Vodafone, Wellington airport soldier on, as cashed-up Infratil makes a loss

Wednesday, 19 May 2021

Covid restrictions weighed heavily on the results for Wellington airport, of which Infratil owns two thirds.

Infrastructure investor Infratil says it will soon have net cash of more than $1 billion at its disposal, even after recent moves to expand more into the health sector.

Infratil has announced a net loss of $49.2 million for the year to March, driven by “unrealised energy derivative losses” at Trustpower, and an increase in management incentive fees.

Jeremy Sullivan, an analyst at Hamilton, Hindin, Greene, said it was a mixed result, reflecting in part the many businesses it was diversified across, but investors would be pleased with a slight increase in dividend to 11.5 cents per share.

The underlying business units themselves were largely stable, he said.

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Waipipi, a nearly finished wind farm in South Taranaki, is owned by Tilt Renewables, which has recently been sold by Infratil and other shareholders for nearly $3b. The buyers included Mercury Energy.

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“The CDC data centre's doing well, Vodafone's tracking sideways, Trustpower if you exclude those derivatives is tracking well, Wellington Airport of course [suffered due to] Covid so that's down, Longroad is down and corporate expenses are up.'

Manager Morrison & Co took $223m in fees, in part a reflection of Infratil's increase in share price, Sullivan said.

It was an eventful year for Infratil, during which its Wellington Airport asset was closed for a long period, it received two unsolicited takeover offers and veered into diagnostic healthcare.

Vodafone’s income was hurt by Covid but its rollout of 5G and network upgrades continue, Infratil says.

Infratil chief executive Jason Boyes said the impact of Covid, in particular for the airport and Vodafone New Zealand, had been offset by strong cost control, a full year of Vodafone revenue, and continued demand for data centre facilities.

Eyes were particularly on Vodafone, in which Infratil acquired a 49.9 per cent stake in 2019.

The telco lost $64m in Covid-related income during the year, prompting significant cost cuts as it furthered its 5G rollout and continued upgrading its network.

However, the outlook for next year was set to improve. Total operating revenue was forecast to increase 10 per cent to between $480m to $510m, compared to $447.8m this year.

Things were tougher at Wellington Airport, where total operational revenue slumped to $36m, 65 per cent lower than the previous year.

Most of the airport’s pick-up was in the second half of the year and its domestic traffic was back to 85 per cent of former levels. Infratil, which owns a 66 per cent stake received $23.7m, down from $68.1m.

Brighter investments including its stake in CDC Data Centres, of which Infratil holds a 48.08 per cent stake. Its share of the revenue grew 25 per cent to $147.3m.

The year was also notable for two unsuccessful takeover bids for Infratil from AustralianSuper.

In October Infratil investors were offered a cash consideration of $4.69 per share and an in-specie distribution of Trustpower shares, implying Infratil shares were worth $6.40 each.

That offer was bumped up to an implied value of $7.43, but the board rejected both offers, saying they materially underestimated the value of Infratil’s renewable energy and digital infrastructure platforms.

The company's shares at 11.18am Wednesday were trading at $7.255, down 0.6 per cent.

Since its balance date, the company has sold wind farm company Tilt, in which Infratil owned a 65.5 per cent stake.

Bought by a consortium of Powering Australian and Mercury Energy, the price paid was at a 106 per cent premium, and is expected to net Infratil $2b. The deal is expected to settle in August.

Infratil also has recently bought controlling stakes in Australian-based diagnostic imaging platform Qscan (in December) and Pacific Radiology (due to settle in May).

Even after this, Infratil said it would still have $1b to reinvest.

“Plenty of headroom for further acquisitions,' Sullivan said.

Boyes said the company believed big synergies could be made in the two healthcare companies, and the move confirmed Infratil’s confidence in 'communications and digital infrastructure, decarbonisation, and aging populations”.

Using its favoured measure, proportionate operating profit, Infratil made $398.8m but gave guidance of between $470m and $520m next year, excluding Tilt Renewables and the new stake in Pacific Radiology.