Air NZ shares jump on share buyback announcement
BUSINESSDESK: Air New Zealand says its share price does not reflect the strength of the national carrier's financial performance and is to begin a share buyback scheme as a consequence, chairman John Palmer told the company's annual meeting in Auckland.
Air NZ shares were up 6.4% mid-afternoon to 70 cents as it targets on-market purchases of up to 3% of the issued stock, valuing the purchase of 33 million shares at approximately $23.1 million.
Reaffirming the outlook statement made a month ago at the annual profit announcement, Mr Palmer says Air NZ is on track to "more than double normalised earnings before taxation", which clocked in at $91 million in the year to June 30.
"Clearly, we operate in a volatile industry with certain variables beyond our control. However, three months into the 2013 financial year we believe we are well placed to deliver that result.
"We believe the current share price does not fairly reflect the underlying value of the company's shares. The board has therefore decided to undertake a share buyback programme.
"We will do so through an on-market share buyback on the NZX and the ASX to acquire up to 3% of the company's shares."
The government, which owns 73% of the ordinary shares on issue, will not participate.
"The programme may commence from October 4, 2012, and may continue until September 27, 2013," Mr Palmer told shareholders, and will not buy shares at a price more than 5% above the five-day volume weighted average market share price, as required by ASX rules.
Shares will be held as treasury stock and may be used for the purposes of fulfilling Air NZ's possible future obligations under employee share-based compensation plans.
Mr Palmer stressed that volatile market conditions mean Air NZ "cannot expect a return to what could be considered normal operating conditions anytime soon" but remained "committed to providing our shareholders with a consistent dividend stream where possible".
The airline had been the only one in Australasia to consistently pay a dividend over the last seven years – "one of the toughest periods the airline industry has ever experienced".