The New Zealand Growth Fund returned -3.0% in August, compared to its benchmark of +0.9%. 

Healthcare and pet product distributor EBOS (-20%) delivered a slightly weaker full year result than expected. Core operating profit (EBITDA) rose +7.5% to $585 million, which was below the midpoint of its A$575-600m guidance range and fell short of expectations for a stronger result. This partly reflects an uplift in competitive pressures in wholesale pharmacy distribution, a slowdown in trading in its premium pet food brands, and higher than expected costs as it transitions to new warehouses with more capacity for growth. The company guided for core operating profit growth of around +7% in the new financial year. When combined with the additional lease impost of the expanded facilities, which had not been previously flagged, this results in a year of unexpected flat profits. Growth is expected to resume beyond this as utilisation of the excess capacity improves. 

Cinema software company Vista (-15%) saw its share price decline after its half-yearly result. Its result showed solid year-on-year growth in most metrics including recurring revenue of +11% and core operating profit (EBITDA) margin increasing from 10% to 13%. A key surprise was the company announcing it will be increasing costs in the short term. This is part of its strategy to accelerate customer migration to a new cloud product suite in response to growing demand. While this move is expected to reduce cash flow over the next few years, it comes just at a point when the company was poised to generate strong growth after a prolonged investment phase. The upside of this is that it should bring a higher proportion of existing customers on its higher-value products earlier. The company also provided detail of its plans to launch embedded payment functionality, which will be of particular benefit to its smaller business customers. Vista can do this in an efficient way that outsources much of the payment processing to specialist providers and means low cost but recurring revenues that will likely grow to over $15m at high additional profit margin. 

a2 Milk (+21%) delivered its full year result in line with expectations, with infant formula revenue growth accelerating from +7% in the first half to +12% in the second with even stronger profit growth. This was off the back of continued market share gains in both a2 Platinum and a2 Zhichu ranges. The growth outlook remains positive given share trajectory plus the recent launch of its a2 Genesis range. The more notable news was the company simultaneously announcing a comprehensive supply chain strategy reset. This includes the sale of its 75% share in loss-making Mataura Valley Milk plant in Southland for $100m and acquisition of full ownership of a Pōkeno milk plant from Yashili for $282m. The Pokeno plant comes complete with infant formula blending and canning lines, and two brand licenses which will enable the company to expand into different segments of the lucrative Chinese infant formula market over time. Over the next five years, the company plans to transition its a2 Platinum range from its current manufacturing partner, Synlait, to the Pōkeno facility. This strategic move is expected to internalise a significant amount of profit margin and deliver solid return on investment over time as production volumes scale up.