MARKET CLOSE: NZ shares fall into correction, Metro Glass and Sky TV drop while Xero gains

Thursday 3rd November 2016

New Zealand shares dropped into correction territory, led lower by Metro Performance Glass and Sky Network Television while Xero gained after delivering its first-half results.

The S&P/NZX 50 Index fell 74.82 points, or 1.1 percent, to 6,778.93. Within the index, 36 stocks declined, eight were unchanged and seven rose. Turnover was $172.1 million.

The index has now fallen 10.5 percent from its all-time high of 7,571.10 on Sept. 7. A fall of 10 percent or more is regarded as a correction.

"We were the worst market in the world in October, down 5.4 percent, but we're still up 10 percent for the year - probably the only thing that gets close is the FTSE, but only in its own dollar terms," said David Price, a broker at Forsyth Barr. "We're still a strong performer, we've just had a rough six weeks. The market itself certainly needed the correction, it's basically only gone one way for a very long time and the valuation had become very stretched. In some stocks, there isn't the support for the price movements that we've had."

Metro Performance Glass led the index lower, down 3.8 percent to $2.05. Sky Network Television dropped 3.6 percent to $4.34, while Metlifecare dropped 2.9 percent to $5.45.

Scales Corp was the best performer on the index, up 3.2 percent to $3.20. It has agreed to buy Hawke's Bay apple grower, packer, and marketer Longview Group Holdings for $20.5 million, adding capacity to sell fruit into the fast-growing Asian market. The deal will immediately lift earnings per share 4 percent in the 2017 financial year. Scales has previously forecast 2016 net profit to be between $29.6 million, or 21.1 cents per share, and $34.6 million, or 24.8 cents.

Xero gained 2.1 percent to $17.25. The cloud-based accounting software firm narrowed its first-half loss for 2016 as revenue lifted 48 percent, with its cash burn continuing to slow. Xero said its financial performance was impacted by the costs of transitioning from Rackspace to Amazon Web Services.

"Xero had been pretty weak against the market for the last few days, so it's taking back some of those losses. They've run their course for today on the upside, which is a bit of a surprise, the result was slightly on the disappointing side."

Mercury NZ fell 0.3 percent to $3. The electricity generator and distributor, formerly known as MightyRiverPower, raised its 2017 earnings before interest, tax, depreciation, amortisation and fair-value adjustments by $5 million to $495 million to reflect additional hydro generation expected from dams in the Waikato catchment.

ANZ New Zealand dropped 0.3 percent to $28.60. The local unit of Australia & New Zealand Banking Group posted a 9 percent fall in annual earnings as its margins got squeezed by more expensive funding and stiff competition for mortgage lending, and as it dealt with more bad debts.

Outside the benchmark index, Briscoe Group rose 0.3 percent to $3.66. The homewares retailer lifted third-quarter sales 8.4 percent to $125.6 million after spending more on campaigns to woo customers, putting a squeeze on its margins.

NPT gained 2.9 percent to 70 cents and Augusta Capital was unchanged at $1.02. The board of listed property investor NPT, which Augusta Capital is attempting to oust, says it is considering other proposals and has asked NZX for guidance on aspects of Augusta's expansion plan for NPT.

BusinessDesk.co.nz

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