NZ shares rise as A2 hits record, Air NZ gains on earnings

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New Zealand shares rose led by A2 Milk Co reaching a record and Air New Zealand gaining on their respective annual earnings while Sky Network Television extended its decline.

The S&P/NZX50 Index gained 12.38 points, or 0.2 per cent, to 7,879.46. Within the index, 21 stocks rose, 19 fell and 10 were unchanged. Turnover was $175 million.

A2 Milk climbed 5.9 per cent to a record $5.20. The milk marketer tripled its annual profit to $90.6m and said it would use some of its accumulated cash to buy back shares, and may pay a special dividend. Revenue rose 56 per cent to $549.5m, ahead of the $545m it forecast in June, which was its second lift in sales guidance.

A2 is the best performing stock on the benchmark S&P/NZX 50 Index this year as it benefits from increased global demand for its infant formula, which generated 72 per cent of its sales in the year, up from 61 per cent in the previous year. The niche milk marketer migrated to the NZX's main board in late 2012 and is now the 11th largest New Zealand stock on the benchmark with a market value of $3.57 billion.

"That result has a bit of everything for everyone, it's a very good result," said Peter McIntyre, investment adviser at Craigs Investment Partners. "There's evidence of a rising brand awareness supporting its patent and advertising spend as they try to build a direct business in China as well as support the informal consumer channels. We've already got analysts out of Australia saying they think the market continues to undervalue the opportunity for other products and different markets. It's not just New Zealand interest, it's global as well."

Metlifecare gained 2.1 per cent to $5.88 and Tourism Holdings rose 1.6 per cent to $4.57.

Air New Zealand's shares advanced 0.3 per cent to $3.41 after it said its full year earnings fell 21 per cent to $527m in an increasingly competitive market. Earnings were still the second highest ever as the airline continues to benefit from lower jet fuel prices and the country's ongoing tourism boom.

Chairman Tony Carter said that a significant increase in industry capacity was the main driver of the reduction in earnings. He noted, however, toward the end of the year, conditions stabilised and positive revenue momentum emerged.

"I think a lot of investors sold into the result, it was sold down to $3.29 but as investors digest that result, and with its positive outlook, we've seen people buy back into the stock on that confidence," McIntyre said. "It's a good income earner, management have good control of costs and the hedging programmes in place. Capital expenditure is expected to ease over the coming years, gearing's under control. It's been able to benefit from passenger growth - it's been a company that's particularly well managed, and the efforts put in around efficiencies are really starting to pay dividends."

Auckland International Airport dipped 0.1 per cent to $6.985. It lifted annual profit 27 per cent to $332.9m with growth from domestic and international passengers and expects underlying earnings growth in 2018. Underlying earnings advanced 17 per cent to $247.8m on a 9.7 per cent revenue lift to $629.3m, while expenses rose 8.8 per cent to $156.2m.

Sky TV dropped 4.9 per cent to $2.93. Selling began yesterday when it posted a 21 per cent decline in annual profit to $116m as content costs increased while revenue and subscriber numbers fell.

"Everyone was expecting earnings to decline, they managed to probably surprise the market to the upside - there has been strong volumes through today, about five times what's normal," McIntyre said. "It needs some direction from here; subscriber numbers were weaker, the market just doesn't see any growth here it just sees continued erosion of numbers. Until (chief executive John) Fellet comes up with plan B or C, investors are going to be careful how they position themselves."

Outside the benchmark index, SLI Systems dropped 19 per cent to 27.5 cents. The Christchurch-based e-commerce accelerator announced a $1.6m loss for the year to June 30, widening from a loss of $162,000 last year, but says it has $5.6m in cash on hand, just $400,000 less than it held at the beginning of last year and "directors remain confident the company has sufficient cash to transition to the new strategy and drive our current growth plans", chair Greg Cross said in a statement to the NZX.

"The cash position is still pretty healthy, it's still a young company by NZX standards so it's got a degree of promise but it needs to show some profitability before it's going to entice investors back into buying," McIntyre said.

Tower rose 3.5 per cent to 90 cents. Suncorp Group's Vero Insurance unit will appeal the Commerce Commission's rejection of its $236m takeover bid for Tower, and has the backing of the NZX-listed general insurer's board. Vero offered to pay $1.40 a share after building up a 19.99 per cent stake.

TeamTalk dipped 1.3 per cent to 77 cents. It returned to full-year profit, at $5.1m, and affirmed its guidance for 2018 as it trims its debt and prepares for a resumption of dividends. Revenue from continuing operations climbed 3.4 per cent to $34m. It recognised a gain on the sale of discontinued operations of $2.97m.