GPG says Coats reorganisation costs will hurt 2012 results

Guinness Peat Group, the investment firm liquidating its portfolio, says it is accelerating its reorganisation of the Coats thread-making business, its biggest asset, which will drive up costs and dent profit this year and next.

Full-year profit before interest and tax at Coats will be in line with market expectations before reorganisation costs, which are expected to be between £16 million and £19 million higher than in 2011, it says in a statement. Charges in 2013 will be £13 million to £19 million.

"In order to position Coats strongly for the future, the board and management continue to identify actions to optimise the footprint and cost base of the business," GPG says in a statement to the London Stock Exchange.

"This accelerated programme brings forward projects planned for future years and one consequence of this is that management do not envisage incurring separately identifiable reorganisation expenditure from 2014 onwards."

The general economic environment for Coats is "expected to remain fragile for the rest of the financial year", it says.

Coats sales rose 5% in the third quarter from a year earlier, made up of a 3% gain for its industrial division and a 9% rise for its crafts division. Despite some margin improvement, the company is seeing gains in commodity prices, which will squeeze margins into 2013.

Behind Coats, GPG's biggest remaining assets are its 33.6% holding of insurer Tower, 22% of Ridley Corp, 73% of CIC Australia, 11.6% of PrimeAg Australia and 47% of Capral.

The company accelerated its wind-down this week with some $125.9 million in asset sales.

The investment company will rename itself Coats "at the point when GPG shareholders' investment is predominantly represented" by the British threadmaker's business. That is expected to happen in the second half of next year.

Shares of Guinness Peat last traded at 59 cents and have gained 0.9% this year.

(BusinessDesk)

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