KEY POINTS:
Fletcher Building, whose share price has plunged 47 per cent this year, has been named New Zealand's biggest value creator for the second year in a row by the Boston Consulting Group (BCG).
Fletcher Building created $4.9 billion of value for its shareholders in the five years to the end of 2007, BCG says in its latest "Value Creators Report".
Telecom, whose shares yesterday hit a 15-year low and have dropped 21 per cent this year, came in at second place, returning $4.4 billion to its shareholders.
Retirement village provider Ryman Healthcare was assessed as the country's fastest value creator among the top 15 listed companies.
The report shows New Zealand companies achieved an average annual Total Shareholder Return (TSR) of 16 per cent in the five years to the end of 2007.
Companies such as New Zealand Refining, TrustPower, Fletcher Building and Infratil contributed to this "notable" result, each delivering over 30 per cent per annum to shareholders.
However, Ryman was the standout, delivering an impressive TSR of 49 per cent over the same time period.
Due to such performances, the NZX-All index outperformed three major regional indices - S&P (Europe) 350, Japan (Topix) and the US S&P 500 - which returned 15 per cent, 13 per cent and 13 per cent respectively.
While Ryman started from a small base five years ago, it now boasts a market capitalisation of over $1 billion.
BCG said over half of New Zealand's largest 15 companies outperformed their Australian industry peers.
"TrustPower put in the most impressive performance with a relative TSR of 33 per cent, compared to Australian Telco/Utility players."
Infratil, Ryman Healthcare, Fletcher Building and Contact Energy also managed relative TSRs of greater than 10 per cent compared to their peers in Australia.
Co-author David Tapper said achieving profitable growth was the key driver of TSR performance.
Despite the woeful performance of the sharemarket this year, there still opportunity to create value, he said.
"Companies that were well prepared could maintain profitable growth over the long term by maintaining a healthy cash flow and using this to invest against the tide.
"Experience shows that companies who reinvest cash in the face of a downturn tend to outperform those that return cash to shareholders or use it to repay debt."
Another co-author, James Goth of BCG Australia said companies needed to take a balanced view of the risks and opportunities a downturn brings.
"At times like this New Zealand managers should be preparing well-structured contingency plans, including health checks that encompass a variety of downturn scenarios," he said.
"Once they have bullet-proofed their cash flows against downturn scenarios, they should also consider the benefits of investing against the tide, both organically - through sales and marketing, R&D (research & development), production, logistics and people - and inorganically through M&A (merger & acquisition)."
In the past companies that planned effectively for a downturn found themselves in a position to increase market share and attract the best talent at a time when competitors were reducing head-count and delaying investments, he said.
- NZPA
