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Infratil says 2018 earnings at top-end of guidance, may pay special dividends

Wednesday 11th April 2018

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Infratil says annual earnings were at the top end of guidance, which was bolstered by favourable rainfall for its Trustpower investor, and may pay special dividends if the investor reaps gains on development gains to boost returns. 


Wellington-based Infratil said earnings before interest, tax, depreciation and amortisation were at the top of its forecast $510 million-to-$525 million range in the year ended March 31, which had been upgraded on the strength of Trustpower's operations. That excludes upside from investment valuations, it said. 


The infrastructure investor forecasts earnings to be between $500 million and $540 million in the 2019 March year, which included Salt Creek wind farm entering full production in July, a return to normal rainfall for Trustpower's hydro schemes, stable earnings from Perth Energy, and growth in its Canberra Data Centres and Longroad investments. 


The outlook gave Infratil enough confidence to predict "continued growth in dividends per share, with potential for special dividends as development gains are realised," it said in a statement accompanying presentations to investors today. The company paid an interim dividend of 6 cents per share in the first half, up from 5.75 cents a year earlier. 


Infratil shares rose 0.3 percent to $3.13 and have declined 6 percent so far this year, and below the net tangible asset value of $3.147. 


The company told investors total shareholder return has been an annual 13.3 percent over the past seven years, but that the share price "has not recognised the potential of the recent investments or option value of multiple extensive pipelines". Still, those valuation discounts are expected to narrow as Infrailt's investments achieve independent scale, and it said it is considering "utilising periodic development gains to supplement shareholder distributions." 


Infratil has reshaped its portfolio in recent years, with investments seen as cash-generating assets or growth drivers through renewables, eldercare, data infrastructure and emerging sectors. More recently, the company has said it's reviewing its NZ Bus ownership after agreeing on smaller contracts with Auckland and Wellington local authorities. 


The investment firm sees a smaller operating cash flow for the coming year, forecasting $210 million-to-$250 million, compared to the $250 million-to-$280 million range in 2018, and anticipates more capital expenditure of between $415 million and $455 million compared to the $325 million and $370 million in the year just ended. Infratil still has more than $500 million of headroom with undrawn bank facilities of $269 million and $250 million in cash. 


Infratil is managed by HRL Morrison & Co, and at today's presentation, investors were told the 2018 contract review raised no material concerns and was encouraged by a formal board sub-committee focusing on the agreement and conflict issues. Last year's review found the terms and conditions of the fees charged were fair to shareholders. 


Trustpower separately noted Infratil's earnings guidance included the sale of Trustpower's Australian assets, which is expected to contribute $27 million-to-$29 million and that hydrology earnings were $20 million-to-$25 million higher in the 2018 year. 


The power company's shares last traded at $5.62, having declined 6 percent, while Tilt Renewables, which is also in Infratil's portfolio, rose 1.1 percent to  $1.89, and is down 8.9 percent this year. 



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