Fisher Funds had a bumper year for performance fees in the year to June 30, 2021. Photo / Dean Purcell.
Falling sharemarkets have taken a heavy toll on fund managers' performance fees, but higher management fees have helped to boost dividends at some of this country's biggest managers.
Fisher Funds - which this week announced an agreement to purchase Kiwi Wealth for $310 million - saw its net profit almost double from $49.8m to $93.9m in the year to March 31, financial accounts show.
That was driven largely by a jump in its fee income, from $125.9m to $199.4m. Its performance fee income rose from $23.3m to $77.155m but that only accounted for fees for the year to June 30, 2021.
Financial markets began falling in November 2021, so any impact on Fisher's performance fees isn't likely to be felt until its next financial year.
That meant it could pay out a bumper dividend of $85m - up from $51.4m a year earlier. Fisher Funds is 34 per cent owned by TA Associates - a US private equity firm - and 66 per cent by the Toi Foundation, which also owns TSB Bank.
But other fund managers have already felt the impact of falling markets. Milford Asset Management's performance fee income slumped from $66.2m to $26.4m in the year to March 31, 2022, although its management fee rose to $147.4m from $93.4m a year earlier.
That resulted in Milford doubling its dividend from $5m to $10.5m. It even gave a $1.396m donation to its charitable arm, the Milford Foundation.
Devon Funds Management's performance fees fell from $5.06m to $899,544 while its management fee rose from $2.22m to $2.39m. That saw it boost its dividend from $6.53m to $7m.
But the biggest fall was at NZ Funds Management, where performance fees plummeted from $57.2m to $2.3m, driving an overall decline in investment management fees, from $81.3m to $33.4m.
It paid a dividend of $800,000 to shareholders, substantially lower than the prior year when it made three payments totalling $23.175m.
Markets have bounced in recent weeks, which could see performance fees rise once more. Funds under management may take a bit a longer to bounce back, although providers with KiwiSaver businesses know that money will largely keep dripping in, no matter what.
Freightways is seen as a bellwether stock for the New Zealand economy, meaning analysts will be watching it closely for any signs of a slowdown in demand, and for any impacts of inflation.
The courier company is due to report its full-year result on Monday. Forsyth Barr analyst Andy Bowley is forecasting a net profit before acquisition-related amortisation of $82.1m, which would be up 2 per cent on the previous financial year.
Bowley said the second half of Freightways' 2022 financial year was likely to be softer after being affected by Omicron.
"The Omicron outbreak in March and April resulted in a NZ$5m–NZ$7m profit hit. Further absenteeism through May and June, together with inflationary cost pressures, will likely have pressured margins through 2H22."
Bowley also predicts that the slowing economy will dampen Freightways' business-to-business parcel momentum, though revenue is likely to remain "robust" thanks to past pricing initiatives and an increase in fuel surcharges.
Its direct-to-the-public deliveries are also likely to have slowed, given recent NZ Post data which showed e-commerce spending was down 10 per cent in June compared to the prior year.
But on the upside, Bowley noted that with international borders now open, Freightways could look to make more acquisitions.
"It's been almost three years since Freightways announced the acquisition of Big Chill. With borders open, we expect further business building deals, with scope for larger, more material acquisitions."
Bowley has a neutral rating on the stock, with a 12-month target price of $12.20. Freightways shares are currently trading well below that, closing at $9.55 yesterday.
The woes continued this week for NZ Automotive Investments (NZAI) - the holding company for 2CheapCars - with the resignation of its auditor.
On Wednesday Grant Thornton resigned, effective immediately. Last month four of the company's directors quit, citing irreconcilable differences between them and the remaining director and major shareholder David Sena.
Sena put up three replacement directors but two stood down before they could even be voted on, amid concerns about director independence raised by the NZ Shareholders' Association.
This weekend will see the official switch-over, with the four resigned directors officially departing on Saturday to be replaced on Sunday by new directors Michael Stiassny and Gordon Shaw, ahead of them standing for re-election at the annual meeting on September 2.
In its AGM notice NZAI has warned that it will be in breach of NZX listing rules if the two new directors are not appointed, which could result in the NZX taking action including suspending trading in the company's shares.
It would also trigger a review of its banking facilities, which the bank could choose to cancel.
That puts a lot of pressure on shareholders to vote in favour of appointing the two new directors.
Once the new directors are in place, it seems the first task will be finding new auditors. Grant Thornton declined to comment on the reason for its resignation.
NZAI shares have bounced back off the low of 44c they hit back on July 22, but have a long way to go to get back to the $1.16 they were trading at a year ago. The shares closed at 47.5c on Thursday.
Mercury's 2023 Ebitda forecast of $800m was above market expectations, but Jarden says its dividend guidance of 21.8c could have been a bit bolder. The previous year's dividend was 20c.
"This is a modest increase relative to the cashflow progression being achieved by the company," Jarden director of equity research Grant Swanepoel said in a research note.
"With a company-stated strong balance sheet position, the slow progression in dividend relative to cashflow growth is underwhelming."
The 2022 year was a "transformative" one for Mercury, having become the country's biggest electricity retailer after the purchase of Trustpower's retail arm this year.
Following the Tilt Renewables transactions, it has also become the country's biggest wind power generator.
The company's net profit after tax was $469m, up $328m, driven by the $367m net gain on the sale of its 20 per cent Tilt holding.
Jarden expects the current 2023 year to be a flat one for PGG Wrightson, after the rural services group reported bumper Ebitda of $667m for 2022.
No guidance for the current year was provided, so investors will have to wait until the October annual meeting for any clues.
However, Jarden noted the company was cautiously optimistic, which it interpreted as translating to flat earnings with some upside opportunity dependent on weather.
"This result follows a strong period of growth since selling the seeds business in 2019, with revenue lifting about $100m in 2022 driven by a strong year in retail and water business - and hence the company is not currently expecting to replicate this same rate of growth, though believes there could be further opportunities available going forward," Jarden said in a note.
NZ GDP falls 1% in September quarter; analysts expected 0.4% decline.