WHSP Holdings Limited (SOL) Earnings Call Transcript & Summary

I'm ready. All right. Hello. Well, welcome, everybody, and thanks for taking time out this afternoon to the Washington H. Soul Pattinson and Brickworks Limited Annual Presentation. You'll be hearing from Todd Barlow and David Grbin today from Soul Pattinson, and Lindsay Partridge and Robert Bakewell from Brickworks. And certainly -- we've certainly had a year that I don't think any of us will forget in a hurry with COVID. And it's been particularly difficult as far as Brickworks is concerned and also new hope with these closed borders. It's been very difficult to get engineering staff and management around to look at all our various operations. So the management has done a wonderful job in very trying circumstances. As usual, when you look at both the results there's quite a large abnormals. Those of you who have followed the companies over a period of time will know that most years are unders and overs. So this year was a very big over. Particularly in the Soul Pattinson case, generated a lot of cash. And Brickworks also had a good year in cash generation as well. We're in positions now with the cycle, I think we're going to see ourselves in after Christmas, an opportune time for anyone that's got some cash and opportunities. So I think we're well positioned moving forward if the markets do come back to where I think they're going to come from. So we're going to open up with Lindsay. So I'll introduce you to Lindsay Partridge, the Managing Director of Brickworks.

Thank you, Chairman, and good afternoon, ladies and gentlemen. Hopefully, most of you have seen the presentation that has been on the market since this morning. In trying to just control the time, I will move over a couple of things fairly quickly. And feel free, if not to ask questions at the end to e-mail either Robert or myself, if you've got additional questions. But our belief in Brickworks is we make beautiful products that last forever. And if you look on that first slide, you see the wonderful Washington H. Soul Pattinson office, where they've used our beautiful San Selmo facings for the entire office. And what a fabulous job that is. We have a very strong culture at Brickworks. And I think what we've seen in this last period, it's been -- just been so important with people working from home and not everyone at work that, that culture has really shone through. And I'm very proud of what the team's achieved in this period. Today, I'll be going through the impact of the COVID, the financial year '20 overview, the divisional review. Robert will talk to the financials outlook and then questions, I think we'll most probably do after Todd. It's the usual way that we handle it. Well, I guess, like all business, we faced a significant disruption during the -- particularly during the initial periods of the pandemic. The only government-imposed restrictions we had was in Pennsylvania, where the governor decided to close us down for months. And we just turned that into an advantage and decided that we'll just accelerate our rationalization, which we did in very quick order a couple of weeks instead of 6 months or a year, and that will gradually pay out dividends over the course of the balance of this year. There's been intermittent closedowns in the United States and particularly county by county. And I'll talk a little bit more on our outlook as to what the impact of that has been. But no doubt, our strong balance sheet and the great investments that we have in our business has stood us in good stead during this period. We did take the time now to consider about what the new world was going to be after post-COVID and then what strategies we need to implement to be the strongest company we could at the other end. And the things that came out of that is we realized that we had to continue our investment, but not excessively. We did hold up for a little bit while we determined what the cash flow and things were going to be like in that regard. We realized that the demand for products was changing, and we needed to review that. And going forward, we're going to have a big product launch in about another month with a lot of the work that everyone's done. We realized that we had to interact with our customers differently. And we need to be more viable as far as digital is concerned. And we're in the process anyhow of rolling out a new ERP system. And we realize that as far as communication a bit like what we're doing now, we're in the process of setting up broadcast bits and often, we do a function with architects in that, and where we used to get a couple of hundred in here, we can get a couple of thousand online. It's -- and they could be not just from Sydney, for example, that could be worldwide. So it has really changed dramatically, and I think it's -- I think we're very well positioned going forward. The biggest issue we've really had is what the Chairman focused on was we've got capital projects in Perth, capital projects in South Australia. Our engineering team is based in Melbourne. We can't get them there. It takes a month to get approval. Then they've got to do their quarantine. If we had a major breakdown somewhere, we would be unable to dispatch staff in short order to bring that factory back online. And that's a major problem. And people that are traveling for bona fide business purposes should be able to get in and around Australia without being delayed -- unduly delayed so that business can be ongoing and that we can get the economy going and get employment going, going forward. Looking at the overview then for the year. Our performance once again was underpinned by a diversified portfolio of attractive assets. The headline statutory profit was up 93% to $299 million. The contribution from property was again a standout and very strong. And the highlight there was the 20-year lease with Amazon. Amazingly, I think our building product was incredibly resilient. I guess, here in Australia, we generally went through at about 90% to 100% of the sales of the prior year. In the U.S., we're in a growth phase, and we felt that we should have gone a bit more than what we did. But we never went backwards, which is amazing. And I should mention is that our health and safety performance was incredible during this period. In Australia -- both Australia and United States, our numbers went down. But we only had 1 lost time injury in Australia, and it was 3 days before the end of the financial year. We almost got to the end of the year with no lost time injuries, which has just been a fabulous performance. Looking at the highlights. The EBITDA from continuing operations was $281 million. The North American operations were offset by declines in other divisions. The underlying profit was down 38% to $146 million. Earnings per share of $0.98. And as the Chairman mentioned, the -- through Soul, the TPG-Vodafone transaction came back up to Brickworks, and that's what gave us the large statutory result of the $299 million. The net tangible assets continue to increase $14.08, up 6%. We were very proud this year, and the directors, I'm sure, were very proud to be able to not only pay a dividend but to increase the dividend to $0.39 final dividend. And this year, the dividend will be underwritten. We've had a lot of people talk to us about the time and about the liquidity of the company and the ability to get shares. And so we underwrote it to assist in that regard, and it seems fairly prudent considering the fair amount of disruption that's ongoing and the extent of the capital works we are currently undertaking. That will be paid on the 25th of November and brings the full year dividend to $0.59 or up $0.02. And for Brickworks, that will make 44 years of dividend being steady or increased. And I think that puts us as only 1 of 7 or other 8 companies who definitely, in the last 20 years, that have been able to achieve that. Looking at the value creation, really strong performance here, 12% per annum for 52 years. If we go back to the last time or the only time we ever reduced the dividend back in the '75s in the early '70s. So $1,000 invested then in actually 1968 would have been worth $416,000 today. And since the end of the -- for our financial year, the shares have risen 11%. Looking at the diversification. Most of you are fairly familiar with the company, but for those of you who aren't, we're Building Products in Australia, North America, Industrial Property here in Australia, and we have an investment in Soul Pattinson. To give you an idea where they're sitting currently. The total asset backing of the company exceeds $3 billion. Washington H. Soul Pattinson at the end of the half was $1.8 billion. The Property Trust was $727 million. Building Products in Australia was $675 million and in the U.S. $225 million, offset by net debt. A lot of the land that we hold in our books is actually -- is held at the purchase price of it. And of course is worth significantly more than what it was purchased at often it was purchased in the late '50s or early '60s. Safety, I mentioned our safety performance. We're very happy with it. I won't repeat that. We've released our sustainability report. I won't go through the main points on that, but it is online, if you wish to read it. I think we've made a lot of progress in that regard. We've also released about what we believe how resilient and -- our products are. And I think I can sum it up in one very simple way, that bricks outperformed all other building materials under all conditions, full stop. And there's -- and we -- and that's why we guarantee them 100 years. And if you're tired of them after 100 years, you can recycle them or reuse them. So there's no building products that can say they can do that. Looking at the divisional review. I won't talk about Soul's because Todd will begin in a minute. Property Trust, our joint venture with Goodman, has -- really went well during the year. Really strong demand and not a lot of supply, I've got to say, particularly in Sydney. And so the rents have held up and the valuations have held up. So we see the further cap rate compression in that regard. The Austral Brick business, as I said, and the other Building Products did fairly well in the tough conditions. And we managed in the U.S. in a very short period of time to really establish ourselves in the northeast of the U.S. The investment performance. I'll make a couple of points because, as I said, Todd is going to be there in a minute. Contribution to us was $51 million. It was down slightly on the prior year, which Todd will talk about. Mentioned about the TPG. So I won't repeat that. We did receive $56 million worth of dividends, which is very important to us. And that was after we sold 7.9 million shares in December '18. The total market value of Brickworks' share actually increased by 16% since the end of financial year, now it sits at $2.15 billion. And I won't go through that. Okay. Looking a little bit closer at the property, delivered the great result. Generated $129 million of EBIT. As I said, very strong demand over there. The rental that we received, which is a lot of people talk about, we didn't have any really deferrals or very few, not like other areas in the property market. In actual fact, our net trust income increased by 15% for the year to $30 million. So it's clearly making a very significant contribution to the company now. The revaluations were very strong, as I mentioned, $53 million, with about -- between 25 and 50 basis point compression. The sale of -- sorry, development profits from the properties that we're finishing in Oakdale South contributed $25 million, and we generated another $26 million from the sale of Oakdale East into the trust. And if you look at how that trust has grown, the total trust is now worth $1.7 billion, plus the -- there's another $397 million worth of land that's yet to be developed. It gives a total value of $2.1 billion. If you take off the gearing, our shares, $727 million, as I mentioned. And that increased by $94 million during the year, which is a staggering increase that it could grow by that much, and you see over the last sort of 10 years where that has come from. In addition, the trust grew in value enough that we're able to -- us and Goodman, were able to withdraw $70 million from the Trust and still maintain our gearing at 36%. So in our view, that is still very conservatively geared. And that building there is the Amazon building, and I've got to tell you we really need to take a photo out there every day. That photo's about 10 days old. And I think it's -- the roofed area is now about double that. If you have a close look at that, you'll see how tiny the cars look. It's a massive, massive building. And it's great that we're part of it. We're -- really puts us -- gets Brickworks associated with the revolution in online shopping. But that is 190,000 square meters. So almost -- not square feet, square meters, that's 38 football fields, 38. Give you some more idea how big it is. Clearly, there will be a development profit on the completion of that building. And then, of course, we'll get the income from the rent. Turning to Building Products Australia. The revenue for the year was $687 million, down 9%. EBIT was $33 million, down 43%, and EBITDA was $91 million under the new accounting standards. As I said, it was quite resilient. And in reality that the main things that knocked our profit around, you remember at the half year, I said we closed factories to do a lot of maintenance because at that point of time, in November, December, we thought the market was going to pick up. We were worried about our stock levels. We had a foot -- the pedal right to the metal. And then of course, we come back into February and we get COVID, and we're sort of trying to slow everything up. And we're a bit worried about how it all turned out. And our cash flows sort of slowed up a little bit there in February and March, then just picked up and picked up every month following on from that. But we've made the prudent decision to pull a lot of plants up in late March and April, just to control the stock because we weren't sure where it was going. And really, those 2 -- having 2 sets of closedowns in a year is very unusual, and it's obviously knocked the profit around quite savagely. The one thing that did run our way this year, the price of gas went down, and that obviously took a bit of pressure out of our costs. The east coast brick business went particularly well. In Western Australia, they're at the bottom of a cyclical low, a 30-year low. We had to slow production down to just 1 plant to make sure that our stocks didn't build up excessively. And of course, that's in a state of flux with restructuring going on. And many of you have heard that last week that BGC announced that they bought the Midland Brick operation from a link -- from a property developer who owned the building -- who owned that operation not even for 24 hours. That's all subject to ACCC. So we'll just have to wait and see where that goes. Our masonry business went well following the ACP acquisition last year. They make concrete sleepers. Timber sleepers don't meet the current standard. So there's strong demand for concrete sleepers. And our biggest client for that business, the product goes through Bunnings since it's very popular because a lot of people, while they're locked up at home, decided to lay some pavers and put up some retaining walls. And so we found that business was quite strong during that period. The roofing business was a bit softer with downturn activity in Southeast Queensland. And the Precast business, we did a review on that and decided that we couldn't see long-term how we're going to be profitable in WA and Queensland, and we've taken steps to close those businesses down and remove ourselves from that market. We will stay in the New South Wales business. We've got a fully automated plant out there. We have a lot of products such as our double wall, which are unique to us, which we think there's a big future for as builders and developers and certifiers come to a conclusion that some of these lightweight products really don't meet the standards. Our Southern Cross Terminal was fully commissioned late last year, and we have now done 6 ships, and we're very confident we have the lowest cost position in Southeast Queensland, and we definitely have the lowest capital invested in that business. That's a tri venture, if you like, with the Neilsen and Neumann Group. And we're all extremely happy how that terminal is performing currently. Looking to the Building Products North America. As you know, we made -- did 2 acquisitions during the year. We acquired the Redland Brick operations. And prior to that, we bought Sioux City operations. Our revenue was at $230 million. EBIT was $10 million, so it was up 63% on the prior year. EBITDA was $27 million, 122% increase. So we do still only got the prior year and had 8 months and because even this year, those operations came on, so it doesn't really reflect the running rate of the business. In the U.S., there's clearly been a fair bit of disruption. Particularly in the large cities, it's more so than the smaller areas. So unfortunately, some of the areas we are, and some of the markets we're in, in the nonresidential area have been slowed down, deferred, delayed. But the jobs are still there and we're still rolling good quantities of specifications going forward. I mentioned that our operations were closed down, and we did close in the Bigler plant. But it doesn't really tell the full story because we had closed earlier a capital plant when we first bought the business, we'd closed the Redfield plant. We closed the Bigler plant. So we closed those. But when we bought Redland, we didn't buy the KF plant. The Rocky Ridge plant wasn't going and we closed Cushwa. So in actual fact, quite a massive restructuring went on. And the result of that is now our operations are running at about 80% output. We haven't -- we're still selling a lot of product from those closed plants and once that runs out, that will put more pressure on those other plants. And hopefully, we can ramp them up going forward. We did a bit of capital during the year. We put in a new extrusion line at Iberia in Ohio, and we're doing up the bespoke Hanley plant with some upgrades, and we've put in some new drives at the Mid-Atlantic plant. So there's a fair bit of work going on there. We dropped 30 million bricks of stock, which is a pretty significant effort in a single year. We sort of bring it more back in line. All those plants tend to be a little bit overstocked. And we've restructured ourselves to a more modern management structure and to better reflect where our markets are, where our factories are. So when you look at what we've achieved in a little over sort of 20 months, we're definitely the market leader in the northeast of Midwest and mid-Atlantic region in the U.S. We have a portfolio of recognized brands, 700 employees, 10 operating plants and a stone plant and annualized sales of approximately 400 million bricks. And we have an extensive reseller network, and we have 16 company-owned outlets. I'll now hand over to Robert Bakewell, who'll go through the financials.

Thanks. Good. Thanks, Lindsay. Good afternoon, everybody. As Lindsay has already mentioned, the total underlying group EBITDA for the year was $281 million, which was down 19%. Including depreciation, the underlying group EBIT was down 34% to $206 million. Now the new leasing standard incorporates amortization costs, and adjusting for this and restating earnings on a like-for-like basis, EBITDA was $247 million, down 29%, and EBIT was $201 million, down 35%. Total borrowing costs were $26 million, and this included $4 million of interest on lease liabilities, and the tax was $33 million. This resulted in the underlying net profit after tax from continuing operations of $146 million, down 38%. Significant items, which I'll come back to in a moment, increased NPAT by $169 million, and as a result, net profit after tax from continuing operations was $315 million, up 60% on the prior year. And when you allow for the $17 million loss we made on the sale of the discontinued Auswest assets, statutory net profit was $299 million for the year, up 93%. And the table on the screen now shows the significant items in more detail. Lindsay has already touched on the significant uplift from the Soul Patts amount, and I'm sure Todd will touch on that later. From a Brickworks perspective, there was a noncash impairment of $32 million net of tax, primarily in relation to property, plant and equipment and the Australian Building Products business. And there were after-tax restructuring cost of $29 million, primarily in relation to stock write-downs and redundancy costs associated with the plant closures and rationalizations in both Australia and North American businesses. And finally, there were $10 million related to COVID-19 costs. Turning to the cash flow. Total operating cash flow for the year was $75 million. And the decrease on the prior year was mainly as a result of the payment of $54 million in tax on the proceeds that we received from the sale of $7.9 million of Soul Patt's shares back in December 2018. Spending on acquisitions totaled $102 million during the year, representing the Sioux City and Redland Brick payments and capital expenditure was $104 million for the year. Dividends paid were $87 million. And looking at a range of the other key financial indicators. As Lindsay has already mentioned, net tangible assets per share was up 6% over the year to $14.08. And after excluding the impact of the leasing standard, net tangible assets per share were up 11% to $14.79. Shareholders' equity increased by $237 million to $2.4 billion, and that represents $16.04 a share. Underlying return on shareholders equity was 6%, which was down from the 11% in the prior year. Over the year, net debt increased to $454 million, due primarily to the cash payments for the acquisitions that I mentioned earlier and the tax payment that I'd already mentioned. Pleasingly, net debt decreased in the second half, and this resulted in a decrease in gearing to 19% from 21% at the end of the first half. And interest cover remains a relatively conservative 8x. And finishing up on our debt maturity and metrics. We currently have around $830 million in committed debt facilities. And these are tranches with varying tenor, with the next maturity not due until the 2022 financial year. And with net debt at $454 million, we have around $380 million in available liquidity based on committed debt facilities and cash on hand, and we have significant headroom within our banking covenants. And with that, I'll hand back to Lindsay to discuss the outlook.

Thank you, Robert. Well, Washington H. Soul Pattinson will -- I'm sure, will continue to deliver stable and growing stream of earnings and dividends in the long term. The COVID-19 pandemic has only accelerated industry towards online shopping, as I mentioned earlier, and that's fueling demand for the company's prime industrial property assets. And there's a number of discussions going on about potential future leases for automated distribution centers. But as always, property earnings depend on the timing of approvals and development activities and land sale transactions. There are no major land sales planned for 2021. Within Building Products Australia, orders and sales have increased in September across most businesses, reflecting the various governments' stimulus measures in place. We actually didn't really expect to see this for another month or so. So it was quite encouraging to see orders starting to increase during this month. Generally talking to builders, they have good pipelines really for the balance of this financial year, which is very encouraging. The stimulus has worked very well. Maybe it was priced a little bit under Sydney. I'd say maybe it just didn't quite engage Sydney. But definitely, regional areas of New South Wales and the rest of the country is strongly engaged. The builders in Melbourne were very lucky to get that little window between the lockdowns, and they wrote extraordinary numbers in that period of time. However, with the lockdown now, it's virtually impossible for potential homebuyers to go and visit a display home or to sign a contract. Although a number of them are signing contracts online, and a number of them are buying houses unseen. I would tend to think that apartments might be a little bit soft going forward, particularly in the cities, lack of students, lack of people that were here from overseas and are on working holidays, et cetera. When I look at North America, it's there. So a lot of the same sort of trends as what we're seeing in Australia. People are moving out of the cities to regional areas because they realize they can work anywhere. So I would tend to think that demand for apartment buildings is a little bit softer. The nonresidential work we're involved in has been slowed down, delayed, deferred, as I mentioned. And so generally, we're sort of seeing that the nonresidential works is down about 20%, 25%. But the residential area has increased strongly. And in some areas, is up as much as 100%. So this is -- between all that, as you know, we've got about 2/3 of our businesses in the nonres area and medium density, but there's obviously going to be a bit of a shift underway there. But Brickworks is in good position. We've got a portfolio of attractive assets, strong balance sheet, and we've got the resilience to see this through, and I'm very confident we'll come out the other side a much stronger company for the experience. So thank you, and I'll hand over to Todd, if you're going to -- thank you.

Thank you, Lindsay, and good afternoon, ladies and gentlemen. Firstly, I want to welcome the 9,000 shareholders who joined our register during the year. Our shareholder numbers grew by 45% in FY '20. We're just shy of 30,000 today. Because we have so many new shareholders, it's always useful to start with an outline of our business strategy and objectives. WHSP has a diversified portfolio of uncorrelated assets across a number of asset classes. Our open mandate allows us to switch between asset classes, depending on our view of what represents the best risk-adjusted returns for the forecast period. By taking a long-term view, we can be contrarian and allow our themes to develop over time, and we can also invest in the growth of our investments. We aim to be a trusted and supportive capital partner for our investee companies and assist them through their journey of growth. We have quite a small team of talented executives to execute on this investment strategy. And the management team is supported by a very experienced Board of Directors, led by Robert Millner as Chairman. In July, we were fortunate to have Josephine Sukkar agree to join the Board. Josephine is an experienced entrepreneur and business executive, having founded the Buildcorp construction business over 30 years ago. More recently, Josephine has served on a number of public industry and government boards on top of contributions to various not-for-profit and charitable institutions. There's a very good mix of skills and experience on the Board and is a great asset for the company. The group regular profit for the year was $170 million, down 45% on the FY '19 result. However, statutory profit was up 284% to $953 million, due to the large nonregular accounting gain from the revaluation of our shareholding in TPG following its merger with Vodafone. However, we don't believe that profit figures are a good indicator of our success. What we focus on is the same thing that any investor focuses on with their portfolio. Firstly, we aim to grow the value of capital. And while the portfolio reduced by 5.3% through the year, that represents an outperformance of 6.9% compared to the market which suffered a significant correction. And secondly, we aim to improve the yield we receive so that we can pass on that yield to our shareholders. And we measure this by looking at the cash we received from our investments, and this was up 49% for the year. The cash generation was robust across the business, notwithstanding a difficult environment where many companies in the market cut dividends and we were assisted by a significant special dividend from TPG prior to the implementation of the merger with Vodafone. The directors have resolved to pay a fully franked final dividend of $0.35 per share. This brings total dividends for the year to $0.60, an increase of 3.4%. The All Ordinaries Index comprises the top 500 companies on the ASX, WHSP is now the only company in the All Ords to have increased its dividend every year for the last 20 years. In fact, there's only 5 companies who have achieved this consistent growth for more than 10 years. We are extremely proud of the fact that the company has never missed paying a dividend since listing in 1903. And more recently, through difficult periods such as the GFC and COVID-19, we've been able to continue to grow the dividend paid to our shareholders. Over the past 20 years, the interim dividend has grown at a 9.2% compound annual growth rate. As I mentioned, for the year ended 31 July 2020, the gross value of the portfolio before tax was 5.3% lower at $5.2 billion. This compares very favorably to the performance of the market, where the All Ordinaries Index fell by 12.2% through that period. This generated an outperformance of 6.9%. And while we saw a strong performance from our investment in TPG, this was offset by poor investment returns from New Hope. There was a significant uplift in the borrowings during the period, which are mostly being placed into liquid assets, to provide us with the capital to take advantage of any new opportunities that we expect will present themselves through this period of dislocation. This slide shows the annualized TSRs for WHSP shareholders for various periods and compares them to the ASX All Ordinaries Accumulation Index, which also includes the reinvestment of dividends. The TSR performance has been strong over the period shown above, with the exception of the 1-year period. While the share price underperformed the market for the last 12 months, as I said on the previous slide, this does not reflect the fact that the underlying value of the portfolio outperformed the market by 6.9%. As a long-term investor, our focus is on delivering outperformance over the long term. We are proud of the 5.2% annual TSR outperformance against the market every year for the last 20 years. And this outperformance has had a material impact on shareholder returns. Over that 20-year period, an investment in WHSP has appreciated nearly 10x, which is over 3x greater than an investment that's performed in line with the market. And this performance has been maintained for a long period of time. If a shareholder had invested $1,000 in WHSP in 1980 and reinvested all of the dividends, the shareholding would today be worth over $155,000. This equates to a compound annual growth rate of 13.5% year-on-year for 40 years. And this growth does not include the value of the franking credits, which have been passed on to shareholders along the way. In this section, I'll look at how our business is dealing with COVID-19. When the outbreak of COVID-19 hit and was subsequently declared a global pandemic, our first priority was to ensure the health and safety of our workforce as well as playing our part to control the spread of the virus. Our next priority was to ensure that the business could maintain continuous operations as well as operate productively and effectively. As a small team with a diverse portfolio, we rely on daily interactions to monitor our existing investments and progress new investments. We are able to do this effectively through the COVID-19 effective period. Our business is very resilient to these kinds of events. We have in place the policies, procedures, technology and culture to be able to adjust, adapt and thrive. The parent company, WHSP, did not apply for any government assistance. A couple of our investments were affected and received a small amount of JobKeeper assistance though they did not pay any dividends. Our cash generation was not supported by government subsidies. We supported all of our businesses who were impacted by COVID-19 through this challenging time. We also did not seek rent relief and nor did we reduce our workforce. While our business operations are resilient, the economic environment is volatile and uncertain. During the last 6 months, we've experienced a number of shocks, any one of which would have been a major event on its own. We saw major global market corrections, oil prices and other commodities collapse, entire industry shutdown for months, mountains of government stimulus and massive increases to government debt. The Australian dollar fell over 20% and then recovered higher than where it was pre-COVID-19. The U.S. Federal Reserve is providing a [ daily ease ] of dollars for its own economies through massive and open-ended purchases of bonds and has provided liquidity swaps with other central banks, meaning the world is drowning in U.S. dollars. On top of that, the recent announcement by the U.S. Federal Reserve indicates a willingness to allow higher inflation and a commitment to low or negative real interest rates. And these will continue to weigh on the U.S. dollar. The biggest impact on our portfolio from an Australian dollar perspective is the price that New Hope receives for its coal. Brickworks North American earnings are also affected and our commodity exposure in Round Oak is also impacted. However, you can see that the commodity price graph on this slide shows that the strength of the Australian dollar in recent months has been overtaken by the increase in the price of copper. So in Australian dollar terms, copper is now above where it was a year ago and continues to have a positive outlook. Coal, on the other hand, has fallen over 30% in Australian dollar terms since March 2020. While we considered TPG to be a consumer staple, which would be less impacted by a downturn, Vodafone has suffered from lost revenue from inbound travelers buying prepaid cards and less roaming margin from inbound and outbound travelers. The latest IMF data predicts a bounce back to global economic growth in 2021. However, the outlook, in our opinion, is still uncertain, and we are cautious. A lot depends on the ability to control further outbreaks, the timing and effectiveness of a vaccine and the geopolitics and the trends towards deglobalization and our responses to all of those challenges. We are treading carefully, but we do believe dislocation brings opportunity, and we have liquidity to take advantage of good opportunities. Since the start of our second half on February 1 this year, WHSP share price has been very resilient. At [ the idea ] of the market correction in March, the All Ordinaries fell 2.5x greater than WHSP share price. And that strong performance has continued. For the period from 1 February to close of trade yesterday, WHSP share price is up 9%, while the All Ordinaries is down 14.2%, an outperformance of 23.2%. Looking back over the last 20 of our financial years ended 31 July 2020, the All Ordinaries has been negative in 5 of those years. And in 4 out of the 5 years, WHSP's total shareholder return was actually positive with an average outperformance of 13.5% per annum. So it's not new that WHSP has a portfolio of assets that tend to be very resilient in difficult conditions. Now looking at our major investments. Our investment in TPG was split into 2 companies with the demerger of Tuas. We also received a $121 million special dividend in July. The merger of TPG and Vodafone occurred during the period to create the merged TPG Group. The merger of equals created a near $15 billion market company, market cap company as at 31 July, and WHSP owns 12.6% of the enlarged entity. Consequently, TPG is no longer an associate, and this triggered a one-off accounting gain of over $1 billion after-tax as we uplifted our investment to market. Both of these companies now are in our telecommunications portfolio, which increased in value by 27.6% during the year after adding back the cash special dividend we received. And while the special dividend of $121 million was received in FY '20, the WHSP Board has allocated the special dividend notionally across the FY '20 and FY '21 years to more accurately represent normal dividend payments from TPG. In FY '18, the TPG dividend was cut to preserve cash for its proposed mobile network rollout. TPG subsequently abandoned its plans for a mobile network and was able to return the cash to shareholders just prior to the merger in July 2020. Of the total dividend, an amount of $92 million was allocated to FY '20 as a catch-up on previous 3 years of depressed dividends. And the remaining $29 million was allocated to FY '21 to account for the fact that the merged TPG changed since year-end and announced it would not be paying a dividend in the second half of calendar year 2020. This will result in WHSP receiving only one ordinary dividend from TPG in FY '21, which will be the final FY '20 dividend and around March next year. TPG shareholders also received shares in Tuas via an in-specie dividend. WHSP owns 25.3% of Tuas, which is the company containing TPG's mobile business in Singapore. This company is significantly advanced in the rollout of its mobile network and has commenced offering services to customers. Tuas will be a disruptor in the Singapore mobile market, able to offer significantly cheaper products than the incumbent operators who have legacy networks and higher overheads. Tuas' assets, being the network infrastructure, spectrum and cash, are in excess of the current market capitalization of that business. The merged TPG Group, as of December 31 year-end, so the last result we have is the first half ended 30 June, that result had only 4 days of contribution from the TPG business and were, therefore, predominantly the Vodafone Hutchison Australia results. The old stand-alone TPG did give some update on its performance for the 11 months to June 2020, and it generated $720 million of EBITDA which implies a 12-month result in line with the upper end of its guidance. Continued migration of customers to the NBN impacted EBITDA by $48 million. However, that was partly offset by $31 million from other growth in corporate, cost savings and fiber to the building products. We expect the NBN migration will have largely played out over the next year or so. Vodafone's underlying EBITDA was down 8%, predominantly on COVID-19 related impacts. These included an 80% reduction in margins from roaming, both inbound and outbound, lower prepaid plans from international visitors, inability to onboard new customers due to contact centers in India being closed and retail store closures in Australia and financial hardship offers and extra data, free calls and the suspension of late fees during the COVID crisis. We're excited about the opportunity for the merged business to be able to achieve significant cost reduction, offer bundled services and aggressively win market share. There's no need for me to go into detail about Brickworks' performance, given we've just heard from Lindsay, but my only comment is that we believe our investment is well supported by the assets of the company and the cash generated from each of those investments, particularly the WHSP dividend and the rental income from Industrial Property Trust go a long way to underpinning the Brickworks' dividend going forward. And Brickworks, as Lindsay pointed out, has a stellar dividend history with -- without any cuts since 1975. New Hope's financial performance for the first half of financial year '20 was solid, recording a profit before tax and nonregular items of $124 million. However, the second half result was greatly impacted by the COVID-19 pandemic and the full year profit before tax and nonregular items was $120 million. Production at Bengalla was up on the previous year. However, those volumes were partly offset by fall in production at New Acland, as the mine is running short of coal without the approval of Stage 3. New Hope remains committed to getting those approvals, however, continues to battle law fair tactics by environmental groups and inaction by the state government. Cash generated from operations before CapEx, tax and interest was approximately $300 million. That's down from the $500 million in FY '19, however, shows that this business is highly cash generative. New Hope's gearing ratio is 14% and has an additional $150 million of headroom to draw down further cash under its existing facilities. New Hope did not declare a final dividend due to the uncertain economic outlook and the funding of important maintenance on the Bengalla dragline. COVID-19 has had a significant impact on global coal markets. Energy demand globally was down 4.5% year-on-year. However, coal consumption was down 22%. This is a result of other sources of energy becoming cheaper, such as gas, and renewables having low marginal costs once the CapEx is being spent. Strong recovery in the Australian dollar relative to the U.S. dollar to levels higher than pre COVID-19 is acting as an additional negative drag on coal revenues. We're starting to see a little upward movement in coal prices. However, the recovery is relying on the post pandemic recovery in the Asian region. Our view remains that the mid- to long-term outlook is healthy as the need for industrial and domestic electricity generation remains strong based on the future of growth in Asia, New Hope's key export market. And recent events have reinforced the importance of low-cost operations. New Hope generated an operating cash surplus of $300 million, even in the challenging year. As I said earlier, the cash generation from assets last year was $500 million. So when coal prices normalize, New Hope will be able to quickly pay down debt and generate strong cash for shareholders. Both Bengalla and New Acland are in the lowest cost quartile of global coal production. At current coal prices, a lot of global production is unprofitable. And we should see some supplier responses with shutdowns or early exits from some high-cost mines. At normalized coal prices, New Hope's assets are highly cash generative. These long life low-cost assets producing quality coal will be resilient throughout the cycle and changes in demand dynamics. The values of listed investments in the portfolio reduced due to the market disruption of COVID-19. Over the year, the portfolio was down 12%, which is roughly in line with the market. Dividends received were, however, in line with the previous year, which is a good result. While a further investment was made in Ironbark Asset Management, none of the unlisted investments were revalued or written down. The total value of the portfolio continues to be well above its cost base. The pharmaceutical portfolio is made up of Australian Pharmaceutical Industries, API, Palla Pharma and Apex Healthcare Berhad, which is listed on the main board of Bursa Malaysia. WHSP received dividends of $5.6 million from the portfolio during the year, which was down on the $9 million we received the previous year. And this was because API did not pay an interim dividend this year at the height of the COVID-19 uncertainty. The pharmaceutical portfolio contributed $12.5 million to the group's regular profit after tax, which is slightly down on the previous year. Round Oak had a difficult first half with falling commodity prices, underperforming operations and high treatment charges for the zinc production at Jaguar. This caused us to reassess the carrying values of the assets at the end of the first half, which coincided with the low point in commodity price and the outlook. Losses persisted while the mines were in development phase. Since then, zinc and copper prices have recovered from the bottom of the market in March 2020. And in the last 6 months, copper has increased over 40% to over USD 3 a pound, and zinc is up over 30% to over USD 2,500 per tonne. Mining of Round Oak's 3 major assets, Mt. Colin, Barbara and Jaguar is proceeding to plan, and the recovery of commodity prices is very well-timed given the development capital for the mines is largely being spent and the ore will be produced and sold over the next couple of years. Exploration activities are focused on targets to increase the life of the current mining operations. Early results have been encouraging, and these programs will continue into FY '21. In July 2020, contracts were exchanged to sell the shopping center at High Street Penrith in which WHSP holds a 50.1% interest. Our share of the proceeds are expected to be $14 million, with settlement during November 2020. That means that we will maintain ownership of 2 property assets directly, 1 on Pennant Hills and the industrial property at Castle Hill. And these assets are presently being repositioned with a blend of capital improvements and leasing initiatives to increase income and value. The private equity portfolio increased in value by $136 million during the year. Finishing at $272 million. This increase was mainly due to new investments in agriculture. We were attracted to the agricultural investment because it's an uncorrelated asset class, and we were seeing opportunities arising out of recent free trade agreements for scalable agricultural production to generate good returns. We also think Australia is globally competitive in food production, and the food scarcity is a theme that interests us. The investments are geographically diverse with a number of different products across citrus, macadamias, avocado, stone fruit and table grapes. The remaining assets in the portfolio performed quite well with the exception of Aquatic Achievers, which was obviously impacted short-term by the shutdown of its swim schools, but most of those schools are now operational. Ampcontrol continues to benefit from infrastructure and resource spending and Dimeo has seen continued demand for commercial cleaning. And finally, WHSP has over $0.5 billion invested across Australian equity strategies. The WHSP large caps portfolio is externally managed by Contact Asset Management. The strategy aims to deliver capital growth and a yield that exceeds the market through the cycle. The large-cap portfolio outperformed the relevant index over the year by 1.9%. WHSP's small-cap portfolio is our allocation of capital to earlier stage, higher growth companies. This portfolio aims to find companies that can grow into a bigger part of our portfolio. And for the 12 months to 31 July, the small-cap portfolio generated an investment return of 4.4%, which is 12.9% more than the relevant index. Thank you very much for listening, and we'll be happy to take questions.

The first question is from Raju Ahmed from CCZ. This is for Brickworks. With current unemployment rates and net immigration, what is your confidence on housing approvals going into financial year '22 and '23 versus current supportive first homebuyer conditions? And what is the likely pent-up Australian new housing demand flowing on from the hard stop caused by the prior Banking Royal Commission?

Thank you, Raju. It's great to see you asking the first question again today. The first thing about immigration, when people immigrate to Australia, it takes about 3 to 5 years before they buy their first house. So I don't think we'll really feel the effects of the low immigration for the next year or so. But eventually, it will start to have impact. And that's why it's so important that the government gets immigration and students coming back into Australia. Anybody who's going to come here for one of those 2 purposes is more than happy to spend 2 weeks in quarantine, and we need to increase the amount of quarantine so we can get those people coming back into Australia. Without that, it's going to significantly hold up the rate that the economy picks up. In regards to the unemployment, this -- the pandemic has impacted some specific sectors. And the people who -- waitresses, et cetera, who work in restaurants, people who work in tourism, these people, and unfortunately, weren't often full-time and weren't often high-income earners. And so therefore, weren't really -- they're more in the rental market is my feeling than they were in buying properties. Might be a bit different in the regional areas where properties are cheaper, but in the major cities. And this is why we have a high rental vacancy in apartment buildings because a lot of those people working restaurants, as you know, were young people from overseas that are just on working holiday around Australia. So I think it will have marginal impact. The -- any builder on the East Coast, particularly in Sydney and Melbourne, will tell you that the main demographic that's buying homes in Australia today is of Indian background or heritage. And they're more likely to be someone who's working in IT or medicine and have well-paid jobs. And so I think we'll find that, that will continue for the time being as long as it picks up, net immigration.

Okay, the next question again from Raju. How should we think about the step change underlying EBIT margin expansion run rate in Building Products North America over the next 2 to 3 years?

Well, clearly, there's some things that we're not really going to know about how the sales are going to go with the interruption of COVID and how that pans out. I mean if we knew that there was a vaccine definitely available and those building sites are going to get going, we think we could see we'd ramp up and we'll get ourselves up more where they should be, which is about another 20% or 25% above where we are at the moment. We're really running with the level we were last year. So we need to see the construction industry in the cities open up again. And because in that area, that nonresidential area is the area where we get the highest margin. It's good to see residential housing picking up, but it doesn't have the margin that we get in that nonresidential area.

Okay. And there's a few questions relating to this next topic. Is further cap rate compression realistic, noting the accelerating shift to e-commerce and resulting likely increasing demand for industrial warehousing type property assets?

Yes. Well, you would have heard me talk every year, I say, I don't think it would go any further and every year I'm wrong. Look, I think what we're going to see, though, there's a lot of factors that go into what the cap rate is. It's not just not cheap money or chasing these sort of returns. It's also what the rent is, what's the competition from other areas. And I think what we might see going forward is more industrial land become available in that corridor between where we are and the new Badgerys Creek Airport. And that will obviously bring more competition to the market. So that might as much hold the rent per square meter down. And so how they work out, it's a bit hard to call, but nobody would have predicted where we are today. And it's one of those things that's very hard to predict what the future will be.

This question is for Todd from David Walker from [ Pring Dean Family Office ]. Todd, in the past, Soul saw financial services as a likely sector for acquisitions by the company. Is this still your view? Or are you now looking at other sectors?

Well, we were always looking at a number of sectors. And financial services was one that we saw had the appropriate tailwinds demographically to support it. And we think that those things are still true today. The continued momentum in growth in superannuation that needs to be invested will drive the individual size of each person's portfolios as they get older. And as portfolio of superannuation individual portfolios increase, the need to be advised appropriately also increases. And the cost of that advice on a relative basis comes down because the portfolio is growing. So we think that there's a really good bright future for good quality financial advice, and it's something that we're continuing to invest in. But it's never been -- the only thing that we're looking at and now with the dislocation that we're seeing, there's a lot more industries and opportunities coming at us.

The next lot of questions, I think, are for Lindsay. So first one is from Brook Campbell-Crawford from JPMorgan. On Australian Building Products, I note on Slide 37, that orders and sales increased in September across most businesses. Can you confirm if this is an increase versus September '19 or increase versus recent months? Also some color on how this growth varies by business unit?

Okay. First of all, that last bit first, it's been pretty universal across bricks, masonry and roof tiles, they've all been strong. As we've said, increased orders in precast, so it's across the whole group. Our sales are running at approximately the same rate as what they're running 12 months prior. However, the orders have taken a significant jump above what we would think would be the normal cancellation rate. And this is basically the leading orders coming in from the government stimulus is what it is. And so I would anticipate that this level of orders will continue for the next period, at least. The bit that I can't give you vision on is how much has -- particularly Victoria, been impacted by this second closedown and has that put a hole or a pot hole in the builders pipeline and construction because people haven't been able to sign their contracts and go visit those display homes. But basically, the rest of Australia is open for business, even if we can't move around. And the stimulus as I mentioned to some other people earlier today, I mean, you got $25,000 from the government. Some states are giving $20,000. Individual and their partner can take $20,000 each out of their super, the builders are offering some pretty big cash back. So you can basically walk into a builder, if you take advantage of all those with over $100,000 deposit, which is there's never been a better time to buy a home. I think once the people can go out of the houses and go see the builders, they'll be knocked down in the rush, to be honest.

The next one is from Andrew Donlan from CLSA. The feedback in Australia suggests that pipeline is building. Can you give us an idea of how long the pipeline is? And given you've reinitiated the capital projects in Australia, should we assume we are close to the bottom in terms of, New South Wales, Vic volumes?

Yes. The pipeline, I think, for the balance of this financial year, so 9 months, is what we're seeing at the moment. The second half of next year, I think the jury is out until -- we'll see what happens with that immigration. And do we get out of this, do we get a vaccine? We don't know the answer to any of those questions. I'm sorry, the second part of the question was, Lisa?

Given you -- sorry, given you have reinitiated...