Guinness Peat Group plc

GUINNESS PEAT GROUP PLC • ANNUAL REPORT 7Chairman’s StatementCoats ReportThis report records the best (Crafts,cashflow) and the worst (EC, relocationcosts) of Coats since acquisition.Based on a 3 year plan for the restorationof profitability and at least the doublingof capital value, we are slightly behindschedule at this stage but 1 January 2005was a symbolic date when Coats began anew financial year for the first time as afully fledged subsidiary of GPG and freeof the disruption of ownership changes.AcquisitionThe period of acquisition, which beganin 2003 and which proved to be moredifficult and prolonged than anticipated,concluded on 31 December 2004, with allof the required accounting adjustmentscompleted.The resultant structure is that GPG owns100% of Coats Group Ltd which, througha subsidiary, owns all of Coats HoldingsLtd (formerly Coats plc) other than thepreference shares which are listed onthe LSE.GPG’s total cost of acquisition was£226.1 million.The overall Coats financial profile asincluded in GPG’s group accounts is:Coats financial profile £mFixed assets 305Net current assets 222Goodwill 139Total Assets 666Net debt (211)Provisions (193)Minorities (40)SHAREHOLDERS’ FUNDS £222There was initial goodwill on acquisitionof £34.1 million but ‘fair value’adjustmentshave been made at the Coats Group levelof £62 million upwards and £172 milliondownwards, thus increasing the goodwillcomponent to £144.0 million which isbeing amortised on a 20 year basis (2004charge : £4.8 million).GPG’s share of Coats’ post acquisition netdeficit incurred to 31 December 2004 is£3.7 million, so that net equity is now£222.4 million, comprising net tangibleassets of £83.1 million and goodwill of£139.3 million.