The New Zealand Growth Fund returned -0.4% in January, compared to its benchmark of +2.3%.

Several companies delivered positive results during the period and saw favourable share price reactions, including most notably a2 Milk (+17%) and Auckland Airport (+11%).

a2 Milk continues to deliver strong results in the China infant formula market. Growth ahead of expectations prompted the company to lift revenue and profit guidance for the current financial year. The company also announced the launch of new products as it enters the $8 billion China paediatric supplements category. This expansion is supported by its strong brand recognition in infant formula and other products, including follow-on kids milk powder, adult milk powders, and seniors supplements. We believe this positions the company to extend its growth runway in the large and lucrative China market.

Auckland Airport saw passenger numbers increase 2% to 9.6 million, which, along with strong cost control, enabled a 6% increase in net profit after tax for the half year. The company also narrowed its full-year profit guidance to the upper part of its previous range.

These were offset in the month by the contributions from Xero (-11%), Summerset (-8%), and EBOS (-7%).

Xero saw its share price under further pressure, as a result of continued fears around how new developments in AI will impact incumbent software providers. This was despite the company hosting an investor event where management delivered a highly credible presentation on the company’s AI strategy and new US payments capabilities, alongside a reiteration of its unchanged medium-term targets.

Summerset delivered its 2025 financial results in line with expectations. However, like the other listed New Zealand retirement operators, its share price came under pressure as mortgage rates have halted their late-2025 descent, with two-year mortgage rates edging higher so far in 2026. This potentially will weigh on the anticipated recovery in New Zealand house prices. The company has demonstrated it can continue to perform well in an environment of low or flat house price growth, although rising prices would certainly boost performance.

EBOS delivered operating results in line with expectations, keeping guidance for the current financial year unchanged, and reiterating confidence in a strong uplift in second-half profitability. There is still a degree of caution about the new management team's command of the business, with the share price trading around a 25% discount to the average price-to-earnings ratio over the last 10 years (around 15x versus 20x), which we think appears attractive for what is fundamentally still a business with both attractive defensive and growth characteristics. We await the upcoming investor day in April to see if management can restore investor confidence that the company's potential remains intact and close the value gap.