NZ market edges up while Fletcher Building goes into trading halt

New Zealand’s market edged up while Fletcher Building slammed on the trading halt brakes over concerns around an upcoming presentation by an Australian builder concerning issues with its leaky pipes in Western Australia.

Wednesday, October 11th 2023, 6:01PM

by BusinessDesk

The S&P/NZX 50 Index rose 13.1 points, or 0.12%, to 11,306.44. Turnover was $66.2 million. There were 72 gainers and 61 decliners on the main board.

Fletcher Building was the big news of the day.

Australian firm BGC – one of Western Australia’s biggest home builders – has claimed that issues with Fletcher Building subsidiary Iplex will cost the company A$1.8 billion (NZ$1.9b).

However, Fletcher said the figures produced by BGC are “designed to be inflammatory”. Fletcher was put in a trading halt at lunchtime today after BusinessDesk asked questions about the Iplex pipe problem.

Fletcher Building was up 2 cents or 0.4% to $4.90 before the halt.

Octagon Asset Management's chief investment officer Paul Robertshawe said in a worst-case scenario, Fletcher could have to do a total product recall, which would be “extraordinarily expensive”.

“Controversy is generally bad for share prices, at least in the short term, until we get more clarity.”

It wasn’t the only piece of news out of Fletcher today – the Fletcher board told the NZX it was withdrawing its resolution over directors’ remuneration from its annual meeting late this month.

Fletcher wanted the aggregate maximum annual remuneration for directors to be increased from $2m to $2.5m.

“Given that the pool had not been adjusted for more than 12 years, resolution 6 sought approval for an increase to align with comparable listed entities in New Zealand and Australia,” chair Bruce Hassell said.

But he said it had become clear that while many shareholders were “supportive” of the increased fees, others were not.

“On matters relating to its own remuneration, the board prefers a clear mandate, and so after careful consideration, the board has decided to withdraw the resolution.”

In other company news, cancer diagnostics firm Pacific Edge was up 0.2 cents or 1.8% to 11.2 cents on Wednesday after it reported a 12% drop in the second quarter of its 2024 test volumes compared to the previous quarter.

The test volume dip was due to a US restructuring and healthcare provider uncertainty about Cxbladder test coverage. In the US, Q2 2024 test volumes fell 15% from the previous quarter but rose 9% from the previous year. In the Asia Pacific region, volumes grew 10% from the prior quarter and 2% from the previous year.

However, Pacific Edge said the test volume numbers were up 8% from the corresponding quarter in 2022.

The stock had another big fall last week after it came out that the US Food and Drug Administration planned to oversee lab-developed tests, including CxBladder.

Robertshawe said he wasn’t surprised by the weakening number of tests but the lower test volumes showed the uncertainty that doctors using the tests had for the company’s future coverage.

“Which is problematic because the company isn’t profitable yet, so it needs those tests to keep growing over time. The share price is being destroyed, really, and it's probably going to go out of the NZX 50,” he said.

“Only the true believers will be left, I think, by the end of this process. It’s an unfortunate story for a New Zealand company that was looking quite promising.”

The stock has fallen over 77% in the past year.

Payroll software provider PaySauce released a quarterly update where it told the market it had achieved a 32% year-on-year growth in annual recurring revenue (ARR) in the latest quarter. PaySauce was down 1.1 cents or 5.2% to 19.9 cents by the end of the day.

Turners Automotive was up 13 cents or 3.2% to $4.20 for the second day in a row. On Monday, the used-car dealer said it expects to achieve a record profit before tax of at least $25m for the six months ending Sept 30.

Forsyth Barr analysts James Lindsay and Will Twiss said in a note that Turner’s trading update had been “positive” and was broadly consistent with Forbarr’s expectations – but the analysts did increase its 2024 profit before tax estimate by $900,000 to $47.8m due to a “stronger-than-expected” first financial half-year.

Michael Hill was down 2 cents or 2.2% to 91 cents. The jeweller released its annual report to shareholders today. Michael Hill’s chair Robert Fyfe said in the report that the 2023 financial year had been a challenging one for the company.

The NZ dollar was trading at 60.49 US cents at 3pm in Wellington, up from 60.29 on Tuesday. The trade-weighted index was at 71.59, from 71.48 on Tuesday.

Tags: Market Close