Big Auckland property company hit hard, Xero sees subscriber growth slow, as Covid effects become clear
Precinct Properties profit dives after revaluations
Precinct Properties has reported a sharp decline in net profit, which slid 82 percent to $35.1 million for the year ended June, from $190.4 million last year. While income improved by 12 percent to $82.7 million, after accounting for non-cash items, it was revaluations of its properties that resulted in a significant hit to its bottom line.
The biggest decline was to its brand new Commercial Bay precinct in the Auckland CBD, which was revalued at $1 billion, or $80.6 million under book value. Nearby HSBC House was also impacted, valued at $102 million, versus a book value of $130.4 million.That combined for a net 2.2 percent valuation loss across the portfolio, with net asset value a share at $1.45, down from $1.49 at June 2019.
Operating income was $105.8 million, with an additional $26.7 million being sought in claims against Commercial Bay contractor Fletcher Construction. Precinct said it was in discussions to agree the final amount due from the building contractor.
Chief executive Scott Pritchard said he was pleased with the company’s performance, particularly given the challenges under the Covid disruption, with two major projects completed during the year – Commercial Bay in Auckland and the first stage of Bowen Campus in Wellington. Overall, the company achieved a 98 percent occupancy for the year, with a weighted average lease term at 8 years, he said.
Precinct’s co-working and shared space subsidiary, Generator, meanwhile, had been a positive performer with a contribution to net operating income of $1.8 million. Pritchard said the firm, which occupies just under 14,000 sqm of flexible space through the Auckland CBD, was at 89 percent occupancy – up slightly on 2019 despite the impacts of Covid.
Precinct shares closed up 2.7 percent at $1.70.
AMP Wealth Management earnings decline
AMP Wealth Management New Zealand has reported a 16 percent fall in first-half operating earnings to $19 million and a 3 percent fall in assets under management to $12.4 billion despite positive funds inflow of $21 million.
While investment returns deteriorated during the year, AMP recorded a $262 million funds outflow in the six months ended June last year. Its Australian parent has declared a A$544 million capital return to shareholders through a mix of special dividends and a share buyback and reported a A$203 million net profit for the six months compared with a A$2.29 billion net loss in the same six months last year.
Xero subscriber growth slows, but cashflow improves
Online accounting software provider Xero has seen its subscriber growth slow markedly in the first four months of its current financial year due to the impact of coronavirus.
Net subscriber growth in the four months ended July was 96,000, taking total subscribers to 2.38 million, chief executive Steve Vamos told shareholders’ at the company’s online annual meeting.
The subdued growth rate compares with a 228,000 net increase in subscribers in the six months ended March, and the 239,000 in the six months ended September 2019.
Vamos said that over the four months, the company saw stronger net subscriber additions in Xero’s Australia and New Zealand segment compared to the international segment. He said this was due to both governments easing lockdown restrictions at an earlier stage than other countries, as well as seasonality within the Australian business cycle due to the tax year ending in June.
Chief financial officer, Kirsty Godfrey-Billy, told the meeting Xero has total liquid resources of $686 million, including cash and short-term deposits of $536 million at March 31. Xero generated $27 million in free cash flow in the year ended March, up $20 million from the previous year.
Xero shares, which are listed on the ASX, closed at A$89.31, up 0.5 percent.
Ryman continues to pursue growth despite Covid challenges
While Covid had created its fair share of challenges for New Zealand’s largest retirement village operator, Ryman Healthcare, the company said it had also provided some unexpected marketing value by promoting the benefits of living in its managed properties where residents enjoy security and peace of mind.
Addressing the company’s AGM yesterday, Ryman chair Dr David Kerr told shareholders sales had recovered well in NZ following the end of the Covid lockdown in June and that demand for aged care facilities remained strong.
Kerr noted the most impacted region for Ryman currently is Victoria, where it has two operational villages with 750 residents and 550 construction, village and office staff. It currently represents six percent of Ryman’s total resident population and the region remains a focus for future growth. Kerr said the latest lockdown measures announced by the Victorian State Government last week will restrict construction and sales activity for approximately six weeks but that it was too early to say what the effect on this year’s build volume will be. Ryman originally planned to have five villages open by the end of the year, but this is now likely to be delayed due to Covid.
In New Zealand, the company said it is developing seven sites, four of which are in Auckland, and one each in Hamilton, Hastings and Christchurch. Ryman said total resales and new sales for the four months to the end of July were higher than in the same period last year.
Ryman Healthcare shares closed down 1c at $12.51.
NZX benefits from multiple capital raisings
NZX has seen its first-half profit increase by 41 percent due to multiple capital raisings earlier in the year as listed companies sought to repair damaged balance sheets, with a significant rise in trading volumes.
Total operating earnings for the half-year ended June rose by 21.5 percent to $17.6 million, which is likely to see the stock exchange operator on track to achieve a full year profit of around $33.5 million.
Almost $6 billion of urgently needed cash was raised by listed companies in the space of 10 weeks, helping them to significantly improve their liquidity. The new shares flowed through into increased trading on the secondary market, where revenue lifted 47.8 percent to $10.5 million. Trading volumes were up 53 percent with a new fee structure also driving cash for the exchange.
Revenue from listing fees rose 8.1 percent to $13.1 million. The annual fees are based on a company’s market capitalisation as of May 31 the prior year.
The growing popularity of new online trading platforms such as Sharesies had seen average daily trades across the half-year increase by more than 350 percent, to approximately 48,000 per day. Daily volume peaked at 112,110 trades, eclipsing the previous all-time record of 37,483 in December last year.
NZX Chief Executive Mark Peterson said the growing popularity of online retail trading had helped spur retail participation to record levels. However, the sudden surge of trading had overwhelmed the NZX’s clearing and settlement system, which Peterson admitted had struggled to cope with the volume. As a result, the NZX has commissioned an independent review with a new system planned to go live in the first half of next year.
NZX shares closed up 2.6 percent at $1.57, a two year high.
Microsoft’s latest mobile phone offering set to be released next month
Microsoft’s first Android phone, the Surface Duo, is set for release on September 10, the company announced yesterday. Priced at US$1399, the company said in a blog post that its dual screen is “a major new form factor” doubling as a folding tablet as well as being a phone. Each of the Surface Duo’s two screens are 5.6-inch displays that combine into a tablet-like 8.1-inch display when unfolded. It has a single camera that supports recording 4K video.
The hinge also works both ways, so you can close the phone like a book or open it fully so it’s a double-sided phone. Microsoft is promoting the Duo as a productivity device. The company said it had optimised the entire Office Suite for the Duo, helping people to make video calls and get their work done on the go.
Microsoft will hope its latest Surface offering is more successful than an earlier version which involved a US$1 billion write-down on the product. However, despite its failure, the popularity of the two-in-one laptop-tablet idea has been incorporated into its latest device.
US markets reclaim pre-Covid February highs
It took less than six months, but US equity markets have all but reclaimed their February highs, an outcome few investors might have believed possible in late March when they were down more than 35 percent. On Wednesday, the S&P500 closed at 3380, just 6 points off its closing high of 3386 on February 19.
Spurred by record stimulus from the US Federal Reserve and trillions of dollars in government spending, US investors now have to contend with a Presidential election and the uncertainty of what a new administration could mean for markets, should Donald Trump fail to win a second term in office. And while the coronavirus outbreak in the US continues to grow, investors seem resigned to the fact a vaccine will emerge in the coming months, if the experts are to be believed.