Washington H. Soul Pattinson and Company Limited (SOL) Earnings Call Transcript

Good morning, and welcome to the Soul Patts' financial results presentation for the financial year 2026 being the 12-month period ending 31 July 2026. My name is Courtney Howe. I'm responsible for Corporate Affairs and Investor Relations at Soul Patts, and I'm pleased to introduce our presenters for today. Todd Barlow, MD and CEO, will address performance highlights and major transactions completed during the year. David Grbin, CFO, will cover the group financial results before handing back to Todd to step through portfolio performance and the outlook. We will respond to questions at the end, starting with analyst questions on the line. As usual, there is the option for written questions to be submitted at any point during the webcast, and you will see a question box on the bottom of your screen. Over to you, Todd.

Thank you, Courtney, and welcome to everybody joining us today. FY '26 was a significant year for Soul Patts. We completed the $15 billion merger with Brickworks, the largest transaction in our 123-year history. We simplified our structure and strengthened the balance sheet. The combined group is already delivering value and outperformance for shareholders. Our portfolio is more diversified and more liquid carrying more capacity to act than at any point before. We're also expanding the portfolio geographically with a growing number of global investments embedded across the broader portfolio. We aim to grow the portfolio and outperform the market over the long term, increased cash generation to underpin dividend growth and deliver those returns while actively managing investment risk. The next 3 slides discuss each of these objectives. Starting with portfolio growth, we had a strong outperformance against the ASX benchmark. Post-tax net asset value on a per share basis grew 27.2%. This includes significant tax assets that arise from the Brickworks merger. If we exclude tax and look at the pretax NAV, the portfolio returned 10.2% outperforming the index by 4.2%. Over the last 5 years, the pretax portfolio has returned 11.5% per annum 3.5% ahead of the market. There's a phenomenal track record in an environment where many fund managers have found the market very difficult. Looking at the growth from the perspective of total shareholder returns, last year, the 16.8% growth was 10.8% above market, what matters more to us is the long run. Over 25 years, Soul Patts has returned 12.8% per annum against 8.4% for the index. Compounded, that is a total return of more than 1,900%, just about tripling the market value. Net cash flows from investments grew 11.5% to $572 million. On a per share basis, NCFI has compounded at 15% per annum over 5 years, from $0.75 per share in FY '21 to $1.51 in FY '26. That cash flow reflects the health of our portfolio and importantly, is what funds the dividend. Today, the company announced a final dividend of $0.63 fully franked, taking total dividends for the year to $1.11, up 7.8% on the previous year. This marks our 28th consecutive year of dividend growth. And over that period, we are very pleased that dividends have compounded at over 10% per annum. One comparison I want to draw out here is Soul Patts' dividend growth relative to the builder market. Over the past 5 years, our dividends per share have compounded at over 12% per annum, whereas dividends across the ASX200 have been fairly flat at around 1% growth per annum and were negative last year. Another key objective is to manage risk. In the last 5 years, we have actively derisked what was an equity-centric portfolio into 1 that is genuinely multi-asset. Today, we are more diversified and less correlated than ever before. The shape of the portfolio shows how actively we managed this. 5 years ago, the portfolio was $5.8 billion and 90% listed equities. Today, there's a $13.7 billion portfolio and listed equities are 40%, including all of the listed equities across listed companies and emerging companies. The balance of the portfolio sits across asset classes that behave differently through the cycle. This year, we turned over $12.7 billion in total buying and selling, and we hold $2.7 billion of net cash and liquid investments in the fixed income strategy. Essentially, our allocations follow opportunity. We do not drill buckets with capital moving to where the risk-adjusted returns are most attractive. Our aim is to exceed market returns with a portfolio that carries lower risk than the market. The clearest evidence of this is what happens when in down markets. Over 25 years, when the ASX has had a negative month, Soul Patts has performed 1.8% better per month on average. We protect shareholder capital when markets fall and keep pace when they arise and this is the biggest contributor to our track record. Let me turn to the 2 major transactions that occurred through the year. First, the merger with Brickworks completed in September 2025, to simplify the structure, increased free float and liquidity and grew our shareholder base by 35% to $84,000. It also transformed our tax position from a constrained into an asset, which David will cover in detail. Brickworks building products is now the largest investment in our private companies asset class. Since taking full ownership, we have been simplifying the operations, we paid debt in certain legacy operating leases and worked with management on a cost-out program with annualized savings that will flow through from FY '27. The merger triggered pre-existing rights held by Goodman, which gave rise to the sale of our industrial property interests, which completed in June 2026, and delivered $1.9 billion of net cash proceeds. This was a very positive result for Soul Patts. The portfolio was substantially developed and stabilized and priced at full market value. At a time when listed industrial property is trading at a meaningful discount to asset backing. Subsequent to the transaction, long-term bond rates have been increasing, putting further pressure on future returns. We are confident we can redeploy the proceeds from this transaction into meaningfully higher returns. We retained about $400 million of real estate exposure from Brickworks now within real assets and importantly, a number of core development sites with further upside. The relationship with Goodman began in 2005, over 2 decades, land at once housed brick plants and claps was progressively developed into prime industrial estates, and the returns over that period were exceptional, it is 1 of the best examples I can point to of what patient capital and the right partner can compound into. Shareholders will have heard us talk about our desire to allocate more to private markets and how that was taking us offshore. This strategy has been developed over the past 3 years where we have been building relationships with private market managers across private equity and credit in North America and the U.K. and Europe. The strategy evolved from the fact that the asset classes we like are quite niche in Australia. In private equity, we look to back high-quality companies with growth capital in partnership with founders, management or owners, a limited number of those kinds of opportunities in Australia at scale. The other area we like is private credit, where we can invest in a structured way to protect our downside and get access to good risk-adjusted returns. There's a natural ceiling to the size of our direct book in Australia, but there's a very deep pool of opportunities globally. The team has mapped more than 1,800 prospective partners and reviewed over 300 in-depth to arrive at 17 commitments for FY '26. Due to sourcing and diligence in-house and the relationships are already earning as co-investment opportunities on preferential terms. FY '26 was a very busy year with around $1 billion of new commitments made across 17 positions. Post year-end, we have agreed to allocate another $660 million. It should be noted that these are just commitments and the funds that have actually been invested to date is around $600 million. But over the coming years, our commitments will be drawn down as opportunities present themselves and money is called. Each position is sourced and diligence by the same team that has responsibility for direct investments. So for example, our fund allocation to credit will sit within our credit asset class and be managed by our credit team. Return profile will take time to build, and the target returns are indicatively above 20% for private companies and above 10% in credit. We believe that offshore markets not only provide the depth of opportunity but also a good diversifier for the portfolio and an opportunity to derive foreign income that we can attach our franking credits to. FY '26 was an extremely productive year. In addition to the merger of Brickworks, we transacted $12.7 billion, which is our highest on record. Sometimes I'm asked how this level of activity reconciles with being a patient long-term investor. I don't believe the portfolio activity is inconsistent with our historical approach. The market environment is changing rapidly, and we need to adapt. In addition to the portfolio adjustments we have been making, we believe we need to be agile and build the liquidity to act when the time is right. We are positioning the portfolio to be even more diverse and resilient than ever before. We're also opening up exciting new asset classes and opportunities. However, our approach to being disciplined, patient and long term, in terms of thinking beyond the short-term randomness of market volatility is consistent with the way we've always acted. Last year, we sold $2.7 billion more than we bought. This was a deliberate strategy and a desire to build up liquidity and a fixed income portfolio that I'll discuss shortly. In addition to the cash we have accumulated, we also have access to attractive debt that would assist with further acquisitions. At year-end, the total liquidity was over $3.8 billion. I'll hand over to David Grbin, our CFO, to take you through the group financial results.

Thank you, Todd. Good morning, everyone. It's a real pleasure today to present our 2026 results to our shareholders. They are a strong set of numbers. And I'll -- it is a delight to be able to do that today. As always, I'd like to remind investors that statutory profit isn't a measure that we always use to assess performance, given the number of one-off items running through the financial report this year, particularly following the Brickworks merger. So I'll do my best to demystify some of these complicated accounting issues for you all today. . So our reported or statutory net profit after tax for the year was $2.191 billion, up 502% on the prior corresponding period of $364 million. This year, we presented our statutory NPAT in 3 components, and we've done that given the high level of portfolio turnover this year and our reduced reliance on associate earnings. So we think the regular and nonregular NPAT which is no longer a meaningful way to look at our financial results. So how have we done this? Firstly, with bucket up items into nonrecurring and a total $1.5 billion gain. Around $1.3 billion of it came from the day 1 accounting gain and tax cost base reset on the completion of the Brickworks merger, which we don't expect to reoccur in 2027. The balance, around $200 million is made up of 2 parts. Firstly, a gain of $436 million from marking to market our remaining interest in Tuas and Aeris. So we moved from equity accounting to fair value accounting during the year. And that was partly offset by just over $200 million worth of impairment restructuring and other nonrecurring costs. The second component is a total portfolio of gains and losses, whether they be realized or unrealized. For FY '26, they totaled $343 million, up $107 million on FY '25. And they will go depending on market conditions and where we want to take the portfolio. And finally, we're left with what we call our operating NPAT, which is the impact from subsidiaries, associates, plus our portfolio income, for example, dividends, interest, fees and distribution, less any of our expenses that we have to pay on the portfolio and our corporate costs. Consolidated operating NPAT was $319 million for FY '26, down $36 million on the prior corresponding period, largely due to a lower profit contribution from our new note investment. If I now turn to our key performance metrics that we do focus on. Net cash flow from investments is the first one. It's the performance measure we believe best reflects the financial health of our portfolio. It captures income received in cash from the portfolio, including dividends, interest, fees and distribution as well as any realized gains or losses on trading assets. NCFI for the year was $572 million, up 11.5% over FY '25. That growth was driven by a larger than average credit book, which delivered strong returns and higher dividend and distribution income from our real assets portfolio through the industrial property joint venture businesses and some property development activity and the cash-generative businesses in private companies. On a per share basis and reflecting the increased capital base following the Brickworks merger, NCFI grew 8.3% to $1.51 per share in FY '26. Over that 5-year -- over a 5-year period, NCFI per share has compounded at 15% per annum, starting from $0.75 in FY '21 and finishing at the $1.51 that I just mentioned in FY '26. This consistency in cash flow growth is what underpins our unbroken 28-year record of dividend increases. I'll now turn to net asset value. We look at net asset value on both a pretax and post-tax basis. Following the Brickworks merger and the resulting step-up in market values of all of our assets in the combined group. Our post-tax NAV is now higher than the pretax on. The deferred tax liability that we really -- that we previously carried has now become a deferred tax asset. In lay terms, it means less tax to pay when we realize those assets in future. Post-tax NAV increased 31.4% in the year to $14.5 billion. That's an extra $8.15 per share or a 27.2% increase on a per share basis. On a pretax basis, NAV was $13.7 billion, a return of 10.2% for the year, outperforming the market by 4.2%. And then our performance is in a 1-year story. Over the 5 years, we've returned 11.5% per annum, outperforming the market by 3.5% per annum. I'll now turn to tax assets. The Brickworks merger has also transformed our tax position. We now hold a net deferred tax asset of $792 million or $2.09 per share compared with a deferred tax liability of $1.4 billion in FY '25. This change has arisen from the merger of Brickworks where the tax cost basis of all of our assets was reset to market patties. This is important for our portfolio as it means we can transact in the future without tax friction. In addition, our shareholders have the benefit of a franking credit of just over $1 billion or $2.75 per share. That balance grows up to a potential dividend of $2.4 billion of untaxed income that's able to be distributed to shareholders fully franked. And given the increasing exposure to offshore assets in our portfolio generating foreign income, Soul Patts can continue to pay a fully franked dividend to our shareholders by drawing down on this bank of the franking credits. Before I hand back to Todd, I'd like to touch briefly on how we value the portfolio, given the increasing diversity of asset classes we now hold. We apply a rigorous valuation methodology to each asset class every 6 months. Around 40% of the portfolio is valued at market value, principal or listed holdings, which are valued at the market prices at the end of each reporting period. A further 31% is subject to third-party valuations. These are assets held in externally managed funds and are valued at the assessed valuations provided by the managers of those funds or based on observable market data. We subject these assets to our own analysis, and of course, they're subject to external audit. An example of this would be our real estate assets, which undergo third-party valuations at least annually. Assets at directors' fair value applies to a further 21% of the portfolio. These are predominantly private companies not held in funds or directors' valuations informed by valuations reviewed externally by independent valuation experts. And the final 8% is our private credit assets that are held at what's called advertised cost. As required by accounting standards, we apply an expected credit loss methodology. This follows a review of credit ratings for each data and a specific market risk factor and company factors are included in that calculation. This approach is also externally reviewed and subject to external orders. I'll hand it back now to Todd to walk us through the portfolio performance and individual asset classes.

Thank you, David. Let me now take you through the portfolio of sale of asset class by asset class. At year-end, the portfolio was $13.7 billion on a pretax basis or $14.5 billion after tax. At the end of the first half, the portfolio held less than $500 million in cash, and today, it's 20% of the portfolio, a deliberate and tactical position to manage liquidity across the group in the current environment. 6 asset classes make up the portfolio today, and every 1 of them now calls a global component, set through H1. Listed companies have come down to 30% of the portfolio from 57% last year. This is largely because Brickworks is no longer listed holding following the merger. It now shows up in private companies and real assets. In addition to the delifting of Brickworks, we sold down $2.8 billion of equities through the year, including $910 million of TPG. We reduced the size of this book through the year to hold 39 positions targeting reliable income and long-term compounding. New Hope remains our largest position alongside TPG. Performance for listed companies were very strong, returning 17.1% for the year and beating the ASX200 benchmark by over 11%. To put that in context, we're roughly 3 quarters of active Australian equity managers failed to beat the benchmark during that period. Performance was driven by our overweight position in energy, exposure to resources and deliberate rotation in the defensive names. Fixed income is a new addition to the portfolio this year now sitting at 20%. We established specifically to actively manage the group's liquidity and give ourselves more flexibility, funding in through equity sales and proceeds from the industrial property divestment. Because it's only been running for a small part of the year, the income contribution so far is modest, but income will build into FY '27. The book itself is conservative by design. It is currently in high quality, short duration instruments split roughly 2/3 to global and 1/3 domestic, carrying a reached AA credit rating and is fully hedged back into Australian dollars. This liquidity gives us real optionality to deploy as actualities emerge. However, this by no means is a parking spot for cash. We are now seeing opportunities in fixed income that look relatively favorable and attractive. The weight that the yields are increasing means we are receiving reasonable compensation for holding cash, which we have not seen for a number of years. To put it in perspective, the current yield on this portfolio would have beaten the total return of the equity markets over the past year, and we are taking very little risk. The private company's portfolio continues to build and nearly doubled in NAV this year and now represents 17% of the total portfolio, largely on the back of the Brickworks products addition alongside strong underlying value creation across the book. We generated an IRR of close to 32% in FY '26. Cash generation improved too. Net cash flow from investments rose 34% to $49 million, driven by stronger contributions from Ampcontrol and Carlileswim. This is a diversified book of 15 investments the value is held directly. And the other 11% of value sits with our allocation to offshore funds and co-investments, which continue to grow. Looking at the 4 largest direct investments. Building Products is now our largest in this asset class, where we are streamlining the platform with the cost-out program, realizing value as we look into FY '27. Ampcontrol, a partnership now in its third decade continues to benefit from the energy transition and is increasingly filling opportunities in data center power infrastructure. Carlileswim brought together several swim school brands under 1 national platform, now running 31 centers. It has a best-in-class curriculum recently receiving a national award for excellence. Ironbark is a leading national wealth platform that has been growing at scale and are in total funds under management and advice increasing 12% over FY '26 to $97 billion. Cat has a long history of backing private businesses. What makes our approach different is structural. We have no time horizon, no pressure to sell. We use low leverage and focus on long-term value creation. This is why founders like to partner with us. Alongside our direct holdings, we are continuing to build out our offshore relationships. At year-end, we've committed close to $500 million -- $518 million across 9 positions with 6 out of this year. Of that $258 million was invested at year-end. Our global private company focus is on mid-market funds of roughly USD 500 million to USD 3 billion run by managers with deep expertise in a particular sector or strategy, where deal flow is more often bilateral than auctions and leverage is lower. We are looking to find emerging managers who have something genuinely differentiated. We are often among the first Australian investors in these funds. Backing the right managers earns us access to individual deals alongside them on preferential terms. 2 of the 6 new positions this year came through exactly that route. Looking at the split of commitments by strategy, the capital sits primarily across growth equity, which is consistent with our focus domestically. Credit sits at 12% of the portfolio and delivered a total return of 13.5% for the year, an excellent result for an asset class that has been performing consistently since FY '22. NAV came down slightly to $1.7 billion, reflecting net repayments of $117 million over the year, even though we deployed $1.1 billion into new positions. The site of good health of the credit book is when you get repaid. But we do have to work really hard to constantly originate new opportunities to remain invested in this asset class. NCFI was up close to 40% -- up close to 40% to $220 million, helped by a higher average invested balance and a record year for origination fees. The book today spans 38 positions -- 34 positions, I should say, 24 direct investments and 10 offshore. Given the high level of new origination, the average remaining loan term of the direct book is around 3 years. Those offshore positions account for $373 million of invested capital, and we've got a further $524 million committed but not yet drawn. We added 5 new offshore commitments in FY '26 and have a further 8 already lined up for FY '27. So there's more growth to come as funds are drawn down. What differentiates our credit book is that we're not constrained to any 1 part of the capital structure. We can land senior, junior secured or unsecured, wherever we see the best risk-adjusted return. This year, that meant fewer larger positions, each individually structured with real downside protection. Right now, the book is weighted firmly towards the top end of the capital structure with senior secured lending, making up the largest single component, complemented by junior secured and asset-backed positions and only a small allocation to unsecured preferred equity and reinsurance. It is also diversified by sector. Industrial is our largest exposure followed by energy, consumer financials and materials with a smaller position in real estate and IT. Fortunately, we've always avoided real estate developer loans, which make up more than half the private credit industry in Australia, and we have not allocated to SaaS businesses offshore, which is where we see the most stress building in the market. We're not making a concentrated bet on any single part of the economy. That discipline shows up in what we didn't do as much as what we did. We turned down more than 80 deals in FY '26 because they didn't meet our return or structuring requirements. And since we started this strategy in FY '22, every single loan or bond position we've exited 22 in total, has been repaid in full with no capital losses. This is the result of careful borrower selection and structuring from day 1. We continue to believe this asset class presents strong risk-adjusted returns, invest in companies we think are good quality or have a strong asset base that provides us with structural downside protections. We're targeting low double-digit returns through faster realization of the strong origination economics and the benefit of rising base rates, not by taking on more risk. Our flexibility and ability to design solutions also enables us to earn Alongside our direct lending, we've built a global network of credit fund partnerships. We've now committed $1.5 billion across 19 positions with 8 more already locked in for FY '27. $373 million of that is currently invested. These commitments are sourced from a matched universe of more than 1,000 managers globally, reviewing over 50 of them in detail, and each manager we back has a distinct strategy and a track record of spending more than 1 credit cycle. We spread capital deliberately across strategy and manager drawing commitments down gradually over 1 to 3 years rather than all at once. All of these strategies target returns in excess of 10%. We merging companies came down to 12% of the portfolio from 16%, and it was a mixed performance. This asset class captures a range of investments we hold for growth includes listed, unlisted and large strategic stakes. Listed assets include NextGen, EOS and [indiscernible]. Strategic assets are assets that are derived from our previous strategic portfolio and include Tuas and Aeris. We also have unlisted investments in companies like Rocket, North Harbor Clean Energy and [indiscernible]. Our listed and unlisted positions both performed well, outperforming their benchmark Listed assets returned 4.3% versus the index of 1.8% and unlisted assets returned 8.9%. Strategic assets, however, dragged on performance in the second half Tuas was hit with an unexpected regulatory intervention in Singapore. The loan cost us 8% of performance within emerging companies and around 2% at a group level. Fortunately, we had already reduced our exposure in Tuas well before the intervention. Our holding reduced from 25% to 14% over the period as we sold more than 40 million shares at an average price of around $6.52 per share. It meant that the impact this year was materially smaller than it would otherwise have been. Looking through this noise, our 3-year track record here remains strong, running comfortably ahead of the benchmark. Through the year, we sold down of around $1.7 billion of positions to derisk and free up capital for redeployment, and we're steadily building more offshore exposure through funds and core investments. Fuel assets is now 10% of the portfolio -- now up 77% on the back of the Brickworks merger and higher data center valuations. Even after the industrial property sale to Goodman will be retained around $400 million of bkk related properties, that includes a 50.1% interest in the Manufacturing Trust, which holds 13 long-leased manufacturing plants, plus $235 million of wholly owned surplus and development land with rezoning potential. Cash flow this year came from distributions of the industrial property assets held ahead of the divestment, together with income from the rest of the property book. Our strategy with respect to real assets is to gain exposure to hard assets that can ultimately benefit from a repositioning and value uplift through derisking over time. Our current portfolio spans real estate, agriculture, data centers and retirement living. Performance in real assets was dragged down by the fact that a large proportion of its assets through the period for the industrial property assets that were sold at the end of the year for the market price at the start of the year, meaning that we did not get a portfolio return other than a small yield. I'll spend a moment on data centers specifically because it's an area we get asked about Optum. We're valuing this exposure at $344 million currently with a further $118 million of committed equity still to deploy. Our approach here is deliberately conservative. We partnered with a developer and operator of global assets who secure the power and lock in a signed customer contract to improve the value before construction. We believe this -- this approach clearly fits our real estate -- sorry, our real asset strategy. There is a downside protection with asset backing of industrial land with access to power. There is upside if we can secure a long-term contract and approval for redevelopment. This is a cloud data center strategy, have limited direct exposure to the AI-specific compute demand that gets a lot of attention in this space. Again, we believe this is a low-risk segment of data centers with proven demand and economics. Let's me close by talking through the outlook, and I want to frame it in a way we measure our performance, grow the portfolio, increase cash generation and managed investment risk. Each asset class has a clear strategy for growing value. Starting with listed companies, we are running an index underwear quality-focused strategy. And this year, we are developing a market-neutral strategy to run alongside the core book specifically to lower our correlations to the broader listed market. In private companies, and controls move into data center power infrastructure is a good example of the growth we're looking for, an existing platform, finding an adjacent market opportunity. In credit, there continues to be good opportunities for direct loans, and we've already got a further 8 offshore credit fund allocations committed in FY '27 to keep the keep building that global exposure. Emerging companies have been more selective following the Tuas outcomes, we're leading into structural themes like uranium and defense, where the current dislocation is creating opportunity rather than risk. And in real assets, data centers remains a growth engine for us. We're focused on progressing assets after development curve. The FY '27 year is off to a strong start, while only the listed parts of the portfolio have been revalued to the market, we have generated strong outperformance in the period to 22 September. Our net asset value has increased 4.3% against a market that is negative 1.1%, a 5.4% outperformance. In relation to our objective to increase cash generation, we are continuing to see rising base rates, which were working in our favor because the majority of our credit book is floating rate. So as rates move up, income from that book moves with it. Rising rates are also beneficial for our fixed income portfolio. To date, many of our private companies have been focused on growth. However, we're starting to see some real opportunity for cash generation across this asset class as the investments mature. And we go into FY '27 with real firepower on the tax side, $1 billion franking credit balance, together with tax assets grounded by the Brickworks merger underpins our distribution capacity for years to come. And we also believe we're in a strong position in terms of the risk management across the portfolio. Our net cash and liquid investments has increased to $3.1 billion, taking available liquidity, including undrawn debt facilities to $4.2 billion. We deliberately established fixed income as a strategic asset class this year and is now benefiting from a rising risk-free rate. That level of liquidity means we're well positioned to capitalize on new opportunities as they emerge and to fund the offshore commitments we've already made without needing to sell anything else down. We remain patient and disciplined. That means continuing to diversify the portfolio and maintain a defensive stance. Closely monitoring how rising rates are reflecting risk-adjusted returns across every asset class and we're being very selective. We'd rather wait for high conviction opportunities and deploying capital just for the sake of it. And on geographic diversification, this is where the scale of what we -- really shows. We now have $2.6 billion of total commitments across our global private partnerships spanning multiple asset classes. These established relationships provide access to increased diversification, ongoing deal flow and opportunities for us to leverage information and learnings from some of the smartest people around the globe. I'll finish on this last slide, which ties together everything we've covered today. Liquidity is the foundation of being able to fund good opportunities. The performance of our -- the permanence of our capital on our balance sheet is a strategic advantage and allows us to be long-term focused. The quality of our opportunity flows from our deal flow. Our ability to be flexible and our reputation is what feeds us the opportunities. These are our strengths. Portfolio allocation comes from selecting the best ideas and ensuring there is a contest for investments. The recycling of capital is an important discipline. New ideas are funded by selling the existing investments. This year, we sold $7.7 billion in assets and made $5 billion in new investments. That activity is regenerating the portfolio. A simple model executed well and exploring our competitive advantages create enduring success for our shareholders. 16.8% total shareholder return this year, 12.8% in the year for 25 years and 28 straight years of dividends growing at over 10% per annum. Thanks very much for your time this morning. I'll hand over to the moderator for questions.

[Operator Instructions] Your first question comes from Steven Sassine from Morgans.

Great set of results, as always. I've just got a couple of questions, if that's all right. Maybe Todd, I'll start with you. And I guess the cash war chest, that's been accumulated $2.7 billion of net cash and liquids, which is what, 20% of the portfolio sitting in that fixed income sleeve. I guess -- is there a realistic time to redeploy those funds either into the market or new opportunities? And I guess the second part of that, is there a point where carry that much liquidity becomes a drag on NAV growth rather than keeping that optionality?

I mean we traditionally -- or I guess, in recent times, people will have seen a large cash balance as a drag on returns and maybe signs of a lazy balance sheet. But -- we don't see it like that. We actually see it as a strong risk-adjusted return asset class right now. As I said, the current returns we're getting are what we saw out of equity markets last year on the ASX. And I think the -- our prediction is that the year ahead might be more difficult than the year that we've just seen. So it's a very deliberate strategy to maintaining capital, take a defensive stance and we're getting paid for it along the way. But that's not to say that we always will have an allocation to fixed income, it certainly is the easiest and most obvious target for liquidity if we ever saw some good opportunities emerge. Now we're already earmarked a lot of that capital for the allocations that we've made globally. As I said, we're up to $2.6 billion in commitments, of which only $600 million is drawn. So there's another $2 billion of funding that will take place over the next couple of years as we build out that portfolio. We think that we've largely set a lot of our ambition in terms of how we want to allocate globally, but the funds will take some time to draw down.

That's great. And maybe if we could just move across to the credit book. Obviously, pretty strong returns in there, but I think you mentioned $1.1 billion of new positions. I guess as you sort of scale and pedal pretty quickly to deploy some of the capital that, that rolls off, are you having to sort of move down the capital stack or accept any sort of tighter spreads at all?

I mean spreads are still very tight in the system. But because of the niche way that we play private credit. We haven't had to do that. So you can see that in our returns have been fairly consistent over the last 3, 4 years that we've been doing this. So even though the book has been growing, the returns haven't suffered. But there has been a view that in this market, we believe that there's better value at the higher quality end of the private credit universe because the spreads are so tight, it doesn't necessarily reward you for taking a lot of risk. But what we do to earn that extra outsized return is we're finding companies that need a flexible solution that we work with. We spend a lot of time and effort to construct something that works for them and for us. And we might provide a sort of bridging solution. So actually, our -- the fact that we get repaid quickly, well, it's frustrating for our team because they have to keep going and originating new deals, it actually makes the returns look better if we get paid back more quickly. So there's lots of reasons why we're getting outsized returns without having to take more risk.

Makes sense. I might push my luck and ask 1 more if I can. Maybe switching to offshore. Obviously, you're building out a pretty meaningful offshore co-investment across your credit private companies as well. Can you just remind us how your resource to monitor some of those global managers. I think you mentioned the resources will be within that existing portfolio domestically. Do you maybe just remind us of the expertise within each of those portfolios to manage that? And maybe the second part, if I can. Is there a target offshore waiting at all?

I mean, we don't really have targets on anything, but we do want to balance our overall allocation globally with the fact that there's some very exciting opportunities for us is a great avenue for us to be able to get offshore income back into Australia and utilizes our franking credit balance. If we keep investing in Australia, we keep paying tax in Australia, and it's hard for us to eat into our frank credit balance, whereas this is a really great opportunity for us to get outsized returns and we also just like the opportunity set. As I said in my talk, it's a deeper pool of opportunity, really, really great managers that we're developing partnerships with who can do things that we would love to be able to do here, but the scale just doesn't exist. And so in terms of your question around the team's ability to do this, the stuff that we're allocating to is consistent with the kinds of investments that we do domestically. It's just that we can't access that deal flow. We don't have boots on the ground to be able to do it offshore. So the way that we look at it is if we were going to do a credit investment that was $100 million or allocate to a fund that was in credit for $100 million is the same level of diligence, research, structuring and relationship development as it would be to a fund as it is to a domestic opportunity that we do directly. So it's effectively the same process done by the same team.

[Operator Instructions] Your next question comes from Esther Holloway from Morningstar.

I call it my peer there at Morgan had some pretty similar 1 to try to go off the cuff. So franking credit balance. On Slide 7, you mentioned that the franking credits can be attached to distributions from offshore investments. And I recall you mentioned that the supplies were the investments from -- with similar tech systems to Australia in locations. Which geographies are the most exposed to these offshore investments and which are you trying to sort of grow coverage in?

Yes. Well, most of the new commitments that we've made in the global private partnerships are in North America. So that is all of it, a little bit in Europe, but yes, it's largely in North America.

Okay. And is the strategy to -- that enables greater sort of drawdown on that substantial franking credit balance is that working as expected?

Well, it's early days yet, but the concept is quite simple. So we will earn offshore income, that offshore income when we bring it back to Australia has already been subject to tax overseas. So it doesn't get double taxed in Australia. So when we go to pass that on to shareholders, we can then attached the franking credits that we've already built up over time to that dividend that we pay to our shareholders. So it is just that net way of utilizing that bank of franking credits that otherwise, if we'd invested in Australia, as Todd said, we would just continue to just keep building it up and shareholders would never get the benefit of it.

Great. And on private credit, obviously, the spotlight has been on private credit and its risk lately. And I note that Soul Patts doesn't have a large exposure to real estate or no AIS business is offshore. So I think that's an important context. But has this sort of given any like to sort of improving your due diligence process? Or are you pretty happy with your strategy as it is?

Yes. We've actually got quite a few questions coming in written questions about that. So maybe I'll spend a bit of time on how we view private credit because there's lots of headlines around it. And I think what we're seeing some potential problems in the asset class because a lot of money has flowed in very quickly to global managers who have to then go and deploy it. And if I'm a really, really large private credit manager, and I getting money thrown at me, I need to go and find ways to deploy it really quickly. So that would tend to mean that they are sharpening the prices. So the risk spreads are contracting. It also means that their diligence might be a little bit looser. It also means that the terms and the structuring of that loan is poorer than it should be. And it also means that it's going to the areas that are that have the most demand for the products. In Australia, what does that mean? Well, over half of the private credit lending in Australia is to real estate, particularly to real estate development. And in the U.S., a lot of that is to sponsor led private equity loans, which are highly levered loans to leverage buyouts. And in the last few years, a lot of those leverage buyouts were SaaS companies, which are now, of course, under threat by AI. So fortunately for us, we have never been in real estate. It's not something that we wanted to do from the outset. We felt that Australia was a bit of a crowded space anyway. And what we wanted to focus on was a derivation of what we already do, which is we invest in equities in good quality businesses. But from time to time, we come across opportunities where that person whose business we like doesn't want to raise equity. For example, they might think that their share price is too low and they want to bridge themselves to a point where they can raise equity at higher prices and for whatever reason, they can't access bank debt. And so we come up with a structured solution. And the way that we see this asset class is rather than it being risky, we see it as a defensive asset class because all of the equity that sits behind us in terms of ranking is our buffer. It's our margin of safety. If something goes wrong, the equity gets to that very quickly and the debt stack is preserved. So when we think about the issues that are emerging in the sector, so there has been some loose practices, but -- the equity is far more exposed in those industries than we are as debt. But for us, it's about being selective. We picked the right companies. We picked the right asset classes, we picked the right instruments. We do the diligence. We structure effectively and we price appropriately. And I think that we are very confident with our book and also we're very confident with the managers that we're partnering with globally.

Thank you. There are no further questions from the analysts on the line at this time. I'll now hand back to Courtney Howe for any written questions on the webcast.

Thank you, Harmony. We have quite a number of written questions that have come through. A couple more analysts are in the written Q&A. So I will start with Simon Fitzgerald from Jefferies. He is asking Todd after the Goodman transaction, Soul Patts retained interest in manufacturing assets and development land, how should investors think about the embedded value creation opportunity that is still remaining within those assets?

Yes. So there's about $400 million of total real estate came across from Brickworks that was not sold to Goodman. A bit over half of that is in the manufacturing trust, which houses a lot of the operating assets that Brickworks have. Now there is some redevelopment opportunity. As we've been solidate sites, we open up the ability to redevelop some of the assets in that portfolio. But generally speaking, it's a stabilized asset and the opportunity is more limited. The other part of that portfolio, just under $200 million is across a number of surplus assets that have real development opportunities. So the big 1 is in Victoria's Craigieburn. And in the U.S., we have the Mid-Atlantic site, both of which we think have good upside from rezoning.

Thank you. Another analyst, Ryan McCarthy from MST Financial. Credit versus fixed income. You spoke about the running yield of fixed income above equity market returns. Could you quantify what you see forward running fixed income yield is? And you mentioned a fair bit of committed capital, do you have a time frame for that deployment? Should we expect fixed income to remain a significant percentage of overall assets?

So the -- the running yield on our current fixed income book is about 150 basis points above the RBA cash rate. Now we're seeing that rate obviously come up a lot in these expectations that there'll be 2 or 3 rate rises imminently. So 150 above is a short duration book now. There might be a time where we actually chase a little bit more duration and a little bit more yield. But of course, you're taking a little bit more risk on future rates at that point. But right now, it's managed a lot more like cash but extracting decent returns out of it.

The second part of the question was in terms of committed capital. So there's $2 billion of further commitments to global managers that are not yet drawn. We think that will be drawn over the next 2 to 3 years. But it's not perfect because in that time, there's also some stuff that will be returned to us, the allocations that we've previously made will receive distributions and repayments along the way. and also some of the stuff that we've allocated to we have liquidity. And so it might be a short-term strategy that exists for a while, and then we redeploy that somewhere else. So right now, as it stands, is $2 billion of commitments that we need to make over the next 2 to 3 years, but it may not be the full $2 billion.