KEY POINTS:
Half-year revenue dropped but net profit almost trebled at Guinness Peat Group after the investment company sold out of an Australian fund management business.
Revenue for the six months ending June 30 was £657 million ($1.8 billion) down from £680 million the previous year, while profit rocketed to
£92 million.
Chairman Ron Brierley said the sale of shares in Australian Wealth Management was the main driver of the profit result.
The NZX-listed UK-based company sold a 19.4 per cent stake for A$267 million ($311.2 million) in April - resulting in a profit of A$172 million after a two-year shareholding.
The value of the shares was lower than at December 31 but it had been the right time to exit with Guinness Peat Group (GPG) having finished its role in creating a credible independent funds management company, Brierley said.
"An interesting second half is unfolding with increased market volatility and the probability of a more severe correction to blue sky values in the foreseeable future," he said.
"Nevertheless, the board looks forward to presenting a positive result for the full year to 31 December 2007."
The company's UK-based Coats sewing thread and needle-craft subsidiary was a useful contributor to the group result and had made progress as expected, with the exception of a downturn in key crafts markets.
"Overall, Coats should record further momentum for the full year and beyond, as it gradually moves from transition to an acceptable return on capital invested," Brierley said.
GPG's share price closed up 5c yesterday at $1.95.
Forsyth Barr analyst Guy Hallwright said GPG had a good track record.
"If you look back ... you'll find that they consistently do well above the market return in the markets that they're operating in."
Net profit at Coats was US$24.7 million ($35.6 million), up from US$23.1 million the previous year, on the back of revenue of US$820.7 million up from US$806.7 million.
Coats chairman Gary Weiss said major restructuring in the industrial business was largely complete with a more competitive cost base enabling the company to focus on growing sales and market share.
"The global market for industrial thread remains highly competitive and challenging but continues to grow, with declining demand in Europe and the Americas more than offset by growth in Asia," Weiss said.
"Coats industrial global footprint is now well balanced and should enable the business to take full advantage of the changes in local demand caused by shifting trade flows."
A first-half recovery in profitability of the North America crafts segment was expected to continue during the rest of the year.
Meanwhile, a restructuring of the European crafts segment into a more cost-effective pan-European business with a single product range was well underway. Brierley said the failure of Australian-based Capral Aluminium to meet expectations was disappointing because it was felt the company had done everything right to modernise manufacturing processes, upgrade customer service and streamline distribution channels.
"However, the full impact of a high aluminium price, Chinese imports and a depressed NSW housing market is a powerful combination to overcome," Brierley said.
"GPG is working with the company to devise potential solutions until market conditions ultimately improve."
The strength of the New Zealand dollar had impacted GPG's result because of a higher level of capital notes repayments, although domestic assets had also increased in value, which was not directly reflected in the accounts.
GUINNESS PEAT
Six months ending June 30
Revenue
2007 - £657m
2006 - £680m
Gross profit
2007 - £203m
2006 - £213m
Net profit
2007 - £92m
2006 - £31m