Bruce Sheppard: Of councils and airports

Bruce Sheppard gives (AIA) shareholders the details and lowdown about the coming vote to sell 40% of AIA to the Canadians.

It is essential reading for shareholders


Bruce Sheppard in Stirring the Pot | 6:00 am 20 February 20o8

The Canadian pension fund has made a bid for 40 per cent of the outstanding shares in

Auckland International Airport at a price of $3.65 for each share acquired. The current price is approximately $1 less than the offer price.

The total number of shares outstanding is 1991 million, which means that the Canadians seek to buy 796.4k. The total premium amounts to $796 million and will be shared among those shareholders who fill the second form in to accept on pro rata basis.

The Auckland and Manukau city councils have each said that they intend to vote “no” on the first form, which is their prerogative. While they have not explained their rational for this, and nor are they obliged to, it is clear that the decision to vote “no” is in response to public opinion. Given it is the voting public that elect them, this is no surprise and understandable.

This vote requires 50 per cent of those who vote to choose “yes” in order to pass. Should the vote go “yes” the Canadians will succeed in achieving 40 per cent ownership and those who accept will share in the premium. If the vote is lost, then all those who accepted the offer do not sell any of their shares to the Canadians and will retain all shares they currently hold.

It is clear both domestic and foreign institutional investors and hedge funds will vote “yes”. This to is unsurprising as such funds are measured on quarterly performance and thus in the main are short-term focused and opportunistic. These funds more than balance the council shareholdings. Thus small shareholders will have to vote strongly “no” for the resolution to be lost. Small shareholders are traditionally a bit of a lottery and the institutions are hoping for a small turnout on the vote.

So the first and only choice in this matter is how to vote on the poll, the second choice is not a choice at all, if you are rational.

Small shareholders should all exercise their right to vote. If they don’t want the airport sold and they do not want to sell either, then they must vote “no”. If they want to get somewhere north of 40 per cent of their shares bought at $3.65 and bag their share of the premium, they should vote “yes”.

I have now discussed this bid with both the board of AIA and the Canadians directly.

I will outline the value add as the Canadians express it:

1. The Canadians propose an amalgamation post this transaction merging the takeover vehicle with AIA. This will create subscribed capital, which can then be returned to all shareholders tax free, this redemption being funded with debt. They say, therefore, that the after tax cash flows on your remaining 60 per cent will be about equal to what you were getting on your original 100 per cent. This requires shareholder, board and Inland Revenue approval. Opinion is divided on whether the IRD will approve it.

2. The second biggie is that they will increase the board firepower and give AIA access to overseas business that can increase the route traffic. They will do this by infomercial marketing using their network of other investments.

3. They will change the airport’s focus from a focus on travellers as its customer to a focus on schmoozing airlines. Music to Air New Zealand’s ears. On this they do have a point. AIA gets much of its income from airlines and it is airlines that need to be wooed to increase AIA traffic.

4. They will focus management on improving the business of AIA.

5. Now interestingly here is the contradiction. While they have some criticism of AIA management, some justified, they respect them sufficiently that they think they can lever the management into managing other peoples airports, an interesting contradiction.

Now to local body politician stupidity. Between Auckland and Manukau their share of the control premium is approximately $200 million. They have publicly stated that they will both vote no and not accept. The net effect of this is that they are transferring this sum of money to the shareholders who accept, the majority of which will go to foreign institutions and hedge funds. How dumb is that! Because the balance of the sales will be made up from those who do want to sell, the control premium will be paid to those sellers only.

Ratepayers in Auckland and Manukau should be deeply concerned that their elected officials are going to transfer money from them to foreigners, never to be recovered.

If they do not wake up to this, remember their stupidity when you face your next rates hike and vote them out. In the meantime write to them to counter balance the “public opinion” that they think they are adhering too.

The New Zealand Shareholders’ Association is not an investment advisor but I am authorised to say categorically that regardless of how you vote on the resolution whether or not to sell 40 per cent, all shareholders should accept the bid. It is simply crazy to transfer your share of the premium to those who do accept. If you vote “no 40 per cent sale” and win on that vote, there are no sales to anyone. If you lose that vote and the Canadians are successful, your chance of extracting a subsequent control premium is so close to nil that you can discount it entirely.

In summary, the issues for shareholders to consider before they vote are these:

First , in relation to the 40 per cent sale issue:-

* If I sell and get cash, what will the remainder of my shares be worth and how many will I get sold?

* If I take cash, I then have to reinvest it, (reinvestment risk) and what are my chances of finding a recession proof investment such as AIA?

* If I only get 40 per cent of my shares sold, I am only getting a control premium of 40 cents on current prices, or the equivalent of about $3 per share. This is below the independent advisors valuation range, so am I getting full value?

* Can the Canadians add enough value to AIA to make the deal worthwhile, i.e. can they improve the price of my remaining shares?

Secondly, in relation to the offer to sell your own shares if the first vote is successful:

REGARDLESS OF HOW YOU VOTE THE FIRST ISSUE, THE RATIONAL RESPONSE IS TO ACCEPT THAT (CONDITIONAL) BID.

Disclosure: I own AIA shares


AIA takeover calendar

Early March: Auckland City Council votes on its response to CPPIB offer
March 6: Deadline for Auckland airport board to review its objection
March 13: CPPIB offer deadline for shareholders


Related Share Investor reading

Softening opposition to CPPIB bid
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Links c Share Investor 2008

Pumpkin Patch a screaming buy

I'm going to do something I have never done before and recommend a stock to buy. I own shares in Pumpkin Patch Ltd [PPL.NZ] and the share price is at near the IPO price when it listed a few years back. It finished down 9c at NZ$1.83 today after reporting a near 23% fall in 2008 first half profit.

The fundamentals of the share price have changed, putting this company into the realms of an income stock whereas before Mr Market priced it as a growth stock-it had reached the dizzy heights of close to 5 bucks last year.

In my opinion though little fundamental has changed to the business itself during its market re-rating.

While profit was down 22.3% to just over $12 million, revenue was up soundly by 13.5% to $205 million, indicating that sales growth is on track and the appetite for the Pumpkin Patch brand is strong.

Clearly costs and a strong NZ dollar have bitten into profit.

As I have said before though, there is nothing the company can do about the exchange rate and many of the increased costs are those associated with growing a company in new markets. All relevant to the business and no surprise to retailers, people who own businesses and those in the market who don't focus on unnecessary hyperbole related to a short term view of the sharemarket.

I love the brand, the management and believe that their growing pains are just that.

Operations in the USA and UK are having a toughish time of things, but all retailers there are. They are still growing revenue, admittedly from a smallish base and once the one-off establishment costs are kicked touch, things should start to focus more tightly on the all important margins.

Managements forward outlook for the coming year is muted but a focus on increasing profitability at the large numbers of new stores they opened in 2007 is a good idea considering the short-term downturn in the retail sectors of their two biggest growing markets, the USA and UK.

I have no idea if $1.83 is the bottom share price wise, probably not, but it would surely find some resistance at the $1.25 IPO price, where brokers, who were extremely bullish on the company less than 4 years ago(and now seem they wouldn't touch it with 3 barge poles) might decide that is a good price to re purchase the stock they sold when the company hit a speed bump.

I recommend this stock as a very strong buy at these current prices if you have an investment horizon of 5 years or longer.

If it is less than that, forget it.


Disc I own PPL shares in the Share Investor Portfolio.


Pumpkin Patch @ Share Investor

Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum



c Share Investor 2008

The Owen Glenn story: Singing the same tune but hitting a bum note

The revelations over Owen Glenn and his murky donations to the Labour Party before and after the 2005 election have taken another turn today.

All sides are now saying what was reported in an interview with Glenn last week was a misunderstanding, taken out of context and statements made by Glenn, such as the assertion he made and was very clear about, that he was offered the post of Minister of Transport in a Labour Government by Helen Clark were light hearted comments misunderstood by the journalist.

Clark initially denied any such offer had been made when the proverbial hit the fan last Friday commenting that "...it didn't happen" but yesterday was reported as saying:

"... could not remember discussing the issue with Glenn, but if it had come up, it would not have been a serious conversation".

Typical Helen Clark backtrack stuff.

Followed by Glenn's statement to the Media:

"I was not offered a Cabinet position. My comments on this matter were light-hearted and have been taken out of context," he said.

"It is unfortunate that some comments I made to a journalist last week have been taken out of context and are now being used as a political football".

The blanket agreement now over what really happened seems a little too convenient for this reader.

As to the murkiness over the secret "loan" of $100,000.00 made after the 2005 election the fact that Labour kept it secret seems more than a little disingenuous when the money was gifted during the heady days of the electoral finance bill debate, where the contention by Labour was that political funding "should be transparent" and political parties must be upfront about just who is funding them.

Clearly this didn't apply to themselves.

So far this major controversy hasn't hit the mainstream media, The Herald, their competition and the blogs have picked it up but the TV networks have done their best to avoid it like the plague.

The media saturation over the secrecy of the Brethren donations in 2005 stands in stark contrast.

Parliament sits today Listen to Parliament (only during sitting, Tues-Thurs, 2.00pm , NZ time) and National must seize on this with both hands and take it to Labour.

We have a Government steeped in a very murky funding issue and their assertions over the Electoral Finance Act, that" funding must be transparent" must be given closer scrutiny.


Related Political Animal reading

Labour Party Election funding murky at best


C Political Animal 2008

Softening opposition to Canadian Pension Plan bid for Auckland Airport

The long winded takeover saga that is Auckland International Airport [AIA.NZ] coming up to one year in July, rolls on with a further possible development revealed today.

The Battle for the Airport

• Council won't sell its shares to Canadians
• Canadians confident of airport stake after mystery bidder pulls out

Links courtesy of NZ Herald


AIA takeover calendar

Early March: Auckland City Council votes on its response to CPPIB offer
March 6: Deadline for Auckland airport board to review its objection
March 13: CPPIB offer deadline for shareholders



According to the AIA board:

"The market has changed significantly since December so we have an obligation to review our recommendation. The board considers that it has a responsibility to whether the reconfirm its recommendation or otherwise."

Its only a suggestion that the board will take into account negative "market conditions" but it is curious to me why the board would waiver on their previous uncompromising stance that they wouldn't support a bid by the Canadian Pension Plan Investment Board(CPPIB) for an almost 40% share of the Airport company.

It seems short sighted, to say the least that the AIA board might backtrack on previous statements around the long-term value of the company and now even consider lightly the short term vagaries of global markets.

That idea should be dismissed forthwith and any recommendation to sell or hold should be made by shareholders in the company as to whether they would want to part with this asset.

Both Auckland and Manukau City Councils have said they wouldnt sell their shares but Auckland remains open to supporting the partial takeover on which they will vote on soon.

The outcome still remains up in the air but institutions must be pressuring the likes of the Councils to approve a partial takeover given their partiality to cut and run and take short term profits.

I will stick my neck out and pick it will fail, because the deal seems too complex and local council political egos are involved. Much like the failed merger of Port of Tauranga(POT) and Port of Auckland last year.

We can but wait.


Disclosure: I own AIA shares


Auckland International Airport @ Share Investor

Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?


Related Links

AIA Financial Data

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities

Related Amazon Reading



Mergers, Acquisitions, and Corporate Restructurings by Patrick A. Gaughan
Buy new: $47.25 / Used from: $41.94
Usually ships in 24 hours


c Share Investor 2008

The Joneses Real Estate business fails to keep up with market conditions

The prospect of the only float this year, so far, to kick off, certainly piqued my interest and following in The Joneses, a cut price, flat rate real estate agent that planned a back door listing on the NZAX early this year.

c Fox Corp 2007

According to the Real Estate Institute, The Joneses real estate business model
was flawed and it led the their liquidation. The business case is no Bart Simpson
fly by night though, the Joneses simply undercapitalised and were unable to function
in the current property and stockmarket downturn.

Its business model differed from the run of the mill Real Estate agents like Barfoot and Thompson, Century 21 and Harcourts, who all charge much larger selling fees on a sliding scale, tapering off as the price they might get for your house gets higher-no incentive here to get a better price for the seller.

Unfortunately the Joneses were not able to keep up with the market uncertainties surrounding them.

In the face of a marked and welcome (in my opinion) downturn in Real estate sales and property prices the IPO was bound to have “done a Burger Fuel” and tanked because the appetite for real estate and sharemarkets in combination was a recipe for disaster.

Joneses management say the business model was sound and I would agree with that. Their problem was that they needed volume of sales for this business model (just like most businesses) and their cash flows simply ran out before they reached critical mass.

The Real Estate Institute came out today and trumpeted their old fashioned model as the only one that could be a success and clearly they were rubbing hands together as their competition bit the dust but they shouldn’t be too quick to dismiss the likes of other cut-price real estate companies that operate successfully.

This sector works well overseas and here but is expensive initially to set up.

Increasingly these days, individuals have become savvier when selling property. Negotiating fees with the full price brokers and as the internet and businesses associated with the net matured, to allow that media to process house and property sales, websites like Trademe have taken business off the big boys.

Contrary to popular belief the best person to sell your property is you. You know better than anyone else, you know your suburb like the back of your hand and the incentive really is there for you to get the best price.

It is human nature for us to be lazy and that is where these Real Estate agents see the gap and try to fill it. We “just don’t have the time”, or “we don’t have the expertise” to sell our house, quite frankly that is bullshit. It ain’t hard.

The laziness also extends to the agents, their “incentive” to get you a better price just isn’t there. When their fee slides downwards as the sale price of your house goes up then one can see they just aren’t living in the real world or working for you or the buyer. They are in it for themselves.

How much extra time do you have to spend at work to pay the $15,000.00 or more these companies charge?

But I digress.

Given better market conditions the Joneses IPO would have been a success. As with most things financial, timing can be 80% of your success. The Joneses management were just not able to time the market to make this thing a goer.

Having said that, clearly the capital to help make this business float wasn’t there from the beginning and the IPO would have allowed them cash to develop the company in a sustainable way.

It would have been wise for Joneses management to have got extra capital from the get go, make the business profitable for a number of years, then list.

The stockmarket is better off without the likes of the Joneses in its present guise and one can see a return of such a company to the market when financial stability returns to the global equities and the real estate sectors.

Related Share Investor reading

Can the Joneses keep up with the market?
IPO quality indicative of poor economy


New From Fishpond.co.nz







c Share Investor 2008

Restaurant Brand's Pizza Hut faces further increase in competition

A very interesting article in the New Zealand Herald yesterday(see below my preamble) about the cut throat pizza business in New Zealand.

I have been ranting and raving about this for years, in respect to Restaurant Brands(RBD) and their badly run Pizza Hut brand.

More competition from the likes of great fast food companies like Hell and Dominos Pizza are continuing to make the going for Pizza Hut as hard as the crust on their flat crust dough and it is only going to get worse because management at RBD continue to flounder.

Hell and Dominos are rapidly expanding while the Pizza Hut business falls away.

The next profit announcement for RBD will be sometime in May and sales figures should be out for their 3 different Brands: KFC, Starbucks and the aforementioned Pizza Hut, soon.

Profit is likely to be better this year because of a slightly recovering KFC but Pizza Hut is likely to drag on overall profit, again.


Restaurant Brands @ Share Investor

Finger Lick'n Good Management
Chart of the Week: Restaurant Brands Ltd
Long Term View: Restaurant Brands Ltd
Stock of Week: Restaurant Brands Ltd
Restaurant Brands: Buy or Sell ?
Pizza Hut sell-off provide opportunities all-round
Danny Diab & Restaurant Brands
2008-2009 KFC sales figures mislead investors
KFC Finally Flying
Starbuck's New Zealand Cup doesn't runneth over
RBD gives KFC a push
McDonald's playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures

Discuss RBD @ Share Investor Forum

Download RBD company reports



c Share Investor 2008







Pizza war to enter next battle

5:00AM Sunday February 17, 2008
By Chris Daniels

The cut-throat pizza business in New Zealand is gearing up for a new round of hostility, as market heavyweight Domino's and Hell try to hold on to slipping profit margins in a world of soaring cheese.

Domino's - which pitches itself as the "value" end of the market - is tomorrow launching a new, healthier pizza, hoping its fat-free crust will attract punters watching the kilos as well as sport on the TV.

It is also staging a push into the "premium" side of the market, where it will find itself in a more direct fight for customers from local pizza heroes, Hell Pizza. A new push to online ordering is also under way, with Domino's this month rolling out its new internet ordering process.

Statistics New Zealand last week reported a 14.7 per cent jump in butter and cheddar cheese prices - prices difficult to pass on to pizza buyers taking advantage of fierce competition between Hell, Domino's and once-dominant Pizza Hut.

Pizza Hut used to command the biggest slice of the market but has been in steady decline for a few years, slugged on one side by the popular iconoclastic Hell brand and on the other by the cheaper Domino's.

"Pizza Hut continued to experience tight trading conditions in a competitive market, which had meant a continuing short-term sales decline," said the stock exchange-listed owner Restaurant Brands in December.

Total sales for the quarter were down 13.4 per cent, with same store sales falling by less than 9 per cent. Year-to-date sales of $56.5 million were down 9.7 per cent, and down 6.6 per cent on a same-store basis.

"Marketing strategy changes, which started to be implemented towards the end of the quarter, were expected to deliver better sales in the last quarter of the year," the company said.

Pizza Hut store numbers fell from 105 in the third quarter last year to 98. Restaurant Brands is progressively closing its "red-roofed" restaurants as leases expire or the "opportunity arose to exit a store".

Despite sales heading through the floor at its Pizza Hut rival, the fast-food industry is in good shape, says Colin Mellar, general manager of Hell in New Zealand. Hell enjoyed some huge sales increases in a record two weeks over Christmas, he says. "That was a bit out of the bag. We were ready, not so much to 'batten down the hatches', but expected the Christmas period to be patchy. But we got a couple of nice surprises."

Domino's is now increasingly looking to "come and play a little in their market", says Mellar.

"They are the cheaper end. We are not of a mind to play too much in that market, but sometimes it's interesting to have a look over the fence.

"We need to continue to grow. We need to grow top lines. We can't just sit in the niche market all the time. Our marketing itself is going through some changes."

Growth last year was reasonable, says Mellar, with a period of "checking the foundations later in the year. But over the Christmas period, same-store sales were up by 15-17 per cent.

What about its rivals, particularly with Domino's moving this week to more healthier fare? Is Hell concerned more health-conscious consumers may start looking elsewhere?

"At the end of the day of the day, pizza has got cheese on it generally, and people want cheese," says Mellar.

"We do have a healthier pizza, but trying to pretend we are lettuce and tomato is, I believe, a joke. We serve good food, but we will never pretend to be a healthy option."

Domino's, says Mellar, will end up seeing that the pizza is the main thing, not the healthier food options. And in the true style of a business rival, Mellar suggests a less benevolent reason for Domino's new-look healthy image.

"If anything this may distract them from their main strategy," he says.

"But I think their main strategy isn't working any more - because [of] their margins. Margins get tight, we know that commodity prices have gone through the roof. The price of cheese is ridiculous - walk into the supermarket and it's nine bucks for a small block.

"Because they are charging so little for their pizzas, they have to look for an alternative, because their franchisees will be screaming at them - saying, 'we're getting no margin with this current pricing strategy'."

The failure of fast-food chain Georgie Pie in the 1990s showed this, says Mellar. Georgie Pie sold pies for $1 each - but the price of inputs went up "and it kills them".

"This is probably a more desperate move by Domino's rather than one of proactivity," says Mellar.

Margins in the business are coming under real pressure, with fuel, commodity and labour prices all going up.

Peter Jones, Domino's New Zealand general manager, backs up the reports of rising pizza sales coming from his rivals at Hell Pizza.

"We have had a really good last 12 months, in fact the best 12 months in our short history over here."

Domino's arrived in New Zealand in mid-2003 and now has 67 stores, with plans for eight more.

This week it's launching what it calls the "superlite thin pizza", a push into healthier food. It's served on a "Lebanese style bread", which has no sugar and is 98 per cent fat free.

But it hasn't gone all health store on the customer. Salads, available in its Australian operation, are yet to appear on this side of the Tasman.

Jones says: "Realistically the message we're giving is that 'we don't condone you should eat any sort of food, let alone pizza, seven days a week'. You should combine it with healthy meals, a good balanced diet and exercise, and pizza should be a treat.

"We really can't go out on a limb and say we stand for a complete healthy food.

"However, we do look for a balance. We should never be arrogant about the fact the world is becoming more focused on eating healthy."

So is Domino's trying to move into better profit territory by selling more premium products?

"We have talked about this, but not just for the dollars either, because the more time goes on, we are seeing our consumers getting more mature in their palate as well," says Jones.

"While we'll never niche ourselves as gourmet pizza, we are examining pizza such as 'seven meats' and about to come out with a range of pizzas called the 'big taste', which is a premium product.

"We don't deliberately try to gain market share as such. What we're trying to do is build same-store sales for all of our franchisees."

The company has also just launched a full online ordering system, which it hopes will make things easier for customers and franchise owners, with more accurate orders and less hassle phoning a noisy store during busy periods.

Domino's biggest rival is probably fish and chips, says Jones, because like pizza, it is a shared meal. Burgers, by comparison, are more individual.

"But having said that, whenever someone is buying a burger or fish and chips or even a pizza from a rival, they're not buying a pizza from us.

"Domino's is a value alternative. It doesn't mean we're cheap and nasty. It means you're getting a good pizza for a good price."

Regardless of whether Domino's is moving up the value chain, its presence in New Zealand has increased the pizza slice of the fast-food sector.

Jones says Domino's research in 2003 showed an average US consumer ate pizza once every 11 or 12 days, an Australian every 29 days, while New Zealanders only once every 50 days. "There's no doubt that has changed."

Poll cements National Party as Election winner

c Stan Blanch 2007

It looks like the momentum has gained traction and polls taken before Christmas have continued to show John Key the most preferred Prime Minister, should an election be held today.

The fact that Clark continue to slip behind as leader to a 27% Prime Ministerial approval rating means she is less favoured than the likes of the great George Bush as the leader of the country.

Previously Clark has had a historically very high ranking in the polls as most preferred leader.

Vote in our new Political Animal poll on the left of this blog, not far from the top. You must tick two boxes, one for your constituency and one for the party vote.


C Political Animal 2008


The full story of the latest poll, courtesy of the NZPA is below:

The TV One Colmar Brunton poll showed National on 53 percent support, down one point since its last poll in December, and Labour also down one point to 34 percent.

The gap between the main parties was 19 points - the same as it was in December.

National's leader, John Key, increased his lead over Helen Clark in the preferred prime minister stakes.

Mr Key gained one point to 36 percent while Miss Clark slipped from 30 percent to 27 percent.

Tonight's poll showed the Greens up from 4.6 percent to 6 percent, putting them safely over the 5 percent threshold the party must achieve in the next election to stay in Parliament.

New Zealand First was down from 2.2 percent to 1.7 percent while the Maori Party was up from 1.7 percent to 3.3 percent.

The Colmar Brunton poll usually rates National higher than other surveys.

On January 26 a New Zealand Herald DigiPoll put National on 47.5 percent and Labour on 38.7, a gap of 8.8 points.

On February 11 a New Zealand Morgan poll showed National slipping 6.5 points to 45.5 percent and Labour gaining three points to reach 36.5 percent, a gap of nine points.

Tonight's poll showed a small drop in the number of people who thought the economic outlook was getting better - 28 percent compared with 31 percent in December.

The poll was conducted between February 9 and 14. It questioned 1000 voters and had a margin of error of plus or minus 3.1 percent.

- NZPA

Labour Party election funding murky at best

c Stan Blanch 2008


The stench surrounding the funding of the Labour Party by ex pat Kiwi Owen Glenn prior to the 2005 election just gets more pungent and darkly ominous, as the weeks and months pass.

Glenn gave NZ$500,000.00 to Labour Party coffers to bolster their empty pockets in the run up the the 2005 stolen election(Labour took over $800,000.00 of taxpayer money to illegally fund their campaign) nothing wrong with that, big money shouldn't be a problem to fund an election run.

It seems though that there is more than meets the eye to this generous individuals gift.

If the bestowing for Glenn, of a New Years honour this year wasn't enough, it seems that the layers of the onion that are the gift to the Labour Party appear to be peeling off to reveal a bit of a rotten core.

It certainly isn't the gift that keeps on giving.

Glenn has revealed that he gifted the money to Labour because of concerns that he had over the Brethren spending their own money(not taxpayers dear readers) to campaign against Labour and the Greens.

But curiously, Glenn made his first donation of $200,000 to Labour in 2004, well before the Brethren's involvement in the 2005 election became public knowledge.

A slip of memory on Glenn's part?

According to Labour Party president Mike Williams yes: "Owen is confused about the timing".

Williams seems very confused since he himself admitted in a May 5 2005 story in the New Zealand Herald that Glenn had been paying funds directly into Labour Party coffers beginning in 2004 and to the tune of $200,000.

The biggest possible scandal exists directly with the Prime Minister though.

Glenn has been reported as saying that he was offered the post of Minister of Transport by Helen Clark, in order to get him back to New Zealand.

Clark has denied Glenn's assertion that he was offered a job in the Labour Cabinet saying on Friday, "...it did not happen..."

Now we have all heard the Prime Minister lie before and caught out multiple times, so Fridays denial seems a trifle perplexing given the status Owen Glenn has reached in his business life. Impeccable business acumen, honesty and straightforwardness have been trademarks of his throughout his distinguished life.

Glenn also loaned the party $100,000.00 to employ fund raisers after the 2005 election, it was paid back without interest but the interest forgone seems to have been in breach of the electoral rules.

I'm unsure whether the changing of the appropriate electoral laws by Labour after the 2005 election to make their illegal pilfering of $800,000.00 of taxpayer funds legal has also made this latest reported breach legal retrospectively, but it bares thinking about when you cast a vote this year.

Whichever way you look at this situation it stinks worse than Parakura Horomia's socks on a wet hot day in Wellington.

Labour have passed laws to crack down on other political parties for the 2008 election but it seems they have some skeletons in the closet left over from 2005.

The funding from Labours wealthy foreign domiciled backers during the 2005 election needs to be looked at more closely by the appropriate authorities and the public of this country cant be fobbed off again by the likes of a Prime Minister who wouldn't know the truth if it came up and shook her hand then slapped her in the face with it.

The public have a right to the truth.

Clearly this scrutiny should also be applied to the coming election for if we can be sure of one thing, Labour will try similar ploys again.


Related Political Animal reading

NZ Herald gets nasty over the Electoral Finance Bill
Electoral Finance Bill: Day of Protest
Electoral Finance Bill: The purpose is clear
Mike Moore turns the knife on Electoral Finance Bill

C Political Animal 2008

Broker downgrades of Pumpkin Patch lack long term vision

Pumpkin Patch, a children's wear
company with more than 200 stores
in four countries, will open a
6,095-square- foot store at Columbia Mall,
in Baltimore, in the mall's lower level,
near Lord & Taylor, on March 25.
New collections, designed by an in-house
team, are introduced throughout the season.



Broker downgrades on Pumpkin Patch Ltd [PPL.NZX] sent the share price down 9% today, NZ.19c down to a multi year low of $1.97.

Broker ABN Amro has this to say:


... its forecasts for the company's first-half earnings, due out next week, this time by a whopping 19 per cent and down to $NZ12.6 million ($11 million).

Pumpkin Patch's problems centre on the poor prospects for its stores in Britain and the US - the latter no real surprise given the growing likelihood of a recession there. Its many Australian outlets are, by contrast, doing well, thanks to the hot economy, with earnings growth hitting 23 per cent.

However, says the ABN analyst Carolyn Holmes, that won't be enough to offset the declines abroad, which is why she has cut her target price for the NZ-listed shares from $NZ3.13 to $NZ2.53.

It is not clear from analyst Carolyn Holmes how she arrived at her downgrade or the reasons for them but I am going to take an educated stab at it.

Clearly the weak US dollar and stronger Kiwi is affecting repatriated profit back to New Zealand.

Nothing Pumpkin Patch management can do about that and not overly material to the day to day short/medium term running of the company. It is something that could get worse before it gets better.

"...poor prospects for its stores in Britain and the US...", well, I wouldn't go that far, clearly not as good as the long established New Zealand and Australian arms but the bulk of the US stores are trading profitably after a very short time opened and the UK unit has been trading profitably for a couple of years.

When establishing a new retail chain, initial loses are to be expected, due to set up costs and until economy of scale is reached and one would expect those stores that are already operating profitably to pick up margin wise once established for a longer period.

The time frame for analysis of a company by broking houses is notoriously short term and while short term indicators are of definite interest to gauge company health on a half year to 12 month basis, it is the long term prospects for a company that should be the primary interest to an investor. Especially when it is a growth company like Pumpkin Patch.

Directors of Pumpkin Patch commented on their business outlook and strategy when reporting the Full year NZ$27.6 Million 2007 profit last August, down from 28.5 million from 2006:

While interest, store opening costs and local market development costs would continue to have an impact on financial results in the short term the directors and management team were confident current strategies would the best long term financial outcomes...

Something I would concur with.

All listed companies with substantial overseas profit and revenues have been marked down over the last 6 months or so. Two other such notables are Fisher & Paykel Healthcare Ltd [FPH.NZX] and Fisher & Paykel Appliances [FPA.NZX]

Both of these companies are well run and Fisher Health has excellent long term prospects, but their market caps have taken a beating of late.

Pumpkin Patch is currently facing toughish times during a strong growth period but it isn't going to last. How long it will last is hard to say but things are not as bleak as some brokers might have you believe.

ABN Amro and other New Zealand brokers who downgraded Pumpkin Patch today all have shareholdings in the New Zealand Stock exchange and ABN recommended NZX as a "buy" today.

I wonder if they are short on Pumpkin Patch?


Disc I own PPL shares in the Share Investor Portfolio


Pumpkin Patch @ Share Investor

Share Investor's Total Returns: Pumpkin Patch Ltd
Share Price Alert: Pumpkin Patch Ltd 3
Share Price Alert: Pumpkin Patch Ltd 2
Share Price Alert: Pumpkin Patch Ltd
Stock of the Week: Pumpkin Patch Ltd
VIDEO INTERVIEW: Pumpkin Patch CFO Matthew Washington
Pumpkin Patch Ltd: 2010 Full Year Profit Analysis
Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum
Download PPL Company Reports

Buy Pumpkin Patch Clothing

New From Fishpond.co.nz

Allan Hubbard: Man Out of Time - By Virginia Green




c Share Investor 20o8

Fletcher Building raises profit through canny management

Fletcher Building Ltd [FBU.NZ] had a profit announcement today that was "inline" with market expectations and given current market uncertainties, the share price was savaged by NZ 28c, down to $8.87 on big volume of over 2.3 million shares.

1d 5d 3m 6m 1y 2y 5y max

Today's FBU chart tells the story after
a positive result out today.


To be fair the proceeding 6 months have been excellent, with a 22% rise in net profit of $235 million and a revenue increase of 19% to just over $3.5 billion. Costs clearly have been contained when you look at those two figures and compare.

Jonathon Ling has done well at his first full year as CEO and the previous head, Ralph Walters, has structured the company in such a way that revenues are diverse and able to push the company forward during economic downturns.

All Fletcher's business units increased profit.

Looking forward, Fletcher Building has over a billion dollars worth of work on backlog in New Zealand and things look positive in the infrastructure arena where governments of both colours look to build more roads and other public works.

The likes of the proposed $2 billion plus tunnel through Helen Clark's electorate of Mt Albert and the Eden Park redevelopment for the 2011 world cup could only be handled by the likes of a company Fletcher's size, so the likelihood of them getting the bulk of those contracts is in their favour.

CEO Jonathon Ling has managed Fletcher
Building well during his first hear. His
challenge now is to try and replicate that
during tougher times.

On the downside though, residential house building is currently facing a slump, while the future for that sector looks bleak in the short to medium term. Fletchers are big residential builders in New Zealand and Australia and supply substantial volumes of building products to other big contractors and small builders alike.

The acquisition last year of American Formica Corp, for close to NZ $1 billion, seems to have folded into the mixture of Fletcher's businesses well but for a slower than expected restructuring of the business and associated costs and a 10% drop in new US housing starts having an affect on laminate sales.

It will be very interesting to see how Formica do if the downturn is as severe and as long as some predict.

In retrospect it wasn't a good time for Fletchers to buy when they did last year. The purchase price and timing of the market would have been such that a lower sticker price would have been the order of the day.

As we know though it is hard to pick markets.

I personally don't think todays announcement warranted the canning the share price took and one would have to say it doesn't bode well for the NZX during this profit season if a company can report a 22% lift in after tax earnings and have "Mr Market" knock more than 3% off company capitalisation.

I give this result a 9.5 out of ten. Good effort, excellent results and great management.


Disclosure: I own FBU shares


Fletcher Building @ Share Investor

Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher's got game


Related Reading

Fletcher Building History - Auckland University

Fletcher Building Financials

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities
• Half Year Results Presentation.pdf ( 1.00 KB )
  

Related Amazon Reading



Project Management in Construction (McGraw-Hill Professional Engineering) by Sidney M. Levy
Buy new: $71.96 / Used from: $60.71
Usually ships in 24 hours


c Share Investor 2008



The full NZX /Fletcher Building press release:


FBU
13/02/2008
HALFYR

REL: 0900 HRS Fletcher Building Limited

HALFYR: FBU: FBU Half Year Results Announcement

Name of Listed Issuer: Fletcher Building Limited

For Half Year Ended: 31 December 2007

This report has been prepared in a manner which complies with generally
accepted accounting practice and gives a true and fair view of the matters to
which the report relates and is based on unaudited accounts.
The amounts as presented have been prepared in a manner which complies with
New Zealand accounting standards which comply with International Financial
Reporting Standards (IFRS).

CONSOLIDATED OPERATING STATEMENT FOR THE HALF YEAR ENDED 31 DECEMBER 2007

Unaudited

Current Half Year NZ$'M; Up/Down %; Previous Corresponding Half Year NZ$'M

Total operating revenue: $3,547m; up 19%; $2,980m.

OPERATING SURPLUS BEFORE UNUSUAL ITEMS AND TAX: $327m; up 11%; $295m.

Unusual items for separate disclosure: 0; n/a; 0

OPERATING SURPLUS BEFORE TAX: $327m; up 11%; $295m.

Less tax on operating profit: $83; down 10%; $92m.

OPERATING SURPLUS AFTER TAX BUT BEFORE MINORITY INTERESTS: $244m; up 20%;
$203m.

Less minority interests: $9m; down 10%; $10m.

OPERATING SURPLUS AFTER TAX ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER: $235m;
up 22%; $193m.

Extraordinary items after tax attributable to Members of the Listed Issuer:
0: n/a: 0.

OPERATING SURPLUS (DEFICIT) AND EXTRAORDINARY ITEMS AFTER TAX ATTRIBUTABLE TO
MEMBERS OF THE LISTED ISSUER: $235m; up 22%; $193m.

Earnings per share: 47.0 cps; up 14%: 41.1 cps

Interim Dividend: 24 cps

Record date: 21 March 2008

Date Payable: 10 April 2008

Tax credits on latest dividend: 100% for New Zealand comprising imputation
credits.

Non New Zealand tax payers can benefit from the partial refund of the New
Zealand tax credits as outlined in the attached press release.

SUMMARY

Directors today announced the group's unaudited interim results for the six
months ended 31 December 2007. Net earnings were $235 million, compared to
$193 million in the previous corresponding period. This is an increase in
earnings per share from 41 cents to 47 cents.

Operating earnings (earnings before interest and tax) and after Formica
restructuring costs of $16 million were $394 million, compared to $340
million in the previous corresponding period. The increased earnings are due
to the Formica acquisition, ongoing operational improvements and some small
acquisitions.

The interim dividend of 24 cents per share is an increase of 2 cents per
share over the previous interim dividend and is the twelfth consecutive
dividend increase by the company. Total shareholder return was negative 4
percent for the half-year, influenced heavily by the uncertainty in equity
markets internationally.

The 22 percent increase in net earnings reflects strong operating
performance, with all divisions recording higher earnings than in the
previous corresponding period. Laminates & Panels' earnings increased on a
like-for-like basis, and also benefited from the acquisition of Formica
Corporation on 2 July 2007.

The Chief Executive Officer, Mr Jonathan Ling, said: "This is a pleasing
performance which reflects the group's ability to deal with variable and
sometimes difficult operating conditions. Across our businesses, commercial
and infrastructure markets are still strong, which is best exemplified in New
Zealand with a construction backlog of over $1 billion. While there is some
weakness in residential markets and provided there is no significant change
in economic conditions, we remain comfortable with our earnings prospects for
this financial year".

Key Points

- Group net earnings up 22 percent to $235 million
- Operating earnings up 16 percent to $394 million
- Cashflow from operations up from $227 million to $245 million
- Earnings per share up from 41 cents to 47 cents
- Interim dividend of 24 cents per share with full New Zealand tax credits -
the 12th consecutive dividend increase
- Acquisition opportunities being evaluated

Contact:
Jonathan Ling Bill Roest
Chief Executive Officer Chief Financial Officer
Phone: +64 9 525 9169 Phone: +64 9 525 9165
Fax: +61 9 525 9032 Fax: +64 9 525 9032