Chris Lee & Partners Ltd

Market News 1 September

Johnny Lee writes:

Spark has published its financial results to market, confirming the long-anticipated dividend reset as the company “returns to core”.

This “core” will be largely centred around the provision of mobile and broadband services. With the data centres business now a minority stake and the physical towers business mostly divested, Spark is refocusing on becoming a much smaller, leaner business, with considerably less debt to its name.

In terms of financial results, reported revenue fell 2%, earnings fell 7% and net profit fell 17%. The dividend of 12.5 cents, effectively confirmed earlier in the year, was upheld.

Cost control was a keen focus for the business this year. Significant FTE Reduction (meaning job layoffs) were made, with further savings expected next year. 

The data centre announcement from earlier in August was confirmed, with the net proceeds – some $580 million expected – to be used to retire debt. 

Perhaps the biggest item of note in the results announcement, however, was the dividend reset.

Spark now intends to tie its dividends to free cash flow, with the company anticipating the 2026 dividends to equate to 100% of free cash flow. Helpfully, the company also published its guidance for 2026 free cash flow – with a midpoint of $310 million – which might equate to near 16 cents per share. At $2.50 per share, this might be closer to 8% P.A than 14%, depending on imputation credits.

This trend towards tying dividends to cashflow is not unique to Spark. Many listed companies are now being asked by shareholders to more formally tie their distributions to actual cash profits, rather than relying on debt to fund the company’s payout during bad years. Meridian Energy’s recent result saw a payout ratio of 230%, with the company electing to see through “rare weather events” and borrow to fund its distribution to shareholders.

For Spark, this may mean less predictable dividends. Hopefully, this unpredictability will be due to the growing nature of the dividends, but shareholders accustomed to consistent dividends will need to adjust their expectations.

Spark’s share price rose modestly after the announcement.

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Heartland Group has reported its results to the market, as the company continues to pursue its ambitious medium goals.

Net profit landed above guidance, with Heartland reporting a $46.9 million profit. This compares to last year’s figure of $102.7 million, and follows the company’s announcement from February outlining a significant impairment expense.

Pleasingly, net interest margin rose, with a particularly strong end of the reporting period. This implies that the next result, due February, may be stronger still. 

Across the business, Reverse Mortgages continues to see strong performance, while Livestock Finance has returned to growth. Motor Finance and Asset Finance remain challenging.

The dividend was reduced from 3 cents to 2 cents, in line with the deterioration in profit. The company expects, however, that this will be temporary.

After meeting its guidance, the company has provided outlook for next year, with profit expected to rise from $46.9 million to $85 million. With the company’s stated policy of paying at least 50% of profit in the form of dividends, dividends should see a commensurate increase.

The market liked the result, with the share price rallying back above 90 cents following the result. It remains well off its highs.

All shareholders should make a note in their diaries – Heartland has declared its annual meeting for the 13th of November and intend to present its new 5 year plan on this date. The company hopes this strategy will produce “significant” increases in profit, as Heartland’s recent investments begin to bear fruit.

Heartland’s result beat guidance, and now the company has set a new watermark for 2026. If this is met, dividends will climb, shareholder confidence will rise and further recovery in the share price should follow. 

The annual meeting on November 13 should provide greater clarity as to the long-term strategy of the company.

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Fonterra Group has finally confirmed the sale of its Consumer division, Mainland Group, to French giant Lactalis for a return of up to $4.22 billion, depending on licensing agreements. Mainland owns brands such as Kapiti and Anchor. 

The sale is subject to farmer vote, expected in late October or early November. If the resolution passes, settlement of the sale is expected in the first half of next year.

If the sale is approved, shareholders would vote again as to the use of the proceeds. Fonterra is proposing a $2 per share return of capital to shareholders, with more details to follow.

The divestment follows an extensive process from the board. Ultimately, the decision to exit the business via a trade sale was motivated by price and a desire to settle the matter quickly. Like many listed companies, Fonterra has conducted a strategic review and concluded by selling assets and “focusing on what we do best”. 

Across the Fonterra portfolio, the Consumer brands were a relatively small component of the overall business. About 16% of the company’s revenue is generated by the Consumer business, with the other arms – Ingredients and Foodservice making up the difference. Consumer also produced the lowest return on capital, a metric that remains a focus for the company. 

News of the divestment sent the shares significantly higher. Fonterra units are now among the best performing asset on the NZX this year. Indeed, in a year where the market index is almost completely flat, the primary sector has been particularly strong. A2 Milk is up 60%, Scales is up 30%, Seeka is up 30% and even Synlait is up 80%. Some of these are rebounding from historic lows, but shareholders will be pleased to see outperformance, nonetheless.

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Comvita Group, the publicly listed honey company, has confirmed it has received a bid to purchase the company. This is, at least, the sixth takeover offer received for an NZX-listed company this year.

The bid comes from Florenz, a subsidiary of Masthead Limited. Masthead owns various brands, including Wedderspoon, Harker Herbals and Xtend-Life.

Florenz currently holds 18.3% of the company already, following an arrangement with existing major shareholders. Comvita’s board separately advised that other major shareholders have privately expressed support for the offer. 

The price of 80 cents will not represent a successful exit for long-term shareholders. Comvita had traded for years at around $3 a share, paying dividends and producing revenues in the hundreds of millions.

But recent years have not been kind to the honey industry. Comvita views the industry as oversupplied, fragmented and fiercely competitive. The board anticipated a heavy loss this year, and would require a significant injection of shareholder capital. Accepting the offer at 80 cents was judged to be the best pathway forward for shareholders.

A shareholder meeting is expected to be called in November. If shareholders vote in favour of the scheme, implementation is expected in December, and yet another New Zealand company would leave our exchange. 

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Vulcan Steel has announced a capital raising, with the steel distributor announcing the purchase of Roofing Industries for $88 million. 

Roofing Industries, as the name implies, sells steel roofing products, as well as offering cladding and fencing solutions. It operates 15 locations across the country.

Vulcan views the acquisition as expanding the product offering within the company, at a relatively low cost (4.5 times earnings). Vulcan has been eyeing roofing as a possible market for over a decade, and views the current environment as the right time to begin consolidation.

The $88 million will be funded by an accelerated rights issue. 

Shareholders will be entitled to buy additional shares at $5.95 AUD (approximately $6.60 NZD) at a ratio of 1 new share for each 9 shares currently held. A shareholder of 1000 shares would be entitled to 112 new shares.

The offer closes on 11 September. A shortfall bookbuild will take place after close, meaning that shareholders who elect not to participate will receive a payment if their entitlement is subsequently sold.

The style of activity – listed companies raising capital to buy smaller, unlisted companies – should be expected to continue, particularly in sectors which are fragmented and undercapitalised. One of the core advantages of an NZX listing is the access to capital, allowing companies like Vulcan to raise money quickly and pounce on opportunities it feels are accretive long-term.

The rights issue is currently open.

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New Issue

Meridian Energy (MEL) has announced that it plans to issue a new 6.5-year senior green bond.

A minimum interest rate has been set at 4.35%.

MEL will not be paying the transaction costs for this offer. Accordingly, clients will be charged brokerage.

We have uploaded the investment statement to our website below:

https://www.chrislee.co.nz/uploads//currentinvestments/mel080.pdf

If you would like a FIRM allocation, please contact us promptly, with an amount and the CSN you wish to use no later than 10am, Thursday 4 September.

Payment will be due no later than Wednesday, 10 September.

Please note that scaling is highly likely.

Travel

Our advisers will be in the following locations on the dates below. 

3 September – Wellington – Edward Lee

11 September – Ellerslie – Edward Lee

12 September – Albany – Edward Lee

24 September – Lower Hutt – Fraser Hunter

24 September – Napier – Edward Lee

30 September – Taupo – Johnny Lee

1 October – Hamilton – Johnny Lee

3 October – Tauranga – Johnny Lee

7 October – Palmerston North – David Colman

8 October – Christchurch – Johnny Lee

Chris Lee and Partners Limited

Market News 22 August 2025

Johnny Lee writes:

A very interesting reporting season continues, with our largest companies giving their “progress reports” to shareholders.

Every season has at least one major surprise, which sends a share price sharply higher or lower.

This season, Sky City Entertainment has taken on this mantle, after the company declared its intention to raise an enormous sum to recapitalise its business.

The casino and hotel operator announced a $240 million capital raise – about half of the value of the entire company – at a price cap of 70 cents per share.

The raise was announced at the same time as the financial results.

Sky City reported a modest full year profit of $29 million, a significant improvement on last year’s $143 million loss. 

Debt lifted sharply, as did the cost of this debt. The last two years has seen debt balloon higher, largely due to one-off costs including the carpark repurchase and the various fines imposed by the regulators (which are assumed to be one-off costs).

The general report would not fill shareholders with optimism either. Gaming visitation was down and, while the opening of Horizon Hotel saw an uplift in hotel room sales, overall occupancy rates were down sharply.

Much hope is placed on the opening of the Convention Centre next year. The company is anticipating around 500,000 annual visitors to this facility once operational, giving Sky City the opportunity to cross-sell its various amenities to a new audience.

Dividends are suspended and will remain so for some time. Clearly, the debt levels – currently $757 million - are causing discomfort, and until this is resolved, returns to shareholders are off the table.

To resolve this debt problem, the company announced the aforementioned capital raising. The entirety of the $240 million raised is being used to retire debt.

The offer is underwritten by three of our largest investment banks. Shareholders do not need to participate if they so choose. The funds are secured, and the company will proceed with its strategy regardless of retail participation. Non-participants would instead see significant dilution. 

Alternatively, retail shareholders are being invited to bid beyond their allocation, up to 60% above their entitlement. 

The critical point may be the price.

70 cents represents its lowest ever price and was, at the time of the announcement, a substantial discount to the prevailing price. 70 cents is also less than half of the low seen during COVID, arguably the company’s toughest trading environment.

Now, the price has since fallen to 71 cents as investors abandon the company. Very high volume has since changed hands, and it seems the share register can expect significant upheaval. 

Of course, every sale at this price requires a buyer at the same point. 

The split between the placement and the entitlement offer is also worth highlighting. 

There has been something of a trend recently, which has seen larger investors allocated a larger proportion of the “pie” in these capital raisings, with existing shareholders left to bid for the scraps. This often leads to retail investors forgoing the opportunity, judging the effort of participation to exceed the potential allocation remaining to them.

One recent capital raising saw only 5 percent of its offer reserved for existing shareholders.

For Sky City, only $81 million of the $240 million has been set aside for the placement. The vast majority is being reserved for existing investors, both retail and institutional. 

It seems inevitable that at least some of this will fall on the shoulders of the underwriters. Without a price incentive, the company may be relying on a well of goodwill that is largely dry.

Sky City, of course, is a rare example of a New Zealand listed company excluded by ESG investors. Coupled with the general economic malaise and societal trends towards other forms of gambling, the company is clearly going through a period of change.

Overall, the result will not lead to cheer amongst investors. The integration of the NZICC to Sky City’s portfolio will be key to the company’s future prospects, with the immediate focus now on raising capital and relieving some of its hefty debt burden. 

Eligible investors have until 4 September to apply for the 70 cent rights.

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Contact Energy’s result pleased the market, following an eventful year as the company welcomed Manawa into the fold.

Earnings, profit and dividends all rose over the 12-month period, with a number of projects in the pipeline to occupy the company’s development team in the medium-term.

While the 2025 year will be most remembered for the Manawa acquisition, it also saw the Tauhara geothermal plant commence generation, as well as a number of projects, including Glenbrook and Kowhai Park, begin development.

2026 will see some of these complete, as well as new projects like Glorit, Argyle and the Glenbrook expansion, decided upon. The pipeline extends to 2029, with a number of wind, solar and battery developments planned over the next three years.

At the same time, the Manawa business is being integrated into Contact’s portfolio, with the company expecting to see some tens of millions reduced in expenditure from the business, while its own development pipeline continues.

Ultimately, these developments will put some strain on the company’s balance sheet. More debt may be needed, although the timing of this - with interest rates in the doldrums - will not unduly concern shareholders. The company has previously utilised hybrid bonds and received considerable support for these products.

Helpfully, Contact has also supplied explicit dividend guidance for shareholders, with an expectation of another 1 cent increase next year, and another 1 to 2 cent increase in 2027. 

Overall, the result had no major surprises and shows the company is continuing to advance its agenda of new generation and improving shareholder returns. Debt levels will need to be managed, but with the Manawa acquisition now settled, the real work begins.

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A2 Milk’s result had a number of important announcements, as the company continues to adapt to the challenges facing its business. 

Revenue, earnings and profit all rose sharply, as sales in China, across both English and Chinese label products, grew strongly. Market share continues to climb for the company. 

The much smaller liquid milk division was also a star, growing over 20%.

A dividend of 11.5 cents was declared, following the 8.5 cent dividend in April. The company hopes to raise dividends over time, as both market share and market size improve.

There were three major announcements in the result.

Firstly, the company is selling Mataura Valley Milk to Open Country for a net value to a2 of $100 million.

MVM has been loss-making for years, including a $20 million EBITDA loss last year and a $26 million loss the year before. A2 has found a clean exit for the loss-making business and is moving on to other avenues.

Secondly, the company is buying Yashili’s integrated canning facility at Pokeno for $282 million net. 

The transaction is subject to regulatory approvals to amend its existing licenses to the a2 brand.

The company was clear that the benefits from these transactions will take several years to flow through to shareholders. The facility already produces two ranges of A2 product and may soon add a Chinese label product to this range.

Lastly, the company is planning a significant capital return to shareholders of approximately $300 million. 

Once the two transactions are complete, the company believes it will be in a position to shrink its books, reducing its $1 billion term deposit account in the form of a special dividend. This might equate to, roughly, 40 cents per share. The dividend will not be imputed.

The share price rallied higher after the announcement, and is now up 53% for the year, marking it as one of our best performing companies of 2025. It remains well off the highs of yesteryear, but the worst looks to be behind it, as the company starts 2026 with a significant strategic shift.

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Santana Minerals capital raising at 58 cents opened last week.

The offer entitles shareholders to purchase up to $30,000 AUD of new Santana shares at a fixed price of 58 cents. At time of writing, the market value of these is 58.5 cents.

Interested parties should be aware of two points.

Firstly, the company is seeking to raise $3,000,000 only, stating that any demand greater than this figure will result in scaling and the excess returned to shareholders. 

Secondly, the application process now allows direct debit from New Zealand dollar accounts. Previous capital raisings have required New Zealand investors to arrange international fund transfers, but the company has helpfully offered to facilitate NZD applications for this offer.

The offer closes on 3 September. Those interested in applying for this small issuance can apply through the dedicated website provided in the e-mail sent to eligible shareholders last Wednesday, the 20th.

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The Reserve Bank has reduced the Official Cash Rate to 3%.

The Reserve Bank’s decision to cut the OCR by 25 basis points was not a surprise to the market, having been well telegraphed in advance, but the divided nature of the committee certainly was, as was the tone of the statement to market.

2 of the 6 members voted for a 50 point cut, with subsequent comments from Governor Hawkesby suggesting that further cuts will come and come soon. Most economists now expect two further rate cuts this year.

Equity markets responded quickly, with buyers emerging for yield stocks, seeking dividends. The bond market, already facing poor liquidity, saw rates move even lower as more buyers entered the market looking for returns.

With regards to the banks, short-dated term deposit rates are now well under 4%, with longer-dated rates hovering above this figure for now.

The next review is expected on 8 October.

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New Issues

ASB Bank (ABB) has announced an offer of up to NZ$100 million of fixed rate notes with a maturity date of 2 September 2030, with the ability to accept unlimited over subscriptions.

The offer opens today and closes on Wednesday 27 August.

Based on the indicative margin range and underlying rates an interest rate slightly above 4.00% is forecast.

The notes are expected to have a rating of AA- and to be listed with the code ABB120.

Brokerage will apply to this issue.

Please contact us urgently if you would like a firm allocation of the ASB Bank Notes.

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Meridian Energy (MEL) has announced it is considering an offer of up to $250 million (with the ability to accept oversubscriptions of up to an additional $50 million) of 6.5 year fixed rate green bonds.

Full details will be released on Monday 1 September when the offer is expected to open.

Underlying rates suggest the interest rate should be in the vicinity of 4.40%.

The Meridian Energy green bonds are expected to have a rating of BBB+ and to be listed with the code MEL080.

Brokerage will apply to this issue.

Please contact us if you would like to indicate your interest in the MEL green bonds.

Travel

Our advisers will be in the following locations on the dates below. 

28 August – Christchurch – Fraser Hunter

11 September – Ellerslie – Edward Lee

12 September – Albany – Edward Lee

Please contact us if you wish to make an appointment.

Johnny Lee

Chris Lee & Partners Limited

Market News 18 August 2025

David Colman writes:

The results season continued with PGG Wrightson (PGW) providing its Full Year results.

PGW is a major provider of products and services to the rural sector and its results help provide a somewhat reasonable evaluation of the New Zealand agricultural sector as a whole.

PGW reported an improved performance for the financial year ended 30 June 2025.

Key results for the year to 30 June 2025:

- Operating Revenue of $975.3 million (up $59.4 million or 6 % on prior financial year)

- Operating EBITDA (Earnings before net interest and foreign exchange items, income tax, depreciation, amortisation, the results from discontinued operations, impairment and fair value adjustments and non-operating items) of $56.1 million (up $12.0 million or 27 %)

- NPAT (Net profit after tax) of $10.7 million (up $7.6 million or 248 %)

- Fully imputed final dividend of 4 cents per share, (6.5 cents per share for full year)

The results reflect a general agri-sector recovery which PGW has been able to respond positively to.

Federated Farmers’ Confidence Survey, which is undertaken twice yearly, was released in July and showed farmer sentiment was at its highest level in eight years.

The operating environment over the year was described by PGW Chair Garry Moore as more challenging in the retail space, but he was pleased with the business continuing to consolidate and grow market share.

PGW has two main divisions:

- Agency: covering livestock, wool and property transactions

- Retail and Water: provides rural supplies and irrigation equipment

PGW also provides pastural and horticultural technical advice and support.

The Retail & Water business (Rural Supplies, Fruitfed Supplies, Water, and Agritrade) recorded Operating EBITDA of $42.2 million, up $1.1 million from the prior year’s result with revenue of $773.0 million, up $39.4 million.

The division refreshed its five-year plan to focus on a range of growth initiatives such as the acquisition of the Nexan Group, completed in July, which manufacturers the Vetmed range of animal health products and other brands.

The acquisition is seen as a complementary fit to PGW’s wholesale and retail range

PGW’s inhouse ‘BlueAG’ agricultural chemicals private label strategy was also described as a growth initiative with the intention of growing brand equity by building trust and credibility with the label and providing the ability to manage pricing.

The Rural Supplies business performed solidly, as sentiment in the farming sector improved in line with increased dairy, sheep, and beef farming returns. More farms are returning to profitability and despite many farmers taking a conservative approach, such as reducing debt, PGW’s sales revenue improved.

Fertiliser and stockfood were in demand, in line with farmers looking to increase production while commodity returns are expected to be higher. Farm spending on capital items, such as fencing, was higher in the latter half of the year.

A challenging arable sector resulted in reduced demand for seed crops.

Fruitfed Supplies also faced a tough trading environment but more recently the kiwifruit and apple sectors showed signs of confidence with a pick-up in orchard investment, new plantings, and a focus on varietal development.

Additionally, export demand is high and post-harvest performance gains provided a more positive outlook for these growers.

Viticulture has struggled with a global oversupply of wine with global wine demand in decline, and the vegetable sector faces market pressure.

The Agency Group division (Livestock, Wool, and Real Estate) reported Operating EBITDA of $23.5 million (up by $11.1 million, almost doubling the prior year’s result) with revenue of $201.0 million, up $20.3 million.

The Livestock business was strong due to elevated meat pricing and increased volumes in beef and dairy cattle pushing livestock prices to record levels.

Processor demand, good feed reserves, and robust beef schedules kept prices high.

Sheep pricing improved significantly year-on-year although the number of sheep transacted was down slightly, influenced by lower numbers from continued land use change.

There were also strong forward contracts for dairy herd sales with stud stock sales rebounding with increased, record setting, demand for sire bulls.

PGW’s GO-STOCK sheep, beef, dairy, and deer products experienced strong demand and its bidr® online trading platform grew its database of buyers.

Growth was driven by continued demand for hybrid integration, online bidding, and livestreaming of cattle sales at saleyards and on-farm auctions. The bidr® platform hosted over 1,000 auctions establishing itself as New Zealand’s leading online auction platform for livestock.

Wool prices were up on the previous year, but significant improvement is required to create a profitable future for wool growers. Wool production was hampered by difficult growing conditions and a decline in shearable sheep, educing bales handled across PGW’s stores.

PGW has partnered with Norsewear to strengthen the value of ethically produced New Zealand wool and support domestic manufacturing which helps connect PGW growers directly with trusted manufacturers, with the intention of delivering better returns for growers through long-term contracts, demand certainty and supply of fully traceable New Zealand wool.

Wool Integrity NZ™, PGW Wool’s assurance brand, certifies that the wool meets world-leading standards in animal welfare and sustainability.

Real estate revenue was up by 55 % on the same period last year buoyed by a gradual downward trend in interest rates, stronger dairy payouts, robust red meat pricing, and farm gate prices elevating confidence in the sector.

Mr Moore provided an optimistic outlook for the primary sector.

Export prices are buoyant, supply is constrained versus solid demand, inflation has eased, interest rates have fallen, input prices have stabilised, creating a positive operating environment.

Subsequently there has been a noticeable lift in farmer confidence which is expected to be positive for PGW’s rural servicing operations.

Geopolitical tensions and unpredictable international trade terms add uncertainty but strong commodity prices are expected to remain throughout full year 2026 across dairy, red meat, and horticulture crops (particularly kiwifruit and apples).

PGW’s fully imputed final dividend of 4 cents per share will be paid on 3 October 2025 bringing the total fully imputed dividends for the year to 6.5 cents per share.

PGW shareholders have seen a much-improved share price trajectory this year with the share price up 53% year to date due to the company’s exposure to the underlying performance of the New Zealand agricultural industry.

The company is expected to provide further guidance for the full year 2026 at its annual Shareholders’ Meeting in October 2025.

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Spark’s (SPK) announcement of the sale of 75% of its data centre business was released on Tuesday.

SPK has entered into an agreement to sell a 75% interest in its data centre business to private equity firm Pacific Equity Partners (PEP).

The investment will be made from PEP’s Secure Asset Fund, which invests in infrastructure growth platforms.

The transaction values the data centre business at up to $705 million, representing a full year 2025 pro-forma EBITDA multiple of just over 30 times.

PEP, as a new capital partner, provides SPK with funding to build out its planned 130MW+ data centre capacity development pipeline to cater for growing cloud services and AI data use.

SPK CEO, Jolie Hodson described the partnership as allowing SPK to realise value for its data centre assets in the short term, while also continuing to participate in the growing market through its 25% retained stake with creating further value for SPK shareholders over the long term in mind.

SPK expects to receive cash proceeds of approximately $486 million at completion, with additional deferred cash proceeds of up to $98 million if certain performance-based objectives are achieved by the end of the 2027 calendar year. Proceeds will used to reduce group net debt.

SPK will move its data centre assets and operations into a new stand-alone company named unimaginatively for now as ‘DC Co’, which will have its own Board, management team and debt financing facilities.

The company will have a solid data centre platform in a growing market, with over 23MW of built capacity at 11 operating data centre facilities across New Zealand.

There are plans for further development on Auckland’s North Shore, and extensions at the Takanini site in South Auckland.

PEP Managing Directors, Andrew Charlier and Evan Hattersley, described the data centre business investment with SPK, as aligning with its Secure Assets strategy of partnering to invest in high quality infrastructure growth platforms.

Both PEP and SPK see the company as providing essential infrastructure to support cloud and AI adoption and data sovereignty in New Zealand.

The deal is subject to regulatory and customary consents including OIO (Overseas Investment Office) approval, with a targeted completion date of 31 December 2025.

SPK’s announcement received a relatively lukewarm response with the share price retreating after the Tuesday release with investment behaviour likely influenced more by the fact that the transaction is still conditional and the announcement arrived just days before SPK will release its Full Year results next week on Wednesday 20 August 2025.

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Vulcan Steel Limited (VSL dual listed on the NZX and ASX) has provided a business update for full year 2025 ahead of its annual results that will be released later in the month.

Vulcan is an Australasian-wide industrial product distributor and value-added processor with 66 logistics and processing facilities. It employs close to 1,350 employees across the company’s Steel and Metals divisions.

It announced a preliminary update on its full year results for the financial year ended 30 June 2025 (FY25) with earnings expected to be in the following ranges:

- Earnings before interest tax, depreciation and amortisation (EBITDA): NZ$106 million to NZ$109 million.

- Net profit after tax (NPAT): NZ$14 million to NZ$16 million.

FY25 reported earnings are after including approximately NZ$3 million impairment (NZ$2 million after tax basis) from the sale of assets of the Wintec operation in Australia (acquired as part of the acquisition of Ullrich Aluminium in August 2022).

The company’s net debt position was reduced further to NZ$232 million from NZ$242 million at 31 December 2024, and from NZ$276 million at the end of financial year ended 30 June 2024.

Vulcan’s banking syndicate granted a 6 month extension of the financial covenant relaxation to now apply to 30 June 2026, and the company continues to comply with all covenants.

The above results are subject to audit finalisation.

Vulcan’s Managing Director and CEO Rhys Jones stated that the 2025 financial year was influenced by persistent economic challenges in both New Zealand and Australia which  contributed to a demanding trading environment and triggered aggressive, and in his view unsustainable, pricing by some market participants in the industry.

Broader macroeconomic uncertainties affected trading but despite cautious consumer and business sentiment, the CEO sees encouraging signs that the downward trend is beginning to level out which is starting to look like a common trend we will see this results season.

In the last three months, VSL’s overall daily sales activity has shown signs of stabilisation, suggesting that the business may be moving towards a more consistent footing. Early signs of renewed momentum in specific customer segments, and a modest uplift in activity was also noted.

The company’s expectations are for daily sales volume to remain broadly stable at low levels in the first half of full year 2026, before firming in the second half of full year 2026.

The company remains focused on maintaining customer service levels, managing its working capital and controlling operating costs, positioning Vulcan to respond effectively as market conditions improve.

The company’s optimism was reflected on-market with the share price closing on Friday at $7.30 after hitting an intraday high of $7.33 and was up from below $6.60 earlier in the week.

Vulcan plans to release its full year FY25 results on Tuesday, 26 August 2025 and will host a conference call to discuss the results.

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Travel

Our advisers will be in the following locations on the dates below. Please contact us if you wish to make an appointment.

20 August – New Plymouth – David Colman

21 August – Wairarapa – Fraser Hunter

22 August – Lower Hutt – David Colman

28 August – Christchurch – Fraser Hunter

11 September – Ellerslie – Edward Lee

12 September – Albany – Edward Lee

David Colman

Chris Lee & Partners Limited

Market News 11 August 2025

David Colman writes:

On Wednesday, Property for Industry Limited (PFI) provided a leasing and development update and dividend guidance for full year 2026.

PFI specialises in industrial properties and has a portfolio of 91 properties across New Zealand leased to over 120 tenants.

The company advised that it has received the early surrender of GrainCorp Foods NZ Limited’s (GrainCorp) lease at 92-98 Harris Road, East Tamaki. 

The lease was due to expire on 3 November 2028, with one further 5-year right of renewal available to Graincorp, but now the lease ends today, 11 August 2025.

The property will not be leased to another tenant immediately as it has joined PFI’s development pipeline with all the existing buildings and other infrastructure on the site scheduled for demolition.

GrainCorp will pay a $5 million surrender fee to PFI as compensation for surrendering the lease early, allowing for operating expenses, and the removal and demolition of plant and equipment left on site.

PFI is expected to gain an after-tax benefit to full year 2026 Adjusted Funds from Operations (AFFO) of approximately $3.5 million (approximately 0.7cps).

PFI has considered the property to be a future development site beyond GrainCorp’s tenancy for some time, mainly because the site is considered relatively underutilised.

The combined building footprint of approximately 7,200 sqm represents only a little above 27% of the 26,300 sqm site.

Plans for the redevelopment of the property include preliminary designs allowing for a large-format industrial facility of approximately 14,500 square metres, with associated office, canopy, yard, and parking areas.

PFI’s website includes the property on its developments page and will provide further updates as its plans take shape.

The project is subject to feasibility, tenant engagement and consents, and could involve an investment of approximately $45 million (excluding land) with the new development targeting a 5 Green Star rating in line with PFI’s sustainability commitments.

PFI also announced an update to its full year 2026 dividend guidance, with dividends now expected to total at least 8.90 cents per share (cps) – at the higher end of guidance between 8.80 and 8.90 cps, representing an increase of between 2.3% to 3.5% on full year 2025 dividends.

The early lease surrender, along with the inclusion of the New Zealand Government’s Investment Boost tax changes (which allows businesses to deduct upfront 20% of the cost of new assets or improvements to existing assets for tax) has resulted in an increased forecast full year 2026 Adjusted Funds from Operations (AFFO).

Full year cash dividends of at least 8.90 cps will be below PFI’s dividend policy pay-out ratio range and will be approximately 85% of AFFO on a one-year basis.

For PFI to pay higher FY26 cash dividends than 8.90 cps will depend on progress on several key efforts including:

- successfully leasing the speculative component of Stage 2 of the 78 Springs Road redevelopment

- confirming development plans and timing for 92-98 Harris Road development

- progress in addressing material full year 2027 lease expiries during full year 2026.

PFI will release its FY25 annual results on 25 August 2025.

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The August results season has begun with T&G Global releasing its half year results.

T&G Global (TGG) started as Turners and Growers more than 125 years ago and is now part of the Global Produce division of the German BayWa conglomerate.

TGG is present in 13 countries and distributes fresh produce to customers and consumers in over 55 countries.

The company’s Half Year Results 2025 highlights:

- Revenue: $920.6 million, up from $820.1 million

- Operating profit: $18.1 million, compared to a loss of $2.6 million

- Net profit before tax: $2.3 million, compared to a loss of $8.2 million

- Net profit after tax: $1.7 million, compared to a loss of $18.6 million

Higher revenue and a return to profitability for the six months ending 30 June 2025 was a significant improvement with the Chair Benedikt Mangold noting that the company is beginning to see the results of its long-term growth and investment strategy.

The company has focused on productivity, efficiencies and cost control across the whole business.

Global demand for its premium apple brands is growing in line with its volumes, and across the business TGG has worked to strengthen customer and grower relationships and optimise its value chain.

Despite global volatility the company has shown resilience.

T&G’s Apples business delivered a sustained uplift in performance, with revenue increasing 15%, to $675.3 million, compared to $589.0 million in the comparable 2024 half year period.

Operating profit increased 99% to $47.2 million, compared to $23.7 million in the corresponding 2024 period.

These improvements reflect significant investment in the company’s long-term Apples strategy.

A high-quality crop was observed across North America and in New Zealand with significant plantings of ENVY™ apples over the past few years described as contributing to a record year for branded apple volumes.

Asian retail programmes were said to be driving new growth with TGG opening a Taiwan office as part of its expansion.

Revenue in T&G Fresh increased to $229.2 million, compared to $218.3 million in the comparable 2024 period, and operating profit increased to $3.7 million, from a loss of $11.3 million in the corresponding 2024 period.

T&G’s VentureFruit business saw its revenue from external customers decrease to $2.9 million, compared to $4.0 million in the comparable 2024 period, due to changes in the timing of invoicing planting fees.

The operating loss increased to a loss of $7.2 million, from a loss of $3.4 million, due largely to phasing of operating expenditure.

The company continues to scale its new premium JOLI™ apple brand, ahead of its consumer launch in 2027.

380,000 trees have been licensed to grow in New Zealand, and test blocks established across Europe this year.

TGG closed up 15c (+6.7%) at $2.40 on Friday and is up an impressive 60% YTD (year to date) comparing well to its peers (NZ listed companies with horticultural exposure) such as Seeka (up 20% YTD) and Scales (up 18% YTD)

Seeka (SEK) and Scales (SCL) release half year results on 20 August and 25 August respectively.

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On Friday, Infratil and the New Zealand Superannuation Fund (NZ Super) announced that they have entered into a binding agreement to sell their 100% interest in RetireAustralia to Invesco Real Estate (the global real estate arm of Invesco Ltd) for A$845 million.

Infratil and the NZ Super Fund each owned a 50% interest in RetireAustralia (both shareholders’ interests managed by Morrison, a global infrastructure investment manager).

RetireAustralia is a privately-held retirement operator in Australia with 4,000 independent living units and apartments across 27 villages in three states (New South Wales, Queensland and South Australia).

The sale is conditional, including FIRB (Foreign Investment in Australia) approval, and is expected to complete in the last quarter of the 2025 calendar year.

Infratil expects to receive proceeds of approximately A$300 million (NZ$328 million), after adjustments for transaction and completion costs.

The sale is expected to result in an accounting loss of NZ$80 million – the difference between Infratil’s 31 March 2025 carrying value of $404 million for RetireAustralia and the approximate NZ$328 proceeds, however when taking into account capital contributed and distributions received the forecast sale proceeds are expected to preserve almost all contributed capital, with an internal rate of return (IRR) close to zero over the 11 year holding period.

The sale also marks the end of Infratil’s interests in the retirement sector which began when it bought a 19.91% stake in Metlifecare at $3.53 per share in 2013. 

It later sold the Metlifecare stake in 2017 at $5.61 per share.

Infratil has a market capitalisation that exceeds NZ$11 billion and is seen to have grown out of its smaller investments.

The company continued to have a positive outlook for RetireAustralia, but the Infratil team found it increasingly difficult to justify an investment of RetireAustralia’s size as able to deliver a meaningful return to Infratil shareholders.

Infratil’s decision to sell RetireAustralia is consistent with its strategy to divest businesses, unlikely to scale under its ownership, and the funds increase balance sheet flexibility for reinvestment. 

Infratil is working towards a $1 billion divestment target so it is inevitable that there will be other assets, with limited scalability, sold in due course (potentially a part of a larger investment such as a One NZ asset, or the sale of its 66% shareholding in Wellington Airport).

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Travel

Our advisors will be in the following locations on the dates below.

20 August – New Plymouth – David Colman

21 August – Wairarapa – Fraser Hunter

22 August – Lower Hutt – David Colman

28 August – Christchurch – Fraser Hunter

Please contact us if you wish to make an appointment.

David Colman

Chris Lee & Partners Limited

Market News 4 August 2025

David Colman writes:

On Friday 1 August, Synlait Milk Limited (SML) provided an update on its performance for the financial year ended 31 July 2025 (FY25).

Synlait experienced manufacturing challenges at its Dunsandel facility across a range of product segments, resulting in one-off costs.

The issues have since been resolved and the Dunsandel plant has undergone routine winter maintenance and is now in new season production.

SML’s overall performance has improved, and the final full year 2025 result is forecast to deliver the following:

- underlying EBITDA (Earnings Before Interest Taxes Depreciation and Amortisation) of $100 to $110 million compared to $45.2 million in FY24

- breakeven underlying NPAT (Net Profit After Tax) compared to -$60.4 million in FY24

- a reported net loss after tax of -$27 to -$40 million compared to -$182.1 million in FY24

- reported EBITDA of $50 to $68 million (-$4.1 million in FY24)

SML is targeting a closing net debt balance of $300 million, and the company remains in compliance with its banking covenants.

The preliminary update remains subject to year-end procedures being completed including audit.

SMI’s share price closed at $0.61, up 1c or 1.7%, the day after the update and is impressively up almost 40% year to date.

The company will announce its FY25 result on Monday 29 September 2025.

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On Wednesday 30 July, NZ Windfarms Limited (formerly listed under NWF) advised that the scheme of arrangement relating to the acquisition by Meridian Energy Limited (MEL) of all of the remaining shares in NZ Windfarms, that it did not already own, was implemented resulting in Meridian acquiring 100% of the shares in NZ Windfarms.

NZ Windfarm shareholders were paid, as part of the Meridian scheme, consideration of 25 cents per share in cash at 5.00pm on 23 July 2025.

Incidentally, Manawa bondholders will be paid as part of Contact Energy’s scheme tomorrow (Tuesday 5 August 2025).

This year of consolidation in the electricity sector, with both Manawa and NZ Windfarms bought by larger operators, leaves just four NZX listed electricity companies (in order of market capitalisation):

Meridian (MEL) worth $14.9billion

Contact (CEN) worth $8.9billion

Mercury (MCY) worth $8.8billion

Genesis (GNE) worth $2.6billion

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Sir Michael Hill passed away last week and in the same week his retail company, Michael Hill Jeweller (MHJ) released a full year trading update providing a glimpse at how the company is tracking in a tough global economic environment.

Well before he was knighted, Sir Michael Hill introduced himself to me, and other television watching kiwis, in the 1980s through a particularly simple and effective advertising campaign.

The primetime television ads consistently included his appearance and iconic line ending ‘Michael Hill, Jeweller’ which meant his distinctive bespectacled face, name, occupation, brand, and business were cemented in the mind of the viewer in just three words.

The update provided key points based on preliminary and unaudited numbers:

- Expectations that full year (FY25) Group earnings will be comparable with estimated EBIT1 range of $14 million to $16 million (FY24: $15.9 million).

- Group total sales and Group same store sales were both flat on last year. In the second half, same store sales improved across all segments, with Group same store sales up 2.4% on the same period last year. 

- Gross margin is expected to be approximately 60.5% for the year, broadly in line with the prior year (FY24: 60.6%) with the impacts of continued aggressive promotional trading conditions and record high gold prices being largely offset by the introduction and mix of higher margin products.

- Inventory levels remain well-managed, closing at approximately $199 million (FY24: $196 million).

- Closing net debt of approximately $42m (FY24: $39m).

- The Group finished the year with 287 stores (FY24: 300) with10 stores permanently closed in Australia and 4 in Canada, two Australian stores were converted to Bevilles, and 2 new stores were opened with 1 in Canada and 1 in New Zealand. There are 250 Michael Hill stores and 37 Bevilles stores,

Interim MHJ CEO, Andrew Lowe commented that despite retail trading conditions remaining challenging in all markets (which has been a familiar theme for retailers for a few years), the business delivered full year earnings and gross margin broadly in line with the prior year.

A relentless focus on store productivity was described as providing a second half lift in same store sales of 2.4% with the Canadian segment again delivering record sales demonstrating a degree of resilience.

The recent positive momentum Is hoped to continue into the important Christmas trading period.

MHJ intends to release its full year FY25 results for the 52-week year ended 29 June 2025 after the ASX market closes on Friday 22 August 2025.

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On Thursday Kiwibank received Government approval to raise capital to support growth and released the following note:

In December 2024, the Government announced it was exploring a private placement of capital to continue to accelerate Kiwibank’s growth.

Since then, Kiwibank’s parent company, Kiwi Group Capital (KGC) and the Treasury have been assessing investor interest in such an initiative.

Following this process, Cabinet has approved for KGC to proceed to the next phase of a potential capital raise of up to $500 million with timing and amount to be determined by KGC, and subject to final approval of terms and conditions by shareholding Ministers.

The transaction is expected to occur prior to 30 June 2026.

David McLean, KGC Chairman, said: “The Government has reaffirmed its commitment to supporting Kiwibank as a competitive, New Zealand-owned alternative to the larger banks, ensuring better outcomes for all New Zealanders.

“The capital raise process aims to provide Kiwibank with capital to continue its above market growth and enhance its competitive position while ensuring all funds raised are invested into New Zealand’s future. There will be no return of capital to the Crown, and no changes for Kiwibank customers.”

Steve Jurkovich, Kiwibank’s Chief Executive, said, “Kiwibank exists to challenge the status quo and to disrupt the banking sector for the good of Kiwi. We are working to create a future where banking is stronger and fairer than ever before.

“Delivering on our Purpose of Kiwi making Kiwi better off is what differentiates Kiwibank and drives our performance, and that is what we continue to be focused on. Any capital raise would be structured to ensure Kiwibank’s continued role to improve services and pricing for consumers.”

The capital raising process is targeting New Zealand-based KiwiSaver funds, investment institutions, and professional investment groups.

Kiwibank will remain 100% New Zealand-owned following the completion of any private placement.

Kiwibank half year 2025 highlights

- Net profit after tax of $92 million for the six months to 31 December 2024.

- Net lending growth of $2 billion growing its lending book by 6% to $34.4 billion.

- Home lending grew 2.1 times faster than the market

- Business lending more than 6 times faster than the market.

- Deposits increased $1.8 billion growing by 6% to $30 billion (1.6 times faster than market growth)

For now, it does not seem that the capital raising will be relevant to retail investors.

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Travel

Our advisors will be in the following locations on the dates below.  Please contact us if you wish to make an appointment:

20 August – New Plymouth – David Colman

21 August – Wairarapa – Fraser Hunter

28 August – Christchurch – Fraser Hunter

Chris Lee & Partners Limited