Final Results

Guinness Peat Group PLC 26 February 2007 Guinness Peat Group plc ("GPG" or "the Company" or "the Group") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 CHAIRMAN'S STATEMENT 2006 was a relatively modest year in conventional accounting terms, mainly due to very few realised capital transactions. Also, the second half was affected by the loss of some of the earlier foreign exchange gains as a consequence of the Board's (incorrect) decision to continue to run our New Zealand dollar exposure rather than lock in existing gains. Much more importantly, however, GPG actually enjoyed a very good year in respect of a substantial increase in the equity value of the shares - the sole purpose of the company's existence. Portfolio investments - unrealised surplus before tax £m Unrealised surplus as at 31 December 2005 111 Realised during 2006 (4) -------- 107 Net increase during 2006 85 -------- Balance at 31 December 2006 £192 -------- Unrealised gains at 31 December 2006 are subject to contingent tax of £37 million, which may be wholly or partly offset by available losses carried forward. The above net increase in value during the year, over and above the reported accounting profit, is the equivalent of 7.5p per GPG share and is the more appropriate measure of GPG's performance (particularly over a longer period of, say, 3 years) than a conventional annual revenue statement. It should be noted the unrealised gain as at 31 December 2006 does not include investments in subsidiary and associated companies (Canberra Investment Corp, Capral, Green's Foods, Maryborough Sugar, Nationwide Accident Repair Services, Rattoon, Tower Australia and Turners & Growers) which are carried at book value and would otherwise increase the surplus by a further £69 million. On a wider basis, the impact of IFRS is, of course, increasingly distorting the relevance of traditional financial reporting disciplines. Another significant factor in the GPG equation is the value of Coats. The present book value of £235 million is essentially still the original cost base on acquisition in 2003. In our view, Coats is a much more valuable company today, although it will take several more years to prove the point. Coats' 2006 profit contribution was £15 million, which was somewhat at the lower end of our best expectations. That figure includes £12 million surplus on sales of properties, which is valid in the GPG context but not of the enduring quality of recurring trading revenue. Coats' Preliminary Results for 2006 are being released today in a separate announcement and will be posted on the GPG website. Coats' financial profile at 31 December 2006 is: £m Fixed assets 272 Intangibles 147 Net current assets 112 ------- 531 Net debt (175) Provisions (111) Minorities (10) ------- SHAREHOLDERS' FUNDS £235 ======= The only real dampener on GPG's 2006 experience was the continued disappointing performance of Capral Aluminium Ltd, which is caught in a squeeze between the high price of aluminium and record low levels of residential building activity in eastern States and in NSW in particular. We maintain our complete faith that Capral will become a successful investment in the foreseeable future. CAPITAL AND DIVIDEND The Board has declared the standard 1p dividend and 1 for 10 bonus issue (the 14th in succession, multiplying an original 1990 holding 3.8 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. BALANCE SHEET GPG is in a strong financial position as shown in the simplified balance sheet below: Simplified Balance Sheet as at 31 December 2006 £m Cash at Bank 182 Debtors 21 Coats 235 Nationwide 4 Canberra Investment Corp 18 Turners & Growers 46 Capral 51 Tower Australia 70 Tower (NZ) 30 Australian Wealth Management 110 Rattoon 33 Share portfolio 324 ------- TOTAL ASSETS 1,124 Creditors (47) Note Issues (201) ------- SHAREHOLDERS' FUNDS £876 ======= REFLECTIONS It is now 17 years since the "new" GPG emerged from the remnants of the failed regimes of the 1980's. There has since been considerable growth in size and in value but the original culture and philosophy has remained entirely unchanged. That is the product of a stable and effective Board of "non independent" dedicated executive Directors throughout the period. An obvious remaining challenge within the present cycle is to vindicate the full potential value of our two largest subsidiaries, Coats and Capral. When that is achieved, there will be an incremental boost to the value of GPG shares which should neatly coincide with the imminence of the 20th anniversary of the successful 1990 restructure. We look forward to making substantial progress towards that goal in 2007. Ron Brierley CHAIRMAN 27 February 2007 Guinness Peat Group plc Consolidated Income Statement Unaudited Unaudited Year ended 31 December 2006 2005 Restated ** £m £m Continuing Operations Revenue 1,356 1,195 Cost of sales (956) (825) Gross profit 400 370 Profit on disposal of investments and other net investment income 45 77 Distribution costs (177) (179) Administrative expenses (196) (150) Operating profit 72 118 Share of profit of joint ventures - 4 Share of loss of associated undertakings (1) (1) Profit on sale of business - continuing operations 5 1 Finance costs (40) (43) Profit before taxation from continuing operations 36 79 Tax on profit from continuing operations (12) (27) Profit for the year from continuing operations 24 52 Discontinued Operations Gain on discontinued operations 10 44 Profit for the year 34 96 Attributable to: EQUITY HOLDERS OF THE PARENT 36 96 Minority interests (2) - 34 96 Earnings per Ordinary Share from continuing and discontinued operations: Basic 3.18p 9.02p Diluted 2.79p 7.90p Earnings per Ordinary Share from continuing operations: Basic 2.28p 4.90p Diluted 2.03p 4.69p ** Restated to reflect changes in accounting policy - see note 1. Guinness Peat Group plc Consolidated Balance Sheet Unaudited Unaudited 31 December 2006 2005 Restated ** £m £m NON-CURRENT ASSETS Intangible assets 198 221 Property, plant and equipment 391 426 Investments in associates 122 62 Investments in joint ventures 17 26 Fixed asset investments 417 282 Derivative financial instruments 6 5 Deferred tax assets 6 4 Pension surpluses 32 33 Trade and other receivables 18 15 1,207 1,074 CURRENT ASSETS Inventories 216 241 Trade and other receivables 238 274 Current asset investments 19 30 Derivative financial instruments 3 2 Cash and cash equivalents 254 253 730 800 Non-current assets classified as held for sale 3 18 TOTAL ASSETS 1,940 1,892 CURRENT LIABILITIES Trade and other payables 254 283 Current income tax liabilities 9 5 Capital notes - 99 Other borrowings 123 113 Provisions 87 90 473 590 NET CURRENT ASSETS 257 210 NON-CURRENT LIABILITIES Trade and other payables 21 24 Deferred tax liabilities 18 8 Capital notes 201 84 Other borrowings 150 217 Retirement benefit obligations: Funded schemes 14 29 Unfunded schemes 58 66 Provisions 37 45 499 473 TOTAL LIABILITIES 972 1,063 NET ASSETS 968 829 Guinness Peat Group plc Consolidated Balance Sheet Unaudited Unaudited 31 December 2006 2005 Restated ** £m £m EQUITY Share capital 57 49 Share premium account 61 16 Translation reserve (24) 12 Unrealised gains reserve 188 86 Other reserves 303 306 Retained earnings 291 251 EQUITY SHAREHOLDERS' FUNDS 876 720 Minority interests 92 109 TOTAL EQUITY 968 829 Net asset backing per share * 76.44p 66.87p * The net asset backing per share for December 2005 has been adjusted for the 2006 Capitalisation Issue. ** Restated to reflect changes in accounting policy - see note 1. Guinness Peat Group plc Consolidated Statement of Recognised Income and Expense Unaudited Unaudited Year ended 31 December 2006 2005 Restated ** £m £m Gains on revaluation of available-for-sale investments 109 50 (Losses)/gains on cash flow hedges (2) 3 Exchange (losses)/gains on translation of foreign operations (36) 21 Actuarial gains on retirement benefit schemes 9 49 Net income recognised directly in equity 80 123 Transfers Transferred to profit or loss on sale of available-for-sale investments (7) (57) Transferred to profit or loss on cash flow hedges 1 - Profit for the year 34 96 Total recognised income and expense for the year 108 162 Attributable to: Equity holders of the parent 110 162 Minority interests (2) - 108 162 IAS 32 and 39 transitional adjustments 105 Attributable to: Equity holders of the parent 120 Minority interests (15) 105 ** Restated to reflect changes in accounting policy - see note 1 Guinness Peat Group plc Reconciliation of Consolidated Movements in Equity Shareholders' Funds Year ended 31 December 2006 Share Share premium Translation Unrealised Other Retained capital account reserve gains reserve reserves earnings Total £m £m £m £m £m £m £m Balance as at 31 December 2004: As previously stated 44 11 (8) - 305 83 435 Transfer of exchange losses - - 1 - - (1) - As re-stated 44 11 (7) - 305 82 435 IAS 32 and 39 transitional adjustments: As previously stated - - (2) 129 1 (8) 120 Transfer of deferred tax assets re tax - - - (36) - 36 - losses As re-stated - - (2) 93 1 28 120 Balance as at 1 January 2005 as restated 44 11 (9) 93 306 110 555 Total recognised income and expense for the year - - 21 (7) 3 145 162 Dividends - - - - - (9) (9) Capitalisation issue of shares 4 - - - (4) - - Scrip dividend alternative - - - - - 5 5 Other share issues 1 5 - - - - 6 Share-based payments - - - - 1 - 1 Balance as at 31 December 2005 as 49 16 12 86 306 251 720 restated Total recognised income and expense for the year - - (36) 102 - 44 110 Dividends (note 10) - - - - - (10) (10) Capitalisation issue of shares 5 - - - (5) - - Scrip dividend alternative - - - - - 6 6 Other share issues 3 45 - - - - 48 Share-based payments - - - - 2 - 2 Balance as at 31 December 2006 57 61 (24) 188 303 291 876 Guinness Peat Group plc Consolidated Cash Flow Statement Unaudited Unaudited Year ended 31 December 2006 2005 £m £m Cash inflow/(outflow) from operating activities Net cash inflow from operating activities 151 227 Interest paid (42) (42) Taxation paid (18) (25) Net cash generated from operating activities 91 160 Cash inflow/(outflow) from investing activities Dividends received from associates and joint ventures 5 7 Capital expenditure and financial investment (82) (60) Acquisitions and disposals (30) (81) Net cash absorbed in investing activities (107) (134) Cash inflow/(outflow) from financing activities Issue of ordinary shares 48 1 Equity dividends paid to Company's shareholders (4) (4) Dividends paid to minority interests (4) (6) Increase/(decrease) in debt 9 (58) Net cash generated by/(absorbed in) financing activities 49 (67) Net increase/(decrease) in cash and cash equivalents 33 (41) Cash and cash equivalents at beginning of the year 238 271 Exchange (losses)/gains on cash and cash equivalents (30) 8 Cash and cash equivalents at end of the year 241 238 Guinness Peat Group plc NOTES TO FINANCIAL INFORMATION 1. The preliminary financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the Group, and complies 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, except as noted below. The Group adopted IAS 32 - Financial Instruments: Disclosure and Presentation, and IAS 39 - Financial Instruments: Recognition and Measurement, with effect from 1 January 2005. The income statement for the year ended 31 December 2005 has 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 £3 million for the year ended 31 December 2005, an increase in retained earnings of £2 million at 31 December 2005 and a corresponding decrease in the translation reserve of £2 million at that date, but has no impact on shareholders' funds at 31 December 2005. The income statement for the year ended 31 December 2005 has also been restated to reflect emerging best practice in respect of the treatment of deferred tax assets recognised following the recognition on implementation of IFRS of unrealised gains and losses on non-current investments. Deferred tax assets recognised were previously offset against deferred tax liabilities in the unrealised gains reserve, but are now separately recognised through the income statement. The impact of this restatement is a decrease in profit of £4 million for the year ended 31 December 2005, an increase in retained earnings of £32 million at 31 December 2005 and a corresponding decrease in the unrealised gains reserve of £32 million at that date, but has no impact on shareholders' funds. In addition, there is an increase in retained earnings of £36 million at 1 January 2005, on implementation of IAS 32 and 39, and a corresponding decrease of £36 million in the unrealised gains reserve at that date. 2. The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 31 December 2006 and 2005. The financial information for the year ended 31 December 2005 is derived from the statutory accounts for that year except for the restatements noted above, which have been filed with the Registrar of Companies. The auditors reported on those accounts and that report was unmodified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. Whilst the financial information included in this announcement has been compiled in accordance with the recognition and measurement principles of applicable IFRS, this announcement does not itself contain sufficient information to comply with IFRS. GPG expects to publish full financial statements that comply with IFRS and these will be available to shareholders in April 2007. The financial information in this report is in the process of being audited. 3. Group foreign exchange movements - during the year ended 31 December 2006, GPG recognised in operating profit £3 million of net foreign exchange gains compared to a restated £15 million of net foreign exchange gains in the year ended 31 December 2005. 4. Tax on profit from continuing operations 2006 2005 £m £m UK Corporation tax at 30% - - Overseas tax (21) (26) (21) (26) Deferred tax 9 (1) (12) (27) 5. Associate and joint venture entities The Group's significant associate and joint venture entities are as 2006 2005 follows: Australian Country Spinners Ltd 50.0% 50.0% Harcourt Hill Estate Ltd 50.0% 50.0% Rattoon Holdings Ltd 44.8% 20.2% Green's Foods Ltd 37.6% 36.9% Nationwide Accident Repair Services plc 31.3% 50.0% Maryborough Sugar Factory Ltd 24.3% - Tower Australia Group Ltd 23.9% - Australian Wealth Management Ltd - 34.7% CPI Group Ltd - 21.6% 5. Associate and joint venture entities - continued During the year Nationwide Accident Repair Services plc became an associate company. Maryborough Sugar Factory Ltd ("MSF") became an associated undertaking in 2006, and contributed £Nil million to Group profit in the year to 31 December 2006. The carrying value of MSF at 31 December 2006 amounted to £5 million. Tower Australia Group Ltd ("TAL") also became an associated undertaking in 2006, and also contributed £Nil million to Group profit in the year to 31 December 2006. The carrying value of TAL at 31 December 2006 amounted to £70 million. Other significant contributions to the profit for the year from associate and joint venture entities were: 2006 2005 £m £m Nationwide Accident Repair Services plc 2 3 Green's Foods Ltd (5) 1 Australian Wealth Management Ltd (to 7 June 2006) 1 2 Capral Aluminium Ltd (to 31 October 2005) - (6) 6. Other investments - Fixed asset investments within non-current assets are classified under IFRS as available-for-sale investments, and current asset investments within current assets are classified under IFRS as held-for-trading investments. 7. Earnings per share - The calculation of earnings per Ordinary Share from continuing and discontinued operations is based on profit for the year attributable to equity shareholders of the parent and the weighted average number of 1,126,994,012 Ordinary shares in issue during the year. The calculation of earnings per Ordinary Share from continuing operations is based on profit for the year from continuing operations attributable to equity shareholders of the parent and the weighted average number of 1,126,994,012 Ordinary shares in issue during the year. The comparatives for the year to 31 December 2005 have been adjusted for the 2006 Capitalisation Issue. 8. The net tangible assets (net assets excluding intangible assets) per share at 31 December 2006 were 67.13p (2005: 56.46p). 9. Changes in the issued share capital during the year to 31 December 2006 comprise the following: £000 At 1 January 2006 48,959 Employee options exercised 273 Share placement (12 April 2006) 2,550 Scrip dividend alternative shares issued (30 May 2006) 326 Capitalisation issue (30 June 2006) 5,202 At 31 December 2006 57,310 10. Dividends - The directors have approved the payment of an interim dividend of 1.00 pence per share payable on 21 May 2007 and making a total of 1.00 pence per share for the year. This 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. An interim cash dividend of 0.91 pence per share (adjusted to reflect the 2006 Capitalisation Issue) in respect of the year ended 31 December 2005 was paid on 30 May 2006 to GPG shareholders. 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 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 11 below). Shareholders are recommended to obtain their own professional advice. 11. The Annual General Meeting of the Company (the "2007 AGM") will be held on 29 May 2007 to consider, amongst other things, the 2007 Capitalisation Issue. Notice of the 2007 AGM will be incorporated in the Annual Report & Accounts to be posted to shareholders on 13 April 2007. A circular which will be posted to accompany the Notice of the 2007 AGM will contain details of the Interim Dividend, the Scrip Dividend Alternative and the 2007 Capitalisation Issue. The shares representing the 2007 Capitalisation Issue cannot be allotted until shareholders have given their approval at the 2007 AGM. In order to accommodate the different market practices of the London Stock Exchange ("LSE"), Australian Stock Exchange ("ASX") and New Zealand Stock Market ("NZSX"), being those markets on which GPG's shares are quoted, and subject to approval of the Capitalisation Issue by shareholders, the Stock Events timetable will be as follows*: Preliminary announcement of results, Interim Dividend and accompanying Scrip Dividend 27.02.07 Alternative and the proposed Capitalisation Issue Shares marked ex-dividend (ASX) 05.03.07 Shares marked ex-dividend (UK) 07.03.07 Record date for dividend 09.03.07 Head securities quoted ex-dividend (NZSX) 12.03.07 Post out Circular with Forms of Election for the Scrip Dividend Alternative 13.04.07 Final date for receipt of Scrip Dividend Alternative elections 14.05.07 Allotment of Scrip Shares (5.00pm UK time) 18.05.07 Dispatch of FASTER mailings notifying NZ holders of the change in holdings following the 21.05.07 Scrip Dividend allotment Dispatch of Scrip Dividend holding statements (AUS) 21.05.07 Dealings commence in Scrip Dividend Shares (AUS and NZ) 21.05.07 Dispatch of Scrip Dividend Share Certificates (UK) 21.05.07 Update of UK CREST accounts (5.00am UK time) 21.05.07 Dealings commence in Scrip Dividend Shares (UK) 21.05.07 Payment of Cash Dividend** 21.05.07 Last date for receipt of 2007 AGM proxies (5.00pm locally) 23.05.07 2007 AGM (4pm UK time) 29.05.07 Shares marked Ex-Capitalisation on ASX and traded on deferred settlement basis 08.06.07 Record date for Capitalisation Issue 15.06.07 Head shares marked Ex-Capitalisation in NZ 18.06.07 Allotment of Capitalisation Shares (5.00pm UK time) 22.06.07 Last day of deferred settlement trading on ASX 25.06.07 Update of UK CREST accounts (5.00am UK time) 25.06.07 Post out Capitalisation Share Certificates (UK) and holding statements (AUS) 25.06.07 Dispatch of FASTER statements in NZ notifying NZ holders of change in holdings following 25.06.07 Capitalisation Issue Shares marked Ex-Capitalisation in UK 25.06.07 Notes: *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 Australian and New Zealand dollars respectively, calculated at the rates of exchange ruling at 4:30pm (UK time) on 14 May 2007. 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 at the same time as the Notice of AGM is posted. To ensure the integrity of the three registers over record dates and 'ex' dates, such registers will be closed for transmissions between them at certain times. 12. Directors - The following persons were directors of GPG during the whole of the 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 13. Directors' Report - The Chairman's Statement appearing in the Preliminary Results and signed by Sir Ron Brierley provides a review of the operations of the Group for the year ended 31 December 2006. 14. 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 Preliminary Results of the consolidated entity: (i) give a true and fair view of the financial position as at 31 December 2006 and the performance of the consolidated entity for the 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. 15. Publication - This statement 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 27 February 2007 UNITED KINGDOM First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP Tel: 020 7484 3370 Fax: 020 7925 0700 AUSTRALIA Registries Ltd PO Box R67, Royal Exchange, Sydney NSW 1224, Australia Tel: 02 9290 9600 Fax: 02 9279 0664 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 PRELIMINARY REPORT OF GUINNESS PEAT GROUP PLC ("GPG") FOR THE YEAR ENDED 31 DECEMBER 2006 GPG results for announcement to the Market for the year ended 31 December 2006. Please note the following key information: * Revenue increased by £161 million (13.5%) over the corresponding period in 2005; * Profit from ordinary activities after tax attributable to members £36 million - a decrease of £60 million (62.5%) from the previous year; * Net profit for the year attributable to members £36 million - a decrease of £60 million (62.5%) from the previous year; * Net increase in unrealised surplus before tax on portfolio investments £85 million; * 1.0p interim dividend has been declared for the year payable on 21 May 2007 (0.91p paid during the year in respect of the year ended 31 December 2005, as adjusted for the 2006 capitalisation issue); * The record date for entitlement to dividend is 9 March 2007. See notes 10 and 11 to the Notes to the Preliminary Results; and * These Preliminary Results are based on financial information for the year ended 31 December 2006 which is in the process of being audited. This information is provided by RNS The company news service from the London Stock Exchange

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