WHSP Holdings Limited (SOL) Earnings Call Transcript & Summary

Very good afternoon, everybody, and it's nice to see people's faces after 2 years, I think it is. So welcome, everybody, and to all those who are on the call, good afternoon to you as well. Rob Millner, I'm Chairman of both Soul Pattinson and Brickworks. And with me today I have Todd Barlow, MD from Soul Pattinson; David Grbin, the Financial Controller; and Brendan O’Dea, who's come over from Milton. And the Brickworks side, I've got Lindsay Partridge, Managing Director; Robert Bakewell, the Financial Controller; and Susan Leppinus, who is our Company Secretary, at the back ready to take the questions. So as you hear me every half year, we've got, again, with the Milton merger that Soul got unders and overs on both sides. And that's one of the reasons why we've always concentrated on the underlying earnings, particularly in the Soul Pattinson's case on the cash generation from the various businesses that we're in. It's been an exceptional year. On the Brickwork side, their property portfolio again has been the stand out. And obviously, on the Soul Pattinson's side, anybody that's been following the commodity market has seen what's happened to commodity prices. And even overnight, I think zinc was up another 6% and copper up 2% and price of coal have got to USD 400 a tonne. So on those few words I'll now handover to Lindsay to do his presentation, and then Todd will follow, and then we will have some questions when they're all complete.

Thank you, Chairman, and good afternoon, ladies and gentlemen, and everyone on the line. I think there's something like 150 on the line. So thank you for your support and interest in our company. And I'd like to concur with the Chairman that it's great to see everybody in person once again. We'll start with a bit of van overview, the half year results, and then look at our divisional performance. Robert Bakewell will handle the financials, and then I will go to the outlook after, and then we'll do questions as the Chairman said, after Todd has presented. So the result gives me great pleasure. I must admit, when I -- back in 2000 when I first became Managing Director, our sales were about $130 million. I never thought I'd be standing up here 1 day and saying that we've just made $581 million. So there was a few abnormals in that statutory, but the underlying $330 million is very respectable. The other figures there to highlight was that the EBITDA was $488 million. It's very strong. That -- with those sales of over $500 million for the half, our sales are set to clear $1 billion in revenue for the first time in the history of the company this year. And I was very pleased that the dividend -- that the directors increased the dividend once again to $0.22 fully franked. It's the ninth year in a row we've increased the dividend, and it has either been steady or gone up since 1975. And if you look at that graphically, that's what it looks like, so we're well on our way to setting the -- very few companies, I think, on the stock exchange, that could say that they've increased their dividend for 10 years in a row. The record date for the dividend is the 12th of April and payment is on the 3rd of May. Just looking at the asset backing of Brickworks. We have our investment in Washington H. Soul Pattinson, which is $2.6 billion. We have the 50% share in the Property Trust, which is now just shy of $1.3 billion. Building Products net tangible assets of $700 million and our Building Products in the U.S. $376 million. We have debt at the end of the period at $626 million, giving us a net asset backing of $4.3 billion or just a little bit over $28 a share. But having said that, the land within the Building Products is held at the original acquisition price, a lot of it back in the '60s and is part of the reason why we're looking at what we've called internally the project build, but the operational setting up a trust of the operational land because the market is not recognizing that value. Looking at the health and safety. It gives me great pleasure here to say a steady improvement we achieved. Once again, 20 years ago in Australia, we basically had 1 lost time injury a week. And we've just completed 6 months with no lost time injuries, which I think is an incredible effort for all those involved in our team that's involved in that. And we're now starting to see with a good focus and good systems being implemented in the United States, we're able to follow that trend. We're a little bit behind, but we are making steady progress each year. Looking at the divisional review. I think most of you are pretty familiar that there's 4 main parts to Brickworks being Investments, Property, Building Products Australia and Building Products in the U.S. If you look at the investments, I won't say too much here because Todd's going to get up. But just from the point of view from Brickworks' perspective, the underlying contribution was $73 million. That was up almost 200%, as the Chairman mentioned, driven by the commodity prices. And we received $34 million during the period in dividends, and the value at the end of the period was $2.6 billion. I won't go into that. I think Todd will cover that, but a very long-term outstanding performance by Soul Pattinson. And I won't go into much of the mergers, I know Todd is going to cover that. But the result of that means that now Brickworks share of Soul is 26.1%. And we declared a one-off noncash profit of $279 million on the transaction. Looking at Property, which was the -- as the Chairman mentioned, the standout performance, an EBIT of $358 million, up almost 300%. It was driven by a further cap rate compression of 50 points. We generated a profit of $228 million. That was on the stabilized leased assets. We also, for the first time, included $48 million associated with fully serviced land. Prior to this, even though we had service land and buildings that are under construction, we never revalued them until such time as those buildings reached PC. But so going forward, we'll be including fully serviced land at the market value. And for this period, it was $48 million and the reason why our profit was above the forecast that we gave a few months ago. So during period, there was also a development profit, which included the massive Amazon building, and that -- and a few others totaled $115 million. And the net trust income increased to $17 million. Looking at the assets there. I mean, the trust almost increased by 1/3 in the period. So it is now $3 billion plus this $0.5 billion worth of land. We've got $974 million worth of debt in there. So that results in the 1.3 -- just shy of the $1.3 billion, an increase by $350 million during the period. Gearing and the trust is very important. I think at this part of the cycle, it's down now to 28%, which we think is very conservative and gives us a lot of headroom should cap rates start to expand. Looking at the stabilized assets. There's a list there on the screen. They produced a gross rent of $113 million. The weighted average lease expiry is 7 years and the average cap rate is 3.6% So we have 823,000 square meters of GLA or gross lettable area. The estates at the M7 Hub, the Interlink, Oakdale Central and the first stage of Oakdale East are now fully developed. And there's significant development activity ongoing in those, which I'll outline in the coming pages. If we look at the estates separately, this is building 1C at Oakdale South, was completed during the half. And that facility is shown in the foreground. Directly behind it, there's another facility there of 40,500 square meters, and that remains -- that is being developed within 2 facilities. One of those -- [ Houston Logistics ] has made a pre-commitment on one of those. This photo is the current sort of situation out at Oakdale West. And then, of course, the large building in the middle and a number of you might have had the chance to come with us to look at that building, but just before a PC. That PC just before Christmas. So in that area, there's more than 180,000 square meters of additional gross lettable area that is pre-committed and under construction. So I'll say it again, 180,000 square meters under construction. And of this 45,000 meters will be completed in the second half of the financial year. And in the rear of that photo, you see the 66,000 square meter Coles facility which is actually in -- footprint is actually bigger than the Amazon building, and that will be completed in the first half of next financial year. If you look at that estate when it's completed, obviously, the area in blue is Amazon, the areas in red are the -- where the pre-commitments are, but there remains a further 144,000 square meters of space that we developed. At Rochedale in Brisbane, the remaining 30,000 meters of gross lettable area has been fully pre-committed, the 2 facilities, one for Woolworths and one for CHEP. I think that's really another important point that the companies that are taking up these commitments are A-grade Australian or international companies. They've been let -- we've let with people that we know that are going to be able to pay the rent. If they can't pay the rent, we're going to have bigger problems than that. We put this in there because we know that a lot of analysts and shareholders have trouble sort of getting their head around that maybe there's still a lot more to go. And they sort of say to us you've nearly run out. But, so we've put this detail in here, so you can sort of see the time line of what we see coming through. But in summary, there's 221,000 square meters of pre-lease commitments already secured across the Property Trust. So that's under construction. There's a further 176,000 meters available for development in the existing estates, and we expect that to be fully built out in the next 3 years. So when you put those together, that results in an additional $60 million annual rent and $1.5 billion in value. Brickworks also retains 100% of additional parcels of land that are suitable for sale into the trust. Some of them need further DAs for that to happen. Planning worker has commenced on developing the balance of Oakdale East. This site is now at stage 2. We've already developed stage 1, where we have a new masonry plant. Currently on that site, we have the Austral Bricks plant #3, which is one of our main base load plants, but it is now 45 years old. And we're currently building a new plant that we call the Plant 2 site. And once that plant is operational, we'll demolish the plant through -- the Plant 3 plant to allow development of that stage 2 at Oakdale East. That will add a further $35 million a year annual gross rent and $875 million in value, and that will happen over the next 5 or 6 years. In addition to that, we have a parcel of land at Craigieburn, Victoria, which is just south of the Woollert facility. We actually, when we built Wollert, we had 2 plants on the site to the south. We demolished those a number of years ago and it's taken us a long time. We thought we'd go residential initially, but at this point in time, we're pretty confident that we'll go industrial. But that's a very large area and the 600,000 square meters of area there, even if the values in Victoria aren't quite the values in New South Wales. And we've announced today that we've been doing a lot of work over the last 12 months, trying to explore how we can show to shareholders and potential investors some of the value that's in the operational land. And we've advanced discussion with Goodman to create a operational Property Trust, and that would be tenanted by ourselves. Initially, we got 15 sites we're looking at putting in and they have a value of about $415 million, and that would be stage 1. We would receive approximately $200 million in cash for the sale of that, and it'd be profit of approximately $260 million to $280 million. Some of which would come in initially, about $100 million initially, and the balance over 20 years. After we see how that goes, and some other work aside, we have other stages that potentially could be put in as well. But over the long term, it makes sense to partner with Goodman because some of them we've got a joining development as the 1 you can see on the screen there, Rochedale, and it would make sense to have it all in 1 estate. I must mention that there are some other blocks of land that are still not included in that, including the Cardup site in Western Australia, which is residential and of course, all of our quarries are also -- are not in there as well. Now looking at Building Products in Australia, especially a very interesting period of time that we've been going through. We had the homebuilder program implemented by the federal government, and I think it exceeded their expectations as to how many people would flock to buy a home. And of course, I just think -- I think they really, or nobody really anticipated the supply line shocks. And so a lot of that construction work has taken a time line, where I have to say that even today, houses that were signed up at the beginning of that program, there would be many houses that haven't started yet. And this is a concern long term is that those builders will be building those houses at a loss at the moment. But having said that, there's been a lot of interruptions to construction. There's 1 builder in South Australia said to myself the other day, I can pour 10 slabs a month, but I only can get 3 frames, so that give you some idea of the bottlenecks that are in there. Fortunately, the bottlenecks aren't bricks. We've been able to supply all the way through. And that's kept -- I don't think we've seen the real pressure we would have seen because there's been these other bottlenecks and shutdowns, et cetera, in other parts of the industry. But having said that, we had strong activity in Queensland and Western Australia as increases. But of course, our largest states, New South Wales and Victoria, have also been running very strongly. Looking at the Building Products. The revenue was up 5% to $348 million. We were impacted in that first -- if we think back to August last year, we had very great hopes for the year. And very quickly, we got shut down, and we ended up having to take a few factories off-line because of -- we filled the yards very quickly. But they were lifted and then we managed to pick up a bit of momentum through the balance of the period. And I was very pleased with the outcome in end of an EBITDA $27 million, up 66%. So it was a very strong recovery. EBITDA of $54 million. As I said, there were some supply line problems. During the period, we have continued construction of our $75 million masonry plant, where the make side of that plant is now operational, but the value add is still 3 or 4 months away. And that has been delayed by us -- the inability of us to get specialists in from overseas even though we've had all the equipment on site now for about 18 months. And we continue to construct the new $130 million brick plant at the Plant 2 site that will produce 130 million bricks per year. It has also been delayed and most recently, even by weather, but we still have some parts sitting on the docks in the United States. We can't get ships. It's been sitting on the docks at 3 or 4 months, we can't get the parts. And we're now considering whether we actually freight them out to complete the plant, but that is well advanced, and we hope that is operational prior to this Christmas. The other important thing that we achieved during the period was we managed to buy 121 hectares of clay lands at Bringelly. It's 2 doors up from the old Boral plant, which is now owned by CSR, and that will refill our reserves for us going forward for most probably at least another 60 or so years. A lot of people might realize that because of the infrastructure that's being built and the tunnels that have been done and the many of the high rises that are going up in the regional areas around Sydney. A very high percentage of our clay that we use make bricks is actually recycled. We actually mine a very low percentage of our clay. Looking at the business performances. Austral Bricks was a standout. Queensland was particularly strong. Following the upgrades to that plant, we did that about 5 years ago. Western Australia remains difficult. We still remain loss-making in WA. And if we can't turn that around in the current cycle, we'll have to review what we're going to do there. But eventually, there's going to be some further shakeout in that industry with the BGC business most probably coming up for sale shortly. Our Concrete Products earnings were down on flat revenue. Austral Precast improved, particularly with sales of our new Double Wall product. The cement terminal that we've got in South Brisbane, we have -- interesting there, before the panic we were paying about USD 9,000 a day for about 25,000 to 30,000 tonnes ship. That went up in a pandemic to $40,000 a day. By about the early part of this year, that had come down to about $18,000 a day. And when the Ukraine war started, it went back up to $40,000 a day. So just there's a lot of moving parts in that -- in these businesses that you've got to keep an eye on. Bristile Roofing was steady. We could have done more work, but we couldn't get the trades people in -- particularly in Melbourne. And there's another example I'd give of inflation. We import terracotta tiles from a manufacturer, La Escandella, in Spain, Alicante in Spain. And we had a price rise last year in the order of 20%, and they've just given us another price rise of 36%. So it's gone up 60% in the last 6 months. But of course, if you look at a terracotta roof, it's much probably costing you $60 per square meter to put on, it's really only gone up, say, 20% or 25% of the total cost, depending if you can find a roof tile. North America. There's the very tough conditions over there. The approvals increased in the period 10%, but you might remember from previous meetings that most of our business traditionally was 60% architectural specification work and only about 40% housing. Within the last 18 months, that's reversed, and now we're doing 60% housing and 40% commercial. As someone said to me on a recent trip, we don't need to build a new school. The school we've got is empty. And so schools was a big part of our business. There's none of those being built, and the same goes for universities. And also a lot of the large jobs, they didn't want the number of people on the sites. And a lot of those were deferred, delayed whatever. So, but housing, as you know, particularly in the southern states has been very strong, and we've been supplying a significant amount of product into those markets. But unfortunately, it is at lower margins than what we get for our architectural specified work. And of course, we have to haul it there, and the price of haulage in the United States has basically doubled, if you can get semi trial -- you can't get a semi trailer brand new. You can't get 1 secondhand, you can't get one -- if you can get one, you can't get a driver. And if you actually put all that together, you mostly can't get enough. So it's been tough. We've been put to the washing machine, through the ringer there. So our earnings were flat, which was encouraging as it wasn't a loss. But our turnover was way up. If you remember, very early in August last year, we bought the IBC, Illinois, Indiana Brick Company, whichever you way look at it. And that significantly boosted our turnover. But we're still yet to see really the turnover increase from when we bought the Redland sale right at the beginning of the pandemic. That turnover has not come through yet, but it will in due course. Our order book is 50% bigger than what it was a year ago. And as we're getting out of winter, we had a very cold winter, someone said to me before, it's like saying the dog ate my homework. But it was a cold winter. Our sales in the last couple of months in the winter were lower than they were a year ago, even though we had this much bigger business. So it was a very severe winter. There's places there in the Midwest, the winter few months ago, the ice was too thick on the ground in the field. Just unbelievable. We also have had quite a few cost increases. To give you some idea there, about 18 months ago, we'd be paying about $13 to $15 an hour for people who were doing manual jobs in our factory. Today, we're paying $22 an hour, to give you some idea of the increase in the labor. Yes. But like in Australia, we did achieve a lot of other things there. On the photo there, you can see the front door to our new design studio in New York, which was opened by Australian ambassador Arthur Sinodinos about -- it was, Chairman, 3 weeks ago? It was a great opening and definitely has got us a lot of attention in New York. And already, we've been writing some jobs. And what's surprisingly, not only get jobs in New York, you get jobs all over the United States, but you get jobs all over the world. And one of the first jobs we got was a major high-rise residential tower in Peru. So it's just quite surprising how it makes us international. We bought IBC, as I mentioned, which gave us 7 extra showrooms. Since then, we've also bought Capital Brick, which is -- services the Washington, D.C. area. We now have 27 of our own locations that we can distribute our products through. So we're able to really, in many cases, take -- mine the clay and then take it right through to where we distribute it to the end user. So I'll now hand over to Robert to handle the financials.

Thanks, Lindsay. Good afternoon, everybody. So I'll spend a little bit of time just looking at the financials in a bit more detail. As Lindsay mentioned, the total underlying group EBITDA for the half was $488 million, which is up 200% on the prior corresponding period. And after depreciation and amortization, the underlying group EBIT was up 254% to $450 million. Total borrowing costs were down slightly at $9 million, and tax was $110 million. And that resulted in an underlying net profit after tax from continuing operations of $330 million, which was up 269%. There were in a number of significant items, which increased the NPAT by $251 million, resulting in that statutory number of $581 million, which was up 720% for the half. And given the size of the -- of those significant items, we spend a little bit of time on that on this next slide. So the key item there was a net profit of $279 million, which followed the Soul Pat's merger with Milton that we had to pick up as part of the equity accounting exercise. And that included a $453 million profit on deem disposal of the Soul Pat's shares that we hold, which was then offset by a share of the goodwill impairment. So that came to the $279 million number. There were then another $14 million of net costs associated Soul Pat's significant items, mainly to do with the deferred taxes on our holding shares. So then the specific Brickworks significant items, there was $6 million in restructuring costs, which are primarily related to the new Austral Masonry plant in Sydney and closure of some outlets in North America, and there were $5 million of COVID-related costs, which again mainly in North America and related to unabsorbed fixed costs. If I look at the cash flow. Total operating cash flow for the half was $63 million. That was down from $76 million in the prior corresponding period. It was adversely affected some inventory build in Building Products, mainly in the U.S. Capital expenditure for the half was $43 million. You'd be aware that there are a number of major projects underway, being the new brick and masonry plants in Sydney, but also some major upgrades in the handling plant in Pennsylvania and the deployment of a new ERP system across both countries. And we also spent $64 million on acquiring IBC in the U.S. and dividend payments for the half of $61 million. There's some other financial indicators. Net tangible assets per share was up 20% over the period to $16.72 per share. Shareholders' equity increased by $509 million, so just shy of $3 billion, which represents $19.69 per share. The underlying return on shareholders' equity was up to 22% on an annualized basis, which is up from 12% for the 2021 financial year. Net debt increased by $107 million to $626 million, mainly reflecting the impact of the capital program and the acquisition of IBC. Gearing was steady at 21%, and our interest cover was very conservative at 37x. I'll finish up on just going through the debt maturity and some of the debt metrics, which are very strong. During the period, we refinanced 2 tranches of our existing syndicated debt facility, and we added 2 additional U.S. dollar tranches. That increased our committed facilities from $830 million to $1 billion. And so we've now got a syndicated multicurrency facility of $735 million, a bilateral cash advance facility of $75 million and an institutional term loan facility of $184 million, which has enabled us to start spreading out the overall tenor of the debt. We currently have around $310 million of funding headroom. That's based on the committed debt facilities and the cash that we have on hand. And we've also renewed a lease over the -- or part of the Brickworks operations down in Woolworths for another 5 years, taking advantage of some very competitive rates there. From the banking covenants perspective, but a significant head in there gearing for the debt document purposes is 17%. The interest cover is 9.6x, and the leverage ratio is 3.4x. So a very strong balance sheet in that respect. And with that, I'll hand back to Lindsay to talk about the outlook.

Thank you, Robert. I'll just say that the -- some of the stockpiles in Australia in every factory we had at full speed through the Christmas period, and of course, when sales are down, so we have to have all those books sold by the end of the period. So we'll see how it goes. Okay. So just moving now to the outlook, we're in a very strong position with diversified portfolio. As I mentioned earlier, we're on track to exceed $1 billion in turnover for the first time. We're very excited about the future of Washington H. Soul Pattinson, and Todd will be talking about that in a minute. I've discussed the strong pipeline of work that we have underway in the Property Trust. I also discussed what we have to realize from the operational lands. And we think that there's -- and previously not mentioned, and our view has changed on this in the last 12 months that there is property opportunities in our North American operations, particularly a couple of sites, and we're now exploring that to see whether or not we can bring some of that to fruition. There is a strong order backlog for our Building Products in Australia. And as I mentioned before, we have a very large order backlog for our Building Products operation North America. In the longer term, I'd be worried here if we don't see return of reasonable immigration, and I'd also be concerned with the consumer confidence that may have fallen off with the outbreak of war and other impacts that we might be unexpected impacts because of the Ukraine war. But overall, we're very confident of the long-term picture of the company. So with that, I will hand over to Todd, which I think should be right there. Thank you, Todd.

Thank you. Thanks, Lindsay. Good afternoon. I'm pleased to present an overview of the significant achievements that the company has made in first half of FY '22 ending 31 January 22. WHSP has a unique offering in the Australian market. Through WHSP, an investor has the opportunity to gain exposure to range of asset classes and industries, investment strategies that have delivered above-market returns for several decades, steady and growing dividends, and our management team with a strong track record of execution and active stewardship of capital. During the half, we completed the merger with Milton Corporation, which has had a number of strategic benefits, which I'll detail in a few slides' time. We are building upon the long history of investment success and seeking to capitalize on the flexibility and investment culture that we have within WHSP. We invest in a diverse range of uncorrelated investments across listed equities, private equity and venture capital, property and structured credit. When we talk about diversification, we're not simply talking about a large number of investments that will revert to the performance of the market. What we have is a range of high conviction ideas that are in industries with low correlation to each other and across asset classes that are also reduced in correlation. We won genuine diversification, but not at the expense of diluting our best ideas. A key advantage is our unconstrained and flexible mandate, which allows WHSP to invest in and support companies from an early stage and grow with them over time. I can't overstate the importance of this flexibility. It not only enables us to be flexible on asset classes but also allows us to compete in areas of investment where there are few competitors. We are disciplined and value-focused and willing to invest through market cycles to deliver returns over the long term. Generally value-focused investors will have found it hard to outperform when markets are soaring so as they have for the previous few years, but WHSP has managed quite well. We have significant liquidity to take advantage of any downturns and opportunistic investments and have the courage to take a contrarian view when we see value that the market is missing. We have an excellent track record of paying consistent and growing dividends for over 20 years. We know that the stability of this dividend is valued by our shareholders. We have seen solid growth in the cash generated from the portfolio, and that bodes well for future dividends. We also focused on protecting capital by investing in a portfolio of assets that are not correlated to each other and are durable and resilient. Our portfolio focuses on businesses with strong earnings and cash flows, defensible market positions and excellent management. And this provides some protection against market volatility. In fact, as we will discuss later, our portfolio performs considerably better than the market when the market is volatile. We aim to be a trusted partner with attractive companies and management teams who will value our long-term, stable and supportive approach. We believe this opens the door to more investment opportunities and produces better results over the long term. Looking now at the half year performance. We've always maintained that group regular profit better reflects the underlying performance of the portfolio as it excludes one-off items. Group regular profit for the half was $343 million. That's an increase of 281% on the previous corresponding period. In fact, our first half regular profit exceeded the result for the entire FY '21 year. Contributing to this strong performance was increased profits from New Hope and Round Oak as a result of stronger commodity prices and growth in the Property division increased profits of Brickworks, as you've just heard. We also saw increased income coming through from the acquired Milton portfolio. As a result of one-off noncash impairment of the goodwill associated with the Milton acquisition, the statutory results swung to a loss after tax of $643 million. Following the announcement of the Milton transaction, WHSP share price appreciated quite strongly. And as at the date of the implementation of the scheme, our share price was $38.20, which for accounting purposes was the value of the scrip issue to Milton shareholders. That price appreciation created $954 million in goodwill at the time of acquisition. And in accordance with accounting standards, we have decided that the goodwill should be fully impaired. I want to emphasize that this is a noncash impairment, and the deemed acquisition price does not alter the benefits of the transaction to WHSP shareholders nor does it undermine the strategic rationale for the transaction. This is highlighted by the strong performance over the last half against our 2 key performance indicators. As many of our shareholders' already know, we measure ourselves against 2 KPIs. Firstly, we aim to improve the yield that we receive, and we measure this by looking at the cash flow from our investments. Net cash flow from investments was $183 million for the half, an increase of 114% over the previous corresponding period. And when we link into account the additional shares that we issued following the Milton transaction, the net cash flow from investments on a per share basis increased 42%. And secondly, we aim to grow the value of the capital of the underlying portfolio. The portfolio as a whole performed very well against the market that experienced a pull back in January. Over the 6 months to 31 January, the All Ordinaries Index fell 5.2%. However, the pretax net asset value per WHSP share outperformed the market by 8.6% over the same period. And as a result of significant tax benefits arising from the Milton transaction, the net asset value per share after tax increased 17.7% throughout the period. The merger with Milton completed on 5 October 2021. And as we have previously said, we believe the merger is transformational and highly strategic to the ongoing success of WHSP. Some shareholders have asked whether we overpaid for Milton and whether the impairment of goodwill is an indicator of this. As I explained before, the goodwill was generated by the movement in WHSP share price and did not impact on the underlying rationale behind the transaction when we agreed the merger back in June 2021. In fact, all of the strategic and financial benefits have lived up to expectations, and that can be seen by the performance against our key performance indicators I discussed on the previous slide. Net asset value per share on a post-tax basis increased by 17.7% as against an All Ordinaries Index, which fell by 5.2%. Cash generation increased across the portfolio and was up 42% per share. The liquidity to enter into new private market transactions enhances our scope to further increase cash flows in the future. There is instantly greater portfolio diversification through the reduced dominance of our major investments. And more importantly, have the liquidity to further diversify across asset classes in the future. We now have over 55,000 shareholders, which should increase market liquidity and has a significant uplift in market capitalization and free float, which increases WHSP's index participation. And finally, the Milton investment team complements WHSP's existing capabilities and has been fully integrated, which was actually a relatively easy task when you -- given the strong alignment in cultures, values and investment styles. The directors today have declared an interim dividend of $0.29 per share fully franked. That's an 11.5% increase on last year's interim dividend, and it's the 24th consecutive increase to the interim dividend. Over the last 20 years, our interim dividends have grown at a compound annual growth rate of over 8%. The strong growth in cash flow receipts from the portfolio has given the Board confidence to materially increase the interim dividend and continue our objective of paying steadily increasing dividends to shareholders over time. The table on this slide shows the total shareholder return for WHSP shareholders over various investment periods. We are focused on providing better-than-market returns over the medium to long term. As you can see, there's a solid outperformance over many years. And over 20 years, the TSR for WHSP has been 13% per annum, which is 4.8% higher than the index. That outperformance compounding over 20 years means that a WHSP shareholder has seen their investment grow by over 10x, which is more than 2.5x more than the index. And while we don't focus on short-term movements in our share price, the 12-month underperformance is not a fair indicator of the performance of the business over the last 12 months. On any measure, the business is in a stronger position now than where we were this time last year. And just to show you that our investment approach is durable, our performance has been strong over 40 years, where total shareholder returns have averaged 14.5% compounding when including dividends reinvested. And it should be noted that this performance does not include the value of franking credits passed on to shareholders with every dividend. I'd like to now introduce Brendan O'Dea, our new Chief Investment Officer, and he'll talk you through the portfolio as well as the performance over the half.

Thank you, Todd, and good afternoon, everybody. The merger of Souls and Milton has, as expected, proceeded very well with the 2 organizations sharing a long history, a compatible culture and consistent investment philosophies. I echo Todd's comments and thank all shareholders for their support. Between the completion date of the 5th of October 2021 and now, we have brought the portfolios together successfully with no discernible portfolio slippage and now manage the combined portfolio by asset class. You can see the allocations to each asset class on this slide. The total portfolio is now just over $9 billion, growing by 56% over the last 6 months. The strategic investments now represent 45% of the portfolio, with the large post-merger portfolio reducing the concentration. Large cap equities, including the strategics are 37% of the overall portfolio through addition of the Milton portfolio to the existing Soul's large-cap portfolio. If we look at the change in the period on a net asset value per share basis, the asset backing has increased by 3.4%, as highlighted by Todd, to 31 January and has outperformed the market. The working capital position has increased by $350 million over the 6 months through portfolio sales and cash generation. I'd like to make a few comments on the investment environment and how it relates to our portfolio. The first half has been very volatile. With inflation concerns, fears of interest rate rises, the COVID Omicron variant and now war in the Ukraine, providing plenty for investors to worry about. Equity markets and indeed all asset classes entered the calendar year at elevated levels, largely due to cheap and ample liquidity and have since corrected as these risks asserted themselves. Valuations in aggregate have fallen as rates have begun to rise. But asset prices could not be considered cheap and valuations vary enormously by sector. The specter of inflation and supply disruptions has caused sharp rises in commodity prices, benefiting resource companies and Australia's terms of trade, but damaging confidence. Notwithstanding this challenging backdrop, corporate earnings growth remains strong. Global economies have largely recovered from COVID and household saving rates are high. Rates, even adjusting for the expected rises, are still very low on an inflation-adjusted basis. All of our portfolios focus on investments that are profitable with strong earnings and cash flows, reasonable valuations, defensible market positions, and strong management. We expect our portfolios to outperform in a rising rate environment as profitability becomes fashionable again and to exhibit defensive properties in the face of expected market volatility. I'll now discuss the portfolios in a little more detail. The strategic portfolio, which you would all be familiar with comprises large stakes in publicly-listed companies where we have Board representation. The portfolio includes TPG, Brickworks, New Hope, Tuas, Apex and Pengana. At the end of January, the strategic portfolio was valued at $4.1 billion, or 46% of the total portfolio, and generated $87.6 million in cash in the 6-month period. The with Milton has reduced the concentration of our strategic investments in the overall portfolio. All of these 6 companies have evolved from private equity investments of WHSP, and the other 2, Brickworks and Apex, have been in the portfolio for several decades. During period, we sold our stake in API to Wesfarmers in connection with its acquisition, a transaction that has recently completed and generated a top-up payment for us. We remain confident that our major investments are well positioned to benefit from favorable longer-term themes and note the recent strength in coal prices, the ongoing success of the property portfolio at Brickworks and expected tailwinds at TPG. The large-cap portfolio has grown significantly through the merger with Milton and is now worth approximately $3.4 billion, representing 37% the overall portfolio. Substantial sales were made in the period to comply with the terms of the scheme, most notably the sale of Milton's Holdings in Brickworks and Souls. The portfolio is actively managed, does not replicate any index and takes a fundamental long-term approach to investing. With that said, the portfolio outperformed the ASX 200 in a volatile period with a total return of minus 3.2%. The portfolio has been actively rebalanced in the context of Soul's broader asset mix and with a view to the risk of rising interest rates. The portfolio is also highly liquid and may provide a source of cash for new investments in other asset classes over time. We remain positive on equity markets due to earnings growth, higher savings rates and growing dividends, but note the worsening global security environment as a source of risk. The portfolio is expected to contribute strongly to cash in future periods, noting that the Milton portfolio has only contributed from October 5, 2021. At WHSP, we are actively seeking to invest in businesses seeking an aligned partner to provide capital and support their journey to grow their business over time. We are aiming to patiently develop a portfolio of platform assets that we can grow through the provision of further investment over time. We have identified a number of themes that we have particular interest in, which include energy transition, financial services, health and aging, food and agriculture, and education. The current portfolio value is approximately $650 million, and we will continue to look to thoughtfully grow this as opportunities arise. Our largest assets are the agricultural portfolio and Round Oak Metals. We have a pipeline of interesting opportunities, which we will approach with our customary discipline. The emerging companies portfolio targets companies outside the ASX 100 that are exhibiting strong growth. These companies are often benefiting from technological and structural changes. The portfolio has grown significantly in the past year to $531 million and has outperformed the index by 11.1%, delivering a total return of 6.5%. Cash flow was also strong, up 156% on the prior comparable period. Whilst these investments can be volatile. We see potential for outsized returns over time in these companies. The investments also provide us with valuable insights into disruptive forces in the market and an opportunity to back companies at an early stage of their growth journey. The composition of the largest global stock market indices are increasingly dominated by the younger disruptive companies, and we aim to be well positioned to see these opportunities. We will continue to apply the same investment discipline evident in the rest of the portfolio. Our structured yield portfolio comprises investments in quality companies through instruments that carry a high cash yield to maturity, are downside protected and can often provide some equity-linked upside. The portfolio leverages our expertise across the capital structure, providing an alternative investment format when our conversations with investee companies indicate that straight equity may not be optimal. We have $360 million invested in the portfolio in 2017 investments across a range of industries. Portfolio produced $10.9 million of cash in the period. Each asset in this portfolio is unique and may take the form of a simple loan all the way to a complex convertible note. We believe that this asset class can provide strong risk-adjusted risk over the long term due to innovative structuring in a market not serviced well by many other providers of capital. And we aim to grow this portfolio as opportunities arise. On the Property side of the portfolio, our direct portfolio comprises 9 assets with a value of around $174 million. During the year, we have acquired some small industrial sites in Kirrawee and Narellan, and we remain opportunistic by looking for transactions that could generate outsized returns through development or repositioning. The property market has been very active lately with rates low and valuations high, reducing the number of well-priced opportunities. From a portfolio allocation perspective, we are mindful of our look-through exposure to industrial property and Brickworks and our other property-backed companies. Also in the portfolio is our retirement development in partnership with Provectus. Sage by Miranda at Cronulla is progressing very well with presales stronger than expected. Also in the portfolio are the joint ventures previously held by Milton in Ellenbrook and Huntley, which have also continued to perform very strongly. And to finish, WHSP remains in a very strong balance sheet position with minimal debt. The working capital position highlighted above represents the balance of debt, cash and assets currently available for sale. The cost of our debt is low, aided by the convertible bond offering that we conducted at the start of 2021. The average cost of our debt is less than 1% per annum. We have significant access to further debt should we need it but have always maintained conservatism when it comes to gearing levels. This leaves us in a very strong position to react to opportunities as they present themselves. Thank you, and good afternoon.

Okay. We'll just ask if there's any questions. There will be Susan who is organizing this.

Yes, we have some questions online. Do you want to go with those first? We have some questions online, would you like to go with those first?

Yes. Yes.

Yes. Okay. So the first question, Lindsay, please -- from Peter Steyn. Please step through your ability to overcome cost pressures through price increases and how you see this playing into demand given the pressures faced by builders in soaking up cost increases in the supply chain.

Yes. Look, there's no doubt that the builders are under a lot of pressure. And as I mentioned earlier, that I think that we might see a bit of a fallout in the industry going forward because many of the homes that builders have been building would be building at a loss, so we'll just have to watch that space. Some of them have been able to -- they haven't been on fixed-price contracts, being able to get higher prices. But eventually, you'd have to be concerned that particularly if interest rates start rising that you're going to see that housing will become unaffordable. Australia's from within our side, at this point in time, we've been able to recover most of our price increases, and I think we've generally found that the builders have been fairly understanding because even though we might put up our products 6% or 10%. They're most probably paying 20%, 30%, 40% increases for a lot of the trades. So they see our cost has been relatively reasonable.

Another question from Peter Steyn. Your U.S. business is now majority exposed to residential activity following the IBC acquisition. How do you see this strategically given the margin mix and your initial keenness on being exposed to non-residential activity and your view on market developments, given current interest rate trajectory?

Yes. As I mentioned, we have an enormous order book, and most of that is in the traditional area. I think that we'll see in the 6 months, we'll set swing back maybe not immediately back to 60-40, but I think we're more likely to see it back at 50-50. We are looking at bringing on some more plant to specifically feed the Texas and Oklahoma and those areas where it's pretty strong. But as I said, it's swinging back quite quickly is really the real answer.

Another question from [ Neil O'Donald ]. Do robotic brick laying machines, such as the one built by FB company in Perth, have any interest to Brickworks?

We were involved in that right at the beginning, and I think we're still a shareholder. But I think, look, they're making steady progress. I think they've got a bit to go yet. I thought that they might sell the machines to other people, and I see that they've done -- they've come to an agreement with -- I'll think of the company in a minute, in Europe that builds this sort of equipment. And if they start building the machines and selling them, I there's a chance there is a good rollout. But while they're limited by their own capital constraints and their own level of technical people to run them, they're quite technical to operate, I think it's going to be a slow progress. So I think if they -- selling machines is like concrete pumps, then we'll see that have an impact going forward.

Now question from Lee Power at UBS. What are your customers saying in terms of how long the pipeline in the Australian Building Products is?

There's a year's work out there.

Another question from Lee Power Remind us what you paid for Bringelly land acquisition, please?

I don't think we told anybody. Now unfortunately, it's confidential, we can't tell you. We didn't say.

And one last question. When do you think commercial end market recovers in the U.S.A.?

Well, I think it's recovered, we've got the orders, I think it's going to start picking up straightaway as we get into spring and head towards summer.

Another few questions have come through from Raju Ahmed at CCZ. Will you reinvest $200 million gross proceeds back into Brickworks? And if yes, which segments?

Well, look, at this point in time, we're looking at reducing that debt and paying off some of the operating leases, particularly the older ones at Wollert.

Can you discuss the dollar cost impact of the New South Wales Victorian lockdown in the first half of FY '22?

Well, I think we took a COVID related in the accounts. But we can't -- unfortunately, with the way that, that standard works, you can't take up the lost sales. But I felt we did recover pretty well, and we now -- we've had the same thing happen this half with the wet weather. I'd be confident in the next 4 months we'll pick it back up.

When do you think the slowdown in housing demand to appear in Brickworks numbers in the current cycle, 1 half FY '23 or further?

I think second half '23. First part of the -- an year's time, next -- this time next year, I think we'll see a bit of a slowdown.

A question for Todd. Of the original 30,000 Milton shareholders, how many are still WHSP shareholders?

We didn't have that data. We haven't tracked it. But what is that there was roughly 30,000 shareholders from each company. And when we merged, that number reduced to about 55,000. We think because there was quite a high level of overlap between the 2 companies. And there might have also been some shareholders who sold prior to the transaction occurring out to some of the event-driven hedge funds. But since the time of merger, we've seen shareholder numbers tracking roughly steady at just over 55,000.

Another question for you, Todd. In the emerging companies portfolio, the company with the ASX code EOS is seeking pathways to invest in its SpaceLink program. Can you update shareholders on how WHSP views EOS performance as an investment and perhaps general statement on our appetite to increase our investment in EOS?

Yes. So EOS is one of the larger positions in the emerging company portfolio. And actually, since 31 January, we've had a couple of big movements in that portfolio. The other large investment is Uniti Wireless. And of course, that's under takeover offer. So we've had big uplift there. EOS was -- its share price had tracked down and has bounced back considerably in the last 2 or 3 weeks. And I think that if you're -- EOS is a defense company and a laser company. And if you're in the defense business at the moment and you're not making money, then you're doing something wrong. We think that the prospects for its defense is very positive, but we're very excited about the SpaceLink business, which is effectively a way of communicating data rather than undersea cable you can do it through a laser in space, and it's got some very exciting technology there, and that's a huge upside for that business.

A question, Todd, from [ Rob Kron ]. Please comment on the rapid decline in total shareholder return for WHSP for the 9 months from the 2 of August '21 to the 23 of March '22?

Well, I think, as I said, we focus on TSRs over the medium to long term. The commentary on the recent TSR is share price related, and we can't control the share price. What we can do is control the underlying performance of the business, and the underlying performance of the business has been extremely good. And I hope I conveyed that in my presentation, both cash flow significantly up 22% for the half as well as the performance of the portfolio was 8.5% better than the market. So we think that, that will drive the share price in the future. And hopefully, that short-term weakness will reverse.

There is another question, a similar question from [ Max Tee ] and Ross Illingworth from Kingfisher Capital Partners. Now that the strategic portfolio is a smaller percentage of WHSP's asset base. It appears that WHSP's future performance may be more correlated to the ASX? Do you see this as a risk?

Well, I think that, that is really a question around our investment culture more so than the actual composition of the portfolio. And so it is true to say that our major investments are a smaller percentage of the overall portfolio. We think that's a good thing. But what we are trying to do is generate more high-conviction ideas. We don't run any of our portfolios to meet a benchmark or hug an index, all of our portfolios are invested in a way where we think we can take advantage of really good ideas. And so I think that just because we have more liquidity, more portfolios, less concentration in certain aspects of those portfolios. I think that what we need to ensure is that our investment culture does not be one that starts looking a lot more like the index.

Question from [ John Smith ] for Todd. Why should investors consider investing in Soul Patts rather than any of the other LICs on the ASX?

It's a good question, and it's one that we intend to take to retail shareholders over the next couple of months through some road shows to point out that there is a very significant difference between an investment in sales and an investment in LIC, and there's a number of reasons for that. And what we say is look at the track record of performance that a company like Soul Pattinson has over the index over several decades. When most of the LICs will track the index, they might slightly overperform in some years and slightly underperform in other years. But in general, the nature of their investments are going to mimic the index. And the reason why we think that we outperform is our investment culture, our courage to be contrarian and invest for the long term. The fact that we are willing to be concentrated in some areas, we do take high conviction investments on things that we really like, but also the diversification across asset classes and styles of investment is important. So when you think about why is it from a portfolio allocation perspective that every sovereign fund around the world, every pension fund around the world, superannuation fund, every family office has an allocation to multi-assets, whereas all LICs in Australia, which is the product that those people used to invest their own savings in are exposed 100% to equities, whereas all of those other investment portfolios are much more diversified than that. So we're trying to provide better portfolio allocation and access to asset classes that the typical retail investor can't get access to themselves. So particularly the private markets around private equity, structured credit, direct property deals, things like that.

Thanks, Todd. There were a number of questions that you were -- in line with what you've just answered. There's one other question for Lindsay, an anonymous question. What was the impact of weather on the Australian Building Products in February and March?

It was fairly similar to the impact we had with the close down back in August last year, surprisingly. So it was particularly new south -- it was different states, of course, that closed down was, if you remember, it was Victoria and New South Wales. Well, this mainly affected us in New South Wales and Queensland, Southeast Queensland. So -- but it was fairly similar and it was obviously fairly severe during that period of time.

There are no more questions online.

Okay. Are there any questions from the room?

Robert, this is a question for you. Can you explain the difference between inferred asset value and NTA for Brickworks? That's the first question. And the second question is, given that a lot of the land is in the books of 1960 values, what is the real either NTA or inferred asset value at this time?

I don't think we publish that number.

I imagine you're referring to the slide there at the beginning. So there, we've tried to indicate those where you've got a value or a cost that you can reference to the accounts. And we talk about the inferred asset backing. So you can find those numbers. So you can find those numbers, whether it's the share of the market cap of Sol Patts or the cost base of -- historical cost base of assets or the NTA of our plant and equipment. That's all referable to a number in the accounts. Question on the other. So that's part of what we've tried to do with the project that we've undertaken at the moment with Goodman looking at the operational land trust. So you can see that this $415 million for those 15 sites. Stage 2 likely to be something similar. We haven't set this out because they are subject to what the market is at the time. So rather than try and guesstimate those, we just indicated the opportunities that are in front of us in the quality of land that's still there and the years that we have ahead of us in terms of development of the property trust.

But we -- part of this process, we have to carry our full valuation. And I think if we go ahead with this first stage. As we've indicated, then we might be able to give a more fulsome answer to your question. Any other questions from the audience?

Yes, some more questions have come through online. Lindsay, energy and fuel costs have spiked since Russia's invasion of Ukraine. Will you need to put through further price hikes to recover the increased costs?

Not at the moment. We're on contracted gas through to early 2024. We'll obviously undertake discussions to extend those contracts. And actually, at the moment, we're also looking at getting electricity from our large wind farm in Victoria, and believe it or not, those costs, the contracted rates will be about 20% lower than what we're paying for electricity today. So we haven't really felt the impacts of that at the moment. Whether the war goes on for a number of years until the point when we're going to roll out those contracts, we'll have to wait and see.

Question. Anonymous question for Todd. Will WHSP continue to drive investment into fossil fuels such as coal to capitalize on sustainable long regional demand tailwinds and record prices against the tide of activist sentiment?

Yes. I think that our view has always been, and we've communicated this over a number of years, that you need to look through the noise, and there's a lot of activism in this space around the ongoing sustainability of thermal coal, a lot of wishful thinking about how quickly thermal coal might cease to exist as a source of energy for the planet. But we just look at the cold hard facts, and we were always very confident that there was going to be quite a life for thermal coal, particularly good quality thermal coal that is low cost, which is exactly what the coal that New Hope produces is. And so what we're seeing now is, I mean, there's definitely an overshooting of prices because of some geopolitical issues, but we've always been very confident in the outlook. We've got a mine in the Hunter Valley that is permitted out to 2039. It's a beautiful asset, low cost, producing good quality coal, and we've always maintained our view that there is a place for that asset and for that product for the foreseeable future.

Okay. Thanks, Todd. One last question from John Smith of all the classes that Soul Patts has invested in, listed equities, structured credit, private equity, et cetera, which does Todd see greatest upside in and why?

Well, greatest upside is a complicated question because, obviously, it's a risk/reward game. And so there's some parts of the portfolio which might have more upside but carry a little bit more risk. But if I look at the blend of those 2, the asset class that we particularly like at the moment is the structured credit where there's quite a lot of opportunity to fund businesses and protect your downside, which is exactly I think what you want to do in these difficult times, and elevate yourself above just a straight equity holder in the business, while securing a return, which what we're targeting in that portfolio is a return that is stronger than the long-term average in the equity markets. So if we can downside protect and beat the long-term returns in equity, then I think that, that is the place that is probably the most exciting part of the portfolio for us.

Thank you. There are no more questions on the results at this time.

Thank you. Any further questions from the audience? Okay. There's no questions. Thank you very much for joining us today. I will be here for a while if anyone wants to talk to us about anything. Thank you.