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MARKET CLOSE: NZ shares down on Kathmandu, Fisher & Paykel results while A2 gains

Tuesday 21st November 2017

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New Zealand shares dropped, led lower by Kathmandu Holdings and Fisher & Paykel Healthcare following trading updates, while A2 Milk Co met investor hopes at its annual meeting today.

The S&P/NZX50 Index fell 1.32 points, or 0.01 percent, to 8,088.48. Within the index, 25 stocks fell, 19 rose and six were unchanged. Turnover was $182.7 million.

Kathmandu Holdings led the index lower, down 4.6 percent to $2.48. The outdoor equipment retailer, set to hold its annual meeting on Friday, said its first-quarter earnings were up despite sales dipping as it widened margins by selling less sale stock.

In the 16 weeks to Nov. 19, group sales rose 0.6 percent at constant exchange rates. In Australia, its largest market, same-store sales grew 2.9 percent in the quarter while they dropped 10 percent in New Zealand. Gross margin expanded 240 basis points, or 2.4 percentage points, with the level of clearance stock about 40 percent lower than a year earlier, it said.

"Sales for the first 16 weeks were positive in Australia but really negative in New Zealand, and I think the market may have just grabbed onto that figure and thought it's quite a significant pullback," said Peter McIntyre, investment adviser at Craigs Investment Partners "That can be readjusted but that figure has scared some investors, and with retail being a particularly difficult industry to be involved in, with the advent of online, I think the market was still looking for better from Kathmandu."

Fisher & Paykel Healthcare dropped 4.5 percent to $13.25. New Zealand's biggest listed company increased first-half profit 4 percent  to $81.3 million, widened its margins, and lifted its forecast for full-year earnings to the top end of its range.

The latest earnings included $12.2 million of patent litigation costs over disputes with rival Resmed compared with $2.4 million of costs a year earlier, and excluding those, profit would have risen 13 percent, it said. First-half revenue lifted 8 percent to $458.4 million. The company had forecast first-half revenue of about $460 million and profit of about $80 million. 

"We're seeing underlying growth slow a little, earnings were slightly ahead of guidance so the slowdown is largely due to the impact of litigation costs," McIntyre said. "The share price prior to the first half was priced to perfection. It was a reasonable result, but I think the market was looking for more."

A2 Milk Co was the best performer, up 5.4 percent to $8.26. The milk marketer said both revenue and net profit jumped in the first four months of the current financial year as it continues to benefit from strong demand for its infant formula. 

Revenue climbed 69 percent to $262.2 million in the four months ended Oct. 30 from the same four months a year earlier, while net profit more than doubled to $52.3 million, the company told shareholders at today's annual meeting in Auckland. 

"It's really positive from their perspective, their comparatives from the PCP are positive," McIntyre said. "Impressive, but they need to be to keep the share price moving. It's all about momentum for them and this set of numbers have given them that as they head into their six-monthly." 

Restaurant Brands rose 2.7 percent to $6.82 and Metro Performance Glass advanced 2.2 percent to 94 cents.

Arvida Group gained 0.9 percent to $1.18. The retirement village company reported a decline in first-half profit on lower valuation gains and higher employee costs after a pay equity deal. Net profit fell to $14.5 million in the six months ended Sept. 30 from $19.4 million a year earlier. The result included an $8.9 million valuation gain on its investment properties from a $14.3 million gain a year earlier as the property market shows signs of slowing after several years of solid growth.

"A lot of retirement village operators and property companies have ridden the wave of higher property re-valuations, these are starting to lessen now and have not such a material impact on their results," McIntyre said. "Demand occupancy is quite high, it is a reasonable result particularly if you look at the underlying earnings."

Argosy Property was unchanged at $1.045. It posted a 58 percent decline in first-half profit as the firm became the latest listed property investor to report a little-changed portfolio valuation after several years of gains, and was faced with smaller rental income. 


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