Guinness Peat Group

Guinness Peat GroupGPG

2006 Financial HighlightsProfit after tax down from £96m to £36m.GPGNo major contribution from sale of assets.Increase in unrealised surplus, before tax, on listed investments at 31 December2006 of £85m to £192m.Simplified Balance Sheet shows Shareholders’ Funds of £876m. (including this£192m, Coats at cost of £235m but after £37m contingent tax liability)Unrealised surplus on listed subsidiaries and associates now stands at £69m.(Mostly Tower Australia, Nationwide and CIC) This is up from £16m in 2005 andis not included in the increase in Shareholders’ Funds.Total increase in unrealised gains (before tax) during the 2006 year wastherefore £138m.2

Coats – Contribution to GPG ResultsGPG£mProfit from Operating ActivitiesFX Gain/(Loss)Property Gain20055.014.19.420068.9(5.5)11.5TOTAL contribution to GPGAfter tax Profit.28.514.95

Australian Wealth Management (19.5%)GPGAWM was spun-off from Tower Ltd in February 2005 with an effective marketcapitalisation of approximately $260 million.In January 2006, announced the merger of AWM and Select Managed Funds Limited.AWM offered 7 of its shares for every 2 Select shares. Merger was successfully completed in May 2006.The merged group has FUMA of $36.3 billion plus a further $17.2 billion funds undersupervision.Currently in the process of integrating the two businesses to extract both cost and revenuesynergies.The merged group currently has a market capitalisation of approximately $1.5 billionbased on AWM’s current share price.GPG controls approximately 19.5% of merged entity. Based on AWM’s current shareprice, GPG’s holding has a market value of $A298m9

Tower Australia Limited - SeparationGPGNovember 2006 geographic demerger via scheme of arrangement.A $160m capital raising via renounceable rights issue underwritten by GPGincreased shareholding from 19.8% to 23.9% at $1.60 per share.Based on TAL’s current share price GPG’s holding in Tower Australia has amarket value of $A223m.Tower Australia Group is one of the leading life insurance player in the Australianmarket.10

Tower Australia LimitedPrefsure Acquisition In January 2006, Tower Australia acquired PrefSure for $A145million.GPGPrefSure is a specialist Life Insurance business with in-force premiums of$A320million.Well positioned in newest growth sector of the market, providing life insuranceproducts to alliance partners who sell these products direct to customers viamedia, mortgage brokers, financial planners, health insurers and direct mail.The underinsurance gap in Australia is estimated to be over $A1.3trillion in TermLife Insurance alone. PrefSure will add to Tower’s pre-existing competitiveproducts and strong market position to exploit future growth opportunities.11

Capral Aluminium cont.GPGStrategic Direction Capral’s market leadership has been eroded by:- an increased presence of imported products- own shortcomings – mainly service and quality issues.Confident that this trend can be reversed through the execution of a sound strategy:- Bremer operating at competitive levels- Improving customer service – and regaining credibility in the market- Recovery of Capral’s distribution and architectural systems businesses- Realisation of synergies from the combination of Capral and Crane Aluminium- Leveraging the skills and experience of our people to maximum benefit- Tight financial controlRefinancing of debt completed with ANZ providing core debt facility and GPG underwriting$50m Convertible Note Issue.13

Premier Investments (GPG 16.1%)GPGOwns 5.8% of Coles Group Limited and 21.6% of Housewares InternationalLimited – single largest shareholder in both companies.Vehicle provides leveraged exposure to Coles Group and HousewaresInternational (Breville, Kambrook, Ronson, Goldair, Baccarat, Sabco).KKR recently made an indicative offer to acquire Coles Group for $15.25 p.s.Coles has now commenced a process to review ownership options for thecompany and its businesses.Based on PMV’s current share price, GPG’s holding has a market value of$A106m.14

Rattoon Limited (44.8%)GPGRattoon is listed on the National Stock Exchange of Australia and is currently negotiating to move to anASX Listing. Other major shareholder is Thorney Group with 43.6%.Rattoon is a single purpose holding company – it currently holds 75.3 million shares in TattersallsLimited.This represents the single largest holding at 5.95%, with a current market value of $A340m. This stake was purchased at an average cost of $3.31 versus the current TTS share price of $4.50.Rattoon is a leveraged play on TTS, which itself is a reasonably low-risk low-volatility gaming group.A 10% movement in the TTS share price equals a 17% movement in Rattoon.At $4.50 for TTS the transparent price for Rattoon is $0.43 per share.Current market value of GPG investment $92m.The book value of RTN for GPG is $0.27 p.s.15

Green’s Foods Limited (GPG 37.6%)GPGNestle Purina Petcare, a division of Nestle Australia Limited, successfullycompleted the acquisition of Green’s for 90 cents per share – a 25.4% premiumto the three month VWAP.As part of the transaction GPG and CVC Limited acquired the consumer foodsbusiness and Bestcare investment for circa $40 million (via a Scheme ofArrangement). Purchase price represents hard assets.Green’s consumer foods business is focused on branded and private labelblended foods and cereals and snacks with key brands including Green’s,Basco, Lowan, Poppin and Lolly Gobble Bliss Bombs.Consumer Foods business has net sales of A$115 million and will be owned72.5% by GPG and 27.5% by CVC Limited.16

Green’s Foods cont.GPGNo.1 market position in retail baking mixes for the combined Green’s andCadbury brands.No.1 market position in microwave popcorn for the Poppin brand.A significant player in the cereal and muesli market through the Lowanbrand.Branded products account for circa 75% of revenue.Business is currently cash flow neutral.Three year strategic plan to return business to acceptable ROFE.17