INSIGHTS BLOG

WHOSE RESULT IMPRESSED THE MOST?

Roy Davidson, 4 March 2019

The calendar flicking over to March brings about the end of yet another reporting season in New Zealand. Over the past month we have heard from a large number of companies, with the bulk reporting results for the six months to 31 December.

These company results are one of the best opportunities for investors to gain an insight into how companies are tracking and are therefore closely watched by the market. As per usual, some companies impressed with a strong set of numbers, while the performance of others disappointed investors.

Who impressed the most?

It’s hard to look past a2 Milk in answering this question, with shares in the company spiking by more than 10% following a stronger than expected interim result and improvement in full year profit guidance.

There have been some concerns about slowing Chinese consumer demand recently, with some of a2 milk’s peers finding the going tougher. However, a2 Milk’s result showed no signs of this with the company continuing to execute flawlessly, lifting its revenue by 41%, resulting in a 55% increase in net profit after tax.

One of the key positives from a2 Milk’s result was the improvement in the company’s share of the Chinese infant formula market, with this now standing at 5.7%. Importantly, china label infant formula sales (in other words, product sold direct into China not via the grey channel) continued to grow strongly, with sales up 83%. The company is now distributing its infant formula in more than 12,000 specialist Mother and Baby Stores in China which bodes well for future growth in the region.

Cinema software provider Vista Group, which recently re-entered the NZX 50, also impressed with its full year result. Vista reported a 21% lift in net profit after tax, driven by its core cinema business which provides software for cinema operators (such as scheduling and ticketing). Vista now has a 48.1% share of the large circuit cinema market and added 814 cinema sites over the course of the year.

This strong performance, along with a better than expected result for the company’s Movio (marketing platform) business, saw the company provide strong profit guidance for the year ahead. Shares closed 12.5% higher on result day.

And who disappointed?

Just as there will be companies who impress, others will inevitably disappoint at results time.

One company to do so was serial underperformer Fletcher Building. While Fletcher Building’s 8% decline in operating profit wasn’t unexpected, a deteriorating operating environment in Australia, along with the lack of any announcement in relation to returning cash to shareholders following the sale of the company’s global businesses, disappointed investors. With investors still uncertain about the company’s outlook, shares fell 5.6% on result day.

Another company to disappoint was casino operator SkyCity. This one is potentially a touch unfair given the company had earlier pre-released its strong set of numbers and delivered an 11.4% increase in normalised net profit after tax. However, a softer outlook for the second half and another delay in the completion for the New Zealand International Convention Centre was enough for shares to fall 4% on the day.

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