MARKET CLOSE: NZ shares fall; Air NZ dips on gloomy outlook, investors cash in recent gains

Friday 26th August 2016

New Zealand shares fell as Air New Zealand declined after warning its record profit might not be repeated and investors cashed in recent gains in an earnings season where companies have responded to increasing demand for yield with bigger dividend payments. Sky Network Television gained after beating earnings expectations.

The S&P/NZX 50 Index declined 35.98, or 0.5 percent, to 7391.3. Within the index 28 stocks fell, 17 rose and six were unchanged. Turnover was $160 million.

Air New Zealand fell 0.5 percent to $2.22 after the national carrier reported a record profit and declared a special dividend, though warned cheap fuel and the country's tourism boom was attracting more foreign carriers which would weigh on the company's earnings in 2017.

"That looks to be showing the business is under pressure from a lot of competition around in the market," said James Lindsay, who helps manage $400 million of NZ equities at Nikko Asset Management. "There have been a lot of new routes opened up on the international side and their domestic competition is doing pretty well."

A2 Milk Co led the market lower, falling 3.3 percent to $2.05 after reporting a return to profit earlier this week, while Metlifecare dropped 3 percent to $6.08 having posted increased earnings and dividends when it reported on Wednesday.

Nikko's Lindsay said the benchmark index had been near record highs with New Zealand's relatively strong economy attracting investors in search of yield.

"Corporate management teams have realised that yield and capital structure are fairly well supported by the market, and you've certainly seen that a number of those stories that have continued that theme with yield," he said.

Sky TV rose 2.8 percent to $4.82 after the pay-TV operator posted a profit of $147.1 million, which included one-off costs associated with a planned merger with Vodafone New Zealand, while managing to increase subscriber numbers to 852,679.

Lindsay said Sky TV had predicted a decline in subscriber numbers in its merger documents and investors had welcomed its ability to maintain its customer base.

Port of Tauranga rose 1.5 percent to $19.65, Vital Healthcare Property Trust gained 1.32 percent to $2.31 and Tegel Group increased 1.2 percent to $1.76.

Fletcher Building declined 0.9 percent to $10.49 and Spark New Zealand increased 0.6 percent to $3.925.

Outside the benchmark index, CBL Corp gained 2.8 percent to $2.90 after lifting first-half operating earnings on increased gross written premium and affirmed guidance for annual profit of $40.4 million. Its first-half bottom line was impacted by a $4.4 million foreign exchange loss.

Vista Group International fell 7.5 percent to $6.20 after the cinema software developer more than doubled first-half profit as revenue was bolstered by a series of recent acquisitions and affirmed guidance for annual sales to rise by 20-to-30 percent.

NZME gained 1.2 percent to 83 cents after the publisher and radio broadcaster increased first-half earnings 0.5 percent as it stripped out costs faster than advertising revenue declined.

Delegat Group was unchanged at $6.10 after the winemaker increased its annual dividend after confirming a record operating profit.

Seeka Kiwifruit Industries was unchanged at $4.50 after the fruit grower almost doubled first half profit and raised its interim dividend as its benefited from its Australian acquisition and record fruit crops.

Cavalier Corp gained 1.1 percent to 89 cents after the carpet maker returned to profit and said it was continuing to put the business on a stable footing.

Marsden Maritime Holdings was unchanged at $3.30 after the half owner of Northport boosted annual profit 44 percent to $12.1 million as the port operation handled record cargo volumes.

BusinessDesk.co.nz

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