Business & Investing: Chorus hit by low migration and wireless competition, Plus Air NZ’s leadership in a new digital health passport

Increasing competition from wireless competitors bypassing the fibre network resulted in Chorus yesterday reporting a 23 percent fall in net earnings for the six months to the end of December.

Pre-tax, interest and depreciation earnings fell to $323 million from $332m a year earlier, though the company maintained its guidance for annual ebitda of $640m-to-$660m for the full year, though it said it is likely to be at the lower end of the range.

Revenue fell 2.1 percent to $473m as declining customer numbers using its copper services outweighed gains in fibre, while net profit declined 22.6 percent to $24m.

A slight increase in its dividend to 10.5 cents per share, up from 10 cents a year earlier, provided some compensation for shareholders.

Capital spending is forecast to increase by around 7 percent to between $670m and $700m.

Fibre connections rose to 813,000 at the end of the half, from 751,000 a year earlier, while total broadband connections dropped slightly to 1.18 million from 1.21 million a year earlier.

Chorus said that while strong housing growth is fuelling increased demand for fibre installations, Covid-19’s effect on net migration into the regions had softened demand on overall broadband connections.

It also plans to start withdrawing copper in a small number of copper cabinet areas where fibre uptake is high. The initial trial will focus on 30 cabinets with roughly 250 customers, starting in September. It pointed out that less than 1 percent of copper customers will be affected by the move over the coming 12 months.

Chorus shares closed down 3.5 percent at $7.77.

Heartland Group delivers half year result in line with expectations

Heartland Group Holdings reported a 10.6 percent lift in its first half profit to $44.1 million and left its full year guidance unchanged at $83m to $85m.

Its New Zealand-based bank and its Australian reverse mortgage business both performed strongly during the period, with reverse mortgage receivables up $55m in Australia and $17m in NZ, motor vehicle lending increased $78m, and business loans originated through brokers lifted $33m. However, its small business digital lending platform, Open for Business, which had been growing strongly, saw lending shrink by $14m, or 18 percent.

While the company plans to retain its $9.6m Covid-19 provision for now, its bad loan costs charged against profit halved to $4.5m from $9m in the previous first half.

Chief executive Jeff Greenslade said the lower impairment expense reflects the remediation of accounts previously in arrears through refinancing and ordinary restructures, rather than through the use of its Extend product.

Heartland’s operating expenses rose 12 percent to $61.1 during the period reflecting a 16.5 percent increase in temporary staff costs to provide additional support to customers through Covid-19 and to support its digital and technology capability.

Heartland will pay a first-half dividend of 4 cents per share, down half a cent from last year due to the Reserve Bank’s continuing ban on NZ banks paying dividends. The policy doesn’t affect Heartland’s Australian earnings which sit outside the bank.

Heartland Group shares closed unchanged at $1.89.

Freightways lifts half year result but shares fall

Package delivery and courier company Freightways posted a net profit after tax of $22 million for the six months to December 2020, while also announcing a dividend of 15.5 cents per share.

Net profit fell by 25 percent for the period, due to a non-recurring expense of $19.2m arising from a change in the fair value estimate for the final instalment for the purchase of food supply chain company Big Chill.

The company said increased volumes in express package and refrigerated transport business overall, helped lift group revenue by 28.7 percent to $410.3m, from $318.9m in December 2019. In addition, a new third-party solutions facility in Auckland had also contributed to the result.

During the year the company established a temporary international airfreight service for NZ exporters in response to the logistical challenges that Covid-19 had created.

Freightways said it was focused on increasing facility utilisation, growing its presence in medical waste and pursuing what it described as an “encouraging pipeline of digitisation opportunities in Australia”.

It expects to spend between $20m and $22m in capital expenditure during the current financial year on a range of IT projects and vehicle and equipment upgrades.

Freightways shares closed down 2.1 percent at $10.63.

Slowing rate of property gains weighs on Property for Industry result

Property for Industry (PFI) reported a 35.6 percent decline in net profit to $135.7 million for the year to the end of December due to the value of its properties increasing less this year than last year.

The value of its properties increased by $72.5m in 2020 compared to a more substantive gain of $125.2m the previous year.

The company said rental income increased 1.4 percent to $97.4m while adjusted funds from operations rose 3.3 percent to $40.1m.

PFI will pay a 2.25 cents per share fourth-quarter dividend, taking the annual payout to 7.7 cents.

Chair Anthony Beverley said the company’s conservative gearing and ability to access liquid funds had worked to its advantage during what had been a challenging year for the commercial property sector.

Gearing at the end of December was 30 percent, slightly above the 28.2 percent level a year earlier, while the headroom on its banking facilities was $110.1m, up from $84.4m a year earlier.

The company recently confirmed the sale of its former Carlaw Park property in Parnell, Auckland. Property for Industry shares closed at $2.87, down 0.35 percent.

Kiwi dollar hits three year high yesterday ahead of latest Reserve Bank MPS tomorrow

The kiwi dollar briefly hit a three year high of 73.4 US cents yesterday before easing back.

The currency has remained in a relatively tight range since the start of the year trading between 71 and 73 US cents. However, increasing speculation that the Reserve Bank may be forced to rein-in some of its current quantitative easing measures when it announces its latest monetary policy statement on Wednesday has led to the latest uptick.

The NZ sharemarket fell almost 1 percent yesterday as investors continued to worry about rising bond yields coupled with a resurgent kiwi dollar. Of the past 10 trading sessions, only two have finished in the green.

Air New Zealand to trial new digital health app in April

Air NZ is preparing to trial a new digital Travel Pass app developed by the International Air Transport Association (IATA) on its Auckland-Sydney route in April.

The trial will run for three weeks once the app has become readily available. The airline said both aircrew and customers will be invited to join the trial.

The app allows customers to create a digital health wallet linked to their e-passport.

The integrated system will mean that once travellers have been tested and/or vaccinated, labs will securely send data to the individual’s app. It then checks requirements for travel against the data and customers who meet those travel requirements will be given the green tick to travel, which will become a new requirement in order to complete check-in.

Air NZ chief digital officer Jennifer Sepull said that once borders eventually reopen, health data for all passengers will need to be verified when they check in.

“It’s essentially like having a digital health certificate that can be easily and securely shared with airlines” she said.

The new system is likely to replace the traditional yellow vaccination booklet that international travellers have previously used to verify vaccinations they have received.

IATA’s senior vice president airport, passenger, cargo and security, Nick Careen said the trial was an important milestone to restarting international travel.

“Air New Zealand is demonstrating its industry leadership, being among the first airlines in the world to offer its passengers a digital travel pass,” he said.

He said customers could have confidence everyone on their flight met the same government health requirements that they did.

A key feature of the new app is that there is no central database storing personal information — rather it is shared at the travellers’ discretion, in a safe and secure way.

“The app has been developed with the highest levels of data privacy and security, so passengers always remain in control of their Covid-19 health information. And governments can be confident that passengers who are ‘Ok to Travel’ are in full compliance of covid-19 travel requirements.”

US considers financial transaction tax in the wake of recent GameStop frenzy

It’s an idea likely to send shivers across Wall Street but that hasn’t stopped the new Biden administration from supporting a move to study the merits of imposing a financial transaction tax in the wake of the recent GameStop trading frenzy.

Some Democrats have backed a tax on stock trading as a way to raise badly needed revenue and address concerns about the health of financial markets.

On Thursday, House Financial Services Chairwoman Maxine Waters said she’s “very interested” and “certainly looking at” a financial transaction tax.

A 0.1 percent tax on stock, bond and derivative transactions could raise US$777 billion for the federal government over a decade, according to a 2018 estimate by the nonpartisan Congressional Budget Office.

However, such a tax would face fierce opposition from Wall Street and retail investors and it’s unclear whether moderate Democrats would support it. Opponents warn it would backfire on retail investors by raising costs and making financial markets less liquid.

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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