South Island listed companies have succumbed to the worldwide upheaval in financial markets during the third quarter of 2008, according to the Deloitte South Island Index issued today.

Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, said the South Island Index had experienced its first decline, falling by 15.2% in the third quarter (July-September) of this year. September proved to be a particularly challenging month with a 15.0% decline. Overall, the Index’s value decreased by $676 million to a total market capitalisation of $3.78 billion. In contrast, the NZX 50 index was down just 3.3% in the quarter.

“Up 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 somewhat in the past quarter. It’s a function of what is a tricky and unpredictable market – the volatility and uncertainty has started to bite.

“The nervousness that has swept through the market should provide the catalyst for companies to undertake sensible planning in areas such as the management of cash flow, liquidity, and debt/equity positions. There’s no better time than now to put some effort into getting this right.”

The Deloitte 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.

Overall, despite the 15% reduction in the SI Index, a total of 53% of the companies in the Index recorded an increase in their market capitalisation this quarter.

Paul Munro said that in previous quarters the declines were primarily being felt by smaller companies in the Index, but this had changed in the past quarter. “This time around it has been the larger companies such as PGG Wrightson, Pike River Coal and NZ Farming Systems Uruguay that have felt the heat. Their relative significance in the South Island Index has meant their declines in market capitalisation have had a major impact.”

Notable percentage increases in market capitalisation were achieved by Pacific Edge Biotechnology (+63% in the quarter), Connexionz (+50%), Apple Fields (+38%), and Scott Technology (+29%). Homeware company Smiths City (+25%) also had a positive quarter, bucking speculation about pain being felt at the retail counter.

As with the second quarter of 2008, five of the eight South Island sectors experienced declines in Q3. Primary (-30.5%) and technology (-16.1%) led the falls, while the best performed was the port sector (+3.5%) – an admirable result in what Mr Munro described as “trying and challenging conditions”.

With a 1% increase in market capitalisation, Ryman Healthcare enjoyed the largest increase in dollar terms and remained the South Island’s largest listed company ($805.0m) as at 30 September 2008. It was followed by PGG Wrightson ($462.9m) and new entrant Pike River Coal ($431.5m).