An artist's impression of a new Fisher & Paykel Healthcare facility planned for Karaka, south of Auckland. Photo / Supplied
Many of the sharemarket’s big guns are due to announce their first half results this month, so what’s in store?
As interest rates continue to march higher and as the labour market continues to tighten, investor attention is turning to how stocks fared over the six months to September 30.
The market’s focus is expected to centre on the NZX’s biggest stock - Fisher and Paykel Healthcare (November 29) - along with some of the bigger retirement village and property companies.
“The economic cycle in New Zealand is clearly taking some time to play out and it’s been slower than most would have expected a year or so ago,” Milford Asset Management portfolio manager Sam Trethewey said.
“The full impact of rising interest rates here is still to come through, and it’s the same for Covid.
“We expect results to be reasonably robust, given that they are backward looking.
“It will be interesting to see how the property companies go and how rising interest rates are managed internally - have they reduced or hedged out some of their exposure?”
Mainfreight set the ball rolling with a net profit of $217 million, up $86m or 66 per cent, largely reflecting a rebound from the impact of Covid in the year-ago period.
Perhaps a sign of things to come for the property sector, Goodman Property’s net profit slumped to $41.1m on the back of sharply lower revaluations.
Trethewey says investors will be keeping an eye on any revaluation changes.
House prices have fallen 11 per cent from their peak in November last year and further falls seem likely as mortgage rates continue to increase, which will make its presence felt in the retirement village space.
“The retirement village operators have leveraged heavily to the residential property market - likes of Ryman (November 18), Arvida (November 29) and Oceania (November 23).
“All of those companies I would describe as being heavily levered.
“So they have to balance rising debt costs versus the cashflow that they are seeing from sales.
“If anyone in this reporting season is starting to feel the economic headwinds it will be in the retirement village space,” Trethewey says.
Respiratory products maker F&P Healthcare has been coming off a big high reached during the Covid period.
After the Covid-driven boom in sales, the market is trying to gauge what the “new normal” will be for the company.
“Judging by what’s going on around the rest of the world, it is still quite volatile and uncertain for them,” Trethewey says.
“And it’s yet to be seen how much Covid will change things in the long term for F&P Healthcare.
“Over time, we have seen that the technology that F&P Healthcare has is very, very powerful.
“It is truly world class.” Trethewey the question will be whether the usage and the adoption of F&P Healthcare’s products has been materially shifted or not by Covid.
“Some argue that it has, some argue that it has not.
“The recent sales trajectory has people questioning that maybe it has not.”
Trethewey said F&P Healthcare’s bold new plan for a new facility at Karaka was an example of “onshoring” - with the company seeking to complement its existing location at East Tāmaki.
In general, Trethewey said it will be interesting to see how company management teams “present their reality”.
“Whether they will be likely to talk about what is happening out there in the economy and the pressures that are building.”
“In New Zealand, the number one issue will be managing staff availability because we are starting to see businesses struggling to find the right number and the right skilled people for the roles that they have.”
While the Government was busy taking aim at bank profits this week shareholders in Heartland Group Holdings - parent of Heartland Bank - voted in favour of a big rise in its directors’ fee pool.
The total remuneration pool for its non-executive directors will increase from $1.2m to $1.6m - a 33 per cent rise - effective from the financial year ending June 30 2023 onwards with the sum to be divided among the directors as determined by the board.
Heartland’s annual report shows in the last financial year the company paid its non-exec directors $100,000 and chair $150,000 although they are also paid an extra $15,000 if they sit on a sub-committee of the board.
It has not increased its director’s fees since November 2016. But it seems much of this increase will go to pay one Australian director. The notice of meeting reveals the bank wanted to bring an independent Australian director on board to help with its planned expansion into Australian banking but in order to meet the market it will have to pay Geoff Summerhayes A$320,000 per annum.
Summerhayes joined the board in October 2021 but because the size of his pay took the board over the fee cap he had to agree to a deferred payment for A$21,390 until the vote was held to increase the cap.
On top of that Heartland Bank plans to appoint another director to its board this month whose pay would be $100,000. Heartland will have 10 non-executive directors after the appointment.
That’s a large number of directors by NZ standards. But the company said in its notice of meeting that the size and composition of the board was considered appropriate due to its business and regulatory obligations.
ANZ NZ - the country’s largest bank - has six non-executive directors.
KiwiSaver funds generally reflected the challenging underlying market conditions experienced over the September quarter, Morningstar said in its latest survey.
The average multisector category returns ranged from minus 1.3 per cent for the conservative category to minus 1.8 per cent for the growth category.
“Globally, as financial conditions tighten and the likelihood of a policy-induced recession rises, the trade-off between growth and inflation is becoming increasingly clear,” Morningstar’s Tim Murphy said.
“Further, the ongoing conflict in Ukraine has continued to disrupt international supply networks and energy sources and this, combined with growth concerns, has affected investor confidence globally,” he said. The MSCI World Index was up 3.12 per cent in the September quarter, helped by the depreciation of the NZ dollar.
Over 10 years, the “aggressive” category average had given investors an annualised return of 8.5 per cent, followed by growth (8.0 per cent), balanced (6.4 per cent), Moderate (4.3 per cent), and conservative (3.9 per cent).
ANZ leads the Kiwisaver market share with more than $17.07 billion.
ASB is in second position, with a market share of 16 per cent.
Westpac holds third spot ahead of Fisher Funds, while Kiwi Wealth sits in fifth spot.
The six largest KiwiSaver providers account for about 69 per cent of assets on Morningstar’s database.
NZ GDP falls 1% in September quarter; analysts expected 0.4% decline.