South Island Index Defies Market Slump

28 July 2008

South Island Index Defies Market Slump

Deloitte South Island Index for June quarter released

South Island listed companies have again outperformed the wider NZX 50 during the second quarter of 2008, according to the Deloitte South Island Index issued today.

Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, said the South Island Index achieved an overall gain of 3% in the second quarter of 2008, increasing its overall value by $110 million to a total market capitalisation of $3.80 billion. In contrast, the NZX 50 index was down almost 8%.

The Deloitte South Island Index measures movements in market capitalisation, tracking the performance of listed companies with a registered office and/or a substantial portion of their operations in the South Island. There were 32 companies on the South Island Index in the first quarter of 2008, and this clicked up to 33 in the second quarter following the addition of Widespread Energy Ltd.

Overall, despite the 3% gain in the SI Index, a total of 61% of the companies in the Index recorded a reduction in their market capitalisation this quarter.

“The main point is that although there are fears that New Zealand may be entering a recession, it is not all doom and gloom, particularly if we look at the relatively strong performances of companies such as PGG Wrightson, NZ Farming Systems Uruguay and Cavotec MSL Holdings. The South Island has some companies, particularly in the primary sector, that are continuing to buck the downward trend of the market.”

Five of the eight South Island sectors experienced declines in Q2 of 2008, with the standout exception being the primary sector (up 18.5%). Hit particularly hard this quarter were companies in retail (down 12.5%), biotechnology (down 8.6%) and technology (down 8.0%).

Mr Munro said there was “some pain” in some of these smaller sectors of the South Island economy. “The implications of the weak economic conditions are that we are in for a period of belt tightening in many sectors, and good cash flow management will remain an absolutely critical factor for many businesses.”

Despite a 7% decline in market capitalisation, Ryman Healthcare remained the South Island’s largest listed company ($795.0m) as at 30 June 2008, followed by PGG Wrightson ($723.2m) and NZ Farming Systems Uruguay ($425.0m). Of the top 20 companies in the South Island Index, NZ Farming Systems Uruguay recorded the largest increase in market capitalisation soaring by 24.3% in the quarter. PGG Wrightson was hard on its heels with an increase of 21.3% in the same period.

The Deloitte South Island Index is released throughout the year, tracking the performance of South Island companies on a quarterly basis. The Index provides investors, companies and the public with an interesting perspective on the financial markets of the Mainland.

About Deloitte in New Zealand
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Deloitte's local experts draw on best practice and innovative methodologies from around the world as part of Deloitte Touche Tohmatsu, whose 150,000 people globally serve over 80 percent of the world's largest companies. A long track record and a wealth of international research into the needs of growing organisations has made Deloitte the world's leading advisor to emerging businesses. For more information about Deloitte in New Zealand, look to our website www.deloitte.co.nz

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