Sold full-year results from linked companies, Washington H Soul Pattinson and Brickworks after solid reports from major satellites including New Hope (50% owned) and TPG Telecom (25%) earlier in the week.
Brickworks is the country’s leading maker of bricks and tiles and it reported a record underlying after-tax profit of $223.7 million for the year ended to July 31, 2018, up 13.9% from the prior year.
Directors said this marks the sixth consecutive year of growth in underlying after-tax earnings.
But statutory net profit was $175.4 million, down 5.8%, after including the impact of significant items. These items included $7.1 million (after tax) in restructuring and commissioning costs within the Building Products and $39.2 million in net cost relating to Washington H Soul Pattinson items (Brickworks owns more than 40% of Soul Patts and Soul Patts owns more than 40% of Brickworks).
Brickworks Chairman Robert Millner said: “Our strong financial performance during the year again reinforced the benefit of our diversification strategy, which has consistently grown net asset value over the long term and helped to deliver solid returns and stability to our shareholders.”
“During the financial year 2018, inferred net assets held by the Group increased in value by $504 million to over $3.2 billion. Since then, the market value of Brickworks stake in WHSP has increased by a further $350 million, bringing total inferred assets to almost $3.6 billion. This provides ample support for our current market capitalisation of around $2.6 billion,” he said.
Directors declared a fully franked final dividend of 36 cents per share, taking the full year dividend to 54 cents fully franked, an increase of 3 cents, or 5.9% on the prior year.
Brickworks’ building products are the core business and reported Earnings Before Interest and Taxes (EBIT) of $76.0 million in financial year 2018, up 16.8% on the prior year. Directors said strong demand across most operations resulted in record sales revenue of $820.0 million for the year to July.
Brickworks Managing Director Mr. Lindsay Partridge said: “The result was characterised by another strong performance from east coast divisions, buoyed by continued robust demand in New South Wales and Victoria. In addition, performance in Western Australia improved following a range of restructuring initiatives, despite a further deterioration in market activity.”
Property EBIT was up 3.7% to $94.0 million. Directors said the improved result was due to significantly higher earnings from the Property Trust, following the completion of developments at Oakdale Central in New South Wales and at Rochedale in Queensland.
“In addition, infrastructure works were completed at the Oakdale South Estate in June, delivering a significant uplift in the value of this property and triggering the settlement on the sale of 30 hectares of land. This sale resulted in $100 million in gross receipts to the Property Trust and a $25.9 million profit contribution to Brickworks.
EBIT from Investments rose nearly 20% to $123.5 million and cash dividends totaling $56.2 million were received for the year ended to July. The market value of Brickworks 42.72% shareholding in WHSP was $2.231 billion at July 31, up $427 million during the year.
Looking to 2018-19 the company says it is seeing weaker demand from the apartment sector but continued solid demand from owner-occupiers. Tighter bank lending controls have reduced personal borrowing capacity, and this is now impacting building activity, due to delays and cancellations of dwelling construction. This outlook saw the shares slide more than 5% to end the session at $16.17.
Directors said the company’s property business already has a nice $33 million profit factored in from the sale of its Punchbowl property in Sydney for $41 million (and book value of $8 million).
Meanwhile, shares in Brickworks’ biggest shareholder, Washington H Soul Pattison also went south yesterday on a less than effusive report for the year to the end of July.
Soul Patts shares slid 6.3% to $24.04 after the company revealed a 17.4% rise in what it calls “regular” after-tax profit to $331.1 million. (Regular profit is not an accepted accounting term).
A more accurate term is net profit after tax (or NPAT) and that showed a 20% slump, hence the weaker share price.
NPAT was $266.8 million for the full year, down 20.0% on 2016-17 and impacted by non-regular losses of $64.3 million (2017: $51.6 million profit) which predominantly related to New Hope’s impairment of an undeveloped exploration project in Queensland.
WHSP Chairman, Robert Millner said in yesterday’s statement: “This year, we have recorded the Group’s highest ever regular profit. Strong trading conditions across the portfolio contributed to a $972 million increase in the pre-tax value of the portfolio, a 21.8% increase for the year.
“New Hope is enjoying record thermal coal prices in Australian dollars terms in addition to increasing its production volumes in recent years. TPG Telecom Limited continues to grow regular profit despite the NBN reducing industry margins, and Brickworks is continuing to experience robust demand for its building products and growing rental income from its property portfolio.
Despite the slide in normal profit, the company is paying a higher final and full year dividend. For the full year, directors have declared a fully franked final dividend of 33 cents a share, up 3.1% over last year’s final dividend of 32 cents a share. Total dividends for the year are up to 56 cents, from 54 cents a share in 2016-17, fully franked.
