Long Term View: AMP Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO.

The calculation of returns includes dividends and tax credits.

Lets have a look at AMP Ltd [AMP.NZ] this time. AMP hasn't done well at all since its 1998 listing. With NZ$2.75 in net dividends paid (see chart above) and another 33% of that figure gained for those eligible for associated tax credits, makes an approx minus 50% return (see chart below for the share price percentage gain against the average of all NZX indexes) over the 12 year listing which gives an approx annual net return of minus 4.16%.

This is approx 150% worse than the return from the average of all NZX indexes.

Long Term View Series

Auckland International Airport
Air New Zealand
AMP Ltd
Briscoe Group Ltd
Contact Energy Ltd
Delegats Group Ltd
EBOS Group Ltd
Fletcher Building Ltd
Fisher & Paykel Appliances
Fisher & Paykel Healthcare
Freightways Ltd
Goodman Fielder Ltd
Hellaby Holdings Ltd
Mainfreight Ltd
Metlifecare Ltd
New Zealand Refining Ltd
Port Of Tauranga Ltd
Pumpkin Patch Ltd
Restaurant Brands Ltd
Ryman Healthcare Ltd
Sanford Ltd
Sky City Entertainment Group Ltd
Sky Network Television Ltd
Telecom NZ Ltd
Telstra Corp Ltd
The Warehouse Group Ltd


AMP @ Share Investor

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The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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c Share Investor 2010

Michael Hill International: 2010 half year profit commentary

The 2010 half year profit for Micheal Hill International [MHI.NZ] out yesterday was a tale with two stories to tell - encouraging and disappointing.

Summary of Key Points

- Underlying profit up more than 65% from $12.7 million to $22.2 million.

- Operating revenue of $244.864m up 7.9% on last year

- Same store sales up 4.5% on last year

- Earnings before interest and tax (EBIT) of $30.329m up 42.3% on last year

- Net profit before tax of $27.542m up 53.9% on last year

- Net profit after tax of $22.299m

- 5 new stores opened during the six months and 2 closed

- Total of 242 stores open at 31 December 2009

- Interim dividend of 1.5 cents per share up from 1.0 cent last year

- NZ stores struggling

- North American stores biting into bottomline

First the disappointing stuff

US stores have tripled their losses to just under US$ 3 million from last year and as I said in my 2009 full year commentary the retail environment in the US isn't going to recover any time soon and it is likely the company will be in for substantial losses. I think there is more bad news to come over the 2010 year on that front.

Michael Hill has said himself that the timing of the US purchase was a mistake (listen to Michael Hill interview - You need to register first) but as he has also said he has always wanted a foothold there, he has it now and holds a long-term view on its future success, as do I but I think it is going to be alot tougher than initially thought.

Michael Hill's Canadian stores have also dropped further back into a small loss on same store sales down by 5%. After adding 3 stores over the last 6 months this division still struggles to make a net profit. Like its cousin further south it continues to drag on the overall results of the company.

New Zealand operations were improved significantly in terms of overall and same store sales but the kicker is that the all important margins were down. Not surprising in this retail environment.

The Encouranging

Underlying profit is up more than 65% from $12.7 million to $22.2 million. Something you cant find on the release but a tax gain of $53 million hides the bottomline.

Australian Michael Hill stores were largely immune from the retail downturn with both an increase in revenue and before tax profit. Margins were very slightly down but Australian stores still defy the downturn of company stores in other geographical areas of operation.

This good news could be coming to and end soon as taxpayer handouts have come to an end (for this time anyway) and much of this welfare money went on spending up large in the retail sector.

Many NZX listed companies have managed their capital well during the credit squeeze and Micheal Hill has been exceptional in this case. Overall company debt is down slightly but an indication that money is being tightly managed is that payables have moved up 36%. Many companies have moved out paying day to day company bills to better manage cashflow during the recession.

The 2009 year was one of the worst years in business for MHI over the last generation. Most of the indicators have been bad and things seem to look more promising but nonetheless a little patchy in 2010, Australia has continued to be an exceptional standout.

MHI management don't make predictions for the future but they do stress things will be tough over the 2010 financial year (well duh!) I will make a prediction though. Life is going to be just as tough this year and their North American stores are going to continue to bleed red ink until consumers decide that this company becomes part of their shopping horizon. A longer time horizon than I at first thought. 5 years plus, rather than the 2-3 that I thought.

My extra shares picked up last year for just this long term play are therefore going to have to wait to appreciate.



MHI shares finished even at NZ$.69c on the news yesterday.


9 .5 for effort, 9 for results.

Disclosure I own Michael Hill International shares in the Share Investor Portfolio.


Michael Hill International @ Share Investor

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Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010

McDonalds: Im Lovin' It!

McDonalds has always been a target for the whakos and lefties in New Zealand for being one of those "evil, greedy" American companies that want to take over our culture, exploit workers. make us all fat buggers and give nothing back to the country but this piece in the New Zealand Herald out today proves that this is wrong on all counts:

McDonald's spent more than $145 million buying goods from local suppliers in 2009 - up $25 million on the year before, mostly due to increased sales.

He said McDonald's had been seeing strong growth in New Zealand in the two years prior to the financial crises, and the company used that time to improve its brand.

Much of the growth came from McDonald's new restaurants - 10 of which were opened last year as part of the company's three-year capital investment programme that will see $300 million invested, Hawthorne said.

He said the company was on track to open 10 new restaurants this year, the first being in Richmond, Nelson, next week.

He said McDonald's had spent the three years prior to the recession struggling to find enough workers, but those employment issues had faded with the downturn.

The company is expanding in a time of high unemployment, it currently directly employs more than 5000 people and indirectly through its suppliers many thousands more and has a distinctive New Zealand culture in its Kiwi businesses.

For franchise owners it also provides a long term opportunity to make some serious money from a good honest community minded business and for workers to have the ability to move from flipping burgers to owning an outlet.

The fast food industry fosters young people and can motivate the right people to better themselves, within and outside the sector.

I don't eat there myself, too expensive and unappealing to me, but the fact that they have 150 outlets and serve over 1 million meals every week means a large numer of New Zealanders love the place.

I love it too for all the positive reasons outlined above.


Recent Share Investor Reading

• Michael Hill International: 2010 half year profit commentary
  
• Long Term View: Air New Zealand Ltd
• Sky City Entertainment: CEO Nigel Morrison discusses 2010 half year
  
• Sky City Entertainment Group 2010 Interim Profit Review
• Freightways Ltd: 2010 Half Year profit commentary
• Long Term View: Auckland International Airport Ltd

Fast Food in New Zealand

Mcdonalds.co.nz
KFC.co.nz
Pizzahut.co.nz
Burgerking.co.nz
Subway.co.nz
Burgerfuel.co.nz

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c Share Investor 2010