South Island Companies On Road To Recovery

10 August 2011

South Island Companies On Road To Recovery

Deloitte South Island Index for the quarter to 30 June 2011 outperforms other benchmark indices, posting growth of 1.2%

South Island listed companies appear to be back on the road to recovery following the Canterbury earthquakes, according to the latest Deloitte South Island Index.

The 14th edition of the Deloitte South Island Index, for the quarter to 30 June 2011, was up by $51.7 million or 1.2% in market capitalisation on the first calendar quarter of 2011. The total market capitalisation for the index now stands at $4.371 billion - an increase of 10.6% on a year ago.

Paul Munro, a corporate finance partner in Deloitte's Christchurch office, says the June quarter started extremely positively for Deloitte South Island Index companies, with 5.2% growth in April, but the index lost ground due to a significant fall in Pyne Gould Corporation's market capitalisation in June.

The performance of the Deloitte South Island Index was also pleasing when compared to the other indices it is benchmarked against, Mr Munro says It outperformed the Dow Jones (which grew by 0.8%), the NZX 50 (up by 02%) and the ASX All Ordinaries (which fell 5.5%).

"There is certainly cause for optimism about South Island listed companies as the region continues to recover from the Canterbury earthquakes. Business confidence is very positive right now and this is likely to be maintained as the rebuilding of Christchurch gathers pace," Mr Munro says.

"One issue of concern, however, is the potential for talent shortages to emerge as the recovery strengthens due to the number of people who have left the region in the months following the February quake."

Ryman Healthcare was the strongest performer for the June quarter, with an increase in market capitalisation by $200 million or 16.9% after announcing a 17% profit for the 2011 financial year. Other positive results included NZ Farming Systems Uruguay, which grew by 27.3% or $36.7 million, Silver Ferns Farms, which was up by $18.5 million or 42.0%, and Chatham Rock Phosphate, which grew by $1.8 million or 39.1%.

Another interesting development was a new addition to the index in Heartland New Zealand Limited, following the merger of CBS Canterbury, MARAC and Southern Cross Building Society. The company listed on the NZX 50 on February 1 and finished the June quarter at seventh on the Deloitte South Island Index with a market capitalisation of $207 million.

The hardest hit Deloitte South Island Index company this quarter was Pyne Gould Corporation, which shed $131.5 million in market capitalisation (60.3%) and fell five places to 12th after it distributed all its shares in Heartland New Zealand to shareholders and cancelled 73.2% of each shareholder's PGC holding.

On an industry basis, the Property sector surged ahead by 16.9%, largely due to Ryman Healthcare's strong showing, while the Primary, Port and Biotechnology sectors all performed well, increasing by 6.3%, 4.6% and 6.6% respectively.

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

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