Outright asset purchases may reduce opportunity to grow
More than half of New Zealand businesses are planning to increase their asset base in the first quarter of 2017, with the vast majority purchasing equipment to increase their asset base rather than replacing existing equipment. The bullish intentions resonate with other indices for business and consumer sentiment in New Zealand, reflecting strong economic growth as the economy tracks at 3.6 per cent, one of the highest rates in the developed world.
However, the latest round of the Alleasing Equipment Demand Index (the Index) has revealed that the way businesses are choosing to fund their assets, could hinder their growth prospects, with almost one in two intending to use equity or internal cash flow to fund their acquisitions.
The Index found that 51.2 per cent of businesses intend increase their asset base this quarter. This is the first time since the Index began in August 2015 that the quarterly increase has moved above 50.0 per cent. In comparison, only 3.0 per cent of businesses reported their intent to decrease their asset base.
Of those businesses looking to increase their asset base, the average increase is 8.9 per cent, another new high. In addition, more than 70.0 per cent of the assets earmarked for acquisition this quarter are part of new investment capital expenditure.
The sample group was divided into three segments, based on annual turnover, and for the first time included ‘upper corporate’ businesses with turnover in the $100 million to $250 million band.
This segment proved to be the most bullish, with 56.9 per cent planning an asset base increase, closely followed by 55.2 per cent of SME’s ($5-20m annual turnover). This leaves lower corporates ($20-100 million) at a significantly lower 41.5 per cent planning an increase.
While businesses are planning acquisitions, the biggest source of funds is internal, with 46.8 per cent saying they will use equity or internal cash flow to fund the purchases.
Commenting on these results, Alleasing Chief Executive Officer, Daniel Blizzard, said: “While this shows that New Zealand businesses are self-reliant, it also reveals significant potential for further growth if these businesses opt to fund their assets another way.
“Our research has found that one in five businesses are suffering from capital constraints, which are inhibiting their ability to expand. Nearly half of these businesses would like to achieve growth through M&A, but a lack of access to capital is frustrating their plans.
“The Index shows that while confidence is strong, major opportunities are being missed because businesses aren’t able to access sufficient capital. This could be a result of banks becoming cautious of how many loans they grant prior to the upcoming implementation of Basel III. If businesses want to grow and remain profitable, they will need to find alternative capital sources instead of relying on outright purchases.”
Leveraging an alternative capital source has the potential to release significant funds for cash flow or business investment. Index data reveals that 16.0 per cent of the asset base of New Zealand businesses is leased or financed. Based on recent data from Statistics New Zealand, this equates to businesses owning assets worth more than two times the value of the nation’s GDP. That is nearly $1.8 trillion of assets, of which, $992 billion are financial assets owned by the finance and insurance sector (i.e. rented or leased). This suggests that businesses across the country hold just over $800 billion in non-financial assets*.
Applying the result from the Alleasing Index, 16.0 per cent of this is leased or financed, leaving a balance of $672 billion in owned assets, compared with national GDP of $255 billion.
“Not all of these assets could be leased or re-financed, but it is clear that adjusting even a small percentage could have a significant impact. By releasing these funds back into a business the capital constraints that are inhibiting growth may be overcome,” says Alleasing’s Daniel Blizzard.
*Non-financial assets are classified as machinery, equipment, transport vehicles, non-residential buildings, marketing assets etc. as stated by Statistics New Zealand.
Download your copy of the New Zealand Equipment Demand Index.
| An Alleasing release | february 16, 2017 ||
Australia’s leading commercial tapware supplier Galvin Engineering has been appointed as the exclusive distributor for UK brand Wallgate in the Australasian region. This distributorship will enable Galvin to sell and service an innovative range of Wallgate products to customers throughout Australia, New Zealand, Papua New Guinea, and the South Pacific Islands.
Headquartered in the UK with distributors across Europe, Northern America, Asia and South Africa, Wallgate specialises in the design and manufacture of robust, innovative and efficient washroom systems and sanitaryware solutions. Their product range includes highly durable sanitaryware designed to normalise the washroom environment, and intelligent water management systems offering significant water and energy savings, and ensuring comprehensive water control.
Wallgate is an established market leader in the secure sectors of mental health and custodial facilities. The addition of Wallgate products to the Galvin Specialised range aligns perfectly with Galvin’s vision of providing products that will ensure better health and safer communities.
A third generation family business established in 1947, Galvin Engineering is highly regarded as a reliable manufacturer, designer and distributor of commercial tapware and related products for the hospital, aged care, correctional, education and food service markets.
| A Wallgate release | February 16, 2017 ||
Mondelez International, the US company that returned US$1.1 billion to shareholders last year, is to close its Cadbury factory at the end of 2018, moving production to Australia and eliminating 350 jobs to cut costs.
The decision will end more than 80 years of production in Dunedin, where the Cadbury factory is a popular tourist attraction and can send the aroma of chocolate wafting over nearby suburbs. The first redundancies would be made before the end of this year, with about 100 people kept on in the business until early 2018, it said.
Mondelez vice president for Australia, New Zealand and Japan Amanda Banfield said the company was "focused on becoming globally cost-competitive through increased production and investment in larger sites while reducing costs, which allows us to fuel the growth in our brands".
She said the factory's distance from its main market of Australia, "low volume and complex product portfolio, make it an expensive place to manufacture our products". The Dunedin factory exports 70 percent of production, mainly to Australia.
Cadbury has lost supermarket shelf space in New Zealand to local brands including J.H. Whittaker & Sons, the nation's second-largest chocolate brand behind Cadbury. It has also battled to retain consumer loyalty after missteps including replacing some of the cocoa butter in its bars with palm oil, a move it reversed after complaints about the taste and the source of the oil.
Nasdaq-listed Mondelez reported global sales US$25.9 billion in 2016, a year in which it returned US$800 million to shareholders by repurchasing stock and paid about US$300 million in cash dividends. It has forecast organic net revenue growth of 1 percent for 2017 after a 0.6 percent gain in 2016. Net earnings last year fell 77 percent to US$1.66 billion.
Mondelez shares last traded at US$45.37 and have gained about 16 percent in the past 12 months.
The company said it was considering making an investment in 'Cadbury World' in Dunedin and about the future use of the factory site. A final decision on a proposed redevelopment would be made by April, it said in a statement.
Green Party co-leader Metiria Turei, a Dunedin resident, sought to make election-year capital out of the announcement, saying the Cadbury factory "has survived major economic ups and downs for more than a hundred years, but it hasn’t been able to survive a National government’s inaction on manufacturing".
“If elected to government in September, we will establish a Minister for Manufacturing in Cabinet, to better represent the interests of manufacturers and ensure they thrive," she said, calling the closure "a tragedy for Dunedin".
Local Labour MPs David Clark and Clare Curran said the closure was "a devastating blow for Dunedin".
Chinese companies started talking a decade ago about cracking the U.S. auto market with an array of low-cost passenger vehicles. That hasn’t happened, so instead they’re getting under the hoods of American cars by buying up parts makers at a record pace writes Bruce Einhorn for Industry Week.
Ningbo Joyson Electronic Corp. supplies windshield-washer and ventilation systems to some of the world’s biggest carmakers, including Ford Motor Co., General Motors Co. and Volkswagen AG. Last year, it spent more than $1 billion buying a Michigan maker of air bags and an Indiana manufacturer of assembly-line equipment.
Now, it’s on track for potentially the biggest deal yet -- using a subsidiary to bid for beleaguered air-bag maker Takata Corp. (IW 1000/616) and further entrench itself in chassis sold to U.S. drivers. The deal would continue an aggressive strategy that put Ningbo Joyson at the forefront of a record $1.6 billion in investments in U.S. companies by Chinese parts makers last year seeking global supply-chain access to compensate for a maturing home market.
> > > Continue to full article
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After three years of developing a brand new rocket, aerospace startup Rocket Lab has finally transported a finished vehicle to the New Zealand launch pad where it will take its first flight. The rocket, called the Electron, has been tested on the ground over the last year but has never been flown to space before. Over the next couple of months, Rocket Lab will conduct a series of test launches of the vehicle to verify that it’s ready to carry payloads into orbit for commercial customers.
Compared to other major commercial rockets like the Falcon 9 or the Atlas V, the Electron is pretty small — only 55 feet tall and and around 4 feet in diameter. That’s because the vehicle is specifically designed to launch small satellites. The vehicle can carry payloads ranging from 330 to 500 pounds into an orbit more than 300 miles up. That’s a relatively light lift contrasted with the Falcon 9, which can carry more than 50,000 pounds into lower Earth orbit.
But Rocket Lab isn’t interested in competing with major players like SpaceX or the United Launch Alliance. The company wants to capitalize solely on what is being hailed as the small satellite revolution — a trend of making space probes as tiny as possible. Typically, aerospace manufacturers will spend years and millions of dollars developing a satellite that’s roughly the size of a bus. And then an entire rocket is needed just to get one thousand-pound satellite into space. But technology has advanced in recent years, and companies have come up with ways to miniaturize their satellites, making these space probes as small as a shoebox. Small satellites usually take less time and money to make, and since they’re so compact, multiple probes can be launched to space on a single rocket.
> > > Continue to read full article | February 16, 2017 ||
Honey, Meat, Fish and Fresh Fruit Among the Cargoes Carried
Since American Airlines Cargo launched a new service between Los Angeles (LAX) and the New Zealand city of Auckland (AKL) in mid-2016, the carrier has seen consistent, rapid expansion—a developing story perfectly illustrated by the short notice shipment of a world renowned honey.
Manuka honey, lauded for its healing properties, is produced in New Zealand by bees that pollinate the native manuka plant. The transport of this honey, which is used in the treatment of a number of illnesses from sore throats to digestive problems, requires delicate handling.
Usually the honey is moved by ocean freight, but recently, on short notice, American was called upon to carry the honey for the first time; a 19,000-pound shipment from AKL to LAX and then on to London Heathrow (LHR)—and did so swiftly and smoothly in order to meet deadlines for a contract in the UK.
Lamb shipments from AKL have also exceeded expectations since the launch of this route, providing a level of confidence that has resulted in additional high-volume lamb shipments for the approaching Easter holiday.
“Customers across New Zealand are benefiting from the tremendous scope of American’s global network,” said Carolyn Evans, country manager for GSA Cargo—the airline’s global sales agent in Australasia. “Conversely, the onwards connections from the Los Angeles gateway to both Europe and South America are proving particularly popular because of the number of industries that need to airfreight goods out of New Zealand. Today, more than 50 percent of what we export is bound for destinations beyond Los Angeles.”
Typical LAX-AKL flights now contain both general freight and perishable cargo with items such as medical equipment, locks, and printed matter, alongside the more traditional meat, fish and fresh fruit products for which New Zealand has long been associated.
“We are currently gearing up for another big fruit and flower season in 2017,” added Evans, who noted that recent bad weather including snow on the south island has impacted exports, which have delayed the season slightly. “Sub-tropicals, like passion fruit, will soon be coming on stream—and in the meantime, we are busy with wine, shoes, wool products and band equipment.”
American provides a daily, direct flight from New Zealand to LAX with its new Boeing 787 aircraft, offering connections beyond the U.S. to China, Japan, London, and Sao Paulo.
Pegasystems is expanding and raising its presence in the New Zealand market in a move it says is designed to grow business in the country with its customer engagement software.
Pega managing director in Australia and New Zealand, Scott Leader, says entry into the New Zealand market will enable it to provide local businesses with greater access to its software ”to drive excellence in their sales, marketing, customer service and operations”.
Pega’s Wellington office will be headed by David Hill, who is leading the company’s expansion into New Zealand.
“New Zealand has long been a key market for us within the APAC region. As local businesses and government agencies continue to go through their digital transformation journeys and digitise their workloads, they are demanding world-leading CRM and Case Management platforms,” Leader says.
“Businesses today need access to data and insights to better manage processes and enable a higher quality of service.
“By opening our Wellington office, we can further meet the growing demand from New Zealand government agencies and organisations looking to improve their citizen and customer journeys. We are very excited for this next step for Pega and are looking forward to the opportunities ahead.”
Leader says Pega’s applications provide businesses with adaptable and intelligent customer engagement software “so that they can optimise any journey their customer chooses in real-time by presenting the right information across any channel”.
A group from the University of Auckland’s Centre for Supply Chain Management, including Lynn who is editor of the FTD magazine, were invited to find out.
The Devonport Naval Base – HMNZS Philomel – is the home of the Royal New Zealand Navy (RNZN), where it hosts training and support services for all its ships and personnel, including engineering facilities. The Naval Supply Depot is also located at the base which houses the Supply Chain Group to support the material requirements for ship operations.Students past and present of the University of Auckland’s Centre for Supply Chain Management enjoyed a tour of the Royal NZ Navy Supply Depot late last year
Commander Julie Simpkins took over the role of logistics and supply chain manager in August last year following a diverse career in the RNZN dating back to 1989, including land and sea experience plus several overseas postings. She says the role of logistics within the RNZN is to ‘deliver today, shape tomorrow’.
> > > Continue to read Lynne's article here
Leading New Zealand civil engineering and resource company, Fulton Hogan, has been recognised with a major international award for innovation.Fulton Hogan picked up the Premier Award in the Innovation Achiever’s Award category as part of the UK based Chartered Institute of Building (CIOB) International Innovation and Research Awards, announced in London earlier this week.
Fulton Hogan, New Zealand Chief Executive Robert Jones, says the company is delighted with the award.
“We are proud to receive this external recognition for our overall programme to encourage and develop innovative ideas from our 6,000 strong workforce, whether it’s from the workers on the front-line or from one of our back office teams,” Mr Jones says.
Chloe Smith, Fulton Hogan’s National Innovation Manager says the company’s innovation programme has a strong industry grounding backed by more technical research where required.
“Our industry base means we’re identifying opportunities and investing in improvements suggested by our teams who are out there ‘doing it’. With the innovation grounded in the reality at the frontline, we get strong early evidence if the innovation is going to make a difference and can be applied elsewhere to improve best practice business-wide,” Ms Smith says.
“This award acknowledges the value of having an open forum for the collection and development of innovative ideas from our staff across all levels of the organisation. This year our focus will be on opening this to our customers to allow us to work on solving their problems,” she says.
Fulton Hogan faced up against teams from as far afield as Hong Kong and Malaysia to pick up the award.
The innovation programme has already contributed to gains in the areas of safety, productivity, sustainability and quality control.
For example, to help improve skid resistance on roads, Fulton Hogan developed a recycled water cutter waste system which increases job quality and safety, boosts sustainability and dramatically reduce costs.
| A FultonHogan release | February 15, 2017
Palace of the Alhambra, Spain
By: Charles Nathaniel Worsley (1862-1923)
From the collection of Sir Heaton Rhodes
Oil on canvas - 118cm x 162cm
Valued $12,000 - $18,000
Offers invited over $9,000
Contact: Henry Newrick – (+64 ) 27 471 2242
Mount Egmont with Lake
By: John Philemon Backhouse (1845-1908)
Oil on Sea Shell - 13cm x 14cm
Valued $2,000-$3,000
Offers invited over $1,500
Contact: Henry Newrick – (+64 ) 27 471 2242