NZ sharemarket down 0.6% on Spark's disappointing update

The New Zealand sharemarket posted a fall of more than 0.5% as leading telecommunications company Spark reduced its earnings and dividend guidance.

Wednesday, October 30th 2024, 6:27PM

by BusinessDesk

The S&P/NZX 50 Index closed at 12,694.84, down 88.52 points or 0.69%, with 29.46 million shares worth $108.64m changing hands.

Spark actually gained 4c to $3 after cutting its operating earnings (ebitdai) guidance by 4% to $1.12 billion-$1.18b, from $1.165b-$1.22b, for the 2025 financial year.

The dividend guidance is now 25c a share, from 27.5c, and capital expenditure has been reduced to $415m-$435m, from $460m-$480m.

Disappointing update

Spark told the market that its current financial performance falls short of what is acceptable and “we understand the disappointment our shareholders will be feeling.

The challenges we are facing are both cyclical and structural.” The country’s biggest telco is reviewing its non-core assets and will be selling its 17% stake in cell tower company Connexa.

“The balance sheet is starting to get stretched, and Spark will want to maintain its A minus credit rating,” Matt Goodson, managing director of Salt Funds Management, said.

Spark’s update was disappointing, he said. “Investors anticipated Spark hasn’t been travelling well, and its share price has been awfully weak, compounded by the expectation that the stock will be removed from the MSCI Global Index.”

Goodson said the reduced earnings guidance was moderate, and the dividend wasn’t cut as much as it could have.

“Spark sold its mobile towers for a good price, and then it used the proceeds to buy back shares in the $5 range.

“That buy-back makes even less sense now with the share price around $3. Investors will welcome the focus back on the core business of telephony, data and IT,” he said.

Across the Tasman, the S&P/ASX 200 Index had fallen 0.88% to 8,176.5 points at 6pm NZ time after the latest underlying inflation of 3.5% remained above the Reserve Bank of Australia’s target band of 2-3%.

Goodson said the Reserve Bank there will likely keep interest rates unchanged till next year – inflation just hasn’t fallen enough.

Local stocks

At home, Fisher and Paykel Healthcare was down 41c to $35.65; Mainfreight declined 95c to $71.65; Auckland International Airport shed 12c to $7.30; Infratil decreased 25c or 1.9% to $12.90; a2 Milk eased 10c to $6.38; and Hallenstein Glasson was down 15c or 1.99% to $7.38.

Other decliners were Stride Property, down 9c, 6.21%, to $1.36; Vista Group, decreasing 6c, 2.01%, to $2.93; Ventia Services, falling 35c, 6.8%, to $4.80; Tourism Holdings, shedding 11c, 5.45%, to $1.91; and KMD Brands, down 2.5c, 5.38%, to 44c.

Freightways gained a further 10c to $10.45; Mercury Energy was up 15c or 2.34% to $6.55; Scott Technology rose 23c or 11.44% to $2.24; Serko added 11c or 3.32% to $3.42; Third Age Health improved 6c or 2.79% to $2.21; and Promisia Healthcare was also up 6c or 12.77% to 53c.

Comvita was down 3c or 2.54% to $1.15 after telling shareholders at the annual meeting that the 2025 financial year will be one of survival, reset and refocus, with trading currently in line with the previous corresponding period, and pressure on margins, which is hurting the bottom line.

The manuka honey producer is in discussion with its bank syndicate over an appropriate covenant structure for the 2025 financial year and said if that discussion was not successful, then present covenants would be breached in December.

Heartland, down 2c or 1.92% to $1.02, told shareholders at the annual meeting it couldn’t provide an accurate full-year net profit guidance because of the continuing volatility in the market, but net interest margin is improving. Heartland is still aiming to deliver a 12-14% return on equity and net profit of $200m for the 2028 financial year.

Recruitment firm Accordant Group, unchanged at 50c, reported a 20.69% fall in revenue to $88.91m and a net loss of $1.438m for the six months ending September.

Accordant said the downturn in economic activity had been unusually protracted, but “we have not subscribed to a ‘Survive till ‘25’ mentality but instead focused on positioning all the group’s business to respond and meet conditions by sector and region and seize demand growth wherever it occurs.”

Transport technology company Eroad, unchanged at 95c, has formed a partnership with telematics leader Geotab, which has 4m connected vehicles globally, and with the aim of expanding its fleet management offerings across Australasia.

AoFrio was up 0.008c or 8% to 10.8c after reporting a 32% rise in revenue to $21.1m for the three months ending September and a 29.1% increase to $59.4m for the nine months. Internet of Things revenue was $32.3m with a 40% gross margin.

AoFrio’s full-year revenue guidance has narrowed to $75m-$80m, compared with the previous $70m-$80m.

Tags: Market Close