NAV per share advances at Guinness Peat

Net asset backing per share at Guinness Peat Group edged up in the third quarter as the investment holding company continued to unwind its investment portfolio to finance its share buy-back programme.

The net asset backing per share stood at 31.07p at the end of September, up from 30.99p at the end of June.

The group has got shot of four investments so far in the second half of the year: ClearView Wealth, Green's Foods, Thwaites and Tourism Asset Holdings. The plan is ultimately for Guinness Peat's principle holding to be Coats, the world's largest supplier of industrial thread and consumer crafts. Since embarking on this mission to whittle down its portfolio, 57% of the portfolio held at the start of January 2011 has been disposed of.

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Total funds generated since July 1st of this year from investments, including dividends and capital returns, amounted to £130m, giving a cumulative total since January 1st, 2011 of £433m. Guinness Peat's parent group's cash at the end of September had risen to £303m from £289m at the end of June.

Given the increased focus on Coats, which is wholly owned by Guinness Peat, the group has given a trading update for the world's second largest zip manufacturer. Despite facing tough market conditions, third quarter like-for-like sales were up 5% on a constant exchange rates basis, but down 4% using actual exchange rates.

The third quarter has seen year-on-year operating margin improvement at Coats as stocks, benefiting from the lower raw material prices experienced earlier in the year, have been sold and the income from the Crafts sales price increases implemented in the first half has been realised. However, Coats is seeing the return of a generally upward trend in commodity prices and this, combined with the structural inflation affecting the business, will contribute to continuing pressure on margins going into 2013. This structural inflation is driven primarily by labour, energy and utility costs.

Despite this, Coats is still expected to return full year profits to be in line with market expectations, with the exception of reorganisation costs that are expected to be somewhere between $25m and $30m higher than last year, although the resultant cash effect will largely arise in the 2013 financial year.

Reorganisation charges are currently projected in the range $20m to $30m for 2013, reflecting an accelerated programme which brings forward projects planned for future years, one consequence of which is that management do not envisage incurring separately identifiable reorganisation expenditure from 2014 onwards.

Overall net cash outflows on these accelerated projects are expected to be largely offset by disposal proceeds of some $50m (£31m) before tax from surplus properties. The increased 2012 reorganisation costs will have an impact on the net result reported by Coats in its income statement for the full year.

JH