Coats drives GPG profit higher

Investment company Guinness Peat Group has boosted its interim profit with a strong performance from subsidiary Coats, as it winds up its asset portfolio and distributes cash to shareholders.

GPG's unaudited interim accounts showed revenue from continuing operations of £760 million ($1.5 billion) in the six months to June 30, compared to £643 million a year earlier.

Operating profit was £66 million, more than double last year’s £31 million, with a bottom line profit of £17 million, or 72p per share, compared to £12 million  (47p per share) the previous year.

Coats Group, the global thread maker that GPG is holding onto while it sells down the rest of its asset portfolio, contributed $US36.9 million (£23 million), notwithstanding a $US6.9 million worsening of foreign exchange losses.

GPG said the Coats result was the best first half attributable profit performance under its ownership.

Profit from asset sales and other investment income was £36 million.

Following a shareholder vote and scheme of arrangement earlier this year, GPG returned £80 million ($157 million) to shareholders on July 12.

An interim dividend of 1.15 pence per share was also granted with an option to elect for shares instead of cash with a ratio to be decided on September 12.

During the reporting period GPG realised £98 million ($192 million) from asset disposals, but also booked impairments totaling £12 million on the carrying value of its remaining assets.

As at June 30 GPG’s investment base was valued at £1.27 billion (less £80 million return to shareholders), for a net asset backing per share of 54.79p compared to 54.63p at the same time last year.

GPG chairman Rob Campbell said the board had adopted a policy of migrating cash generated from disposals of Australian and UK assets to New Zealand dollars to balance exposure to currency risk.

On the home front GPG said Turners & Growers was engaged with a number of parties, following a strategic review of the business by Goldman Sachs.

GPG's New Zealand assets include a 35% stake in insurance company Tower, a 65% stake in fruit and produce company Turners and Growers and a 19.4% stake in car auction company Turners Auctions.

Mr Campbell said the interim report came in the midst of considerable market turmoil.

“It would be naïve to think that this does not adversely impact on both assets and liabilities of the company.

“We are working very hard to manage every aspect of that which is amenable to our influence whether it will be in the positive creation of value or limitation of damage to value.”

Meanwhile, GPG planned to purchase $NZ77 million of its listed capital notes and might look at a share buy back programme depending on the company’s share price relative to net asset backing.

GPG shares opened up 1.5c at 64.5c on the NZX this morning.

GPG’s decision to wind up its investment portfolio by selling assets, came on the back of intense pressure from local investors and differed from an earlier GPG plan to spin off the Australian unit, which would have been run by former Australian director Gary Weiss.

Mr Campbell was elected GPG chairman in April, replacing founder Sir Ron Brierley.