South Island Companies Continue to Rebound

South Island Companies Continue to Rebound

Deloitte South Island Index for the quarter to 31 December 2010
offers some light at the end of the tunnel

South Island listed companies have had a second successive quarter of growth following the mid-2010 slump, according to the Deloitte South Island Index.

The latest edition of the Deloitte South Island Index, for the quarter to 31 December 2010, was up by 3.9% or $156 million in market capitalisation on the third calendar quarter of 2010. Total market capitalisation for the index stood at $4.119 billion.

Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, says the latest Deloitte South Island Index offers some hope that brighter times are ahead, particularly following the region’s turbulent times during the latter part of 2010.

“It’s great to see that the South Island finished 2010 on a positive note, with the index gaining 5% in December. No one could argue that 2010 has been a tough year for the South Island economy.

“We have endured the impact of the global financial crisis, the Christchurch earthquake and then the Pike River tragedy. So it is good to see the Deloitte South Island Index finish the year strongly and we are hopeful of seeing continued growth in 2011,” Mr Munro says.

“The first two calendar quarters of this year will reveal the true impact of the earthquake, but looking forward there is cause for optimism, particularly as EQC and insurance payments start filtering through the economy as the rebuilding phase begins.”

The largest increases in market capitalisation were from Ryman Healthcare, Skellerup Holdings and Cavotec MSL Holdings. The index’s star performer Ryman, ranked number one on the index, grew by $115 million or 11.1%, while Skellerup was up $47.8 million (26.6%) and Cavotec grew $41.4 million (24.1%).

NZ Wool Services International recorded the largest gain in percentage terms, up by 34% for the December quarter.

“This result is particularly significant because of the importance of the wool growing industry to the South Island economy, and reflects wool prices which are at a 14-year high on the back of increased global demand for New Zealand wool,” Mr Munro says.

Of the 12 companies to suffer falls, the largest in dollar terms was Lyttelton Port Company (down $24.5 million or 10%), while notable falls by percentage included NZ Windfarms (down $17.3 million or 25%), The National Property Trust (down $18.6 million or 18%), and Pacific Edge (down $6.5 million, 17%).

On an industry basis, the results for the December quarter were mixed, with half recording growth and the other half falls. The Technology, Other and Development sectors recorded the biggest gains, by 15.8%, 133% and 6.6% respectively, while Biotechnology had the biggest fall, by 11.1%, followed by the Port sector (7.2%).

The most worrying trend was a third successive quarter fall for the retail sector, down by 5.4% in the December quarter, although there was some positive news in December with Kathmandu Holdings gaining 6.5%.

“Clearly the retail sector has been hard hit by the aftershocks in Canterbury and the ongoing issues with repairing damaged premises. But with retail continuing to be soft nationwide, this sector may be slower to recover than others.”

Growth in the Deloitte South Island Index was marginally behind other indices that the index is benchmarked against, but was in line with an overall pattern of growth for the second half of 2010. The NZX 50 Gross Index was up 4.1% in the December quarter while the ASX All Ordinaries improved 4.5% and the Dow Jones was up 7.3%.

All four indices recorded growth in the latter half of 2010 of more than 10%, indicating that the global economy had turned a corner and 2011 should be a year where gains outweigh falls.

The Deloitte South Island Index has been amended to take account of the suspension of share trading in Pike River Coal following the mine disaster and the delisting of Canterbury Building Society (which merged with MARAC and Southern Cross Building Society on January 5, 2011). Both these companies have been removed from the index and the base period retrospectively adjusted.

To see the full Deloitte South Island Index quarterly report, go to www.deloitte.com/nz/southislandindex.

ENDS

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