ABC BUSINESS

WELCOME

Steve Smith

Steve Smith AREINZ
Managing Director

2010 REINZ BUSINESS BROKERAGE OF THE YEAR

This newsletter is proudly sent to you by NZ’s #1 Business Brokerage. The recent REINZ (Real Estate Institute of NZ) Awards for Excellence honoured ABC as the recipients of the major prize for 2010 and also recognised outstanding sales agent, Anthony Gilbert as runner-up in the Business Broker of the Year competition. We are always striving to bring the best service possible to our valued clientele and these awards acknowledge both the individual and combined efforts of our team. We have always believed that it is important to uphold the highest of standards and we are delighted to be recognised by both our peers and our industry organisation.

The worst effects of the Christchurch earthquake are being addressed, but there are still a lot of businesses that are unable to operate. Our Manchester Street office is in the heart of the affected downtown area, but was spared from any damage and was back in business after the cordon was removed. Some of our team took a few knocks but they are all bouncing back in true Mainland style. Please get in touch if there’s anything we can do to help through this difficult period. Now that daylight saving has arrived, there is a noticeable change in people’s attitudes. As we move from the murk of winter into the optimism of spring we become re-energised and more forward thinking. We have a greater appreciation that our behaviour can influence what happens today and tomorrow, and that it’s too late to worry about yesterday.

The new GST regime kicked off on Friday and there will no doubt be a few teething problems. IRD have generously allowed the poor old Cantab’s a bit of leeway as they patch up their lives and business affairs. We are seeing many retailers holding their prices at previous levels, and the big guns are keeping up their discount / sales strategies. We will also see many prices increase by more than the extra 2.5% would suggest. Some retailers are reasonably arguing that they’ve absorbed increased costs for a long while and now it’s catch-up time. As usual, it’s buyer beware and the market will sort out the profiteers and the unscrupulous.

The Warriors Under 20’s side showed us how it’s done, winning the club’s first major competition, and the Commonwealth Games have finally delivered on their promise with a spectacular opening ceremony. We can now all look forward to a stunning fortnight of competition.

We are also looking forward to greater sales activity as the joys of spring translate into fresh thinking, new careers and bold changes of direction.

Regards,

Steve Smith AREINZ
MANAGING DIRECTOR

Scissor Platforms

Opportunity

An Auckland based company, ‘Scissor Platforms’ has been trading in Christchurch since June 2009. Due to the lack of a hands-on owner the business is significantly under performing. This is a great opportunity for a local operator to leverage off an established client base with outstanding plant and equipment. This business is for sale at plant value only and all offers will be considered.

Overview

Scissor Platforms specialises in hiring, selling a range of Skyjack elevating work platforms for various jobs and terrains, with both battery and diesel options. Boom lifts from 12 to 28 meters (working height) and Scissor Platforms from 6 to 17 meters (working height). They have slab and all terrain models.

Do they know a lot about access equipment? Absolutely! Scissor Platforms is a family-owned business focused on providing reliable, durable equipment and service times that will blow you away.

They transport access equipment and offer free site inspections so that they can gauge exactly which piece of equipment is best suited to customer needs.

The business specialises in the hire and sale of speciality access equipment with an extensive range of Scissor Lifts, Z-Booms, Telescopic Booms ideally suited for a wide range of applications.

The highly visible Moorhouse Avenue site comprises two offices, small kitchen, toilets and a workshop. There is ample car parking at the rear of the premises and easy access to Moorhouse Avenue for the movement of hire equipment etc.

The business operates from leased premises with the current lease expiring 30 November 2016, with an annual rental at a very reasonable $25,000 plus GST plus outgoings (including car parks).

Staff

The business currently has three (3) staff including the owner who operates the business on a week on week off basis as he commutes from Auckland.

One staff member works full time and manages the business when the owner is absent. And another does general duties, deliveries, light maintenance etc. He has been employed with the company since April

Asking Price: $1,350,000

Contact Greg Peters
03 379 0379, 021 253 3348

Ref: 30335

Click here to learn more

Abrasive Blasting and Refinishing Specialists

Overview

This business is located in a South Canterbury industrial area. It operates out of three reasonably modern buildings on a north facing site. The main building is mainly used for storage of plant, machinery and staff amenities and offices. There are two other buildings on site, one used for blasting and one for storage or painting. The company has a mobile unit for blasting on site for clients such as food processing companies, freezing works, building sites, boat builders etc. Other clients include transport companies, machinery manufacturers, and steel fabricators to name a few.

Compliance

For off-site blasting the operator needs to hold a license, this license is transferred from one location to another. An ‘Off-Site Blasting Record’ needs to be filled out and filed at the end of each job. The company holds consents to blast on site as well as off-site. These consents will be transferable to a new owner.

Lease

The land and buildings are owned by the Vendor who will make a new lease available to the Purchaser of the business with a rental of $60,000 plus GST per annum and standard outgoings.

Profits

Accounts show an operating profit of $185,521 (2010), a rental of $60,000 would reduce this to $125,521 for a working owner

Summary

A profitable business that has traded strongly during the recession period and is still trading at the same level. Figures for the period April to July of this year will be available.

Price

Tangible Assets	$200,000.00
Intangible Assets	$125,000.00
Stock	$1,500.00	Subject to valuation

Total Price	$326,500.00

Contact Ted Box
03 379 0379, 0272 225 228

Ref: 30302

Click here to learn more

Office Furniture

Overview

A retailer of office furniture to the public, businesses, and government and education sector organizations, this business is one of the few privately owned and operated office supply companies with a large percentage of its products supplied by New Zealand manufacturers. The business carries all of the leading brands, and if something is not immediately available, it can be supplied from their warehouse or designed and made to order using the in-house design and consultancy service.

Growth Opportunities

Additional Retail Products:
Examine and extend the range of add-on products available to customers.
Pricing Large Projects:
The business has not actively priced large office furniture projects such as schools and large offices..
Large Scale Supply:
There is an opportunity to target supplying a large group of independent retailers.

Strengths of the Business

Strong presence and brand
Great staff
Documented operating systems
Reliable financial reporting
Excellent location
Quality suppliers

Competition

According to the Vendor, the office furniture market is tough to enter as a new competitor. Over the last 15 years the only new players of any significance to enter the marketplace have been Warehouse Stationery and perhaps Office Max.

Office furniture is price, quality and service competitive and the longevity of this business is testament to the businesses’ ability to deliver on all counts.

Direct competition to this business comes from McGreal’s (although competition from McGreal’s is not likely to be sustained) and Systems. Warehouse Stationery, despite their presence, has a budget range of furniture and has made a very small impact on this business’s market share.

The differentiated product of each of the competitors, and Chinese manufacturers tending to supply only one design of each product to a single company in New Zealand reduces direct price/product focused competition within the market.

Major Suppliers

As is typical within the industry, there are no contracts with suppliers. Instead there is a long term, loyal working relationships with all suppliers. The businesses’ main supplier of commercial furniture is Westtec. Other suppliers, in no particular order are Damba, Rola Martin Lee, Fredman’s, Eden Furnishing, Mini Screens, Sea Quest, and Malaysian, Chinese and Taiwanese suppliers.

Stock

Currently stock is about $190,000 (but this varies widely based on import volumes). Stock supplied by local suppliers is delivered on a ‘just in time’ basis. Popular items are held in stock in showroom.

Summary

This business would suit some-one with a mix of sales and marketing skills wanting a business with a regular, steady clientele and the opportunity to build on this company’s reputation for quality and dependability.

Price

Intangible Assets	$170,000.00
Tangible Assets	$40,000.00
Stock	$190,000.00

Total Price	$400,000.00

Contact Peter Nola
09 630 1600, 021 507 313

Ref: 22358

Click here to learn more

Interest rates will rise - gradually

Richie Lowe

John Paine B.Sc Dip BIA

In last month’s newsletter I talked about a series of articles on interest rates published by Westpac economists Brendan O’Donovan and Dominick Stephens. I said they should be compulsory reading for everyone who is in business (or owns a house).

A more recent article entitle “Raising interest” shows why the New Zealand banking system has only limited scope to raise funds from local deposits by paying higher interest rates to investors placing money on term deposit.

The banking system here sources about 45% of its funding from retail deposits such as credits in personal and business bank accounts and term deposits. The balance is sourced from wholesale markets, most of which comes from offshore. Since the Global Financial Crisis it has become more difficult and expensive for banks to raise money in that way.

Adding to the fund raising difficulties banks have, the Reserve Bank regulations that have sprung from the Global Financial Crisis make retail funds significantly more attractive to banks than wholesale funds. This is because banks now have to have 65% of their funding from “core” sources and wholesale funds lose their core status when there is 6 months remaining to maturity, whereas most retail deposits are counted at 90% core right up to the day of maturity.

Consequently banks are competing more for retail deposits and this has driven up the interest rates the banks are paying for them. But the Westpac economists have found that retail deposits are relatively unresponsive to higher interest rates, so they need to pay higher rates for funds from retail or wholesale sources.

The higher cost of funds will be passed on to borrowers so the ultimate result of the Global Financial Crisis will be higher interest rates and little change in the retail/wholesale mix of bank funding.

For a copy of this latest and the previous articles look under NZ Economic Bulletins here on Westpac’s web site here.

But don’t expect a rapid rise. The consensus amongst virtually all commentators is the Official Cash Rate will remain as it is for the rest of this year and probably until March 2011.

And there’s no indication offshore rates will rise rapidly as the Western economies continue to experience problems. The latest news from the U.S. is a statement from the Fed saying more action was needed to bring down America’s unemployment rate, which raised the prospect of more quantitative easing – a synonym for printing money – and led to a further drop in value for the U.S. currency. The NZ dollar hit 74.4 cents last Friday.

The perceived lag in any increase in offshore or domestic rates indicates floating rates here will remain on hold for some months. Fixed term rates – which are more a function of offshore interest rates – also look to be on hold and will only rise if there is a substantial turnaround in sentiment on the global economy.

Demand for money dropping

Meanwhile the business lending market has reduced by $5.5 billion over the last years. Partly this is because banks remain reluctant to lend to any but the most credit worthy customers.

But there’s another reason it’s down and that’s because people are less willing to borrow. At Global Pacific we’re finding unusually low demand for business finance. This may be due to a number of factors, but in general is seems businesses continue to prefer to reduce debt than take it on.

This doesn’t reduce the demand for temporary finance for business, for example to stock up for the coming Christmas season. Fortunately there are lenders out there who specialise in this form of finance.

Like to know more?

If you’ve got any questions about how to raise finance for business or property phone us on 09 303 3700 or enquire online here. In either case tell us you read about our services through ABC business.

John Paine is a consultant for Global Pacific Corporation. He has over 30 years experience in the merchant banking and finance industry.