GPG year net profit falls 9pc

By NZPA

Monday 17th March 2003

Sir Ron Brierley's Guinness Peat Group today reported its net profit fell nine percent to stg42.46 million ($NZ123.86 million) from stg46.89 million ($NZ136.78 million) in 2002.

The operating profit from continuing operations fell to stg39.49 million from stg55.97 million while profits from discontinued operations came to STG7.04 million against stg3.96 million.

Group turnover from continuing operations came to stg458.55 million against stg304.17 million.

Diluted earnings per share fell to 7.0p from a restated 7.99p.

"Although the reported net profit for 2002 was marginally less than for 2001, it was nevertheless a very good result -- particularly having regard to the resources required on several large projects which are important to GPG, but did not contribute to earnings for the year," chairman Sir Ron said.

A major contributor to realised profits was the year-end sale of shares in Joe White Maltings Ltd when GPG accepted a takeover offer by Ausbulk.

Sir Ron said this represented a "classic investment exercise for GPG" -- the original identification of potential value, the acquisition of a strategic stake, the success of a rare "hostile" partial offer, implementation of management changes and the sale of non-core assets.

He said GPG's involvement in the rationalisation of the UK motor vehicle distributors, Quicks plc and Ryland Group plc, again proved rewarding with favourable sales of shares.

GPG's 10 percent owned New Zealand financial services company Tower Ltd still had problems and legacies to overcome, "but there is also considerable strength in its undoubted intrinsic value as one of New Zealand and Australia's oldest financial institutions".

Sir Ron said the only "black spot" in the 2002 year was the necessity to equity account profits and losses of other public companies in which GPG was a substantial shareholder.

He said the amounts were not material in aggregate for GPG but the principle was "completely wrong".

"GPG receives dividends from these companies on exactly the same basis as the smallest private shareholder and the inclusion of additional amounts to which there is no legal or commercial entitlement is simply reporting bogus income," he said.

"This course is not adopted by choice, but is forced upon us by so called `international accounting standards' of which equity accounting is but one of many serious deficiencies."

The simplified balance sheet showed the company had assets of stg471 million including stg95 million in cash.

As usual, GPG announced a one-for-10 bonus issue -- the 10th year in succession.

Having completed the "tax efficient" merger with Brunel merger in 2002, Sir Ron said it was "timely to consider additional benefits" for shareholders. They are offered the option to redeem up to 10 percent of their shares at a rate of five 8 percent, convertible unsecured notes of 20p for every two GPG shares (ex bonus).

The principal is repayable in equal instalments on June 30, 2004 and 2005. with an option for shareholders to convert at 48.84p in 2004 and 52.59p in 2005. GPG shares closed on London at 50p on Friday.

Sir Ron described this as an attractive offer that would, if popular, be repeated in future years.

He said that whether GPG could maintain the same level of profit in 2003 "depends to some extent opon the certainty and timing of events beyond our control".

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