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Pyne Gould Corporation Shares To List

Pyne Gould Corporation Shares To List On The Nzsx On March 30

Financial services company Pyne Gould Corporation (PGC), with a market capitalisation of around $252 million, will make its debut on the New Zealand sharemarket next week.

Having traded on the unlisted market for many years, the iconic South Island company now has more than 1,700 shareholders on its register.

The chairman of PGC, Mr Sam Maling, said the decision to seek a main board listing was a logical step for the company.

“In almost all aspects of our business we operate like a fully listed company,” he said. “We already have governance and compliance regimes in place that are comparable to NZX companies. We also have a significant shareholder base with whom we communicate regularly.

“At this stage we will not be looking to raise any additional capital so no shares will be offered for sale or subscription. It will simply be a compliance listing.

“However, we do expect that a main board listing will generate additional shareholder interest in the company, particularly from share brokers and institutional investors. Getting onto the NZSX50 will attract additional interest, particularly from the index funds. Certainly we qualify for this index based on our capitalisation. Liquidity is another criterion, and though we have a wide shareholder spread, we’ll have to wait and see if trading volumes increase sufficiently.

“A further benefit of a main board listing will be the enhanced ability in the future to raise capital and to issue shares for business acquisitions. We certainly anticipate expanding our business.”

PGC was formed in 1987 as a holding company to direct and manage investments. Its origins, however, can be traced back to 1851 when one of the founders of the rural services company, Pyne Gould Guinness (PGG), commenced business in Christchurch. PGG itself was established in the early 1900s as a merger of three stock and station companies. Today PGG is one of the two largest rural servicing companies in New Zealand and is itself a listed entity with a market capitalisation of $125 million. PGC has a 56% shareholding in PGG.

While PGC’s roots may be in rural services, it is now principally a financial services company. PGC is the holding company for two wholly owned financial services businesses – MARAC (itself a former sharemarket listed company from the 1960s until 1985) and Perpetual Trust. MARAC Finance is one of New Zealand’s larger finance companies with finance receivables of $835 million. Perpetual Trust is one of the four trustee companies authorised by statute to operate in the New Zealand market.

PGC managing director Mr Richard Elworthy noted that while the company has a strong historical association with the South Island, its business now is predominantly North Island based. “MARAC, which is Auckland-based, is our largest asset contributing around 63% of our earnings.”

Following a strategic review in 2000, the focus of the business has been substantially reshaped. This has seen it move away from a diversified investment strategy under which the company had investments in assets such as Amuri Corporation, which later changed its name to South Eastern Utilities after it became involved in the electricity sector.

“The change in strategy was not because we haven’t been successful – the diversified strategy produced good results,” Mr Elworthy said. “It was more about focusing our energies on our core business activities – financial and rural services. The outcome has been a further substantial lift in performance with current year forecast NPAT $21.1 million and dividend 25 cents per share, compared with $15.5 million and 17 cents three years ago.”

Financial services represent a common thread across the group as Pyne Gould Guinness has a substantial rural finance business. Financial services comprise 78% of group earnings on a consolidated basis.

“It is our intention to expand our financial services business further through organic growth and, where appropriate, acquisition. At the same time we are looking at opportunities to expand the services offered to our rural clients as well as to seek further consolidation opportunities in the rural sector, as we did through the merger of PGG and Reid Farmers in 2001.”

In terms of investor returns, PGC has a good track record, said Mr Elworthy. “Since our strategic review just over three years ago we have achieved an annual compound return for our shareholders of 20%.”

PGC currently has 48.9 million shares on issue and its share price last traded at $5.15. The share price has increased by 34% over the past six months. This reflects increased interest in the company as the listing date nears, as well as the recently announced half-year earnings, in which the company reported a 56% jump in after-tax profit along with a 2.5 cents per share increase in dividend.

PGC shares are expected to debut on March 30. A listing profile is available from the PGC website:

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