More delays for GPG

TIM HUNTER
Last updated 09:57 25/02/2014

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Costs are mounting at investment company GPG as British pension regulators stymie its plans to pay out its huge cash pile.

Releasing its annual result today, GPG said its operating costs had doubled on a year earlier, to $89 million, driven by expenditure of $36m on work relating to the regulatory inquiry.

The company is sitting on cash of $773m after selling up its investment portfolio and wants to distribute the bulk of the money to shareholders. That plan has been halted by regulatory action in the UK over GPG's obligation to fund pension schemes it acquired with corporate assets years ago.

At GPG's December 31 balance date the three legacy pension schemes were in deficit by a combined $359m, an improvement on the $567m deficit of a year earlier.

Chairman Rob Campbell said it had been a frustrating year.

''We completed the asset realisation process on time and on value expectations only to have the further announced intention to distribute surplus funds, while maintaining a listing for the Coats business, delayed by regulatory intervention in the UK.''

The company had made clear its intention to treat the pension schemes fairly and it accepted the need to keep money aside to fund those obligations, he said.

''It has always been and remains our intention to do the right thing, balancing our continuing obligations to the Group's ongoing schemes with our clear commitment to enhance shareholder returns and we believe a fair and timely resolution is in the interests of all concerned.''

The amount of money required by the regulator for pension funding would not be clear until the second half of the year at the earliest, the company said.

As well as cash, GPG owns 100 per cent of multinational thread maker Coats Group and it aims to restructure itself as Coats in Britain once the pension issues are resolved.

The Coats business had grown sales and profit during the year, GPG said. Revenue was US$1.7 billion, up 5 per cent on a like-for-like basis, while net profit was US$37m, up from a loss of US$139m in 2012.

Coats chief executive Paul Forman said the business had been resilient in muted market conditions.

''We have continued to generate a good level of free cash flow and growth in returns on capital.

Furthermore we have increasingly robust foundations for future growth through accelerating product innovation, exciting new service offerings and greater capability in key areas like consumer crafts marketing and market leading digital propositions.''

GPG's net asset backing at balance date was 64c a share, up  from 56c in 2012.

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The company's shares closed on the NZX yesterday at 67c, representing a market capitalisation of $943m.

- Fairfax Media

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