Preliminary Results
Guinness Peat Group PLC
23 March 2001
23 March 2001
GUINNESS PEAT GROUP PLC
('GPG' or 'the Company')
PRELIMINARY RESULT FOR THE YEAR ENDED 31 DECEMBER 2000
CHAIRMAN'S STATEMENT
'2000 was the most difficult year for global stockmarkets since
1990 and reflected the overbought nature of most markets at the
beginning of the year'
----- Merrill Lynch Annual Survey
The net profit of £18.7 million appears relatively ordinary but
otherwise the year 2000, as a whole, was rather more successful
than indicated in pure accounting terms.
It was a year of much useful activity and, in the post Tyndall
phase, there was a quite high level of reinvestment from which
there has not yet been any material return. However, it has
created a definite level of added potential for the present and the
future.
If there is any weakness in the GPG scenario, it is possibly the
need to be more vigorous in crystallising and completing a greater
number of what is always a wide range of investment projects in the
Company's portfolio. This is not to abandon a long term approach
but to recognise, in today's market, a demand for more rapid
revisions of corporate strategies.
Already, in the current term, we have initiated various avenues of
'shareholder activism' which have been on the drawing board for
some time and which are referred to later in this report. Without
an unlikely first round 'knockout', these initiatives are
invariably characterised as 'failures' by the media and analysts
but this is a necessary part of the process where sensible and
supportable proposals to enhance shareholder value are seldom
unrewarded in the longer run.
Successful investments are the key to GPG's future performance and
among the more significant new subsidiaries, associates and
portfolio additions, not previously reported to shareholders are -
STAVELEY INDUSTRIES PLC
Staveley has been a difficult and unrewarding investment but, as a
consequence of a successful takeover offer late last year, it is
now wholly owned by GPG.
After the sale of the main subsidiary, British Salt Ltd, the
residual group comprises some six engineering based manufacturing
and contracting businesses in UK and USA. As the problems of the
previous regime steadily diminish, GPG is probably not the most
logical permanent owner of these businesses but, in the meantime,
it has a valid role to support management in achieving consistent
profitability and improved capital values.
JOE WHITE MALTINGS
Joe White has exceeded expectations since we took effective control
in March 2000 with a 45% holding. Necessary structural and
personnel changes, the sale of the difficult foods businesses and,
not least, an upturn in the malt price cycle have all contributed
to a much better outlook than for many years past.
ENZA
So far, less than satisfactory. Prior to the appointment of the
new Board, the company was in a worse position than previously
known, with possible severe repercussions for New Zealand apple and
pear growers.
GPG has contributed a disproportionate level of input relative to
the absolute size of our investment (18% of the capital with a book
value of £1.8 million) but which we accept, within reason, as our
contribution to the rescue of an important national industry.
Enza can become a large (Year 2000 sales of NZ$800 million) and
successful organisation if industry politics embrace a greater
sense of unity and commercial logic.
WRIGHTSONS
Not a major investment (£3.3 million at cost) but a timely one,
insofar as improved performance has reflected a more buoyant New
Zealand rural economy. The market value of the shares is now 80%
above our entry price.
OTTER GOLD
Another difficult situation where the adverse legacies of the
previous convoluted ownership structure have lingered on. The
recent cash issue has lifted GPG's holding to 44% and provides
funds and greater proprietorial focus to extract the best value
from the company's three gold mining ventures.
TOMORROW LTD
This arises from a reconstruction of Mid-East Minerals which has
reduced GPG's ownership from 88% to a fully diluted 36% of the
enlarged company.
Tomorrow is not a 'technology' stock in its own right but an
investor in distressed situations in that sector where additional
funding is considered likely to produce a credible commercial
result.
---------------------------------------
GPG's other subsidiary and associated companies are Canberra
Investment Corporation (69%), a Canberra based residential land
developer with a solid, if unspectacular, earnings record and good
asset strength and Turners & Growers (45%), one of New Zealand's
oldest and most respected corporate names, which has made a most
valued contribution to the group.
GPG's largest portfolio investments are Coats Viyella plc (12% at
cost, £38 million) and Inchcape plc (16% at cost, £37 million).
Coats is the world's leading thread manufacturer and was once one
of Britain's major industrial concerns but its textile operations
including fashion labels 'Jaeger' and 'Viyella', have been severely
impacted by the steady decline of the UK manufacturing industry.
An exciting and worthwhile challenge for GPG's recently appointed
Board representative!
Inchcape is another historic British Empire trading house but
nowadays is a much smaller company operating exclusively in the
motor trade (it contains a significant portion of the former TKM,
an important subsidiary of BIL in the 1980's).
In our view, Inchcape's international model is no longer
appropriate in the modern age and considerably greater value would
be obtained by realising the strategic value of its individual
components. The present Board of Inchcape does not share this view
and the debate continues in the current term.
Other major investments are De Vere Group (5%, at cost, £18
million) and Brickworks (10%, at cost, £20 million). These two
companies could not be further apart in geography and industry but
they share a common characteristic of intrinsic value well in
excess of market capitalisation and requiring serious structural
reform to release that value to shareholders.
A badly directed company with good assets may be a little harsh,
but is nevertheless a succinct description of De Vere. It owns a
mix of prestige hotels, budget accommodation and leisure facilities
in the UK which GPG proposes should be split into separate
corporate units. This will happen eventually (if De Vere is not
taken over in the meantime) but at present the 'synergy' card has
not yet been played out to exhaustion.
During 2000, GPG made a takeover offer for Brickworks which was
unsuccessful at that time but we retain complete confidence in the
ultimate outcome of this investment.
The Board's capital and dividend proposals for this year are:
* A cash dividend of 1.0p per share (an effective increase of
10%)
* Reinstatement of the scrip dividend alternative
* The 8th successive 1 for 10 bonus issue. (An investor who
purchased the equivalent of 100 10p shares in the 1991 placement
at an effective cost of NZ90 cents and who took no subsequent
action would now hold 195 shares at a cost of NZ46c each. In
reality, cash issues and scrip dividends would have reduced the
cost to less than 40c.)
* Serious consideration was given to offering shareholders
another series of redeemable convertible notes on terms similar
to last year's issue. However, it was decided preferable to
conserve the company's administrative and financial resources
for a very full program of investment activity during the rest
of the year rather than the diversion of non essential capital
adjustments.
The year 2001 will be a critical one for GPG insofar as the Company
has never been better placed to achieve a strong combination of
realised profits, higher asset backing and the momentum for
continuing gains in the future.
Ron Brierley
CHAIRMAN 23 March 2001
Enquiries:
Guinness Peat Group plc 020 7236 0336
Blake Nixon, UK Executive Director
Square Mile BSMG 020 7601 1000
Kevin Smith/Becky Jewers
GUINNESS PEAT GROUP PLC
Consolidated Profit and Loss Account
Year ended Year ended
31 December 31 December
2000 1999
Unaudited Re-stated
Notes £000's £000's
Turnover: group and share of joint ventures 36,278 54,890
Less: share of joint ventures (2,748) (5,309)
-----------------------------
Continuing operations 33,530 49,581
Acquisitions 114,670 -
-----------------------------
Group turnover - continuing operations 148,200 49,581
Group turnover - discontinued operations - 54,193
-----------------------------
Group turnover 148,200 103,774
Profit on disposal of investments and
other net investment income 27,878 38,563
Net operating expenses (155,823) (119,364)
-----------------------------
Continuing operations 19,536 11,925
Acquisitions 719 -
-----------------------------
20,255 11,925
Discontinued operations - 11,048
-----------------------------
Group operating profit 20,255 22,973
Share of operating profit of joint ventures 447 1,065
Share of operating profit of
associated undertakings 2,276 1,485
-----------------------------
22,978 25,523
Profit on disposal of businesses - 95,498
-----------------------------
Profit on ordinary activities before interest 22,978 121,021
Interest payable and similar charges (2,001) (619)
-----------------------------
Profit on ordinary activities before taxation 20,977 120,402
Tax on profit on ordinary activities (2,309) (5,210)
-----------------------------
Profit on ordinary activities after taxation 18,668 115,192
Minority interests 72 (3,246)
==============================================================================
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS £ 18,740 £ 111,946
==============================================================================
Equity dividends 4 (4,757) (4,695)
-----------------------------
Retained profit for the year 13,983 107,251
-----------------------------
Earnings per ordinary share-basic (pence) 3 3.81 21.81
Earnings per ordinary share-diluted (pence) 3 3.78 21.51
Dividends per ordinary share (pence) 4 1.00 0.91
GUINNESS PEAT GROUP PLC
Consolidated Balance Sheet
31 December 31 December
2000 1999
Unaudited Audited
Notes £000's £000's
Fixed assets
Intangible assets - negative goodwill (3,152) -
Tangible assets 50,552 1,665
Investments 199,615 181,408
------------------------------
247,015 183,073
Current assets
Stocks and development work in progress 21,682 3,053
Debtors 76,554 11,501
Investments 22,848 36,747
Cash at bank and in hand 67,353 85,044
------------------------------
188,437 136,345
Creditors: amounts falling due within one year
Trade and other creditors (84,725) (26,292)
Convertible subordinated loan notes (3,863) -
Other borrowings (18,304) (2,632)
------------------------------
(106,892) (28,924)
Net current assets 81,545 107,421
Total assets less current liabilities 328,560 290,494
Creditors: amounts falling due after one year
Trade and other creditors (758) (83)
Convertible subordinated loan notes (15,450) -
Other borrowings (11,456) (451)
------------------------------
(27,664) (534)
Provisions for liabilities and charges (10,740) (2,539)
------------------------------
NET ASSETS 290,156 287,421
==============================
Capital and reserves
Share capital 5 47,567 46,953
Share premium account 17,432 21,635
Capital redemption reserve 3,863 -
Profit and loss account 203,341 215,321
------------------------------
EQUITY SHAREHOLDERS' FUNDS 272,203 283,909
Minority interests (equity) 17,953 3,512
------------------------------
CAPITAL EMPLOYED 290,156 287,421
==============================
Net asset backing per ordinary share (pence) 57.22 54.97
GUINNESS PEAT GROUP PLC
Consolidated Cash Flow Statement
Year ended Year ended
31 December 31 December
2000 1999
Unaudited Audited
£000's £000's
Net cash flow from operating activities 35,009 (2,603)
Dividends received from associates and
joint ventures 13,476 875
Returns on investments and servicing of finance (2,528) (2,437)
Taxation (626) 88
Capital expenditure and financial investment (53,583) (109,658)
Acquisitions and disposals (4,655) 126,685
Equity dividends paid (4,662) (530)
----------------------------
Cash (outflow)/inflow before management of
liquid resources and financing (17,569) 12,420
Management of liquid resources 31,074 (33,177)
Financing
Issue of ordinary shares 307 1,470
Increase/(decrease) in debt 5,787 (6,510)
-----------------------------
Increase/(decrease) in cash for the period 19,599 (25,797)
=============================
Non-cash transaction:
On 2 June 2000, the Company repurchased 38.6 million ordinary shares
for an aggregate consideration of £19,313,000 which was settled through
the issue of convertible subordinated loan notes.
Analysis of changes in cash at bank and in hand
Opening balance 85,044 72,854
Net cash inflow/(outflow) 19,599 (25,797)
(Decrease)/increase in liquid resources (31,074) 33,177
Increase in bank overdraft 172 -
Currency translation differences (6,388) 4,810
------------------------------
Closing balance 67,353 85,044
==============================
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2000
1.PRESENTATIONAL CHANGES
The directors have amended the presentation of the financial
statements in the following ways:
(a)Following the disposal of Tyndall Australia in May 1999, the
Group does not operate any insurance business. The balance sheet
format has been revised to reflect this.
(b)In accordance with FRS16, dividends from UK companies are
no longer grossed up for the imputed tax credit. Dividends
received from non-UK companies include any underlying
withholding taxes, but exclude any underlying tax paid by the
investee company on its own profit. Comparative figures have
been re-stated to reflect this change of accounting policy,
although there is no impact on profit attributable to
shareholders.
2. SIGNIFICANT ACQUISITIONS / DISPOSALS
Staveley Industries plc became an associated undertaking on 3
November 1999 when GPG obtained Board representation with a
holding of 29%. GPG's offer for the remaining shares went
unconditional on 27 September 2000 and Staveley has been
consolidated as a subsidiary since that date.
On 10 April 2000, GPG appointed two directors to the Board of
Joe White Maltings Limited, a company registered in Australia.
At the time GPG held 44.5% of the equity shares, which
subsequently increased to 47.5%. The Board considers that it
has exercised dominant influence over Joe White Maltings
Limited from 10 April 2000. It has been consolidated from that
date.
Two further associates were acquired during the year, Wrightsons
(20.9%) and Otter Gold Mines (43.65%), both registered in New
Zealand. GPG's share of the operating profit of these new
associates was £2,075,000.
GPG sold its holding in Tyndall Australia in May 1999 and
recorded a profit of £95.5 million. There was no taxation
attributable to that gain. The results of Tyndall up to the date
of disposal are shown as discontinued operations in 1999.
3. EARNINGS PER SHARE
Earnings per share is calculated on a net basis using earnings
of £18,740,000 (1999: £111,946,000) on the weighted average
number of 491,718,999 shares in issue during the year (1999:
513,362,893) and amounts to 3.81 pence (1999: 21.81 pence).
Earnings per ordinary share for 1999 have been adjusted for the
2000 Capitalisation issue of shares.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares, which are options granted to
employees.
4. DIVIDEND
An ordinary dividend of 1.00 pence per share is recommended for
the year ended 31 December 2000. This is subject to a right for
shareholders to elect, instead of the cash dividend, to receive
one new ordinary share for every 35 existing shares held at the
appropriate record date.
An interim dividend of 0.91 pence (adjusted to reflect the 2000
Capitalisation Issue) was paid to shareholders on 28 March 2000
in respect of the year to 31 December 1999.
There are local regulatory differences in the countries in which
the Group'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. Shareholders are advised to obtain
their own professional advice.
The following sets out the principal timetable features which
vary across the Company's three registers due to local
regulatory differences:
Cash payment* 1.00 pence
Record date:
UK 06.04.2001
Australia 06.04.2001
New Zealand 06.04.2001
Ex-dividend:
UK 04.04.2001
Australia 02.04.2001
New Zealand 09.04.2001
In recent years GPG's cash dividend payments have been made in
relevant local currency to shareholders on the UK, Australian
and New Zealand share registers. However, this year
shareholders who prefer to receive their cash dividend in one of
the two other specified currencies will be given the right to
make such an election. Further information regarding this
right, together with details of the payment timetable, date the
exchange rates will be struck, and information on the Scrip
Dividend Alternative and proposed Capitalisation Issue, will be
contained in a circular to be distributed to shareholders with
the Annual Report and Accounts.
5.ISSUES OF SHARES
During the year the movements on the Company's share capital
were as follows:
Ordinary shares at 1 January 2000 469,526,862
Employee options exercised 1,540,000
Capitalisation issue of shares 43,233,048
Buy-back of shares (38,625,036)
____________
Ordinary shares at 31 December 2000 475,674,874
____________
6.NON-STATUTORY ACCOUNTS
This announcement does not constitute full financial statements.
The company's full financial statements for the year ended 31
December 2000 have not yet been signed by the auditors. The
financial information for 1999 has been extracted from the latest
published accounts, as adjusted for the presentational changes
described in note 1. These accounts have been delivered to the
Registrar of Companies. The report of the auditors on the
1999 accounts was unqualified and did not contain a statement
under s237(2) or s237(3) of the Companies Act 1985.