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Investment house Washington H. Soul Pattinson has reported that its first half earnings plunged to a $643.1 million loss, largely attributable to a one-off goodwill impairment as a result of a merger with Milton Corporation on 5 October 2021.
The Milton acquisition created a $954 million goodwill charge, which resulted in the $643.1 million loss. This compares to profits of $68.9 million a year ago.
Excluding the Milton merger, the company’s regular profit after tax was up 281 per cent to $343.7 million.
The ASX-listed business saw an 117 per cent uptick in revenue to $1.28 billion compared to $589 million in the same period last year.
Soul Patts CEO Todd Barlow, left, and chairman Rob Millner are looking to new revenue streams. Credit:Louie Douvis
The company is paying an interim fully-franked dividend of 29 cents per share, an increase of 12 per cent.
Chairman Robert Millner described the merger with Milton as a “significant highlight” during the half-year.
“One of WHSP’s key advantages is its flexible mandate to make long-term investment decisions and adjust the portfolio by changing the mix of investment classes over time,” he said.
“WHSP maintains a strong balance sheet with modest gearing and solid liquidity. WHSP also has available profit reserves and franking credit balances,” he said.
The ASX-listed investment company has invested in several businesses across various industries, including TPG Telecom, Brickworks, Australian Pharmaceutical Industries (API), Round Oak Minerals, and more.
In terms of outlook, Mr Millner said stock market valuations had returned to “long run averages” after the sharp drop in late January. Before this decline, valuations were at “elevated levels” and markets were “susceptible to a pullback”.
“We expect that investors will continue to reallocate from long term bonds to equities and have large cash reserves given the higher than average savings rates,” he said.
“This suggests that equity markets will remain supported with a rising rate environment favouring profitable assets with robust cash flows.“
WHSP will look to use its diversified portfolio to grow earnings and cash flow across the long term and “use periods of volatility to add to the portfolio in a disciplined manner”.