2018 Annual Report Highlights

Highlights

Highlights

Year ended 31 March

2018

2017

Net Parent Surplus

$60.5m

$66.1m

Underling EBITDAF¹ 
(Continuing operations)

$525.8m

$488.0m

Net operating cash flow 

$295.8m

$245.0m

Capital expenditure 

$325.9m

$728.2m

Net debt (Net debt fell to 31% of capital)

$779.7m

$913.3m

Dividends declared 

16.75 cps

15.75 cps

1. Underlying EBITDAF is a non-GAAP measure of financial performance, presented to show management’s view of the underlying business performance. Underlying EBITDAF represents consolidated net earnings before interest, tax, depreciation, amortisation, financial derivative movements, revaluations, non-operating gains or losses on the sales of investments, and includes Infratil’s share of its associates’ underlying profits (Canberra Data Centres, Longroad Energy and RetireAustralia). Underlying profit for RetireAustralia removes the impact of unrealised fair value movements on investment properties.

Underlying EBITDAF from continuing operations increased 8%, operating cash flows rose 21%.

Including contributions from assets sold during the year total Underlying EBITDAF was $552.4 million. 

The net surplus was down 8%. Depreciation, tax and minorities were up $60.9 million. Interest was down $9.4 million and revaluations were up $47.4 million.

Reflecting the good operating and financial performance and a strong balance sheet, the dividend was increased for the seventh year in succession.

Infratil undertook $325.9 million of internal investment. Last year $231.9 million was invested within platforms, $411.5 million was invested buying 48% of Canberra Data Centres and $84.4 million was invested in ANU Student Accommodation.

Net debt at the end of the period was down $133.6 million. Infratil retains a significant capacity to undertake investment.

Trustpower delivered a 20% uplift in EBITDAF. 

Wellington Airport hosted more than six million passengers for the first time and is approaching the end of its five year $300 million capital investment programme.

Canberra Data Centres lifted its EBITDAF run rate from A$50 million to A$69 million and started construction of a new A$150 million data centre.

Tilt Renewables started construction of a 54MW wind farm in Victoria and progressed over $3 billion of other generation projects.

Longroad Energy purchased 684MW of solar and wind generation and established a generation management capability.

NZ Bus recontracted two thirds of its services for up to 12 years and won new service contracts in the Bay of Plenty.

Perth Energy Holdings returned to EBITDAF profitability after a very difficult period.

RetireAustralia progressed its provision of a full-continuum of accommodation and care, which is now available to 30% of residents.

Ideas that matter

Infratil seeks to invest in sectors where something big is underway. The key themes which now underpin where it is allocating capital are population aging, decarbonisation, air travel, and data. 

In 2017 the New Zealand and Australian population of people aged 85 or over rose 2.5% to 85,100 and 494,500 respectively.

Boeing and Airbus are both projecting Asia-Pacifc air travel to double within 12 to 13 years.

197 countries have signed the Paris Accord to cap global manmade greenhouse gas emissions. In 2017 global emissions of CO2 are estimated to have amounted to 14 billion tonnes with New Zealand contributing an estimated 76 million tonnes (59 million tonnes after deducting offsets).

Its estimated that 2,500,000,000,000,000,000 bytes of data are now generated a day (about 25 billion times as much data as is used by an average connected New Zealand household).

Financial trends

We provide five graphs that set out Infratil’s assets, capital investment, funding, earnings and cashflow/dividends over the last decade. We have also sought to explain what has happened and why.

Infratil Assets

Over the period, $3,993 million was invested. 
$1,960 million of this was undertaken by Trustpower, Tilt Renewables, Wellington Airport and NZ Bus. A further $1,034 million was internally invested across the rest of Infratil’s businesses.
$999 million was allocated to acquisitions.
The reason the total level of assets remained relatively consistent over the decade was that $2,180 million was realised from divestment.

Infratil Assets 1x
Capital Investment

As noted above, Infratil’s total capital investment over the decade has amounted to $3,993 million (divestments were $2,180 million). This includes $1,023 million invested into data centres and social infrastructure assets. 
Infrastructure is intrinsically capital intensive. Its only by deploying capital that it’s possible to generate compound growth.

Capital Investment
Infratil Funding

Over the decade Infratil’s use of debt has declined. Ten years ago, dated debt made up 49% of Infratil’s capital. It is now 22%. Perpetual debt contributed about 9% of the funding throughout. 
In part this has been due to a more conservative approach to the use of debt, and in part it reflects that over the last couple of years Infratil’s need for debt has declined because capital has been available from the sale of assets. The lower level of borrowing is also because Infratil held capacity in reserve.

Infratil Funding
Underlying EBITDAF

As with the ten year asset profile, more has happened than may appear at first glance. The combined earnings of the core businesses Trustpower/Tilt/Wellington Airport have risen 38%, but the net contribution of the balance has risen 138%.
 Looking forward, it is anticipated that earnings will rise materially over the next few years as recent investments lift their earnings contributions.

Underlying EBITDAF@1x
Operating Cash Flows & Dividends

Operating cash flows comprise EBITDAF less payments of interest and tax and any adjustment required for changes in working capital (which can be up or down). This has been relatively stable over the last six years due to the same factors which have determined EBITDAF.
The robust levels of cash earning have supported the increase in the dividend to Infratil’s shareholders.

Operation Cash Flow & Dividents@1x

Financial performance & position

Consolidated results

Year Ended 31 March
$Millions

2018

2017

Operating revenue

$1,783.5 

$1,876.5 

Operating expenses

($1,280.5) 

($1,374.7)

Depreciation & amortisation

($193.8)

($183.7)

Net interest

($153.5)

($162.9)

Tax expense

($52.2)

($15.7)

Revaluations

$20.3

($27.1)

Discontinued operations

$15.4

$18.0

Net profit after tax

$139.2

$130.4

Minority earnings

($78.7)

($64.3) 

Net parent surplus

$60.5 

$66.1 


For FY2018 the average NZ$/A$ exchange rate was 0.9238 and the NZ$/US$ was 0.7149 (0.9418 and 0.7092 in FY2017). 

Lower revenue and operating costs were largely due a reduced level of activity at Perth Energy.

Net interest fell because of lower interest rates and lower average borrowing.

Revaluations include changes of value of hedges used to cover energy prices, interest rates and foreign exchange rates and asset revaluations.

Discontinued operations shows the net surplus of Green State Power. During the last year this company was sold by Trustpower for A$168 million having been purchased in FY2014 for approximately A$65 million.

Underlying EBITDAF

Year Ended 31 March
$Millions

2018

2017

Trustpower

$243.1
$203.0 

Tilt Renewables

$112.3 
$131.7 

Perth Energy

($5.8) 
($14.1) 

Wellington Airport

$95.4 
$90.5 

NZ Bus

$33.4 
$43.7 

RetireAustralia

$18.3 
$31.4 

Longroad Energy

($13.8) 
($2.9) 

ANU Student Accommodation 

$14.4 
$7.0 

Canberra Data Centres 

$56.1 

$10.6 

Metlifecare

-

$14.9 
Parent/Other

($27.6) 

($27.8) 

Continuing Operations

$525.8 

$488.0  

Discontinued operations 

 $26.6

$31.5

Total

 $552.4

$519.5

                            

Breakdown of consolidated results

The following tables give the breakdown of Infratil’s consolidated results by business, for the last two financial years.

Year ended 31 March 2018

$Millions 

Infratil's share 

Underlying EBITDAF 

D&A 

Interest 

Tax 

Revaluations adjustments 

Net surplus 

Minorities 

Infratil share of earnings 

Trustpower

51% 

 $243.1

($44.3)

($32.1)

($44.9)

($7.8)

$114.0

($56.5)

$57.5

Tilt Renewables

51%

 $112.3

($86.9)

($31.8)

$2.0

$1.3

($3.1)

 $1.5

($1.6)

Perth Energy

80%

($5.8)

($5.7) 

($7.2) 

($3.1) 

 -

($21.8) 

 $4.4

($17.4) 

Wellington Airport

66% 

$95.4 

($23.6) 

($18.4) 

($4.2) 

$13.4 

$62.6 

($17.7) 

$44.9 

NZ Bus

100% 

$33.4 

($32.9) 

($5.6) 

$3.1 

($1.2) 

($3.2) 

-

 ($3.2) 

RetireAustralia¹

50% 

$18.3 

-

-

-

($22.8) 

($4.5)

-

$4.5 

Longroad Energy¹

45% 

$13.8

-

-

$13.8 

-

($13.8) 

ANU Student Accommodation¹ 

50% 

$14.4

-

-

-

-

$14.4

-

$14.4

Canberra Data Centres¹ 

48% 

$56.1 

-

 -

 -

$56.1

-

 $56.1 

Parent/Other

 

($27.6) 

($0.4) 

($58.3) 

($5.1) 

$14.5

($76.9)

($2.8) 

($79.7) 

Continuing operation

 

 $525.8 

($193.8) 

($153.4) 

($52.2) 

$2.6 

 $123.8

($71.1) 

$52.7

Discontinued operations

 

$26.7 

($2.4) 

($2.1) 

($6.5) 

($0.4) 

 $15.4

($7.6) 

$7.8 

Total 

 

$552.4 

($196.2) 

($155.5) 

($58.7) 

$2.8 

 $139.2

($78.7) 

$60.5

1. With RetireAustralia, Canberra Data Centres, ANU Student Accommodation and Longroad Energy, Infratil accounts for its share of their net surplus.
2. The adjustment removes revaluation gains. Infratil consolidates RetireAustralia's underlying net surplus.

Year ended 31 March 2017

$Millions 

Infratil's share 

Underlying EBITDAF 

D&A 

Interest 

Tax 

Revaluations adjustments 

Net surplus 

Minorities 

Infratil share of earnings 

Trustpower

51% 

 $203.0

($44.7)

($37.8)

($28.0)

($16.4))

$76.1

($38.0)

$38.1

Tilt Renewables

51%

 $131.7

($78.6)

($33.8)

($10.1)

$8.2

$17.4

 ($6.0)

$11.4

Perth Energy

80%

($14.1)

($5.6) 

($5.1) 

$7.4 

$0.1

($17.3)

 $3.5

($13.8)

Wellington Airport

66% 

$90.5 

($21.7) 

($21.5) 

($11.9) 

$8.4

$43.8

($15.0)

$28.8

NZ Bus

100% 

$43.7

($32.3) 

($7.3) 

($1.2) 

($0.2)

$2.7 

-

 $2.7

RetireAustralia¹

50% 

$31.4 

-

-

 -

($2.1)

$29.3 

$29.3

Longroad Energy¹

45% 

($2.9)

-

-

-

($2.9)

($2.9) 

ANU Student Accommodation¹ 

50% 

$7.0

-

-

-

-

$7.0

-

$7.0

Canberra Data Centres¹ 

48% 

$10.6

-

 -

-

($5.6)

$5.0

 -

 $5.0

Metlifecare¹ 

20% 

$14.9

 - 

 

($16.2)

($1.3)

 - 

 ($1.3)

Parent/Other

 

($27.8) 

($0.8) 

($57.4)

$28.1

$10.5

 ($47.4)

($0.4)

($47.5) 

Continuing operations

 

$488.0

($183.7)

($162.9) 

($15.7)

($13.3)

$112.4

($55.6)

($56.8)

Discontinued operations

 

$31.5

($2.8)

($2.8)  

($8.9)

$1.0

$18.0

($8.7)

$9.3

Total

 

$519.5

($186.5)

($165.7)

($24.6)

($12.3)

$130.4

($64.3)

$66.1

1. With Metlifecare, RetireAustralia, Canberra Data Centres, ANU Student Accommodation and Longroad Energy, Infratil accounts for its share of their surplus.
 
Consolidated operating cash flow

Year Ended 31 March
$ Millions

2018

2017

Underlying EBITDAF (continuing operations)

$525.8

$488.0

Net interest

(147.1)

($156.4)

Tax paid

($77.9)

($47.7)

Working capital/other

($16.7)

($66.7)

Discontinued operations

$11.7

$27.8

Operating cash flow

$295.8

$245.0

 The lower interest cost resulted from lower interest rates and less borrowing. The tax rise was due to capital gains tax on Trustpower’s sale of its Australian assets. The prior year included the reversal of a deferred tax liability in respect to Infratil's investment in Metlifecare.

Capital investment

Year ended 31 March 
$Millions

2018

2017

Trustpower

$27.9

$26.7

Tilt Renewables

$90.5

$6.3

Perth Energy

$5.0

$24.8

Longroad Energy¹ 

$30.6

$33.2

Wellington Airport

$85.1

$79.3

NZ Bus

$19.1

$16.2

RetireAustralia²

$35.9

$37.8

ANU Student Accommodation

-

$84.8

Canberra Data Centres²

$22.0

$411.5

Other

$9.8

$7.6

 

$325.9

$728.2

1. This is the amount Infratil invested into Longroad Energy.
2. These companies are not consolidated. The values shown for FY2018 are 50% of RetireAustralia’s capex and 48% of Canberra Data Centres.

Infratil's funding 

Year ended 31 March 
$Millions

2018

2017

Net cash of 100% subsidiaries

($221.8)

($92.2)

Dated Infrastructure Bonds

$769.6

$773.6

Perpetual Infrastructure Bonds

$231.9

$231.9

Market value Infratil equity

$1,733.8

$1,629.8

Total capital

$2,513.5

$2,543.2

Net dated debt/total capital

21.8%

26.8%

Net debt/total capital

31.0%

35.9%

 

As at 31 March 2018 Infratil and 100% owned subsidiaries had $311.1 million of committed bank funding facilities of which $269.0 million was undrawn.

Infratil has guaranteed borrowing facilities of Perth Energy which as at 31 March 2018 amounted to $76.5 million ($74.1 million as at 31 March 2017) and were drawn to $42.4 million ($47.7 million as at 31 March 2017).

Infratil guaranteed letters of credit issued by Longroad Energy which as at 31 March 2018 amounted to $67.3 million. 

Infratil's assets

Year ended 31 March 
$Millions

2018

2017

Trustpower

$893.0

$734.8

Tilt Renewables

$285.9

$341.8

Perth Energy

$61.7

$73.4

Longroad Energy

$16.0

$33.2

Wellington Airport

$471.9

$414.5

NZ Bus

$167.1

$191.2

RetireAustralia

$319.0

$278.2

ANU Student Accommodation

$96.1

$91.2

Metlifecare 

-

$237.9

Canberra Data Centres

$453.2

$426.3

Other 

$90.0

$85.2

 

$2,854.0

$2,908.0

For 31 March 2018, exchange rates of NZ$/A$ 0.9409 and NZ$/US$ 0.7203 were used (0.9142 and 0.6991 for 2017).  Values exclude 100% subsidiaries’ cash balances and deferred tax where CGT does not apply.
 

The Trustpower and Tilt Renewables values reflect the price of their shares on the NZX on the relevant dates. Infratil sold its interest in Metlifecare in FY2018.

Infratil advanced a further $54 million to RetireAustralia and $31 million to Longroad Energy. Most other changes in value reflect the individual companies movements in shareholders’ funds resulting from retaining earnings, losses or revaluations, and with those domiciled offshore the effect of changes in the value of the NZ dollar.

Infratil’s investment of $66.8 million into Longroad Energy ($63.8 million equity, $3.0 Million loan is shown as having a value of $16.0 million. In part this is because Longroad Energy has repaid $28.4 million of capital. A fuller explanation is provided later in this Report. “Other” includes Snapper, Infratil Infrastructure Property, ASIP and Envision.
 

Shareholder returns & ownership

Infratil’s share price rose from $2.91 on 31 March 2017 to $3.10 on 31 March 2018. Fully imputed dividends of 10.0 cents and 6.0 cents per share were paid in June and December 2017 respectively.Had the dividends been reinvested in Infratil shares at the time they were paid they would have provided a fully imputed return of 5.7% per annum on the 31 March 2017 share price. Added together, the dividend and share price movement resulted in shareholders receiving a return of 12.2% per annumOver the last seven years Infratil’s compound return after tax to shareholders has been 13.1% per annum. Seven years is a useful period as it removed the market slump and recovery associated with the Global Financial Crisis. Analysis of the seven years shows:

 

Full seven years

Most recent three years

Prior four years

Infratil return 

13.1% per annum

4.6% per annum

19.9% per annum

NZX50G returns

13.4% per annum

12.5% per annum

14.1% per annum

 

 

 

 

While the returns to Infratil over the seven years (since 31 March 2011) have been close to those of the NZX50 (both calculations include dividends), it is apparent that Infratil’s returns were excellent for four years and then modest for the last three.Management believes that the under-performance is largely because the share  market’s value of Infratil does not fully reflect either the earnings that will arise from the $2,363 million invested over the last five years, or the growth potential from the development pipelines of Tilt Renewables, Longroad Energy, Canberra Data Centres and RetireAustralia. A number of initiatives to improve this are set out in the Report of the Chair and the CEO. 

Year track record


Over the 24 years since Infratil listed, compound after tax returns have been 16.6% per annum. Someone who invested $1,000 in Infratil shares on 31 March 1994 and subsequently reinvested all dividends and the value of rights issues, etc. (i.e. who neither took money out nor put money in) would, as at 31 March 2018, own 12,741 shares worth $39,497.

Year Track Record
Ownership

It is estimated that less than 20% of Infratil’s shares changed hands over the year.

Infratil repurchased 775,000 shares for $2.4 million (average price $3.11). No shares were issued.

New Zealand domiciled ownership was stable at slightly over 75%. The ten largest New Zealand institutional holdings amounted to 115 million shares as at 31 March 2018, the same as a year ago. The ten largest offshore institutional holdings rose to 93 million shares from 91 million a year prior. Interests associated with ex management employees and directors sold 4.6 million shares.

 

31 March 2018

31 March 2017

 

Million Shares

%

Million Shares

%

New Zealand retail investors

286

51%

276

49%

New Zealand institutions

117

21%

121

22%

Management/other¹

33

6%

38

7%

Offshore¹

124

22%

125

22%

 

560

 

560

 

1. As at 31 March 2018 12.2 million shares shown as held by interests associated with a retired director were deemed to be held by an offshore party, giving total offshore ownership of 24.3%.

Infratil has approximately 24,000 individual shareholders and 16,000 bondholders. 

Infratil Annual Report 2018
Infratil Annual Report 2018
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