Infratil signals cautious new investment approach, announces 2nd special dividend

Tuesday 19th May 2015

Infrastructure portfolio investor Infratil is to make a second special dividend payment to shareholders as it anticipates less capital investment in the year ahead and high prices for potential acquisitions make the company cautious.

The announcement came with Infratil's profit results for the year to March 31, which showed a net parent surplus of $384 million for the year, compared with $199 million the previous year, largely reflecting the combined impacts of divestments, mainly Australian energy assets, totalling a net $345 million and strong earnings from Trustpower, which began booking returns from its Snowtown Stage 2 wind power station in South Australia.

"Infrastructure and capital markets are currently positive, although we remain cautious given current pricing and the potential for significant volatility as developed markets face the end of QE (quantitative easing by the US Federal Reserve)," the company said in presentation notes with today's result.

"Normally, Infratil relies on debt to provide approximately 50 percent of its capital. With debt now providing closer to 30 percent of funding, there is substantial capacity for further capital management or new investments."

While the company believed shareholders would rather the company deployed its capital, "we are conscious that if new investments are not executed in a reasonable time frame, then some capital should be returned."

The comments coincide with a year in which much lower levels of capital expenditure are anticipated, with a forecast of between $160 million to $190 million of known capital commitments in 2016, compared with total capex last year of $507.6 million, $219.2 million of which was the joint venture investment in RetireAustralia with the New Zealand Superannuation Fund. The largest capex commitment for the year ahead is for upgrades of the Wellington airport terminal.

Consolidated earnings before interest, tax, depreciation, amortisations and changes in the value of financial instruments were up 4 percent on the year to $437 million. After adjustment for discontinued operations, Ebitdaf was 7 percent higher than the previous year, at $493 million, including Z Energy earnings on a replacement cost basis.

A fourth earnings measure, adjusted net surplus, which excluded changes in the value of derivatives, revaluations and realisations and minority interests, adjusted for Z Energy's contribution on a replacement cost basis and RetireAustralia's contribution before acquisition costs, showed a 101 percent gain, at $78.5 million.

For guidance purposes, the company picks Ebitdaf, which it says should fall in the range of $520 million to $550 million in the 2016 financial year. It forecasts operating cash flows rising from $236 million in the year under review to between $270 million to $300 million, with a full year of earnings from Snowtown a major contributor, along with increased earnings from its 50 percent stake in RetireAustralia, acquired in the last financial year, and higher traffic and aeronautical charges at Wellington airport.

The company will pay an ordinary final dividend of 8 cents per share and a special dividend of 6.4 cents per share, both fully imputed, on June 15. Total ordinary distributions for the year at 12.5 cents per share are 16 percent above last year's and the second special dividend replaces a previously announced share buyback, to allow the company to use imputation credits. A special dividend of 15cps was also paid in December.

"Share buybacks will remain a longer term consideration to add shareholder value," the company says.

BusinessDesk.co.nz

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