Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (Soul Patts) released its FY21 report yesterday. There were a few different highlights for investors to be aware of. The Soul Patts share price rose almost 6% on Thursday after the released numbers.
Looking at the headline profit numbers, regular net profit after tax (NPAT) increased by 93% to $328 million. This was driven by Brickworks Limited (ASX: BKW), Round Oak and New Hope Corporation Limited (ASX: NHC).
However, the statutory NPAT fell 71% because the $1 billion one-off gain on changing how it accounts for its TPG Telecom Ltd (ASX: TPG) holding was not repeated.
Here are some of the three main highlights from the result:
Dividend growth continues
Soul Patts is the only company in the ASX All Ordinaries Index to have increased its dividend every year since 2000. ‘
The total dividend for FY21 was $0.62 per share, an increase of 3.3% on FY20.
Soul Patts pays for its dividend from its net cash from investments. That includes things like dividends, distributions, interest and profit from its privately-owned businesses.
FY21 net cash from investments decreased by 29% over the year to $180 million. The FY20 cash from operations included $92 million from TPG as a pre-merger dividend. But, the FY21 cash generation was 6% higher than FY19.
The total dividends paid in FY21 represents 82% of net cash flows from its investments. That leaves the 18% in the business for re-investment back into more opportunities.
As part of the result, Soul Patts re-iterated its investment philosophy, but it also revealed where management are currently looking for opportunities.
It wants the portfolio to be diversified, with a range of uncorrelated investments across listed shares, private equity and venture capital, property, structured credit and cash.
Soul Patts notes that it’s unconstrained. A flexible mandate allows the company to invest in and support companies from an early stage and grow with them over the long-term.
The investment style is long-term, with a disciplined and value-focused approach to investing through market cycles to deliver returns over the long-term.
It also wants its portfolio to offer capital protection. Management believe the investment conglomerate has a portfolio of assets that generate reliable cash through market cycles which aims to protect against the downside in market corrections.
With the merger with Milton Corporation Limited (ASX: MLT) nearly complete, Soul Patts is looking at few different key investment themes including health and ageing, energy transition, agriculture, financial services and education. It invested a further $60 million in agriculture in FY21.
New chief investment officer
Milton’s CEO and managing director Brendan O’Dea will become Soul Patts’ chief investment officer.
He spent over 22 years in Citigroup’s equities division, including as a managing director, across a broad range of roles including trading, investing and business/risk management in Sydney, Hong Kong, New York and Tokyo. Some roles included being the chief operating officer of pan-Asian equities, head of Japanese equities and head of US equity proprietary investments.
This may be interesting and perhaps signals Soul Patts’ greater intent on finding global equities to add to its portfolio for long-term growth.
At the moment, the limited international exposure that Soul Patts has includes Pengana International Equities Ltd (ASX: PIA) and Apex Healthcare. Apex is a “leading healthcare group with operations in Singapore, Malaysia, Vietnam and Myanmar.” Pengana International Equities is a listed investment company (LIC) that invests in global shares.