An About Turn? The Deloitte South Island Index A review of the performance of South Island listed companies during the quarter ending 31 December 2018 February 2019 44th Edition The Deloitte South Island Index | 44th Edition
Introduction
Welcome to the 44th The Deloitte South Island Index took an NZX Main Board on 26 November 2018. about turn to finish the December quarter edition of the Deloitte down, $2,390.4 million (9.2%), following Five out of the seven sectors tracked two consecutive quarters of growth. recorded losses, with the Aged Care South Island Index. sector recording the largest decline Movements in December 2018 in terms of market capitalisation In this edition we look For the month ended 31 December decreasing 21.9%. The Technology back on the performance 2018 the Deloitte South Island Index and the Energy & Mining sectors both recorded a decline of 2.3%. Of the indices recorded gains for the December quarter, of South Island listed tracked the Dow Jones recorded the up 16.0% and 3.6% respectfully. companies during the largest decline for December, falling 8.7%, followed by the ASX All Ords, down 0.7% Annual movements – December 2017 most recent quarter to and the S&P/NZX 50 Capital down 0.4%. to December 2018 Over the twelve months to December 31 December 2018. Quarterly movements – Q4 2018 2018 the Deloitte South Island Index grew During the quarter three participants were by $1,941.1 million (9.0%). Of the other removed from the Index; Heartland Group indices tracked, the Deloitte South Island Holdings Ltd, EnergyMad and Windflow Index’s closest rival in terms of market Technology. Heartland Group Holdings capitalisation growth was the S&P/NZX 50 have shifted their central operations and Capital, wwhicho recorded a 1.4% increase are no longer considered to predominantly for the year to 31 December 2018. Both operate out of the South Island. EnergyMad the Dow Jones and ASX All Ords recorded completed its acquisition transaction with declines for the 12 months to 31 December PaySauce Ltd, and their central operation 2018, falling 5.7% and 7.4% respectively. are no longer considered to predominantly operate out of the South Island. In addition Windflow Technology was delisted from the
2 The Deloitte South Island Index | 44th Edition
Executive summary
The Deloitte South Island Index changed gears and reversed the growth achieved in the prior two quarters, resulting in 9.0% growth for the year.
Key points for the fourth quarter of percentage terms, falling $1,630.0 million Key points for the 12 months to 2018 include: (23.3%) during the December 2018 December 2018 include: quarter. EBOS Group and Synlait Milk •• The Deloitte South Island Index •• Over the twelve months to 31 December both declined, 10.6% ($363.0 million) and decreased by $2,390.4 million (9.2%) 2018 the top performers, in percentage 17.1% ($331.6 million) respectively. during the quarter to 31 December terms, were some of the smaller players, 2018. All other indices tracked recorded SLI Systems (up 220.0%), Pharmazen (up decreases over the same period with the •• The smallest 10 companies collectively 119.4%) and Connexionz (up 60.0%). In Dow Jones leading the decline, decreasing grew, recording a $28.7 million (21.1%) dollar terms the list looks different with by 11.8%. This was followed by the ASX All increase in market capitalisation. Meridian Energy topping the table with Ords Index decreasing by 9.7% and the growth of $1,230.2 million over the past S&P/ NZX 50 Gross Index decreasing by •• Outside of the Top Four, the Index’s best twelve months, followed by Synlait Milk 6.4% in terms of market capitalisation. performers (in percentage terms) were (up $322.6 million) and EBOS Group (up SLI Systems whose market capitalisation $233.4 million). •• During the quarter three participants increased 94.1% ($19.3 million) during were removed from the Index – Heartland the December quarter followed by •• The largest declines over the 12 months Group Holdings Ltd, EnergyMad and SeaDragon who increased their market in percentage terms were Smiths City Windflow Technology. Both Heartland capitalisation by 61.1% ($5.5 million) and Group (down 54.2%), SeaDragon (down Group Holdings Ltd and EnergyMad no Pharmazen up 35.3% ($5.5 million). 46.4%) and Chatham Rock Phosphate longer predominantly operate out of the (down 44.8%). In dollar terms the largest South Island and Windflow Technology •• Significant declines outside the Top Four declines were PGG Wrightson (down was delisted from the NZX Main Board. this quarter were led by Chatham Rock $67.9 million), Scott Technology (down Phosphate, who dropped 28.6% ($1.4 $57.2 million) and Scales Corporation •• Foley Family Wines (FFW) had a name and million), followed by Connexionz who fell (down $36.7 million). ticker change and are now listed as Foley by 24.6% ($1.4 million) and Kathmandu Wines limited (FWL) on the main board. Holdings who fell 17.1% ($127.5 million).
•• The Top Four Companies collectively declined by $2,017.1 million (9.7%) during the December 2018 quarter. Meridian Energy was the only Top Four Company to record an increase for the December 2018 quarter, increasing by $307.5 million (3.7%). Ryman Healthcare recorded the largest decline in both dollar and in
3 The Deloitte South Island Index decreased by $2,390.4m (9.2%)
The Top 4 companies olle ti el de lined illion Top gains Meridian Energy De e e 3.7% ua te
SLI Systems Ryman Healthcare 94.1% 23.3% SeaDragon EBOS Group 61.1% 10.6% Pharmazen Synlait Milk 35.3% 17.1%
Top declinesSe te e De e e ua te ua te
Chatham Rock Phosphate 28.6% in th t th ee a ti i ants Connexionz o d o th nd ea tland 24.6% ou oldin s td ne ad nd Windflow Technology Ryman Healthcare 23.3%
4 The Deloitte South Island Index | 44th Edition
Quarter to 31 December 2018
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Pacific Edge
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Meridian Energy
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Increases in Market Capitalisation increased by 61.1% (up $5.5 million). In percentage terms In percentage terms there were nine Pharmazen increased its market participantsDe lin ethat in recorded a et growth a italisation in in ua te there were nine market capitalisation for the December capitalisation by 35.3% during the participants that 2018 quarter. Three participants recorded December 2018 quarter with its share no movement in market capitalisation. price increasing by $0.025 to $0.096. recorded growth in
SLI Systems recorded the largest During the December 4 2018 quarter,Skyline FoleyEnterprises market capitalisation Family Wines migrated to the NZX Main percentage increase (94.1%) in market 4 Arvida Group for the December Board and changed their name to Foley capitalisation for the December 2018 4 Skellerup Holdings Wines Ltd and a ticker change to FWL. 2018 quarter. quarter. During the quarter ESW Holdings South Port New Zealand Inc. (a Texas based company, which invests During December Foley Wines Ltd issued ith it o in SaaS enterprise software development 12.7 million shares at a price of $1.48 per ott hno o and IT service based companies) presented share. The capital raised will be used to o o tion an unconditional full cash takeover offer for partially fund the Mt Difficulty acquisition SLI Systems. ESW’s offer of 63 cents a share and other new capital projects.EBOS Foley Group was more than double SLI’s closing share Wines Ltd announced that all substantive t price prior to the offer on 19 October 2018. conditions for the Mt DifficultyNew transactions Zealand King Salmon Investments had now been satisfied and completion i ht on SeaDragon raised $1.1 million during the was targeted for 3 January 2019. n it i quarter from its 1 for 1 rights offer, at an Kathmandu Holdings issue price of $0.0033 per share. During n th the quarter SeaDragon’s share price increased by $0.001 to $0.003 and as a 4 onn ion result SeaDragons market capitalisation 4 h th o ho h t 5 o th in a et a italisation in ua te
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Pacific Edge
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Meridian Energy
Marlborough Wine Estates Group
hno o i The Deloitte South Island Index | 44th Edition o o
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4 Skyline Enterprises 4 Arvida Group 4 Skellerup Holdings South Port New Zealand ith it o ott hno o o o tion EBOS Group t New Zealand King Salmon Investments i ht on n it i Kathmandu Holdings n th 4 onn ion 4 h th o ho h t
Declines in Market Capitalisation Ryman Healthcare finished the quarter Chatham Rock Chatham Rock Phosphate recorded the down 23.3% as a result of a $3.26 share greatest decline in market capitalisation on price fall. During the quarter Ryman Phosphate recorded a percentage term basis, falling 28.6%. This Healthcare released their half year report the greatest decline in represented a $0.075 reduction in share to September 2018, recording a 16.3% price from the previous quarter. decrease in reported profit (including market capitalisation unrealised fair-value movements on on a percentage term Connexionz recorded the second largest investment property). During the quarter decline in market capitalisation on a Ryman announced it had purchased its basis, falling 28.6%. percentage basis, falling 24.6%. During the ninth retirement village site in Victoria, quarter Connexionz released their half year Australia. to 30 September 2018 unaudited results. Revenue was down 11% and net loss before tax has increased to $231,824 from $32,208 compared to the corresponding six months to 30 September 2017.
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Sector movements
Quarter to 31 December 2018 Resources recorded no change for the In the Primary Sector five out of the nine In percentage terms, the growth of quarter and Chatham Rock Phosphate fell participants recorded declines. Synlait the Index was led by the Technology 28.6% for the December 2018 quarter. Milk and PGG Wrightson had the largest sector which grew by 16.0%. On both percentage declines, falling 17.1% and a percentage and dollar term basis, SLI The Other sector was a mixed bag 16.4% respectively. Growth was seen in Systems lead the charge within the sector of results, Moa Group finished the SeaDragon, Foley Wines Limited and Silver increasing its market capitalisation by $19.3 December 2018 quarter with an 18.5% Fern Farms, increasing 61.1%, 25.8% and million (94.1%), followed by Pharmazen who increase in market capitalisation. During 20.7% respectively. Marlborough Wine increased their market capitalisation by the quarter Moa Group announced a Estates Group’s market capitalisation 35.3%. Pacific Edge increased the number conditional agreement to purchase Savour did not change from the prior quarter. of shares it had on issue during the quarter Group, which is a NZ bar and restaurant resulting in an 11.1% increase in market business. The remaining two participants capitalisation. During the quarter Pacific in the Other sector recorded declines Edge released its half year 2019 financial for the December quarter with Skyline statements, noting a 29% increase in total Enterprises and South Port New Zealand revenue and a 13% improvement in net declining by 4.2% and 6.0% respectively. loss. Connexionz was the only participant The Retail sector recorded the second in the sector to record a decline of 24.6%. largest decline for the December 2018 Energy & Mining had a reasonable quarter quarter, falling 16.9%. Kathmandu with Meridian Energy out performing both recorded the biggest decrease of the Aorere Resources and Chatham Rock two participants, falling 17.1% and Phosphate. Meridian Energy increased Smiths City Group declined by 8.2%. their market capitalisation by 3.7%, Aorere
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Base period - December 2006 1.00 The Deloitte South Island Index | 44th Edition
Industry Number of 31 Dec 30 Sep Mvmt in % change % of Index Companies 2018 2018 Quarter $ in Mkt Cap $ million $ million million during quarter
Technology 6 $313.8 $270.6 $43.2 16.0% 1.3%
Energy & Mining 3 $8,732.0 $8,425.9 $306.1 3.6% 37.0%
Manufactoring & Distribution 3 $3,667.6 $4,075.1 $(407.5) (10.0)% 15.5%
Primary 9 $3,200.7 $3,702.2 $(501.5) (13.5)% 13.6%
Aged Care 2 $5,904.0 $7,558.8 $(1,654.8) (21.9)% 25.0%
Retail 2 $643.3 $763.1 $(128.8) (16.9)% 2.7%
Other 3 $1,140.2 $1,187.3 $(47.1) (4.0)% 4.8%
TOTAL 28 $23,592.6 $25,983.0 $(2,390.4) (9.2)% 100.0%
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Benchmarking
The Deloitte South Island Index finished Between October and the first quarter of 2018 down 1.5%, the second quarter saw a brighter pace with December 2018, the the Index up 10.5%, the third quarter Index declined 9.2% in delivered growth at a softer pace, up 8.8% however, between October and keeping with the other December 2018, the Index declined 9.2% o e ent in Index indices tracked. in keeping with the other indeces tracked.
The Dow Jones recorded the largest decline for the December quarter, falling 11.8%, the ASX All Ords recorded a slightly larger decline compared to the
Deloitte South Island Index, declining by 9.7% and the S&P/NZX 50 hno o Capital Index Energy n t in i Aged Care t i Other inin i t i tion recorded the smallest decline, falling Se to 6.4% during the December quarter.
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Deloitte SI Index S&P/NZX 50 Capital Index o on ASX All Ords
Base period - December 2006 1.00
9 Deloitte South Island Index – December 2018
Of the 28 companies currently listed on the Deloitte South Island Index, 9 (32%) experienced a rise in market capitalisation during the quarter to 31 December 2018, 16 (57%) declined and 3 (11%) remained unchanged.
The full Deloitte South Island Index for the quarter ended 31 December 2018, ranked by market capitalisation, is set out in the table below.
Dec Sept Ticker Company Sector Mcap Mcap Change in Change in Share 2018 2018 Dec 2018 Sept 2018 Mcap ($m) in Mcap (%) Price 31 Rank Rank ($m) ($m) Quarter in Quarter Dec 2018
1 1 MEL Meridian Energy Energy & Mining $8,727.0 $8,419.5 $307.5 3.7% $3.405
2 2 RYM Ryman Healthcare Aged Care $5,370.0 $7,000.0 $(1,630.0) (23.3)% $10.740
Manufacturing & 3 3 EBO EBOS Group $3,063.0 $3,426.0 $(363.0) (10.6)% $20.080 Distribution
4 4 SML Synlait Milk Primary $1,613.0 $1,944.6 $(331.6) (17.1)% $9.000
5 5 SKYLINE Skyline Enterprises Other $936.3 $977.2 $(40.9) (4.2)% $27.500
6 7 SCL Scales Corporation Primary $635.0 $705.5 $(70.5) (10.0)% $4.500
7 6 KMD Kathmandu Holdings Retail $619.8 $747.3 $(127.5) (17.1)% $2.740
8 8 ARV Arvida Group Aged Care $534.0 $558.8 $(24.8) (4.4)% $1.290
Manufacturing & 9 10 SKL Skellerup Holdings $393.4 $416.8 $(23.4) (5.6)% $2.020 Distribution
10 9 PGW PGG Wrightson Primary $385.0 $460.5 $(75.5) (16.4)% $0.510
New Zealand King 11 11 NZK Primary $315.9 $372.8 $(56.9) (15.3)% $2.280 Salmon Investments
Manufacturing & 12 12 SCT Scott Technology $211.2 $232.3 $(21.1) (9.1)% $2.750 Distribution
13 13 SPN South Port New Zealand Other $173.2 $184.2 $(11.0) (6.0)% $6.600
14 14 PEB Pacific Edge Technology $168.8 $151.9 $16.9 11.1% $0.340
15 15 FFW Foley Family Wines Primary $96.6 $76.8 $19.8 25.8% $1.470
Marlborough Wine 16 16 MWE Primary $67.5 $67.5 $0.0 0.0% $0.230 Estates Group
17 17 SYF Syft Technologies Technology $59.9 $57.0 $2.9 5.1% $0.840
18 18 SFF Silver Fern Farms Primary $58.2 $48.2 $10.0 20.7% $0.580
19 20 SLI SLI Systems Technology $39.8 $20.5 $19.3 94.1% $0.640
20 19 MOA Moa Group Other $30.7 $25.9 $4.8 18.5% $0.510
21 24 PAZ Pharmazen Technology $21.1 $15.6 $5.5 35.3% $0.096
22 21 BLT BLIS Technologies Technology $19.9 $19.9 $0.0 0.0% $0.018
23 22 BLUESKY Blue Sky Meats Primary $15.0 $17.3 $(2.3) (13.3)% $1.300
24 25 SEA SeaDragon Primary $14.5 $9.0 $5.5 61.1% $0.003
25 23 SCY Smiths City Group Retail $14.5 $15.8 $(1.3) (8.2)% $0.275
26 26 CNX Connexionz Technology $4.3 $5.7 $(1.4) (24.6)% $0.080
27 27 CRP Chatham Rock Phosphate Energy & Mining $3.5 $4.9 $(1.4) (28.6)% $0.190
28 28 AOR Aorere Resources Energy & Mining $1.5 $1.5 $0.0 0.0% $0.001
28 28 TOTAL $23,592.6 $25,983.0 ($2,390.4) (9.2)%
10 The Deloitte South Island Index | 44th Edition
Compilation of the Deloitte South Island Index The Deloitte South Island Index (‘the Index’) is compiled from information provided by the NZX, and Unlisted on the market capitalisation of each South-Island based listed company. Broadly, a company is included in the Index where its registered office is in the South Island and/or a substantial portion of its operations are focused in the South Island. The information on South Island listed companies is extracted and totalled to provide a cumulative market capitalisation for all South Island listed companies.
The base period of the Deloitte South Island Index is 31 December 2006 and for the purposes of the Index this data is given a notional value of one. All subsequent quarterly cumulative market capitalisation totals are divided by the totals for the December 2006 quarter to obtain a relative movement. Market capitalisation will move as a result of capital injections, payments of dividends and capital returns. If a new South Island based company lists on the NZX or Unlisted they will be reflected in the Index as though they were present in the base period. Accordingly, the Index will only reflect changes in market capitalisation subsequent to listing. If a company is suspended or delisted during a quarter, no data will be included for the company, including any historical data, until the company is re-listed or the suspension lifted.
For the purposes of the sector analysis some sector segments have been grouped to provide a more meaningful analysis.
Information Deloitte Corporate Finance is the firm’s specialist corporate finance practice. For information regarding the Deloitte South Island Index or any of the services that we offer please contact any of our selected South Island based team below.
Christchurch
Scott McClay Richard Bailey Rob McDonald Partner | Corporate Finance Partner | Corporate Finance Director | Corporate Finance +64 (03) 363 3834 +64 (03) 363 3828 +64 (03) 363 3836 [email protected] [email protected] [email protected] Kyle Callow Aaron Thorn Shari Carter Director | Corporate Finance Partner | Tax & Private Partner | Tax & Private +64 (03) 363 3832 +64 (03) 363 3813 Direct : +64 (03) 363 3849 [email protected] [email protected] [email protected]
Mike Hoshek Steve Law Partner | Audit Partner | Consulting Direct : +64 (03) 363 3744 Direct : +64 (03) 363 3872 [email protected] [email protected]
Dunedin Queenstown
Mike Hawken Kyle Cameron Daniel Hellyer Partner | Audit Partner | Tax & Private Partner | Tax & Private Direct : +64 (03) 474 8684 Direct : +64 (03) 474 8674 Direct : +64 (03) 901 0573 [email protected] [email protected] [email protected]
Mike Horne Phil Stevenson Partner | Tax & Private Partner | Tax & Private Direct : +64 (03) 474 8647 Direct : +64 (03) 474 8665 [email protected] [email protected]
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