Basking in the glow The Deloitte South Island Index A review of the performance of South Island listed companies during the quarter to 31 March 2014 25th Edition Introduction The Deloitte South Island Index started off the 2014 year on a positive note gaining $699.8 million (6.4%) Welcome to the 25th Edition of to the quarter ended 31 March 2014, setting an encouraging tone for the year ahead. This result extends the Deloitte South Island Index. the Index’s streak of successive positive quarterly results In this edition we reflect on the to seven, pushing the value of the Index to a new high. Movements in March 2014 performance of South Island The month of March resulted in a moderate increase of 4.8% in the Deloitte South Island Index, outperforming listed companies during the the other indices tracked. The next best performance came from the NZX 50, posting a sound 3.0% gain. most recent quarter to 31 Over the same period the Dow Jones gained a marginal March 2014. 0.8%, and the ASX All Ords decreased by a minor 0.2%. Quarterly movements – Q1 2014 The Deloitte South Island Index had another solid quarter – gaining $699.8 million (6.4%) in market capitalisation since 31 December 2013. This result was mainly attributable to an excellent quarter for the Property sector which gained 11.2% ($450.0 million), well supported by the Manufacturing & Distribution and Other sectors increasing their market capitalisations by $79.0 million and $78.5 million respectively. Annual movements – Mar 2013 – Mar 2014 The Deloitte South Island Index increased by $3.89 billion (50.5%) during the year to 31 March 2014 – outperforming increases in the NZX 50 of 16.2%, the Dow Jones of 12.9% and the ASX All Ords of 8.5%. Cover photo by Darren Allchurch 2 The Deloitte South Island Index started off the 2014 year on a positive note gaining $699.8 million (6.4%) to the quarter ended 31 March 2014, setting an encouraging tone for the year ahead. Deloitte South Island Index – 25th Edition 3 Executive Summary Quarter to 31 March 2014 (up $25.5 million), and SLI Systems (up $23.5 million). The first quarter to the 2014 year kicks off on a positive Heartland New Zealand announced during the note with the Deloitte South Island Index continuing quarter that it had entered into a Sale and Purchase the run of successive positive quarters to seven in a row. Agreement with Seniors Money International Limited Growth from this quarter comes across the board with for the acquisition of its New Zealand and Australian seven of the eight sectors posting positive quarters. The Home Equity Release mortgage businesses, and number of companies in the Deloitte South Island Index completed a successful capital raising programme to remains at 33. partially fund the acquisition. Key points for the first quarter of 2014 include: • Kathmandu Holdings’ solid results ensured that the Retail sector had another positive quarter, growing • The Deloitte South Island Index increased by $699.8 by 8.9%, despite the other two companies in the million (6.4%) during the quarter to 31 March 2014 sector declining over the quarter to 31 March 2014. – continuing to extend its market capitalisation to The Manufacturing & Distribution sector performed new record heights since the inception of the Index. well over the quarter increasing $79.0 million (4.3%) In comparison, over the same period, the NZX 50 on the back of EBOS Group’s share price increasing recorded its highest quarterly growth rate in a year by $81.2m (5.7%). Energy Mad also contributed well (8.5%), while the two overseas indices tracked to the sector’s results having an exceptional quarter performed poorly with the ASX All Ords growing gaining 46.6% – the greatest percentage gain of all a diminutive 0.9% and the Dow Jones decreasing the companies on the Index. 0.7%. The top performances for the quarter include Ryman Healthcare (up $450 million), Meridian Energy Over the 12 months to 31 March 2014, the Deloitte (up $150 million) and EBOS Group (up $81 million). South Island Index has increased by $3.89 billion (50.5%). The majority of this increase in market • The five largest companies on the Index, all with capitalisation is attributable to the increase of Ryman market capitalisation greater than $500 million, Healthcare and EBOS Group, growing $1,855 million collectively grew 9.0%, with four of the five achieving and $1,022 million respectively in the year. On a growth during the quarter to 31 March 2014. While percentage basis the greatest climbers for the past the ten smallest companies on the Index collectively 12 months were EBOS Group (208.3%), Pacific Edge declined in market capitalisation by 12.4%, with only (126.9%) and Ryman Healthcare (73.6%). Overall, 20 of three of the companies posting positive results. the 33 companies on the Index (61%) grew over the 12 • All except one of the eight sectors posted growth months to 31 March 2014. in the quarter to 31 March 2014 – the odd one out being the Primary sector, which experienced a decline in market capitalisation of 2.8%. The Property sector was the leading performer with a gain of 11.2%, The Deloitte South Island Index once again on the back of investors continuing to clamour for shares in Ryman Healthcare. The increased by $699.8 million company announced late in the quarter its intention to build eight new retirement villages in New Zealand (6.4%) during the quarter to 31 with five of them being located in the Auckland region. March 2014 – continuing to • The Other sector also posted strong results for extend its market capitalisation the quarter, gaining 9.8%, with four of the five companies increasing their market capitalisation. The to new record heights since the sector’s increase was mainly attributable to Heartland New Zealand (up $31.9 million), Skyline Enterprises inception of the Index. 4 The Quarter to 31 March 2014 Growth in Market Capitalisation during the quarter, announcing an increase in NPAT Ryman Healthcare continued its incredible run of share of 56% from the previous corresponding half year. price growth, as it recorded its eleventh successive Heartland New Zealand also announced it had entered quarterly increase in market capitalisation, growing into a Sale and Purchase Agreement with Seniors Money by $450.0 million (11.5%) during the first quarter of International Limited for the acquisition of its New 2014. Ryman Healthcare’s share price rose by $0.90 Zealand and Australian Home Equity Release mortgage over the quarter to $8.75 per share, coincidentally by businesses, and completed a successful capital raising the same amount as the previous quarter. During the programme to partially fund the acquisition. quarter the company signalled its intention to up the ante in its build rate of New Zealand retirement homes, announcing its plan to build eight new retirement villages in New Zealand, five of which will be located in the Auckland region. Managing Director Simon Challies said the target was to lift the current New Zealand Skellerup Holdings 3% build rate to 850 units and beds per annum by 2017 to SLI Systems 21% meet increasing demand. The increase means Ryman Healthcare will be building at almost double the rate it Skyline Enterprises 8% was five years ago. Heartland New Zealand 10% Meridian Energy increased its market capitalisation over the first quarter of 2014 by $150.2 million - a Kathmandu Holdings 10% growth rate of 11.5%. During the quarter, Meridian Energy released its interim results for the half year to EBOS Group 6% 31 December 2013 with a NPBT result 49.3% above the Prospectus forecast assumptions, including $41.2 Meridian Energy 12% million of non-cash fair value gains. As a result of the Ryman Healthcare 11% company’s performance a dividend of 4.19 cents per share was announced to be paid on 15 April 2014. $0 $100 $200 $300 $400 $500 EBOS Group reversed its previous quarter’s decline with an $81.2 million gain in market capitalisation to $10.25 $ million per share – a 5.7% gain. EBOS Group was another company that released its half year results during the quarter with EBOS Managing Director Mark Waller (11%) BLIS Technologies saying, “We delivered a result in line with what we said we would. We did this in spite of a much higher than Ryman Healthcare continued(17%) Blue Sky itsMeats expected NZ dollar. The strength of our result can be put Moa Group down to excellent performances across all our business incredible run of share(14%) price units, which together generated turnover in excess of $3 (10%) Silver Fern Farms billion. We are delighted with the first half results”. growth, as it recorded its eleventh (32%) NZ Windfarms Both Kathmandu Holdings and Heartland New Zealand successive quarterly increase in had strong quarters increasing $68.1 million (9.7%) (21%) Scott Technology and $31.9 million (9.6%) in market capitalisation market capitalisation,(6%) growingSynlait Milk by respectively. Kathmandu Holdings announced strong results with Sales, Gross Profit, EBIT and NPBT all $450.0(59%) million (11.5%) duringBathurst Resources the increasing compared to the same period the previous $(120) $(100) $(80) $(60) $(40) $(20) $0 year in an environment where others in the Retail sector first quarter of 2014. are struggling. Meanwhile, Heartland New Zealand $ million also released to the market an excellent half year result Movement in Sector Indices - Quarter to March 2014 12% Deloitte South Island Index – 25th Edition 5 10% 8% 6% 4% 2% % Movement in Index 0% -2% -4% Bio- Energy Manufacturing Port Primary Property Retail Other technology & Mining & Distribution Sector Skellerup Holdings 3% SLI Systems 21% Skyline Enterprises 8% Heartland New Zealand 10% Kathmandu Holdings 10% Declines in Market Capitalisation of over USD300 per tonne to a current spot of about EBOS Group Bathurst6% Resources had a quarter to forget losing more USD120 per tonne, its weakest position in about nine than half of its value, as it dropped $101.0 million years” - leading Bathurst Resources to reassess its Meridian Energy (58.6%) in market12% capitalisation during the quarter to operations and make about 29 positions redundant.