Floating helicopters: will it fly?
By GREG NINNESS - Sunday Star TimesLast updated 05:00 06/12/2009The proposed float of Southbury Group could create a listed company with annual revenues of about $600 million.
Helicopters NZ will need 17 new machines to meet the requirements of its new contracts.
But the diverse nature of the companies involved could prove a hard sell to investors. One market source told the Sunday Star-Times: "Any institutional investor putting money in there will be taking a leap of faith."
The companies being prepared for a float – tentatively expected around February/March – are South Canterbury Finance, Scales Corporation and Helicopters NZ. ...
The article goes on to outline the situation for the three businesses mentioned.
Scales corp is profitable and growing, and there isn't talk of it needing additional capital. This is the kind of thing the market might be interested in.
Scales Corporation has diverse operations allied to the agricultural sector, mainly focussed on the export trade. It is a major grower and exporter of apples, harvesting around 220 million apples from its own orchards in the year to June. It is also a major owner and operator of coolstore facilities for both its own and other producers' products, has a pet food manufacturing business, a half share in a fruit juice plant and operates a major shipping agency.Helicopters NZ is also profitable and growing, but needs additional capital:
In the year to June it had revenue of $203.4m from which it posted a net profit before tax of $17.4m, more than double the previous year's figure of $7m.
It has revealed that in the year to June it had revenues of $96m, from which it produced an operating profit (before interest and tax) of $19m. It has been on a steep growth curve over the past five years, with turnover climbing from just $38m in 2005/06. It is picking that to more than double again by 2012 when it is hoping to hit $200m. ... To fulfil the new contracts that will underpin its expected growth, it will need to acquire 17 new helicopters, which, depending on the requirements of the particular contracts involved, could cost between $15m and $25m each. That's a total outlay of between $255m and $425m.I'm not sure what price to earnings ratios these businesses might fetch, but I'll guess 10-15 to give ($19m + $17m) * 10-15 = $360m - $540m. This should be enough to recapitalise South Canterbury Finance and clean up its balance sheet by selling the dairy farms and paying off Southbury's big loan from SCF and paying off some related party loans.
South Canterbury Finance itself, however, I think it won't be floated unless and until it has recapitalised and cleaned up its balance sheet, and has proven that it can be profitable again, and this would take at least another year. I don't think there is any market demand for South Canterbury Finance or for Southbury shares. I'm expecting more investment write downs and loan losses to be booked by South Canterbury Finance, and who wants to have a share of those?
So, Southbury won't have an IPO, instead it will try to spin off individual businesses that are in a condition to be in demand by the market.
See also http://davidhillary.blogspot.com/search/label/South%20Cantebury%20Finance
4 comments:
Having another look at the article:
'It has revealed that in the year to June it had revenues of $96m, from which it produced an operating profit (before interest and tax) of $19m.'
I wonder if this means that its profitability, after interest, was poor?
David, look into 'Durney Land Company'.
Hasting court last week. Owing contact energy $420,000 tied up with Kelt Capital and SFC. Iconic HB development company with potential huge losses on property speculation.Now involved in huge selloff of assets.
Next,yes biggest theft of stock in history. Crafar farms,the receivers lost over 1700 cows 36 truck and trailer loads. Turns out owned by Stockco, a Hastings based stock financier who apparently stole them back one night. it looks like Stockco get their money from Kelt capital and SCF. Cows value could be over $2000. Receivers are in process of getting money and cows from Stockco who may go broke.
I dont think Stockco are in the wrong, the argument is about who holds the security. AT the moment its just talk at the pub,im sure a good journalist could get to the bottom.
I think one interesting question is, if stockco purchased the cows then were did the money they paid for them go.There was a piece in one of the farming rags about the missing cows a month ago,the banks appeared to know where they had gone.
I have no confirmation that SFC or Kelt capital are involved but I find it hard to believe the major banks would be involved in this type of lending.
Durney's were in fridays HB Today apparently. SFC are still getting interest but no one else is being paid including wages.
Hi Anon, so how much do you think SCF could lose on the deal?
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