GPG profit up despite Otter 'dud'

By Phil Boeyen, ShareChat Business News Editor

Tuesday 4th September 2001

Investment company Guinness Peat Group (NZSE: GPG) has improved on its half-year profit despite writing off a £5.3 million investment in Otter Gold.

GPG has reported profit of £12.3 million for the six months ended June, up from £10 million last year. The result also includes exchange losses of £3.1 million.

The company doesn't believe in taking too much stock from its interim reports, instead preferring investors to measure its results over several years. However it admits to being pleased with progress this year even in light of its Otter Gold investment, which it says has been a resounding 'dud'.

"It is small comfort that the problems derive entirely from the previous convoluted regime, but which does not disguise GPG's misjudgment in the level and timing of our investment in this company," GPG says.

"Having 'bitten the bullet' to write-off the book value of our shareholding, we are nevertheless tackling the recovery process with full vigour and some salvage can be reasonably anticipated in future years."

GPG says it has been caught up in the Enza controversy, contributing a disproportionate level of responsibility and commitment to resolve issues faced by the company.

"Forthcoming deregulation likely presages a further unsettled period, but the longer run (say, two years) should be favourable for Enza which will continue to represent the bulk of the industry, based purely on competitive merit and experience."

GPG says its investment of $6.7 million is important, but not critical, if Enza fails to realise its potential.

The investment company did well out of another local investment, selling shares in Wrightson for more than double its entry price.

In Australia the company says it has made sound and steady progress in a number of areas, with Joe White Maltings continuing to gain in strength after years in the doldrums. GPG now has a majority 51% holding.

GPG is also confident about its acquisition of 27% of Capral Aluminium earlier in the year, which it says was timely in view of the subsequent sharemarket resurgence of the building products sector.

Back in the UK the company has reported continued 'shareholder activism' with mixed success.

Although its arguments for a change in business strategy at automotive services company Inchcape have fallen on deaf ears, the market rerated the shares and GPG has sold half its shareholding. It has also acquired an 8% stake in Inchcape Motors in Singapore, which is 63% owned by Inchcape Plc.

"We do not believe the additional public listing has any logical merit for Inchcape, or for minorities, and GPG has a possible role as a catalyst for alternative proposals which may be to the greater advantage of all shareholders in the company."

GPG has also sold its holding in luxury products company Time Products after helping to bring about a management buyout. That transaction settled after the June 30 date and will appear in the full-year accounts.

Meanwhile Staveley Industries, which GPG describes as the former 'bete noire' of its share portfolio, has completed its first six months as a wholly-owned subsidiary with a contribution of £2.2 million.

GPG says its recent $250 million Capital Notes offer to New Zealand investors has been well received and is expected to be fully subscribed, but has not divulged yet where it will be spending the money.

"There are no specific plans for the additional funding which will augment existing strong liquidity and other sources of capital when required."

Comments from our readers

No comments yet