Second year of strong performance for Kingfish
Second year of strong performance for Kingfish
Kingfish Limited ("Kingfish") announces a second year of strong performance, increasing the value of the company net assets an impressive 64% since listing in April 2004. Kingfish's Net Asset Value ("NAV") per share increased from $1.2852 at 31 March 2005 to $1.5888 as at 31 March 2006, or 24%.
Kingfish Chairman, Rob Challinor said that "the increase in NAV was substantially ahead of the Benchmark Rate of 14.43% (being 7% plus the change in the NZX 90 day bank bill index for the year), reflecting the successful efforts of the Manager, Fisher Funds Management Limited ("Fisher Funds"). It is worth noting that the 24% annual increase in NAV was ahead of the comparable 4% gain in the NZSX Smallcap Index and the 13% gain in the NZSX Midcap Index".
Kingfish also announces an audited net surplus after tax of $18.8m for the year ended 31 March 2006, a 12.95% increase over the previous year.
Kingfish has today declared a fully imputed ordinary dividend of 2.5 cents per share which will be paid to shareholders on 16 June 2006. The record date for the dividend is 5pm on 2 June 2006. Kingfish is investigating the possibility of qualifying as a collective investment vehicle under the tax changes proposed to come into effect on 1 April 2007. If it does qualify, there would be no restriction on its ability to distribute gains from sale of its investments. This should have a favourable impact on the level of future dividends paid.
The Management Agreement with Fisher Funds provides for a payment of an annual performance fee if returns are achieved above the Benchmark Rate. In accordance with the Management Agreement subsequent to balance date, half the value of the performance fee payable has been subscribed by Fisher Funds for 357,782 Kingfish shares at an issue price equal to the audited NAV per share of $1.5888 at year end. The NAV is after the deduction of the performance fee and Treasury Stock.
As at 31 March 2006, the Kingfish portfolio held 12 stocks which made up 97% of total assets. Core stock holdings are: Freightways, Metlifecare, Waste Management, Pumpkin Patch, Mainfreight, Michael Hill and Ryman Healthcare. The Kingfish Nursery portfolio includes the following stocks: Comvita, Kidicorp, NZ Exchange, Software of Excellence (Mandatory Convertible Notes) and Cadmus Technology.
Seven of the 12 stocks in the portfolio posted share price gains during the year, some of them quite spectacular. The four main performance contributors were Freightways (+26%), Mainfreight (+77%), Ryman Healthcare (+76%) and Waste Management (+39%). Carmel Fisher, stated "Profit results of the core companies over the past year have been generally better than expected, while certain companies have made very positive progress in executing their expansion strategies. For example, Ryman Healthcare reported a 54% gain in September 2005 interim profit and its management team was sufficiently confident to predict at least that rate of growth for the full year. Mainfreight's international businesses continue to go from strength to strength, to the extent that the company now generates around 45% of its earnings outside NZ. Turners Auctions 43% share price fall was the main detractor from the portfolio performance."
The past 12 months has seen a resurgence of merger and takeover activity in the NZ market, which has indirectly involved Kingfish. Offers were made for all the shares in Metlifecare and Waste Management. The Kingfish Investment Manager, Fisher Funds, declined to accept the Metlifecare offer and is still in the process of assessing the merits of the Waste Management offer. Five holdings were sold during the period: Turners Auctions, Turners & Growers, Pod, Just Water International and Steel & Tube.
The Kingfish Board announced on 26 October 2005 that it would undertake an on-market buyback of up to 2.925m shares (representing 5% of the original issued capital of the company) between 1 November 2005 and 31 October 2006. At 31 March 2006, 1.580m shares had been purchased at a total cost of $1,533,000. All the shares acquired under the buyback are held as treasury stock. The decision to implement the buyback reflects the Boards belief that the Kingfish share price is too low relative to the underlying value of the assets and hence represents an attractive investment.
A warrant buyback was announced by the Board in conjunction with the share buyback to increase the flexibility and liquidity of the buyback programme. At 31 March 2006, 2.416m warrants had been acquired under the buyback at a total cost of $386,000 and subsequently cancelled. The Board continues to actively explore alternative methods to control the share price discount.
The Board has commented a number of times on the effects of the likely slowdown in the NZ economy and a fall in the NZ dollar. Fisher Funds' strategy in such times is to hone its stock selection and entrust the management teams of the companies in which it invests to navigate the more difficult economic climes. Carmel Fisher added "The Kingfish portfolio contains a hand-picked selection of NZ's best growth companies that have the following attributes which should see them continue to perform in good times and bad:
1. Point of difference in their business position (e.g Pumpkin Patch brand and format is very different to its competition); 2. Well managed and governed (e.g the foresight of Freightways' senior management over a year ago to plan strategies to offset the effects of the current business slowdown); 3. Robust, macro-impervious businesses (e.g Ryman Healthcare will continue to develop and sell new and existing retirement units regardless of whether the NZ economy is growing fast or slow); and 4. Scaleable (e.g Pumpkin Patch has the potential to be bigger in North America than their existing businesses are in total today)."
"It is important that shareholders remember that portfolio returns will more likely reflect the performance of the individual portfolio companies than the market overall. Fisher Funds has historically demonstrated a consistent capability to select companies that outperform the market." said Rob Challinor.
The Annual Report to shareholders will be sent
by 5 June 2006. Investors are encouraged to register for
regular email updates on the Kingfish Limited web site,
The Kingfish Annual Shareholders Meeting will be held at the Bruce Mason Centre, Takapuna, Auckland on Wednesday, 5 July 2006 at 10.00am.
Overview of Kingfish Limited Kingfish Limited is a listed investment company investing in small New Zealand companies. The investment portfolio is managed by Fisher Funds Management Limited, a specialist New Zealand investment manager with a track record of successfully investing in smaller company shares. Kingfish began operating in March 2004 when it received subscriptions for 58.5m shares at $1 per share. For each share issued, subscribers received one option (warrant) to subscribe for a share at $1, exercisable at the end of either March 2006, 2007 or 2008. At 4 May 2006, 55,045,714 warrants remain to be exercised on 31 March 07 and/or 31 March 2008.