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GPG's Coats posts flat 3rd-quarter sales, affirms full year target

GPG's Coats posts flat third-quarter sales, still working through UK pension liability.

Paul McBeth
Tue, 28 Oct 2014

Guiness Peat Group's [NZX: GPG] Coats unit reported flat sales in the third quarter, affirming expectations annual profit will meet market forecasts, while the wider group continues to work through its outstanding UK pension liabilities.

Group sales for the UK threadmaker were unchanged in the third quarter, with a 5 percent increase in its industrial unit offset by a 10 percent decline in the crafts division, GPG said in a statement. The industrial segment is expected to deliver annual sales growth, though trading conditions for the crafts division are seen as "challenging" for the remainder of the year.

GPG is reviewing its strategy for the crafts unit in Europe, Middle East, and Asia, which it expects to complete in the fourth quarter.

"At a group level it is expected that operating profit will be further impacted by crafts performance although attributable profit will be in line with market expectations," GPG said. The company is forecast to report a 1.4 pecent fall in revenue to 1.07 billion pounds in calendar 2014, for an operating profit of 57.6 million pounds, and net income of 7.8 million pounds, according to a Reuters survey of analysts.

GPG is in the process of rebranding as Coats after liquidating its broader portfolio, though that's been delayed by protracted negotiations to settle its group pension liability with the UK Pensions Regulator.

The company today said it hasn't received a warning notice in relation to the Coats Plan or confirmation that one will be issued, but has an indication the regulator contends at least one of the sponsoring companies for the plan was insufficiently resourced as at Dec. 31, 2012. GPG has made submission on notices received over the Brunel and Staveley plans, and still expects a hearing is unlikely before the first half of 2015.

"All options are being explored to try to resolve these matters as efficiently as possible, recognising the interests of both shareholders and pension scheme members," GPG said. "Once these matters are clarified, the board expects to run an appropriately leveraged balance sheet and pay annual dividends to shareholders from free cash flow generated by the Coats group."

As at Sept. 30, the deficit for the pension schemes was 237 million pounds, up from 178 million pounds as at June 30, due to a reduction in the discount rate applied to the valuation.

GPG had cash of 369 million pounds as at Sept. 30, down from 376 million pounds three months earlier, due to spending on the regulatory investigation, redundancy costs from the exit of the remaining GPG executives, and foreign exchange movements.

The shares last traded at 55 cents on the NZX, and have declined 6.8 percent this year. The stock is rated an average 'hold' based on five analyst recommendations compiled by Reuters, with a median price target of 62 cents.


Paul McBeth
Tue, 28 Oct 2014
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GPG's Coats posts flat 3rd-quarter sales, affirms full year target