2019 Annual Report Highlights

Financial Highlights

The reported results summarised below were impacted by the one-offs of Infratil’s performance fee and disposals. But for those, Infratil would have delivered an increased parent surplus and EBITDAF.

The key events of the year were the $679.0 million of capital invested to drive future returns, the combined $132.1 million earnings increase delivered by Longroad Energy, Tilt Renewables, Canberra Data Centres and Wellington Airport, and the marked increase in the value of Infratil’s investments which was reflected in the returns Infratil delivered for its shareholders.  

The $90.9 million reduction in net surplus reflects the $102.6 million management performance fee accrual. The fee is reflected in Infratil’s earnings, while the corresponding performance (for which the fee is being paid) is captured in the value of Infratil’s assets (and the share price). 

Infratil’s EBITDAF was reduced by the performance fee. Retained businesses increased their contribution by $102.1 million while businesses held for disposal increased their contribution by an aggregate $24.2 million.

Infratil invested $42.7 million more into Canberra Data Centres, $288.2 million into Tilt Renewables and $87.2 million into Longroad Energy and they, along with Infratil’s other businesses, undertook a total of $473.4 million of investment into facilities and services.

Net debt of the 100% group at the end of the period amounted to 33.6% of Infratil’s capitalisation, up from 31.0%.

FY 2019

FY 2018

Net surplus

($19.5m)

$71.4m

Underlying EBITDAF¹ ²

$477.5m

$482.0m

Net operating cash flow

$276.9m

$295.8m

Capital expenditure

$679.0m

$325.9m

Net debt³

$1,180.7m

$779.7m

Dividends declared

17.25cps

16.75cps

1. Underlying EBITDAF is a non-GAAP measure of financial performance, presented to show management’s view of business performance. Underlying EBITDAF is the consolidated net earnings before interest, tax, depreciation, amortisation, financial derivative movements, revaluations, and non-operating gains or losses on the sales of investments of Infratil’s subsidiaries plus Infratil’s share of the underlying after tax profits of its associates (Canberra Data Centres, Longroad Energy, and ANU student accommodation). For RetireAustralia, Infratil’s Underlying EBITDAF accounts for the underlying profit as this is a common performance measure used by retirement companies to remove the impact of unrealised fair value movements on investment properties, impairment of property, plant and equipment, one-off gains and deferred taxation, while adding back realised resale gains and realised development margins.

2. Excludes Discontinued Operations which are NZ Bus, Snapper, ANU student accommodation, and Perth Energy. Each of which is subject to a sales process.

3. 100% group.

Corporate structure

Corporate Structure 2019@2x

The last twenty five years
1994–2019

In March 1994 Infratil was listed on the New Zealand Stock Exchange having raised $25 million to invest in the shares of the energy and transport businesses then being sold by local government. 

Infratil’s first investment was a 14% stake in the then vertically integrated (generation-distribution-retailing) Trustpower (it had previously been owned by an electric power board).

The also newly listed Trustpower sought a long-term shareholder with expertise and capital. Gradually over time as others sold their shares Infratil increased its holding to 51%. Along the way Infratil made major contributions to Trustpower’s evolution and critical strategic decisions. In particular, the sale from distribution (the lines activities) and use of the proceeds to buy more generation; and the expansion into wind farm development in Australia, which was later separated out into Tilt Renewables.

Infratil’s relationship with Trustpower is illustrative of Infratil’s approach. Initially Infratil was invited onto the register by the Company to provide expansion capital, expertise, and to balance community shareholders. Gradually other shareholders sold and Infratil increased its stake and influence. It has been a very successful long-term, patient, investment for Infratil and one which has added great value to Trustpower.

Along with the patient, influential investment approach illustrated by Trustpower, Infratil’s other hallmark is a relentless prioritisation of shareholder value. 

Even Berkshire Hathaway only grew US$1,000 to US$18,705 over the 25 years to 31 December 2018 (and the US$ depreciated against the NZ$ over that period).

The graph also shows Infratil's main investments over the 25 years, which indicates an average of about one major transaction every couple of years. Returns have been generated by selecting good businesses which absorb capital to deliver compound growth and returns. Wellington Airport is the ideal case study of the model. In 1998 Infratil's 66% shareholding was valued at $96 million, EBITDAF was $14 million and 3.5 million passengers used the Airport. Over the subsequent twenty years $648 million has been invested by the Airport in its facilities, passenger numbers have risen to 6.4 million per year and earnings to $101 million.

Financial trends

The five graphs show the evolution of Infratil’s assets, capital investment, funding, earnings and cashflow/dividends over the last decade; with a brief explanation of what happened and why.

Infratil Assets

The goal of asset allocation is to achieve a balance between core and growth assets; ones that provide robust income and those that will generate value growth. This objective is reflected in the evolving portfolio of businesses. 

However, “core” can mean both Wellington Airport and a fully contracted CDC data centre or a Tilt wind farm. And of the $4,397 million invested over the decade, $2,057 million was undertaken by Trustpower, Tilt, Wellington Airport and NZ Bus, reflecting that even the core businesses undertake growth investment.A further $1,092 million was internally invested by other businesses and $1,248 million was allocated to acquisitions. Funding for the investment was largely provided by divestments and operating cash flows.

Infratil assets
Capital Investment

Infratil’s total capital investment over the decade amounted to $4,397 million (divestments were $2,147 million). 

Infrastructure is intrinsically capital intensive. It is only by deploying capital that it is possible to generate compound growth.

Capital investment
Infratil Funding

Changes to Infratil’s capital structure (the relative use of debt and equity funding) has occurred as businesses have been sold and funds have been only gradually redeployed.

The use of debt is bounded by Infratil’s policy of maintaining credit metrics that are broadly consistent with an Investment Grade credit rating (Infratil is not credit rated) and with maintaining availability of funds for investment opportunities.

Infratil funding
Underlying EBITDAF

(for 2018 and 2019 the graphed amounts are before disposals)
Over the decade the combined earnings of the core businesses Trustpower/Tilt Renewables/Wellington Airport have risen 37% and the contribution of the rest rose 455% (excluding management costs).

The level of earnings of recent years reflects recycling capital (selling from mature higher earnings companies and reinvesting into businesses at an earlier stage of their commercial lives) and because Infratil only accounts for its share of the after tax profits of RetireAustralia, CDC and Longroad Energy as these investments not consolidated. 

Underlying EBITDAF
Operating Cash Flows & Dividends

Robust cash earnings have supported the increase in the dividend to Infratil’s shareholders. 

Operating cash flows comprise EBITDAF less payments of interest and tax adjustments for changes in working capital (which can be up or down). 

Operating cash flows and dividends

Financial performance & position

Infratil Assets

The Trustpower and Tilt Renewables values reflect the price of their shares on the NZX on the relevant dates.

The other values show Infratil’s share of the relevant company’s net book value with changes arising from 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 New Zealand dollar. 

If Infratil increases or reduces its investment that will also show up in changes. Over the last year Infratil paid $109.3 million to lift its holding in Tilt from 51% to 65% and then $178.9 million to subscribe for additional Tilt shares. A further $42.7 million was also invested in CDC.

$Millions

31 March 2019

31 March 2018

Trustpower

$1,055.9

$893.0 

Tilt Renewables

$720.9

$285.9

Perth Energy

$89.3

$68.7

Longroad Energy

$10.8

$10.1

Wellington Airport

$481.5

$471.9

NZ Bus

$166.7

$167.1

Canberra Data Centres

$555.3

$453.2

RetireAustralia

$290.4

$319.0

ANU Student Accommodation

$108.2

$96.1 

Parent/other 

$105.8

$90.0

 

$3,584.7

$2,861.0


For 31 March 2019, exchange rates of NZ$/A$ 0.9574 and NZ$/US$ 0.6785 were used (0.9409 and 0.7203 for 2018). Values exclude 100% subsidiaries’ cash balances and deferred tax where CGT does not apply

Infratil Funding

As at 31 March 2019 Infratil and 100% subsidiaries had $502.4 million of committed bank funding facilities of which $403.0 million was undrawn ($311.1 million and $269.0 million the prior year). 

Infratil guaranteed borrowing facilities of Perth Energy which as at 31 March 2019 amounted to $67.6 million and were drawn to $36.8 million. ($76.5 million and $42.4 million respectively the prior year).

Infratil guaranteed letters of credit issued by Longroad Energy which as at 31 March 2019 amounted to $85.0 million. ($67.3 million the prior year.) 

$Millions

31 March 2019

31 March 2018

Net debt/(cash) of 100% subsidiaries

$44.3

($221.8)

Dated Infrastructure Bonds

$904.5

$769.6

Perpetual Infrastructure Bonds

$231.9

$231.9

Market value Infratil equity

$2,332.2

$1,733.8

Total capital

$3,512.9

$2,513.5

Net dated debt/total capital

27.0%

21.8%

Net debt/total capital

33.6%

31.0%

Consolidated Results

The revenue increase was largely contributed by Trustpower and Tilt Renewables, while higher costs reflected Trustpower’s high cost of purchased electricity and Infratil’s management performance fee.

Increased depreciation and amortisation reflects the higher asset base. Most of the tax increase relates to US tax payable in relation to Infratil’s investment in Longroad. Revaluations in FY2018 were due to changes in the treatment of Tilt’s electricity sales agreements.

Discontinued operations were NZ Bus, Perth Energy, ANU and Snapper. In FY2018 they also included Green State Power.

Year Ended 31 March ($Millions)

2019

2018

Operating revenue

$1,442.2

$1,233.9

Operating expenses

($997.8)

($774.7)

Depreciation & amortisation

($160.4)

($151.5)

Net interest

($148.5)

($150.5)

Tax expense

($72.0)

($52.7)

Revaluations¹

$0.9

$48.7

Discontinued operations

($12.0)

$7.3

Net profit after tax

$52.4

$160.5

Minority earnings

($71.9)

($89.1)

Net parent surplus

($19.5)

$71.4

For FY2019 the average NZ$/A$ exchange rate was 0.9334 and the NZ$/US$ was 0.6810 (0.9238 and 0.7149 in FY2018).
1. Revaluations does not include the RetireAustralia normalisation adjustment of $33.1 million and $22.8 million the previous year.

Underlying EBITDAF

Several businesses provided marked increases over the year; Longroad Energy +$66.2 million, Perth Energy +$41.7 million, Tilt +$32.1 million, and CDC +$27.8 million, while Trustpower’s earnings were -$20.9 million, NZ Bus -$16.0 million and RetireAustralia -$9.1 million.

Management costs rose $106.4 million largely due to the $102.6 million performance payment.

Year Ended 31 March ($Millions)

2019

2018

Trustpower

$222.2

$243.1

Tilt Renewables

$144.4

$112.3

Longroad Energy

$46.5

($19.7)

Wellington Airport

$101.4

$95.4

Canberra Data Centres

$83.9

$56.1

RetireAustralia

$9.2

$18.3

Parent/Other

($130.1)

($23.5)

Continuing operations

$477.5

$482.0

Perth Energy

$35.9

($5.8)

NZ Bus

$17.4

$33.4

ANU Student Accommodation

$12.8

$14.4

Other

($4.1)

$22.4

Total

$539.5

$546.4

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 2019

$Millions 

Infratil's share 

Underlying EBITDAF 

D&A 

Interest 

Tax 

Revaluations adjustments 

Net surplus 

Minorities 

Infratil share of earnings 

Trustpower

51% 

 $222.2

($47.2)

($28.2)

($37.5)

($16.7)

$92.6

($46.6)

$46.0

Tilt Renewables

65%

 $144.4

($89.5)

($32.2)

($7.4)

($2.1)

$13.2

($5.7)

$7.5

Longroad Energy¹,²

40%

$46.5

-

-

-

 -

$46.5

-

$46.5

Wellington Airport

66% 

$101.4

($23.7) 

($19.4) 

($0.2) 

$6.0 

$64.1 

($17.9) 

$46.2

Canberra Data Centres¹

48%

$83.9

-

-

-

-

$83.9

 

$83.9

RetireAustralia¹

50% 

$9.2

-

-

-

($33.1) 

($23.9)

-

($23.9)

Parent/Other

 

($130.1) 

($68.7) 

($26.9)² 

$13.7

($212.0)

($0.4) 

($211.6) 

Total

 

$477.5

($160.4)

($148.5)

($72.0)

($32.2)

$64.4

($69.8)

($5.4)

Perth Energy

80%

$35.9

($6.0)

($2.1)

($13.6)

-

$14.2

($2.1)

$12.1

NZ Bus

100%

$17.4

($21.1)

($0.2)

$2.3

($29.2)

($30.8)

-

($30.8)

ANU Student Accommodation¹

50%

$12.8

-

-

-

-

$12.8

-

$12.8

Other discontinued

 

($4.1)

($0.7) 

($0.1) 

($3.3)

 ($8.2)

-

($8.2)

Total 

 

$539.5

($188.2) 

($150.9)

($83.3) 

($64.7)

 $52.4

($71.9) 

($19.3)

1. These companies are not consolidated. Infratil only accounts for its share of the net surplus of RetireAustralia, CDC, ANU, and Longroad.
2. $13.2 million of tax was incurred in the US on Longroad's gains. 
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

($83.6)

($31.8)

($7.1)

$28.4

$18.2

 ($8.9)

$9.3

Longroad Energy¹

45%

($19.7)

-

-

-

-

($19.7)

 -

($19.7)

Wellington Airport

66% 

$95.4

($23.6) 

($18.4) 

($4.2) 

$13.4

$62.6

($17.7)

$44.9

Canberra Data Centres¹ 

48%

$56.1

-

-

-

$56.1 

-

 $56.1

RetireAustralia¹

50% 

$18.3

-

-

 -

($22.8)

($4.5)

($4.5)

Parent/Other

 

($23.5) 

- 

($68.2)

$3.5

$14.7

 ($73.5)

($2.8)

($76.3) 

Total

 

$482.0

($151.5)

($150.5) 

($52.7)

$25.9

$153.2

($85.9)

$67.3

Perth Energy

80%

($5.8)

($5.7)

($2.9)

($4.3)

-

($18.7)

$4.4

($14.3)

NZ Bus

100%

$33.4

($32.9)

($0.2)

$1.6

($1.2)

$0.7

-

$0.7

ANU Student Accommodation¹

50%

$14.4

-

-

-

-

$14.4

 

$14.4

Other discontinued

 

$22.4

($2.8)

($2.0)  

($6.5)

($0.2)

$10.9

($7.6)

$3.3

Total

 

$546.4

($192.9)

($155.6)

($61.9)

$24.5

$160.5

($89.1)

$71.4

1. These companies are not consolidated. Infratil only accounts for its share of the net surplus of RetireAustralia, CDC, ANU, and Longroad.
 

Consolidated Operating Cash Flow

Year Ended 31 March ($Millions)

2019

2018

Underlying EBITDAF

$477.5

$482.0

Net interest

($142.2)

($147.1)

Tax

($71.8)

($77.9)

Working capital

($4.5)

$0.6

Discontinued operations

$1.79

$38.3

Operating cash flow

$276.9

$295.8

Capital Investment

Year Ended 31 March ($Millions)

2019

2018

Trustpower

$27.7

$27.9

Tilt Renewables¹

$236.4

$90.5

Perth Energy

$0.4

$5.0

Longroad Energy²

$87.2

$30.6

Wellington Airport

$72.1

$85.1

NZ Bus

$45.9

$19.1

Canberra Data Centres³

$140.6

$22.0

RetireAustralia³

$31.8

$35.9

ANU Student Accommodation

$9.1

-

Parent/Other

$27.7

$9.8

 

$679.0

$325.9

 

1. In FY2019 Infratil invested $109.3 million increasing its shareholding in Tilt while Tilt invested $127.1 million in new generation capacity. The FY2018 figure is what Tilt invested in generation.
2. These are the amounts Infratil invested into Longroad.
3. These companies are not consolidated. The values shown are 50% of RetireAustralia’s capex and 48% of CDC’s. In FY2019 Infratil also invested $42.7 million into CDC and in FY2018 it invested $53.9 million into RetireAustralia.

Shareholder Returns & Ownership

Infratil’s share price rose from $3.10 on 31 March 2018 to $4.17 on 31 March 2019. Dividends of 10.75 cents and 6.25 cents per share cash and 4.18 cents and 1.50 cents imputation credits were paid in June and December 2018 respectively.

Had the cash dividends been reinvested in Infratil shares at the time they were paid they would have provided a return of 5.5% per annum on the 31 March 2018 share price. Added together, the dividend and share price movement resulted in shareholders receiving a return of 41.3% per annum.

The table shows Infratil’s compound return after tax to shareholders broken into five year periods.

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 2019, own 13,380 shares with an NZX value of $55,795. 

 

Infratil

NZX50

5 Year NZ Government bond¹

1994-1999

24.7% per annum

5.7% per annum

6.5% per annum

1999-2004 

22.1% per annum

6.5% per annum

5.5% per annum

2004-2009

7.9% per annum

(0.6% per annum)

5.6% per annum

2009-2014

13.3% per annum

14.7% per annum

4.5% per annum

2014-2019

20.0% per annum

13.9% per annum

4.2% per annum

Cumulative

17.5% per annum

7.9% per annum

5.3% per annum

¹The five year bond rate at the start of the five year period. Note that the returns are not strictly comparable as Infratil's returns are after tax and the bond yield is pre tax.

25 year track record

Infratil Track Record April 2019 02

Ownership

It is estimated that approximately 12% of Infratil’s shares changed hands over the year.

 Infratil neither repurchased nor issued any shares during the period.

New Zealand domiciled ownership was stable at 75%. The ten largest New Zealand institutional holdings amounted to 112 million shares as at 31 March 2019, 3 million less than a year prior. The ten largest offshore institutional holdings fell to 89 million shares from 94 million a year prior.

 

31 March 2019

31 March 2018

 

Million Shares

%

Million Shares

%

New Zealand retail investors

300

54%

300

54%

New Zealand institutions

119

21%

123

22%

Offshore

140

25%

136

24%

 

559

 

560

 

Infratil has approximately 27,000 individual shareholders and 19,000 bondholders.
Infratil Annual Report 2019
Infratil Annual Report 2019
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