Business & Investing: Total retail sales down just 0.2 percent for the year to October, but Europe’s economic activity falls again due to the resurgence of Covid-19

Property valuation increases help Kiwi Property report a big lift in after tax net profit
Third quarter pokie stats reveal massive gambling spike during lockdown
Third Covid-19 vaccine developed successfully
Euro zone economic activity falls once again due to new lockdowns

September quarter retail sales bounced back strongly from the impact of the lockdown, recording the largest rise for the quarter since the series began in 1995, Statistics New Zealand (SNZ) said.

Spending on major household items, vehicles, and groceries contributed to a 7.4 percent ($1.8 billion) rise in total retail sales compared with the September 2019 quarter.

The figures are actual – rather than seasonally adjusted – due to the volatility that has been caused by the lockdown measures.

Despite the rise, it still falls short of making up for the historic fall of 15 percent ($3.6 billion) in the Covid-19-affected June 2020 quarter, according to SNZ.

Total retail sales for the 12-month period from October 2019 to September 2020 were $97.6 billion, down 0.2 percent.

By industry, the main movements included electrical and electronic goods retailing up 28 percent, recreational goods up 17 percent and hardware, building and garden supplies up 14 percent. Supermarket and grocery shopping were up almost 5 percent.

Food & beverage services and accommodation retail remain well below pre-Covid-19 levels and may take some time to recover given the weak outlook for household incomes and limited tourism spending.

Property valuation increases help Kiwi Property report a big lift in after tax net profit

Kiwi Property yesterday announced an operating profit before tax of $55.2 million, down 8.4 percent on the same period last year. However, net profit after tax rose 47.5 percent to $54.2 million, assisted by a fair value gain on investment properties.

Kiwi Property Chief Executive Officer Clive Mackenzie said proactive steps taken early in the financial year had enabled the company to navigate the financial impacts of Covid-19.

“While operating profit fell for the period, it’s important to consider the result within the context of the lockdowns that took place in the first half. Looking ahead, we’re focused on delivering a solid performance through the remainder of the 2021 financial year, capitalising on our diversified property portfolio and the successful opening of Sylvia Park Level 1”

As at September 30, the company’s mixed use, office, retail and other investment properties recorded an $11.8 million fair value uplift. Net tangible assets per share also increased marginally to $1.29.

Kiwi Property’s office assets proved the most resistant to the economic impact of the pandemic, increasing in value by 4.3 percent to $950 million. In contrast, the Company’s mixed-use and retail portfolios declined in value by 0.9 percent (to $1.55 billion) and 3.3 percent (to $469 million) respectively.

“While the uncertainty caused by Covid-19 continues to impact property values, it’s encouraging to see a firming of capitalisation rates and a general stabilisation of asset pricing across our portfolio.”

The cost of the rent relief measures introduced to support tenants post-lockdowns contributed to a 5.3 percent reduction in net rental income to $84.9 million.

Kiwi Income Property said the cash cost of the tenant support package remains within the $20 million provision previously outlined and will have a first half pre-tax accounting impact of approximately $8.1 million. However, these rent relief costs are expected to be partially offset by the reintroduction of depreciation allowances for commercial buildings, expected to increase Kiwi Property’s full year after-tax earnings by approximately $4.5 million.

At the half year, Kiwi Property’s assets were 99.1 percent occupied, with a robust weighted average lease expiry of 4.7 years.

Kiwi Property shares closed up 1c at $1.285.

Third quarter pokie stats reveal massive gambling spike during lockdown

The latest quarterly statistics for pokies in pubs and clubs reflect the ongoing impacts of Covid-19 restrictions as New Zealand has moved through the alert levels, according to the Department of Internal Affairs, which oversees the sector.

Statistics for the September quarter show a significant increase in Gaming Machine Profits (GMP) than was the case between the June and September quarters over the past five years, as New Zealanders were able to access Class 4 venues which were closed for seven-eight weeks during the Covid-19 lockdown, and then again as the Auckland region was moved back into Alert Level 3 in August.

The headline statistics for the September quarter show GMP increased by 116 percent ($130,661,758) compared to an average increase of 3.2 percent in each of the previous five June to September quarters.

The actual GMP figure for the September quarter ($243,250,908) is 8.1 percent ($18,295,621) higher than what was forecast, based on the March 2020 quarter and historic gambling patterns.

Third Covid-19 vaccine developed successfully

British pharmaceutical giant AstraZeneca is the latest company to claim success in developing a Covid-19 vaccine after providing interim analysis of clinical trials showing an average efficacy of 70% in protecting against the virus.

It comes after a string of encouraging vaccine results in recent weeks, following late-stage trial readouts from Pfizer-BioNtech and Moderna.

Both Pfizer and Moderna reported preliminary results showing that their respective Covid vaccines were around 95 percent effective.

The AstraZeneca vaccine, developed in collaboration with the University of Oxford, was assessed over two different dosing regimens.

One dosing regimen showed an effectiveness of 90 percent when trial participants received a half dose, followed by a full dose at least one month apart. The other showed 62 percent efficacy when given as two full doses at least one month apart.

The combined analysis from both dosing regimens found average vaccine effectiveness of 70 percent. No hospitalisations or severe cases of the disease were reported in participants receiving the vaccine.

More than 23,000 volunteers took part in the trials, conducted in the UK and Brazil, with more data to be collected from around the world in the coming weeks.

Unlike the Pfizer vaccine announced two weeks ago, AstraZeneca says its vaccine can be stored, transported, and handled at normal refrigerated conditions (36-46 degrees Fahrenheit) for at least six months and administered within existing healthcare settings.

Euro zone economic activity falls once again due to new lockdowns

Economic activity in the euro zone sank once again in November after governments introduced new lockdowns and social restrictions to contain further spreading of the coronavirus.

However, news that a Covid-19 vaccine might soon be ready for distribution has made businesses more confident about returning to their normal activity levels in the next 12 months.

The flash euro zone PMI composite output index, which looks at activity in both manufacturing and services sectors, came in at 45.1 in November — the lowest reading in six months, and down from 50 in October.

A reading below 50 represents a contraction in business activity.

The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections.

Amid a second wave of coronavirus cases in the fall, many European nations tightened social restrictions in October, which has dented their economies once again. The economic shock was once again felt mostly in the services sector with non-essential shops closed, as well as restrictions on movement and curfews.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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