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March 12 (BusinessWire) – Business journalists in New Zealand just came through an unusually busy half-year reporting season, partly because there are few of us left and also because the state-owned enterprises reported at about the same time. Previously, …

SMELLIE SNIFFS THE BREEZE: Season of Disclosure

By Pattrick Smellie

March 12 (BusinessWire) – Business journalists in New Zealand just came through an unusually busy half-year reporting season, partly because there are few of us left and also because the state-owned enterprises reported at about the same time.

Previously, the SOEs reported later and mysteriously, their disclosure governed by the unguessable rules of Parliament, whereby their reports turn up on a varnished wooden bench-top in the Bill’s Office out the back of Parliament before anywhere else.

Now they report like listed companies, using the Interweb. A number have already begun using the NZX platform to make both continuous disclosure and marketing announcements in the same way that NZX-listed companies do.

With results announced, many listed companies are now running “investor days” or issuing strategy updates. Three examples of this intriguing genre this week came from Infratil, NZX, and Warehouse.

All are in PowerPoint, and all contain a carefully leavened mixture of corporate communictions spin and material new information, which requires their timely release under the NZX Listing Rules’ continuous disclosure obligations to ensure no one has information that others shouldn’t have.

Not that the material provided was always earth-shattering. The opening line of the strategy update from Warehouse strategy paper declares: “Total shareholder return remains a key objective of The Warehouse Group.”

Crikey! No one call the police! What a subversive notion.

On the same opening slide, a new adjective is created: “in-organic” with a dash. It’s used in the bullet point that basically says Warehouse profitability is flat-lining, despite a legend that it was recession-proof and should be expected to grow when “everyone wants a bargain.” To counter that, Warehouse will look to buy competitors to grow. As in: “in-organic growth remains a consideration”.

The NZX disclosure was intriguing because only one presentation, from its head of traded products Fiona Mackenzie, was judged sensitive enough to require immediate disclosure.

All the other presentations from NZX’s big day in with analysts on Wednesday were released Thursday morning, but Mackenzie’s was the most fulsome explication to date of the NZX strategy to re-engineer around high margin derivatives trading, based on joint investment with the Reserve Bank on a single, highly credible clearing and settlement system.

NZX expects to spend around $10 million to create this “core we never had.” Clearing and settlement is a high standard of service to meet, but it’s the sort of thing a central bank wouldn’t do badly, and it adds a lustre of trust to an exchange that can offer a marketplace where the level of exchange risk is so low. Therein lies good fees also.

Whether the NZX idea will work remains to be seen. However, it’s consistent with Prime Minister John Key’s idea of creating a banking back-office centre in New Zealand.

To achieve that vision, however, would almost certainly need better international data connections. Enter this week’s launch of the Pacific Fibre idea that Stephen Tindall, Sam Morgan, Rod Drury and other patriotic rich guys launched this week, for a mega-serious bit of fibre between us and the U.S. western seaboard.

Could it be that these guys are talking to each other?

Whether the NZX is dreaming or not, the strategy it unveiled is consistent with one of its corporate values: bravery.

Backed by its unique position to develop a new global dairy futures trade, NZX aims to skim extra liquidity into a range of New Zealand derivatives and equities markets and do quite well at it.

NZX forecasts a future in which half its income comes from the provision of clearing and settlement services, and the attractive margins available on derivatives trading, compared to the deracinated fees these days from sharebroking anywhere, let alone New Zealand’s sluggish equities market. It has invested in a grain futures platform in Australia and is fighting to run the electricity derivatives mandated by Energy Minister Gerry Brownlee, against stiff ASX competition.

In this new world portrayed by the NZX presentation, only 40% of its income flows from traditional broking, while creation of valuable market information for paying subscribers adds another 10%.

It’s a big call to think this can be achieved in New Zealand. ASX offers clearing and settlement systems and has a relatively mature derivatives market across a range of agricultural and energy commodities. In the case of each new derivative, it generally took years to create adequate volume to justify the offer.

Announcements must be due in the very near future, given the July 1 start date for Brownlee’s electricity reforms.

Speaking of which, a brace of investor day presentations from Infratil made a fascinating read, which boiled down to this: TrustPower is far and away the best-run power company in the land, charging more and gaining greater retail margin by a country mile than any other, including listed rival Contact Energy.

After a mixed experience in secondary European airports, the Wellington specialist infrastructure investor is withdrawing to Australasia “with an energy bias”, drawing together an interesting portfolio of New Zealand and Australian assets in a way that could yet surprise.

Infratil founder Lloyd Morrison is nothing if not a dreamer. With the purchase of Shell petrol stations in New Zealand at a time when the other oil majors look uncertain long term owners, Infratil is sitting on an energy supply chain powderkeg, which will definitely be worth watching.

(BusinessWire)

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