 65 29 (67) Net increase/(decrease) in cash and cash equivalents 24 (48) (41) Cash and cash equivalents at beginning of the period 238 271 271 Exchange (losses)/gains on cash and cash equivalents (29) 4 8 Cash and cash equivalents at end of the period 233 227 238 NOTES TO THE FINANCIAL INFORMATION 1a. The interim financial information has been prepared in accordance with the recognition and measurement principles of applicable International Financial Reporting Standards (IFRSs) as adopted by the Group, and comply with the disclosure requirements of the Listing Rules of the UK Financial Services Authority and the Listing Rules of the Australian Stock Exchange. The accounting policies adopted have been consistently applied to all periods presented, other than as set out in 1b. below. 1b. The comparative balance sheet as at 30 June 2005 has been restated to exclude a £28 million provision for pension fund administration costs. This is to reflect emerging best practice for administration costs to be deducted annually from the expected and actual return on pension plan assets, rather than for provision to be made for the present value of the costs expected over the life of the plan, and reflects the policy adopted in the statutory accounts for the year ended 31 December 2005. The income statements for the year ended 31 December 2005 and for the six months ended 30 June 2005 have been restated in accordance with the European Union's endorsement of an amendment to IAS 21 "The Effects of Changes in Foreign Exchange Rates" whereby currency translation gains and losses arising on inter-company loans that are not denominated in the functional currency of either party can be dealt with through the translation reserve rather than in the income statement. The impact of this restatement is an increase in profit of £2 million for the year ended 31 December 2005 and for the six months to 30 June 2005, but has no impact on shareholders' funds at either of those dates. 2. The figures for the year ended 31 December 2005 do not constitute statutory accounts for that year but have been extracted from the statutory accounts, which have been filed with the Registrar of Companies. The auditors reported on those accounts and that report was unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. The financial information for the six months ended 30 June 2006 has not been audited, nor has the financial information for the equivalent period in 2005. 3. Group foreign exchange movements - during the six months to 30 June 2006, GPG recognised in operating profit £20 million of net foreign exchange gains compared to £12 million of net foreign exchange gains in the six months to 30 June 2005 (£15 million net gains in the year to 31 December 2005). 4. Tax on profit from continuing operations 30 June 30 June 31 December 2006 2005 2005 £m £m £m UK Corporation tax at 30% (3) 1 - Overseas tax (6) (10) (26) (9) (9) (26) Deferred tax (1) 4 3 (10) (5) (23) NOTES TO THE FINANCIAL INFORMATION - continued 5. The Group's significant joint venture and associate entities were as follows: 30 June 30 June 31 December 2006 2005 2005 Nationwide Accident Repair Services plc 50.0% 50.0% 50.0% Harcourt Hill Estate Ltd 50.0% 50.0% 50.0% Australian Country Spinners Ltd 50.0% na 50.0% Green's Foods Ltd 37.4% 34.8% 36.9% CPI Group Ltd 22.9% 21.6% 21.6% The Maryborough Sugar Factory Ltd 22.4% na na Rattoon Holdings Ltd 20.2% na 20.2% Dawson International plc na 24.8% na Capral Aluminium Ltd na 38.3% na Australian Wealth Management Ltd na 31.5% 34.7% Significant contributions to the profit for the period from joint venture and associate entities were: 30 June 30 June 31 December 2006 2005 2005 £m £m £m Nationwide Accident Repair Services plc 2 4 3 Australian Wealth Management Ltd 1 1 2 Capral Aluminium Ltd (to 31 October 2005) na (4) (6) 6. Earnings per share - The calculation of earnings per Ordinary share is based on profit after taxation attributable to shareholders and the weighted average number of 1,108,634,961 Ordinary shares in issue during the six months ended 30 June 2006. The comparatives for the six months to 30 June 2005 and the year to 31 December 2005 have been adjusted for the Capitalisation Issue which took place in June 2006. 7. The net tangible assets per share at 30 June 2006 were 63.67p (30 June 2005: 47.35p, 31 December 2005: 56.46p). 8. The Group has announced a proposed issue of Capital Notes ("Offer") to New Zealand investors. The proposed Offer, which is conditional on requisite resolutions being passed at a meeting of the Company's shareholders on 31 August 2006, is for an aggregate principal amount of NZ$250,000,000 and the Group will have the ability to accept up to a further NZ$100,000,000 of over-subscriptions. The Offer consists of an Exchange Offer for holders of existing Capital Notes issued in 2001 and a General Offer available only by firm allocation. The Exchange Offer will allow existing 2001 Note holders to exchange their 2001 Capital Notes for new Capital Notes issued under the Offer. The new issue will have a similar structure to the two previous issues of Capital Notes undertaken in 2001 and 2003. NOTES TO THE FINANCIAL INFORMATION - continued 9. Changes in the issued share capital during the six months to 30 June 2006 comprise the following: £000 At 1 January 2006 48,959 Employee options exercised 198 Share placement (12 April 2006) 2,550 Scrip dividend alternative shares issued (30 May 2006) 326 Capitalisation Issue (30 June 2006) 5,202 At 30 June 2006 57,235 10. Dividends - The directors have not recommended the payment of an interim dividend (6 months to 30 June 2005: Nil). An interim dividend of 0.91p per share, adjusted for the 2006 Capitalisation Issue, was paid during the period in respect of the year ended 31 December 2005. A final dividend of 0.91p per share, adjusted for the 2005 Capitalisation Issue, was paid during the six months ended 30 June 2005 in respect of the year ended 31 December 2004. 11. Directors - The following persons were directors of GPG during the whole of the half-year and up to the date of this report: Sir Ron Brierley G J Cureton A I Gibbs B A Nixon Dr G H Weiss 12. Directors' Report - The Chairman's Statement appearing in the Interim Results and signed by Sir Ron Brierley provides a review of the operations of the Group for the six months ended 30 June 2006. 13. Directors' Declaration - In accordance with a resolution of the directors of Guinness Peat Group plc I state that: in the opinion of the Directors: a) the Interim Results of the consolidated group: (i) give a true and fair view of the financial position as at 30 June 2006 and the performance of the consolidated group for the half-year ended on that date; (ii) comply with the recognition and measurement principles of applicable International Financial Reporting Standards as adopted by the Group; and b) there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable. 14. Publication - This statement is being sent to shareholders and copies will be available at the registered office of the Company, First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP. A copy will also be displayed on the Company's website on www.gpgplc.com. On behalf of the Board B A Nixon Director 30 August 2006 UNITED KINGDOM First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP Tel: 020 7484 3370 Fax: 020 7925 0700 AUSTRALIA c/o Registries Ltd PO Box R67, Royal Exchange, Sydney NSW 1224 Tel: 02 9290 9600 Fax: 02 9279 0664 Australia NEW ZEALAND c/o Computershare Investor Services Limited Tel: 09 488 8700 Fax: 09 488 8787 Private Bag 92119, Auckland 1020, New Zealand Registered in England No. 103548 INDEPENDENT REVIEW REPORT TO GUINNESS PEAT GROUP PLC Introduction We have been instructed by Guinness Peat Group plc ("the Company") to review the consolidated financial information of the Company and its subsidiaries (together, "the Group") for the six months ended 30 June 2006 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the reconciliation of consolidated movements in equity shareholders' funds, the consolidated cash flow statement and the related notes (hereinafter referred to as "the interim report"). We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2006. Deloitte & Touche LLP Chartered Accountants London 30 August 2006 This information is provided by RNS The company news service from the London Stock Exchange KQFBKDAFB

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