One NZ chief executive Jason Paris on his company’s rebrand from Vodafone NZ, and a new partnership with Elon Musk’s SpaceX to provide 100% mobile coverage to Aotearoa in 2024. Video / Michael Craig
Infratil’s full-year result came in near the top end of its guidance as its two key holdings, One NZ and CDC, beat analysts’ operating profit estimates and guided to stronger performances again in FY2024.
Shares gave back some recent strong gains (see chart below) and were down 0.6 per centin early afternoon trading to $9.69, pacing a fall in the wider NZX50.
Jarden said it was an in-line, “solid result” that had been well-flagged. One’s forecast of $580 million to 620m operating earnings for FY2024 - partly driven by jettisoned brand payments to Vodafone PLC - was “very strong”, Jarden research director Nevill Gluyas said.
Gluyas noted that guidance for CDC (Canberra Data Centres) had been “shaved” from the 20 to 30 per cent increase given at a March investor day to 23 per cent.
“The market will likely want confidence that growth rates will remain in the 25 per cent range for future years,” the Jarden analyst said.
HRL Morrison & Co, which manages Infratil, said it had changed the formula behind its management fee (or “incentive fee”) that had trimmed $5.7m from its FY2023 payment. The fees have been a longstanding point of controversy, previously drawing flak from ACC’s investment wing.
NZ Shareholders Association CEO Oliver Mander said the changes were positive, and brought Infratil’s arrangement into line with other LICs (listed investment companies).
“Any underperformance in an asset they own will now be carried forward when calculating the incentive fee,” Mander explained.
“This is effectively a ‘high water mark’ for those assets, removing the potential for the same performance return being claimed twice over a number of years – a situation that occurs in the context of market volatility as asset values go up and down.”
Mander added: “NZSA is highly supportive of this amendment. This reflects the long-term nature of Infratil’s investments, the underlying volatility in markets they invest in and is more closely aligned with the returns enjoyed by shareholders.”
The upshot was that Infratil’s incentive fee for FY2023 fell to $232.9m (between international and domestic portfolio fees), from FY2022′s $278.7m). Infratil said Morrison’s fee was driven by “strong uplifts” in valuations for CDC and Longroad Energy.
CDC's 14 megawatt Hobsonville 1 data centre in northwest Auckland, which also went live in November as part of the firm's $300m build. It's twinned with Silverdale 1. CDC said in January that it's bought land for the construction of extra facilities to add another 12MW of capacity. Photo / Chris Keall
Infratil reported total ebitdaf rose 33 per cent to $531 million of the year to March 31, near the top end of Forsyth Barr’s estimate ($520m-$535m).
Net profit, buoyed by the partial sale of One’s celltower network, was $891.7m, down from $1.23 billion in FY2022 - a result driven by $965m from the sale of Tilt Renewables. Net profit from continuing operations was $561.6m from the year-ago $105.9m.
Total revenue was $1.8b from $1.3b a year ago.
The second-half dividend was 12.5 cents per share, taking the full-year profit payout to 19.25cps, a 4 per cent increase over FY2021.
The infrastructure firm guided to ebitdaf of $570m to $620m for FY2024.
One NZ - which booked $28m in rebranding costs during the period ahead of its change from Vodafone NZ on April 1 - saw its ebitdaf rise 9.7 per cent to $527.8m, ahead of ForBarr’s estimate of $520m in a year when high-margin roaming revenue returned to 80 per cent of pre-Covid levels.
And One NZ operating earnings for FY2024 were forecast at $580m to 620m - handily ahead of Jarden’s estimate ($540m) and ForBarr’s punt ($550m).
Infratil chief executive Jason Boyes. Photo / Mark Mitchell
An investor presentation reiterated One’s SpaceX partnership will “deliver mobile coverage to 100 per cent of New Zealand from late 2024″ via a partnership with Elon Musk’s Starlink (recently the subject of counter-jabs from 2degrees, which has a trial with putative Starlink rival Lynk, and Spark partner Intelsat, whose local manager thinks the hype is running too far ahead of events).
CDC Canberra Data Centres (CDC) ebitdaf rose by 33.7 per cent to A$215.5m, at the midpoint of guidance.
Expansion during the year included the opening of CDC’s first New Zealand data centres, with two “hyperscale” facilities opened (one in Hobsonville and one in Silverdale) with expansion confirmed for 2025.
One NZ CEO Jason Paris marked his telco's April 1 rebrand from Vodafone NZ by revealing a partnership with the Elon Musk-owned Starlink. Photo / Michael Craig
Infratil recently valued its stake in CDC upwards by a third to $3.1 billion to confirm its position as the company’s single largest asset.
ForBarr said CDC guidance would be the most important number delivered today. The wealth manager picked Infratil would forecast 20 to 30 per cent operating earnings growth. In the event, Infratil said ebidaf would rise 23 per cent to between A$260 and $270m in FY2023.
The independent valuation of Infratil’s share of Longroad Energy (in which it holds a 37 per cent stake, coinvesting with the NZ Super Fund) was hiked by nearly five times to US$7.44m.
The energy firm, which earlier raised US$500m for six projects across five US states, reported a 13.5 per cent ebitdaf rise to US$39.7m, with no operating earnings guidance given for FY2024.
Infratil saw ebitdaf of $169m - $45.7m more than FY2022 - for its imaging business, with the lift underpinned by its first full year of RHCNZ Medical Imaging Group.
It forecast operating earnings for the division of between $180m and $220m for FY2024.
After upbeat guidance delivered for One NZ and CDC at Infratil’s recent Investor Day in March, and Manawa Energy (formerly Trustpower) and Wellington Airport reporting since (the power company’s ebitdaf fell 14.3 per cent to $136.7m, the airport earnings increased 57.7 per cent to $89.8m on post-pandemic revival), analysts saw only limited chance for a reporting day surprise.
Forbarr has an “outperform” rating on Infratil, with a 12-month target of $10.60.
