Octagon Asset Management’s chief investment officer Paul Robertshawe said in a worst-case scenario, Fletcher could potentially 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 - in the morning, the Fletcher board told the NZX that it was withdrawing its resolution over directors’ remuneration from its upcoming annual meeting in late October.
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 in order to align with comparable listed entities in New Zealand and Australia,” chair Bruce Hassell said.
But Hassell said it had become clear that while many shareholders were “supportive” of the increased fees, other shareholders 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 0.2c or 1.8 per cent to 11.2c after it reported a 12 per cent 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 per cent from the previous quarter but rose 9 per cent from the previous year. In the Asia Pacific region, volumes grew by 10 per cent from the prior quarter and 2 per cent from the previous year.
However, Pacific Edge said the test volume numbers were up 8 per cent 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 per cent in the last year.
Payroll software provider PaySauce released a quarterly update where it told the market it had achieved a 32 per cent year-on-year growth in annual recurring revenue (ARR) in the latest quarter. PaySauce was down 1.1c or 5.2 per cent to 19.9c by the end of the day.
Turners Automotive was up 13c or 3.2 per cent to $4.20 for the second day in a row. On Monday, the listed used car dealer said it expects to achieve a record profit before tax of at least $25m for the six months ending September 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 2c or 2.2 per cent to 91c. 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 New Zealand dollar was trading at US60.49c at 3pm in Wellington, up from US60.29c on Tuesday. The trade-weighted index was at 71.59, from 71.48 on Tuesday.
