Washington H. Soul Pattinson & Co. Ltd (ASX: SOL) shares are under selling pressure today following the release of its full-year result.
In an announcement to the ASX, Soul Patts reported revenue of $967 million, up 56% on the prior corresponding period. Regular net profit, which excludes unusual items, came in at $282 million for the year to 31 July, up 59% from the same period last year.
Soul Patts is a conglomerate with large investments in select ASX-listed companies.
This year's increase in profit came from higher contributions from its major investments, including New Hope Corporation Limited (ASX: NHC) which benefitted from a recovery in coal prices.
Meanwhile, TPG Telecom Ltd (ASX: TPM), in which Soul Patts owns 25% of shares outstanding, was helped by ongoing growth in its consumer and corporate segments. Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API) rounded a strong year for Soul Patts, with profit contributions up 6% and 17%, respectively.
Todd Barlow, Soul Patts' Managing Director noted that the profit result was the highest ever achieved by the company.
"In addition, the high non-regular profit demonstrates our nimble investment capabilities with investments in Pengana Capital and Hunter Hall International in the past year," Barlow said.
"Importantly, our diversified portfolio continues to deliver reliable cash returns which enables us to provide increasing fully franked dividends to shareholders."
With a full-year dividend of 32 cents per share (fully franked) due to be paid on December 11th, the company has increased its yearly dividends every year for 17 years. According to Barlow, it is one of only two ASX-listed companies to have achieved this milestone.
In addition to its strong cash flows and upbeat profit result, Soul Patts detailed its push into the financial services sector. During the year, Soul Patts added to its sector exposure and is now the largest shareholder in Pengana Capital Group (ASX: PCG) and the small-cap investment company Urb Investments Ltd (ASX: URB).
Reflecting on the portfolio Soul Patts' long-serving Chairman Robert Millner was quick to point out the regulatory pressure facing his company's businesses, including TPG Telecom with the arrival of the NBN, as well as Brickworks' rising energy costs.
"The energy crisis in Australia has increased the cost of doing business," Millner said. But concluded, "despite these challenges, we are delighted with the strong earnings growth exhibited across the portfolio."
Looking ahead, Millner expects the portfolio to continue performing well, with higher coal prices. He added, "TPG's entry into the mobile market in Australia and Singapore is a very exciting opportunity to significantly grow its business."
Foolish Takeaway
Soul Patts' shares are trading down today, but in my opinion, it is one of the more impressive companies on the ASX. While its holding structure is often criticised, the fact remains that it has produced stellar returns for investors over a long period of time with both capital gains and tax-effective dividends.
