WHSP Holdings Limited ($SOL)

About owning assets that behave differently across industries, asset classes, geographies and risk profiles. They don't all move in the same direction at the same time. So when 1 part of the portfolio falls out of favor and we have exposure, our portfolio can absorb it. That is by design. We also have permanent capital investing our own balance sheet. That means we can have strong conviction behind our investment decisions at times going against the grain with a contrarian view. We can hold our positions for the long term and compound great returns for shareholders. These are structural advantages that are genuinely hard to replicate. And lastly, our structure is totally aligned with shareholders. When you invest with Soul Patts, you are not just buying a portfolio of assets. You are buying into an embedded investment company with a strong purpose, deep capability, networks and competitive strengths that have been built over 100 years. Our principles run deep and have been shaped over multiple generations of the founding family carried forward today by our Chairman, Rob Millner. Our team is invested in the outcome with incentives tied to growing portfolio value and cash flow, not growth in funds under management. The compounding effect of all of that put together is what you see in our long-term track record. Over the last 5 years, our portfolio has evolved considerably. Back in January 2021, and the portfolio was $5.2 billion and heavily concentrated in equities, mainly Brickworks, New Hope and TPG. By early 2023, the portfolio was starting to see the benefit of the Milton merger, which had completed about 18 months prior. We had begun the exercise of repositioning the equities portfolio we acquired from Milton into private asset classes. It was strategically important for derisking the portfolio by shifting more capital into these uncorrelated and diverse asset classes such as credit and private companies. Over the last 3 years, we have grown our credit book by more than 8x. Credit is uncorrelated to equity markets and exhibits more defensive qualities. We have the internal capabilities to originate, structure and manage these investments in a way that generates a good return for the level of risk being taken. Private companies have grown nearly 4x over the same period. These are high-quality businesses that benefit from our capital, insights and long-term support. Today, we have a $13.8 billion portfolio spread across 5 distinct asset classes. The key message I want to reinforce is this. By recycling and redeploying capital, we are actively managing risk. We are building the capacity to deploy this capital into higher conviction opportunities as and when they emerge. The Soul Patts portfolio has always managed risk well, Today, we are even more diversified and less correlated than ever before. Against our backdrop of Evolution, the strategy itself remains entirely consistent. We have always measured ourselves against 3 clear objectives. First, we aim to increase cash generation from the portfolio to underpin dividend growth. The interim dividend has now grown every year for the past 28 years, the compound annual growth rate over that period has been 10.4% per annum. This track record is unmatched in the Australian market. Second, we aim to grow the portfolio and outperform the market on a total return basis over the long term. Over the past 25 years, the annualized total shareholder return has been 12.9% and which is 4.6% higher than the market. Third, our objective is to deliver strong financial returns while actively managing investment risk. This is fundamental. It means that we are constantly looking for outsized returns for the risk we are taking in any asset, and we construct a portfolio to protect shareholder capital on the downside. With a truly diversified portfolio, each asset class performs differently through the cycle, which adds resilience. Over the past 25 years, whenever the market has had a negative month Soul Patts has outperformed by around 2% on average per month. This is how our company is structured to both grow and protect shareholder capital through market cycles. Turning now to the first half. We had a very strong performance against each of those key objectives. On cash generation, net cash flow from investments of $334 million is up 15.4% on the prior corresponding period. This strong cash flow enabled the Board to declare an interim dividend of $0.48 per share fully franked, marking our 28th year of consecutive dividend increases. On portfolio growth, the net asset value of $13.8 billion is an increase of $1.8 billion in the prior period. On a per share basis, the portfolio returned 9.7% in the half, outperformed the ASX 200 indexed by 6.6%. And on risk management, we executed $4.3 billion in transaction activity during the half with $2.1 billion in new investments. What these numbers tell you is that we are actively rebalancing the portfolio towards greater liquidity in what remains a volatile environment. I'll come back to this point later in the presentation. We've been positioning the portfolio to be more resilient through challenging markets, and we ended the period with $472 million in available cash, which gives us strategic optionality. We also have undrawn debt facilities of around $1.2 billion, which gives us further flexibility. I'll hand over to David Grbin, our CFO, to take you through the group financials in more detail.

Thanks very much, Todd, and it's a real pleasure to present a solid set of results for the -- which is the first set of results for the merged entity. On each of our key measures of performance we've exceeded the prior period or the balance at the previous financial year at the end of 2025. And we have an even stronger balance sheet post merger gearing is low, and we have ample liquidity to take advantage of any market dislocation. If we look at the group financial results now for the half, statutory or reported NPAT was $2.3 billion. A little over $2 billion of that are nonrecurring or we don't expect to happen in further periods. They are as a result of the merger and the tax reset that took place at the time of the merger. So around $2 billion are nonrecurring items. $1 billion of that comes from these one-off accounting gains and tax cost reset as a result of the Brickworks merger. During the half, we sold some shares in Tuas and ARIS and took a profit on those of around $300 million. And we -- as a result of those sell-downs no longer account for those investments as equity encounter investments. They now go to be set at market value. And on accounting, there's another $40 million gain from that reset. And finally, there's a couple of hundred million dollars in that nonregular item of $2 billion resulting from unrealized gains from some of our trading stakes in the emerging companies portfolio. This really illustrates the difficulty of using profit as a measure of overall portfolio health. To try and guide people with that, we do provide an underlying profit number, and that's the regular NPAT number, which you can see on the bottom of the slide there, a little over $300 million up nearly 7% on the prior corresponding period. That's arisen through 2 events. Firstly, we've got some fair value gains that came through in the portfolio both in the emerging company and an extra contribution from real assets, offset by lower results coming out of New Hope. Overall, underlying profit up nearly 7% for the half. If we turn now to our preferred measure of portfolio health, which is net cash flow from investments. And for the half, it was $334 million, a little over 15% up on the prior corresponding period. And if we take into account the larger capital base because we raised more equity at the time of the merger, it's up 12.5% on any measure, a very strong result on the prior corresponding period. Over the last 3 years, net cash flow from investments has compounded at a little over 9% per annum from $0.68 per share in the first half of 2023 to now at $0.89 per share in the most recent half. that consistent delivery of cash flows and consistent growth in cash flows really underpins the ability to us to continually increase the dividend that we pay to shareholders. and we've been increasing that dividend to shareholders every year for the last 28 years. We always like to remind shareholders that Soul Patts has never missed paying a dividend since becoming a publicly listed company in 1903. And this includes major periods of disruption, including the global financial crisis, world wars, great depressions and even most recently, COVID. If we now look to the net asset value of the portfolio, the total NAV on a pretax basis was $13.8 billion, up $1.8 billion on the prior corresponding period, and as Todd mentioned, delivered close to 10% return for the half. The portfolio outperformed the ASX 200 Index over that period by nearly 7%. And on a 12-month trailing basis, when we adjust for dividends, that return was 14.3%. This is an exceptionally strong outcome for our shareholders against a very volatile market climate. The primary drivers of the recent NAV growth were our equity holdings in stocks like NextGen Tuas, New Hope in ARIS, which all performed strongly for the half. The the merger that we took place with Brickworks in September was accretive to NAV, and that's around 2% of that return. So even if you back that 2% out that comes from the merger, we've still got substantial outperformance for the half. And when we adjust the dividends, NAV has compounded a little over 11% per annum for 3 years. If I finally now turn to capital management. So as Todd mentioned, we have, at the half, nearly $500 million in available cash, and that reflects some of the equity raising proceeds that we've we raised back in September and also the cash generation over the last 6 months. We've got available debt of $1.2 billion. So we've got ample liquidity to take advantage of any of those market dislocation. Importantly, one of the outcomes of the merger was that we were able to reset the tax cost base for all of the investments across the whole portfolio. So both in the old Saul Patts on portfolio and the Brickworks portfolio, and they've been able to be reset to market values at the time of the merger. This now means that going forward, we're not burdened with assets that have large unrealized capital gains tax liabilities. They've been reduced now because we've been able to reset up to market as at the date of the merger in late September. This structural improvement in the balance sheet means that the investment team can rebalance the portfolio or make changes to the portfolio and there will be minimal tax friction. Importantly, the franking balance of both Soul Patts and Brickworks could be merged together and it now stands at a little over $1.1 billion. I'll now hand back to Todd who will walk through the individual asset classes and our strategic direction.

Thanks, David. Let's now go through each part of the portfolio in turn. The portfolio, as I said, is now genuinely multi-asset class. Each of these asset classes plays a specific role whether this is to generate uncorrelated income streams, compound value or provide exposure to structural growth tailwinds. Increasingly, we're diversifying the portfolio to include more international investments, which now accounts for 18% of the total portfolio value. And what we do with each of those international investments is put them into the relevant asset class bucket that you see on this slide. So it's not a separate asset class. I'll move through each of the asset classes and their contribution to the group results. Listed companies now represent 32% of the total portfolio. That's down from 57% in the prior corresponding period. So in the last 12 months, that's produced. That reflects the removal of Brickworks as a listed equity following the merger. Brickworks is now sitting across private companies and real assets. On performance, the total return for the half was 5.9% that outperformed the ASX 200 Total Return Index. Our performance was driven by our overweight position in LNG sector, which is predominantly our investment in New Hope. Net cash flow from investments was $150 million, down 23.9% in the prior period, which is a reflection of the reduced size of the portfolio. Listed companies has a long legacy of strong performance built around businesses that generate cash and compound value over time. We look for businesses with durable competitive advantages run by quality management teams with a long-term orientation. And there's no better example of that than Apex Healthcare, a founder-led leading pharmaceutical group headquartered in Malaysia and one of the leading players in this market. Apex shows what patient high conviction investing can deliver. Over the past 20 years, our investment has compounded at 20% per annum, and it began with a decision that had nothing to do with returns. It began with people. In the 1950s, our former Chairman, Jim Milner, arranged for Key taping, the founder of Apex to do his pharmaceutical apprenticeship with Soul Patts. A decade later, [ Ketan ] established the first Apex pharmacy in Malaysia. He would then go on to expand the business into distribution and manufacturing, establishing a joint venture with Saul Patts under the name [ Zep Pattinson. ] Pictured on the right is the first manufacturing plant in Malaysia and its official opening ceremony attended by Jim Milner. When Apex listed on the Kuala Lumpur Stock Exchange in 2000, salads retained approximately 30% on alongside the founding family. Keith Sun, Kirk Chin, stepped up as the CEO. At the same time, Soul Patts Chairman, Rob Milner joined the Apex Board and was instrumental in establishing Apex long-term track record of dividend payments. Apex was a phenomenal growth story. From a $65 million Malaysian wine company at IPO to MYR 1.9 billion business at the time of privatization. We supported that process and helped bring in a new partner to take Apex into its next chapter. And our stake was divested for over AUD 200 million. Emerging companies is now 21% of the total portfolio, up from 16% in the prior period and the performance for this half was exceptional. Total return was 36.7% outperforming the small orgs benchmark by 19.4%. Net cash flow from investments came in at $81 million, up 161% on the prior period, driven by strong trading gains. The outperformance was driven primarily by early high conviction exposures to energy, communication services and defense. Souls has had a strong track record of backing emerging high-growth companies. Large positions in this portfolio today include TAS, EOS and NextGen Energy. This portfolio capitalizes on our flexibility to invest in both listed and unlisted opportunities, a variety of industries as well as jurisdictions. The chart on the right reflects that breadth. Credit is 12% of the total portfolio. The net asset value grew 36.5% to $1.6 billion. Net cash flow from investments was $103 million, up 9% on the prior period. And this was a pleasing result because the prior period was elevated by the timing of loan repayments, mainly EOS who repaid 1 of their previous loans ahead of time in the first half of -- we deployed $383 million of new capital during the half, including $67 million offshore and had $474 million of loans we paid, a healthy sign of a book that is actively turning over. To offset these repayments, we need to keep writing new loans, and this is the biggest challenge we have. Returns from this asset class are driven by the quality of our borrowers, the way we structure each loan and the interest we earn for the risk we are taking. Soul Patts is structurally different to other credit funds in that we are deploying our own balance sheet, and we don't need to worry about duration mismatch. Our book is built through direct relationships -- the majority of the loans in this book have been sourced by our team. So our reputation gives us a meaningful advantage in this regard. And with the preference for bilateral deals, this enables us to have a lot more control over deal structure, setting the terms and maintaining active oversight. The pipeline remains active, both onshore and offshore, with $367 million in undrawn but committed funds to offshore credit partnerships. We see the current environment as being potentially attractive for continued offshore deployment. Private credit is a deep asset pool and in recent times, has seen significant growth. However, we've all heard of the many large funds being in outflows, and this should create a better environment for future investment. Private companies now makes up 11% of the total portfolio. The net asset value grew 49% to $1.6 billion, following the addition of Brickworks building products and other new investments. These are the new investments were predominantly offshore with $50 million deployed into strategic partnerships. While this is still a very small proportion of the overall portfolio, we believe that allocations to partners in offshore markets gives us access to unique opportunity sets and specialist expertise. Net cash flow from investments increased 32% to $37 million for the half. What is unique about our approach to private companies investing is our flexible mandate. We have the ability to hold minority and majority positions, and we do not have a requirement to exit the investment quickly. Our edge is the access we get to these types of deals before anyone else sees them. This is evidenced by the current portfolio where 94% of the current assets in that portfolio were sourced through a proprietary deal origination. It tells you that we have high-quality relationships and a reliable reputation as a long-term capital partner. When founders or business owners are choosing who they want as an investor. They want someone who will be there through cycles, who won't force a short-term exit and who can add genuine value alongside them. We work alongside management to actively shape strategy and unlock value, and we are continuing to build and grow these businesses as we constantly regenerate the portfolio. Now I mentioned that the newest addition to private companies was the Brickworks Building Products business. The integration of Brickworks has gone extremely well. We've reduced the structural complexity in the business and enhanced financial flexibility. In addition, the management of Brickworks are taking the opportunity to simplify the operating model. These are tangible improvements that make the business easier to manage and position it better for the cycle ahead. Building Products is our second largest asset in the private companies portfolio and one that we believe will perform well over time. The current market environment remains challenging. While we are starting to see some recovery in the Australian market, particularly in multiresidential demand, the U.S. market remains soft. For example, the nonresidential market that Brickwork services is 27% below where it was 3 years ago. We knew that building products is a cyclical industry, but we have conviction in the quality of the underlying assets and the structural dynamics of the market they operate in over time. Real assets are now 22% of the portfolio, which is a large increase from the prior period. The increase in NAV reflects the addition of the industrial property joint venture with Goodman Group, which came across through the Brickworks merger. Net cash flow of $24 million was driven by distributions from some of our existing property assets, which are exposed to industrial and residential development tailwinds. The attraction of real assets is the combination of income generation and long-term capital growth with defensive characteristics that provide resilience through different market environments. Industrial property, data centers, agriculture and water rights are tangible assets tied to positive structural shifts in the economy. They benefit from demographic tailwinds such as the growth of e-commerce the demand for data infrastructure and Australia's high-quality agricultural land. I'll now touch on how we think about capital allocation, and I think it's important to understand the principles that drive investment decisions, not just the outcomes. There are 3 principles at work in how we construct and manage this portfolio. The first is a bottom-up portfolio construction approach. Capital flows -- capital follows our highest conviction ideas. We are not allocating by filling buckets or trying to hit sector targets. Every asset is in constant competition with every other idea in the pipeline. If something better comes along, the capital moves. And we manage risk dynamically, not by preset targets but by considering the portfolio as a whole. If the market changes or the opportunity set changes, we have the flexibility to respond. The second is protecting shareholder capital, that means owning assets that exhibit strong fundamentals and resilience through cycles. We have a bias to companies with strong cash flows that are low cost, have high-quality management and strong balance sheets. We're also seeking asymmetric positions where the upside is meaningfully larger than the downside. The question we are always asking is the same. Does the return we can generate more than compensate for the risk we are taking. That discipline never changes regardless of market conditions. The third is we want to use our structural advantages. We seek to exploit our permanent capital and our flexibility to generate alpha. These advantages only compound in value over time and create more access to opportunities. Right now, we are being deliberate about building more liquidity in the portfolio because the world is very uncertain, but uncertainty creates volatility and opportunities for mispricing. In this kind of environment, permanent capital and flexibility are significant advantages. This slide here shows you the -- those principles in practice. During the recent half, we transacted over $4.3 billion, and that excludes the corporate activity around Brickworks. That is a significant level of transaction velocity and reflects the dynamic nature of how we manage risk. The number is carved up between buying and selling. We invested $1 billion into emerging companies, $0.5 billion into large-cap equities, $400 million into credit and circa $100 million into private companies. On the other side, we divested around $700 million from emerging companies. We sold $1 billion from large cap equities and had circa $500 million of credit loans repaid. So you can see that the credit portfolio was slightly decreased in size because we had more repayments than we could make new investments, but we did substantially reduce the size of the large-cap equities booked through the period. That rotation in and out, rebalancing, recycling is active portfolio management. and is how we maintain the quality of the portfolio over time. We ended the period with a strong cash balance for strategic deployment. In the period since the end of the half, we've continued to increase the liquidity across the portfolio. It means that when the right opportunities emerge, be they mispriced assets, countercyclical plays or high conviction new positions will be ready to act. Acting on behalf of shareholders is our team and a strong culture that comes with 92 years of combined service to sell pads. We've made a couple of changes to our executive leadership team during the half that I'd like to share. Deane Price, who first joined Soul Patts in 2008 was recently promoted to the investment team leader in addition to his current role as Managing Director. As the portfolio grows, Dean ensures we are constantly collaborating across all investment teams to keep across emerging opportunities. Brent Smith, who also first joined in 2008 was recently promoted to Managing Director. A more recent appointment in January was Andrew Sutajewski as Managing Director. Andrew brings a diverse investment skill set from experience in Australia and internationally spending private equity listed equities and M&A. Former CIO, Brendan O Dea, departed the company to pursue other endeavors late last year, and we thank him for his contribution to the business, wishing him well for the future. We often get asked about how we maintain a strong culture. This is a culture that has been passed down from generations of family oversight of the business. We are stewards of shareholder capital, and that duty is front of mind. And that culture has strengthened over time. Following our most recent culture survey, we received a very strong engagement score that outperformed the top 10% of companies operating within the financial services industry. We have very low staff turnover with a rolling annual attrition rate of less than 1%. Our team is a one-to-one balance between investment and enablement staff generalists and specialists working along see each other, alongside each other as 1 team. Our team is a huge part of our competitive advantage. The portfolio is in good shape, and we've been preparing for this kind of environment for some time. The current priorities are: first, to actively manage liquidity. We are increasing the liquidity profile of the portfolio and managing cash -- this includes ensuring that we have leverage available to us for additional flexibility. At the same time, we are allocating to more defensive and liquid strategies. Second, to reposition the portfolio -- we are continuing to ensure that the portfolio is resilient in what remains a highly volatile environment. And we are continuing to increase our international exposure where we see strong risk-adjusted returns and partnerships that can benefit from the current environment. Third, to allocate opportunistically. We will continue to look from this price risk. We are prepared to be countercyclical and contrarian. We need to be in a position where disciplined analysis can generate outsized returns in periods of dislocation. It is in these environments where our structural advantages perform best. Our permanent capital and unconstrained mandate allow us to take a long-term view when others are worried about liquidity and short-term performance. In closing, a recap of the key performance highlights for the recent half. The portfolio grew 9.7% per share over the first half, significantly outperforming the broader market. Net cash flow from investments grew by 15.4% on the prior corresponding period. underpinning a fully franked interim dividend of $0.48 per share, which is up 9.1% on the prior year. And we continue to maintain liquidity and optionality with available cash close to $500 million and significant undrawn leverage and rebalance the portfolio with over $2 billion of new investment ideas made during the half. Over the longer term, our strong performance has enabled the Board to continue increasing dividends, which have increased for 28 straight years and compounded at nearly 12% per annum for the last 5 years. Looking at total shareholder return, we have delivered an average return of 12.9% per annum over 25 years, outperforming the ASX 200 by 4.6% per annum, which means that over 25 years, an investment in Soul Patts has multiplied by around 20 times which is triple an investment in the ASX 200 index alone. That is the compounding effect of a consistent philosophy and disciplined execution. Thank you. Courtney?

Thank you, Todd, and thank you, David. We will now open up to the Q&A part, and we will start with analyst questions that may be on the line. Thank you, moderator.

[Operator Instructions]. Your first question today comes from Steven Sassine with Morgans.

Want to ask a couple of questions, and congratulations on another strong result. I've got 3 questions. I might just ask them 1 at a time if that's okay. I'll start with the private credit portfolio. I mean, Todd, you spoke to that quite a fair bit in your opening remarks. -- it's quite topical at the moment, and we're starting to see some sort of pockets of stress emerging globally. And obviously, there's elevated scrutiny. Can you maybe just talk to any concerns you have about this becoming more of a systemic issue? And I guess, your overall confidence around the quality of your existing credit investments.

Sure. Thank you. So my view on the private credit market is we haven't seen any real indications of structural stress in the system. We haven't seen the defaults increasing. What we're seeing is people's expectations of higher defaults I mean to date, what we've seen is a few select examples whether people call them cockroaches or otherwise. But there are a few examples of fraud. -- rather than structural issues. Now you could argue that there's a structural issue that perhaps there was being too much money coming into private company so private credit land and people have had to deploy that quickly and maybe their credit standards has dropped and maybe that's why they were exposed to some of that fraud. But I think the broader issue that people are concerned about, in particular, in the U.S. is the exposure to SaaS and software loans. Now I mean, what I always say about -- if you're worried about defaults of credit, then you should certainly be worried that the equity is more than impacted because at the moment where people can't repay loans, the equity has gone to 0. So I think to some degree, we haven't seen how that's going to play out. But I would say that the it's net positive for us because what we've been seeing in the general environment is a rush of funds into private credit. And what that has meant is that those funds have to be deployed. And so generally speaking, we've seen loosening credit terms, and we've seen tightening spreads. And so what you saw with our portfolio in the last 6 months, is less deployment than repayments. So we were in net outflow. Now that wasn't because we were choosing to allocate less to this asset class, it was because we couldn't find as many good opportunities to replace the repayments that we were seeing. Repayments are a great thing because it shows that we provided loans to the right companies. They're now in a position to refinance them with cheaper money. So getting repaid is healthy. And the fact that we didn't chase the market down and provide lower quality loans, I think, is an important discipline. So I don't think our thesis on private credit has changed. We're not seeing any stress in our book. The kinds of managers that we are partnering with offshore, we'll do better in this environment where we will see less money coming into private credit funds. And in fact, we're going to see outflows and that should be very beneficial for the type of people that we invest alongside.

Great. That makes perfect sense. And my second question is probably more of a broader question actually. Clearly, the portfolio performs pretty well in volatile markets, and we can see that with the uncorrelated returns and the current defensive positioning. But I mean, if we assume things normalize from a geopolitical sense, if you think sort of 6 to 12 months out, like how are you positioning the overall portfolio for growth, like where are the actual opportunities at the moment?

Well, I mean, we've fortunately been heavily invested in the right thematics. And I think that those thematics will be enduringly positive for some time. So we've always been tilted towards energy for a long time because we believe that there was significant growth in energy required for the electrification of everything and growing populations and urbanization and all those sort of things. Then we saw the growth in energy demand as a result of the data centers in -- and now what we're seeing is energy dislocation from the war. So that's the theme that we think is enduringly positive for us. And so I imagine that we're going to do quite well out of that for some time. Fortunately, the other parts of our emerging companies portfolio is telco. So we've got to us in the emerging companies and TPG and the listed companies. I think they are very defensive companies in that -- people are not going to switch off their mobile phone if they get into a more sort of recessionary or low-growth environment. So I think that they are high-quality assets we've got exposure to real assets. Now that's still generating a positive return for us, but it also has the additional benefits of being defensive and resilient in inflationary low-growth environment. So I think everything that we've been positioning ourselves towards has done very well. But the reason why we're sort of just getting a little bit more liquidity is because the environment is uncertain at the moment that we want to be in a position to be able to strike wherever we see that next opportunity. And I don't know what that's going to look like, but I suspect the opportunity set looks better in a stressed environment than what it has in the last couple of years, where there's been lots of money flushing around the system and everyone's been risk on.

Great. And just my final one. 18% of the portfolio off the top of my head, I think, is allocated to offshore investments.

That's right.

Wwhat was sort of -- what sort of appetite is that to ramp that up? Like is there a target? Or will it be sort of more opportunity dependent? And I guess, secondly, if that does ramp up, can you just maybe touch on your internal capability to manage these? Like is there going to be additional headcount required?

Yes. So I mean like everything, we don't have a desired target of how much we want to allocate to these strategies. But it takes time. You can't just allocate all of it at once, firstly, because you need to find and develop the relationships with the right managers. But secondly, you want to sort of average into different vintages and not peak. When you're investing in a fund, you're sort of taking a 5- to 10-year view, so it's better to do that over time rather than all at once. So we're being disciplined about the way that we're allocating it and it's probably increasing by sort of circa $500 million per annum. The way that we're managing that internally is we think of an allocation to a manager in the same way that we think of an allocation to a company. The difference being that -- we can't get to the underlying companies offshore because we don't have boots on the ground. We recognize that by the time we see that opportunity, it's probably been passed over all of the established people in the market. And so what we're doing is that's why we're partnering with people who do have that expertise, but they think like us. And so the approach that we're taking from our team is to think about it just in the same way that you would an allocation to a company where we are hands on. We're deciding that, that team is aligned with our way of thinking and they're good people to back. But we're also learning from all of their experience and on-the-ground expertise that we can then apply back here. So it's completely additive. I mean, not only are we getting them to make the investments, but we're also getting a lot of access to great quality data along the way.

Congrats on the strong result.

[Operator Instructions]. There are no further questions from the analysts on the line at this time. I'll now hand back to Courtney Howe for any written questions on the webcast.

Thank you, moderator, and we do have quite a number of questions that have come through on the webcast Todd. Picking up on the credit thematic, which I know Steven asked you about, but there's a couple of follow-up questions to that. Firstly, can you comment on the mix of the current loan book in terms of the security, the spreads, whether there are defaults and the covenants?

Yes. So I mean we've avoided any kind of covenant light structure most of the book that we have has senior security, I would say probably 60% of it is senior secured. 15% is asset backed. About 15% is sort of junior in security and then there's other stuff like prep equity and other instruments in there. But mostly, we are looking at ways where we get elevated above a substantial amount of equity in the liquidation preference, ensuring that we have really strong controls around covenants and information and rights to step in if things getting to travel.

And another follow-up question on credit. A shareholder is asking, are you able to state which global credit funds that Soul Patts is invested in to give shareholders more transparency in terms of the industry and the risks associated with global credit managers.

Yes, there's a fairly long list of our exposures to credit and private equity funds. But if I'm just looking at credit, and I think maybe next time around, we'll have a separate bit of information around our approach to international investments. But I would say, to answer that in terms of credit, I would say that our focus is more around either funds that do well in distressed environments like special sits or distressed funds or asset-backed financing. We have tended to avoid the sort of generic leverage buyout lenders, leveraged finance lenders. A lot of those are the ones that in the U.S. are going to be exposed to some of those SaaS companies and things. Our exposure to that is limited to nil.

Thank you. Moving on now to franking credits. David, I might ask you these questions. We have a couple of them. So franking credits highlighted is $1.1 billion. Could you comment on the Board's intended franking strategy, meaning buffer versus deployment and what constraints might limit franking utilization.

Well, the -- so at the moment, and we said in the presentation, there's about $1.1 billion of franking credits available. If you gross that up to say, well, how much of a dividend we could pay to eliminate that balance, it's about $2.6 billion. So that's the first point. In terms of being able to use that, I think most of the constraints are not ours. They do come from restrictions that the various federal governments have put in over the last sort of 15 years. So it becomes very, very difficult to -- other than if you want to take on a fair way for gearing and then and pay that out as a dividend. That is an option, but we don't see the need to do that. Given that would prefer to use that gearing to reinvest into the portfolio. What we are doing and what Todd mentioned in terms of putting more of the portfolio offshore, we can do that in a manner that earns higher post-tax returns and then attach franking credits to that to that -- to those earnings because they're offshore. They're not subject to tax in Australia, and we can then continue to attach franking credits to continue to use that balance and try and wear that down over time.

Thanks, David. Turning back to international. There's a question here about where Soul Patts is seeing the most attractive opportunities for the marginal dollar. And in framing itself as a listed family office, shouldn't there be a larger slice allocated to listed global equities, Todd?

So the marginal dollars are going into strategies that we think will perform over the next 3 to 5 years. So as I said, there is a bias in some of our deployment offshore to those funds that will do well in dislocation. And these are funds that have still managed to do quite well even in good times. So in the last sort of 5 years, they might have been able to still do 10% to 13%, but they would do much, much better in periods where there's a bit more distress -- the second part of the question was...

Inframing us ourselves as a talk...

About global equities Yes. Well, I mean when we did the analysis a few years ago, we looked at where -- even though we had a lot of ASX-listed companies, the proportion of international revenue in those companies was very, very high. And if I think about things like New Hope, as an example, it has almost all of its demand and revenue from offshore. And so we have always had an international flavor to the business. But I think that we are being a little bit more active now in thinking about how we can get exposure to offshore equities, particularly in in emerging markets, I think, is probably the one where we have a bit of interest right now. And I think that gives us a fair amount of liquidity at the same time. So I think that, that is an opportunity for us to grow a bit more.

Thank you. And with a portfolio that has great allocation to private assets, does the liquidity advantage that Soul Patts has reduced over time as the listed equity position reduces?

It's a good point because a lot of those private companies are illiquid. But at the same time, when I talk about having liquidity and increasing liquidity across the portfolio, I don't mean the whole portfolio. I mean, it would be silly for us to give up on the advantage that we have with our permanent capital and give away that sort of premium for illiquidity by having the whole book capable of being liquid. So we want to be thoughtful about it, but what we are doing is in the listed part of the book, we're increasing the liquidity. So we're broadening out the book and reducing some of the sizes of what we have, and that just gives us more flexibility. But you can see that the direction of travel has been to increase our exposure to private markets. But at 50-50, that is by no means compromising the liquidity that we have.

And a follow-up to that question, you talked about the lower risk that you are taking and yet continue to generate excellent returns. Could you give a couple of examples of this low risk in practice?

Well, I think there's lots of examples. I mean, credit, as an example, is, in my mind, a defensive asset class in the sense that when something goes wrong, equity is going to experience much, much more downside before even $1 of its debt is impacted and so we think of the equity in those companies has been our buffer. And so we've got $1.6 billion in in credit, but it's been generating sort of 14% return for the last 4, 5 years fairly consistently. Now that's better than the long-term returns available to equity market. So you're getting the best of both worlds. You're getting outsized performance, but lower risk. And so I think that's probably the easiest example to point to that where we can find opportunities that are lower risk, but generating still very strong returns.

And a question here on how you think about the disconnect in the first half between the strong NAV outperformance, which was 6.6% above market and our share price underperformance.

Yes. I think -- I mean, there's a couple of things at play there. I mean the share price frequently has a little bit more volatility than the portfolio does, and that's dictated for a range of reasons. But -- in the last 6 months, we had an elevated starting position because we'd already announced the Brickworks merger. So some of that was being reversed. But also I think the market probably hasn't been aware of the quality of the underlying performance and some of the traditional share price to NAV that we usually trade at the premium has been eroded. So we're seeing a little bit of share price weakness in the last 6 months, but hopefully that will wash through.

And I've got a question here on the team. Can you provide a bit more information about the depth of the team and the intelligence resourcing to support a totally unconstrained investment mandate across multiple asset classes that includes private credit.

Well, the private credit team is I mean it's one team looking after 1 portfolio. And where we do best is when we share ideas and market intelligence across the firm. So it's extremely powerful in terms of the the network effect that we can generate from seeing new opportunities and learning about what's happening in the market because we're not focused on 1 asset class, we're focused on lots of asset classes. So I would say that's actually additive rather than being difficult for people to understand more information because I think more information is always better. And so with that information, we become really high-quality generalists that are capable of understanding what's happening in the market, but also analyzing what and investment in 1 asset class looks like relative to what we could be getting in another asset class. So I think that our team does particularly well in that environment. As I said, we don't have high turnover. There's roughly 56 people, 28 investment professionals. The biggest team is in credit because it does require some specialist skills. We've recruited people with insolvency and restructuring backgrounds. There's probably 3 or 4 people in the team who have those backgrounds. That's a fairly unique attribute and something that will be particularly valuable in this market. But when you team up that kind of knowledge with people who have the expertise in M&A, private companies, equity investing, then we can put all of that together, it's a very powerful combination.

And now a question on Tuas, just whether we have any concerns with no longer having Board representation.

No, I think that's a business that is obviously you're overseen by David Teo. He has been an exceptional telecommunications investor and manager of businesses to someone who we are very comfortable with. And there was nothing more for us to add. In doing that, Rob Milner is trying to focus more on what's happening with sole pads. When you think about the amount of activity that we are doing here, he's focusing his attention there and less on the satellite companies that -- particularly those that are performing well and we don't need to have oversight on.

I've got a question for you now, David. A question here about tax, how much tax is payable on recent asset sales?

So very little, if any. And the reason for that is that the rules for tax consolidation meant that at the time of the merger, we could reset all the tax cost basis of the assets up to their market value at the date of the merger, which was late September 2025. So any subsequent sales after that, the cost base of the assets is restated up to that market value. And if it's -- if we sell it at a profit, sure, there'll be a little bit of -- there could be some tax to pay, but we also have capital losses and some revenue losses that we can use to offset that. So for the next sort of foreseeable future, there shouldn't be very much tax friction attached to the investment portfolio.

Thanks, David. I think we have time for 1 more question. Todd, we've been getting quite a few about the situation in the Middle East and questions about how Soul Patts is managing its business in this context? Are we going more into cash? Are we looking at buying more equities, more distressed assets? Would love your thoughts on that.

Well, we're really a period of peak uncertainty. And even before the war, there was every day or every week, you are reading about some industry that was going to be significantly disrupted by AI. We were already at a point where we were late in the cycle, asset prices were fully valued. And so it was a pretty tough environment to invest into, but it's only gotten worse. Now with the oil price shock and inflation that was already present but now being added to, I think it's a very difficult time, but this is the environment that we've been preparing ourselves for 5 years. We've been saying for 5 years now that we're going to broaden out the portfolio. We're going to add uncorrelated assets. We're going to increase the diversification. We're going to remain defensively positioned and we're increasing our liquidity, and we've always had cash and we've been net cash rather than being geared through that part of the cycle. We want to be geared when the opportunities get a lot better, and that's when we can deploy capital. So we've been preparing ourselves for this. We typically do have always done better in more volatile markets. And you can see that play out in the last 6 months, in fact. But I think if things get worse from here, we've built in mechanisms for our portfolio to be resilient, but also ways for us to take advantage of those situations.

Thank you very much, Todd. We're at time. So apologies if we didn't get to your question, but there will be a recording of today's presentation on our website shortly. And Todd, I'll throw back to you for any closing remarks.

Well, I think we've summed up lots of great questions. I think it's covered everything that I wanted to say, but I really appreciate people's focus on us and their time today.

Thank you.