Star Rating: John Goulter
John Goulter, Auckland International Airport's chief executive, will be a big loss to the sharemarket when he retires in September.
Goulter has been chief executive of Auckland Airport since its incorporation in June 1988. Before that he spent 25 years under Sir Tom Clark at Ceramco.
His big test came in mid-1998 when the Crown sold its 45 per cent stake to the public at $1.80 a share. The public issue was a success and the airport has gone from strength to strength since listing.
The prospectus net profit forecast of $35 million for the June 1999 year was easily surpassed and the company reported net earnings of $71.5 million for the latest year. Dividends have also increased from the prospectus forecast of 5c to 13.5c in the latest year.
In the June 2002 year the airport generated positive operating cashflow of $109.6 million and a few months ago it returned $215 million of tax-free capital to shareholders.
Chairman Wayne Boyd told the annual meeting in November: "In John's time we have seen passenger throughput increase by 90 per cent, revenue increased by 210 per cent, retailing revenue increase by 430 per cent and shareholders funds rise by 240 per cent."
Some would argue that Auckland Airport is a monopoly and Goulter's task has been relatively easy. The airport is a monopoly but the chief executive has done a great job developing its non-monopoly operations, particularly retailing and property.
On the star rating system Goulter scores 13 out of 15, making him one of the best of our listed-company chief executives.
Boyd told the annual meeting that the company had recorded revenue of $74 million for the first four months of the 2003 year, a 13.1 per cent increase on the same period last year and net earnings for the July to October period were $25.25 million, 20.2 per cent ahead of the previous year.
He told shareholders that although the full-year result will be affected by an increased interest charge relating to the recent $215 million capital repayment, the board is sure a result in excess of last year's record profit of $71.5 million will be achieved unless international events adversely affect the company.
At yesterday's closing price of $5.53 Auckland International Airport is on a prospective price/earnings ratio of 23 and fully imputed dividend yield of 3.6 per cent. On a short-term basis the stock is fairly fully valued but its long-term prospects are excellent as long as the board finds a new chief executive as good as Goulter.
John Goulter: Delivering results
* Performance
Net earnings: +105 per cent
Dividend: +170 per cent
Share price: +148 per cent
Strategy: good
Communications: good
* Rating
Net earnings: ***
Dividend: ***
Share price: ***
Strategy: **
Communications: **
Score:
13/15
Base: June 26, 1998
The New Year Rally
Is the New Year rally fact or fiction?
Every year brokers start talking about the New Year rally from mid-December onwards. Many claim that nine years out of 10 the market rises in January and investors should be in a position to take advantage of this.
Unfortunately, these claims are far more myth than reality. In the past 20 years the NZSE40 Capital Index has risen 10 times in January and fallen 10 times. Over the 20-year period January has produced a positive return of 5.67 per cent or an average of 0.28 per cent a year, surely nothing to get excited about.
The myth about January may have been built around a few spectacular performances. In January 1994 the NZSE40 Index rose 9.59 per cent, by 8.38 per cent in 1989, 8.21 per cent in 1984, 5.59 per cent in 2001 and 5.53 per cent in 1999.
There is no evidence that a strong sharemarket performance in January sets a positive pace for the rest of the year. In four of the five years mentioned above, more than 50 per cent of the market returns for the year were achieved by the end of January.
In other words, even if January is a positive month historic records indicate the positive momentum is unlikely to be maintained throughout the year.
Dividends
High dividend yield companies could be the hot stocks in 2003 for reasons including: the low interest rate environment; the influence of the post-World War II baby boomers; an international trend towards dividend-paying companies; and the belief that companies paying dividends are financially sound.
As the Herald share table on page C4 shows there are many companies offering high dividend yields, after adjusting for imputation credits. Many offer yields above the 6 per cent offered on five and 10-year Government stock. The baby boomers are also heading towards retirement and they are becoming less interested in companies that offer high growth and low income and much more interested in income-generating investments.
Baby boomers' orientation towards income has generated renewed interest in dividend yields throughout the world.
There is also a belief that companies that pay dividends are in a stronger financial position. This is not always the case but it is unlikely that directors will recommend a high dividend if earnings are unsustainable.
Wakefield Hospital
An announcement to the Stock Exchange on December 23 neatly summed up the attitude of many boards to the appointment of directors.
Wakefield Hospital announced that Mark Fraundorfer had resigned from the board for personal reasons and chairman John Calder was quoted as saying "the board would consider replacing Mr Fraundorfer at its next meeting".
Wait a minute: aren't shareholders supposed to appoint directors? Shouldn't Wakefield be consulting widely with shareholders before considering a new appointment?
Our sporting bodies advertise board vacancies but most of our listed companies still choose board members from a small pool of associates. Is this the best way to establish strong and independent boards that represent the best interests of shareholders?
The Wakefield Hospital board is particularly unsuited to choose its own members. The company's net profit fell well short of its prospectus forecast, it has been the subject of a highly critical Securities Commission report and its share price is well below the $2.50 issue price.
Wakefield badly needs a number of strong and independent directors, who have no association with existing board members, to represent the interests of all shareholders.
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