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.


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