Deloitte South Island Index shows strong annual gain
South Island listed companies collectively experience the largest increase for any 12-month period in the past two years
The Deloitte South Island Index continues to set new highs, gaining an incredible $3,771.7 million (26.0%) in market capitalisation during the year to 30 June 2016.
South Island listed companies have collectively experienced the largest increase for any 12-month period in the past two years, according to the annual review of the Deloitte South Island Index presented this evening in Christchurch.
The Index tracks the quarterly performance of listed companies with operations in the South Island. The 26.0% gain in the year ended 30 June comes after a 3.8% gain in the most recent quarter and three consecutive quarterly increases.
Twenty-two of the twenty-nine companies in the Index grew during the past year and the Index’s annual growth outperformed all comparator indices tracked with the S&P/NZX 50 Capital Index increasing by 15.3%, the Dow Jones increasing by 1.8% the ASX All Ords dropping by 2.6% during the year to 30 June 2016.
Scott McClay, a corporate finance partner at Deloitte’s Christchurch office, says the three largest companies in the Deloitte South Island Index – Ryman Healthcare, Meridian Energy and EBOS Group – continue to provide the Index with significant weight.
“Over the last year these three companies, each with market capitalisation in excess of a billion dollars, collectively grew the Index by 25.8%. Meridian Energy was the standout performer in the Index gaining $1,217.4 million (22.0%), EBOS Group gained $931.0 million (60.3%) and Ryman Healthcare increased its market capitalisation by $705.0 million (17.8%),” says Mr McClay.
“The considerable difference in the performance of the largest companies on the Index compared to the remainder of the companies is understandable as investors tend to flock to substantial companies, especially in times when markets face ongoing volatility,” says Mr McClay.
“It could also be that less information and analysis of the smaller listed companies leads to a lower risk appetite by investors in the case of these companies outside the top three on the Index.”
Outside of the three largest companies in the South Island Index, 19 of the remaining companies achieved gains in market capitalisation, six saw declines and one company saw no change in the previous twelve months.
Of these Skyline Enterprises was the standout performer with an annual increase in market capitalisation of $323.5 million (73.1%), followed by Scales Corporation growing by $174.7 million (72.7%) and Arvida Group gaining $128.1 million (64.7%) in market capitalisation in the year to 30 June 2016.
For the second year running, the company with the largest annual fall in market capitalisation was Kathmandu Holdings, dropping $44.3 million (12.6%) over the year to 30 June 2016. PGG Wrightson had a topsy-turvy twelve months ending the year down $33.9 million (9.8%) while Skellerup Holdings declined by $7.7 million (3.1%) in market capitalisation.
Six of the seven sectors in the Deloitte South Island Index achieved growth in their market capitalisation over the year to 30 June 2016. The Manufacturing & Distribution sector led the way with an increase of 54.2% while the Energy & Mining sector toped the table in terms of dollar growth, gaining $1,219.5 million in market capitalisation during the year.
Mr McClay says the outlook for the Deloitte South Island Index over the next year is cloudy for international prospects, but brighter locally. With the political turmoil occurring in several of New Zealand’s major trading partners, particularly the recent Brexit referendum and the upcoming United States elections, South Island companies with international trade will be wary of changing circumstances impacting on their businesses. However positive trends, like the increasing number of tourists visiting New Zealand, create the potential for substantial financial spinoff for supporting sectors on the Mainland.
“Although the uncertainty of political leadership in several of New Zealand’s major trading partners casts a shadow of gloom on the outlook for future prospects, South Island firms have proven in the past that they have been able to beat the odds and achieve positive results in a volatile global economy,” concludes Mr McClay.
To see the full Deloitte South Island Index quarterly report, go to www.deloitte.com/nz/southislandindex