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MARKET CLOSE: NZ shares drop as Orion suffers on strong kiwi

MARKET CLOSE: NZ shares drop as Orion suffers on strong kiwi; Warehouse, Hallensteins gain

By Sophie Boot

Sept. 23 (BusinessDesk) - New Zealand shares fell, led by Orion Health Group as the export-focused software developer contends with a strong kiwi dollar, while Warehouse Group and Hallensteins Glasson Holdings gained on their earnings.

The S&P/NZX 50 Index dropped 14.98 points, or 0.2 percent, to 7,296.73. Within the index, 24 stocks fell, 18 rose and eight were unchanged. Turnover was $154.6 million.

"Even offshore strength is not having any effect on investors continuing to take profits on the local market," said Grant Williamson, director at Hamilton Hindin Green. "We're entering a phase where prices are starting to drift off a bit - we had a few days where the Nuplex proceeds were getting reinvested in the marketplace, but right at the moment investors are being pretty cautious and continuing to take some profits."

Orion Health led the index lower, down 5.2 percent to $3.50, having risen 2.5 percent yesterday after the company's annual meeting. The health software developer is on track to return to profit in 2018, though the strength of the kiwi is crimping revenue in local currency terms and drained more cash than anticipated, the chairman said.

"The commentary wasn't overly positive because of the strong kiwi dollar and that's obviously influencing that share price, which has had some pretty wild swings this year," Williamson said. The stock soared as high as $5.31 in February, having started the year at $3.23, and has fallen back since.

Air New Zealand fell 2.9 percent to $1.82, Heartland Bank dropped 1.9 percent to $1.54, and Chorus fell 1.6 percent to $3.73.

The biggest gained was Kathmandu Holdings, up 2 percent to $2.04, while Australia & New Zealand Banking Group rose 1.6 percent to $28.99 and Tower gained 1.5 percent to $1.

Warehouse Group rose 1.4 percent to $2.94. The country's largest listed retailer lifted annual earnings 12 percent, just beating the top end of its guidance, as it eked out bigger reductions in its cost base to widen operating margins.

Adjusted profit rose to $64.1 million in the 52 weeks ended July 31 from $57.1 million a year earlier, the Auckland-based company said in a statement. Revenue increased 5.6 percent to $2.92 billion with sales growth across all of the retailer's brands. Gross margins shrank due to its Noel Leeming group lifting sales of low-margin consumer electronic goods, however, operating margins widened to 3.8 percent from 3.4 percent as Warehouse focused on stripping out costs.

"It's a pretty respectable result, the retail conditions out there is probably one area of the economy that's struggling in some cases, but the Warehouse is continuing their improvement in earnings and investors are rewarding that a little, bucking the trend of the weakness in the marketplace today," Williamson said.

Outside the benchmark index, Hallenstein Glasson gained 4.3 percent to $3.14. The clothes retailer posted a 21 percent decline in full-year profit, reflecting a loss from its Glassons unit in Australia and weaker earnings from its flagship menswear chain.

In the first six weeks of the current year, sales are up about 9 percent, Glassons is recovering and "we anticipate a much-improved profit performance for the current trading period," chief executive Graeme Popplewell said.

"Although they'd signalled it wasn't going to be a very good result, the commentary was very positive for 2017 and they've maintained the dividend - it puts them on a very attractive dividend return. Investors are encouraged by that." Williamson said.

Intueri Education Group was placed in a trading halt on the NZX and ASX. After the market closed, it announced the Australian Skills Quality Authority (ASQA) will either cancel the registration of its Australian organisations - Online Courses Australia and Conwal & Associates - or impose sanctions of lesser severity, following audits done in July 2016.

Approximately two-thirds of Intueri's 2016 earnings guidance, of underlying earnings before interest, tax, depreciation and amortisation of approximately $15 million, is generated by these businesses, so the company has engaged with its bank regarding the possible implications, it said in a statement. It's asked to stay in its trading halt.


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