Archive | Sectors

Retail trade up 7.3% nationally in August

Furniture boom continues, car sales quieter

Retail trade figures were steady in August compared to July, and 7.3% above August 2001. Auckland was ahead of last year by the national average, the Waikato pulled back from a July surge and Wellington remained in the doldrums.

Around $4 billion (excluding gst) has been sold monthly in 6 of the past 12 months (and Christmas sales took December to $4.8 billion). The level now is about $280 million above the level a year ago, a 7.3% rise.

Among the significant moves in the figures released by Statistics NZ today:

furniture & floorcoverings continued a 5-month boom run with sales 18.9% above a year ago at $115 million

appliance retailing was up 12.3% to $140 million (highly volatile over those 5 months, ranging from a 13.7% gain in April, which included Easter this year, to a 1.1% fall in June, but in actual dollars varying between $120-140 million/month this year)

department store retailing rose 13.3% over August 2001 to $213 million, but over the past 6 months has been in a range from $202-231 million/month, with the high including Easter) and

recreation goods sales rose 12.8% over August 2001 to $154 million (but sales in this category have been in the very tight $154-157 million/month for 5 months).Vehicle retailing quieter

Vehicle retailing was up 9.4% on August 2001 to $634 million, in the middle of the $607-650 million/month range of the past 6 months. This category rose 26.7% in April, but the $610 million of sales that month was at the low end of the spectrum.

Regional shifts

Sales in the Auckland region rose 7.4% over August 2001 to $1.364 billion.

In the Waikato, sales in August 2001 were 10.5% on a year earlier, but were followed by a comparative dip to a 5.2% rise in September 2001. Waikato sales rises were in double figures for 8 of the next 10 months (April was up 20.7%, July 13.4%). In June there was a comparative dip to an 8.1% rise, and in August 2002 the rise was 8.7%.

In Wellington, the picture has been entirely different. The rise in August was 3.1%, following a 2.4% rise in July, no change in June and 2 months of 5.1% increases.

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Securities Commission bans First Foundation ads

Gold Coast company’s website lacks credibility details

Gold Coast developer First Foundation Developments Ltd has been told to stop advertising in New Zealand for investors.

The Securities Commission’s enforcement director, Norman Miller, issued a statement today saying the commission had banned the company’s advertisements because it didn’t offer the required registered prospectus & investment statement.

Its last advertisement was in the Weekend Herald on 8 March. The advertisement highlighted a 15.92% annual return. The website, however, refers on the investment page to an annual return between 11.55% and 15.92%.

Minimum subscription was $A10,000. The ad also mentioned Golden Pacific Homes.

The website names some architects working with the company. The 1 person named in the website as having a direct relationship closer than a contract with the company is Shane Summers, described as “1 of the 1st associate directors of First Foundation,” with more than 25 years’ building experience and winner of 2 Queensland house of the year awards. “Mr Summers recently was a valued associate of the Queensland Master Builders Association providing support and regulation for the building community throughout Queensland.”

The Australian Securities & Investments Commission register shows the company was registered as a proprietary company on 8 August 2002, then resolved on 26 September to become a public company.

Company website: First Foundation Developments Ltd

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Airport company to examine hotel without Sky

International passenger record beaten 4 times this summer

Auckland International Airport Ltd made 2 announcements on Tuesday, 1 that it processed a record number of passengers in the week to 12 January and the other that Sky City Entertainment Group Ltd has pulled out of a joint proposal to build an airport hotel.

The airport company processed a record 125,188 international passengers in the week to 12 January, compared to the previous record of 114,463 in the week to 13 January 2002.

The previous record was beaten 4 times over this summer.

Auckland International Airport said it would continue to examine the economics of building an airport hotel, “which obviously would be enhanced through the involvement of a recognised hotel operator.”

The airport company said its 2200m² 3-storey office building under construction opposite the airport shopping centre would be completed by the end of this month.

It’s fully tenanted. The company said it will consider another office development in the vicinity.

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Fletcher Building doubles interim net earnings to $83 million

Dividend raised from 6c to 9c

Fletcher Building Ltd keeps on getting strong: the company doubled net earnings in the December half to $83 million although revenue rose less than 2%, to $1.483 billion.

Chief executive Ralph Waters said economic growth might start to level off in Australia & New Zealand in the 2nd half, and the strong NZ dollar would affect earnings, but he expected the full-year result would be satisfactory.

Ebit (earnings before interest & tax) of $160 million included $8 million from the Laminex group, acquired on 13 November.

Operating earnings before unusuals & tax rose 117% to $137 million

Mr Waters said the result had enabled the company to increase dividends again. The interim dividend will be 9c/share with full tax credits, compared to an interim 6c/share to December 2001 and 8c/share final for June 2002.

He said all divisions had lifted earnings in the December half. “Market conditions in both New Zealand & Australia remained strong, and our operations were positioned well to take advantage of this following improvements in operational efficiency, overheads & prices during the past 2 years.

“From a strategic point of view, the highlight of the period was clearly the acquisition of the Laminex group in Australia, which diversified the company’s revenue & earnings base. The sale of the company’s operations in Bolivia was also a significant development.

“These changes were accompanied by a series of initiatives to provide acquisition funding & refinance the company’s existing borrowings.”

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Hind Hotels

Hind director looks afresh at NZ

Singapore Government-controlled DBS Realty has been struggling for a month to mop up just over 1% of the shares in Hind Hotels so it can complete a takeover begun early last year.
Meanwhile one of Hind’s former controlling shareholders, Niwas Jhunjhnuwala (right), is looking again at New Zealand property. He has taken control of the investment portfolio he and his brothers began acquiring in the early 90s, which he estimates is worth about $S100 million ($NZ122 million) although takeover documents show its value dipped well below that during Asia’s economic upheaval.
The New Zealand assets had been keeping the tired Singapore hotel company afloat, although the last company documents before the directors bought the portfolio show their value to the group fell from $S90 million to $S79 million in the year to December 1998.
Those assets are headed by Central Office Park, at the Ellerslie-Penrose interchange on Auckland’s Southern Motorway, which fell from a value of $S43 million in 1997 to $S36.6 million.
Hind bought the office park in 1992 for $NZ38 million from a bank syndicate which took it over from the statutory managers of Aurora Group. Hind later bought the Wiri woolstore and Masport industrial estate in Mt Wellington and, two years ago, paid $NZ8.5 million for the Meadowland shopping centre in Howick.
Niwas Jhunjhnuwala said, during an interview in Singapore in January, he wants to spread his investments and fields hundreds of proposals. An example: the brothers took off for Romania two years ago to check one of these. “We went to buy a port, but it didn’t stack up,” he said.
Those other opportunities now have to match the feel he has for New Zealand. “Now I have a good feel of the market, hopefully I will further expand and may go public.”
Mr Jhunjhnuwala says a float of the New Zealand portfolio is probably “some time away.” It might also depend on a new generation having that feel, because Niwas and brother Lal, who was Hind chairman, are in their 70s.
Their start in New Zealand was entirely debt-funded, ironically so because they bought from banks selling up New Zealand companies, which by then were being charged very heavy penalty interest rates. (Central Park developer Aurora was controlled by Equiticorp and fell in that group’s collapse.)
“In 1992 the equity ratio was nil, 30% was a bank letter of credit from Singapore. I’m building an equity base, roughly 40% equity,” Mr Jhunjhnuwala says.
He says Hind bought “at the right time” but may now sell some of its assets to buy better. That “something better” has some basic requirements to meet: “We go for good long-term tenants. It should not hurt my pocket. My expenditure should come out of rent.”
The asset category does not seem important. Whatever scheme is shown to be viable, “we are ready,” he says.
“I can ready inside [a proposal] now, good or not good. The main thing is feeling you can retain that growth. That’s why we go for blue-chip, long-term tenants, who are getting more and more rare. It’s not a landlord’s market, it’s a tenant’s market now.”
The Jhunjhnuwalas own their industrial premises in Hong Kong and Niwas has an office in Bombay, but the brothers steered clear of Indonesia, the Phillipines, Malaysia and Thailand during their growth surge. “I don’t take currency risk and I borrow long-term. I pay extra but I can sleep peacefully.”
The Jhunjhnuwala brothers have moved cautiously, despite the size of the New Zealand portfolio, ensuring rent more than pays the mortgage. Between them they have numerous business interests around the world – among them, watchmaking in Hong Kong and an experimental farm in Burma which exports black beans and green peas to India. Another branch of the family has been in construction in India for 50 years and now manages 46 hotels there.

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CDL Hotels lifts own performance as well as picking up CDL Investments & Kingsgate earnings

Occupancy & room rate rises produce 10.4% yield increase

CDL Hotels NZ Ltd made money out of Kingsgate International Corp and CDL Investments, but what did it do for itself in 2002?

All up, net profit after tax rose 60% to $17.1 million. The company said the earnings increase despite a 6% revenue fall to $190.1 million, mostly due to high sales of Kingsgate’s Birkenhead Quays apartments in 2001 and a much lower sales level in 2002.

Total assets fell $23 million to $455.8 million as cash from Kingsgate apartment sales was used to cut bank debt & reduce development property stock. total liabilities fell 18.1% to $129.9 million, but net asset backing, share rose from 62.5c to 63.9c/share. Earnings/share rose from 3.06c to 4.89c/share.

CDL Hotels will pay a fully imputed 1.4c/share dividend.

CDL Hotels is the largest hotel operator in New Zealand with a portfolio of 3576 rooms in 28 hotels in 15 locations.

Hotels perform better

Turnover rose 8.5% to $114.2 million, average occupancy rose 5.9% and the average room rate rose 4.5%. The combination produced an overall 10.4% increase in yield, which chairman John Wilson said endorsed CDL’s policy of focusing on the higher-yielding end of the market.

He said CDL worked at growing the domestic market as a hedge against international uncertainty, and managed to cut the international visitor share of its market from 65% to 62.9%.

Revenue grew around the regions, particularly at Queenstown Rotorua, Christchurch and in CDL’s provincial hotels, though no significant international events were hosted outside Auckland. Wellington maintained its occupancy levels and average room rate.

CDL said the Millennium- and Copthorne-branded hotels improved their position and recorded revenue & profit increases well above 2001 levels. The Quality branded hotels continued to operate against more competition.

Choice Hotels International, which holds the licence for the Quality brand, has told CDL it won’t renew the master franchise agreement on review in August 2006 but will franchise the properties directly through its Australian office.

2 refurbs, 1 sale planned

Mr Wilson said CDL planned major refurbishments for its Copthorne Durham St, Christchurch, and Quality Hotel Oriental Bay, Wellington, in the 1st half of 2003. “The position of Millennium Queenstown and Millennium Christchurch are presently under review.”

The company has entered into an unconditional contract to sell the Quality Hotel Willis St, Wellington’s former YWCA, which has a feature fancier hotels around the world fail on — a pool which can be used at any time of the day. Settlement is scheduled for 31 March 2003. CDL’s management company, Hospitality Services Ltd, will continue to manage it.

In Sydney, closure of Kingsgate’s Millennium hotel for conversion of the 250 rooms into 97 apartments will cut income over the next 18 months, before apartment sales kick in at the end of 2004.

CDL Hotels Ltd appointed chief operating officer Gordon Wilson as a director on 28 February.

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Pacific Retail buys Living & Giving

Long-term growth ambition stated for “under-served segment”

Pacific Retail Group has bought the trading assets of home and giftware retailer Living & Giving Ltd from Sally Bisley and Peter Jackson on the basis of an enterprise value of $4.4 million.

Pacific Retail said settlement was by an upfront payment of $2 million and a final $3.1 million, deferred for one year. Living & Giving has six stores in Auckland and Hamilton with total turnover of $10.7 million.

Although Pacific Retail’s focus is on appliance retailing, the company said homeware and gifts was “an under-served segment” and it expected to use Living & Giving “as a platform to build a significant position in the category over time.”

It said the small scale of the present asset, and the work to assimilate and expand it, would temper short-term returns.

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PFI raises March quarter surplus 5%

Portfolio 99% leased

Listed industrial investor Property For Industry Ltd raised its March quarter pretax operating surplus by 5% to $3.757 million, on rent up 1% to $5.464 million and interest costs down 14% to just over $1 million, and took its portfolio occupancy to 99%.

Earnings/share rose 1.47c to 1.52c.

During the quarter PFI secured logistics company Daniel Silva Ltd as a tenant of 16-18 Fisher Crescent, Mt Wellington, for 6 years on rent of $283,000/year.

This means PFI has tenants committed for all space where leases were scheduled to expire in 2003, bringing occupancy to 99%. The only available space in its portfolio is 3974m2 at 7 Carmont Place, Mt Wellington, which became vacant last year.

PFI shareholders will receive a steady 1st-quarter dividend of 1.35c/share with imputation credits of 0.3c/share.

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Mainzeal profit $2.9 million as Richina Pacific returns to black

Construction margin 0.7% in a tough year

Local construction company Mainzeal has been submerged under the interests of Richina Pacific’s directors in strengthening their China businesses, but still manages to perform positively for the group.

The company said in its announcement of the 2000 result that Mainzeal “continued to perform soundly in an environment of intense competition and uncertainty. Mainzeal increased its turnover by 12% to $406.6 million and posted a modest profit of $2.9 million, down 28%.

That’s only a 0.7% margin on sales, which wouldn’t win a place in any retailer’s hall of fame, but it is better than the Beijing Blue Zoo, which went from a $934,000 profit in 1999 to a $37,000 loss.

The aquarium project was finished on time and under budget, but the partners who promoted it to Richina Pacific wanted to develop and sell. That was one of the areas of serious conflict within Richina Pacific which has seen numerous faces leave the top table.

The company warned of unreasonable price competition from newer aquariums in Beijing last year and blamed this year’s loss on “fierce price-cutting by competitor aquariums in the Chinese capital.”

Nevertheless, Richina Pacific was able to produce a happy swansong for retiring chairman Sir Allan Wright, producing a $4.7 million bottom line compared to a $3.85 million loss in 1999, on revenue up 26% to $725 million and an operating surplus of $4.4 million, compared to a $5.5 million 1999 deficit.

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Force and MTM back in High Court

Question to be decided: which plan should completion be based on?

Force Corporation and the MTM Entertainment Trust of Australia were back in court today to resume their dispute which will decide who must own the Force Entertainment Centre on Queen St in Auckland.

Force developed the centre, used MTM money in doing so and had an agreement to sell it to MTM. The price was to be determined after practical completion. When work began it was touted as a $75 million project and when MTM floated in 1998, the centre accounted for 35% of the new trust’s assets at $A62 million, which translated to $NZ71 million on the exchange rate used.

MTM Funds Management Ltd, the management company which ran this trust and another MTM trust which owns a single Sydney office block, has also been embroiled in a battle to retain its job running the office trust this year, finally losing out to James Fielding Investments Ltd, set up by Paladin founder Greg Paramor and Rod Leaver.

Practical completion was required by 30 December 1999. A certificate of practical completion was filed that day by the project architect, Ashley Gillard-Allen of Walker Co Partnership, but MTM took Force to court claiming practical completion was not achieved. Weeks later, MTM filed more proceedings alleging deficiencies in the certificate as well as failure to complete.

In the High Court this week, the parties are seeking to resolve what constitute the plans on which the practical completion decision would be based.

Once that basis is decided by Justice Hugh Williams, a nominated architect, Russell Hawken, will decide the practical completion issue. Only then can the ownership position be decided.

Neither party is jumping at the prospect.

MTM Funds Management, already minus its office trust after a performance which didn’t satisfy magnate Kerry Packer, is fighting to survive in a tough Australian trust management market. The entertainment trust declared an $A29.6 million loss for the year to June, while Force declared an $NZ7 million loss.

One of the attractions of the Queen St centre, the Imax big screen, proved a troublesome feature when its management company, Cinema Plus, went into receivership on both sides of the Tasman, and the other major feature, Planet Hollywood, struck financial trouble back in the US and couldn’t find a local partner. Force is managing both businesses in Queen St.

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