Interim Results

Guinness Peat Group PLC 12 September 2005 Guinness Peat Group plc ("GPG" or "the Company" or "the Group") PRELIMINARY RESULTS FOR THE SIX MONTHS ENDING 30 JUNE 2005 CHAIRMAN'S STATEMENT "IFRS stands for International Financial Reporting Standards but from a fast, unfriendly look at them, might as well be Incomprehensible Fouled-up Reporting Standards." Trevor Sykes Australian Financial Review 22/1/05 GPG has experienced a good year so far in 2005 and the £50 million interim result largely speaks for itself. The main source of profit in the half year was the sale of De Vere shares and other capital transactions but there was also a useful all-round increase from trading subsidiaries, dividends and interest. It is necessary to add a note of caution however, as these are the first accounts prepared in accordance with IFRS which considerably distorts comparisons with earlier periods. The profit after tax recognised under IFRS is at least £8 million higher than would have been the case under GPG's traditional conservative approach to financial reporting. A more valid comparable figure, therefore, would be nearer to £42 million, which is still a good result for the period. There are also a few offsetting debit items but on much smaller scale. Overall, it will be necessary to await the full year accounts to measure the precise impact of IFRS but the initial impression is certainly not favourable. IFRS also introduces changes to the Balance Sheet, mainly in two respects. The restatement of the share portfolio at market rather than book value is harmless enough but the appearance of "Retirement benefits obligations" totalling £142 million, of which £86 million is in respect of GPG's funded schemes, requires explanation. That figure looks very daunting at first glance but fortunately it is not the reality. A discussion of all the issues relating to UK "pensions" would require excessive length in this Report but suffice to say that pension funds in the GPG group have total assets of nearly £2 billion. In the Board's view, barring a disastrous investment performance in the future, that is vastly more than sufficient to cover every last obligation to every last pensioner over the next 30 years or more as the Funds gradually exhaust their continuing liabilities. A more positive outlook is that there could ultimately, in fact, be a large surplus at any future terminal point. The residual £56 million of the provisions relates to promised retirement payments to Coats Europe employees and for which annual provision has been made in Coats' published accounts since well before the GPG acquisition. In the 2004 Annual Report it was stated that Coats' 3 year development plan was "slightly behind schedule" but there has been considerable progress in the last 6 months as evidenced by the net profit of £14.4 million for the period. Coats itself reported a net profit after tax of US$33.3 million (£17.7 million) including currency gains of US$22.5 million (£12.0 million) but is £3.3 million lower at the GPG level due to the elimination of some of the currency content. Coats performance is very encouraging notwithstanding there is still a long way to go to reach our ultimate objectives for the company. All of the comments re Coats in the last Annual Report remain valid and will be updated in more detail at next balance date. The balance sheet is in excellent shape with strong liquidity despite a reasonably active investment program. The simplified parent company version is shown below which for investors is the most relevant measure of GPG. It should be noted that the share portfolio is now shown at market value. SIMPLIFIED BALANCE SHEET AT 30 JUNE 2005 £(GBP)m Cash at Bank 192 Debtors 9 Coats 189 Nationwide 7 Staveley (UK & USA) (14) Canberra Investment Corp 25 Turners & Growers 43 Capral 30 Tower 59 Australian Wealth Management 33 Share Portfolio 259 TOTAL ASSETS 832 Creditors (58) Note Issues (178) SHAREHOLDERS' FUNDS £596m Every indication at this stage is for a very satisfactory full year result at 31 December 2005. Ron Brierley Chairman 12 September 2005 Consolidated Income Statement Unaudited Unaudited Unaudited 6 months 6 months Year to to to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Continuing Operations Revenue 565 339 920 Cost of sales (381) (236) (645) Gross profit 184 103 275 Profit on disposal of investments and other net investment income 50 28 65 Distribution costs (85) (44) (137) Administrative expenses (74) (60) (134) Operating profit 75 27 69 Share of profit/(loss) of joint ventures 5 (2) (2) Share of loss of associated undertakings (2) - (6) Profit on sale of business - continuing operations 1 - - Finance costs (22) (14) (35) Profit before taxation 57 11 26 Taxation (5) (4) - Profit for the period from continuing operations 52 7 26 Discontinued Operations (Loss)/gain on discontinued operations (1) 2 6 Profit for the period 51 9 32 Attributable to: EQUITY HOLDERS OF THE COMPANY 50 7 30 Minority interests 1 2 2 51 9 32 Earnings per Ordinary Share - Basic (pence) 5.23p 0.81p 3.35p Notes 1-14 under the header "Notes to the Financial Statements" form part of these financial statements Consolidated Balance Sheet Unaudited Unaudited Unaudited 30 June 30 June 31 December 2005 2004 2004 NON-CURRENT ASSETS £m £m £m Intangible assets 174 162 160 Property, plant and equipment 341 341 343 Investments in associates 85 48 47 Investments in joint ventures 24 13 12 Long term investments 284 161 159 Deferred tax assets 7 4 17 Trade and other receivables 26 17 27 941 746 765 CURRENT ASSETS Inventories 248 224 186 Trade and other receivables 266 306 268 Trading investments 13 51 20 Cash and cash equivalents 246 213 283 773 794 757 Non-current assets classified as held for sale 105 56 60 TOTAL ASSETS 1,819 1,596 1,582 CURRENT LIABILITIES Trade and other creditors 220 278 273 Current income tax liabilities 24 15 24 Convertible subordinated loan notes - 6 6 Other borrowings 101 80 45 Provisions for liabilities and charges 98 103 102 443 482 450 NET CURRENT ASSETS 330 312 307 NON-CURRENT LIABILITIES Trade and other creditors 8 37 4 Deferred tax liabilities 10 18 15 Capital notes 178 159 172 Other borrowings 277 310 267 Retirement benefit obligations: Funded schemes 86 36 91 Unfunded schemes 56 59 61 Provisions for liabilities and charges 29 12 22 644 631 632 Liabilities directly associated with non-current assets classified as held for sale 83 30 30 TOTAL LIABILITIES 1,170 1,143 1,112 NET ASSETS 649 453 470 EQUITY Share capital 48 43 43 Share premium account 12 6 11 Translation reserve 15 (11) (8) Unrealised gains reserve 118 - - Other reserves 300 305 305 Retained earnings 103 60 65 EQUITY SHAREHOLDERS' FUNDS 596 403 416 Minority interests 53 50 54 TOTAL EQUITY 649 453 470 Net assets per share * - (pence) 61.74 42.78 43.52 - (Australian cents) 145.18 111.37 106.58 - (New Zealand cents) 159.05 122.17 115.68 * The net assets per share for June 2004 and December 2004 have been adjusted for the 2005 Capitalisation Issue. Blake Nixon, Director Approved by the Board on 12 September 2005 Consolidated Statement of Recognised Income and Expense Unaudited Unaudited Unaudited 6 months to 6 months to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Gains on revaluation of long term investments 16 - - Exchange differences on translation of foreign operations 23 (11) (8) Actuarial losses on defined benefit pension schemes - - (19) Net income recognised directly in equity 39 (11) (27) Transfers Transferred to profit or loss on sale of long term (28) - - investments Profit for the period 51 9 32 Total recognised income and expense for the period 62 (2) 5 Attributable to: EQUITY SHAREHOLDERS OF THE COMPANY 61 (4) 3 Minority interests 1 2 2 62 (2) 5 Reconciliation of Consolidated Movements in Equity Shareholders' Funds Share Share premium Translation Unrealised Other Retained capital account reserve gains reserve reserves earnings Total £m £m £m £m £m £m £m GROUP Balance as at 31 December 2004 43 11 (8) - 305 65 416 IAS 32 and 39 adjustments - - - 130 - (8) 122 Balance as at 1 January 2005 43 11 (8) 130 305 57 538 Exchange differences on translation of foreign operations - - 23 - - - 23 Increases in fair value - - - 16 - - 16 Transfers to profit or loss - - - (28) - - (28) Net income recognised directly in - - 23 (12) - - 11 equity Profit for the period - - - - - 50 50 Total recognised income and expense - - 23 (12) - 50 61 Dividends - - - - - (9) (9) Capitalisation issue of shares 5 - - - (5) - - Scrip dividend alternative - - - - - 5 5 Share based payments - 1 - - - - 1 Balance as at 30 June 2005 48 12 15 118 300 103 596 Consolidated Cash Flow Statement Unaudited Unaudited Unaudited 6 months to 6 months to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Cash inflow from operating activities Net cash inflow from operating activities 44 5 190 Interest paid (21) (12) (34) Taxation paid (20) (7) (19) Net cash (absorbed in)/generated from operating 3 (14) 137 activities Cash inflow/(outflow) from investing activities Dividends received from associates and joint ventures 2 2 4 Capital expenditure and financial investment (43) (12) (36) Acquisitions and disposals (39) 12 * 12 Net cash absorbed in investing activities (80) 2 (20) Cash inflow/(outflow) from financing activities Issue of ordinary shares, net of buy back expenses - 3 4 Equity dividends paid to Company's shareholders (4) (2) (2) Dividends paid to minority interests (3) (1) (1) Increase/(decrease) in debt 36 (68)* (131) Net cash generated from/(absorbed in) financing 29 (68) (130) activities Net decrease in cash and cash equivalents (48) (80) (13) Cash and cash equivalents at beginning of the period 271 290 290 Exchange gains/(losses) on cash and cash equivalents 4 (15) (6) Cash and cash equivalents at end of the period 227 195 271 * Restated to reflect presentation adopted in December 2004 NOTES TO THE FINANCIAL STATEMENTS 1. The interim financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs), and the accounting policies adopted have been consistently applied to all periods presented except for those relating to the classification and measurement of financial instruments. The Group has made use of the exemption available under IFRS 1 to only apply IAS 32 and IAS 39 from 1 January 2005. The IFRS standards and FRIC interpretations adopted in this interim financial information are those issued and effective as at the time of preparation of this report - the IFRS and IFRIC interpretations that will be applicable at 31 December 2005 may introduce further changes. As a UK company listed on the London Stock Exchange, GPG is obliged under European Union requirements to adopt International Financial Reporting Standards (IFRS) with effect from 1 January 2005. Previously GPG produced its accounts under UK Generally Accepted Accounting Principles ("UK GAAP"). A number of differences arise from the adoption of IFRS, and UK listed entities are therefore also obliged to produce a document re-presenting their results for the year ended 31 December 2004 in accordance with IFRS. GPG has therefore published a separate Announcement containing narrative explanation and reconciliations between IFRS and previously reported financial information under UK GAAP as at 1 January 2004, 30 June 2004 and 31 December 2004. This separate Announcement also appears on GPG's website. 2. The figures for the year ended 31 December 2004 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, and adjusted as appropriate to reflect the restatement of those accounts from UK GAAP to IFRS. The auditors reported on the UK GAAP accounts and that report was unmodified and did not contain a statement under Section 237(2) of the Companies Act 1985. The accounts for the six months ended 30 June 2005 have not been audited, nor have the accounts for the equivalent period in 2004. 3. Foreign exchange movements - during the six months to 30 June 2005, GPG recognised in operating profit £10 million of foreign exchange gains compared to £4 million of foreign exchange losses in the six months to 30 June 2004 (£7 million losses in the year to 31 December 2004). 4. Tax on profit on ordinary activities 30 June 30 June 31 December 2005 2004 2004 £m £m £m UK Corporation tax at 30% 1 3 1 Overseas tax (10) (21) (7) (9) (18) (6) Deferred tax 4 18 2 (5) - (4) 5. The Group's significant associate and joint venture entities are as follows: 30 June 30 June 31 December 2005 2004 2004 Nationwide Accident Repair Services plc 50.0% 50.0% 50.0% Harcourt Hill Estate Ltd 50.0% 50.0% 50.0% Dawson International plc 24.8% 29.9% 29.9% Capral Aluminium Ltd 38.3% 36.6% 34.3% Green's Foods Ltd 34.8% 29.0% 28.9% Australian Wealth Management Ltd 31.5% - - CPI Group Ltd 21.6% 19.9% 21.6% Australian Wealth Management Ltd ("AWM") became an associated undertaking in March 2005, and contributed £1 million to Group profit in the 6 months to 30 June 2005. The carrying value of AWM at 30 June 2005 amounted to £33 million. Other significant contributions to the profit for the period from associate and joint venture entities were: 30 June 30 June 31 December 2005 2004 2004 £m £m £m Nationwide Accident Repair Services plc 4 1 1 Capral Aluminium Ltd (4) (2) (10) 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 959,300,613 Ordinary shares in issue during the six months. The comparatives for the six months to 30 June 2004 and the year to 31 December 2004 have been adjusted for the Capitalisation Issue which took place in May 2005. 7. The net tangible assets per share at 30 June 2005 were 49.29p (30 June 2004: 30.92p, 31 December 2004: 32.41p) 8. Changes in the issued share capital during the six months to 30 June 2005 comprise the following: £000 At 1 January 2005 43,451 Employee options exercised 109 Scrip dividend alternative shares issued (13 May 2005) 288 Capitalisation issue (23 May 2005) 4,384 At 30 June 2005 48,232 9. Dividends - The directors have not recommended the payment of an interim dividend (6 months to 30 June 2004 Nil). A final dividend of 0.91p per share, adjusted for the 2005 Capitalisation Issue, was paid during the period in respect of the year ended 31 December 2004. 10. On 5 July 2005, those holders of GPG (UK) Holdings plc Convertible Loan Notes ("CLNs") who elected to convert their Election Amounts were issued with 11.7 million Ordinary shares of 5p each ("Conversion Shares") and the remaining CLN holders were repaid Redemption Amounts of £0.9 million in cash. As no Interim Dividend has been declared, the Conversion Shares will, with immediate effect, rank equally with the other shares of the Company. 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, C 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 Company for the six months ended 30 June 2005. 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 entity: (i) give a true and fair view of the financial position as at 30 June 2005 and the performance of the consolidated entity for the half-year ended on that date; and (ii) comply with applicable International Financial Reporting Standards and the UK Companies Act 1985; 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 12 September 2005 UNITED KINGDOM First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP Tel: 020 7484 3370 Fax: 020 7925 0700 AUSTRALIA c/o PKF Chartered Accountants and Business Advisers Level 10, 1 Margaret Street, Sydney, NSW 2000 Tel: 02 9251 4100 Fax: 02 9240 9821 NEW ZEALAND c/o Computershare Investor Services Limited Private Bag 92119, Auckland 1020, New Zealand Tel: 09 488 8700 Fax: 09 488 8787 Registered in England No. 103548 INDEPENDENT REVIEW REPORT TO THE MEMBERS OF 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 2005 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expenses, 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. International Financial Reporting Standards As disclosed in the Basis of preparation to the IFRS restatement, the next annual financial statements of the Group will be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU. Accordingly, the interim report has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules. The accounting policies are consistent with those that the Directors intend to use in the annual financial statements. There is, however, a possibility that the Directors may determine that some changes to these policies are necessary when preparing the full annual financial statements for the first time in accordance with IFRS as adopted for use in the EU. 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 In our opinion, 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 2005. Deloitte & Touche LLP Chartered Accountants London 12 September 2005 This review report will be published on the Company's website. A review does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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