Deloitte South Island Index continues its rocky ride

17 November 2015

Deloitte South Island Index continues its rocky ride in 2015

South Island listed firms market capitalisation dips 0.3% in the quarter to 30 September despite encouraging results from smaller companies

The Deloitte South Island Index dipped slightly during the quarter to 30 September 2015, continuing its rocky ride through the 2015 calendar year.

South Island listed firms decreased their market capitalisation by $50.6 million (0.3%) in the quarter ended 30 September with a couple of the largest companies on the Index dragging down the overall results.

Scott McClay, a corporate finance partner in Deloitte’s Christchurch office, says that the Index’ overall decline during the quarter overshadows the positive performance of the smaller companies on the Index.

“The key elements to this quarter’s results lie with poor performances of a couple of the largest companies. This is hiding the positive results of smaller companies which are creating a flowing undercurrent of positive activity in the South,” says Mr McClay.

“Without the top three companies in the Index, the remaining companies collectively grew by $75.1 million (2.1%). And outside the ten largest companies, the smaller companies on the Index collectively grew by $133.4 million (13.6%) in the quarter.”

“While the larger sized companies generally get the headlines, it is the smaller companies that are making a splash with investors on the back of some encouraging results. The performance of these companies is encouraging for the wider South Island economy, proving that size is not a limit to success,” says Mr McClay.

The Deloitte South Island Index’ 0.3% quarterly decline was the smallest decline among international benchmark indices with the NZX 50 Capital Index down 4.1%, the ASX All Ords down 7.2% and the Dow Jones down 7.6% during the quarter to 30 September 2015.

The Index’ top performer for the quarter, in terms of the dollar value of their market capitalisation, was EBOS Group which grew by $333.1 million (21.6%) during the quarter to 30 September 2015. EBOS Group’s performance comes on the back of their August announcement that revenues for the year to 30 June 2015 exceeded the $6 billion mark for the first time and that net profit after tax increased by 15.1% from the prior year to $105.9 million. This performance positions them well to progress their acquisition strategy and continue to improve shareholder returns.

Silver Fern Farms had the largest percentage growth in market capitalisation during the quarter at 274.6%, gaining $110.4 million during the quarter to 30 September after their Board recommended entering into a partnership with China’s leading meat processor Shanghai Maling.

The biggest declines for the quarter came from Index heavyweights Ryman Healthcare and Meridian Energy, which fell $305.0 million (7.7%) and $153.8 million (2.8%) in market capitalisation respectively during the quarter to 30 September.

Only three of the seven industry sectors in the South Island Index posted positive movements in the quarter to 30 September 2015. The Manufacturing & Distribution sector was the leading performer with 17.9% growth, while the Primary sector gained 10.1% and the Other sector gained 0.8%. The Manufacturing & Distribution sector’s performance was dominated by the excellent showing of EBOS Group, Silver Fern Farms buoyed the Primary sector and Skyline Enterprises helped the Other sector gain value.

The Retail, Property, Energy & Mining and Biotechnology sectors each lost value during the quarter to 30 September 2015 declining 18.4%, 6.6%, 2.8% and 0.3% respectively.

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

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