••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••Retail ••• SHAReMARKeT INTellIGeNCe / FAMIlY MoNeY / INVeSTMeNT PRoPeRTY / M0NeY MARKeT / CURReNCIeS NZ $ (Includes GST) 4.95 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• P O Box 20034, Bishopdale, Christchurch. www.headliner.co.nz for 24/7 Markets News 7 AUGUST 2014 VolUMe 35 No 22 Moa margins NZOG moves OceanaGold Abano sets improving onwards on track good pace page 2 page3 page 4 page 4 Renewed guidance by Kathmandu Xero takes the cause Kathmandu Holdings provided update on its sales perform- ance and forecast earnings for the year ended 31.7.14 (FY14), including a lowered expectation on net profit. into the US Market • Total sales of $392.9m were up $8.9m (2.3%) on the pre- vious year; By WARREN HEAD • Same store sales (for the 52 weeks) up 4.2% at constant Xero has now reached the stage in its exchange rates; development where it is spending more to • EBIT expected to be in the range of $62.5m to $65.5m, maintain momentum in the greatest market compared to $63.4m for the previous year; on the planet and I mean not China but • NPAT expected to be in the range of $39.5m to $42.5m, America. As the latest GDP data showed compared to $44.2m for the previous year. there is a lot more momentum in America On 24.6.14 Kathmandu advised that in the absence of a than you’d imagine. more normal winter pattern through July, earnings for the In Washington the august group of year would likely be between 10 and 15% down on the Federal Reserve regional governors that result in FY13. During July, temperatures were generally comprise the FOMC are starting to show colder in comparison to June across most of Australia and less of an obelisk face to the world in New Zealand, particularly in the second half of the month. debating rate-setting because some parts of Since 24.6.14 Kathmandu has recovered a significant portion of the shortfall in sales revenue it experienced in the early the States are doing much, much, better. part of winter. This is the home of software. They Kathmandu’s CEO Peter Halkett said KMD would deliver a invented accounting software not long after better full year result for FY14 than management were IBM and Burroughs gave them machines on anticipating a few weeks ago when warm winter weather which to run it. You don’t just turn up here had significantly reduced customer demand. “The improve- and go chase market share off us, thank you. ment in sales and earnings in July once colder winter Or do you? weather became established has resulted in a satisfactory Xero is a typical Kiwi start-up. Why RoD DuRy Puts mARket GRowth In ConteXt. outcome from our key winter sale event.” wouldn’t you let us into your offices and Continuedonpage7 home too of we have something better than the logical. XRO forecasts subscription revenue growth for unwieldy stuff you’re used to. A Kiwi should have FY15. In FY14 March year it grew 84% to $66.6m. Only invented Apple. when they are doing recurring revenue ~$100m would So how is Xero footing it in this massive market? be better for listing off. For a start they’re throwing lots of cash at building Today it has 334,000 customers, a third of the way a market there. Just as well the recent capital raising to the target of 1 million. was as successful as it was. And as at 30.6.14 XRO still In XRO’s annual meeting presentation, CEO Rod had cash balances of NZ$192.7m. Drury produced a fascinating chart showing how long Net operating and investing cash outflows for the it had taken rival products to reach $100m of revenue. current quarter were NZ$17.3m compared with It took XRO six years to reach $20m and expectation is NZ$11.8 million for the March 2014 quarter. Not to get that in year 8 it will reach $100m. hung up about this surge in cash-burn. Given the In terms of XRO’s market share, most is in small seasonal nature of the Xero business, year-on-year business at 284,000, Australian customer numbers just comparisons provide the clearest view of growth shading New Zealand. In North America the total is trends. 18,000 but in the ‘Partners’ space the US component is A lot of this is the cost of a bigger field force. The already more than half the size of the NZ partner base. increase in staff costs is in line with headcount growth. The elephant in the room is Intuit with its The 103% increase in payments for other operating QuickBooks package but details aired at the XRO costs is higher than growth in actual expenditure due AGM suggest that at certain points recently XRO has to cash flow timings. been able to match the average monthly new customer Overall the increase in receipts from customers growth of this huge competitor. Although, of course, in reflects the continuation of strong growth in revenue sheer size Intuit is hardly being impacted. Their while the increase in costs reflects the ongoing invest- success is inside the US market just as XRO’s is in the ment in building the business for the future. NZ market (94% vs. 6% of the business). I do not know why there is such media interest in a It is quite a raw bare-knuckled sort of industry and possible US listing. It is a distraction. The company XRO didn’t pull back from throwing a few jabs at its kAthmAnDu RelIshes the ColDeR weAtheR. says there’ll be one when the timing is right, when it’s Continuedonpage3 Earnings growth in FY15 for Mainfreight When shareholders met today, Mainfreight executive chairman Bruce first 36 years. In the five years since the global recession took hold, Plested underscored the need for the company’s directors to build our 2014 profit has increased by a remarkable 81% — or some years of experience by outlining the board’s practice of meeting $49m. management in multiple markets. “Profits in every country, and overall in Europe, have improved In a brief commentary on the state of markets, he also empha- on the previous year, and those improvements are continuing into sized that there remains considerable economic weakness in most the current year. We see great opportunities for this current year.” of the world. MFT’s trading update indicated an overall 10%+ YoY group “Few would deny that we are experiencing some climate change, EBITDA growth (in NZD) in 1Q FY15E compared with the 12% YoY evident so far in more extremes of weather in very recent years. growth recorded in 2H14A. “Encouragingly, EBITDA growth rate in 1Q “Our political leaders are struggling to deal with these very big FY15E exceeded 10% YoY in all regions,” noted First NZ Capital. problems. This may be a time when we as individuals have to play “Growth in 2H FY15E could slow as the company begins to cycle an important role — a role of maturity, tolerance and under- the stronger performance in 2H FY14A. Even so, our current trajec- standing towards our political leaders, and the people and nations tory is for 2H FY15E EBITDA growth remains at a comfortable high less well off. single-digit. Management expects all regions to outperform FY14A.” “Anger, war, violence, insularity, cause only anger, war, violence, FNZC says MFT is a freight logistics business with global ambi- insularity and retaliation. As individuals, and collectively, we have tion. “With a service footprint in major trade lanes and regions that important roles to play in dealing with these very challenging spans from Australasia to Asia, North America and EU, MFT is now times. positioned to become a more serious contender in the global mAInfReIGht eXeCutIve ChAIRmAn “As for Mainfreight, we have built a strong platform over our Continuedonpage6 BRuCe PlesteD. HoT INVeSTMeNT NeWS oN WWW.HeADlINeR.Co.NZ. PReMIUM MeMBeRSHIP FoR THe MAGAZINe + WeBSITe top tier Moa improving margins – seeks new capital Craft beer brewer moa Group has prepped the ground for the rights issue to raise new capital of up to $5.75m by making some tough calls. managing director Geoff Ross says moa has now turned the corner with better sales performance and brand positioning. “The growth achieved in the last nine months is evidence that there has been a true turnaround. Sales, distribu- tion, marketing and brewing are all driving growth and increased margins. “We are now a stronger business,” he says in the prospectus for an issue of 1 additional share for every 1 currently held at a price of 33cps. “Recent results demonstrate regained momentum and significant sales growth. We remain positive regarding the market and busi- ness opportunity.” The rights issue is being supported by the major shareholders, including those who have invested via the place- ment, with all places as well as Pioneer Capital, The Business Bakery and Allan Scott Wines & Estates committing to subscribe for shares via the rights issue, although they do not guarantee the shares. That means that, at the outset, formal commitments have been received for 68% of the rights issue. Since making significant changes to across grocery channels; doubling our beverage credentials, and specifically deeper taste profile, although not too the sales and distribution structure in market share since the “New Moa” for us, continues to grow. big, and will also require accessible October last year craft beers brewer started 1 October 2013.” Consumers can now buy Moa in key price points. Moa Group has had a substantial New Zealand is the priority market Woolworths stores and Moa also has a “Moa Original lager and our new increase in sales measured by the for Moa right now.