Retirement Specialist Tops List
Retirement Specialist Tops List of New Zealand’s Value Creators
A new report from BCG highlights New Zealand’s top performers and suggests companies “invest against the tide” to maintain profitable growth in the face of economic downturn
Auckland, July 2 - Retirement village provider Ryman Healthcare is New Zealand’s fastest value creator, according to the latest Value Creators Report released today by The Boston Consulting Group (BCG).
The new report “Investing Against the Tide”, looks at New Zealand’s 15 largest companies over the last five years.
The report reveals New Zealand companies achieved an average annual Total Shareholder Return (TSR) of 16 percent in the five years to the end of 2007.
Companies such as New Zealand Refining, TrustPower, Fletcher Building and Infratil contributed to this notable result, each delivering over 30 percent per annum to shareholders.
However, the standout performer was Ryman Healthcare, who delivered an impressive TSR of 49 percent over the same time period.
Due to such performances, the NZX All outperformed three major regional indices – S&P (Eur) 350, Japan (Topix) and the S&P 500 – who returned 15 percent, 13 percent and 13 percent TSR respectively.
While Ryman started from a small base five years ago, it now boasts a market capitalisation of over $1 billion.
However, starting from a small base meant that Ryman did not manage to collect the prize for New Zealand’s greatest value creator.
This went to Fletcher Building, who has been named New Zealand’s biggest value creator for the second year in a row in the BCG report.
Fletcher Building created $4.9 billion of value for its shareholders in the five years to the end of 2007, while Telecom came in at second place, returning $4.4 billion to its shareholders.
To put these figures in perspective, BCG compared New Zealand’s top companies’ performance with their Australian industry peers.
More than half of New Zealand’s largest 15 companies outperformed their Australian industry peers.
TrustPower put in the most impressive performance with a relative TSR of 33 percent, compared to Australian Telco/Utility players.
Infratil, Ryman Healthcare, Fletcher Building and Contact Energy also managed relative TSRs of greater than ten per cent compared to their peers in Australia.
David Tapper, Partner and Managing Director of BCG’s Auckland office and co-author of the report, said that achieving profitable growth was the key driver of TSR performance.
He noted that while the first four months of 2008 have seen all major indices fall, companies that were well prepared could maintain profitable growth over the long term by maintaining a healthy cash flow and using this to “invest against the tide”.
“Experience shows that companies who reinvest cash in the face of a downturn tend to outperform those who return cash to shareholders or use it to repay debt.”
The leader of BCG’s Strategy practice in Australia and NZ and report co-author, James Goth, said New Zealand companies needed to take a balanced view of the risks and opportunities that a potential downturn would bring.
At times like this, he said, New Zealand managers should be preparing well-structured contingency plans, including health checks that encompass a variety of downturn scenarios.
“Once they have bullet-proofed their cash flows against downturn scenarios, they should also consider the benefits of investing against the tide, both organically – through sales and marketing, R&D, production, logistics and people – and inorganically through M&A.”
Nicholas Glenning, who leads BCG’s Corporate Development practice in Australia and NZ and also co-authored the report, pointed out that in the past, companies that planned effectively for a downturn found themselves in a position to increase market share and attract the best talent at a time when competitors were reducing head-count and delaying investments.
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