Of Bulls & Bears

Friday 2nd March 2001

Frucor counts its contributions

As a long-time reader of company profit announcements, Ferdinand thought he knew all the profit acronyms. There is NPAT, EBIT, EBLIT and even EBLITD (earnings before leases, interest, tax and depreciation). However, soft drinks company Frucor has come up with an unusual classification of profit in its interim report this week - CBM. This stands for "contribution before marketing" and is used by the company to explain why its profits are not as high as it would like. After announcing NPAT (net profit after tax) of $6.4 million for the six months to December 31, up 39%, it reveals its profit margin has fallen from 5.8% of sales to 5.3%. "The lower profit margin was due entirely to the large increase in marketing investment," it said. This is understandable given the company's rapid international expansion but there hardly seems a point in making marketing a special item. Surely it is a cost of business just like everything else.

Airport share price takes wing

Airports are normally staid utilities not prone to wildly moving share prices. However, Auckland International Airport appears to be an exception. From $3 a share at the beginning of the year, the airport's shares have shot up to around $3.57 this week, a gain of 19% in seven weeks. Contributing factors appear to be a 15% improvement in its interim net profit to December of $28.5 million and the announcement of a new property development for US giant Federal Express Corporation. This performance is beginning to justify the faith shown in the airport by Singapore Changi Airport Enterprise, a Singapore government entity that runs the massive Changi airport. It bought a 7.1% stake in November 1999 for $2.90 a share. That investment didn't look so flash in April last year, when the airport company's share price had fallen to $2.40 but the patience of investors is beginning to pay off.

Tax haven buys worth dodging

Fancy making a 1000% return on a capital-guaranteed investment in the Bahamas that is impossible to understand? If so, you are eligible to join the surprisingly large number of businesspeople who have been caught up in outright frauds in recent years. These include Nigerian money laundering deals, spurious prime bank instrument transactions and pyramid selling schemes. Ferdinand feels duty-bound to reveal what regulators say are the top five indications that an investment or business proposition is dodgy. Watch out for

promises of unrealistically high returns;
assurances a investment is guaranteed or cannot result in a loss;
statements that the investment is so complicated, you should trust your adviser;
exotic elements such as foreign tax havens, cutting edge technology or inside information; and
material that contains incomprehensible technical terms or jargon.

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