Guinness Peat realised 165M pounds on asset sales

Friday 24th February 2012

Guinness Peat Group, which is in wind-up mode, realised a net 165 million British pounds from complete or partial sales of 48 investments between Jan. 1 last year and Feb. 17 this year, chairman Rob Campbell said.

Adjusted to include the prospective sale of GPG's 63.5 percent stake in produce company Turners & Growers, net proceeds since January 2011 including dividends and other cash distributions are about 238 million pounds, Campbell said.

This represents about 35.2 percent of the portfolio as at January last year, excluding Coats and cash, he said.

The investment company's net profit for calendar 2011 was 1 million pounds, down from 46 million pounds the previous year. The shares fell 12 percent to 50 cens on the NZX today.

Shareholders' funds fell by 391 million pounds to 602 million pounds, mainly due to actuarial losses of 215 million pounds on the group's pension schemes, a 60 million pound writedown of investments, 26 million pounds in foreign exchange losses and the 80 million pounds returned to shareholders in July last year.

The value of GPG's largest investment, wholly-owned thread company Coats, fell by 169 million pounds to 150 million pounds, mostly because of 187 million pound of actuarial losses relating to its pension plan.

“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 progress has been made,” Campbell said.

The board still has two years of the three-year sell-down period to go and “it was never the intention to simply conduct a garage sale,” he said.

Most of GPG's investments are illiquid. “Simple auction or market sell-down processes are not necessarily the path to appropriate value realisation, but rather intensive work with other stakeholders is expected to produce the right outcomes for all shareholders.”

In principle, the board doesn't favour distributing investments in specie, or distributing investments in their present form rather than selling them and distributing the cash.

However, it will consider this “where realisation at an acceptable value proves unachievable within a reasonable time frame.” With the exception of Coats, no investment presently falls into this category, Campbell said.

GPG had 200 million pounds in cash at Dec. 31 but is committed to repaying NZ$77 million, or 39 million pounds, of New Zealand-listed bonds on March 15 and it has a further NZ$350 million, or 176 million pounds, of bonds maturing on Nov. 15. Campbell said GPG won't repurchase the latter early.

The need to support GPG's pension schemes will likely mean 130 million pounds of the proceeds of asset sales will need to be retained and won't be available for distribution to shareholders in the medium term, he said.

“It is important that shareholders understand the limited nature of the options facing the company on this matter,” he said. “Pensions are a very serious challenge. While options are limited, it is also unwise to assume that this challenge cannot be met.”

GPG hasn't declared a dividend but directors are still considering one as well as a share buyback.

“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.”

BusinessDesk.co.nz

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