Interim Results

Guinness Peat Group PLC 25 August 2004 GUINNESS PEAT GROUP plc ("GPG" or "the Company") Interim Results for the Six Months to 30 June 2004 Chairman's Statement Another active and productive half year for GPG, although only a modest £5 million result in conventional accounting terms. As we have stated before, many of GPG's major sources of profit do not fall neatly into six or twelve month reporting periods and some volatility must be accepted. For the same reason, the half year is not necessarily indicative of the full year result when various transactions now under discussion or negotiation are likely to come to fruition. The acquisition of 100% of Coats plc has also had an initial adverse profit impact. We made a policy decision to incur various upfront charges and write-offs as a cost of establishing long term benefits but, in the event, the process has been more painful than originally anticipated. This will persist through the remainder of 2004, but 1 January 2005 will be a symbolic date when Coats begins a new financial year as a reorganised and fully fledged subsidiary of GPG. Coats' operating profit improved from £6.2 million to £11.5 million for the half year, but was eaten up by refinancing charges and, more particularly, by a geographic mismatch of taxable earnings and unused credits for past losses carried forward. These are issues which GPG can and will resolve, but which require more time to implement on a global scale. Having completed stage 3 of the Coats exercise (Stage 1, Acquisition of strategic holding, 2. Successful takeover offer, 3. 100% ownership, 4. Full integration with GPG, 5. Deliver results) it is timely to update the profile of our other investments and activities and to define some of the opportunities and challenges on the GPG horizon: 1 Our UK and USA based operating companies are Staveley Industries (UK), Staveley Inc (USA) and Nationwide Accident Repair Services (50%) with an aggregate book value of £13 million. Earnings of these companies are satisfactory on the relatively low level of invested capital, but somewhat less so in relation to true economic values. Plenty of scope for value improvement including acquisition and industry rationalisation. 2 Dawson International plc: After some success in the 1990's, this old established Scottish textile and cashmere manufacturer reverted to problem status several years ago and in 2003 we prudently wrote-off the value of our 30.36 million shares (29.9%). Subsequently, GPG has provided strong proprietorial support including subscribing for 81% of a £10 million convertible notes issue which has assisted to restore the company to a more even keel. In certain circumstances, the exercise of conversion rights at 5p could increase our holding well above the 50% mark. The shares are presently trading at around 8p which is probably a fair reflection of their perceived value and prospects. 3 The balance of the UK share portfolio has a market value of £118 million. The largest components are De Vere Group £50 million, Charter £25 million and Young & Co's Brewery £17 million. GPG has long been agitating for structural changes in all of these companies but, so far, with little success. 4 Canberra Investment Corporation (66%) Book value A$31 million. An excellent, conservatively managed, asset oriented business, well established as a land and housing developer in the Australian Capital Territory. 5 Capral Aluminium (37%) Book value A$65 million. There are parallels with Coats insofar as a major relocation of the main manufacturing operations from NSW to a new modern facility in Queensland has required a recapitalisation of the balance sheet and has adversely affected current profitability. A short term cost for clear long term advantage. GPG's confidence in the future is reflected in the size of its investment in Capral. 6 Solution 6 Holdings (19%) Book value A$26 million. Solution 7! - since 30 June, the merger with MYOB Ltd has been concluded, producing a surplus of A$22 million for GPG (mainly in the form of MYOB shares of which we now hold 7.37%). 7 Green's Foods (29%) Book value A$12 million. Has experienced an impressive revival under the direction of GPG and several other major shareholders. Specialises in niche areas of food manufacture in an industry in Australia otherwise dominated by multinationals. 8 ABB Grain (8%) (formerly the Australian Barley Board) Market value A$25 million. Proposes an agreed merger with Ausbulk Ltd to create a powerful new force in the important Australian rural servicing area. GPG will be a supportive cornerstone shareholder in the new Adelaide based group. Reminiscent of Southern Farmers Group, a very successful investment for IEL in the 1970's and 1980's. 9 Intellect Holdings (20%) Book value A$14 million, Market value A$5 million. Obviously, an unsatisfactory investment as the company has experienced losses and a management upheaval and the market value of our shares is less than half cost. GPG has since underwritten a new issue of shares in conjunction with a capital reconstruction which appears to have a reasonable chance of restoring value. If not, a writedown will be necessary in the second half. 10 The balance of the Australian share portfolio has a market value of A$155 million. The largest holdings are Premier Investments $50 million, Australian Pharmaceutical Industries $23 million, AV Jennings $21 million and Reinsurance Australia $18 million. 11 Turners & Growers (79%) Book value NZ$114 million. A Stock Exchange listing is imminent and thereafter it is intended to "spin off" the Enza Foods business in the same manner as the earlier successful divestment of Turners Auctions. This should prove beneficial to Turners & Growers' shareholders without diminishing the strong commitment to its core operations in fruit and produce marketing. 12 The New Zealand share portfolio largely comprises Rubicon, Tenon and Tower with an aggregate market value of NZ$188 million. All are considered to be sound value, but we are not budgeting more than nominal returns in the current year. In the simplified GPG Balance Sheet below, all figures relate to book value, not market. Overall, the aggregate market value of listed shares (including subsidiaries and associates) exceeds book value by £140 million. SIMPLIFIED BALANCE SHEET AT 30 JUNE 2004 £m Cash at Bank 150 Debtors 10 Coats 215 Nationwide 9 Staveley (UK & USA) 4 Canberra Investment Corp 12 De Vere 32 Turners & Growers 40 Capral 25 Tower 34 Share portfolio 139 ----- TOTAL ASSETS 670 Creditors (23) Note issues (166) ----- SHAREHOLDERS' FUNDS 481 The Directors look forward to reporting good progress in all areas for the full year to 31 December 2004. Ron Brierley Chairman 25 August 2004 Enquiries: Weber Shandwick Square Mile 020 7067 0700 Kevin Smith / Josh Royston GPG Blake Nixon, Executive Director (London) 020 7484 3370 Dr Gary Weiss, Executive Director (Sydney) (0061) 2 8298 4300 Websites: Guinness Peat Group plc www.gpgplc.com Coats www.coatsplc.co.uk Consolidated Profit and Loss Account 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 Group turnover 478,613 281,856 552,988 -------------------------------------------------------------------- Group operating profit 28,366 45,395 67,517 Share of operating profit of joint ventures and associates 3,379 4,810 24,570 ---------------------------------------- 31,745 50,205 92,087 Profit on sale of business - continuing operations - - 19,056 ---------------------------------------- Profit before interest payable 31,745 50,205 111,143 Interest payable and similar charges (19,059) (10,884) (23,423) ---------------------------------------- Profit before taxation 12,686 39,321 87,720 Taxation (7,071) (14,380) (21,113) ---------------------------------------- Profit after taxation 5,615 24,941 66,607 Minority interests (317) (1,199) (2,641) -------------------------------------------------------------------- PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 5,298 23,742 63,966 -------------------------------------------------------------------- Dividends paid/proposed (75) - (6,894) ---------------------------------------- PROFIT RETAINED FOR THE PERIOD 5,223 23,742 57,072 ---------------------------------------- Earnings per Ordinary Share - Basic (pence) 0.68p 3.13p 8.43p Dividends per Ordinary Share (pence) - - 0.91p Consolidated Balance Sheet 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 FIXED ASSETS ------------------------------------------------------------------------- Intangible assets 35,642 (8,779) (8,283) Tangible assets 405,385 75,641 77,107 Investments 213,969 251,951 291,496 --------------------------------------- TOTAL FIXED ASSETS 654,996 318,813 360,320 --------------------------------------- CURRENT ASSETS ------------------------------------------------------------------------- Debtors 381,699 140,468 93,229 Stocks/Development work in progress 260,275 43,512 28,235 Investments 50,294 21,347 17,426 Cash at bank 211,511 178,318 289,463 --------------------------------------- TOTAL CURRENT ASSETS 903,779 383,645 428,353 --------------------------------------- CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR ------------------------------------------------------------------------- Trade and other creditors (334,601) (137,946) (126,886) Convertible subordinated loan notes (5,964) (3,425) (5,963) Other borrowings (82,495) (35,873) (838) --------------------------------------- TOTAL CURRENT LIABILITIES (423,060) (177,244) (133,687) --------------------------------------- --------------------------------------- Net current assets 480,719 206,401 294,666 --------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,135,715 525,214 654,986 --------------------------------------- CREDITORS: AMOUNTS FALLING DUE AFTER 1 YEAR ------------------------------------------------------------------------- Trade and other creditors (1,249) (792) (1,588) Convertible subordinated loan notes - (3,425) (5,964) Capital notes (159,531) (67,887) (166,513) Other borrowings (309,909) (15,504) (22,584) --------------------------------------- TOTAL LONG-TERM CREDITORS (470,689) (87,608) (196,649) --------------------------------------- PROVISIONS FOR LIABILITIES AND CHARGES (123,796) (10,107) (10,662) --------------------------------------- NET ASSETS 541,230 427,499 447,675 ======================================= CAPITAL AND RESERVES ------------------------------------------------------------------------- Share capital 42,805 34,823 34,461 Share premium account 53,171 2,162 3,389 Other reserves 257,577 260,596 261,117 Profit and loss account 127,466 113,056 130,871 ------------------------------------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 481,019 410,637 429,838 ------------------------------------------------------------------------- Minority interests (equity) 60,211 16,862 17,837 --------------------------------------- CAPITAL EMPLOYED 541,230 427,499 447,675 ======================================= Net assets per share * - (pence) 56.19 53.60 56.70 - (Australian cents) 146.27 131.88 134.71 - (New Zealand cents) 160.45 151.08 154.59 * The net assets per share for June 2003 and December 2003 have been adjusted for the 2004 Capitalisation Issue. Consolidated Cash Flow Statement 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 Net cash inflow from operating activities 5,865 33,827 102,366 Dividends received from associates and joint ventures 1,897 1,915 5,558 Returns on investments and servicing of finance (13,499) (5,706) (13,246) Taxation (7,157) (4,846) (5,958) Capital expenditure and financial investment (11,543) (16,038) (51,656) Acquisitions and disposals (76,940) 16,781 30,611 Equity dividends paid (2,325) (2,113) (2,116) --------------------------------------- CASH (OUTFLOW)/INFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING (103,711) 23,820 65,559 Management of liquid resources 121,007 (67,103) (157,939) Financing Issue of ordinary shares 3,010 372 (224) Increase in debt 21,039 30,083 98,922 ------------------------------------------------------------------------- INCREASE/(DECREASE) IN CASH FOR THE PERIOD 41,345 (12,828) 6,318 ------------------------------------------------------------------------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Increase/(decrease) in cash for the period 41,345 (12,828) 6,318 Cash (inflow)/outflow from increase/decrease in liquid resources (121,007) 67,103 157,939 Cash inflow from increase in debt (21,039) (30,083) (98,922) --------------------------------------- Change in net funds resulting from cash flows (100,701) 24,192 65,335 Acquisition of subsidiaries (326,251) - - Currency translation differences (7,037) 11,301 4,256 Other non-cash movements (see note below) - 1,313 2,612 --------------------------------------- Movement in net funds for the period (433,989) 36,806 72,203 Net funds as at 1 January 87,601 15,398 15,398 ------------------------------------------------------------------------- CLOSING NET (DEBT)/FUNDS (346,388) 52,204 87,601 ------------------------------------------------------------------------- Non-cash transactions: On 5 July 2004 the Group redeemed the fourth 10p tranche of the remaining convertible subordinated loan notes through the payment of £1,035,000 in cash, with the balance of £4,995,000 being satisfied by the issue of Ordinary Shares. NOTES TO THE FINANCIAL STATEMENTS 1. The interim financial information has been prepared on a basis consistent with the accounting policies adopted in the group's financial statements for the year ended 31 December 2003. 2. Abridged accounts (Companies Act 1985) - The figures for the year ended 31 December 2003 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 have reported on those accounts and that report was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985. The accounts for the six months ended 30 June 2004 have not been audited, nor have the accounts for the equivalent period in 2003. 3. Foreign exchange movements - during the 6 months to 30 June 2004, GPG recognised in operating profit £5.3 million of foreign exchange losses compared to £14.3 million of foreign exchange gains in the 6 months to 30 June 2003 (£16.2 million gains in the year to 31 December 2003). 4. 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 directors resigned from the board of Coats. On 25 May 2004, GPG's offer for the Coats shares held by the minority shareholders became unconditional, and Coats became a wholly owned subsidiary. Coats contributed a loss of £215,000 before taxation during the six months. 5. The Group's significant associate and joint venture entities are as follows: 30 June 30 June 31 December 2004 2003 2003 Coats Group (see 3. above) n/a 63.97% 63.97% Nationwide Accident Repair Services 50.00% 50.00% 50.00% Harcourt Hill Estate 50.00% 50.00% 50.00% Dawson International 29.91% 29.91% 29.91% Capral Aluminium 36.61% 31.63% 34.26% Green's Foods 28.99% 25.93% 28.91% 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 784,007,693 Ordinary shares in issue during the six months. The comparatives for the six months to 30 June 2003 and the year to 31 December 2003 have been adjusted for the Capitalisation Issue which took place in May 2004. 7. Changes in the issued share capital during the six months to 30 June 2004 comprise the following: £000 At 31 December 2003 34,461 Employee Options exercised 685 Scrip Dividend Alternative shares issued (14 May 2004) 332 Capitalisation Issue (24 May 2004) 3,540 Acquisition of subsidiary 3,787 ------- At 30 June 2004 42,805 ------- 8. Dividends - The directors have not recommended the payment of an interim dividend. The dividend of 1.00p per share for the year ended 31 December 2003 has been adjusted for the 2004 Capitalisation Issue. 9. On 5 July 2004, those holders of GPG (UK) Holdings plc Convertible Loan Notes ("CLNs") who elected to convert their Election Amounts were issued with 11,248,786 Ordinary shares of 5p each ("Conversion Shares") and the remaining CLN holders were repaid Redemption Amounts of £1.0million 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. 10. 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 T J N Beyer G J Cureton A I Gibbs B A Nixon Dr G H Weiss 11. Directors' Report - The Chairman's Statement appearing in the Interim Results and signed by Sir Ron Brierley provides a comprehensive review of the operations of the Company for the six months ended 30 June 2004. 12. 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 2004 and the performance of the consolidated entity for the half-year ended on that date; and (ii) comply with applicable UK Accounting 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. 13. 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 25 August 2004 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 GUINNESS PEAT GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2004 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 13. 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 in the United Kingdom 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 United Kingdom auditing standards 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 2004. Deloitte & Touche LLP Chartered Accountants London 25 August 2004 This review report will be published on the Company's website. Neither an audit nor a review provides assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular 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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