Final Results

Guinness Peat Group PLC 28 February 2005 28 February 2005 Guinness Peat Group plc ("GPG" or "the Company" or "the Group") PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2004 CHAIRMAN'S STATEMENT A relatively modest year for GPG in accounting terms with profit down from £64.0 million to £25.3 million. A rather better result was the continued overall increase in value of the Company (expressed in terms of market value of quoted investments and book value elsewhere) of some £87 million which is probably a more appropriate measure for a company such as GPG. The reasons for the lower profit are readily identifiable and are worth further explanation. 1. A fewer number of completed capital transactions. This is essentially a timing issue with various projected asset sales now in the pipeline for 2005. 2. Coats' net loss of £5.6 million. In view of Coats' importance to GPG, a separate report on this investment is produced on Pages 4 and 5. 3. An "exchange translation" loss of £7.0 million compared with a profit of £15.9 million in 2003. Regardless of annual fluctuations, in the longer run, the basket of currencies in which our portfolio is held, must largely equalise. Since 1991, the net aggregate outcome of currency changes to date is a deficit of £1 million. 4. A £6 million write-off in the value of Intellect Holdings Ltd. As foreshadowed in the Interim Report, it has been necessary to take a provision in respect of what has so far been an unsuccessful investment and it was decided to write off the book value entirely. We do not believe it to be all bad, however, and since 30 June, we have contributed an additional £1.3 million (wisely or not, remains to be seen) in recapitalising the company. Our holding is now 18%. We have also invested £6.6 million in a new entity called Tafmo Ltd, an unlisted public company in which we have a direct 56% interest and Intellect has a further 28%. Tafmo appears to have good credentials in the development of electronic payments technology. 5. An "equity accounted" loss of £9.8 million ex Capral Aluminium Ltd. This is purely accounting fiction as GPG has no entitlement to ex Capral Aluminium Ltd profits or losses other than dividends received (or, in this case, not received). Capral's poor result (which includes the write-off of a "future tax benefit" of A$27.2 million) is, however, of definite concern to GPG in respect of its substantial investment in the company. There are distinct parallels with Coats insofar as a major relocation of the main manufacturing operations has adversely affected current profitability but must pay off in the longer term. The market price of the shares has held up well, reflecting the confidence of GPG and other major shareholders in the company's future prospects. The sale of Charter shares was a major contributor to the 2004 result and there were also useful profits from Solution 6, Reinsurance Australia and Australian Pharmaceutical Industries. In 2003 we wrote off the value of our 30% holding in Dawson International but the company has actually recovered reasonably well and recently repaid £4.0 million of its convertible notes. Also, it has now acquired Dorma Group from Coats. Dorma has been a problem area in the past but in the Dawson environment it has every opportunity to succeed, as indeed it should, with its strong brands in linen and bedwear and an extensive marketing network in the UK. The "spinoff" by Tower of certain of its Australian operations into a new listing of Australian Wealth Management Ltd is proceeding to plan. This is the first significant move by Tower since GPG became involved several years ago and it is very positive for all concerned. GPG will continue to be the major shareholder in both companies - AWM, a formidable new entrant in a strongly growing area of financial services and for Tower, the next phase in the development of a leaner, more streamlined organisation. Since balance date, we have sold most of our shareholding in De Vere Group on a satisfactory basis. After some years of mild confrontation, it was finally a happy ending all round. For GPG, the successful sale of De Vere's main asset, The Belfry hotel and golf course, produced the long awaited rerating in the market value of the shares which we had consistently advocated and De Vere welcomed the departure of an unwanted activist shareholder. Turners & Growers (GPG 78%) Stock Exchange listing duly occurred and it is operating according to projections notwithstanding that New Zealand apple returns are well down this year for both growers and exporters. Otherwise, GPG's subsidiaries, associates and major investments are largely unchanged from the profile in the Interim Report. New holdings in Maryborough Sugar, Tassal (salmon farming), Tandou (cotton), Farm Pride Foods (eggs), Newcastle Stock Exchange and Rattoon Holdings (investor in "Tattersalls") have been noted in the media but all are relatively small scale and too soon at this stage to make any material impact. As usual, a simplified GPG Balance Sheet (book value figures) is set out below. This provides a more useful analysis of GPG as an investor than the conventional group accounts. Simplified Balance Sheet at 31 December 2004 £m Cash at Bank 193 Debtors 14 Coats 222 Nationwide 9 Staveley (UK & USA) - Canberra Investment Corp. 13 Turners & Growers 44 De Vere Group 33 Capral 20 Tower 35 Share portfolio 133 ------- TOTAL ASSETS 716 Creditors (24) Note Issues (178) ------- SHAREHOLDERS' FUNDS £514 ======= CAPITAL AND DIVIDEND The Board has declared the standard 1p dividend and a 1 for 10 bonus issue (the 12th in succession, multiplying an original 1990 holding 3.14 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. DIRECTORS Trevor Beyer has retired as a Director and we thank him for his many years of valuable service. No replacement has been made at this stage with the Chairman and Blake Nixon assuming additional responsibilities in the UK. Overall, the Directors operate as a cohesive unit with regular Board meetings in London. OUTLOOK The Directors anticipate an exciting and successful year for GPG in 2005. Ron Brierley CHAIRMAN London, 28 February 2005 COATS REPORT This report records the best (Crafts, cash flow) and the worst (EC, relocation costs) of Coats since acquisition. Based on a 3 year plan for the restoration of profitability and at least the doubling of capital value, we are slightly behind schedule at this stage but 1 January 2005 was a symbolic date when Coats began a new financial year for the first time as a fully fledged subsidiary of GPG and free of the disruption of ownership changes. Acquisition The period of acquisition which began in 2003 and which proved to be more difficult and prolonged than anticipated, concluded on 31 December 2004, with all of the required accounting adjustments completed. The resultant structure is that GPG owns 100% of Coats Group Ltd which, through a subsidiary, owns all of Coats Holdings Ltd (formerly Coats plc) other than the preference shares which are listed on the LSE. GPG's total cost of acquisition was £226.1 million. There was initial goodwill on acquisition of £34.1 million but 'fair value' adjustments have been made at the Coats Group level of £62 million upwards and £172 million downwards, thus increasing the goodwill component to £144.1 million which is being amortised on a 20 year basis (2004 charge : £4.8 million). GPG's share of Coats' post acquisition net deficit incurred to 31 December 2004 is £3.7 million, so that net equity is now £222.4 million, comprising net tangible assets of £83.1 million and goodwill of £139.3 million. The overall Coats financial profile as included in GPG's group accounts is: £m Fixed assets 305 Net current assets 222 Goodwill 139 -------- TOTAL ASSETS 666 Net debt (211) Provisions (193) Minorities (40) -------- SHAREHOLDERS' FUNDS £222 ======== Geography Coats' geographic reach is impressive. It has manufacturing units in 41 countries covering the whole world and is particularly strong in the high growth areas of India, China and other Far East countries. In November 2004, it opened a major new plant (80,000 sq.m.) in Shenzhen, China which is indicative of the trend to larger facilities in lower cost areas. This follows the recent establishment of similar modern facilities in Mexico and Romania. Coats' real estate value is substantial but more important is the total replacement cost of an established network which would be virtually impossible to replicate. No other thread producer can match this level of international service. Relocations In the decade prior to GPG's arrival, there was a major shift of production capacity to developing countries but there is still much to be done - more than we originally estimated would be required. There are very heavy one-off costs of closing traditional sites but it is imperative the process continues to completion as it represents an essential investment for the future. 2005 will be a further period of transition but on a lesser scale than 2004 and the real benefits will begin to flow in 2006 and beyond. Cash Flow Cash flow has proved to be very strong and a sound indicator of basic business health. To some extent this has been at the expense of profitability with an emphasis on reducing surplus inventory and tighter debtor control rather than increased sales. 2004 net cash inflow from operations was £131 million. Cash generation for essential capital expenditure and debt reduction will continue to be a priority. Real Estate A number of well situated properties are surplus or will be so in the near future. Disposals to date also include various fringe assets (lochs in Scotland, a racecourse in India) which had accumulated in Coats' 100 years or more of existence. The anticipated proceeds from property sales will, to a large extent, compensate for the one-off costs of reorganisation. Crafts The value and potential of the crafts division of Coats has exceeded expectations. Initially viewed as a somewhat secondary adjunct to thread manufacture, that is not the reality. It is a growing and substantial business in its own right, partly due to a revival in traditional crafts activities, particularly in the USA. Crafts was seriously underrated as an asset of the listed Coats plc. EC The least welcome aspect of the Coats acquisition is the emergence of "the EC legacy" - three separate but related proceedings against the company resulting from a European Commission investigation into trading practices in the European haberdashery and thread industry in the early 1990's. One has been determined at an administrative level, resulting in a claim of €30 million and the other two have yet to reach a conclusion. The €30 million claim relates to hand sewing needles for which total sales in the relevant period were €3 million and therefore appears grossly disproportionate, whatever the circumstances at the time. It should be stressed that the present Board had no involvement in these matters and is simply objectively dealing with the facts as established. The next stage of these proceedings is a more formal tribunal hearing at which the company has much greater rights of advocacy which will be actively pursued. Full provision has already been made for any anticipated eventual payment so no adverse impact on profit is foreseen. Unfortunately, it will be 2 to 3 years before any final resolution is obtained and in the meantime there are continuing costs and diversion of effort. On a more positive note, that coincides with the period when Coats' transformation will become fully effective and the EC matter is something which must and will be overcome together with other difficult challenges which will no doubt arise from time to time. GUINNESS PEAT GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 31 December 2004 2003 Unaudited Audited £m £m Turnover: group and share of joint ventures 737.1 1,085.8 Less: share of joint ventures (204.1) (541.8) Continuing operations (excluding acquisitions) 533.0 544.0 Acquisitions Turnover: group and share of joint ventures 654.1 - Less: share of joint ventures - - 654.1 - Group turnover - continuing operations 1,187.1 544.0 Group turnover - discontinued operations 7.7 9.0 Group turnover 1,194.8 553.0 Cost of sales (874.5) (423.0) Gross profit 320.3 130.0 Profit on disposal of investments and other net investment income 64.8 41.8 Net operating expenses (310.2) (104.3) Operating profit continuing operations (excluding acquisitions) 53.4 66.4 Operating profit acquisitions (excluding joint ventures and associates) 20.8 - 74.2 66.4 Operating profit-discontinued operations 0.7 1.1 Group operating profit 74.9 67.5 Share of operating profit of joint ventures 3.0 24.8 Share of operating loss of associated undertakings (2.2) (0.2) 75.7 92.1 Profit on sale of business continuing operations - 19.0 Profit on sale of subsidiary discontinued operations 1.8 - Interest payable and similar charges (43.5) (23.4) Profit on ordinary activities before taxation 34.0 87.7 Tax on profit on ordinary activities (8.0) (21.1) Profit on ordinary activities after taxation 26.0 66.6 Minority interests (0.7) (2.6) PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 25.3 64.0 Equity dividends (8.8) (6.9) Retained profit for the year 16.5 57.1 Re-stated* Earnings per ordinary share basic (pence) 3.07p 8.43p Earnings per ordinary share diluted (pence) 2.60p 6.16p Dividends per ordinary share(pence) 1.00p 0.91p *See note 3 GUINNESS PEAT GROUP PLC Consolidated Balance Sheet 31 December 2004 2003 Unaudited Audited £m £m Fixed assets Intangible assets: Goodwill 141.3 1.4 Negative goodwill (8.5) (9.7) Other 5.1 - 137.9 (8.3) Tangible assets 399.3 77.1 Investments 208.3 291.5 745.5 360.3 Current assets Stocks and development work in progress 183.8 28.2 Debtors 339.4 93.2 Investments 27.3 17.5 Cash at bank and in hand 283.7 289.5 834.2 428.4 Creditors: amounts falling due within 1 year Trade and other creditors (301.5) (126.9) Convertible subordinated loan notes (6.0) (6.0) Other borrowings (46.7) (0.8) (354.2) (133.7) Net current assets 480.0 294.7 Total assets less current liabilities 1,225.5 655.0 Creditors: amounts falling due after 1 year Trade and other creditors (3.6) (1.6) Convertible subordinated loan notes - (6.0) Capital notes (172.0) (166.5) Other borrowings (267.2) (22.6) (442.8) (196.7) Provisions for liabilities and charges (204.4) (10.6) NET ASSETS 578.3 447.7 Capital and reserves Share capital 43.5 34.5 Share premium account 10.6 3.4 Capital redemption reserve 0.5 0.5 Other reserve 304.4 260.6 Profit and loss account 155.4 130.9 EQUITY SHAREHOLDERS' FUNDS 514.4 429.9 Minority interests (equity) 63.9 17.8 CAPITAL EMPLOYED 578.3 447.7 Net asset backing per ordinary share (pence) 59.26 56.70 GUINNESS PEAT GROUP PLC Consolidated Cash Flow Statement Year ended 31 December 2004 2003 Unaudited Audited £m £m Net cash inflow from operating activities 196.7 102.4 Dividends received from associates and joint ventures 2.7 5.6 Returns on investments and servicing of finance (35.0) (13.2) Taxation (19.3) (6.0) Capital expenditure and financial investment (35.5) (51.7) Acquisitions and disposals 10.7 30.6 Equity dividends paid (2.3) (2.1) Cash inflow before management of liquid resources and financing 118.0 65.6 Management of liquid resources 71.6 (158.0) Financing Issue of ordinary shares, net of buyback expenses 3.2 (0.2) (Decrease)/increase in debt (133.3) 98.9 Increase in cash for the year 59.5 6.3 Non-cash transactions: On 5 July 2004, the Group redeemed the fourth 10p principal amount of the remaining convertible subordinated loan notes through the payment of £1.0m in cash, with the balance of £5.0m being satisfied by the issue of Ordinary Shares. Analysis of Changes in Cash And Liquid Resources During the Year Year ended 31 December 2004 2003 Unaudited Audited £m £m Opening balance 289.5 113.8 Net cash in flow 59.5 6.3 (Decrease)/increase in liquid resources (71.6) 158.0 Increase/(decrease) in bank overdraft 12.0 (0.5) Currency translation differences (5.7) 11.9 Closing balance 283.7 289.5 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. 2004 Acquisitions and Disposals 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 non-GPG directors resigned from its board. On 25 May 2004, following the successful conclusion of GPG's offer for the Coats shares held by the minority shareholders, Coats became a wholly-owned subsidiary. Coats during the year contributed a profit of £1,109,000 before taxation and minority interests. The £226.1 million cost of acquisition in Coats includes subscription for new capital of £75 million. In September 2004 the Group acquired a 56% holding in TAFMO Ltd, an Australian electronics processing company. In October 2004 Staveley Inc disposed of its non-destructive testing instrumentation business. 2. The Group's holdings in its significant associate and joint venture entities 31 December 31 December 2004 2003 Coats (see 1. above) n/a 63.97% Nationwide Accident Repair Services plc 50.00% 50.00% Harcourt Hill Estate Ltd 50.00% 50.00% Dawson International PLC 29.91% 29.91% Capral Aluminium Ltd 37.25% 34.26% Green's Foods Ltd 31.91% 28.91% CPI Group Ltd 21.58% n/a 3. Earnings per share -The calculation of basic earnings per Ordinary share is based on profit after taxation attributable to shareholders and the weighted average number of 826,308,514 Ordinary shares in issue during the year. The comparatives for the year to 31 December 2003 have been adjusted for the Capitalisation Issue which took place in May 2004. 4. Changes in the issued share capital during the year to 31 December 2004 Ordinary Shares Nominal of 5p each Value £m At 1 January 2004 689,220,175 34.5 Employee options exercised 15,355,603 0.8 Scrip dividend alternative shares issued (14 May 2004) 6,632,381 0.3 Capitalisation issue (24 May 2004) 70,795,434 3.5 Acquisition of subsidiary (25 May 2004) 75,754,914 3.8 Conversion of CLNs (5 July 2004) 11,248,786 0.6 At 31 December 2004 869,007,293 43.5 5. Tax on profit on ordinary activities 2004 2003 £m £m Current tax credit/(charge): UK corporation tax at 30% (2003:30%) 0.9 (1.4) Overseas tax (21.1) (6.7) Tax attributable to associated undertakings (4.6) (0.1) Tax attributable to joint ventures (1.5) (6.7) (26.3) (14.9) Deferred tax credit/(charge) 18.3 (6.2) Total tax charge (8.0) (21.1) 6. Dividends The Directors propose a final ordinary dividend of 1.00 pence per share for the year ended 31 December 2004, payable on 16 May 2005. No interim dividend was declared during the year. The proposed final dividend 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. A final dividend of 0.91 pence (adjusted to reflect the 2004 Capitalisation issue) in respect of the year to 31 December 2003 was paid on 17 May 2004 to GPG shareholders. There are local regulatory differences in the countries in which the Company'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. 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 7 below). Shareholders are recommended to obtain their own professional advice. 7. Proposed Year End Timetable 2005 The Annual General Meeting of the Company will be held on 11 May 2005.A circular which will contain details of the Dividend, the Scrip Dividend Alternative and the 2005 Capitalisation Issue ("the Circular") will be posted shortly. The Circular, together with the Forms of Election and Notices of Entitlement to the Scrip Dividend Alternative, will accompany the 2004 Report & Accounts. In order to accommodate the different market practices of the London Stock Exchange ("LSE"), Australian Stock Exchange ("ASX")and New Zealand Stock Exchange ("NZX"), being those markets on which GPG's shares are quoted and subject to approval of the Dividend and the Capitalisation Issue by shareholders, the Stock Events timetable will be as follows*: Preliminary announcement of results, Dividend and Scrip 28.02.05 Dividend Alternative and Capitalisation Issue Shares marked ex-dividend (ASX) 07.03.05 Shares marked ex-dividend (UK) 09.03.05 Record date for dividend 11.03.05 Head securities quoted ex-dividend (NZX) 14.03.05 Final date for receipt of Scrip Dividend elections 06.05.05 Final date for receipt of AGM proxies 09.05.05 AGM (11:00 am UK time) 11.05.05 Allotment of Scrip Shares (5:00 pm UK time) 13.05.05 Payment of Cash Dividend** 16.05.05 Update of UK CREST accounts (5:00 am UK) 16.05.05 Dealings commence in Scrip Dividend Shares 16.05.05 Dispatch of Scrip Dividend Share Certificates (UK) and 16.05.05 holding statement (AUS) Shares marked Ex-Capitalisation and bonus shares traded 16.05.05 on deferred settlement basis (ASX) Dispatch of FASTER statements in NZ notifying NZ holders of 17.05.05 the change in holdings following the Scrip Dividend allotment Record date for Capitalisation Issue 20.05.05 Head shares marked Ex-Capitalisation in NZ 23.05.05 Allotment of Capitalisation (5:00 pm UK time) 23.05.05 Last day of deferred settlement trading on ASX 23.05.05 Update of UK CREST accounts (5:00 am UK time) 24.05.05 Shares marked Ex-Capitalisation in UK 24.05.05 Dealings commence in Capitalisation Shares 24.05.05 Post out Capitalisation Shares Certificates (UK) and holding 24.05.05 statements (Australia) Dispatch of FASTER statements in NZ notifying NZ holders of 31.05.05 change in holdings following the Capitalisation Issue * 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 Australia and New Zealand dollars respectively, calculated at the rates of exchange ruling at 4:30 pm (UK time) on 9 May 2005. 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 with the Notice of AGM. To ensure the integrity of the registers over record dates and 'ex' dates the three registers will be closed for transmission between the registers at certain times. 8. Non-Statutory Accounts This announcement does not constitute full financial statements. The Company's full financial statements for the year ended 31 December 2004, which are being prepared in accordance with UK GAAP, are in the process of being audited but have not yet been signed by the auditors. The financial information for 2003 has been extracted from the 2003 audited accounts. These accounts have been delivered to the Registrar of Companies. The report of the auditors on the 2003 accounts was unqualified and did not contain a statement under s237(2) or s237 (3) of the Companies Act 1985 Guinness Peat Group plc Supplementary information required for Australian Stock Exchange (ASX) Appendix 4E Year ended 31 December 2004 2003 Unaudited Audited £m £m Retained profits: Retained profits brought forward 130.9 72.0 Profit attributable to ordinary shareholders 25.3 64.0 Equity dividends (8.8) (6.9) Scrip dividend alternative 4.6 4.1 Currency translation differences (net) 3.3 0.5 Deferred tax on currency translation differences 0.1 3.5 Buyback of shares - (6.0) Negative goodwill written back on disposals - (0.3) Retained profits carried forward 155.4 130.9 Net tangible assets per ordinary share (pence) 43.39 57.79 Additional cash flow information: Dividends received from associates 2.6 1.9 Dividends received from joint ventures 0.1 3.7 Other dividends received 5.1 7.6 Interest and other income received 18.4 13.2 Interest and other finance costs paid (34.0) (12.9) Interest capitalised 0.7 0.2 Depreciation 35.6 10.4 Amortisation of intangibles: Release of negative goodwill (1.2) (1.2) Amortisation of other intangibles 5.5 - Total amortisation of intangibles 4.3 (1.2) The supplementary information should be read in conjunction with the Guinness Peat Group plc preliminary announcement of results for the year ended 31 December 2004. This information is provided by RNS The company news service from the London Stock Exchange


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