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MARKET CLOSE: NZ shares fall; Chorus at month-low, Metro Glass drops, Metlifecare rises

Monday 28th August 2017

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New Zealand shares fell, led by Chorus which hit a one-month low, while Metro Performance Glass extended last week's slide and Metlifecare rallied.

The S&P/NZX 50 Index dropped 30.94 points, or 0.4 percent, to 7,826.87. Within the index, 25 stocks fell, 19 rose and six were unchanged. Turnover was $125.9 million.

Chorus led the index lower, down 5.6 percent to $4.39. It lifted annual profit 24 percent to $113 million after cutting costs and changing the way it capitalises some labour costs, making up for a decline in connection numbers that's been driven by the network operator's biggest customer, Spark New Zealand. It forecast gross capital expenditure for 2018 of $780-$820 million, up from $639 million in 2017.

"The thing that surprised people is the big step up in capital expenditure they announced - it's a lot higher than analysts have generally been going for, it's the key surprise that caught people out a bit," said Craig Stent, executive director and head of equities at Harbour Asset Management. "The result was in line with expectations, but they have to spend a bit more money to catch up with what they need to do. They've kept their dividends in line, haven't changed their policy, but it is for modest growth over time so people worry about that being at risk at some stage."

Metro Performance Glass dropped 3.5 percent to $1.09, A2 Milk Co fell 2.8 percent to $5.58, and Westpac Banking Corp dropped 1.8 percent to $34.48.

Metlifecare was the best performer, up 3.4 percent to $6.07. The retirement village operator reported a 10 percent increase in full-year profit to $251.5 million on the back of resale gains and wider development margins and said it isn't yet seeing any impact from a slowdown in New Zealand's housing market. Underlying profit, which removes unrealised gains in asset values, was $82.1 million, up 24 percent on the year.

"You've got the supportive property market generally in Auckland particularly, they're more Auckland-based than other operators," Stent said. "What has surprised people is the developer margins they're getting out of new villages, that's a bit higher than expectations. Clearly it has had a tough journey compared to Summerset and Ryman over the past few years, but it has repositioned its business, it's getting a bit more into development and care and maybe this is the first step in them showing they can actually roll that product out and successfully sell it at good margins." 

Summerset Group rose 0.2 percent to $5.13 today and Ryman Healthcare dropped 1.6 percent to $9.10.

Heartland Bank rose 2.1 percent to $1.93, Comvita gained 1.7 percent to $7.32 and SkyCity Entertainment Group advanced 1.3 percent to $3.97.

Restaurant Brands New Zealand rose 0.2 percent to $6.38. It has extended its KFC footprint across the Tasman, buying 10 stores from Yum! Restaurants International for A$27.5 million.

The acquisition lifts its total number of stores in the state of New South Wales to 57. The new stores are expected to generate annual sales of A$29 million and earnings before interest, tax, depreciation and amortisation of A$4.5 million.

"The master franchise operator Yum, which owns quite a few stores in Australia, has been slowly selling off selective sites off to two players - Restaurant Brands and a group called Collins Foods in Australia," Stent said. "We could expect to see more from Restaurant Brands in terms of acquisitions in Australia."

Outside the benchmark index, Methven shed 5.4 percent to $1.06. The shower and tapware designer's annual profit fell by almost a quarter in a "very disappointing year" but expects 2018 to deliver 10 percent profit growth as it starts a new business plan.

Net profit fell 24.5 percent to $5.8 million, or 15.1 percent on a constant currency basis, in the year ended June 30, the Auckland-based company said in a statement. Revenue fell 5.4 percent to $100 million while net debt rose 23 percent to $27 million.

Delegat Group dropped 0.7 percent to $6.80. New Zealand's largest listed winemaker reported a 6 percent gain in operating profit to a record $38.5 million and said it expects to achieve at least as much in the 2018 year, subject to foreign exchange movements.

Sales rose 3 percent to $247.7 million as the volume of sales increased 10 percent and the value fell 7 percent. Of the drop in value, 4 percent related to foreign exchange movements and 3 percent to the company's underlying price/product mix, it said.

Abano Healthcare rose 0.2 percent to $9.30. The Australasian radiology and dental centre operator successfully completed the shortfall bookbuild component of the $35 million capital raise announced on July 26, with strong investor support. The clearing price under the shortfall bookbuild was $9.25 per share, a premium of $1.10 per share over the application price of $8.15 under the offer.


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