RNS Number : 0378Y
Guinness Peat Group PLC
23 February 2012
 



 

GUINNESS PEAT GROUP plc

("GPG" or "the Company")

 

 

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

 

 

CHAIRMAN'S STATEMENT

 

 

"Do not dwell in the past,

do not dream of the future,

concentrate the mind on the present moment."

Buddha

 

The 2011 financial year saw the announcement and implementation of the strategy to realise value for shareholders by discontinuation of new investment and orderly recoupment of value from the investment portfolio.  This strategy was endorsed by shareholders at the Annual General Meeting in June 2011. Since that time the Board and management have devoted their efforts to the implementation of that strategy.

 

It is fair to say that market conditions have not been conducive to either equity value increase on a macro level nor to specific asset sales at enhanced values.  However, we consider that sound progress has been made.  From 1 January 2011 to 17 February 2012 total net proceeds of £165 million have been generated through the completed or partially completed sales of 48 investments.  Furthermore, we now have in place a number of value enhancement projects and a number of value realisation projects. I will touch on these later.

 

This statement, which accompanies the preliminary results for the 2011 financial year, contains more detail than might normally be required. This reflects the desire of the Board not only to have shareholders fully understand the progress which has been made, but also to provide a very frank assessment of the current issues facing the Company and the value of its component parts and some guide to our thinking on the way forward.  The issues are substantial and the strategy and situation of the Company atypical.  It is hoped that shareholder reaction to this statement and ongoing dialogue about the issues will further assist the Board in any recommendations put forward to the next Annual General Meeting in May 2012.

 

We concentrate our minds on the present moment, on the assets we have, the liabilities we have and the markets we have.  History and hope are no use to GPG shareholders.

 

The strategy has been directed towards turning assets held into cash at values reasonably commensurate with their underlying value given risk and timing considerations.  We have taken the view that, in principle, distribution in specie is not a preferred option though signalling that our working assumption is that Coats will be a substantial residual asset which is left in shareholders' hands at the conclusion of the broader process. The Board will, however, continue to adopt a flexible approach to the principal objective of cash realisation and return. In relation to substantial assets where realisation at an acceptable value proves unachievable within a reasonable time frame, the Board will consider alternatives which give shareholders direct access to the assets concerned. At the present time, given that the original schedule provides for two more years to achieve our cash realisation objectives, there is no investment, Coats excepted, which falls into this category.

 

To be explicit about Coats, concerning which some misunderstanding has been observed:

 

·   The priority is growing the strength of Coats as an ultimately independent company;

 

·   As indicated above, our presumption is that Coats will be the remaining ongoing business and will continue to be owned by GPG shareholders;

 

·   If, however, an offer for part or all of Coats is received which is thought to produce greater overall value for GPG shareholders that option will be given serious consideration.

 

It is the Board's intention that surplus cash proceeds from the asset realisation programme be returned to shareholders as expeditiously as possible.  The Group will retain the capital necessary for Coats' ongoing requirements and to ensure it remains able to meet its actual and contingent liabilities. The GPG Group's cash position and the progress made with the realisation programme during the first half of 2011 enabled the Group to make an initial £80 million (NZ$159 million) return of cash to shareholders in July 2011.  Also, in October a £12 million (NZ$24 million) cash dividend was paid, together with the issue of £6 million (NZ$12 million) of shares to existing shareholders pursuant to the Scrip Dividend Alternative.

 

GPG's consolidated financial results for the period ending 31 December 2011 reflect a combination of underlying investee company performance and year-end balance sheet positions (in the case of GPG's subsidiaries, joint ventures and associates) as well as the market value of other assets within the GPG portfolio at year-end, including GPG's Parent Group cash resources and liabilities. While in keeping with international accounting standards, this consolidated accounting presentation obscures an investor's view of GPG and its net asset value components.

 

An overview of both the consolidated accounting financial results and a simplified presentation of GPG's net asset position is contained in the following sections of this statement.

 

Reported (Consolidated) Financial Results

 

GPG's net profit attributable to members in the year was £1 million (NZ$2 million) compared to a profit of £46 million (NZ$92 million) in 2010.  Shareholders' funds decreased by £391 million (NZ$779 million) to £602 million (NZ$1,199 million) at 31 December 2011, due in the main to actuarial losses of £215 million (NZ$428 million) on the Group's defined benefit pension schemes, a £60 million (NZ$120 million) reduction in unrealised gains on investments (a portion of which is not a charge to shareholders' funds), foreign exchange losses of £26 million (NZ$52 million) recognised in reserves, and the return of capital of £80 million (NZ$159 million).  As a consequence of these factors, the net asset backing per share decreased during the year from 54.6p (NZ$1.09) to 37.1p (NZ$0.74).  The net profit for the year represented a return of 0.1% (2010: 5.0%) on average shareholders' funds.

 

At the year end the GPG Parent Group had cash of £200 million (NZ$398 million) (2010: £203 million (NZ$404 million)).

 

Coats' performance and key developments

 

·   Coats' trading during 2011 produced an attributable GPG profit of £44 million (NZ$88 million) (2010: £39 million, NZ$78 million). Coats' sales of US$1,702 million (£1,059 million, NZ$2,110 million) were 7% ahead of the prior year with sales increasing in both the Industrial and Crafts businesses. This performance was achieved against the background of difficult market conditions, especially in the second half of the year, and significant cost inflation. These results, both sales and attributable profit, were record performances under GPG ownership and confirmed the recovery from the low point of 2009 when sales were US$1,408 million (£903 million, NZ$1,799 million).  In that year Coats reported an attributable loss of £3 million (NZ$6 million).

 

·   During the year the Coats Board was strengthened by the appointment of three independent directors, each with substantial international commercial experience. I also joined the Coats Board to strengthen the governance relationship between GPG and Coats.  Since the year end it has been confirmed that Gary Weiss will be stepping down as Chairman with effect from 30 April 2012 and that he will be replaced by Mike Allen.  I would like to thank Gary for his chairmanship during a period of 8 years. 

 

·   The Coats performance in 2011 and its plans for 2012 and beyond will be fully outlined in its own year end documents.  There will also be a variety of opportunities for investors and analysts to receive detailed briefings.  Suffice it to say at this point that while trading market conditions for Coats remain very challenging, the management team is implementing the strategy effectively, but the business requires constant change and reinvention while reducing costs and improving cash generation. It is a very strong challenge to which GPG remains fully committed.  During 2012 the Coats Board will be undertaking a full internal review of its strategy and approach to the market.

 

·   It is significant to note that during 2011 Coats completed a full renewal of its standalone banking facilities.

 

Investment Portfolio (excluding Coats)

 

·   The Board has again, as it does for each reporting period, carefully reviewed the carrying values of its assets.  It has determined that impairments totalling £55 million (NZ$110 million) should be made and these are reflected in the full year results.  The rigour and degree of conservatism which has been applied to these revisions is driven by an intention to be very clear to investors about the position at year end. 

 

·   A more detailed review of the current investment portfolio and divestments achieved to date are outlined later in this statement.

 

 

Consolidated Income Statement:

 

GPG's financial performance in 2011 is shown below in the Simplified Income Statement.  GPG's profit before taxation from continuing operations was £53 million (NZ$106 million), compared to £65 million (NZ$129 million) in 2010 (as re-stated for the impact of discontinued operations - principally Turners & Growers).

 

 

 

Year Ended

31 December 2011

£ million

 

Re-stated

Year Ended

31 December 2010

£ million

 

Gross Profit

 

 

Parent Group

Coats

372 

370 

Other Subsidiaries

20 

18 

Total £ million

392 

389 

Total NZ$ million

781 

775 

 

 

 

 

 

 

 

Profit on disposal of investments and other net

investment income

 

 

Parent Group

36 

31 

Coats

Other Subsidiaries

Total £ million

44 

41 

Total NZ$ million

88 

82 

 

Exchange gains/(losses)

 

 

Parent Group

(7)

Coats

(2)

Total £ million

(7)

Total NZ$ million

(14)

 

Net operating expenses

 

 

Parent Group

(35)

(24)

Coats

(289)

(295)

Other Subsidiaries

(25)

(21)

Total £ million

(349)

(340)

Total NZ$ million

(695)

(678)

 

Share of (loss)/profit of joint ventures and

associated undertakings

 

 

Parent Group

(16)

Coats

Other Subsidiaries

Total £ million

(6)

12 

Total NZ$ million

(12)

24 

 

Profit/(loss) on ordinary activities before interest

 

 

Parent Group

(12)

Coats

88 

79 

Other Subsidiaries

10 

Total £ million

82 

95 

Total NZ$ million

164 

189 

 

 

Finance costs (net)

 

 

Parent Group

(17)

(18)

Coats

(11)

(10)

Other Subsidiaries

(1)

(2)

Total £ million

(29)

(30)

Total NZ$ million

(58)

(60)

 

Profit/(loss) before taxation from continuing operations

 

 

Parent Group

(29)

(12)

Coats

77 

69 

Other Subsidiaries

Total £ million

53 

65 

Total NZ$ million

106

129 

 

 



 

Simplified Balance Sheet:

 

GPG's financial position is shown in the 31 December 2011 Simplified Balance Sheet below:

 

 

 

2011

 

2010

 

 

£m

£m

£m

£m

Operating subsidiaries excluding Coats (book value)

 

 

50 

 

 

48 

Associated undertakings and joint ventures (book value)

 

 

212 

 

 

250 

Other portfolio investments

 

212 

 

366 

Turners & Growers

 

66 

 

78 

Total investments

 

540 

 

742 

Cash

 

200 

 

203 

Gross assets excluding Coats

 

740 

 

945 

Capital Notes

 

(214)

 

(212)

GPG pension schemes

 

(64)

 

(37)

Other net creditors

 

(10)

 

(22)

 

 

452 

 

674 

 

 

 

 

 

Coats

 

 

 

 

  Other net assets

464 

 

472 

 

  Net debt

(153)

 

(154)

 

  UK pension (deficit)/surplus

(161)

 

 

 

 

150 

 

319 

Shareholders' Funds £ million

 

602 

 

993 

Shareholders' Funds NZ$ million

 

1,199 

 

1,978 

 

 

 

 

 

NAV/share (NZ¢)

 

73.9 

 

108.8 

 

 

Overview of GPG's Key Net Asset Value (NAV) Components

 

Another way of looking at GPG's NAV is to view it in its component parts from an investor's perspective. While it is not possible to generalise about how one investor may view GPG from another, a possible approach is to look at GPG's key asset groups and subtract from that GPG's actual and contingent liabilities.

 

GPG key asset components:

·   Cash at bank;

 

·   Investment portfolio (excluding Coats); and

 

·   Coats (including Coats' pension schemes and EC fine contingent liability).

 

GPG key actual and contingent liability components:

 

·   Capital notes;

 

·   Pensions; and

 

·   GPG overhead costs.



 

An overview of each of these asset and liability items is outlined below:

 

Cash at bank

 

As previously noted, cash at bank as at 31 December 2011 was £200 million.

 

Disposals of investments during 2011 saw net cash generated from investment activity and realisations totalling £144 million (NZ$287 million). Between 1 January 2012 and 17 February 2012 a further £21 million (NZ$42 million) has been realised. This includes full realisation of investments in CSR, Capilano Honey, Farm Pride, Tasmanian Pure Foods and Autologic.  A schedule showing the proceeds from disposals during the above periods is set out at the end of this statement.

 

As at 17 February 2012, and adjusted to include the prospective sale to BayWa Aktiengesellschaft of GPG's 63.46% stake in Turners & Growers, the total net proceeds including dividend and other cash distributions generated since 1 January 2011 are approximately £238 million (NZ$474 million), representing circa 35.2% of the opening investment portfolio (excluding Coats and cash) at 1 January 2011.

 

Investment Portfolio (excluding Coats)

 

As at 17 February 2012, GPG's investment portfolio including subsidiaries, associated undertakings and joint ventures had a valuation of £491 million (NZ$978 million), representing the mark to market value of its listed investments and the current book value of its non-listed investments. A summary of the major holdings in the current investment portfolio is outlined below:

 

Investments (excluding Coats)

Shareholding

Market Value (£m)

 

 

 

Listed Investments

 

 

Turners & Growers Limited

63.5%

70

Tower Limited

34.0%

69

ClearView Wealth Limited

48.6%

64

Ridley Corporation Limited

22.1%

48

Young & Co's Brewery plc Non-Voting

34.2%

35

CIC Australia Limited

73.1%

31

Young & Co's Brewery plc 'A' Ordinary

15.4%

29

PrimeAg Australia Limited

11.6%

23

Capral Limited

47.4%

21

Metals X Limited

6.0%

12

Tandou Limited

28.4%

10

eServGlobal Limited

19.5%

7

Thwaites (Daniel) plc

9.4%

6

AVJennings Limited

7.7%

6

Newbury Racecourse plc

29.9%

5

Other listed

 

5


 


Non-listed Investments*

 

50


 


Total

 

491

 

*    Non-listed investments, which include Green's General Foods (72.5%), Tourism Asset Holdings (10.2%), Gosford Quarry Holdings (100%), Touch Holdings (56.0%) and Tourism Property Investment Group (10.0%) are shown at consolidated book value.

 

It is not appropriate for the Board to disclose asset specific realisation processes while they are in action as this may compromise process and value. A number are in train at this time as the outcome of considered and structured plans generated and managed by GPG.

 

The Board and management receive a steady flow of expressions of interest in assets, interest which spans the range of genuine to opportunistic.  While each such expression is treated with interest and added to our thinking, it was never the intention to simply conduct a garage sale. GPG was and remains invested in a range of assets at different stages of maturity in the investment cycle as with any investment company. While a rigorous time value of capital invested is now imposed, some assets, simply because of the stage they occupy in the value creation process, and other assets because of genuine illiquidity, will not be realised in the short term.

 

It may be useful to shareholders to comment on some specific assets of size in which the main current emphasis is on value creation:

 

·   Tower had a sound performance in 2011 despite the difficulties created by earthquakes. The difficult aspect of Tower is that its share price continues to languish well below assessment of its underlying value, illustrated by the typical analysts' "sum of the parts" valuation at over NZ$2 per share. We concur with this assessment. The Tower Board has now embarked on a review of its strategies, which we support. It is very important to both GPG shareholders and to Tower shareholders that during 2012 there is a considerable strengthening of Tower's market position, performance and recognition of its value.

 

·   ClearView is an investment that is at an early stage of its planned development into an independent life insurance and wealth management service provider in the Australian market. During 2011 and into 2012 the company has made very good progress in product development, internal operational improvement and developing its distribution channels. This is a continuing process which has GPG's full support. We expect to see substantial progress in 2012 and better recognition of the growing inherent value in the business.

 

·   CIC is a significant property development business. During the past year substantial progress has been made in refinancing and de-risking its exposure to some large but attractive assets. CIC has strong partner relationships and is well placed to gain in value from any cyclical improvement in the Australian housing market.

 

The above list does not imply that there is no work going on to enhance and unlock value from GPG's other investments but rather those examples provided are intended to indicate the multi-layered nature of the value realisation process in practice. Most of GPG's investments are illiquid and have their inherent value encapsulated in either hard assets and/or other strategic attributes. The point here is that simple auction or market sell-down processes are not necessarily the path to appropriate value realisation but rather intensive work with other stakeholders are expected to produce the right outcomes for all shareholders.

 

GPG has significant capital tax losses both in the UK and Australia.  To the extent that GPG generates capital gains from the realisation programme, it is anticipated that the proceeds can be returned to the UK without significant tax leakage.



 

Coats

 

The book value of Coats in the GPG consolidated balance sheet at 31 December 2011 was £150 million.  This represents a decrease of £169 million from the balance reported at the previous year end.  The principal movements during the year were the reported profit of £44 million, foreign exchange losses taken directly to reserves of £26 million and actuarial losses, primarily in respect of its UK Pension Plan, of £187 million.  The foreign currency losses arose mainly as a result of the strengthening of the US dollar against the currencies in which Coats' assets are denominated.  The adverse movement in the IAS19 funding position of the Coats UK Pension Plan is specifically described below in more detail under 'Pensions'.

 

As previously reported, Coats has been the subject of legal action which it is vigorously contesting, in respect of a European Commission investigation into European fasteners.  The appeal against the fine imposed on Coats was heard in July 2011 and a final determination is expected towards the end of 2012 or during the first half of 2013.  The full potential liability including interest as at 31 December 2011 amounted to €135 million (£113 million).

 

Capital Notes

 

Two issues of capital notes remained outstanding at the year end.  Notice of early repayment of the notes with an initial election date of 15 December 2013 was given in September 2011 and this issue, with a principal value of NZ$77 million (£39 million), will be purchased on 15 March 2012.  The remaining capital notes have an initial election date of 15 November 2012 and a principal value of NZ$350 million (£176 million) but no notice of early repurchase will be given in respect of this issue. 

 

Pensions

 

The carrying values of the Coats UK Pension Plan ("Coats Plan") and the two GPG pension schemes, Brunel and Staveley ("the GPG Pension Schemes"), on an IAS19 financial reporting basis (which, irrespective of assets held, requires the Schemes' liabilities to be discounted at AA rated corporate bond interest rates) have worsened significantly during the year.  As a result of unprecedentedly low corporate bond rates the balance sheet position of the three schemes at 31 December 2011 was as follows:

 

 

31 December 2011

31 December 2010

IAS19 Surplus/(deficit)

£m

£m

Coats

(161)

12 

Brunel

(31)

(23)

Staveley

(34)

(14)

Total £ million

(226)

(25)

Total NZ$ million

(450)

(50)

 

Future financial conditions are not possible to forecast.  Since the year end, bond yields continue to be at historically low levels, although equity values have improved to some extent. 

 

These accounting outcomes are very significant in their impact on the balance sheet of GPG. In terms of their year to year impact, the accounting position of such schemes does vary substantially with discount rate changes and market conditions. In accordance with the Group's stated accounting policy, the actuarial losses arising from experience adjustments and changes in assumptions are charged directly to equity.  In operating businesses the immediate impact is when cash contributions to schemes change. Cash contributions into the pension schemes are determined by the results of triennial actuarial valuations.  The last valuation of the Coats Plan (as at April 2009) resulted in a funding deficit of £101 million (NZ$201 million) which Coats agreed to make good by contributions of £7 million (NZ$14 million) per annum over a period of ten years.  This is subject to review at the next valuation of the Coats Plan (as at April 2012) which is due to be completed by July 2013.  If the current financial conditions continue it is likely that contributions will increase.

 

The most recently completed actuarial valuations of the Brunel scheme (as at March 2010) and the Staveley scheme (as at April 2008) did not result in funding deficits, so no company contributions are currently being made to those schemes. The Staveley scheme valuation as at April 2011 is due to be completed by July 2012 and it is anticipated that it will result in a funding deficit. There is no reason at this point to think that any changes in cash contributions to the Staveley scheme in 2012 will be difficult to manage. The results of the next Brunel valuation (as at March 2013) will not be determined until 2014.

 

In the GPG half year announcement in August 2011 reference was made to the liabilities associated with the GPG Pension Schemes and the potential for these to become a limiting factor on the ability to return capital to shareholders.  The Board has been considering how to manage the obligations to the GPG Pension Schemes in the context of the GPG realisation strategy. The Board continues to seek arrangements whereby the relevant companies' obligations to the GPG Pension Schemes can be met, without triggering calls to "cash up" the support to meet present shortfalls.  This is the most immediately concerning issue. 

 

In order to prevent an adverse outcome with respect to the GPG Pension Schemes, the support provided by GPG to back these schemes will need to be maintained.  The current support provisions effectively provide the Trustees of the GPG Pension Schemes with a contingent claim over the assets of GPG of approximately £130 million (NZ$259 million).  This will likely mean that £130 million (NZ$259 million) of asset realisation proceeds will be required to be retained by the GPG group and will not be available for distribution to shareholders in the medium term.

 

Support arrangements for the GPG Pension Schemes are subject to negotiation and agreement with the Trustees.  In addition the UK Pensions Regulator has powers to overturn scheme valuations he deems inappropriate and impose additional support arrangements where certain statutory tests are met and he deems reasonable to do so such that there is a small risk that any agreement reached with the Trustees is subsequently overturned. 

 

It is important that shareholders understand the limited nature of the options facing the Company on this matter which is a legacy of previous corporate acquisitions.  Living in the present as we do, pensions are a very serious challenge.  While options are limited, it is also unwise to assume that this challenge cannot be met.  It is our intention to give a further update on this matter at the forthcoming Annual General Meeting.

 



 

Overhead costs

 

Net operating expenses of £35 million for the Parent Group in the 2011 financial year can be further analysed as follows:

 

 

31 December 2011

31 December 2010

 

£m

£m

One-off advisors' fees  relating to the strategic review and return of capital

Cost of redundancies arising in the year

Other staff incentives

Other operating costs

18 

20 

Total £ million

35 

24 

Total NZ$ million

70 

48 

 

The other staff incentives represent the cost of staff retention and reward programmes and future redundancies. These costs, some of which are dependent on the outcome of the asset realisation exercise, are being spread over the period the related services are being provided.  Significant progress has been made during the year to reduce other overhead costs of the Parent Group.  Further progress in this regard is expected to be made and this is likely to include a combination in time of certain activities with those of Coats.

 

Capital Management

 

We have had calls from shareholders to implement the share buy-back capability which we have as one means of reducing the share price to asset value gap. A buy-back has been given, and continues to be given, active consideration. While it has merit,  we have had equal calls to maintain the dividend if possible as many shareholders look to this as a significant income stream. On top of this we have the obligations in respect of capital notes to meet and no absolute clarity as to the timing of future cash flow from realisations.

 

In implementing its capital management strategy, the Board will exercise its judgment in the best interest of the Company and shareholders considered as a whole.

 

The Board is not declaring a dividend at this time but this matter remains under consideration. 

 

Ongoing consideration is also being given to the relative tax effectiveness of the various means of returning value to shareholders.  The structure of GPG's shareholder base is such that finding a route to suit all interested parties is complex and it may be that a pragmatic approach aimed at meeting this objective for the majority of shareholders, whilst minimising the costs of achieving the return, is the best approach. A share buy-back, at the appropriate time may meet this test.  Subject to applicable laws, and it being in the best interests of the Company and shareholders at the time, shareholders should expect to see such action taken during the current year.

 

As reported in the half-yearly financial report, a clear strategy has been implemented to migrate spare Parent Group cash funds into New Zealand dollars to match the capital notes liabilities and shareholder capital return obligations. At the year end the Parent Group cash was held in the following currencies:



 

 

£ million

GBP

73 

AUD

17 

NZD

109 

Other

Total

200 

 

The holding in GBP represents part of the Group's hedging strategy against its UK pension scheme liabilities. The holding in NZD, which is expected to be supplemented by the proceeds from the sale of Turners & Growers, will be initially applied to the purchase of the 2008 capital notes on 15 March 2012.

 

Board Changes and Corporate Governance

 

As flagged at the half year, there have been several changes in the composition of the Board.  To re-cap, Mark Johnson stepped down as a director and Chairman of the Company on 6 April 2011, and I was appointed Chairman from this date, Gary Weiss resigned as a director of the Company on 30 April 2011, Blake Nixon resigned from his role as an Executive Director on 30 June 2011 and, from 1 July 2011 became a Non-Executive Director, and on 29 July 2011 Gavin Walker resigned as a director of the Company.  On 19 January 2012 Scott Malcolm was appointed an independent Non-Executive Director of the Company.

 

The Board now comprises five Non-Executive Directors, of whom three are considered to be independent.  This composition is in line with the UK Corporate Governance Code issued by the UK Financial Reporting Council and provides a Board of appropriate calibre and experience to pursue the current strategy, while at the same time providing a suitable corporate governance framework.

 

As indicated at the previous Annual General Meeting, the Board has created the appropriate committee structures and procedures, including Board performance review.

 

Annual General Meeting

 

The Annual General Meeting is intended to be held on Thursday 24 May 2012 in Auckland.  Further details of the exact location and timing of the meeting will be provided in the Notice of Meeting which GPG intends to send to shareholders in April 2012.

 

Conclusion

 

The Company is very much living in the present and continuing with the strategy determined in 2011.  The strategy has been and continues to be a challenge for the Board and management. The process in which we are engaged is highly unusual for a company which remains listed, let alone listed on three exchanges in different jurisdictions. However, the experience and the outcomes to date are generally consistent with any reasonable expectation and in our presentation to the Annual General Meeting, shareholders may expect a further update and ongoing analysis of the options available to the Company.

 

I would like to thank the management team and staff of GPG, who have all contributed to GPG's achievements in 2011, and to their commitment to enhancing value for all GPG shareholders.

 



 

Proceeds from disposals from 1 January 2011 to 17 February 2012

 

Investments fully disposed of in the period

£ million 

 

NZ$ million 

CSR

53 

 

106 

Chrysalis Group

                      15 

 

30 

Pertama Holdings

                      13 

 

26 

Alinta Energy (now Redbank Energy)

                      11 

 

22 

Marshalls

                        6 

 

12 

MSF Sugar

                        6 

 

12 

NIB Holdings

                        5 

 

10 

M J Gleeson

                        3 

 

Turners Auctions

                        3 

 

Fuller Smith & Turner

                        2 

 

Adnams

                        2 

 

Autologic

 

NSX

                        1 

 

Jersey Electricity

                        1 

 

Jersey New Water

                        1 

 

Augean

                        1 

 

Sante Fe

                        1 

 

Dickinson Legg

                        1 

 

ASB Capital No 2

                        1 

 

Capilano Honey

 

Others

                        4 

 

 

                    133 

 

265 

Net receipts from part disposals and other investment activity

                          4 

 

 8 

Dividend receipts

                      28 

 

56 

Total generated in the period

                    165 

 

329 

 

Note: All amounts stated in NZ$ are for illustrative purposes only, based on the NZ$: GBP exchange rate on 31 December 2011, NZ$1.9922: £1.00.

 

 

 

 

 

Rob Campbell

Chairman

24 February 2012

 

 

 

Enquiry details are:

 

New Zealand and Australian media:

 

Geoff Senescall on:

 

+64 9 309 5659




UK media:

Kevin Smith on:

+44 20 7282 1054

 

 



 

 

Guinness Peat Group plc





 






 

Consolidated Income Statement





 






 


Unaudited


Audited


 

Year ended 31 December

2011


2010


 




Restated*


 


£m


£m


 

Continuing Operations





 

Revenue

1,141 


1,066 


 






 

Cost of sales

(748)


(677)


 






 

Gross profit

393 


389 


 






 

Profit on disposal of investments and other net investment income

44 


40 


 






 

Distribution costs

(182)


(176)


 

Administrative expenses

(167)


(170)


 






 

Operating profit

88 


83 


 






 

Share of profit of joint ventures

12 



 






 

Share of (loss)/profit of associated undertakings

(18)



 






 

Finance costs (net)

(29)


(30)


 






 

Profit before taxation from continuing operations

53 


65 


 






 

Tax on profit from continuing operations

(38)


(16)


 






 

Profit for the year from continuing operations

15 


49 


 






 

Discontinued Operations





 

(Loss)/profit from discontinued operations (Turners & Growers (£17 million loss);





 

(2010: £3 million profit)) (Note 7)

(18)



 






 

(LOSS)/PROFIT FOR THE YEAR

(3)


53


 






 






 

Attributable to:





 

EQUITY HOLDERS OF THE PARENT


46 


 

Non-controlling interests

(4)



 


(3)


53 


 






 

Earnings per Ordinary Share from continuing and discontinued operations:





 

Basic

0.03p


2.57p


 

Diluted

0.03p


2.41p


 






 

Earnings per Ordinary Share from continuing operations:





 

Basic

0.62p


2.45p


 

Diluted

0.62p


2.32p


 






*   Restated to reflect the results of Turners & Growers Ltd as a discontinued operation.

 

 

Guinness Peat Group plc








Consolidated Statement of Comprehensive Income









Unaudited


Audited

Year ended 31 December

2011


2010


£m


£m





(Loss)/profit for the year

(3)


53 





(Losses)/gains on revaluation of fixed asset investments

(27)


87 

Losses on cash flow hedges

(5)


(5)

Exchange (losses)/gains on translation of foreign operations

(23)


58 

Actuarial losses on retirement benefit schemes

(215)


(17)

Tax on items taken directly to equity


(14)

Net (loss)/income recognised directly in equity

(261)


109 





Transfers




Transferred to profit or loss on sale or impairment of fixed asset investments

(43)


(17)

Transferred to profit or loss on sale of businesses

(3)


(7)

Transferred to profit or loss on cash flow hedges



(42)


(16)





TOTAL COMPREHENSIVE (EXPENSE)/INCOME FOR THE YEAR

(306)


146









Attributable to:




EQUITY HOLDERS OF THE PARENT

(301)


130 

Non-controlling interests

(5)


16 






(306)


146 

 



 

Guinness Peat Group plc








Consolidated Statement of Financial Position









Unaudited


Audited

31 December

2011


2010


£m


£m

NON-CURRENT ASSETS




Intangible assets

169 


180 

Biological assets


Property, plant and equipment

303 


420 

Investments in associated undertakings

186 


236 

Investments in joint ventures

62 


56 

Fixed asset investments

203 


333 

Deferred tax assets

12 


13 

Pension surpluses

20 


31 

Trade and other receivables

10 


27 


965 


1,303 





CURRENT ASSETS




Inventories

216 


265 

Biological assets

- 


Trade and other receivables

217 


272 

Current asset investments

10 


14 

Derivative financial instruments


Cash and cash equivalents

276 


313 


721 


873 





Assets held for sale

215 






TOTAL ASSETS

1,901 


2,178 





CURRENT LIABILITIES




Trade and other payables

250 


288 

Current income tax liabilities


Capital notes

214 


Other borrowings

50 


121 

Derivative financial instruments


20 

Provisions

63 


72 


588 


509 





NET CURRENT ASSETS

133 


364 





NON-CURRENT LIABILITIES




Trade and other payables

13 


11 

Deferred tax liabilities

25 


29 

Capital notes


212 

Other borrowings

216 


231 

Derivative financial instruments


Retirement benefit obligations:




Funded schemes

221 


37 

Unfunded schemes

54 


56 

Provisions

21 


26 


553 


607 





Liabilities directly associated with assets held for sale

94 






TOTAL LIABILITIES

1,235 


1,116 





NET ASSETS

666 


1,062 

 



 

Guinness Peat Group plc








Consolidated Statement of Financial Position (continued)









Unaudited


Audited

31 December

2011


2010


£m


£m

EQUITY




Share capital

81 


91 

Share premium account


62 

Translation reserve

139 


165 

Unrealised gains reserve

64 


124 

Capital reduction reserve

118 


Other reserves

109 


270 

Retained earnings

91 


281 

EQUITY SHAREHOLDERS' FUNDS

602 


993 

Non-controlling interests

64 


69 

TOTAL EQUITY

666 


1,062 









Net asset backing per share

37.10p


54.63p

 



 



 

Guinness Peat Group plc


















Consolidated Statement of Changes in Equity




















Year ended 31 December 2011























Share


Unrealised

Capital





Non-


Share

Premium

Translation

Gains 

Reduction

Other

Retained



Controlling


Capital

Account

Reserve

Reserve

Reserve

Reserves

Earnings

Total


Interests


£m

£m

£m

£m

£m

£m

£m

£m


£m












Balance as at 1 January 2010

81 

63 

123 

68 

274 

258 

867 


77 












Total comprehensive income for the year

42 

56 

29 

130 


16 

Dividends

(16)

(16)


(5)

Scrip dividend alternative

(1)

10 

10 


Capitalisation issue of shares

(8)


Other share issues


Share based payments


Dilution of investments in subsidiaries


15 

Disposal of subsidiaries


(34)












Balance as at 31 December 2010

91 

62 

165 

124 

270 

281 

993 


69 












Total comprehensive expense for the year

(26)

(60)

- 

(1)

(214)

(301)


(5)

Return of capital

(11)

(63)

118 

(161)

37 

(80)


Dividends

(18)

(18)


(4)

Scrip dividend alternative

(1)


Other share issues


Share based payments


Dilution of investment in subsidiaries

(1)

(1)













Balance as at 31 December 2011

81 

139 

64 

118

109 

91 

602 


64 

 

 

Following Shareholder and Court approval, a Scheme of Arrangement and consequent Reduction of Capital became effective on 5 July 2011.  Under that Scheme, three deferred shares of nominal value £37 million (Class A share), £6 million (Class B share) and £118 million (Class C share) were allotted and issued as fully paid.  The Class A share was cancelled and the reserve arising from the cancellation was credited to the Company's profit and loss account and the Class C share was cancelled and the reserve arising from the cancellation was credited to a capital reduction reserve.  In addition, in order to fund a capital return to shareholders of £80 million, the share capital of the Company was reduced by the cancellation of £11 million of ordinary shares and the Class B share and the Company's share premium account was cancelled.

 



 

 

Guinness Peat Group plc








Consolidated Statement of Cash Flows













Unaudited


Audited

Year ended 31 December

2011


2010


£m


£m





Cash inflow/(outflow) from operating activities




Net cash inflow from operating activities

209 


61 

Interest paid

(41)


(42)

Taxation paid

(27)


(25)

Net cash generated by/(absorbed in) operating activities

141 


(6) 





Cash inflow/(outflow) from investing activities




Dividends received from joint ventures


Capital expenditure and financial investment

(38)


(29)

Acquisitions and disposals

(1)


(90)

Net cash absorbed in investing activities

(31)


(110)





Cash (outflow)/inflow from financing activities




(Capital return)/issue of Ordinary Shares

(78)


Equity dividends paid to the Company's shareholders

(12)


(6)

Dividends paid to non-controlling interests

(4)


(5)

Net (decrease)/increase in borrowings

(45)


Net cash absorbed in financing activities

(139)


(2)





Net decrease in cash and cash equivalents

(29)


(118)

Cash and cash equivalents at beginning of the year

287 


388 

Exchange gains on cash and cash equivalents


17 

Cash and cash equivalents at end of the year

259 


287 





Cash and cash equivalents per the Consolidated Statement of Financial Position

276 


313 

Bank overdrafts

(17)


(26)

Cash and cash equivalents at end of the year

259 


287 









Summary of net debt








-  Parent Group * cash

200 


203 

-  Capital Notes

(214)


(212)

-  Parent Group net debt

(14)


(9)

-  Other group cash

76 


110 

-  Other group debt

(266)


(352)





Total group net debt

(204)


(251)









* Parent Group comprises the Group's central investment activities.




 

 



 

Guinness Peat Group plc

 

NOTES TO FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2011

 

1.         The preliminary financial information ("the financial information") set out in this report is based on GPG's unaudited consolidated financial statements, which are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and complies with the disclosure requirements of the Listing Rules of the UK Financial Services Authority and the Listing Rules of the Australian Securities Exchange.  The accounting policies adopted by the Group have been applied consistently to all periods presented.

 

The Group has changed the presentation in the Consolidated Statement of Financial Position to disclose separately biological assets, which were previously included within Property, plant and equipment and Trade and other receivables. 

 

2.         The financial information set out in this report does not constitute the Group's statutory accounts for the years ended 31 December 2011 and 2010.  Other than the restatement of the Consolidated Income Statement to reflect Turners & Growers Ltd ("T&G") as a discontinued operation the financial information for the year ended 31 December 2010 is derived from the statutory accounts for that year, which have been filed with the Registrar of Companies.  The auditors' report on those accounts included an emphasis of matter paragraph to highlight the significant uncertainty in relation to the European Commission competition investigation into alleged market sharing agreements relating to the European haberdashery market.  Further details relating to this matter are set out in Note 13.  The auditors' report did not contain statements under Sections 498(2) or 498(3) of the Companies Act 2006.  The audit of the statutory accounts for the year ended 31 December 2011 is not yet complete.  Those accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 

 

Whilst the financial information included in this report has been compiled in accordance with the recognition and measurement principles of applicable IFRS, this report 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 March 2012.

 

At the year end the Parent Group had net debt, after taking account of the capital notes, totalling £14 million (2010: £9 million).  The Parent Group also has various other actual and contingent liabilities.  The Board expects to be able to meet these obligations from existing resources.  Further information on the net debt position of the Group is provided in the table at the foot of the Consolidated Statement of Cash Flows.

 

Giving due consideration to the nature of the Group's business and underlying investments, including the ability of the Parent Group to realise its liquid investments, the uncertainty inherent in the capital markets in which it operates and foreign currency risk and also taking into consideration the cash flow forecasts prepared by the Group and the sensitivity analysis associated therewith, the directors consider that the Company and the Group are going concerns and this financial information is prepared on that basis.



 

3.         Group foreign exchange movements - during the year ended 31 December 2011, GPG recognised in operating profit £1 million of net foreign exchange gains (2010: £7 million net foreign exchange losses).  Net foreign exchange losses of £23 million (2010: £58 million gains) were recognised in reserves.

 

4.         Tax on profit from continuing operations

 

 

2011

 

2010

 

£m

 

£m

 

 

 

 

UK Corporation tax credit at 26.5% (2010: 28.0%)

 

Overseas tax charge

(27)

 

(25)

 

(25)

 

(25)

Deferred tax (charge)/credit

(13)

 

 

(38)

 

(16)

 

The tax charge for 2011 includes a non-cash tax charge of £9 million (2010: non-cash tax credit of £14 million) in respect of movements recognised in respect of deferred tax assets relating to tax losses.  This charge (2010: credit) arises from a similar size decrease (2010: increase) in deferred tax liabilities recognised through the unrealised gains reserve.  The tax charges for both years also reflect the impact of unrelieved losses in certain subsidiary undertakings.

 

5.         Associated undertakings and joint ventures

 

The Parent Group's associated undertakings and joint ventures at 31 December were as follows:

 

 

2011

 

2010

 

 

 

 

Australian Country Spinners Ltd

50.0%

 

50.0%

Autologic Holdings plc

26.2%

 

26.2%

Capral Ltd

47.4%

 

47.4%

ClearView Wealth Ltd

48.6%

 

49.0%

Green's General Foods Pty Ltd

72.5%

 

72.5%

Peanut Company of Australia Ltd

*

 

24.8%

Rattoon Holdings Ltd

*

 

44.4%

Tower Ltd

34.1%

 

34.7%

 

 

 

 

*Reclassified as fixed asset investments

 

 

 

 

 

 

 

 

Associated

 

Joint

 

undertakings

 

ventures

 

£m

 

£m

 

 

 

 

At 1 January 2011

236 

 

56 

Currency translation differences

(3)

 

Additions

 

Dividends receivable

(7)

 

(8)

Actuarial gains on retirement benefit schemes

 

Share of share-based payment transactions

 

Share of profit after tax and minorities

12 

 

12 

Impairments

(45)

 

Transfer to non-current assets held for sale

(7)

 

Reclassified to subsidiaries

(2)

 

At 31 December 2011

186

 

62

 

 

The impairment charge of £45 million made against the carrying value of the Group's associated undertakings was partially offset in the Consolidated Income Statement by an amount of £15 million recycled from the unrealised gains reserve.  This charge arose from a review of these investments in the light of the strategic announcement made by the Board on 11 February 2011.  Associated undertakings are held at the lower of cost plus post acquisition changes in the Group's share of net assets and the higher of fair value less costs to sell and value in use.  Fair value in these cases has been determined in the context of the orderly value realisation being undertaken, following a detailed review by the Investment Committee and the Board which took account of indicative offers, market values and other similar factors. 

 

6.         Purchase of subsidiary undertaking

 

On 15 March 2011 T&G acquired a controlling interest (100%) in the voting rights of Inglis Horticulture Ltd ("Inglis"), a former associated undertaking in New Zealand.  The values of net assets acquired, using the purchase method of accounting, were as follows:

 

 

£m

 

 

Property, plant and equipment

12 

Biological assets

12 

Deferred tax assets

Trade and other payables

(6)

Borrowings

(14)

Deferred tax liabilities

(3)

Net assets at acquisition


 

Consideration:

 

Cash paid in prior years

Shares issued in current year

Total consideration

Less losses previously recognised as an associated undertaking

(1)

Net assets at acquisition

 

Inglis contributed revenue of £4 million and a loss of £12 million to the Group results for the period.  Had Inglis been consolidated from the beginning of the period, reported revenue would have increased by £1 million, with no impact on reported profit for the period.

 

7.         Discontinued operations

 

Following the conditional sale of T&G, that investment has been treated as a discontinued operation in both the 2011 and 2010 Income Statement.  No opening statement of financial position has been presented for the prior year in these financial statements as it is unchanged from that previously reported. 



 

The net assets of T&G were written down to market value as at 30 September 2011, as follows:

 

 

 

 

 

 

£m

 

 

 

 

 

 

 

Book

 

 

 

Carrying

 

Value

 

Impairment

 

value

Intangible assets

10 

 

(8)

 

Property, plant and equipment

99 

 

 

99 

Biological assets

13 

 

 

13 

Associated undertakings

 

 

Inventories

22 

 

 

22 

Deferred tax assets

 

 

Trade and other receivables

50 

 

 

50 

Cash and cash equivalents

 

 

Trade and other payables

(43)

 

 

(43)

Borrowings

(48)

 

 

(48)

Deferred tax liabilities

(9)

 

 

(9)

Net assets at reclassification

111 

 

(8)

 

103 

 

Assets classified as held for sale

211 

 

(8)

 

203 

Liabilities directly associated with

 

 

 

 

 

assets classified as held for sale

(100)

 

 

(100)

 

111 

 

(8)

 

103 

 

 

 

 

 

 

The results of T&G as included within the Consolidated Income Statement for the year to 31 December 2011 were as follows:

 

 

 

 

 

 

 

 

 

2011

 

2010

 

 

 

£m

 

£m

(Loss)/profit after tax for period prior to

 

 

 

 

 

reclassification as an asset held for sale

 

 

(8)

 

Loss arising on measurement to fair value on

 

 

 

 

 

reclassification (above)

 

 

(8)

 

Loss for period after reclassification

 

 

(1)

 

(Loss)/profit on T&G as a discontinued

 

 

 

 

 

operation

 

 

(17)

 

 

 

 

 

 

 

 

8.         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.

 

9.         Earnings per share - The calculation of basic earnings per Ordinary Share from continuing and discontinued operations is based on profit for the year attributable to equity shareholders of the parent and weighted average number of 1,715,466,321 Ordinary Shares in issue during the year.

 

The calculation of basic 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 1,715,466,321 Ordinary Shares in issue during the year.

 

Calculations of earnings per Ordinary Share are based on results to the nearest £'000.

 

10.       The net tangible assets (net assets excluding intangible assets) per share at 31 December 2011 were 30.66p (2010: 48.57p).

 

11.       Changes in the issued share capital during the year ended 31 December 2011 comprise the following:

 

 

£m

At 1 January 2011

91 

Employee options exercised

Return of capital (5 July 2011)

(11)

Scrip dividend alternative shares issued (24 October 2011)

At 31 December 2011

81 

 

12.       Dividends - An interim cash dividend of 1.15 pence per share in respect of the year ended 31 December 2011 was paid on 24 October 2011 to GPG shareholders. 

 

13.       European Commission Investigation - As previously reported, Coats has been the subject of legal action, which it is vigorously contesting, in respect of a European Commission investigation into European fasteners. The appeal against the fine imposed on the Coats plc Group of €110.3 million (equivalent to £92.1 million at 31 December 2011 exchange rates) plus interest of €24.7 million (equivalent to £20.6 million at 31 December 2011 exchange rates) was heard in July 2011 and a final determination is expected towards the end of 2012 or during the first half of 2013.

 

Coats plc has provided the European Commission with payment bonds to cover its exposure to the full extent of the fine.  The Company has provided to the bond issuers a counter indemnity for Coats plc's performance.  This counter indemnity is due to expire in June 2012. 

 

As stated in previous reports, the Group remains of the view that any anticipated eventual payment of this fine is adequately covered by existing provisions.

 

14.       Environmental costs - As noted in previous reports, the US Environmental Protection Agency has notified Coats that it is a potentially responsible party under the US Superfund for investigation and remediation costs in connection with the Lower Passaic River Study Area in New Jersey, in respect of former facilities which operated in that area prior to 1950.  The Group considers this a contingent liability.  Approximately 70 companies to date have formed a co-operating parties group to fund and conduct a remedial investigation and feasibility study of the area.  Coats joined this group in 2011 and a further $2.5 million (£1.6 million) (2010: $2.5 million (£1.6 million)) has been charged in the year in respect of Coats' estimated share of the cost of this study and associated legal and consultancy expenses.

 

15.       Directors - The following persons were, except as noted, directors of GPG during the whole of the year and up to the date of this report:

 

RJ Campbell

MN Allen

Sir Ron Brierley

SL Malcolm (appointed 19 January 2012)

BA Nixon (non-executive from 1 July 2011)

MRG Johnson (to 5 April 2011)

GR Walker (to 29 July 2011)

Dr GH Weiss (to 30 April 2011)

 

16.       Directors' Report - The Chairman's Statement appearing in the Preliminary Results and signed by Rob Campbell provides a review of the operations of the Group for the year ended 31 December 2011.

 

17.       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

RJ Campbell

Director

24 February 2012

 

 

UNITED KINGDOM

First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP

Tel:  020 7484 3370        Fax:  020 7925 0700

 

AUSTRALIA

c/o Computershare Investor Services Pty Limited


GPO Box 242, Melbourne, VIC 3001 Australia

Tel:  03 9415 4083           Fax:  03 9473 2506

 

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

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange