Sky TV was the worst performer, down 3.1 per cent to $3.08, the lowest it has traded since December 2008. It posted a 21 per cent decline in annual profit to $116m as content costs increased while revenue and subscriber numbers fell.
The pay-TV operator faces increased rivalry from online streaming video services such as Netflix which has seen its subscriber base come under pressure while its programming costs continue to rise. Its costs to secure programming rights increased 5.6 per cent to $349.4m in the latest year, equating to 39.1 per cent of revenue from 35.7 per cent of revenue a year earlier.
"From our perspective it was a little better than we thought, but we'd taken a bit more of a pessimistic view on the sub numbers, so while core satellite subs are falling the Neon and Fanpass subs have actually done a little bit better, the net net is ok," said James Lindsay, senior portfolio manager at Nikko Asset Management. "They've beaten the market's view about where costs would be - programming costs have come in about $10 to $15m lower than people thought."
"But it hasn't helped the stock, everybody's realising the momentum is negative for sub numbers and it doesn't bode well for the medium term," Lindsay said. "For New Zealand names that are owned in high percentages by Australian institutions, they seem to be a bit less discretionary in their purchases here, and when the stock doesn't achieve expectations they're happy to sell it - we've seen a number of reasonable sell-offs."
The gentailers held up following their earnings announcements, with Mercury New Zealand rising 2.3 per cent to $3.60 and Genesis Energy dipping 0.4 per cent to $2.45.
Mercury increased North Island hydro generation, helping boost net profit in the year to June 30 by 15 per cent to $184m. However, it is forecasting a 4.4 per cent ebitdaf drop to about $500m guidance for the current financial year.
Genesis delivered steady full-year earnings, reflecting both positive and negative effects from swiftly changing South Island hydro-generation conditions in the last half of the year. Ebitdaf was $335m in the 12 months to June 30, a 1 per cent fall on the previous year but ahead of previously announced earnings guidance. For the year ahead, Genesis is forecasting ebitdaf to rise to between $345m and $365m.
Mercury declared a 2 per cent increase in fully imputed final dividend and a 5 cents per share special dividend. Genesis will pay an 80 per cent imputed final dividend of 8.4 cents per share, a 1.2 per cent increase on the previous financial year.
"They're both high dividend stock so that limits some of the downside - you've had Mercury provide a special, and the yield on Genesis has been pretty reasonable anyway," Lindsay said. "They haven't been sold off to any extent, even though in theory both of them are around about a 3 per cent earnings miss on a go-forward earnings basis for 2018. It looks somewhat sustainable that Mercury may be able to do specials for some years ahead, so investors may be pricing that in."
