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Corporate Value Driven To New Heights

Monday, 4 October 2004

Corporate Value Driven To New Heights

SKYCITY Tops PricewaterhouseCoopers Corporate Value Report

The PricewaterhouseCoopers Corporate Value Report released today contains good news for shareholders with 90% of companies in the survey enjoying positive returns this year, up from 80% in 2003. The median return to shareholders was almost 20%, an increase from 16% last year.

PricewaterhouseCoopers Corporate Finance partner David Bridgman said these upward trends were driven by the focus on governance which followed in the wake of the corporate accounting scandals in 2002. “Companies have responded by buttressing their risk management and compliance systems to protect their corporate value. The pendulum is still swinging back towards value creation as businesses take calculated risks to boost performance.”

The Corporate Value Report analyses data relating to 70 companies listed on the NZX with a minimum market capitalisation of $40m. The PricewaterhouseCoopers ValueWeb methodology ranks each company using eleven criteria including total shareholder return, liquidity and volatility, ownership concentration, intangible value, revenue growth, margins, and price/earnings ratios.

By not focusing on a single measure, the ValueWeb is much less likely to be distorted by isolated events and is able to provide a comprehensive view of a company’s overall value.

Prominent Australasian gaming and entertainment company, SKYCITY Entertainment Group Ltd emerged with the best overall performance in 2004.

There were a number of factors which contributed to SKYCITY delivering the best value for shareholders, according to Bridgman. “The company has a relatively low financial risk profile and high intangible asset intensity. It showed good economic profitability in the gaming sector which is a highly regulated and consolidating market.”

Auckland International Airport Ltd and Fisher & Paykel Healthcare Ltd filled second and third positions in the Corporate Value Report’s rankings.

The Corporate Value Report also highlighted the need for companies to consider the impact of the change to International Financial Reporting Standards (IFRS) on the valuation of their intangible assets. Approximately 20% of the companies surveyed had a market value lower than the carrying value of their assets, meaning impairment issues could be a real concern for some companies.

“Ultimately the key is to achieve a balance between risk and value as the single-minded pursuit of one objective tends to compromise the other. Our ValueWeb takes a much more holistic approach and looks at a range of factors with proven links to value creation and sustainability.” said Bridgman.


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