Interest rises in Vertex as share issue opens

By NZPA

Monday 10th June 2002

Interest is growing in the share issue of Carter Holt Harvey's spin-off plastics packaging business Vertex Group, which is selling itself as "the household name you've never heard of".

Vertex and its two major shareholders are hoping to raise about $61 million, at $2.05 per share in the offering which opened today.

The majority of stock being sold -- 93 percent of the company -- is owned by investment companies Pacific Equity, Bain Capital and their associates. Vertex will sell 488,000 shares of the 29.756 million on offer.

The company has forecast a 24 percent rise in operating earnings for its initial public offer to $12 million, from $9.7 million in 2002.

Gross dividend yield for 2003 is forecast at 10.3 percent, with Vertex expecting to pay out dividends at around 70 percent of net profits after tax in future.

Vertex has moved from a centralised structure under Carter Holt Harvey to numerous divisions manufacturing a range of plastic food containers, moulded components and industrial goods,.

As a result the company, with factories in Wellington, Hamilton, Auckland and Hastings as well as Australia, has been able to concentrate its operations and cut costs.

Vertex's diverse products range from packaging for dairy consumables such as yoghurt, bottles for household products, trays, industrial containers, and Securefresh (supplying machinery to companies to produce longlife packaging of fresh meat).

However, one analyst said the company's track record was not well known and investors were unfamiliar with the company, which is selling the issue in full page newspaper adverts as "a share in the household name you've never heard of".

Vertex chief executive Patrick Boyle told a briefing today the spin-off from Carter Holt in 2000 was good for both companies.

"I think Carter Holt is a great integrated business that adds value to wood fibre, and they've been thinking for possibly two years, `does plastics fit?', and they made the right decision -- it does not.

"The polymer price cycles, the capital investment cycles are quite different from running a Kinleith mill or a cardboard packaging plant," Mr Boyle said.

"It enabled us to widen our view of our markets so we could put more money into things which traditionally did not align with what Carter Holt did with packaging."

A large part of Vertex's forecast growth will be on the back of cost-cutting.

Mr Boyle said the company, along with others in the industry, was hit in the first few months of the year by one of the biggest spikes in polystyrene prices recently.

All the company's raw materials are denominated in US dollars, including polystyrene which comes from Australia.

The company's ability to handle price cycles was researched by the major shareholders when they were looking to invest, Mr Boyle said.

"It has also been researched thoroughly by the incoming directors, and in both instances they have been well satisfied by the ability to handle such price increases with appropriate pass-on (of costs).

"Our customers are generally well-informed, they understand where raw materials are headed."

Around 20 percent of 2002 revenues totalling $85.9 million came from exports, mainly to Australia, the Pacific Islands and the United States.

The recent rise of the New Zealand dollar against the US dollar had not significantly changed Vertex's outlook.

Forsyth Barr Frater Williams head of retail broking Shane Edmond said it was too early to tell how the market would react to the issue, one of only two public offerings launched so far this year.

`It's fair to say that some media publicity over the weekend has at least generated some enquiries from the public. Very early days at this stage but certainly the level of interest has been quite strong today," Mr Edmond said.

"At this point it appears that the general interest is quite high, as it is for all new issues at the moment."

Vertex shares, which were only allocated to retail brokers and some financial institutions, with no public pool, will trade from early July.

The share sale is being managed and underwritten by JB Were NZ, with UBS Warburg co-lead manager.

New Zealand's market will also see the listing of rubber and farm equipment manufacturer Skellmax Industries next week, which aims to raise $115 million.

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