Shares in Contact Energy were placed in a two-day trading halt yesterday after it announced it would raise $400 million to help fund a 152-megawatt geothermal plant at Tauhara near Taupō. It also plans to review the future of its gas-fired power stations.
Reporting its results for the six months to the end of December, Contact lifted its pre-tax, interest and depreciation earnings 11 percent to $246 million, while its net profit rose 32 percent to $78 million. However, the company said it would pay a smaller interim dividend of 14 cents per share, down from 16 cents a year earlier.
Chief executive Mike Fuge was upbeat about plans to future proof the energy producer with an increased focus on renewables and decarbonising New Zealand’s economy.
“There is no room for complacency as there is an ongoing challenge around the deliverability of gas from declining gas fields and preparing for the exciting opportunity to grow demand for our low carbon energy,”
Contact expects construction of the $580 million Tauhara plant to be completed in 2023. The geothermal plant and review of its thermal assets are part of Contact’s strategic response to ongoing decarbonisation.
The $400 million capital raise will comprise a $325 million underwritten placement to institutions, with a $75 million retail offer. The placement will be at $7 a share, and the retail offer at the lower of either $7 or a 2.5 percent discount to the five-day volume-weighted trading average.
Contact shares closed on Friday at $7.20.
The announcement weighed on the energy sector with Mercury NZ falling 5.4 percent to $6.43. Trustpower declined 3.5 percent to $8.35, Genesis Energy eased 2.8 percent to $3.70, and Meridian Energy fell a further 2.4 percent to $5.67.
Travel and tourism stocks feel the impact from latest lockdown
The Government’s decision to impose a Level 3 lockdown on Auckland, the first since August last year, while the rest of the country was moved to Level 2 restrictions, led to a further sell-off in travel and tourism stocks yesterday, though some proved to be more resilient than others.
Tourism Holdings shares fell as low as $2.02 intraday before recovering to close unchanged at $2.15.
Similarly, Auckland Airport shares traded down to $6.55 but regained some early losses to close down 11 at $6.79 ahead of its interim results this Thursday.
Shares in travel expense software company Serko closed down 13c at $5.37 after slipping to $5.17 earlier in the day.
SkyCity shares closed at a three-month low of $2.94 after it announced it would close its Auckland casino during the lockdown. The company will report its half year result this Thursday.
Air New Zealand shares were barely changed closing at $1.56.
The NZX50 ended the day down 79 points or 0.63 percent at 12,510, a three-month low and its fifth consecutive day of losses. A further fall of 300 points would move the index into correction territory.
Latest PSI data shows services sector continues to struggle
The latest BNZ-BusinessNZ Performance of Services Index continues to highlight the difficulties the sector is facing one year after the emergence of Covid-19.
Activity contracted for a third consecutive month, with the PSI for January coming in at 47.9, down 1.2 points from December. It also remained well below the long-term average of 53.8 for the survey.
BusinessNZ chief executive Kirk Hope said that the January result was generally negative when examined more deeply.
“While New Orders/Business (53.7) remained in expansion mode, the remaining sub-indices all displayed contraction, including Activity/Sales (46.4) and Employment (46.9). “
Hope said that many survey respondents had noted ongoing COVID-19 related issues, including freight challenges, as being of particular concern.
BNZ Senior Economist Doug Steel said that “combining last week’s very strong PMI with today’s soft PSI points to some slowing in growth. But we also need to factor in strong public sector jobs growth and a booming construction sector”.
My Food Bag CEO oversteps the mark with growth projections
Soon to be listed meal kit provider My Food Bag was forced to issue a clarifying statement yesterday after CEO Kevin Bowler told BusinessDesk the business would likely outperform the financial forecast in its initial public offer documents.
In a written statement, issued through its PR agents, Chair Tony Carter said the prospective financial information in My Food Bag’s product disclosure statement had been “prepared with due care and attention” and was reasonable.
“My Food Bag is confident that it will achieve its prospective financial information, but any suggestion that the business will outperform those financial results should be disregarded,” Carter said.
The statement came after the Financial Markets Authority (FMA) said it was engaging with the firm regarding the reported comments.
The regulator said it had asked My Food Bag whether it was comfortable with information in the public domain relating to its offer of shares.
Companies intending to list on the sharemarket are required to follow strict guidelines regarding the information they convey to prospective investors in advance of the listing in order to avoid inflating expectations.
In its product disclosure statement, the company forecast revenue of $186.4 million for the March 2022 financial year.
My Food Bag is set to list on March 5.
Google doing deals with Australian media companies
After previously threatening to walk away from Australia, it appears tech giant Google has had a change of heart and is now doing deals with some of the country’s largest news organisations after months of intense negotiations.
The ABC, Nine Entertainment Co and Guardian Australia are understood to be in eleventh-hour negotiations with the $1.8 trillion tech giant for use of their content on various Google services.
While there are no guarantees the agreements will be completed there is pressure on both sides to get deals finalised. It’s likely to be precedent setting and used as a benchmark leading other countries to enact legislation that will force Google to pay for news content it has previously been able to use for free.
Kerry Stokes’ Seven West Media became the first of the major media companies to ink an agreement with Google on Monday.
The Australian Federal Parliament is preparing to debate the Morrison government’s media bargaining code legislation this week. It would force Google and Facebook into mandatory arbitration with news publishers for ‘payment for value’ they obtain from having news content in news feeds and search results.
Historic moment for Japan’s Nikkei index
Japan’s Nikkei 225 share index surged past the 30,000 level for the first time in more than 30 years yesterday.
Government data showed Japan’s economy growing 12.7 percent on an annualised basis between October and December last year. The preliminary reading for fourth-quarter gross domestic product was higher than economists’ median estimate of a 9.5 percent gain, according to Reuters.
In 1989 the Nikkei famously peaked at 39,000 after increasing sixfold in the 80s at the height of Japan’s technology and vehicle manufacturing boom only for it to slide all the way back to a low of 7055 in March 2009 as the GFC crisis sell-off was bottoming out, a decline of 82 percent from its peak.
