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Allan Gray cuts NZME stake after weak earnings trigger 22% slump

Thursday 6th September 2018

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Australian investment firm Allan Gray has halved its stake in NZME since the local media group reported underwhelming earnings last month, spurring a 22 percent slide in the share price. 

The Sydney-based fund manager was NZME's biggest shareholder with almost 16 percent when it was spun out of APN News & Media in 2016. Allan Gray sold down to about 12 percent since the demerger, but after series of trades since Aug. 30 has whittled that down to 5.9 percent. 

Auckland-based NZME posted a 53 percent slide in first-half profit to $3.7 million, as increased redundancy costs and consultant fees for the on-again/off-again Stuff merger added to weaker radio advertising revenue and greater investment in its digital classified ventures. The media group paid a smaller interim dividend than anticipated, drawing down more heavily on bank debt to do so due to the timing of a tax bill, and said it was reviewing its dividend policy and capital needs. 

The result fell short of analyst expectations and First NZ Capital cut its target price to 76 cents from 83 cents, while retaining a 'neutral' rating. The share price dropped as much as 22 percent to 65 cents on the NZX since the announcement. It was recently up 4.6 percent to 68 cents. 

The dual-listed stock fell as much as 25 percent to 57.5 Australian cents on the ASX and recently traded at 60.5 Australian cents across the Tasman.

Substantial shareholder notices show Allan Gray sold A$3.15 million of shares at average price of 59.5 Australian cents and A$4.03 million at 61.2 cents. The investment firm wasn't immediately available to comment. 

Other investors have used the slump as an opportunity to buy in, with Sydney-based boutique fund manager Renaissance Smaller Companies building a 6.8 percent stake, buying A$2.17 million of shares at 59.5 Australian cents apiece. Similarly, recently appointed director Barbara Chapman bought 50,000 on market on Aug. 29 at an average 65.8 New Zealand cents apiece. 


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