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SOL - Washington H. Soul Pattinson and Company

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Dona Ferentes said:
wow. the Millner boys have a bit of a penchant for these things.
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...only thing I don't get "Three future-facing themes (and how Soul Patts is allocating to these) " ... funds management is a bit old n use by-ed
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tucked away in PPT is the Trust Company ( used to be TRU ) which does more than boring old wealth management , they also oversee a good part of hybrid/convertible note oversight maybe they see a future in managing other companies' debt instruments
 
how's this going to be funded.... entitlement/ rights? plus flog off TrustCo.?

a few hours earlier to the lob, Perpetual said its board was exploring a demerger of its asset management unit from its wealth and corporate trust business in an effort to unlock up to $1 billion of value .
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they must have felt the glare of SOL on their back.
 
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Pitt St, Sydney
 
Dona Ferentes said:
PE of 18.5 .. trading down a bit since last week
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In terms of share price it doesn't seem to have done much since the merger with Milton. However, it is only three years so not really long enough to make a judgement as to whether the merger added value. Over a longer term (20 year) it seems to have done pretty well.

From SOL's half-yearly it's priced slightly above it's NTA. I haven't added to my holdings since 2020 when it was at the $17 - $18 mark.

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The secrets of Australia’s Berkshire Hathaway​


www.firstlinks.com.au

The secrets of Australia’s Berkshire Hathaway

Washington H. Soul Pattinson is an ASX top 50 stock with one of the best investment track records this country has seen. Yet, most Australians haven’t heard of it, and the company seems to prefer it that way.
www.firstlinks.com.au www.firstlinks.com.au

i hold SOL ( since 2011 )
 

Financing activity​

Soul Patts announced repurchasing up to 100% of the outstanding $225 million senior unsecured convertible notes, which are due in 2026.

It's going to carry out a placement of up to $225 million to fund the repurchase at an issue price of $34.23 per ordinary Soul Patts share (a 0% discount to the last closing price of Soul Patts shares). It has signed commitment letters with existing shareholders who have already committed to $225 million.

It is also launching an offer of $450 million of senior unsecured convertible notes, which are due in 2030, which will be listed in Singapore. Soul Patts said the new notes provide longer-term, low-cost debt to further strengthen its capital position for deployment into new investment opportunities.

Soul Patts said it has the right to choose to cash settle the new notes, if converted. The new notes have a coupon (interest) rate of between 2.375% to 2.875% per annum, payable on a semi-annual basis.

The conversion premium for these notes is 25% to 30% above the reference share price of $34.23, which is the placement price. Therefore, the conversion price will be between $42.79 to $44.50.

The new notes settlement and issue, placement settlement of new Soul Patts shares, and repurchase of the old notes will occur on 29 August 2024.

As part of this announcement, the company revealed insight into its FY24 performance – its financial year finished on 31 July 2024, so it isn't due to report its full FY24 result for a few weeks yet.

FY24 result​

Soul Patts focuses on two performance metrics – how much its portfolio is worth and how much cash flow its portfolio pays. These are the same things that most investors focus on with their own portfolios.

The company reported that its pre-tax NAV at 31 July 2024 is expected to be between $11.6 billion and $12 billion. That represents a year-over-year increase of 7.4% to 11.1%.

FY24 net cash flow from investments is expected to be between $463 million and $472 million, representing a year-over-year increase of between 9.1% to 11.2%. These are the cash flows generated by its investment portfolio after deducting corporate costs, income tax and non-regular cash flows. The board determines Soul Patts' dividend based on the net cash flow from investments.

The Soul Patts managing director and CEO Todd Barlow said:

"Following the success of our first convertible bond in 2021 where we have benefited from low-cost debt funding (3.5 years at 0.625% p.a.), we are pleased to be accessing this market again. We have received strong support from equity investors for the placement to fund the repurchase.
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"Since the issue of the 2021 convertible bond, our NAV per share (adding back dividends) has increased 15% p.a.
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"We continue to experience high levels of deal flow and executed $4.7 billion of transactions in FY24. Soul Patts has established itself as a capital partner of choice and we are seeing significant growth in our private equity and credit portfolios.
Following this transaction, we will be in a net cash position with significant flexibility to further accelerate Soul Patts' growth.
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dates out for 2024 Full year results ... note that a DRP has been introduced.

Results and final dividend announcement 26 Sept 2024
Ex-dividend date for final dividend 15 Oct 2024
DRP Participation deadline (5:00pm Melbourne time) 17 Oct 2024
Payment date for final dividend 8 Nov 2024
Annual General Meeting 22 Nov 2024
 
Soul Patts is also often a business operator. It takes stakes in companies that translate into anything from influence to substantial control.....

At our Livewire Live event held yesterday in Sydney, Bell Potter’s James Unger asked Mr Barlow a series of questions about the journey Soul Patts is on now, where it’s seeing opportunities, and what makes the company a unique investing proposition for Aussie investors.

Any of the key changes that you've been making through the course of this year, and where do you see the opportunities as we head into 2025?​

So, if I think about this last year that's just gone, we did about $4.7 billion of transaction activity across the portfolio – that's total acquisitions and disposals. On a net basis we deployed about $1 billion and of that $1 billion, about $500 million went into credit. So, we feel very good about the opportunities in credit right now and it's giving us downside protection, but a greater end-market return. It just seems like a good way to invest, to preserve capital and protect your downside, and to get something better than we could be experiencing in the equities market.

We've also been continuing to add bolt-ons into our private equity portfolio. We spent about $150 odd million last year adding to our positions there.

We put $200 million into uranium assets last year. That's a thematic that we feel very strongly about, and actually, just the energy thematic generally. We feel very positive about the long-term demand for energy from all sources. Whether that's electrification of everything, EVs, artificial intelligence and data centres. I think that the world is going to need a lot more energy than we can currently forecast simply to cater for urbanisation, growing populations, and just plain wealthier nations. So, we're very positive on energy.

Do you see the opportunity to go offshore?​

There's no doubt that our strength is in Australia. This is where our networks are, this is where our deals come from, and it would be naive of us to think that we could go and compete on the same basis in Europe or North America. But then when I look at the portfolio, there’s actually a strong international flavour to it. Take Brickworks (ASX: BKW) for example, it has a North American business in bricks, and New Hope Corporation (ASX:NHC) is an export-oriented company.

We also have businesses that are wholly based outside of Australia, like 2S, a Singaporean mobile business or Apex, a healthcare business that's listed in Malaysia. So, there's always been a very strong bias towards companies that are competitive on a global scale. We want to find private equity businesses that can compete globally, and we want all of our businesses to grow into businesses that are bigger than they could be if they were only domestic.

Tell us about some of your investments in interesting Australian companies.​

Australia is very globally advantaged in agriculture, so we've got quite a decent agricultural portfolio. We've also got very strong financial services in the growing superannuation pool, and the need for good quality wealth advice, so we have a business called Ironbark Asset Management. We’re also keen on businesses servicing health and ageing, and we've been looking at several assets in that sector for some time.

What is the overriding investing strategy behind Soul Patts?​

We've looked at family offices from around the world, basically people who have sold their business or inherited some money or whatever the case may be and they’re looking to invest that capital for the long term and protect it as well. They all tend to invest in a very similar way, which is they will be diversified across asset classes, they'll be concentrated in the things that they know and like and have high conviction on, they will be looking to extract a fairly steady dividend or income stream from the assets, and they'll be looking to preserve capital.

So, we thought, well, everybody who has that opportunity to invest a lump sum of money tends to adopt a very similar style, and yet there is no one company that can do that. We have listed investment companies (LICs) in Australia, but they tend to be singularly focused on certain asset classes, whereas we're trying to provide the same kind of opportunity to every Australian investor.
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hold
 
financial results for the year ended 31 July 2024 (FY24).

Key performance indicators
... FY24 (FY23) change
- Net Asset Value (pre-tax)
.... $11.8b ($10.8b) + 8.7%
- Net Cash Flow From Investments
... $468.0m ($424.3m ) +10.3%
- Total Ordinary Dividends (fully franked)
....95cps ( 87cps) +9.2%

Net Asset Value (pre-tax) and Net Cash Flow From Investments are non-statutory measures. These are reconciled to statutory measures and defined in the 2024 Annual Report.

Managing Director & CEO, Todd Barlow said: "Our strategy of long-term commitment to building value, strength in conviction when making investment decisions, and unconstrained mandate to invest where we can extract the highest quality returns, continues to deliver for our shareholders.

"Pleasingly in 2024, we performed well against our three key objectives:
• Increase cash generation: Net Cash Flow From Investments increased 10.3% to $468.0 million, driven by increased cash generation from our Private Equity, Emerging Companies and Credit Portfolios, enabling Soul Patts to pay a final dividend of 55cps, bringing the total FY24 dividend to 95.0 cents, an increase of 9.2% on the previous corresponding period.
• Grow the portfolio: Our portfolio grew by 8.7% to a Net Asset Value of $11.8 billion, with strong performance across all portfolios. Adjusted for dividends, this represents a return of 12.0% in FY24.
• Manage investment risk: During the financial year, we invested $2.8 billion in high quality resilient and growing businesses. Total transaction activity of $4.7 billion is indicative of an active investment period that has aligned the portfolio more closely with our long-term strategic and investment objectives.
 
Todd Barlow, the Washington H Soul Pattinson & Co boss and his chief investment officer, Brendan O’Dea, have a wide open remit.

“The best idea wins,” Barlow says. And his best idea is still private credit, despite a wave of money rushing to the sector in the past 12 to 18 months.

Soul Patts wrote $644 million of new loans in the past year and had only $184 million in loans mature. The private credit portfolio was worth $1.1. billion at July 31 and it returned a juicy 14.9 per cent in FY24.

Barlow says that 14.9 per cent includes upfront fees paid to write new loans – and there were quite a few of them – but was not far off the real rate charged to borrowers. Soul Patts’ biggest loan was $125 million and its smallest was $10 million.

That private credit book’s grown strongly in the past three years. Barlow says returns in that time are pretty much the same “which is kind of surprising”.

“We expected as you get bigger, it would be more difficult to find those deals we were getting originally. “But we keep finding really good deals.”

Barlow reckons there is plenty for syndicated and less risky deals returning 8 per cent to 9 per cent a year, but Soul Patts isn’t having to drop return expectations in its patch. There were about 20 loans at July 31, mostly senior secured.
“I don’t think the whole sector is the same. “There are pockets that are getting more competitive, but there is not a lot of new money doing what we do.”

Soul Patts also put money into emerging companies and private equity in FY24 – a few hundred million dollars each – and sold some of its listed equities portfolio on valuation grounds.
 
(Interests associated with) Rob Millner topped up recently ... he holds well North of 23 million shares
 

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