Business & Investing: The Covid spread in multiple Australian states is likely to have a sharp effect on this country’s tourism sector.
Tourism related shares including Auckland International Airport, Air NZ and THL are all likely to come under pressure today following Saturday’s announcement of Sydney’s two week lockdown resulting in the trans-Tasman travel bubble between Australia and NZ being placed on hold.
The timing couldn’t be worse for local tourism operators with the start of the school holidays in Australia beginning this week. Queenstown in particular had been banking on large numbers of Aussie families providing a much needed boost for the hard-hit resort town as it gears up for the start of its ski season. It’s likely that many of those bookings, particularly those involving Sydney residents, will now have to be cancelled.
The NZX50 ended the week up 0.6 percent, notching up its fourth consecutive week of advances and is on track to record a gain of around 1.5 percent for the month. However, at the halfway point for the year, the NZX50 is still in negative territory, down 4.7 percent year to date, and lagging well behind the performance of other international markets including both Australia and the US.
Shares in a2 Milk closed unchanged for the week at $6.75 after trading as high as $6.88, while F&P Healthcare shares closed up 2.8 percent at $31.35. Manuka honey exporter Comvita reported a strong uptick in sales from a major online festival in China which saw its shares gain almost 5 percent on Friday to close at $3.44.
The Australian sharemarket ended last week down 0.8 percent at 7308 after hitting an all-time high the previous week.
US MARKETS
US stocks moved further into record territory last week to secure their strongest weekly advance since February, as enthusiasm for President Joe Biden’s infrastructure spending deal outweighed concern over the highest US inflation reading in 29 years.
The benchmark S&P500 index rose 2.7 per cent for the week to close at a new record high of 4281 after Biden secured an infrastructure spending deal worth almost US$1tn, boosting industrial, energy and financial stocks. If enacted, it’s estimated the infrastructure plan would increase US GDP by roughly 1 percent, according to analysts.
The deal outweighed Friday’s release of data showing core personal consumption expenditure in the US — the Federal Reserve’s preferred measure of price rises — hitting 3.4 per cent in the 12 months to May, its largest annual increase since 1992.
The news will add to concerns already being expressed by inflation hawks that expectations of rising inflation by businesses and consumers will lead to further price increases and possibly trigger a wage-price spiral.
On commodity markets oil continued its strong run. Brent crude oil futures closed at a three year high up 4 percent for the week at US$76.12 a barrel and looking likely to test US$80 in the coming weeks. Gold gained 0.8 percent for the week to close at US$1781 an ounce following last week’s 6 percent fall.
Bitcoin continued to trade lower, at one point last week falling below US$30,000, and ended the week down more than 8 percent at US$32,600.
The NZ dollar pushed back above 70 US cents after the previous week’s dramatic 2.6 percent slide. It gained 1.85% for the week to finish at 70.67 US cents.
THE WEEK IN REVIEW
Mercury, the Auckland-based energy producer and retailer announced it would acquire Trustpower’s retail electricity, gas and telecommunications services. The deal adds 252,000 electricity customers to Mercury’s existing customer base of more than 331,000 customers, making it the largest electricity retailer in the country after Genesis Energy, which had previously occupied the top spot. The deal is subject to Commerce Commission and shareholder approvals. It also marks Mercury’s second major transaction after acquiring previously owned by infrastructure investor Infratil. Mercury shares gained 2.8 percent last week to close at $6.50
Pacific Edge shares jumped more than 6 percent last week after announcing that healthcare giant Kaiser Permanente would begin using its Cxbladder triage product from July. Kaiser approved commercial use of Cxbladder products last June. The US health insurance company told Pacific Edge it plans to begin using the triage product – for patients showing possible symptoms of bladder cancer – in a single clinic comprising six urologists next month. Pacific Edge said Kaiser plans to “progressively roll out” triage across its network.
Westpac McDermott Miller Consumer Confidence Index rose 1.9 points in the June quarter, taking it to 107.1. Westpac economist Satish Ranchhod said that while the index remains below its long term average of 110.7 confidence had been trending higher in recent months and has now recovered most of the drop that followed last year’s (Covid-19) outbreak. However, confidence is split across age groups with young people much more concerned about the economy’s longer term trajectory.
Cavalier Corporation has appointed Greg Smith, previously chief executive of Icebreaker, as its new CEO. Smith completed eight years with Icebreaker holding the position of CEO and brand president for almost four years. Previously he held senior executive roles at Michael Hill Jeweller for more than 21 years. He will take up the role on July 26. Current CEO Paul Alston will remain with the leadership team for up to three months to assist with the transition.
Sky Television confirmed it will retain existing partnerships with the NRL and New Zealand Rugby League (NZRL) until the end of 2027. The broadcaster said the deal will allow it to screen all NRL games as well as the annual State of Origin series. It will also broadcast all NZRL-run matches involving the Kiwis and the Kiwi Ferns. The announcement comes six days after rival Spark Sport acquired the broadcasting rights for the Rugby League World Cup from Sky.
Westpac’s Australian owners have decided not to split off its profitable New Zealand banking operation having previously given the idea serious consideration. Westpac group chief executive Peter King said after a detailed review it believed a demerger of the Westpac NZ business would not be in the best interests of shareholders.
Vista Group International said its cash flow is improving steadily as cinemas around the world reopen and that its average monthly cash burn will now be below $2 million for the six months ending this month. Based on the assumption that the current trajectory of cinema openings is sustained in key markets, the company said it expects its cash flow position to track positive for the second half of 2021. It said more than 83 percent of the world’s cinemas had now reopened.
Tourism Holdings updated its guidance having previously warned investors to expect a full year loss of between $14m and $18m. It said the net loss would now be on the “lower side of that range”. Debt had been expected to increase to $90m but will be approximately $50m in the year ending June 30, largely due to a payment for new vehicles in the United States being pushed into the next financial year. Tourism Holdings said it was unable to give earnings guidance for 2022 until it had a chance to assess the impact of the trans-Tasman bubble in late August or early September.
Comvita said it experienced record-breaking sales during China’s 618 festival and that its brand outperformed all other mānuka honey brands on China’s two leading e-commerce platforms, Tmall and JD.com. The company said total sales through the festival increased 31 percent on last year, reflecting a strong growth in consumer awareness and demand for the Comvita brand. The 618 festival began in 2004 as an anniversary promotion for JD.com but Comvita said it is now the second-most important annual shopping event in China.
Me Today shareholders approved the purchase of King Honey. The $36 million acquisition is made up of $21m cash, $10m in new shares and $5m in subordinated notes to King Honey’s Terry Jarvis. Shareholders approved the issue of 113,636,364 ordinary shares at 8.8 cents in favour of Jarvis. Its shares are currently trading at 10c. The King Honey business was valued at between $35.4m – $40.5m. A capital raise of $15.75m was in the process of being finalised.
COMING UP THIS WEEK
Mon, 28 June – Cannasouth AGM, Employment indicators (May) – Stats NZ
Tues, 29 June – Argosy Property AGM, NZ Refining AGM, Evolve Education Group AGM
Wed, 30 June – AFC Group Holdings full year result
Thur, 1 July – Building consents (May) – Stats NZ
Fri, 2 July – Arvida Group AGM
