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MARKET CLOSE: NZ shares fall as Spark earnings disappoint, Sky TV in merger spat

Thursday 16th February 2017

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New Zealand shares dropped, led by Spark New Zealand as company earnings show the telecommunications sector is experiencing stiff competition, while Sky Network Television fell as its merger continues to attract opposition. A2 Milk Co and Fletcher also declined.

The S&P/NZX50 Index fell 80.05 points, or 1.1 percent, to 7,099.98. Within the index, 22 stocks dropped, 17 rose and 11 were unchanged. Turnover was $134.4 million.

Spark was the worst performer, down 4 percent to $3.56. The country's biggest telecommunications company lifted first-half earnings 3.5 percent to $178 million as the acquisition of Computer Concepts bolstered revenue from its IT services unit and got an early dividend from its stake in the Southern Cross trans-Pacific cable, and affirmed its annual earnings outlook.  

"It probably, as a headline number, looked to be in line with expectations," said James Lindsay, senior portfolio manager at Nikko Asset Management. "The Southern Cross dividend was a bit higher than people's expectations, the manager suggested that shifted about $9 million from the second half into the first half, and they've lost a bit of share of the mobile market and broadband as well, which probably surprised the market a bit, and they upped their capex. A combination of that has led to a mild disappointment in the result.

"Overlaying that, Telstra announced their result which was a poor result which has driven both stocks down. It shows the competitive dynamic in the industry still remains pretty high - Spark have talked about further competition in the market hurting them and broadband remaining competitive," Lindsay said. Dual-listed Australian telco Telstra fell 4.7 percent to $5.25 on the NZX. 

Sky TV dropped 2 percent to $4.50. Sky says it won't delay a merger with Vodafone New Zealand to give other telecommunications companies, including Spark, time to appeal it in court if the transaction is approved by the Commerce Commission. Simon Moutter, Spark chief executive, told an analyst briefing he is considering options after that rejection and will likely make a decision today.

"It was up extremely strongly and unusually yesterday, so it's given up its performance," Lindsay said. "It was an odd request that Spark has made to Sky, and it may suggest it's going towards a decision that may reflect the merger going ahead."

A2 Milk dropped 3.9 percent to $2.46, Fletcher Building fell 2.7 percent to $10.11, and Meridian Energy declined 2.2 percent to $2.64.

Precinct Properties New Zealand dipped 0.4 percent to $1.23. The listed commercial property investor lifted first-half profit 12 percent to $39.1 million as its overall occupancy rate rose to 99 percent and demand for its Commercial Bay development remained strong.

Ebos Group was the best performer, up 2.2 percent to $18.44. Air New Zealand rose 1.9 percent to $2.135 and Mainfreight advanced 1 percent to $21.50.

Units in the Fonterra Shareholders' Fund gained 0.3 percent to $6.22. The Auckland-based cooperative said in its latest Global Dairy update to the NZX that it sees a smaller decline in local milk production after better-than-expected collections followed unfavourable weather during peak milking months. Fonterra had been picking the 2017 season collection to fall 7 percent after a very wet spring hurt North Island milking operations, but is now forecasting a 5 percent decline as "collections have shown signs of improvement" since then.

Outside the benchmark index, Skellerup Holdings sank 6.2 percent to $1.51. First-half profit fell 7.5 percent to $8.9 million due to weaker sales to the mining sector in Australia and higher finance costs for a new factory in Christchurch. Revenue declined 9.5 percent to $97.3 million. The result is weaker than the $100.5 million revenue and $10 million profit forecast by brokerage Forsyth Barr.

Abano Healthcare was unchanged at $8.70. Healthcare Partners Holdings will consider mounting a full takeover bid for Abano provided it can get access to the medical investor's books, and has raised its bid for a controlling stake to $10.16 per share from $10 in the meantime. Healthcare Partners has attracted 1 percent of Abano's shares since mounting its offer to build a 50.01 percent stake in the business. The Hutsons and Reeves already own about 19 percent, meaning acceptances would probably be scaled if they achieve control. The offer closes on March 3. 

 

BusinessDesk.co.nz

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