Freightways seen as highlight

Photo from ODT files.
Photo from ODT files.
Close scrutiny continues this week of the stock exchange's second full week of the company reporting season, with bellwether companies providing a snapshot of the economy.

There has been a burst of positive New Zealand economic data in recent weeks, including the manufacturing, exports, housing and service sectors.

However, gains in housing in New Zealand and construction in Canterbury are at times being undermined by similar but soft sectors in Australia, while companies with Australian exposure are taking hits in foreign exchange transactions because of the ongoing strength of the New Zealand dollar.

Comments by analysts and chief executives last week on the half-year results included ''disappointing, flat or below expectations'', with several highlighting lacklustre Australian operations or the kiwi's strength undermining revenue.

Companies due to report this week include Freightways, Chorus, Summerset Group, SLI Systems, Air New Zealand, Hellaby Holdings, PGG Wrightson, Cavalier Corp, Metlifecare and Mighty River Power.

Craigs Investment Partners broker Peter McIntyre said the highlight for this week would be

Freightways, as an economic barometer and for its anticipated forward guidance, while Chorus would be the low-light, because of uncertainty over its network and pressures on its balance sheet.

Forsyth Barr broker Haley Van Leeuwen highlighted Wynyard Group and SLI reporting this week, to see how they are both faring compared to their respective prospectuses after having initial public offerings last year.

She said Mighty River Power's result, towards the end of the week, would be keenly anticipated by investors and also the public.

Forsyth Barr broker Suzanne Kinnaird said one of the key issues for Chorus was fibre costs, both per household passed and per household connected. Chorus was expected to start providing some view on the long-run costs to connect homes.

''While the focus has been on the regulatory issues facing Chorus, the fibre-build programme has continued,'' she said.

She predicted Chorus sales revenue would be up 1%, from $525 million a year ago to $532 million, while after-tax profit would decline 4%, from $84 million to $80 million.

She was hoping for a Chorus update on plans to reduce operating costs longer term, to partially mitigate any future changes to the unbundled bit-stream access price.

Craigs Investment Partners broker Chris Timms was similarly looking for updates from Chorus, especially on progress on various work streams and whether an equity raising was required at present.

''The market will be looking for Chorus to update on potential changes to the business plan and strategy ... and some outlook for liquidity and approach to capital structure,'' he said.

Freightways, a bellwether company reflecting other businesses' activity, is expected to reflect its earnings momentum within its first-half report, Mr Timms said.

''At the divisional level, trading conditions are generally positive for the express package business, although the retail environment remains competitive, due to the rapid growth of online sales.''

Sky TV was expected to report an underlying after-tax profit gain of 10% to $75 million, mainly driven by a reduction in depreciation expenses, Ms Kinnaird said.

Sky had forecast subscriber growth at 10,000 for the full year, for standard service, but there was ''no major hero events'' to drive this, she said.

''We believe the boost in subscriber numbers will require a significant event, such as the launch of improved internet-delivered services,'' she said.

Mr Timms said carpet manufacturer Cavalier Corp had a slower-than-expected start to its full-year trading, due to stock clearance, plus an impact from restructuring in Australia.

Following a stellar previous year for aged-care stocks Ryman Healthcare, Summerset and Metlifecare, investors will be eager for their guidance outlooks.

Ms Van Leeuwen said she expected Summerset to report an underlying profit gain of more than than 40%, up to $21.8 million, when realising gains on new sales and resales across its expanding portfolio.

Some key issues for investors in the half-year report will be the level of development activity and profit margin gains, and Summerset's earnings outlook statements, but also the cost pressures it is facing.

-simon.hartley@odt.co.nz

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