Business and Commerce News

The most significant upward contribution to the rise in the FEPI in the latest quarter came from the repairs, maintenance and motor vehicle repairs index, which rose 1.2 percent on the back of higher material and labour costs. Other upward contributions came from a 1.1 percent rise in the index for interest rates, and a 0.6 percent rise in the livestock purchases index. Prior to this quarter’s increase, the livestock purchases index had recorded six consecutive quarterly decreases.

A 1.1 percent fall in the fertiliser, lime and seeds index was the only significant downward influence on the FEPI in the March 2004 quarter. Respondents cited the appreciation of the exchange rate as the driving factor behind the movement in this index.

The FEPI excluding livestock rose 0.4 percent in the March 2004 quarter.

The final price has been set at $1.70 per Share. At the final price, Feltex will have a market capitalisation of $254 million making it the largest IPO of a New Zealand company since 1999. It will also place Feltex within the top 30 listed companies.

“We’re delighted the Feltex IPO has been so well received in the market. The level of retail investor interest in the offer has been excellent and the book build attracted good support from a range of domestic and international institutions and Primary Market Participants”, said Feltex chairman Tim Saunders.

At the final price of $1.70 per share, the Shares are projected to provide a gross dividend yield of 9.6% for the year ending 30 June 2005. As well as providing investors with an attractive FY2005 projected gross dividend yield, a dividend of six cents per share is projected to be paid in October 2004 in respect of the year ending 30 June 2004″, said Feltex chief executive officer Sam Magill.

The offer of Shares pursuant to firm allocations from Primary Market Participants (NZX Firms) does not close until Wednesday, 2 June 2004. Under the offer structure, potential investors can now purchase shares at the fixed price of $1.70 per share via certain Primary Market Participants.

Mr Magill said: “We’re very pleased with the success of the Offer process to date. We’ve had excellent feedback from New Zealand retail brokers and their clients as well as from other investors. The company will have a strong and diverse share register”.

“The very attractive dividend yield on our shares when compared to recently announced IPO’s and the general market provides investors with a real opportunity to acquire an investment with an excellent projected income flow priced at an attractive P/E (pre-goodwill amortisation) multiple of 9.8x”.

Credit Suisse First Boston Asian Merchant Partners, L.P. has owned the business for more than seven years, during which time it has expanded the company through the purchase of Shaw Industries Australia in 2000 into a leading Australasian carpet manufacturer and marketer.

Feltex Carpets’ Shares are expected to be listed on the NZSX on 4 June 2004. Mr Magill said: “I am looking forward to seeing Feltex shares successfully listed as a prominent public company in New Zealand. The company is excited about its future and the listing is a further important milestone for Feltex.”

First NZ Capital and Forsyth Barr acted as Joint Lead Managers to the Offer.

Overall New Zealand’s PMI value increased in both February and March, peaking at 58.9 in March before slipping to 54.8 in April (a PMI reading above 50 points indicates expansion and below 50 indicates decline). This remains 5.5 points higher than April 2003.

Three of the five sub-indexes recorded expansion in April (production, new orders and deliveries of raw materials), while the employment index was broadly stable and the finished stocks sub-index recorded a moderate decline. The decline in finished stocks is encouraging as it suggests manufactures sales were higher than production in April. New orders (59.6) was again the highest of the sub-indexes, indicating a reasonable level of expansion is still expected. The continuing weakness in the employment sub-index implies ongoing productivity improvement in the sector.

Three of the four regions recorded expansion, with the Canterbury/Westland region indicating the strongest level of expansion. Production increased in Otago/Southland but the index was pulled down by a further decline in employment and a moderate decline in stock levels.

Some firms reported increased autumn investment in the rural sector, while increased domestic investment expenditure contributed to stronger growth in new orders in the machinery & equipment sector.

Export activity continues to be mixed, with some firms reporting a pick-up in new orders from Australia, Japan and the U.S., while others were still finding export orders difficult due to the value of the New Zealand dollar. The improvement in PMI scores in Australia (58.4), Japan (55.3) and the Eurozone (53.3) are positive for exporters and manufacturing expansion in the US (62.4) also remains at high levels

Some respondents expressed concern at competition from imports and higher raw materials prices in the chemicals sector.

The most significant contribution to the overall increase for the March 2004 quarter came from a 1.9 percent increase in the residential buildings index. The main reasons cited by respondents for this quarter’s price increase were the rising costs of subcontractors’ charges, construction materials and labour. This is the sixth consecutive quarter in which the residential buildings index has been the most significant upward contributor to the CGPI. In the year to the March 2004 quarter, the residential buildings index rose by 8.8 percent.

The increases in residential and non-residential buildings were partly offset by a 0.5 percent fall in the plant, machinery and equipment index and a 0.4 percent fall in the transport equipment index in the March 2004 quarter. Respondents cited a favourable exchange rate as the main reason for this quarter’s decreases in both of these indexes. The plant, machinery and equipment index has recorded quarterly falls in the last nine quarters, and is now 6.4 percent lower than in the December 2001 quarter.

Ryman increased its annual dividend to shareholders from 7.5c to 9c as a result of a strong financial year.

`We have experienced five years of rapid growth since floating on the stock exchange by continually expanding our portfolio of retirement villages,” managing director Kevin Hickman said today.

Ryman posted a $6 million surplus when it listed five years ago and the profit has grown three-fold in that time. Over the same period dividends have also grown from 2.5c to 9.0c a share.

“We are very happy with our expansion path and we are committed to sustaining a high level of growth,” Mr Hickman said.

For the first time, Ryman went beyond $100 million in turnover, compared with $31 million when it listed five years ago.

Net operating cashflows for the latest financial year stands at $50 million while net assets grew to $147 million. With a debt to assets ratio of 25 percent the company is well positioned to fund future expansion.

Ryman announced today the conditional purchase of a new site in Christchurch. Further details will be made available at a later date.

Ryman recently announced the purchase of the old Sacred Heart College site in Wanganui and it is well into construction at the Princess Alexandra village site in Napier, which is scheduled to open in September.

The $20 million Princess Alexandra village will include 24-hour nursing facilities and will provide homes for 150 elderly people, create 50 new jobs and will be the 13th village in the listed company’s stable of retirement villages.

Ryman’s 12 villages, resthomes and hospitals are situated in Invercargill, Dunedin, Christchurch, Wellington, Lower Hutt, Hamilton and Auckland.

Site works are under way at what will become the company’s largest village, next to the Remuera golf course in Auckland.

Ryman is well placed to maintain its earnings growth as latest Statistics New Zealand figures show the number of people over 65 years growing from 450,000 in 2001 to 924,000 by 2026.

This will significantly increase the demand for Ryman’s facilities and services.

The final dividend of 5.0c will be paid on June 25 and the record date for entitlements is June 11.

Key Statistics

Financial Year : Mar 04 : Mar 03

Earnings (cents per share) : 18.4 : 15.3

Dividend (cents per share) : 9.0 : 7.5

Net Assets (cents per share) : 147 : 124

Revenue ($m)

New Sales of Occupation Rights : 40 : 35

Care Fees : 37 : 31

Resales of Occupation Rights : 26 : 23

Management Fees : 5 : 4

Other : 1 : 1

Total Revenue : 109 : 94

Earnings ($m)

Earnings Before Interest & Tax : 19.7 : 16.9

Net Surplus after Tax : 18.4 : 15.3

Operating Cash Flows ($m) : 53 : 40

Sales of Occupation Rights (no)

New Sales : 158 : 175

Resales : 168 : 170

Total Sales : 326 : 345

Asset Base (no)

Retirement Village Units 1,058 : 932

Residential Care Beds

Resthome : 622 : 566

Hospital : 351 : 319

Total Assets : 2,031 : 1,817

CHH is pleased to advise it has successfully completed the sale of its Tissue business and 50 per cent interest in Sancella to SCA, effective 19 May 2004.

Toll NZ chief executive officer David Jackson says, “the decision to return to full ownership of Tranz Scenic follows a full review of all the interests Toll Holdings acquired following the partial takeover of Tranz Rail last year.

“Our assessment was that it made sound strategic and operational business sense to regain full ownership of Tranz Scenic,” says Mr Jackson.

Tranz Scenic consists of The Northerner and Overlander between Auckland and Wellington, the Capital Connection between Wellington and Palmerston North, the Tranz Coastal between Picton and Christchurch and the Tranz Alpine between Christchurch and the West Coast.

Management will continue to review of all these services.

Hirequip’s Executive Chairman Graeme Wong said, “Power Hire is a very good fit with Hirequip. It is the leading company in the electricity generator hire and sales market, being able to supply the full range of generators from 5 KVa to 1,800 KVa. This acquisition marries the specialist skills of Power Hire, particularly in the large generator market, with the New Zealand-wide branch network and financial strength of Hirequip.

“We have previously signalled our intention to grow the business through the acquisition of other equipment hire companies and the development of related business activities. In December last year we bought North Island hire company Ready Hire and Christchurch general hire business Hamill Hire, which increased the company’s hire business revenues by over 30 per cent.

“The acquisition of Power Hire will add further $6.5 million revenue to our business giving Hirequip a revenue stream from equipment hire in excess of $70 million on an annualised basis. The acquisition will be funded from cash flow,” Graeme Wong said.

“Power Hire was attractive not only for its growth potential but also for earnings that are unrelated to the construction cycle and so provides a measure of diversification.”

Hirequip already operates in the generator hire market providing generators up to 550 KVa and the combined business, following this acquisition, will increase Hirequip’s hire revenue in this sector by some 250% making Hirequip the leading electricity generator hire company by a considerable margin.

Stuart McKinlay, Managing Director of Hirequip Limited said, “The combined skills of both organisations will provide new business opportunities.”

Power Hire is being purchased from the family interests of Mr. Michael Jacomb who established the business in 1975 at Upper Hutt. In 1988 a branch opened in Auckland and the business now has branches in Christchurch and Dunedin as well.

Power Hire owns the largest generator hire fleet in New Zealand with some 120 sets above 20 KVa. These modern generators come with options such as acoustic canopies, exhaust silencing, and automatic mains failure and mains synchronising control systems.

Customers come from a wide range of industries including shipping, power companies, and hospitals, mining companies, telecommunications and Government.

Power Hire is the sole NZ agent for the FG Wilson range of generators. FG Wilson is one of the largest generator set manufacturers in the world.

Michael Jacomb will continue as a consultant to the Company. Mr. Jacomb said he intends to hold his shares in Hirequip as a long-term investment. Graeme Wong said, “The Directors of Hirequip welcome Mike to the Company as a new and significant shareholder.”

Hirequip sees the fundamentals of the power hire sector as being very attractive. Users are now very aware of the likelihood of tight supply as gas reserves diminish, large-scale hydro projects have been abandoned, and hydro storage levels vary dramatically from season to season. Major users and critical services all need back-up and/or standby generation capacity and Power Hire is ideally placed as the leading player selling, hiring and servicing generators in this market.

This capability was demonstrated recently when it hired two generators to supply the town of Woodville whilst the system was shut down to effect repairs and maintenance arising from recent flood damage.

“Mr. McKinlay said, “Power Hire will continue to run as a specialist generator solution provider. Employment has been offered to all Power Hire employees on substantially the same terms and conditions that they currently have. I am hopeful that all employees will opt to accept employment.”

Mr. Wong said, “We have been actively seeking opportunities to make further hire equipment business investments and Power Hire provided an excellent opportunity to grow and complement our business.”

“Looking ahead, we have a number of growth initiatives under investigation which are allied to Hirequip’s core competencies. Further growth will come from our existing hire company, branch expansion, and the acquisition of other equipment hire providers where we are satisfied as to the business case for adding value.”