GPG says farewell to NZ as it returns to profit

Guinness Peat says farewell to NZ, returns to profit in first half

By Jonathan Underhill

Aug. 26 (BusinessDesk) – Guinness Peat Group has closed its New Zealand office, saying the nation where chairman Ron Brierley cut his teeth as a corporate raider holds “little or no opportunities” for the investment company.

Brierley made the comments with GPG’s first-half results, which showed a return to profit of $12 million, from a year-earlier loss of $24 million. GPG’s board members fell out over strategy, which saw long-serving director Tony Gibbs sacked. He kept the chairmanship of 66%-owned Turners & Growers and 35%-owned Tower, which have been transferred to GPG’s Australian portfolio.

“The New Zealand operation has necessarily become expendable for GPG,” Brierley. “During the forthcoming months, the corporate restructure will continue to be the main priority but not neglecting traditional ‘value enhancement measures, expected to emerge before the end of the financial year.”

In June, GPG announced plans to spin off its Australian assets into a separate listed company while retaining its biggest investment, the Coats threadmaking company, until conditions for a sale improve. Its shares have dropped 26% this year and were last at 64 cents. Over the past five years they have shed some 65% of their value.

“It is inescapable that the present corporate model no longer works for GPG and we are now revisiting alternative capital restructuring proposals and will shortly be appointing three new directors to assist in this task,” Brierley said. The Australian demerger proposal “did not find favour with various institutional investors.”

GPG’s return to profit reflects earnings from Coats, which had net income of US$35.5 million, from a loss of US$8.7 million a year earlier. Sales jumped 15% to US$761.2 million and the manufacturing lowered its net gearing to 65% from 76%. GPG also benefited from a small profit from Capral, another long-time problem investment.

“Both Coats and Capral still have a long way to go but, hopefully, the actual and intangible resource which GPG has invested over the years is now finally starting to pay off,” Brierley said.

(BusinessDesk)

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