The kindest tax cut of all : Te Tare no tak'e

Good news for Kiwis today and another sign of a massive change in direction for the National Government when compared to the losers of the last 9 years.

Up to 250 jobs at the Inland Revenue department will go. A very small cut by any means because the department employs more than 5000 but nevertheless a good start to the year.

What this means in real terms is that Kiwis, especially businesses, will be able to operate their lives with less interference from these sorts of people.

That clearly means more time spent on actual work rather than IRD paperwork and as a consequence of that more productivity, something New Zealand desperately needs.

This cut is a reflection of this Government's emphasis on spending less taxpayer money and extracting less of that tax from their pockets in the first place.

It is only a good thing and any criticism is mainly from those that want to see higher taxes, more state involvement and constant interference in our lives.

My only criticism is that the cut was about 1000 too low.

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c Political Animal 2009

More Moola Please!

Back on the agenda for this week is the capital raising that is sweeping NZX listed companies.

Apart from the fact that they have been carried out without the permission of shareholders and the NZX has granted them waivers to allow management to do so, there seems to be a pattern forming.

The latest capital raising to be announced was Sky City Entertainment [SKC.NZ] who came out today with an underwritten offering of 71 million shares to institutions and a further NZ$50 million or around 20 million shares in an offer to smaller shareholders like me.

The company really doesn't need the extra funding because its current debt servicing doesn't have to be re-negotiated for a number of years.

This is much like the deal offered from Fletcher Building [FBU.NZ] and Freightways Ltd [FRE.NZ] for extra capital over the last couple of weeks.

Just doing very rough figures in my head the dilutionary effect for shareholders for these 3 companies is around 15%.

What that means to me is the followng to avoid dilution of my shareholdings:

1. Fletcher Building - additional 150 shares

2. Freightways Ltd - additional 1230 shares

3. Sky City Entertainment - additional 5250 shares

What I have decided to do is the following:

1. Fletcher Building - additional 500 shares @ 5.35 per share approx

2. Freightways Ltd - additional 1800 shares @ 2.44 per share approx

3. Sky City Entertainment - maximum of 6000 shares @ 2.52 per share approx


An additional $NZ 22,000 approx that I must find. Not a problem for me and I don't have a big issue with stumping up the cash because as part owner of these businesses sometimes you extract money from them and sometimes you have to put it back in.

As I mentioned above what I do have a big issue with is the lack of consultation with shareholders like me and the NZX's collusion with company management to allow them to bypass owners rights and give institutions preferences that smaller shareholders dont get. I would have said yes to company requests (sans the institutional favouritism) for more capital but I nevertheless should be asked in the first place.

I own part of these companies after all !

It has sent me into a kind of Bruce Sheppard mode on speed but there is very little I can do except make it known here that I am an unhappy camper.

As I said back in early January capital raising is set to become popular this year and it has by no means finished yet.

Nuplex Group [NPX.NZ], Fisher & Paykel Appliances [FPA.NZ], Kiwi Income Property Trust [KIP.NZ] and a whole host of other companies have already had out the begging bowl and I fully expect to have to fork out more myself although the bulk of my extra capital allocations have already revealed themselves.

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c Share Investor 2009

Im Buying: 2009

Close watchers of mine would have noted a renewed interest in Auckland International Airport [AIA.NZ] over the last few days. I have written a couple of articles (1 2 )on Auckland's near monopoly air services provider.

My interest has culminated today by buying a small additional shareholding of 2000 shares to add to my existing 1000. Cost NZ$1.70 per share.

I have taken my eye off the ball over the last few months with other commitments and it is not until you can sit down and look at the figures that you can start to make a case to spend more money in this turbulent investing environment.

Only yesterday did I write that I felt that collectively investors had seemed to reach some kind of investing "Tipping Point" where they have got thoroughly brassed off with all the gloom and focused on the more positive aspects of business and investing.

This has certainly been the case for me today with my new purchase but lets not get carried away. I have bought at a good price for me, my original foray into AIA being at $2.15 in November 2006. With dividends and tax credits included in that initial AIA purchase my cost price comes in at $1.88 per share. Today's purchase then is 18c per share lower than it was more than 2 years ago.

That is like a sale at Bricoes!

Readers may like to be reminded that Canadian and Arab investors were last year willing to pay more than twice today's closing price for a half share in the Airport before being stopped by Government legislation.

My wandering into the market today was the first time since July 2008 when I bought Hallenstein Glasson [HLG.NZ] and Postie Plus [PPG.NZ] shares.

No extra money went into the Share Investor Portfolio today, the $3400.00 plus $30 brokerage was funded from a part of this reporting seasons dividends.

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c Share Investor 2009

Auckland Airport needs main focus on its core business

Auckland International Airport [AIA.NZ] looks like they are using a downturn in passenger numbers and therefore revenue to move away from their core business of airport services.

The downturn in passenger arrivals coincided with the release of a new strategy plan for Auckland Airport by Moutter, himself newly appointed to the job.

The previous management team had responded to the drivers of the day, which was strong and continuing passenger growth, said Moutter. But the dynamic had shifted, and there was huge uncertainty as to when that growth might return. "But if we hunker down and drop everything to the lowest cost base, then we won't be able to capitalise when growth triggers return," he said.

His new strategy concentrates far more on developing the substantial land holdings held by the company. Property, he says, is one area where the airport company had the highest hopes and greatest opportunity of surviving, and even thriving through the recession. Full Story ( Doc attachment)

Investors need to beware that when a company with a core business changes tack there can be problems with that change and all the associated financial fallout that entails-increased capital expenditure being just one of those fallout's.

Auckland Airport have done well in the past from operating an airport and that is where their business expertise principally lies.

Granted they are landlords for retail outlets that operate inside and outside their main airport buildings and revenue also comes from their large car parking facility. These areas of their business comprise 55% of their income but management need to keep in mind why those facilities are there and are successful in the first place - the foot traffic that comes from airport user and visitor foot traffic.

New Zealand listed businesses are littered with the failure of management moving outside their sphere of business experience. Recent examples include The Warehouse Group [WHS.NZ], Restaurant Brands [RBD.NZ], Telecom NZ [TEL.NZ] and Hallenstein Glasson [HLG.NZ] making moves into markets they didn't know well and their shareholders were materially affected by these poor decisions.

Don't get me wrong, you have to adapt to changing markets. Auckland Airport passenger numbers are currently falling, but this will not last and management simply cannot take their eye off the golden goose lest they be caught unaware when traffic numbers climb again.

The focus for the long term must be on planning for increases in airport facilities, for passengers, planes etc and driving demand for more airline business.

The other bolt on revenue streams, while clearly important, need to come second to the main business and driver of those other revenue streams, core airport facilities.

Disclosure I own AIA, WHS, and HLG shares

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AIA Financial Data

As at 2:16 pm, 20 Apr (20 min delay)

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c Share Investor 2009