GPG
23/05/2014 08:30
ADDRESS

REL: 0830 HRS Guinness Peat Group Plc

ADDRESS: GPG: AGM: Chairman's Presentation

GUINNESS PEAT GROUP plc
("GPG" or the "Company")

Announcement

Annual General Meeting: Chairman's Presentation

GPG announces that at its Annual General Meeting ("AGM") to be held in
London, United Kingdom on 22 May 2014 at 2 pm, the Chairman will make the
following presentation, the text of which is set out below:
"In February 2011 the GPG Board announced a strategy to sell its assets in
order to increase and return value to GPG shareholders. This strategy
included:
- Undertaking an orderly sell down of GPG's investment portfolio over time
- As part of this process, GPG's investment portfolio may be reduced to the
point where an investment in GPG becomes an investment in Coats
- Proceeds from the sale of investments to be used to return value to
shareholders
We should recognise that substantial progress has been made in delivering
this strategy, and on your behalf I would like to congratulate the GPG
executives for successfully completing the divestment programme.
Investment realisation programme
The investment realisation programme was completed on time and on value
expectations in October 2013 with the sale of GPG's shareholding in Tower
Limited. Total cash generated since 1 January 2011 was 698 million, of
which 240 million arose in 2013.
The proceeds generated, including dividends and other forms of distribution,
should be compared with the approximate portfolio market value shortly before
the announcement of the realisation strategy of 677 million.
As of last week, GPG's unaudited cash position was 380 million.
This balance is being managed prudently by the Board and we will continue
holding it in cash instruments so that capital is protected. The Board has
taken a view on the currencies in which to hold cash, taking into account the
spread of the shareholder base, the obligations which certain companies in
the Group have to the UK pension schemes, the functional currency of the
Coats business and our corporate costs, which I will return to in a moment.
Coats
As many of you are aware, Coats is the world's leading industrial thread and
consumer textile crafts company. Its business spans almost every country in
the world, and it employs more than 20,000 people across six continents.

Coats' Industrial business has a strong share of the global apparel and
footwear thread market. This is based on a combination of strong customer
relationships, the ability to supply the textile industry from 'around the
corner' in almost every market in the world, together with a reputation for
product quality, reliability and ethical and responsible behaviour.
Coats is building on these strengths by growing its Speciality Industrial
business. Speciality threads and yarns are tailored to specific customer end
uses, such as medical sutures, fibre optics, flame retardant uniforms and
equipment, and airbags in cars, to name a few.
Coats' Crafts business inspires and supplies the textile crafting needs of
consumers around the world through its well-known and trusted brands, some of
which have been famous from the time of our parents and even grandparents.
These strategic strengths translated into a positive set of results in 2013:
o Turnover of approximately 1.1bn (USD $1.7bn) was up 5% year on year at
constant exchange rates
o Coats also generated substantial levels of cash flow, with free cash flow
in 2013 of 29 million (USD $45 million)
o Trading since the start of 2014 has been in line with management's
expectations with Q1 like-for-like sales up 5% at a Group level
The management team at Coats, led by Group Chief Executive Paul Forman, has
been working hard to ensure that Coats continues to grow and build on this
strong foundation and so deliver strong returns to our shareholders.
Pensions
As you are aware, the intention of completing the objective of finalising the
return of value to shareholders while maintaining a listing for the Coats
business has been delayed by the UK Pension Regulator's investigations.
To recap, the GPG Group has three UK pension schemes within it - GPG's legacy
schemes Brunel Holdings Pension Scheme and the Staveley Industries Retirement
Benefits Scheme, as well as the Coats Pension Plan, which is the Coats
scheme.
As we announced on 22 December 2013, we have received formal Warning Notices
from the UK Pensions Regulator in relation to the Brunel and Staveley Schemes
which set out why, in the Regulator's case team's view, it may be reasonable
to require the Group to provide additional financial support to the two
schemes. GPG is in the process of formally responding to these two Warning
Notices.
The Regulator notified the Board on 29 November 2013 that it would not be in
a position to conclude its initial investigation and decide whether or not to
issue a Warning Notice in connection with the Coats scheme by year end 2013.
It is looking to conclude the investigations over the course of 2014. No
Warning Notice has been received to date.
We continue to engage with the Regulator and are actively maintaining open
dialogue with the trustees of the relevant pension schemes. The Board is
exploring all options with the aim of resolving these matters as efficiently
as possible without compromising shareholder interests.
It is still too early to advise shareholders as to the likely outcome on the
investigations. If the matter is not settled through negotiation, any
hearing before the Regulator's Determinations Panel will not take place
before the second half of this year.
While the regulatory process continues, concluding the return of value to
shareholders and the Group transition has been delayed. Any decision on the
future capital structure of the GPG Group and further return of value to
shareholders unfortunately continues to be on hold while these matters are
being resolved.
Corporate cost reduction
In the meantime, the GPG Board continues to focus on minimising costs at the
Group level.
As announced in the Q1 2014 IMS earlier in May, the Board will complete the
downsizing and migration of support services to Coats by 30 June 2014 when it
closes its remaining London office, at which point the remaining few GPG
employees will depart. The Sydney office will be closed at the same time.
We have also continued to reduce our Board costs. In 2012, total GPG Board
fees were 700,000, in 2013 they were reduced to 500,000 and our expectation
is that in 2014 they will not exceed 300,000.
GPG Board
On 16 April I was delighted to be appointed Chairman of GPG, following my
appointment as a Non-Executive Director in February 2014 and appointment as
Chairman of Coats in August 2013.
I am looking forward to using the Board experience I have gained from Which?
Ltd, Serco Group, ITV, BAA, and as Chairman of Her Majesty's Revenue &
Customs, to guide the Company through the changes it is facing and to
continue Coats' growth journey.
Ruth Anderson was also appointed in April as Non-Executive Director, and
Chairman of GPG's Audit, Finance and Risk Committee. Ruth is a chartered
accountant and spent much of her career at KPMG, holding senior positions
such as UK Vice Chairman for five years. Ruth is currently Chairman of the
audit committee at both Ocado plc and Travis Perkins plc. As such she is the
ideal candidate with absolutely the right experience to chair GPG's Audit,
Finance and Risk Committee.
Our former Chairman Rob Campbell successfully led GPG's divestment programme,
and I am extremely pleased that he remains on the Board as a Non-Executive
Director. Rob brings continuity, experience and insight to GPG's strategy,
to determining the appropriate capital structure of the Group and to
completing the return of value to shareholders.
Turning now to the Board structures. At present, while the pensions
investigations are ongoing, it is appropriate to have two Boards with clearly
defined roles. The principal task of the GPG Board is to bring the Pensions
Regulator's investigations to a satisfactory conclusion, determine the
appropriate capital structure of the Group and complete the return of value
to shareholders.
The Coats Board is focused on successfully running and developing its global
business which is, and will continue to be, the heart of your company and
investment.

Conclusion
GPG has undergone a major change process since 2011.
The strategy of GPG remains consistent, namely:
1. Providing Coats with a path to a future as an independent listed group,
including ensuring it has the right corporate governance in place and
determining its optimal capital structure
2. Bringing the Pension Regulator's investigations to a fair and timely
resolution, and
3. Completing the return of value to shareholders, taking into consideration
these factors.
GPG is no longer an investment holding company with a mixed portfolio of
assets - it holds one operating asset - Coats plc - the legacy Brunel and
Staveley pension schemes and the cash from the investment sales.
Investing in the long term future of GPG is now essentially investing in
Coats - the world's leading industrial thread and consumer textile crafts
company."

Chris Healy
Company Secretary
Guinness Peat Group plc
Tel: +44 20 7663 3992

22 May 2014

Enquiry details are:

New Zealand and Australian media: Geoff Senescall on: +64 9 309 5659
UK media: Kevin Smith on: +44 20 7282 1054
Charles Ryland on: +44 20 7466 5000
End CA:00250777 For:GPG Type:ADDRESS Time:2014-05-23 08:30:13

distributed by