Archive | Gainz

Ryman Healthcare boosts profit 69%

High full-year earnings expected as expansion continues

Ryman Healthcare Ltd increased its net surplus for the September half by 69% to $7.6 million on gross revenue up 60% to $43.6 million and said full-year earnings should comfortably exceed last year’s.

Ebitda (earnings before interest, tax, depreciation & amortisation) rose 51% to $9.2 million, the operating cashflow was steady at $18.7 million, earnings/share rose 69% to 7.6c/share and the dividend was increased 50% to 3c/share, with no imputation credit.

Ryman’s total assets rose 12.6% to $180.2 million, including the new Hilda Ross retirement village in Hamilton & the just-opened Grace Joel retirement village in St Heliers, Auckland.

Equity rose from $100.3 million to $116.4 million (giving a conservative 35.4% debt:assets ratio) after the company retained 60% of earnings for expansion in the previous half. Its debt ratio is likely to stay at that level as expansion is funded by operating cashflows.

Ryman has established 5 retirement villages since it listed in June 1999 and said it would continue growing its asset base by developing new villages in the upper North Island. It holds land for expansion at 6 existing sites over the whole country, plus the large Abbotts Way site in Ellerslie, yet to be developed.

Earnings from ongoing operations improved, with higher occupancy than last year. The substantial portfolio growth increased resales revenue & deferred management fees markedly.

Opening of the Hilda Ross village contributed significantly to the earnings increase, both in terms of new sales of occupation rights and the establishment of a profitable care operation. Further facilities are being developed there.

Occupation right sales more than doubled, from 93 to 190. New sales rose from 45 to 109, and earnings from those sales increased from $7.9 million to $17.6 million.

Resales rose from 48 to 81, and resale earnings from $5.5 million to $9.5 million.

The company said strong interest had been expressed in the Grace Joel village and more units would be available in the 2nd half.

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Net annual migrant inflow 41,600

3 factors cut short-term visitor numbers 4%

Long-term arrivals exceeded departures by 1800 in March, 100 more than in March 2002, taking the net inflow for the year to 41,600, Statistics NZ said today.

The net inflow for the previous year was 25,600.

The increase for the year resulted from 98,700 long-term arrivals (up 10,300) and 57,100 departures (down 5700) in 2003. Non-citizen arrivals rose by 8600 and NZ citizen departures fell 7000.

Significant net inflows were from China (15,900), India (6300), South Africa (2400), Japan (2300), Korea (2200) and Fiji (1900). The inflow from Britain rose from 3400 to 7200, the net outflow to Australia fell from 31,600 in 2001 to 16,100 in 2002 and 11,300 in the March 2003 year.

Visitor arrivals increased in the 1st fortnight of March but fell in the 2nd, resulting in a 4%, or 8700, fall to 193,900 short-term visitors.

Statistics NZ attributed the fall to the Sars (severe acute respiratory syndrome) virus, uncertainty before the US-led invasion of Iraq and the fact that Easter fell in March last year.

Visitor arrivals for the March year were still up 6%, at 2.062 million.

The NZ population is due to hit 4 million at 5.30pm next Thursday, 24 April, according to Statistics NZ. The 1st million was reached in 1908, the 2nd in 1952 & the 3rd in 1973.

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Prebble says economic base unsustainable

Migration, rising house prices & falling net wages

“Our whole economy now depends on increasing house prices that in turn depend on levels of migration that are at record levels. It is not sustainable,” Act leader Richard Prebble said in his state-of-the-nation speech in Auckland today.

Below are 3 extracts from his address. The 1st relates to debt, which is arising through property price rises and will impact on property. The 2nd relates to the state of political balance, which Mr Prebble sees as precarious. The 3rd relates to real incomes, which will again impact on property.

“The Westpac Household Savings Indicators reported in November last year revealed that households now owe $80 billion dollars, 8.6% more than a year ago.

“Household borrowing in the 90s increased from 57% of disposable income in 1990 to 112% in 2002.
The average Kiwi has never been more in debt. When the official figures are released I predict that retail spending at Christmas & the now important Boxing Day/January sales were a record, and we owe record credit card debt. Spending through the bank’s electronic system payment was up 11% in December. And let’s not forget that student debt has doubled under Labour.

“Our banks that have financed household debt have borrowed from overseas. Our own savings are insufficient. The Reserve Bank Governor (now MP Don Brash) stated: ‘NZ banks now rely more heavily on overseas borrowing than banks in any developed country — roughly a third of the total assets of the banking system are now fuelled by borrowing overseas.’

“The alarming state of our trading banks’ balance sheets does not concern the Reserve Bank. Banks borrowing overseas to onlend for domestic mortgages & credit card spending is a crash waiting to happen. The official answer is that our major banks are Australian and they are strong enough to refinance their NZ subsidiaries in the event of a downturn.

“No one asks what happens if Australia also has a downturn? No one asks what if the Australian banks also tighten up in New Zealand. Our whole economy now depends on increasing house prices that in turn depend on levels of migration that are at record levels. It is not sustainable.”

Abolishing Privy Council

Mr Prebble began his look at the political balance by focusing on the constitutional issue of abolishing the Privy Council and setting up a new Supreme Court with its membership drawn entirely by the present government, and probably not containing existing Appeal Court members.

“Abolishing the Privy Council is an important step to the Socialist Republic nightmare. But the Greens, if they are consistent with their election promise, must make the GE ban a precondition of support. Labour in turn, if they are consistent with their election promise, the government must lift the GE moratorium. So it’s an interesting year. This government is nothing like as stable as commentators opine. Minority governments can always fall.”

Actual wages fall

Lastly, the state of the family pocket:

“While gross wages have basically matched inflation, government has taken much more in tax, so take-home pay of the average worker has actually fallen in real terms.

“Over this summer I have had the parliamentary library research real take home pay. The average worker’s take-home pay after tax & inflation is $14/week less today than when Labour took office, a reduction of 2.4%.

“Increased income tax, user charges, petrol tax, government charges & stealth taxes have reduced the real income of the average working person. What families have done is take on more debt to keep up living standards. As interest rates are lower, households can do this.

“So now we have the most heavily indebted families in our history. A small increase in mortgage rates will have a disastrous effect on New Zealand families.”

Full address on Act website

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Fletcher Challenge rethink lifts emphasis on earnings from forest land

Hunt for margin new aim in forestry

Fletcher Challenge Forests Ltd’s rethink on what it is & how it operates could bring a serious re-evaluation of rural land in New Zealand.

The earnings performance of the big foresters has been abysmal as they have fought long-running down cycles in forestry products.

If you consider trees as a crop, and that the owners of the land have been making losses or low profits from milling the crop, then large tracts of New Zealand have been depreciated over several years.

While the best land-use option might seem to have been a switch to dairying in the past 5 years, the idea of harvesting immature forests made it an impractical option.

US forestry company Rayonier came to New Zealand in 1988 and has always separated the forestry resource & manufacturing divisions. They don’t necessarily trade with each other, if the price is wrong.

Fletcher Challenge, on the other hand, built itself into a conglomerate based on control of the resource through to sale of the finished product. In the breakup of the conglomerate, Fletcher Challenge Forests was no longer part of a full vertically integrated business.

On Monday, Fletcher Challenge Forests chairman Sir Dryden Spring said the company would separate forest ownership activities from value-added processing, marketing, distribution & forest management.

Sir Dryden went back to the strategic direction statement announced last year: Run the business efficiently to world’s best standards, invest in high-margin added-value processing & distribution, reduce investment in trees where appropriate value can be achieved, and return surplus capital to shareholders.

The important 1st step was to sell cutting rights to UBS recently. Now Fletcher wants to further reduce the money sitting in its forests by getting more external investment into the estate. The company intends to return the released capital to shareholders.

Sir Dryden said the decision to partition off the ownership of forests was “a clear statement that the company is committed to achieving a value from its forest estate that is well in excess of the value currently ascribed to it in the share price today.”

Fletcher Challenge Forests has appointed Macquarie NZ Ltd to advise it on the restructuring process.
Sir Dryden said the focus in the new-look forestry business would be on access & supply, not ownership. Fletcher’s existing business dealing in 3rd-party supply & trading would become more significant.

In the new executive structure after chief executive Terry McFadgen retires at the end of the month, chief financial officer John Dell will be joint managing director responsible for corporate strategy, restructuring initiatives & group financial performance, and chief operating officer Ian Boyd will be the other joint chief, responsible for operations, growth strategies & external commercial relationships.

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December trade surplus first in 5 years

Imports up 3.1% for year

Provisional figures show a merchandise trade surplus of $26 million for December, which would be the first December surplus for five years. Export figures to verify this will be released on 13 February.

December imports totalled $2.564 billion.
The provisional value of imports for calendar 2001 was $31.7 billion, up 3.1%. Excluding items worth $100 million-plus to take out distortions, the annual rise was 5.1%.

Statistics NZ said the seasonally adjusted value of imports for the December quarter was flat after a 1.3% fall in the September quarter. A fall in goods imported for further processing, such as crude oil, was offset by a rise in capital transport equipment imports.

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Trans Tasman shareholders reject bond swap

Noteholders agree to swap

Trans Tasman Properties Ltd shareholders voted overwhelmingly today to stay shareholders. Noteholders voted by an even bigger margin to turn themselves into bondholders.

It’s a result which will benefit the company. The terms of the trust deed for the convertible capital notes prevented Trans Tasman from paying a dividend.

Without that hanging over the shares, part of the share price discount may be removed — even though the company is not about to pay a dividend.

The vote against converting all the company’s shares into bonds gives Trans Tasman more leeway with cashflow than if it had been tied to a fixed bond interest payout.

It may still be some time before portfolio writedowns stop. But institutional shareholders voted strongly to keep their shares so they can take advantage of capital growth coming from a market upswing, and at least some of the smaller investors at today’s series of meetings seemed to be swayed by that thinking.

(More to come)

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Welcome to a year of exciting new opportunities

US slowdown means tougher times here

Welcome back for what promises to be a tough year internationally, which means that despite some good signs in New Zealand it’ll be a tough year here, too.

2000 ended with American commentators intent on promoting the advent of a recession, using plenty of misleadingly based statistics to encourage the rest of the world into believing it will happen. It’s the sort of suggestion that becomes self-fulfilling.

The use of seasonally based statistics in the US has me bemused, because it’s a big enough country to experience all weather seasons at once, though events like Christmas trade may be cause for seasonal comparative adjustment. I prefer to compare year-on-year, which is what I do with New Zealand building statistics; American comparisons are usually of back-to-back months or quarters, with the subjectivity of seasonal adjustment introduced.

NZ building getting into balance

Statistics NZ highlights seasonally adjusted building figures and its trendlines, which are shifted in hindsight, so the pictures they’ve been presenting recently are also quite different from mine.

The New Zealand residential building scene was overheated in 1999, but came back to equilibrium by being underdone last year. Equilibrium at the moment seems to be about 2000 consents a month, less over the summer, 23,000 for the year.

The figures for November came out on Monday, showing yet another month about 20% below that month in 1999, which can be seen as confirmation that this sector is rebalancing. But other comparisons will please suppliers and builders — bigger houses on average, and more value in each square metre.

Trouble looming overseas will flow through to our economy, right down to the rate of residential construction.

Fragility recognised in NZ, plenty of trouble overseas too

The syndicates’ desire to package more properties together was recognition of how fragile our provincial commercial and industrial property sectors are, and that fragility extends into prime areas as well.

Kiwi Income’s bid to take over Kiwi Development Trust should be contested in a healthy property market; acquiescence will certify the New Zealand office market as a weak patient.

Summer retailing was a mixture — some did well, others fared poorly. A festive season of high expectations in the US has ended with retail chain bankruptcies, followed by online retail collapses.

It may be that the American collapses are a part of sector restructuring, as seen in Asia by the demise of Japan’s Sogo and the tough market encountered as new discount stores beat the other traditional Japanese department stores.

Reits expect return to popularity, but serious questionmark over them

The fall of technology stocks, where it had been impossible to distinguish between real value in intangibles and the puffery of hot air buying more hot air, has been followed in the US by an expectation among real estate investment trusts that investors will head back towards their security.

There is an overwhelming and widespread supposition that these trusts will retain value, though too many are not transparent and seem to be shopping as if there was a permanent full moon.

Canute in charge

In Hong Kong and Singapore, there have been attempts to hold up the prices of residential stock, to the point that governments are being asked to stop or reduce the flow of cheap housing. Japan managed that kind of Canutish behaviour for a dozen years after the 1987 crash, but at some point reality has to strike.

What may save the world from a US recession and the repercussions of that on trade everywhere is the election of a Republican president bent on doling out tax cuts. That will help to maintain the unreal boom the US has experienced for what is already an extraordinarily long time.

Originality required for NZ to stay afloat

Back down in the South Pacific, the more we choose to be a clone of the rest of the world, the more difficult we’ll make our long-term future. Sydney, for one, will drain our blood.

Without originality, much of our secondary office space will stay redundant. Plenty of our industrial heartland has been turned over to warehousing.

Chancery, Viaduct refreshing

The advent of Chancery in the city centre is refreshing because it is different, and will draw the High St fashion district together. If Westfield-on-Mercury beats the Newmarket strip into submission, High St’s position will be cemented in.

The Viaduct is refreshing, too, for allowing a New Zealand business district to get near the water. Defying a century and more of business districts turning their backs to the water was a step that had to be made — beyond building boats, beyond hosting world extravaganzas such as the America’s Cup — if we were ever to recognise that the future of this speck in the ocean has to be maritime.

If that recognition of a different future spreads, we’ll also come to see more vital changes around the rural coast, and then into the countryside.

A good dairy season has put a spike into the price of any land you can park a cow on, but changes around a place like Matakana, or on Waiheke Island, may be more significant. Vines and olives identify some of the change; as the nature of the neighbourhood is transformed, our commodity-based thinking will also undergo change.

In the above, then, you will see a land of changing opportunity. Terrific. I’ll be writing about it for you. Sign on for an exciting year.

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Bridgecorp Holdings to shift incorporation to Australia

NZ businesses to carry on as usual

Bridgecorp Holdings Ltd (Rod Petricevic) has declared its departure to incorporation in New South Wales, although its New Zealand businesses will continue as usual.

Bridgecorp has given notice that it intends to apply to be removed from the New Zealand Companies Register after 10 June and to become incorporated in New South Wales. That doesn’t mean an Australian listing, though, or at least not yet.

The proposal has been discussed at length in the company over the past 2 years and has won shareholder support.

The company used to be listed in New Zealand , from 1980 as Bridgevale Mining, turning into Bridgecorp in 1986. After taking over Toy Warehouse, a business which crashed, Bridgecorp was left as a shell and was delisted in 1992.

The company tried to regain its listing in 1999, but was rebuffed by the Stock Exchange. It tried again in 2000, but Mr Petricevic said the exchange didn’t respond. It is now a substantial finance company, with about one-third of its business in Australia.

In New Zealand it lends through Bridgecorp Ltd and Bridgecorp Finance Ltd, which will continue. Its interests in property development through the Goodman companies has been shifted off balance sheet, and Goodman has a separate board.

Mr Petricevic said that after the exchange rebuff Bridgecorp was no longer looking to list because 1 of the 2 main factors in listing — a method to raise capital (the other being negotiability of securities) — had been overcome.

“We sought capital from other areas, which has been successful. We can double the size of our business without any more capital raisings. We’ve just had an options exercise which will result in a further $9 million of capital, and we’ve been to the market in capital notes,” Mr Petricevic said.

The company has 11,000 investors in debt securities.

Property activity

The latest city development by Goodman, the Rodney block of flats on Vincent St, is a month away from completion, and the group has some unsold units in West Auckland.

Mr Petricevic said the Renaissance, a huge 180-apartment development on the north side of the Manukau City commercial/council area (photographed at the start of April; its balconies are now attached) was off balance sheet and had been refinanced with bank funding. It’s due for completion in July, 1 month ahead of schedule.

2 other development sites next to the Renaissance block are for a hotel and probably some other residential use, Mr Petricevic said.

Bridgecorp, as mortgagee in possession, also has a Fort St development site previously owned by Reg Watt of NZ Equities Ltd, which is to be developed into a parking building with apartments on top and some ground-floor shops.

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Securities Commission holds exemptions line

Commission says no to small village seeking to avoid prospectus, wants someone to write new rules

The Securities Commission says in its latest Bulletin, out today, it will not create a new exemptions policy for small retirement villages.

It received an application for exemption from Securities Act prospectus and supervision requirements from promoters of a small scheme which would have up to 12 dwellings, but said it was a profoundly important investment decision for elderly people likely to be investing a large part of their savings in it.

Separately, the commission also said it wanted to review the Securities Act (Retirement Villages) Exemption Notice 1999: “It seems from discussion with the industry that more cost-effective regulation could be achieved by modifying the terms and conditions of exemption, particularly those relating to financial disclosure.”

How do you get action? By putting out a cute notice asking someone else to get the ball rolling: “An application to amend or replace the current notice from an appropriate retirement village organisation would be received with interest.”

Just occasionally it would be lovely to see our Securities Commission trying its hand at sensible proactivity, drafting some rules in simple English — or maybe even ringing up the organisation it wants to draft the rules for it.

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Shopping more important than catching the plane

Retail tops airfield as airport company earner

The order of shops on your way to the plane is as important, these days, as having a ticket.

Sequential purchasing,” was how Murray Barclay, Auckland International Airport Ltd’s general manager, commercial, put it.

“One of the priorities of airport retailing is to get every passenger walking past you. The mix is important — international brands, but we were also keen to have local flavour. Though they won’t be the biggest earners, they will contribute by giving that flavour.”

Airport retailing beyond the border is nowadays divided in three — main street, early New Zealand and, nearest the aircraft, shops selling cheap t-shirts and cds.

“You get cheaper as you come closer,” Mr Barclay said.

New landing charges and a rise in the international departure fee to $22 have caused complaint, but there are some things for free, still (albeit with a commercial motive): “Airspace entertainment centre — most of it’s free to play to increase dwelling time. Helps food and beverage,” Mr Barclay explained during a tour of the airport’s newer facilities in the wake of the company’s 20% profit rise.

Retail 3% ahead of airfield

In the hands of its listed operators, Auckland International Airport is more a shop than a transport centre, with climbing passenger numbers looked after to the extent that, happier, they’ll shop more.

And they do.

Retail moved ahead of airfield income by 1% last year (29-28) and by 3% this year (30-27) in the provision of the airport company’s $170 million of operating revenue.

You remember way back when parking to farewell your friends was free? Now parking provides 7% of the company’s income.

Mr Barclay and airport company managing director John Goulter are not shy about making money out of their visitors, so long as they can make those visitors happy in the spend.

Shortly, they’ll be making their visitors even happier. A 5225m² Warehouse store opens a short distance from the terminal in mid-November and a supermarket is planned to go alongside it. Five shops to be built in front of it have all been taken.

Hotel still in plans

Mr Goulter hopes work can start on the supermarket site before Christmas, and the airport’s hopes for a hotel have not receded to fantasy despite a downtown oversupply of beds.

“We’re very close to coming to some resolution on the hotel. A number of things are driving that. Total Logistics [which has just built a distribution centre on George Bolt Drive, at the entrance to the main airport area] distribute about 45% of all the pharmaceuticals in New Zealand, so they get visits from Johnston & Johnston executives, for example. As we bring more activity onto the airport, different ones say, ‘We want a hotel.’

“With a bit of luck we should have something to advise in the not too distant future,” Mr Goulter said.

He believes the airport hotel could have 200-250 rooms.

The airport company is working on plans and construction for about 50ha near the terminals — a 25ha commercial park, 15ha business centre, about 4ha for the retail centre, an office cluster “kicking off as soon as we have the retail centre fully leased, and earthworks have been done for a sports field,” Mr Barclay said.

$60m investment property portfolio

The company’s investment property portfolio will be worth $60 million on completion of three projects. At year-end, the company had six projects under way, worth $18 million.

Kiwi Dairy Group has its headquarters planned for an airport site, United Parcels’ New Zealand agent, Fliway, is adding 50% to its structure and DHL has become the airport’s biggest project. TNT has a new warehouse under construction beside Total Logistics.

DHL’s Gateway head office will have 2000m² of office and 2500m² of warehouse. A new apron will enable freight planes to taxi to 15m from DHL’s warehouse for processing of cargo.

“That’s quite a revolution in this part of the world,” Mr Goulter said. “We’re dealing with Ford to come on to the airport as well.”

All of this built on a surge in passenger numbers, up 4.6% for international and 4.3% domestic to top 8 million for the first time.

New Airbus to change whole picture

Mr Goulter is now looking at increasing the number of passengers, but reducing the number of aircraft movements, which rose in the year to June by 5.5%. A new Airbus, projected to carry 650 passengers initially, and later being configured to take 1000, “is excellent news for this company.” By cutting flight numbers it will help air traffic control, at the same time deferring the need for a second runway.

Auckland International Airport increased its surplus before interest, tax and depreciation by 9.6% to $123.8 million ($112.9 million), its pretax surplus by 19.8% to $75.7 million ($63.2 million), its aftertax surplus by 20.4% $51 million ($42.4 million), its return on average equity by 21.8% to 10.11% (8.3%).

Mr Goulter said the surplus did not include a $2.5 million revaluation gain on investment property, which flowed straight through to the revaluation reserve.

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