South Island counts on growth

ALAN WOOD
Last updated 05:00 08/01/2013

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South Island firms are increasingly bullish as the mainland takes strength from the earthquake rebuild.

A Grant Thornton IBR survey of 150 companies across New Zealand shows South Island firms are a bit more optimistic than in the North Island and are hiring staff at a higher rate.

One Christchurch-based building company that has increased investment and seen activity rise as the rebuild kicks in is Spanbild, whose brands include Versatile Homes and Buildings and Totalspan.

Spanbild chief executive Peter Jensen said his group had invested more than $1 million in preparation for the rebuild.

Some of the investment had been ahead of the real start to recovery work, which had taken a lot longer than initial expectations.

However in the last half of 2012, particularly in the final quarter, commercial and residential building work had ramped up significantly in Canterbury.

Spanbild was in a position to judge that as it worked on a national level and also in Australia, Jensen said.

"We had a strong second half of 2012 relative to a very difficult period in the construction industry since 2008, and yes, the earthquake rebuild activity is certainly a big part of that.

"I would say like many companies we invested in plant and people ahead of the work," he said.

"We've invested more than $1 million in capital just ensuring we have sufficient capacity to meet any demand really."

Christchurch-based Grant Thornton partner Simon Carey said 73.2 per cent of the South Island businesses surveyed expected an increase in revenue or turnover in the next 12 months.

This was ahead of the 65.4 per cent of the surveyed North Island businesses that were expecting an increase.

Overall 65 per cent of southern businesses were very or slightly optimistic, compared with 57.2 per cent in the North Island.

The Christchurch rebuild was a major factor in the growing confidence, he said.

"Last year [2012] I think it's fair to say that many businesses have been watching from the sidelines as they wait for the city's blueprint to be finalised and the way cleared for rebuild activity.

"We're now almost at that stage and businesses are optimistic about what lies ahead," Carey said.

"Clearly there will be benefits across the country and in the past year we have already seen some businesses opening an office in Christchurch or expanding their operations, poised for the economic spin-offs which are set to accrue."

Carey also said that the importance of the agricultural sector could not be under-estimated.

Commodity prices remained relatively strong and dairy numbers were growing. Water schemes would help the expansion.

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His own clients in the South Island agricultural and transport-logistics sectors were cautiously optimistic. However there were still concerns about the high New Zealand dollar and the uncertain global economic environment.

Both South Island and North Island businesses expected profitability to increase - 64.9 per cent and 67.3 per cent respectively - while 26.8 per cent and 24 per cent thought it would remain steady, Carey said.

That confidence was reflected in the intention of 66 per cent of South Island firms, and 51 per cent of North Island firms, to increase investment in plant and machinery.

As well, 47.4 per cent in the South and 34.6 per cent in the North were planning to increase the number of employees.

Helping the employment situation in the South Island, 44.3 per cent of businesses increased the number of people they employed during 2012, higher than 27.9 per cent in the North Island.

BRIGHT HORIZON

Looking ahead: 73 per cent of South Island businesses expect an increase in revenue, compared with 65 per cent in the North Island. 65 per cent of southern businesses are very or slightly optimistic, compared with 57 per cent in the North Island.

65 per cent of South Island businesses expect profitability to increase, compared with 67 per cent in the North Island.

66 per cent of South Island firms intend to up plant and machinery investment, compared with 51 per cent in the North.

47 per cent of South Island firms plan to increase the number of employees, compared with 35 per cent in the North.

- BusinessDay.co.nz

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