Pyne Gould annual profit shrinks 99% from restated 2014 result

Pyne Gould Corp [NZX: PGC], which restated its 2014 accounts to remove an anticipated gain on the sale of Perpetual Trust, said 2015 profit shrank by 99% as interest income fell, expenses jumped and the asset management firm didn't get a repeat of the previous year's one-time gain.

Net profit was £38,000 in the 12 months ended June 30, from a profit of £6.46 million a year earlier, the Guernsey-based company said in a statement. Net operating income fell 62% to £3.4 million, including a 4% decline in management fees to £2.2 million.

Pyne Gould (PGC) is controlled by managing director George Kerr, an NBR 2015 Rich Lister with wealth estimated at $80 million. He was left in control of a listed company in 2012 when he failed to take the company private in a full takeover attempt.

At the time of his offer, he had warned that the company wouldn't contemplate paying dividends as it sold assets and that retail investors could face a bumpy road as he took PGC in directions that wouldn't necessarily generate quick profits. Today, PGC is focused on investments in Australia and the UK through its Torchlight Group, which "manages and co-­invests in proprietary funds focused on non-traditional investment opportunities," according to its website.

The company was fined and censured by the NZ Markets Disciplinary Tribunal in January over the delayed release of its 2014 annual report, which had been tagged by auditor PwC, over the firm's inability to obtain sufficient information about PGC's investment in Torchlight Group and Torchlight Fund.

In February, the Financial Markets Authority said it was looking into the company's 2014 accounts over the gain it booked on Perpetual Trust, while in May, Bath Street Capital rejected a $22 million demand from PGC over the Perpetual Trust acquisition, saying no price was fixed in the deal and the agreement was for PGC to be paid if the shares of a subsidiary company were listed on the stock market.

No further action has been taken since the demand was rejected, while the 2015 accounts show a one-time gain of £11.3 million on the sale of discontinued operations in 2014.

PGC's total comprehensive loss for the 2015 was £8.3 million, compared to a year-earlier income of £2.9 million, and included a charge of about £8 million against foreign currency reserves, more than twice the year-earlier adjustment.

"In 2011, we said that it would take a decade or more for PGC to fully convert its collection of difficult assets into a strong and sustainable business," Mr Kerr said in a statement.

"We said that the job of converting bad book assets to cash and then into a strong core business was technically demanding, inherently unpopular and results would inevitably be lumpy," he said. "We were correct – the time frame is long, the job requires highly specific skills in arcane areas, we continue to ignore popularity contests and the results are lumpy. However, and despite this, we have always been highly confident our strategy of exit of non-core assets and building a long term business from distressed assets was compelling."

Total assets stood at £64.8 million as at June 30, down from £74 million a year earlier. Of that, some £17 million related to advances to associates and finance receivables, listed among current assets, while non-current assets including £9.1 million of available for sale financial assets, £2.3 million of investment property, and £24.8 million of investment in associates.

PGC shares last traded at 29c on the NZX, valuing the company at $60.2 million, and have declined 36% in the past 12 months.

(BusinessDesk)