Business & Investing: The sharemarket breaks its run of weekly falls, Oil prices pushed lower and Bitcoin’s plunge continues
The New Zealand sharemarket struggled for direction last week as investors weighed growing inflation fears with a mixed bag of earnings results from My Food Bag, Serko, Plexure and fishing company Sanford. However, a rebound in a2 Milk shares, which gained 6 percent on Friday after weeks of intense selling pressure, helped the local market to achieve its first positive weekly close since late April. The NZX50 ended the week up 0.7 percent at 12,459, though the index remains down 2.1 percent for the month, and 4.8 percent year to date.
Across the Tasman, Australia’s ASX200 index added just 0.2 percent for the week closing at 7,030, while in the US the S&P500 index fell 0.4 percent to 4,156 after recovering from a low of 4060 for a second week.
On commodity markets gold continued to find favour with investors gaining 1.7 percent for the week and closing at US$1875 an ounce. Brent Crude oil futures weakened 3.1 percent to US$66.66 a barrel as concerns of increased supply coming on stream pushed prices lower after Iran’s president Hassan Rouhani said world powers had accepted during the latest round of talks that sanctions against Iran, including oil exports, would be lifted.
The big news of the week was another dramatic plunge in the price of bitcoin. The cryptocurrency traded in a $13,500 range last Wednesday after China announced plans to crack down on mining and trading of the cryptocurrency. Meanwhile, US officials pledged to get tough on those using bitcoin to conduct “illegal activity broadly including tax evasion.” The Treasury Department said it would require reporting on crypto transfers of more than US$10,000, just as it does with cash transfer exceeding this amount.
Bitcoin fell 23 percent last week to US$37,000 after trading at a four month low of $30,000 during the week. So far this month the popular cryptocurrency has fallen 38 percent in value making it Bitcoin’s biggest monthly fall to date.
The NZ/US dollar cross fell 1 percent to close at 71.77 US cents.
WEEK IN REVIEW
My Food Bag’s earnings exceeded its IPO forecast, but its shares continued to weaken as investors remain concerned about growing competitive pressures being faced by the company. Reporting its results for the first time since listing in March, the meal-kit provider achieved underlying earnings that were 1.8 percent above its IPO forecasts at $29 million, on revenue of $190.7m.
Investors had largely anticipated the outperformance after CEO Kevin Bowler indicated the company was likely to exceed its forecast results during the IPO process. In the results statement, directors said they were “conscious” of the fact the company’s shares had traded well below their issue price since listing. My Food Bag shares closed on Friday down 4.7 percent at $1.42.
Metro Performance Glass reported pre-tax earnings for the year to March of $17.9 million compared with $21m the previous year. The result was in the middle of February’s guidance range. The company said it intended to resume paying a dividend when it reports its results next year. Its shares closed up 5.1 percent at 41 cents.
Sanford shares fell sharply last week after the seafood and fishing group reported adjusted pre-tax earnings fell almost a third to $25.8 million from $36.7m in the same period last year. Revenue fell 5 percent to $233.5m as the company continued to be impacted by declining foodservice returns and higher air freight costs. It will forgo paying an interim dividend. Sanford shares closed down 5 percent for the week at $4.40, just 10c above its February low of $4.30.
Serko reported a net loss of $29.4 million for the year to March on operating revenue of just $12.4m but hopes to increase that revenue by 8 times in the “mid-term”. The travel software company said peak annualised transactional monthly revenue, which the company uses as an indicator of future growth potential, was at $17.2m. Serko is expecting full recovery to occur around 2023 and expects to hit $100 million in revenue by then. Its shares closed up 4 percent for the week at $6.50.
Infratil reported proportionate pre-tax earnings of $398.8 million for the year to March, up from $370.2 million in the comparative period. The company said the impact of Covid on its investment portfolio, in particular for Wellington Airport and Vodafone New Zealand, was offset by strong cost control and the continued demand for high-quality data centres facilities, which saw CDC Data Centres earnings growth of 25 percent. Infratil declared a final dividend of 11.5 cents per share, a 4.5 percent increase on the prior year, reflecting confidence in future forecast cash flows. Its shares closed up 4 percent for the week at $7.52
Trustpower reported a 69 percent fall in after tax profit from continuing operations of $30.7 million from $97.6 million in the previous period, however its pre-tax operating earnings increased 7 percent from 186.5 million to $200.2 million. Retail earnings increased 33 percent on the previous year, from $35.3 million to $47.0 million, with the introduction of mobile to the company’s bundled product offering and continued customer migration to higher value broadband plans driving a strong increase in telco revenue. Generation delivered pre-tax earnings of $154.1 million, in line with the previous year.
The company announced a fully imputed dividend of 17.0 cents per share, as well as a one-off special dividend of 1.5 cents per share, also fully imputed. Trustpower shares closed down 1 percent for the week at $8.23.
Villa Maria Estate appointed receivers to the winemaker’s holding company, though the business itself is not affected by the decision. Brendon Gibson and Neale Jackson of Calibre Partners were appointed receivers of the Fistonich family’s FFWL holding company. Villa Maria has been weighing up its capital options in recent months and had previously floated a possible equity injection or share sale. NZX-listed agribusiness Scales Corp has been mooted as a possible buyer.
Ports of Auckland announced the resignation of long standing CEO Tony Gibson following revelations in recent months of a poor safety culture at the port that has resulted in the deaths of two staff. In addition, the port also blamed Covid and global logistics snarl-ups for ongoing delays to its controversial automation project but wouldn’t reveal the new launch date saying the actual timeline was dependent on the completion of a safety assurance review of the automated system, as well as ensuring adequate training was in place.
Plexure shares fell more than 10 percent last week after the digital marketing company reported an $8 million loss as operating costs continued to climb. Revenue from existing customers lifted 15 percent to $29.2m for the year ended March 31, but last year’s $1m profit evaporated into a loss of $7.9m. The company attributed this loss to increased investment in people to help scale the business, though it said its hiring intentions had been stalled by Covid. While Plexure did manage to add 11 new staff during the full year, it said its team was actually smaller than it was at the time of the capital raise and the interim half-year report in November last year. Its shares closed at 68c having fallen almost 60 percent since peaking at $1.55 in November.
Auckland International Airport announced chief executive Adrian Littlewood would step down towards the end of this year after nearly nine years in the role. Littlewood said he had stayed at the helm longer than originally planned but felt it was important to see the company through the Covid-19 response and subsequent focus on safely re-opening borders.
The Warehouse Group shares were placed in a trading halt on Friday to allow supermarket cooperative Foodstuffs to sell its 9 percent stake in company it acquired 15 years ago. The block sale of 31.1m shares at a price of at least $3.25, an 11 percent discount to Thursday’s closing price, is well below the $5 a share paid by the three Foodstuffs cooperatives in 2006 to prevent the retailer from launching a competing grocery offering. Rival supermarket chain Woolworths also bought a 10 percent stake in 2006, successfully stopping Warehouse Group founder Stephen Tindall from taking the company private.
Another busy week of earnings announcements with two in particular, from market heavyweights Mainfreight and F&P Healthcare, set to be closely watched by investors.
Mon: AFT Pharma and Kiwi Property Group both report their full year results to March
Tues: Turners Automotive and Arvida Group report full year results to March, while Napier Port Holdings will report its half year results
Wed: Mainfreight will report its full year results to March and Tower reports its half year results
Thur: F&P Healthcare, Asset Plus, Rakon and Pacific Edge will all report full year results to March, while Gentrack will report its half year results
Fri: Eroad and Radius Residential Care both report full year results
Also this week, the Reserve Bank will release its latest monetary policy statement on Wednesday and Statistics NZ will issue updated overseas trade data and employment indicators for April on Wednesday and Friday respectively.