Scales gets set for growth after debut

The apple growing business, Mr Apple, represents roughly half of Scales' operations. Photo / APN

With its sharemarket listing completed Scales Corporation is poised for expansion, particularly in Asian markets, says managing director Andy Borland.

Shares in the Christchurch-based company were issued in the initial public offering (IPO) at $1.60 and first traded at $1.61 before falling to close at $1.58 last night.

It was the second newly listed stock to sink below its IPO price this week after ikeGPS shares fell beneath their $1.10 offer price after they began trading on Wednesday. Shares in ikeGPS, which develops geo-location and measurement devices, closed down 4 per cent at 97c last night.

Borland said Scales was targeting growth across its three divisions - horticulture, storage and logistics and food ingredients.

The offer price valued the company at $244 million and the listing raised a total of $148 million, including $30 million of new capital that will be used to halve the company's $60 million debt. "That really puts us in a position to expand," Borland said.

He said the firm was looking to expand its cold store network - which already extends from Otago to the Waikato - into Auckland and was planning to open a site in the city before the end of 2015.

Scales is one of New Zealand's oldest companies and about 65 per cent of its business takes place in Hawkes Bay, with its apple growing business, Mr Apple, representing roughly half of its operations.

"We already have new plantings in the ground to support our apple business and we'll support those extra volumes with investment in market, especially in Asia," he said.

Borland said a new apple brand Scales had recently released - called Diva, a fuji variety - was selling well in Asian markets, which range from Taiwan and China to Malaysia, Indonesia and Thailand.

The strong New Zealand dollar had been putting a lot of pressure on exports and it was good to see the currency weakening, he said. The kiwi was trading at US85.78c at 4pm yesterday, down from above US88c earlier this month after the Reserve Bank signalled a pause in interest rate rises. "We hope it doesn't stop [weakening] any time soon," Borland said. "It would be good for exporters if it came off a lot more."

Scales' existing investors - private equity company Direct Capital Investments, together with its co-investors the New Zealand Superannuation Fund and ACC - have retained a cornerstone shareholding of 20 per cent following the IPO.

The firm has forecast net profit to fall from $20.4 million in the 2013 financial year to $15.9 million in 2014, before rising to $20.8 million in 2015.

Scales expects to pay a dividend of between 9.4c a share and 9.6c a share, implying a gross dividend yield of 7.2 per cent to 8.2 per cent, for the 2014 financial year. A dividend of 10.5c to 10.7c a share, implying a gross yield of 8 per cent to 9.1 per cent, has been forecast for the following year.

The offer was managed by Deutsche Craigs and First NZ Capital.