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The long winding road The Deloitte South Island Index A review of the performance of South Island listed companies during the year to 30 June 2014 26th Edition Introduction Over the past twelve months the Deloitte South Island Index continued on its phenomenal rate of growth from Welcome to the 26th Edition of the previous year, gaining a remarkable $2.92 billion (35.3%) in the year ended 30 June 2014 despite the the Deloitte South Island Index. 3.0% decline in the most recent quarter. One of the key milestones achieved during the year was the Index In this edition we reflect on the breaking through the $10 billion barrier for the first time. An encouraging outcome from the past twelve performance of South Island months is that the remarkable growth was well spread, listed companies during the most with all sectors tracked exhibiting growth. Movements in June 2014 recent quarter and review the The month of June resulted in a slight increase in value with the Deloitte South Island Index increasing by past year to 30 June 2014. 0.9%. Over the same period all the indices tracked also had minor movements, with the Dow Jones gaining 0.7%, the NZX 50 dipping 0.7% and the ASX All Ords decreasing by 1.7%. Quarterly movements – Q2 2014 Despite the slight increase in June, the Deloitte South Island Index had its first decline in two years – falling $351.6 million (3.0%) in market capitalisation since 31 March 2014. This result was shaped by a disappointing quarter for the Bio-technology and Retail sectors, which reduced by $180.5 million and $132.1 million in market capitalisation respectively. Annual movements – Jul 2013 to Jun 2014 The Deloitte South Island Index increased by $2.92 billion (35.3%) during the year to 30 June 2014 – considerably outperforming increases in the NZX 50 of 15.8%, the Dow Jones of 12.9% and the ASX All Ords of 12.7%. 2 Executive Summary Year to 30 June 2014 The Deloitte South Island Index started off the past 12 months very well, with the Index shooting The Deloitte South Island Index to new heights and continuing on its strong performance from the previous year, before increased by $2.92 billion (35.3%). hitting a stumbling block in the last quarter. Over the year the number of companies in the Index The results show that half of the increased by one, after the following movements: 32 companies in the Index grew • The successful listing of Rakaia based Synlait Milk Limited on the NZX in July 2013; during the past 12 months. • The highly publicised listing of Meridian Energy Limited on the NZX in October 2013; and • The removal from the Index of Synlait Quarter to 30 June 2014 Farms Limited after the finalisation of Key points for the second quarter of 2014 include: the takeover offer in March 2014. • The Deloitte South Island Index decreased by $351.6 The key points for the year to 30 June 2014 include: million (3.0%) during the quarter to 30 June 2014. In comparison, over the same period, the Dow Jones • The Deloitte South Island Index increased by $2.92 and the NZX 50 Index grew by 2.2% and 0.03% billion (35.3%). The results show that half of the respectively, meanwhile the ASX All Ords dipped 32 companies in the Index grew during the past by 0.4%. The top performers in the quarter include 12 months. In comparison to the NZX 50 and Meridian Energy (up $100.4 million), Heartland indices of New Zealand’s major trading partners, New Zealand (up $74.5 million), Lyttelton Port the Deloitte South Island Index’s growth of 35.3% (up $15.3 million), Skyline Enterprises (up $10.2 outpaced all the other indices, more than doubling million) and Scott Technology (up $8.6 million). the closest challenger. Over the same twelve months, the NZX 50 achieved growth of 15.8%, the ASX • The Bio-technology sector was the standout performer All Ords 12.7%, and the Dow Jones 12.9%. for the wrong reason, declining 39.5% on the back of Pacific Edge’s poor share price performance • All sectors achieved growth in their market during the quarter. Only three of the eight industry capitalisations over the year to 30 June 2014. The sectors tracked posted positive movements in the Manufacturing & Distribution sector led the way with quarter to 30 June 2014 – being the Other, Energy an outstanding increase of 93.7%, while the Property & Mining and the Port sectors which gained 4.5%, sector topped the growth table in terms of dollars. 4.4% and 3.5% in market capitalisation respectively. • The ten largest companies in the Index, • Kathmandu Holdings finally joined the rest of the Retail all with market capitalisation greater than sector with a fall in market capitalisation, resulting $300 million, collectively grew 40.5% over in the sector falling 16.4% during the quarter to the twelve months to 30 June 2014. 30 June 2014. The largest decline in the sector was • The top five contributors to the overall growth in suffered by Postie Plus Group after shares were placed dollar terms were Ryman Healthcare ($1,090.0 in a trading halt in late May 2014 as the company million), EBOS Group ($871.4 million), Meridian appointed Administrators to facilitate a sale of the Energy ($300.8 million), Synlait Milk ($171.2 million) company's assets and pursue compensation for losses. and Kathmandu Holdings ($135.5 million). • The disappointing quarter was felt across the board with segments at both ends of the Index experiencing declines as the largest five companies (down 2.2%), largest ten companies (down 0.9%) and the smallest ten companies (down 8.8%) all contributed to the quarterly loss. Deloitte South Island Index – 26th Edition 3 Looking back Performance of Deloitte South Island Index against Performancemajor indices of Deloitte South Island Index against major indices 2.20 2.20 2.00 2.00 1.80 1.80 1.60 1.60 1.40 1.40 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 Total Market Capitalisation (relative to one) Total Market Capitalisation (relative to one) 0.40 0.40 0.20 0.20 - - 31/12/2006 30/06/2007 31/12/2007 30/06/2008 31/12/2008 30/06/2009 31/12/200931/12/2006 30/06/2010 30/06/2007 31/12/2010 31/12/2007 30/06/20 30/06/200811 31/12/20 31/12/200811 30/06/2012 30/06/2009 31/12/2012 31/12/2009 30/06/2013 30/06/2010 31/12/2013 31/12/2010 30/06/2014 30/06/20 11 31/12/2011 30/06/2012 31/12/2012 30/06/2013 31/12/2013 30/06/2014 NZX 50 Deloitte Dow Jones ASX AllNZX Ords 50 Deloitte Dow Jones ASX All Ords Gross Index SI Index Gross Index SI Index Base period - December 2006 = 1.00 Base period - December 2006 = 1.00 The South Island Index has been produced quarterly Pacific Edge since MarchPacific 2008. Edge It has followed51.1% the movement in 51.1% market capitalisation of the companies in the Index PGG Wrightson 41.4% PGG Wrightson 41.4% from 31 December 2006 to 30 June 2014. Over thisHeartland period, New the Zealand Index as a whole36.4% has increased by Heartland New Zealand 36.4% 97.3%, with the majority of the gain being from the Kathmandu Holdings 26.8% exceptionalKathmandu performance Holdings over 26.8%the past 24 months. In comparison to the other major indices tracked, Synlait Milk 53.2% Synlait Milk 53.2% no other index achieved anything on par with the Index’s Meridianperformance Energy since its inception,24.0% with the Dow Meridian Energy 24.0% Jones being the closest challenger achieving growth EBOS Group 138.5% of 35.0%. EBOSThe NZXGroup 50 increased 26.8% over the 138.5% same Rymanperiod Healthcare in terms of market capitalisation, whilst Ryman Healthcare34.2% 34.2% the ASX All Ords struggles to battle its way upward since the low point in0 February200 2009, still400 4.6% 600 800 1,000 01,200 200 400 600 800 1,000 1,200 down since the base period of December 2006. $million $million Unsurprisingly, once again, Ryman Healthcare was the Growth in Market Capitalisation standout performer for the year with an impressive Since 30 June 2013, the Deloitte South Island Index $1,090.0 million increase in market capitalisation. The has grown by $2.92 billion or 35.3% in terms of NZX 10 participant has quadrupled its size since 30 market capitalisation. During that period half of the June 2010, growing 429.6% over the past four years. companies on the Index (16 out of 32) have increased (14.1)% Chatham Rock Phosphate (14.1)% Chatham Rock Phosphate their market capitalisation, Pharmazen returned to The other notable performances in the index were from (36.0)% NZ Windfarms (36.0)% NZ Windfarms the same level it was 12 months earlier, and the the next two largest companies on the Index table – remaining companies experienced a decrease. Meridian(10.3)% Energy and EBOSSLI Group. Systems Meridian Energy (10.3)% SLI Systems (21.9)% Silver Fern Farms (21.9)% Silver Fern Farms (12.0)% NPT (12.0)% NPT 4 (61.8)% Moa Group (61.8)% Moa Group (25.1)% Scott Technology (25.1)% Scott Technology (48.1)% (48.1)%Bathurst Resources Bathurst Resources (50.0) (40.0) (30.0) (20.0) (10.0) (50.0) 0.0 (40.0) (30.0) (20.0) (10.0) 0.0 $million $million Performance of Deloitte South Island Index against major indices 2.20 2.00 1.80 1.60 1.40 1.20 took the second ranked position on the Index 1.00 ladder levels”.