INSIGHTS BLOG

WEEK IN REVIEW: 25 FEBRUARY - 1 MARCH

Research Team, 1 March 2019

It was another busy week on the reporting calendar in both New Zealand and Australia. 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.

Cinema software provider Vista Group, which recently re-entered the NZX 50, impressed the market 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.

Freightways also posted a good result.

Reporting a 6% lift in first half profit thanks to strong revenue and volume growth. Net profit rose to $33.4m from $31.4m on the prior comparable period, while operating earnings gained 6.0% to $38.6m. Shares closed 1.2% higher following the result.

Tourism Holdings posted a slightly weaker than expected result.

The company lowered its annual earnings guidance to around $32m, the bottom of its $32m - $34m forecast range. Chief executive Grant Webster said Tourism Holdings was still experiencing growth in forward bookings, despite growing uncertainty in international tourism markets. Shares tumbled 6.7% on the day, but managed to recover some of these losses later in the week.

Air New Zealand announced earnings before taxation of $211m for the six month period ending December 31, compared to $323m in the prior period.

Chief Executive Officer Christopher Luxon acknowledged the rate of growth in the New Zealand market is slowing from previous years to be more in line with other developed markets. Consequently, the airline will be reviewing its network, fleet and cost base to reflect the new environment. Shareholders will receive an interim dividend of 11 cents per share. At the time of writing, shares were down 4.5% for the week.

Retirement village operator Metlifecare saw underlying net profit increase.

From 15% to $41.7m in the first half, driven by development profits. The company said growth in the value of properties slowed, while the cost of property maintenance and wages increased slightly. Shares slipped 2.5% on the day.

Meanwhile, enterprise software company Gentrack tumbled 7.3% on Tuesday.

After downgrading its guidance at its annual meeting. The company expects earnings will be about 20% lower in the six months ending March, due to extra investment in staff.

Off the main index, Comvita slumped almost 20% Tuesday.

Closing at its lowest in almost four years, after reporting a first half net loss of $2.7m on revenue of $77.7m. The company said its change in approach with sales in China had taken longer than expected to implement. Meanwhile, there had been no orders from one major existing USA customer, along with another poor pre-Christmas honey harvest, contributed to the poor result. The honey maker said it would not pay an interim dividend, compared with a 4 cent payout last year.

In other corporate news, Fonterra increased its 2018/19 forecast Farmgate Milk Price range.

Increasing to $6.30-$6.60 per kgMS, up from $6.00-$6.30, and downgraded its forecast earnings down to 15-25 cents per share vs. previous guidance of 25-35cps. Chairman John Monaghan said the improved milk price forecast reflects the increases in global milk prices over the last quarter and stated it will not be paying an interim dividend.