GPG gains from new reporting standards

Profits have soared in the past half- year at Sir Ron Brierley's British-based investment company, Guinness Peat Group, although new financial reporting standards can take some of the credit.

GPG made an after-tax profit of 50 million ($130 million) for the six months to the end of June, up from 7 million for the same period last year.

GPG's main source of profits in the half-year came from its sale of shares in the UK hotel group De Vere, from which it is understood to have earned 30 million.

Brierley's barely concealed disdain for the new accounting obligations imposed on GPG was revealed when he included a quote from Australian Financial Review writer Trevor Sykes in his stock exchange announcement.

"IFRS stands for International Financial Reporting Standards but from a fast, unfriendly look at them, might as well be Incomprehensible Fouled-up Reporting Standards," wrote Sykes.

Brierley said this latest half-year result should be read with caution since the accounts were the first to be prepared using IFRS. This "considerably distorts comparisons with earlier periods".

The IFRS profit was at least 8 million higher than would have been the case under what GPG describes as its "traditional conservative approach to financial reporting".

A more valid profit comparison would be nearer to 42 million, which was still a good result.

"Overall, it will be necessary to await the full-year accounts to measure the precise impact of IFRS but the initial impression is certainly not favourable."

Brierley said that GPG's balance sheet was in excellent shape with strong liquidity, despite a "reasonably active" investment programme.

Every indication was for a "satisfactory full-year result".

Because it is a UK company listed on the London Stock Exchange, GPG was obliged under European Union requirements to adopt IFRS from the start of this year.

One change for GPG from moving its accounts to IFRS is that it now recognises pension liabilities and brands on its balance sheet. It also will not recognise potential dividend payouts as liabilities at the balance sheet date.

Coats, the British-based international thread manufacturer, which became a wholly owned subsidiary of GPG in April last year, made a net profit after tax of $47.3 million for the half-year, but most of this was due to currency gains.

Profits last year fell 60 per cent to 25.3 million but Brierley said earlier that the outlook for 2005 was good.