The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), or WHSP, share price is in focus after reporting its FY24 result.
WHSP is an investment house that’s diversified across various industries including resources, telecommunications, construction products, farming, swimming schools and many more.
FY24 result
Here are some of the highlights from the 12 months to 31 July 2024:
- Net cash flow from investments grew 10.3% to $468 million
- Pre-tax net asset value (NAV) rose 8.7% to $11.8 billion
- Regular net profit after tax (NPAT) down 35.8% to $487.6 million
- Statutory NPAT down 27.8% to $498.8 million
- Final dividend up 7.8% to $0.55 per share
- Full-year dividend up 9.2% to $0.95 per share
WHSP explained that the decline in the NPAT figures was due to lower profit contributions from Brickworks Limited (ASX: BKW) and New Hope Corporation Ltd (ASX: NHC).
The WHSP share price is affected by all of its segments, particularly its strategic portfolio (which includes Brickworks and New Hope) because that’s the largest allocation on its balance sheet.
The net cash flow from investments, which WHSP uses to pay its dividends, benefited from the cash generation from its private equity, emerging companies and credit portfolios.
The emerging companies portfolio benefited from higher realised trading gains compared to FY23, with net cash flow rising 192.3% to $46.4 million.
Within its private equity segment, during FY24 it completed the acquisition of Redland Premium Fruit, which includes processing infrastructure. Ironbark completed a merger with Invest Blue to give the group more scale to target opportunities. Aquatic Achievers now operates 30 swim schools across Australia and sees more opportunities for further organic growth. This segment saw net cash flow from investments soar 97.9% to $29.7 million.
The credit portfolio experienced a 161.3% rise in net cash flow thanks growth of the portfolio over the last 18 months.
Management commentary
Chair Robert Millner and Managing Director & CEO Todd Barlow said:
Our strategy of long-term commitment to building value, strength of conviction when making investment decisions, and unconstrained mandate to invest where we can extract the highest quality returns, continues to deliver for our shareholders.
Although the Australian economy has shown surprising strength, we expect monetary policy to remain restrictive with inflation above the Reserve Bank’s target range of 2% to 3%. The investing environment remains volatile and there is material risk in the outlook with public market valuations elevated in the context of a higher interest rate environment. Soul Patts continues to invest in a diverse range of assets in order to build a resilient, cash-generating portfolio.
Final thoughts on the WHSP share price
The business has seen its net cash flow from investments and the underlying value, the NAV per share, continue to grow. Those are the two main things investors want to see from their own portfolio.
I like the company’s ongoing diversification and the reduction in the focus on the strategic portfolio. Its dividends remain somewhat reliant on New Hope, Brickworks and TPG Telecom Ltd (ASX: TPG), so growth in other areas of the business would be ideal.
It has demonstrated its ability to outperform the ASX share market over the long-term and I think this record can continue, as long as its new investments can deliver ASX-beating performance.
WHSP is already one of the larger positions in my portfolio and I’m planning to make more investments over time. At 31 July 2024 it had a pre-tax NAV per share of $32.61, so I think there is plenty of underlying value at the current WHSP share price. It has a 4% dividend yield including the franking credits.
