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South Island firms continue to show encouraging growth

Deloitte South Island Index kicks off the 2013 calendar year with 6.9% gain in the quarter to 31 March 2013

South Island listed companies continued to show encouraging growth posting a gain of 6.9%, according to the latest Deloitte South Island Index released today.

The 21st edition of the Deloitte South Island Index, for the quarter to 31 March 2013, saw the Index gain $388 million or 6.9% in market capitalisation, continuing on the upward trajectory from the previous three quarters. The latest quarter’s results see the Index up $1.3 billion (27.9%) during the year to 31 March 2013 with total market capitalisation now standing at $6.05 billion, another new high since its inception in 2007.

All four benchmark indices grew during the March quarter, with the Dow Jones and NZX leading the way with 11.3% and 8.8% growth respectively. The ASX All Ords showed similar growth to the South Island Index with 6.8% growth in the quarter to 31 March 2013.

Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, says “although growth for the companies in the Index is not universal, with only about half of them increasing their market capitalisation, it is encouraging to see that a number of those companies have achieved a positive result without the direct stimulus provided by the Canterbury earthquake rebuild. This is a good sign for the South Island economy as a whole showing that it doesn’t rely exclusively on the rebuild to achieve growth.” “The overall growth of the Index is in spite of the Primary sector, traditionally a stronghold of the South Island economy, seemingly struggling to achieve growth in the current environment, with investors being wary of the high New Zealand dollar and the adverse weather conditions over the New Zealand summer potentially affecting the sector’s results,” adds Mr Munro.

Once again, the Index’s top performer for the quarter was Ryman Healthcare, gaining $245 million in market capitalisation or 10.8%. Ryman’s results mirror its growth seen in the previous quarter as investors’ love affair with the company continues, cementing Ryman’s position in first place on the Deloitte South Island Index.

Kathmandu Holdings had a strong quarter, gaining $108.1 million (27.1%) in market capitalisation on the back of reported sales increases of 13% and a corresponding 24% rise in EBIT in the six months to 31 January 2013. Ebos Group was another strong performer gaining $53.7 million (12.3%) in market capitalisation and currently sitting in third position on the Deloitte South Island Index, behind Ryman Healthcare and Kathmandu Holdings.

The biggest decline in the quarter came from Bathhurst Resources, which lost $62.8 million in market capitalisation, a decline of 18.0%, on the back of uncertainty awaiting an Environment Court decision relating to its Escarpment Mine Project near Westport. PGG Wrightson also lost ground shrinking by $52.8 million (15.9%) in market capitalisation, an unfortunate U-turn from the previous quarter’s performance.

Six of the eight industry sectors posted positive movements in the quarter to 31 March 2013 led by Retail and Biotechnology gaining $107.1 million (24.4%) and $40.5 million (24.0%) respectively. Retail sector growth was primarily on the back of Kathmandu Holdings’ continuing share price appreciation and the Biotechnology sector continued its strong performance thanks in part to share price growth of Pacific Edge Limited (26.0%) and BLIS Technologies (14.0%).

To see the full Deloitte South Island Index quarterly report, go to www.deloitte.com/nz/southislandindex.

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