WHSP Holdings Limited (SOL) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Soul Patts financial results presentation for the first half ending 31st of January 2025. My name is Tanny Mangos, and I'm responsible for Investor Relations at Soul Patts. As most of you know, Soul Patts is a diversified investment house that is unique in the Australian market. Our aim is to grow shareholder wealth through a diversified range of investments that can perform throughout market cycles. Our team actively manages our portfolio of over 200 investments, and we can adjust the investment mix to extract the highest quality risk-adjusted returns. I'm pleased to introduce our presenters for today, Todd Barlow, Managing Director and CEO, will go through the group performance highlights; David Grbin, Chief Financial Officer, will cover the group financial results; and Brendan O'Dea, Chief Investment Officer, will provide an update on the performance of each investment portfolio. Todd will then close the presentation with the outlook before Q&A. [Operator Instructions] With that, I now hand over to Todd Barlow.

Thank you, Tanny, and welcome, everyone, to our first half 2025 financial results. Our commitment to long-term value creation, decisive investment strategies and an open mandate to seek the highest quality returns continues to benefit our shareholders. Our purpose has remained the same since listing in 1903: To generate enduring success for our shareholders. We do this through our long-term commitment to building value and not being distracted by short-term events; our strength and conviction when making investment decisions; and our unconstrained opportunity to invest where we can extract the highest quality returns. As I hope we'll be able to demonstrate to you today in this presentation, overall, our first half results were very strong, and we performed well against our 3 key investment measures of success, increasing cash generation, growing the portfolio and managing investment risk. The first of our objectives is generating strong cash flows from our portfolio. The cash from our portfolio is an important indicator of the health of our operations as well as allowing us to keep paying higher dividends to our shareholders. Net cash flow from investments, or NCFI, is the dividend and interest income across the portfolio. NCFI was $289.5 million for the first half of FY '25, representing an increase of 8.2% on a per share basis compared to the previous corresponding period. Over the past 3 years, NCFI has grown at a rate of 16% per annum. This has enabled us to pay higher dividends that have grown at a rate of 15.1% per annum for the past 3 years. This is really an outstanding level of growth when we consider the low growth in dividends across the market in recent years. You can see from this graph on the right that Soul Pattinson's dividends have grown a total of 68% over the last 5 years, which is more than 10x as much as the all ordinaries group of companies. The second objective is to grow the capital value of the portfolio. Our net asset value, or NAV, grew to $12.1 billion, delivering a return of 2.4% in the first half of 2025. While this is below market, the market exhibited strong growth against our expectations. And if we look at the last 3 years of performance, the NAV has compounded at 12.8% per annum, which is nearly 2% higher than market. This outperformance over that 3-year period has added nearly $650 million to shareholder wealth over and above market returns. The benefits of that compounding outperformance can be seen on the graph on the right, where the total NAV growth for Soul Patts over 5 years is 54% higher than market growth. Third objective is to manage investment risk. During the first half of '25, we continue to manage risk through a combination of portfolio rebalancing and maintaining a strong cash position. During the half, our total transaction activity was $1.9 billion, with $1 billion invested in public and private investments. 3 years ago, private investments made up just 13% of the total portfolio. Today, almost 1/3 of our portfolio is invested in private assets. Our net cash position during this half increased by $502 million. This brings our cash to $716 million supported by our successful capital raising in August 2024, which provides us with significant funds and flexibility for future investments. To illustrate the defensive qualities of the portfolio and how that has performed in previous periods of volatility, you can see that during the last 25 years, when the market has a down month, it averages a 3.3% loss. In each of those months, Soul Patts performs 2.4% better than the market. This has been a major driver of outperformance for us. As a result of the strong cash generation I referred to earlier, the Board has declared a $0.44 per share fully franked interim dividend. That is 10% up on the interim dividend from last year. This continues an extraordinary 25-year period of dividend growth where ordinary dividends have grown at a compound average growth rate of 9.8%. And that is just ordinary dividends and excludes $1.05 of total special dividends that have been paid along the way. As I mentioned earlier, the 15.1% growth per annum over the last 3 years is against a backdrop where market dividends have not been growing. The long-term shareholder returns, which captures both capital and dividend growth have been excellent. Over a 25-year period, we have delivered a TSR of 13% per annum, outperforming the market by 4.5% per annum. A $10,000 investment in Soul Patts in the year 2000 is now worth over $200,000 if all dividends were reinvested. That is triple the returns from an equivalent investment in the index. Against each of our objectives, we continue to perform well and that translates into these phenomenal total shareholder returns over the longer term. I'll ask our CFO, David Grbin, to take us through our financial results in a bit more detail.

Thanks, Todd, and good afternoon, everyone. Once again, it's an absolute delight as CFO to present another strong financial performance from Soul Patts for the first half of the 2025 financial year. For over the last 5 years, we've consistently grown our portfolio, net cash flow from our investments and our dividend faster than the overall market. The statutory net profit after tax was $326.9 million or up $24.4 million or 8.1% for the half, due in part to a solid 18% increase in regular or underlying net profit from our investments to $284.8 million and additional nonregular profit contribution of $42.1 million, largely from investment sales. The increase in regular net profit arose from improved operating contributions from New Hope, Brickworks and our credit portfolio. Nonregular gains of $42.1 million came about from a sell-down of our Tuas stake, realizing a gain of around $85 million which was partly offset by an impairment on Brickworks North American business and a write-down of our investment in Aeris. It's helpful to remember that statutory accounting earnings and balance sheets are not our preferred measure of performance or our primary focus when we assess our performance and financial position. We're all about growing the value of our portfolio as measured by net asset value and the cash income the portfolio generates as measured by net cash flow from investments. I'll now consider each in turn. Net cash flow from investments was up nearly 10% on the previous corresponding period to $289.5 million. When adjusted for the expanded capital base, the growth rate was 8.2% over the prior corresponding period. Most of the growth in our first half came from higher interest income and fees from our credit book and an improved contribution from our private equity portfolio. Importantly, the growth in net cash flow from investments has been consistent. On a per share basis, net cash flow from investments has grown by 13.3% per annum on a compounded basis over the last 5 years. This sustained growth in net cash flows has enabled a 10% increase in the interim dividend to $0.44 per share. The pretax net asset value of our portfolio as at the end of January 2025 stood at $11.1 billion as compared to $11.5 billion at the end of January 2024, up 4.7% or around $600 million. If you include dividends paid to our shareholders of $347 million over the last 12 months, the total return on the portfolio is 5.8%. The growth in our NAV over the last 12 months has come about from capital growth in our private equity portfolio and the August '24 equity raise and retained net cash flow from investments. Importantly, back in August 2024, we took the opportunity to lock in additional long-term debt at a low interest rate with a new $450 million convertible bond that was well received by the market. As at the end of January 2025, our cash balances totaled nearly $716 million, and we continue to retain substantial liquidity to take advantage of investment opportunities. I'll now hand over to Brendan, who will take us through our portfolios.

Thank you, David, and good afternoon. I'm pleased to be updating you again on our investment portfolio. We have continued to take steps to make our portfolio more resilient through the growth of uncorrelated and high-performing private credit and equity assets. In the half, markets continue to rise, bolstered by renewed economic optimism and the potential for interest rate cuts enabled by moderating inflation. Valuations remain elevated. Our focus, as always, has remained on a disciplined investment process that emphasizes the price that we are paying for investments, the generation of growing cash returns over the long term, the generation of capital growth and management of risk and the protection of capital. This approach has served us well over the last 120 years and has delivered excellent returns over the long term. Turning to portfolio composition. You can see that our listed portfolios have decreased in size over the prior year as we prioritize the growth of private equity and private credit. 28% of our portfolio is now invested in private assets. This is a continuation of a deliberate strategy that has been in train over the last 3 years to diversify our portfolio and create the opportunity for above-market capital and income growth over the long term. Our unconstrained approach allows us to target what we believe to be the best opportunities regardless of investment type. Much of this activity took place in the second half of the 2024 financial year. But the first half of the 2025 year has continued the momentum. At the end of the half, the portfolio was valued at $12.1 billion, an increase of $600 million on last year. In the first half of 2025, the portfolio returned 2.4%. This is an underperformance against the All Ords, which returned 7.5% in the 6-month period, including a remarkable 4.4% in January alone. But we have been consistent in our statements that we do not look to follow indices or react to short-term noise. We are pleased with the continued growth in the portfolio, improved cash generation and the consistent management of risk that Soul Patts is known for. Starting with strategic. The strategic portfolio has delivered excellent returns for us over the long term. It has been at the heart of our long-term outperformance and dividend growth. Strategic, whilst 47% of our overall portfolio, supplied 58% of our net cash flow from investments in the half. Our strategic investments are generally material in terms of ownership levels. And we usually have representation on the Board to support growth and protect our interests. In the half, strategic delivered a total return of 1.9% with a very strong return from Tuas, unable to overcome weakness at Brickworks and TPG. Tuas had a total return of 47% in the period and was our largest performance contributor. They continue to grow rapidly in the telecommunication market in Singapore. We took the opportunity in the period to sell down some of our investment and remain excited by Tuas' growth prospects. Brickworks had a difficult half as the cyclical slowdown in building activity impacted their domestic business, with the U.S. business also dealing with challenging conditions. TPG had a very active half in terms of corporate activity with the new roaming agreement with Optus now Live increasing their addressable market. The new roaming agreement is already delivering increased market share. Also, I note the approval today for the sale of network infrastructure, which may allow for balance sheet improvement. In terms of Perpetual, they recently rejected a bid by KKR due to insufficient net proceeds to shareholders. This was a disappointing but logical outcome due to the inefficient tax treatment of the proposal. We remain Perpetual's largest shareholder and see clear upside in the business. New Hope delivered a solid return in the half and continues to deliver our strong dividends. New Hope are a high-quality, low-cost producer and as such, are resilient in the face of recently lower thermal coal prices. Moving to large caps. Our $2.2 billion large caps portfolio was, by a small margin, our strongest performing listed portfolio in the half, but it trailed the broader market. This is due, in large part, to our underweight positions in banks, gold and tech. This underweight position is present across the overall Soul Patts portfolio. The chart on this slide illustrates this clearly. Only 2.3% of the market's 7.5% return was attributable to sectors other than banks, tech and gold. With 30 investments and a strong commitment to valuation discipline, the portfolio is not invested with short-term market tracking in mind and does not seek to chase market momentum. The portfolio size is lower against the prior period due to sales of investments, with most of the sales recorded in the second half of financial year 2024. We were concerned that market valuations were elevated and continue to bias portfolio reduction. We note that there has been considerable volatility in February and March whilst preparing these comments. Cash generated was 23.9% lower than the previous half due to a lower portfolio size and some specific compositional items. Moving on to PE. Our private equity portfolio remains an area of particular focus for us and continues to deliver strong results. We do not revalue the whole portfolio at the half year. So we've shown some revenue data on this slide to give you a sense of how the businesses are performing. You can see the strength of the revenue growth in each of these high-quality businesses. Strategic acquisitions remain an opportunity for us across our Private Equity businesses, and it is an area where Soul Patts can help our investee companies succeed due to our access to capital and transaction expertise. We invested an additional $84 million in the half on acquisitions. The portfolio is now $1.7 billion in size and cash generated was $27.7 million in the half, an increase of 107.9% against the previous year. We continue to find a niche to operate in the market by taking a partnership approach to private equity and looking to grow with companies and their founders over the long term. Soul Patts is a logical partner for founders who seek capital for growth or to deal with ownership changes or liquidity needs. We believe that there are many businesses that fit this profile who are attracted to our unique approach. Turning to credit. The credit portfolio delivered great returns in the half with net cash flow from investments growing by 81.4% to $94.1 million. Credit is highly complementary to our broader portfolio, delivering strong growth in cash and acting as a risk diversifier. The portfolio size has increased by $500 million versus the prior year. The private credit market continues to expand globally. And we remain active with $266 million of new credit investments made in the half. We are attracted to opportunities where our structuring capabilities allow us to generate appropriate returns for the risk taken. Our multiproduct capabilities and portfolio flexibility are a source of competitive advantage in a market where many participants take a narrowly defined approach. On this slide, we highlight the EOS transaction, as an example of how our flexible and innovative approach can generate excellent outcomes for Soul Patts and our investment counterparties. EOS struggled with working capital and debt maturity issues. We were able to propose a flexible solution that allowed the company to work through its challenges. The loan has subsequently been repaid, and EOS is trading well with the share price up 137% from the date of our initial support until repayment of our loan. In terms of repayments, in the half, $146 million of loans were repaid. There have been no instances where we have not been repaid as expected. Each of our credit investments are actively managed, allowing us to be proactive with the investees. The portfolio has an average tenor of between 2 and 3 years. We also have $238 million of committed but undrawn credit lines. In the period, we executed several offshore transactions and expect that our international exposure will continue to increase over time. Moving on to emerging. Our emerging companies portfolio generated a total return in the half of 1.8%. Cash generated from the portfolio was $25.1 million, supported by realized investment gains. Portfolio size is roughly unchanged on the prior year due to approximately $100 million of sales in the half. The portfolio underperformed a Small Ords Index by 4.8% over the last 6 months, but the chart above demonstrates the strong long-term returns that have been delivered by the team. The portfolio is highly concentrated with just over 30% of the portfolio invested in uranium-exposed companies. Spot uranium prices weakened over the half, retracing from elevated levels. Spot is now trading below the longer-term contract price which should act as a support over time. We expect our uranium-linked investments to benefit from the long-term growth in the nuclear industry globally as decarbonization efforts mount and the demand for electricity grows for everything from AI to electric vehicles. To wrap up, overall, we are very pleased with the half, which has continued to demonstrate the benefits of portfolio flexibility, our focus on cash and a long-term and disciplined approach to investing. The portfolio changes we have made over the last 3 years continue to deliver results. I would like to thank the investment team and the various groups that support them for their professionalism and efforts in the half. And I will now hand it back to Todd for some comments on the outlook.

Thank you, Brendan. Soul Patts is well positioned to navigate current market uncertainty with our strong liquidity position and low gearing. This financial strength allows us to continue looking at opportunities that will create long-term value. We are seeing continued growth in cash generation across the portfolio. And while thermal coal prices are currently lower than forecast, that should be somewhat mitigated by higher production from New Hope and the weaker Australian dollar. The market may continue to experience meager growth in earnings and dividends. However, we will continue to drive higher cash flows from our private equity and credit portfolios. We also believe these private market opportunities present better value than public markets and are less correlated with equity markets. We're also building our capabilities to invest offshore by developing partnerships with high-quality and like-minded people. In times of market uncertainty, our defensive portfolio is designed to perform well, offering stability and resilience in softer market conditions. Our strong balance sheet and flexible financial position provide a solid foundation for growth. Thank you very much for your interest in our company. We'll now answer some of the questions that I can see have slowly come through the portal, but please feel free to continue to submit questions, and we'll endeavor to respond to them.

Thank you, Todd. Before we go to questions, we've had a couple of questions around the dividend payment date. I'd like to remind shareholders that is the 14th of May 2025. Now first question relates to our exposure to gold stocks in large caps. Will you consider increasing that exposure to gold?

Well, one of the portfolios -- one of the companies in the strategic portfolio is Aeris, which is both a copper and gold producer, and unfortunately, the production of that company hasn't been as we expected to be able to capture some of the upside in both the gold and copper prices. But that was certainly one of the ways that we were seeking exposure to that sector. If I look at some of the other portfolios and particularly the large caps, that is not something that we would typically invest in. Our view on gold is a little more cyclical. It's harder to have a fundamental valuation based on cash flows because you are taking that commodity risk without necessarily having a fundamental supply and demand basis for taking that view. So we've tended to shy away from those sorts of volatile commodity stocks. And as Brendan outlined, gold has certainly performed well in recent times, but that's something that we haven't had a lot of exposure to.

Todd, just on the theme of large caps, someone is asking whether there's been an exposure, what is your exposure to copper and your thoughts on copper prices?

Yes. I guess that's a little linked to what I just said around gold. With the difference being we have a bit more of a fundamental view on copper because you can take a view that the increased level of electrification and the supply and demand outlook for copper is very favorable for copper prices, whereas gold is a bit more of a bet on the macro environment. So hopefully, the number of assets that Aeris have, which are currently in development and have the capacity to come online and really benefit from higher copper prices in the future, I think there's ways that we can capture some of that upside through our investment in Aeris.

We do have a constructive view on copper, as Todd touched on and drawing attention to the large cap portfolio, particularly. It probably comes as no surprise that our largest investment in the large-cap portfolio right now is BHP. And we're invested heavily there because we are quite attracted to their future-facing suite of commodities, their positioning in copper being one of them. So it's definitely a thematic that we are excited by and something that we're positioning for.

Now the next couple of questions relate to Perpetual holding. Shareholders are asking about reducing the large stake in Perpetual, especially now that the KKR deal has been rejected, and what has actually changed in terms of the attractiveness of Perpetual? And is it still considered part of the strategic portfolio?

Thank you for the question. Obviously, the Perpetual situation has been one that has had many twists and turns through the life of -- life of that, not only the KKR transaction, but our involvement from the outset. We did restructure our derivative holdings in Perpetual recently. We did so because the votes that were attached to that structure were clearly no longer strategically important given what has gone on with the KKR transaction and our own transaction. So really, that was just us effectively tidying up our position. Where that leaves us in terms of our Perpetual holding, as I touched on earlier, are still being the largest shareholder. Our economic exposure to Perpetual is largely unchanged through the time. Our view around Perpetual also hasn't changed. We believe they have 3 very high-quality businesses there that are underappreciated by the market in terms of where the shares are trading right now, and we are comfortable in our shareholding and looking forward to the share price rerating on that. We are in contact with them around our shareholding. We know they're looking to sell off their wealth unit, which we think is a logical reaction to their balance sheet and getting a little more flexibility there. But we think the market generally under appreciates Perpetual. It was our thesis going in. We haven't changed that view. All we've done is restructured our position because it was -- the votes were less strategic than before. But I do welcome the question.

The next question relates to our level of retained earnings versus the current annual dividend. What is that level? I might throw that to the CFO.

Yes. So you'll find in our filings today, there's an investment portfolio information. So that gives the balance sheet for the parent entity, the head stock. And if you turn to Page 14 of our half year report, you'll see our retained earnings are just over $2.8 billion. So in a full year, last year, we paid $347 million in dividends. So we've more than -- we've got lots of coverage there in terms of our ability from a retained earnings perspective. We've also said today that we've got cash and liquid funds of $716 million. And importantly, there's over $970 million worth of franking credit. So there's almost an unlimited supply of franking credits to pay out on our dividend. So we're in a very, very strong position to fund the dividends going forward.

But just to reiterate how we think about setting the dividend, it is not by reference to our retained earnings. I mean, obviously, a company that's as old as ours and as successful as ours has built up a lot of retained earnings over the -- over that period. What we try to do is maintain a level of discipline that says that we will pass on a good proportion of the cash that we generate out of our portfolio to our shareholders. And in the last sort of couple of years, that's been running at around about 70% to 80%. And so we're passing on the cash that we generate. And if we keep increasing the cash generation from the portfolio, that has allowed us to pay those higher dividends. And as I've mentioned in my presentation, I'm enormously proud of the track record of dividend growth over the last few years, which is something that we're just not seeing across the market.

Our next question relates to offshore opportunities. Shareholders would like to know what are these and how many more will you be pursuing?

So which portfolio was that?

It's around offshore opportunities.

Offshore. Yes. So I mean that's something that we've been doing over the last couple of years, exploring how we can get more access to global opportunities. I mean, obviously, Australia is a great to invest. We've got really good opportunities here in a sense that we are well known. We get a lot of deal flow, and we have a lot of connectivity to be able to generate the kinds of deals that we're looking for. So what we've been doing is trying to replicate that offshore. Now we're not going to be able to have people on the ground who are able to do what we do, but what we can do is find partners who have those capabilities, and we've been building that up. At the moment, we've allocated about $400 million through partnerships to offshore funds. That's primarily credit and private equity. That continues to grow because those markets are very deep and rich in terms of opportunity. And it just makes sense for us to get more diversity across our portfolio. So that's something that you'll see a little bit more of. As I said, it's $400 million and continuing to grow.

The next question relates to Star Entertainment and the impact of what's happening at Star and whether Soul Patts will lose any money on the loans that have been given to Star Casino.

We don't expect to. The thesis upon which we loaned money was that the total amount of debt was a small fraction of the assets in the business, and that continues to be our view. So there's a lot of noise around the operating business and the equity value and their liquidity constraints, but nothing has changed our view that there is significant coverage that in the event of default or if it continues on, we should get repaid. But I would note that our accounts actually provide a reasonable amount against Star investment, but that doesn't reflect our view about what will actually play out.

The next question relates to private markets, which now make up around 28% of the portfolio. Do you plan to increase this allocation? And how do you actually assess the liquidity risks in that portfolio? But also given the weight of capital moving into private credit over the last 12 months, how are you seeing pricing move in this asset cost?

Well, we continue to allocate to private markets because we see fundamentally better value propositions in those private assets, whether that's private equity or credit. And you can see the performance of our private equity investments and the performance of our credit portfolio is just better than what we can replicate in public markets. So we'll continue to do that whilst we continue to see the opportunities. So that doesn't mean that we're going to set some target and drive towards that target, irrespective of market conditions and opportunities. It's all going to be opportunity-led. But at the moment, we're continuing to see good opportunities. We'd like to add to our private equity portfolio. We're continuing to invest alongside our existing suite of private equity investments. And we deployed about another $100 million into those names in the last 6 months. On the question of liquidity, I mean this is one of the great competitive advantages that we have in that we don't have liquidity constraints. The only liquidity constraints that we have or the liquidity needs that we have is to pay dividends to our shareholders. And as I mentioned, we pay those dividends out of the cash that we generate across the portfolio. We don't have redemption risk, and that shareholders can't ask for their money back, they can sell their shares and they get liquidity every day because they can buy and sell on market. But we don't have to fund any redemptions. So therefore, we don't have liquidity constraints. But that being said, we have plenty of liquidity across the portfolio because we have lots of listed investments elsewhere. We've got debt capacity. We've got cash. So we don't have any liquidity constraints, but we don't have any liquidity needs that would concern me about getting exposed to more private assets.

And a question around the outlook of coal.

We are still positive on coal thematically. If you look at the supply and demand outlook and the rising need for energy and the way that our trading partners in Asia are positioning themselves with the build-out of coal-fired power plants, everything looks positive. We've been a little bit surprised at the short-term volatility in thermal coal prices. Leading up to Christmas, it was at USD 140 a tonne. Currently, it's down at about $100. So that's a pretty significant drop. But if anyone followed the results from New Hope a couple of days ago, you can see that their earnings were up. They are producing more, and we'll continue to grow that production profile as Acland comes online and eventually, Malabar will produce as well. They're also expanding production at Bengalla. And we've also got a weaker Australian dollar, which is somewhat offsetting the lower thermal coal price. So all of the indications are that the coal price will recover. But even at USD 100, New Hope makes a lot of cash because of its low cost production.

The next question relates to large caps disclosure. Historically, we used to disclose the 20 top shareholdings. Can management comment why this has changed?

So I'd point out, certainly at the end of each year, we provide a limited amount of disclosure in terms of what's in the portfolio. But there's a very particular reason why we don't disclose holdings in the large-cap portfolio in the way that we perhaps would have in the past. And in the past, you're probably -- or you may well be referring to back in the Milton LIC days. And the main reason is turnover. One of the real advantages that we've had in terms of the way that, that portfolio is run and the setting it now exists in is that we are able to be active with our portfolio in a way that we weren't able to be in the past. And if you look at the investor presentation, you will notice that we executed on $600 million worth of buys and sells within the large-cap portfolio in the last 6-month period. The large-cap portfolio was a $2.2 billion portfolio. So you can see that the turnover of that portfolio could be as high as 50% for the year on a full year basis. So it wouldn't really be appropriate for us to disclose stale position information, if you like, which as it relates to large-cap portfolio, when impact those positions may have changed. So we didn't really want to put out information that may be misinterpreted. The portfolio is run quite differently to how it was in the past. And that's the reason why our disclosures have changed.

Next question is, are any of the private equity holdings likely to come to the ASX market in the near term as an IPO?

No immediate plans to list any of our private equity investments. We're still in that phase where we are rapidly growing those businesses, as you can see in terms of the revenue and earnings CAGR that we're experiencing there. Our view is also that it's helpful for fast-growing businesses that are needing capital to remain unlisted because it's a lot easier for us to fund that growth because we can just write a check. When it becomes a public company, you have to go through a whole process of doing capital raises and matching up that capital raise with your opportunities, and it's just a lot more challenging. So there will be a point where these businesses grow to a sufficient size that they can have their own life in the public markets. But whilst they continue to be in this high-growth phase, we'll incubate them.

Another question relates to the investment in NexGen Canada. How big is it? What is it? And which portfolio area does it fit in? And what do you see the outlook for this investment?

So NexGen is a developer of a uranium mine in Canada. It sits inside our emerging companies portfolio, and it's about $300 million in value. And I guess the interesting thing about that is that's about 30% of the emerging company portfolio in almost just 1 stock. They are extremely bullish on uranium and the outlook for that commodity. It shows the way that we think about portfolio management that each individual portfolio can be very concentrated because when we manage the portfolio as a whole, not as an individual portfolio parts. And so as I said, there's a view that the world is going to be short uranium. And as we see, particularly -- I mean, our thesis didn't include the need for massive amounts of electricity to fuel data centers and AI and all these sort of things. But we're certainly seeing a lot more interest in nuclear power over and above our existing thesis, which was that the world was going to be short uranium. And NexGen is a very large deposit and will produce quite a lot of uranium at a very low cost when it comes online in future years. It's just going through its final development approvals, and we are very bullish on that stock.

The next question relates to the gross shareholding with Brickworks. How should the shareholders think about the value of Brickworks holding and specifically the circular nature of the joint shareholding?

Yes. I mean, years ago, we used to get this question when people sort of were tying themselves up in not trying to think about valuations. And the easiest way to think about it is that they are not really linked. I mean we could sell a Brickworks share or $100 worth of Brickworks shares and turn that $100 asset into $100 of cash. And equally, Brickworks would do the same with its Soul shares. And it has done. I mean a number of years ago, it sold a couple of hundred million dollars of Soul shares to fund its investments in the U.S. And so they are real assets held by each of the respective companies. So it's really, in our minds, a simple sum of the parts valuation for each respective company taking into account the market valuations of the stocks that they hold and could sell.

There is a follow-up question to the NexGen. What sort of investment is it and in terms of shares or other?

It's a combination of convertible notes, which give us a right to convert into shares, probably about 1/3 of it is in convertible bonds and 2/3 is just ordinary equity.

Next question is around defense stocks, not defensive stocks and whether you own any defense stocks other than EOS.

Yes. I mean, EOS is probably the one that stands out. It's actually, from a private equity perspective, one of the thematics that we are doing a lot of work on. We think that there's opportunities for us to help fund some emerging and fast-growing Australian businesses that have some really interesting technology and global capability. But other than that, I can't think of any major stocks that we have at present.

Next question relates to Aeris and whether there's a current update.

Well, I mean, I think you can refer to the Aeris' market releases for an update on Aeris. I mean, our investment in Aeris is around about $40 million so it's not going to feature in our presentation just because of the scale of it. But that has been an underperformer in our strategic portfolio. As I said, there's been some production issues that I think need to be corrected. But the commodities, certainly gold and copper, are certainly favorable right now, and there's some quite exciting assets inside the Aeris portfolio that, I think, in future years, they can exploit.

The next question relates to agriculture and what stocks do you like in the ag space at the moment?

Well, we don't have any direct exposure to ag stocks because we have quite significant exposure in our private equity portfolio. I think our private equity amount is about $500 million invested in direct agricultural assets. So that's where we get our exposure to ag. I think ag is a good fundamental thematic. Australia is very good at producing efficiently, and we've built out a portfolio of high-quality farms producing export market. So that's the way we're playing agriculture.

The next question relates to the large-caps portfolio and whether we use a dividend-harvesting strategy.

We do not. And there's some reasons for that. Obviously, when a share goes ex dividend, the share price itself always drops. So we think about that in the context of total returns. We don't have a need to harvest income that way and would draw people's attention to really the strong cash growth that we're going out of the rest of our portfolio. We don't need to run our large-cap portfolio for income because we've got very strong production of cash out of strategic, very strong production of cash out of credit and increasingly strong production of cash out of private equity. So we're in a very fortunate position that we don't need to do that. It's quite liberating for the team in terms of the way they can invest. So no, we don't follow a particular dividend-harvesting approach.

Next question relates to Brickworks, which announced its results today. Can you comment on the share price compared to the net asset value?

Yes. I mean as I said earlier around how to think about valuation of our companies, I think a sum of the parts valuation is appropriate. And if you look at the asset composition for Brickworks, it's sort of roughly 50% is its shareholding in Soul Patts. So that's pretty easy to value because you've got a share price to value that. Then about 40-odd percent of the value is properties, of which the majority are independently valued and stated in their accounts. And so it's actually only a small proportion of its asset base that is valued on a capitalized earnings basis, which is -- relates to the Building Products business. And so I think it's a pretty straightforward proposition to value that business, but it is an unusual business in that so much of its asset value is in assets that are not what it's primarily known for.

Another question. Has Soul Patts considered setting up funds for external investors to invest in alongside current portfolios?

We have thought about that, and we get asked a lot about it. The issue for us is we are greedy, and we want to preserve as much of the high-quality deal flow that we're seeing for our shareholders. And so when you start taking on third-party funds, you're then having to share that very good deal flow with a broader audience. And secondly, when you take on other people's funds, you end up signing up to very strict mandates about how those funds will be invested and you'll be subject to redemption risk. You'll then keep an eye on how you are performing in the short term. And so I think you're starting to undo a lot of the competitive advantages that we naturally have. So if we ever do that, we'll tread it very cautiously. But to date, we have been resisting it just so that we can focus on extracting maximum value for our own balance sheet.

Next question relates to whether we're doing shareholder roadshow meetings this year and which cities are you visiting. Maybe I can answer that question. We are definitely -- we're coming to Brisbane and Perth. We're going to be in Brisbane on the 2nd of April and in Perth on the 8th of April, and we've got some scheduled shareholder briefings that we'll be announcing at a later date in Melbourne, Sydney and Adelaide. Now just a final question. And how are you managing risk of dividend income/outcome, especially in the 25th year of consecutive dividends?

Well, the best way that we can mitigate the risk of a decline in dividend is by continuing to grow the cash generation. And we feel pretty good about the outlook for the cash generation across the portfolio. We've engineered the business to be much more resilient. We're no longer relying on just a couple of companies to deliver that cash to us. There is a lot of different assets that are performing in different ways to each other. And if you just look at the growth of the creditor, as an example, that has been a really strong performer for us in terms of cash outlook. Private equity, our companies -- we've invested heavily in their growth, which means that there's been a lot of sort of capital and investment in those businesses, but they will get to a position where they will start spinning off quite a lot of cash. So I mean even in the last 2 years, we've already seen a market that has decreased the dividends that is paid on average. And you can see what our portfolio has done in those last few years. So we feel very strongly about the outlook, and it's something that we know is important to our shareholders, and it's a key performance indicator for us.

Well, that wraps up our presentation and the questions and answers. Thank you again for joining us and supporting Soul Patts.