Soul Patts share price struggles on falling profits

ASX 200 investment house Soul Patts reported its half year results this morning.

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The Washington H Soul Pattinson & Company Ltd (ASX: SOL), or Soul Patts, share price is edging lower today.

Shares in the S&P/ASX 200 Index (ASX: XJO) diversified investment house closed yesterday trading for $35.04. In morning trade on Thursday, shares are swapping hands for $34.76, down 0.8%

For some context, the ASX 200 is up 0.7% at this same time.

This comes following the release of Soul Patts' half-year results for the six months ending 31 December (1H FY2024)

Read on for the highlights.

Soul Patts share price edges higher on dividend boost

  • Portfolio (pre-tax net asset value) of $11.5 billion, up 10% year on year
  • Net cash flow from investments of $263.4 million, up 6.9% from 1H FY2023
  • Fully franked interim dividend of 40 cents per share, up from 36 cents per share last year
  • Statutory profit of $302.5 million, down 33.2% from 1H FY2023
  • Cash balance at 31 January of $394.2 million

What else happened with the ASX 200 investment house over the half year?

The Soul Patts share price is in the red in early trade with the investment house increasing its portfolio by 10% to $11.5 billion. After adding dividends back in this delivered a total return of 8.3%, outperforming the All Ordinaries Accumulation Index by 2.4% (excluding the benefits of any franking credits).

The fully franked interim dividend of 40 cents per share will be paid out on 10 May. This represents the 24th consecutive year the company has increased its dividend payout.

Management attributed the 6.9% year on year increase in net cash flow from investments to ongoing growth of its credit portfolio and income from its strategic portfolio. These contributed an increase of $33.1 million and $12.9 million respectively.

On the negative side of the ledger, these gains were offset by a $14.9 million year on year decline from the company's large caps portfolio due to its reduced size. The investment house also reported $13.2 million in lower realised trading gains from its emerging companies portfolio.

Also likely throwing up headwinds for the Soul Patts share price is the steep half-year decline in profits.

Statutory profit attributable to shareholders came in at $302.5 million, down 33.2% year on year. And regular profit after tax of $241.3 million was down 49.3%.

The company attributed the decline to a lower share of profit contributions from Brickworks Ltd (ASX: BKW) and New Hope Corp Ltd (ASX: NHC).

Soul Patts noted:

As an investment house, Soul Patts does not consider profit to be an accurate reflection of investment performance. The key drivers of success are growth in the capital value of the portfolio and a growing yield as measured by net cash flow from investments.

What did management say?

Commenting on the half-year results that are seeing the Soul Patts share price nudge up today, CEO Todd Barlow, said:

Our investment team transacted $2.4 billion in value during the six-month period, which is equivalent to two-thirds of the transaction volumes in the prior 12 months. The market environment has provided many opportunities, as reflected in our $1.6 billion of capital allocated across listed equities and private investments.

We are increasingly active in how we manage the portfolio mix and our investment appetite continues with over $500 million in undrawn but committed funds.

Soul Patts share price snapshot

Over the past 12 months, the Soul Patts share price has surged 25%. And that's not including dividends.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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