South Island listed companies run out of steam

South Island listed companies have run out of steam, succumbing to the worldwide upheaval in financial markets, according to a "South Island Index" issued today.

Paul Munro, a corporate finance partner in accountancy company Deloitte's, said the firm's index of South Island-listed companies had dropped for the first time, slumping 15.2 percent in the September quarter.

Most of that drop was during September, as global financial systems started showing serious strain, the South Island companies contracted 15 percent.

Over the whole quarter, the South Island index dropped by $676 million to a total market capitalisation of $3.78 billion, while during the same period, the NZX50 index was down just 3.3 percent in the quarter.

"Until now the South Island has proven to be relatively well insulated against tightening market conditions in 2008, but we've seen this resilience give way," said Mr Munro.

In a tricky and unpredictable market "the volatility and uncertainty has started to bite".

Mr Munro said that the nervousness that had swept through the market had triggered companies to undertake sensible planning in areas such as management of cash flow, liquidity, and debt/equity positions.

The South Island index measures movements in market capitalisation, tracking the performance of more than 30 listed companies with a registered office and/or a substantial portion of their operations in the South Island.

Despite the 15 percent reduction in the index, a total of 53 percent of its companies recorded an increase in their market capitalisation this quarter.

Mr Munro noted that it had been larger companies such as PGG Wrightson, Pike River Coal and NZ Farming Systems Uruguay that had most felt the heat, and their relative importance in the South Island had meant their drops a big overall impact.

Increases in market capitalisation included Pacific Edge Biotechnology (up 63 percent in the quarter), Connexionz (up 50 percent), Apple Fields (up 38 percent), and Scott Technology (up 29 percent).

Smiths City rose 25 percent, despite concerns about declines in the retail sector.

Five of the eight South Island sectors fell in the third quarter, with the biggest fall in the primary production (down 30.5 percent) and technology (down 16.1 percent).

The best performed was the relatively narrow port sector (up 3.5 percent).

With a 1 percent increase in market capitalisation, Ryman Healthcare showed the largest increase in dollar terms and remained the South Island's largest listed company ($805m) at September 30, followed by PGG Wrightson ($462.9m) and new entrant Pike River Coal ($431.5m).

Add a Comment