South Island listed companies experience a challenging twelve months
After record gains in recent years the Deloitte South Island Index achieves modest 0.8% growth for year to 31 March 2015
South Island listed companies have collectively experienced the smallest year-on-year increase in market capitalisation over the past three years, according to the annual review of the Deloitte South Island Index presented this evening in Christchurch.
The Index, which tracks the quarterly performance of listed companies with operations in the South Island, gained a modest $96.4 million (0.8%) in the year ended 31 March 2015. This comes after a 0.2% drop in the most recent quarter, the Index’s third quarterly decline in the past four quarters.
Only 12 of the 31 companies in the Index grew during the twelve months and its 0.8% annual growth was outperformed by all comparator indices with the NZX 50 Capital Index increasing by 8.6%, the ASX All Ords increasing by 8.5% and the Dow Jones increasing by 8.0% during the year to 31 March 2015.
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 – 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 9.8%. However, individually the results were mixed, says Mr McClay.
Meridian Energy was the standout performer in the Index gaining $1,085.9 million (74.6%), EBOS Group gained a more modest $89.2 million (5.9%) and Ryman saw a decrease in market capitalisation of $455.0 million, a decline of 10.4% after a long run of significant share price growth in which Ryman almost tripled in market capitalisation over the two preceding years.
Outside of the three largest companies in the South Island Index, 10 of the remaining companies achieved gains, 17 saw declines and one company saw no change in its market capitalisation in the year to 31 March 2015.
“Of these, Heartland Bank was the shining light with an annual increase in market capitalisation of $232.1 million (63.5%) after 12 consecutive quarterly gains,” says Mr McClay.
“The keys to Heartland’s standout performance have been the elevation of their Standard & Poor’s credit rating from BBB- to BBB, their positive full year profit results and their investment in HarMoney Corp Limited, New Zealand’s only licensed peer-to-peer lending platform.”
The company with the largest annual fall in market capitalisation was Kathmandu Holdings, dropping $493.8 million (64.0%) over the year to 31 March 2015 on the back of poor sales in the lead up to Christmas and disappointing results from Boxing Day through January. Dunedin based company Pacific Edge also performed poorly on the stock exchange in the year to 31 March 2015 dropping $184.8 million in market capitalisation, a decline of 43.0%, and Synlait Milk struggled with its share price over the past twelve months dropping in market capitalisation by $111.3 million (20.6%).
Only three of the seven sectors in the Deloitte South Island Index achieved growth in their market capitalisations over the year to 31 March 2015. The Energy & Mining sector led the way with an increase of 62.8% as well as topping the table in terms of dollar growth.
“However, the numbers are skewed by Meridian Energy as without its exceptional performance the sector would have dropped 63.2% and suffered the Index’s greatest loss,” says Mr McClay.
Mr McClay says the outlook for the Deloitte South Island Index over the next year is mixed with global economic factors expected to influence the New Zealand dollar and the performance of many South Island companies.
“Over the last three years, the performance of the largest companies has been nothing short of breath taking, accounting for the Index hitting its highest peak in the December 2014 quarter. However, it would be heartening to see investors looking to consistently support more of the companies outside of the top three,” he says.
“The smaller companies on the Index have shown promising pockets of positive performance in recent years but have suffered from lower publicity and investor interest,” concludes Mr McClay.
To download the full report, go to www.deloitte.com/nz/southislandindex