Infratil still aspires to total shareholder returns of 20% a year

Wednesday 24th August 2016

Infratil still aspires to generating total shareholder returns of 20 percent a year as it broadens the focus of its investment portfolio into sectors it wouldn't have entered 10 years ago.

The Wellington-based infrastructure investor has branched into new sectors with recent acquisitions including Canberra Data Centres, RetireAustralia and Australian National University student accommodation as it looks to redeploy capital and generate above-average returns. Chief executive Marko Bogoievski told shareholders at today's annual meeting in Wellington that Infratil has taken on more risk than it would have done a decade ago, and is balancing cash-generating assets with growth opportunities that need capital.

When asked what was meant by above-average returns, Bogoievski said Infratil aims to deliver a bigger return to investors relative to the risk taken and better absolute returns than any other investment manager or stock with the same risk profile.

"If you're talking about a low (interest) rate environment, clearly it's much more difficult to earn the same level of absolute returns. As it happens, in 22 years of being listed we're still travelling at about 18 percent," Bogoievski said. "I can think of at least three or four major market cycles that have occurred since 1994 and 2016. As they say, previous performance is no guarantee of future success, I understand that, but it's a pretty good guide about this model and its robustness in different cycles."

Chairman Mark Tume said Infratil's founding vision was to generate annual total shareholder returns of 20 percent.

"We haven't achieved that, but we're pulling out all the stops and we continue to see that as our aspirational goal," Tume said.

Infratil built up a $1 billion war chest after selling its Z Energy, Lumo and iSite holdings in the 2016 financial year, which it planned to spend on renewable energy, the retirement sector, and social infrastructure such as housing, telecommunications infrastructure, and waste management.

Recent acquisitions and development pipelines have used up most of that existing capital, though Bogoievski said the company is still sitting on about $240 million in cash and can access another $250 million in bank funding.

Infratil is more confident about the prospects of renewable energy investments, though is less sure about how large utilities will interact with customers in future, he said.

The company affirmed guidance for underlying earnings of between $485 million and $525 million in the 2017 financial year, with capital expenditure and investment of between $785 million and $860 million.

The annual meeting was the last for founding director Duncan Saville, who retired today at the meeting's conclusion and received a round of applause from a full meeting room at Wellington's Amora Hotel. Saville is still a director of HRL Morrison & Co, which manages Infratil, so will remain indirectly involved in the business.

Infratil shares slipped 0.2 percent to $3.36, and have increased 2.8 percent so far this year.

BusinessDesk.co.nz

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