Ferret's Stock to Watch: WH SOUL PATTINSON LIMITED 08:36, Monday, 4 April 2005
A TRIED AND TRUE PERFORMER WITH MASSIVE CORPORATE INTERESTS
Sydney - Monday - April 4: (RWE Australian Business News) *********************************************************
OVERVIEW ********
The name of Washington H. Soul Pattinson and Company Limited (SOL) has been around the stock exchange for more than a 100 years.
It has always been regarded as a blue-chip industrial stock which has moved with the times.
WH Soul has an impeccable reputation in looking after shareholders down through the years and it prides itself as being the most profitable company ever run by a family for so long in Australian financial history.
A good example is Souls Private Equity Limited (SPEL) launched last November.
An initial public offer was quickly snapped up and maximum oversubscription lifted to $125 million.
The company was listed last December.
SPEL was established as a vehicle to house and develop WH Soul Pattinson's (WHSP) private equity investments and the IPO created a seed portfolio.
The strategy underlying the establishment of SPEL was to capture the successful WHSP track record in private equity, examples of which include New Hope Corporation, SP Telemedia and NBN Television which all started as private equity investments.
Last December WHSP's investments in these companies were valued at about $630 million in the case of New Hope Corporation, $264 million in the case of SP Telemedia and NBN Television was recently sold to SP Telemedia for $145 million.
According to the chairman of WHSP and SPEL, Mr Rob Millner, SPEL provided an opportunity for investors to have direct access to the benefits of private equity investment through a vehicle dedicated to this purpose and which also offered investors the liquidity of an ASX listing.
"We have established a structure that includes investments which we believe offer high prospects for capital growth over the long term as well as having an equity participation in the manager of the company, Pitt Capital Partners," Mr Millner said.
"SPEL expects a strong private equity deal flow through WHSP and the manager, Pitt Capital Partners. WHSP now has a vehicle for channelling equity to private businesses which can often be acquired at more attractive prices than listed investments," Mr Millner added at the time.
Last week WH Soul reported a 28 per cent surge in profit to $51.7 million for half year to January 31.
Directors attributed the better result mainly to increased profits from the group's coal operations and a 51.9 per cent increase in dividends received from investments.
The profit of the group, after tax and non-regular items, was $68.9 million, a decrease of 29.7 per cent over the previous corresponding period.
Non-regular items in the previous period were $57.6 million and included the group's share of the equity accounted profit of $35.2 million from the sale of Brickworks Limited investment portfolio and an abnormal item in PT Indonesia Bulk Terminal.
Profit on non-regular items in the current period amount to $17.3 million and comprise profits on the sale of properties, businesses and investments.
The latest half-year profit was derived from sales of $296.6 million, up 12 per cent on the same period a year ago.
Profit after tax before non-regular items was $51,658 up 27.7 per cent.
The report also discloses that share of net profits of associates amounted to $30.3 million, up 54.7 per cent.
Earnings per share before non-regular items was 21.6c, an increase of 27.7 per cent.
Directors declared an interim dividend of 10c a share, up 25 per cent over last year's interim.
Dividend is fully franked and will be paid on May 12.
SHARE PRICE MOVEMENTS *********************
Shares of WH Soul sold steady at $9.68 on Friday. Rolling high for the year has been $11.40 and low $6.19.
Dividend is 22c a share to yield a small return of 2.27 per cent. At this stage of its history WH Soul is clearly a capital gains stock.
Directors also touched on investments in the half year review.
They said that the company's share portfolio of investments, which includes the group's listed controlled entities and associated companies, returned 32.9 per cent for the half year, after including unrealised capital gains, compared to the Benchmark S&P/ASX 300 Accumulation Index of 18.6 per cent for the same period.
The market value of the listed investment portfolio was $2.6 billion as at January 31, compared with $1.9 billion as at July 31, 2004, an increase of 36.8 per cent.
During the half year $4 million was invested in the equity market with the main purchases being Trust Company of Australia Ltd, Choiseul Investments Ltd and Mariner Financial Ltd.
Sales of $2 million included Crane Group Ltd, Spotless Group Ltd and Macquarie Bank Stapled Securities.
Additional investments in controlled entities and associates during the period amounted to $27 million and included the exercise of options in SP Telemedia Ltd and New Hope Corporation Ltd as well as participation in the Souls Private Equity Ltd IPO and the capital reconstruction of KH Foods Ltd.
Dividend income from investments, excluding dividends from controlled entities and associates, was $8.2 million in this half year compared with $5.4 million in the previous corresponding period.
Investment associated entities included Australian Pharmaceutical Industries Ltd (API) (group shareholding 20.3 per cent).
The group's equity accounted profit from API was $2.7 million compared with $2.9 million for the previous corresponding period.
Despite continued revenue growth of 10.2 per cent, API's net profit after tax for the half year ended October 31, 2004 declined 5.3 per cent to $11.9 million.
The result was affected by the significant expense of $8.7 million arising from the Kingsgrove manufacturing plant production losses incurred since the voluntary closure of the facility in late 2003.
Together with the announcement of its half year result, API also reported the completion of a strategic review of the business following the acquisition of New Price Retail.
BACKGROUND **********
Washington H. Soul Pattinson and Company Limited was incorporated on January 21, 1903, having previously traded as two separate companies - Pattinson and Co. and Washington H. Soul and Co.
The first public offering of shares was in December 1902 and Washington H. Soul Pattinson and Company Limited was listed on the Sydney Stock Exchange (now the Australian Stock Exchange) on January 21, 1903.
When Caleb Soul and his son Washington opened their first store at 177 Pitt Street, Sydney, in 1872 neither of them could have envisaged that some 130 years later their single pharmacy would have evolved into a company as prominent and diversified as WH Soul Pattinson.
It is one of the few successful public companies that has been managed by the same family from the outset - and therein lies the key to its strength.
Its leadership has been grounded in successive family members who value the history of the company, yet are able to adapt to changing times and economic conditions.
All have had the ability to spot talented people to fill senior and middle management positions.
In turn, management has always been supported by able, loyal and long-serving staff.
More than 40 employees have worked for the company for over 50 years.
Four generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.
Washington H. Soul Pattinson is now a significant investment house with a portfolio encompassing many industries - its traditional field of pharmacy as well as building materials, natural resources, food technology and beverages, equity investments, media and telecommunications, merchant banking and funds management.
ENDS
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I don't hold SOL
SOL Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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