June 11, 2025 • 35 mins
Jason Boyes, Infratil CEO, joins us from their $500M upgrade site at Wellington Airport—where the infrastructure investor holds a 66% stake. After reporting mixed results for the last financial year, Jason charts the course of Infratil’s future.
What’s driven the company’s net loss for FY2024, even while underlying earnings showed growth? How does the management team plan to rein in their cash flow imbalance? Jason reaffirms Infratil’s commitment to dividends and explains a new focus on larger, scalable assets—divesting almost a billion dollars to reinvest in major projects. Find out why Jason is so confident that Infratil is positioned to benefit from US energy shortages and growing demand for data centres to support AI expansion.
Plus, hear about Infratil rising star Gurin Energy, supplying solar power to the Singaporean government.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Jodder and welcome to Shared Lunch, brought to you by Chasea's.
I'm Helen Madison and today we're at Wellington Airport, which
is one of the oldest assets for infrastructure investment company
infratil now Vertill is super popular on Cheza's And in
a moment I'll be speak with Jason Boys, the CEO,
about the full year results, the challenges and the outlook.
(00:23):
Well also look at what's happening to Wellington Airport now
the eagles have gone.
Speaker 2 (00:28):
Investing involves a risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Speaker 3 (00:39):
Everything you're about.
Speaker 2 (00:40):
To see and here is current at the time of recording.
Speaker 1 (00:42):
Hi Jason, thank you for having us here at Wellington.
Speaker 4 (00:45):
Thanks you for coming Now.
Speaker 1 (00:47):
Wellington Airport is an iconic infrastructure piece for Wellington. That said,
poor old Wellington hasn't had the easiest time public service
cuts and the like, and yeah, it's been an adulgen
So what hecet does Wellington Airport play in that recovery?
Speaker 4 (01:05):
Yeah, yeah, I agree with both. Live in Wellington, we
we feel how the city has changed over the last
year or so. From our perspective in Wellington Airports, this
is the front door to the city and we take
that really seriously. And even though we've got a lot
of construction going on, which we'll go and have a
look at in a second, you know, we do stuff
(01:26):
like this to make it feel like, you know, this
is you've arrived in Wellington. I think we're going to
keep investing though. One thing that has been quite good.
I know domestic has been tough with what's been going
on with the government, but actually international has been an
incredible success story over the last years. So the team's
done incredibly well and there's more good stuff there to come,
and so we're continuing to invest to give us the
(01:48):
best of options for international growth, which we can talk
about in a minute and sort of get ready for
when domestic returns.
Speaker 1 (01:55):
So quantus they decided they will increase their three you're
like thirty one percent for summer.
Speaker 3 (02:02):
Yeah, so that will be quite a boon for the airport.
Speaker 4 (02:04):
Pretty exciting. So at the moment, if you want to
fly to Sydney from here, right, everybody's got up at
three thirty in the morning and slipped their way down
here and all that sort of stuff. But now they
are talking about putting on or they are going to
put on one that I think they live around nine
or something in the morning, like much more civilized and
civilized times. And you can fly back in the afternoon
from Sydney as well. I think you leave at one
and you'll get back at.
Speaker 3 (02:24):
Six or something like that, not the midnight.
Speaker 4 (02:26):
Not even the midnight one if you don't want to
so or you know, come back on the morning flight.
But your whole day's gone, yes as well. So that's
pretty exciting I think for the city.
Speaker 1 (02:36):
In terms of Lloyd Morrison's vision that he was the
founder of Infantil and way back thirty plus years ago
he always liked the es sat but although it was
always not the Crown and the Jewel, but it was
kind of nostalgic. It was one that he couldn't see selling.
Things have changed though, the world is different. Where does
(02:59):
in patrol position Wellington Airport longer term?
Speaker 4 (03:04):
So airports are a great asset to own and it's
in the stable cashlow generating part of our portfolio that
we talk about and does a great job. So if
we could have more airports and good value. You know,
I think there would be a great place to be
putting all our money frankly. But also we talked to
the full year results a couple of weeks ago about
(03:24):
the fact that as the portfolio grows, the cash flow
generating parts of the portfolio need to grow with it.
So that would need to happen in around the airport
and we have a few ideas about how that can happen.
But eventually you can sort of outgrow some of the
assets over time. It's not the case for Wellington Airport today,
but it could be in the future. Agree.
Speaker 1 (03:41):
One thing a lot of people want to know though,
is that Eagles are gone, small is still here?
Speaker 3 (03:48):
Is there anything else coming?
Speaker 4 (03:49):
There is and it's pretty exciting actually, but Macluk CEO
has swam media secrecy, so can't tell you just now.
Speaker 1 (03:58):
So, Jason, the airport has a five hundred million dollar
five year infrastructure project that's underway. Can you tell us
a bit about what that means, particularly for the runway
that was always a bit of bone of contention because
it wasn't long enough and it did prevent some overseas
carriers coming.
Speaker 4 (04:20):
It was pretty exciting actually of that five hundred, the
team has already invested over one hundred of that in
just the last year. The big bulk of the capital
program is kind of getting Wellington Airport set for that
future international growth that you mentioned. So the first stuff
that's happened a little bit boring is the car parks
(04:41):
been moved across the back, which then creates room for
the taxiway where the planes are to move wider, and
that means we can move more domestic round that way
and international in the future. And then there's a big
baggage facility investment that needs to happen in our baggage
belt sometimes break down sadly, so finally having the opportunity
(05:04):
to get that in the plan and replaced with our
airline partners who ultimately end up paying for all of this,
which is what we've agreed is a fantastic I think
development for the city. And then the last pieces you
mentioned is the runway length and that was a big
project and what the team are installing is what is
called EMASS, which is a way of slowing down planes
(05:26):
if they need to be slowed down in the runoff
areas of the runway, and that means you actually get
more operating link out of the runway than we currently have,
but also that you effectively get more operating length for
these long range aircraft. So I think when it's done,
we'll be able to take aircraft, some of the new
aircraft that can fly from Asia or even from the
(05:47):
States and land and depart fully loaded from here, which
will be finally kind of the vision for the airport
really with a lot less investment and a lot less
intrusive on the bay of.
Speaker 1 (05:57):
Listening in terms of the actual land around the airport
that's also in development. I know that the city council
have sold you for properties on the Lyle Bay Parade
if you like, near the surf beach.
Speaker 3 (06:11):
And there's all sorts of things.
Speaker 1 (06:13):
I think it's a surfing hub, other recreational aspects, hospitality,
you name it.
Speaker 3 (06:18):
How does that work in with what fatils vision. It's
for the airport.
Speaker 4 (06:24):
So within the airport, and this goes back to Lloyd,
our founder and his philosophy around the airport's. His idea
really was that as the airport owner, we're the best
developer of the land around it. And that is both
in terms of things that serve the airport, but also
building in flexibility so if the airport needs to expand
like we're doing now, you can have that land bag
(06:45):
later on. So that's not unusue for us to invest
in the land around the airport, be the developer, but
do it in a way that we know is not
going to affect the airport's operations, but enables us that
flexibility later on.
Speaker 1 (06:56):
That's a nice sad way into thinking about the full
year results which came out, you know.
Speaker 3 (07:01):
A few days ago.
Speaker 1 (07:04):
From one I could see it was quite a challenging
time optically and particularly for the understanding of retail investors,
which is our audience, and that you know, there was
a net loss, there was a big management fee, there
was a concern about cash flow, a number of things
which even though underlying earnings you know, were quite a robust,
(07:28):
that's quite a hard story to tell. So what was
your sort of strategy with that.
Speaker 4 (07:34):
We always look at it in two ways. One is
the underlying operating performance of the businesses, which always needs
to be strong, and then there's this strategic kind of
initiatives around the portfolio, how it's made up and what
you're doing with the bits and pieces. So always on
the first part, you're looking to see that underlying earnings
grow on the basis that we calculated, on the basis
(07:55):
that people use it to value those businesses. And actually
over the period, as you say, the performance was pretty
good across the business. I think pretty much everyone got
on guide and succept Manawa, who was tied up in
a transaction. So I think I think most people that
I've talked to anyway since then thought that actually, when
you look around the economy, a lot of double digit
(08:16):
growth in the portfolio on an underlying earning spasis was
a pretty good outcome. So that was the first part.
Then a lot of strategic indisties that we talked about
which was showing good progress in the portfolio.
Speaker 1 (08:26):
If we look at the loss, though, that's an accounting loss,
so how does that But I mean, are we going
to see more of those or is it just one
of those things with business.
Speaker 4 (08:37):
For us all the way down to the bottom the
net profit or loss that's often influenced now by whether
or not you're selling something in a given year, and
that is what was the case, I think two or
three years in a row beforehand, there really wasn't something
turning up there. I think as we get the operating
(08:58):
cash flow back end balance, which is what we've talked about,
you should see that more naturally even out I think
over time, and that sort of goes to that strategic
initiatives I mentioned just on.
Speaker 1 (09:08):
That cash flow, because that has been a concern that
has been talked about. At the moment, you're unable to
maybe fulfill the dividend promise and other things too, and
cash flow is pretty important. Yeah, So it's out of
kilter at the moment. You're not being able to live
within your means if you like, how long before you
(09:29):
can get it back in balance.
Speaker 4 (09:31):
So we've said a ticket for that of the next
two or three years in a medium term, we have
pretty strong set of plans in order to get that
in place. Actually, we could have done that in multiple
times in my time here. Anyway. I don't think the
operating cash flow has covered the dividend. Certainly wasn't covering
it when I became the CEOs. Really, since we invested
in one end Z, I think that we've been finding
(09:54):
our way back to that position. Really, we've kind of
drawn a lot in the sand this year saying actually
are going to do this. What you effectively do is
you trade off reinvesting that cash for future growth versus
something like making sure you're covering your dividend on an
annual basis out of your operating earning. So we've been
(10:14):
able to do it a number of ways over my time,
and we've just sort of drawn along the sound saying
let's do that. We will forego a little bit of
future earnings. But I don't think future growth is really
our problem where the portfolio is configured. I think it's
more making it more sustainable and more kind of this
long term growth engine, which is where we've made our
kind of best returns over time.
Speaker 1 (10:35):
So what is the longer term or the dividend approach
then for we used to come is it? Will we
have a difference next year? I mean, how we'll retail
investors sort of be guided in that.
Speaker 4 (10:49):
Yeah, I think they should take a lot of comfort
from the fact that we're openly saying now that we
believe the dividend is important for the business going into
the future. We think we tell shareholders for whom that
is most valuable, are an important mix in our shareholder
base as we continue to grow. So reaffirming that commitment
to the dividend. You should see it continue to at
(11:13):
least cover inflation, I would say, in terms of its
growth in the years ahead, and then we'll get it
back in balance and we can kind of give some
more messages from there.
Speaker 1 (11:22):
I think so this year we had I think you
announced fifteen point five cents was the interim, and then
the full year's twenty five plus.
Speaker 4 (11:31):
Is that mar right?
Speaker 3 (11:32):
So it's slightly up, yeah, exactly.
Speaker 4 (11:34):
I think it's about two percent. I think it's sort
of what we're trying to aim for to at least
give an inflation coverage, which investing in infrastructure asset should
give you. Yes, but we're not trying to get the
percentage yield on the share price, for example, back into
a range. That's not something we were aiming to do.
Speaker 1 (11:50):
The good old share price every CEOs read when somebody
asks them. It's fair to say that it had a
bit of a beating when you did release your consolidated earnings.
I think it was down nearly six percent on the day.
I think it's recovered somewhat since. If we do look
at that, though, the shareholder return is minus two point
(12:11):
six percent.
Speaker 3 (12:12):
I think is what I saw. I think it was
in the annual report.
Speaker 4 (12:17):
I think was the twelve months to thirty or March.
Speaker 1 (12:19):
Yeah, Now that does seem to be a discount, and
you do talk about this in the annual report, between
the share price and the assets values. What can be
done about that.
Speaker 4 (12:33):
Discount? And there is an interesting topic I'd talk to
at least a third of people I'd talk to. So
there's no discount because the market's always rome, which there's
some truth to that rome. And there's definitely a difference
between the value for one share today versus a majority
or the whole business in five years time. Really the
listed price is the price today for any given volume
(12:56):
of shares, right, So it's not really the long term
value of the assets, and it's the different between that
long term value and the current value that people talk
about the discount. For us, it's really a signal for
us to think about, is there something about our business
that's not understood well and should we therefore be issuing
some communications or bringing people into c our assets so
(13:18):
that we can take that stuff off the table and over.
I think the start of this year there was a
lot of worries about AI and deep seek and the
implications for CDC, which we thought was what was going
on with a number of share prices in our sector
at the time, and so through April we had a
number of we had to site visit to our big
(13:39):
development in Melbourne for CDC and a few other communications
with the team to try and make sure people understood
how CDC was placed and actually you saw actually I
think the market react quite nicely to that and the
share pers kind of move up. So really it is
for us it's where we should focus our communications and
tensions where we first go to. Obviously, every day, like
(13:59):
any normal human, you re examine every decision you made
the day before, so you do a bit of that
as well, but mostly it's for communications.
Speaker 1 (14:07):
Thinking of a CDC, though I did think endless this
time with the release of the four year results, we're
a little bit worried about the RePhase praising of the
contracts and the revenue coming in it not being linear,
I think is what some of them had expected, and
there was a bit of disappointment there.
Speaker 3 (14:28):
What do you say to that.
Speaker 4 (14:29):
I think we've been pretty clear even actually since the
half year last year so November that customer demand for
these particularly AI related workloads was changing very quickly day
to day, month to month, and a lot of it
was to do with how the customers were kind of
(14:50):
equipping themselves and growing to understand the new technology and
how the infrastructure needed to be built around it. And
so the result that we we released last week really
just was a continuation of the same message from November.
And I can understand it. As an investor, You'd hope
that had changed in the meantime, but I'm here telling
(15:10):
everybody now, no, it hasn't changed. We've made some really
good progress. We signed like a ton of contracts in January,
which no one else in the market has sign on
one hundred megawats of contracts in January like we have,
and all the messages that we were trying to get
out earlier this year and in the last week around
(15:31):
CDC's point of difference, it's very strong position in the
Australian market and being really well placed to when I
would say more than it's fair share of contracts when
our customers decide they need them, is actually still very strong.
So everybody wants their Christmas presents opened earlier, don't they,
But it's always better if you wait a bit, I think.
(15:53):
So we're in that mode at the moment.
Speaker 1 (15:54):
Right and see kind of thing day Well, CDC is
now forty percent of the portfolio.
Speaker 3 (16:00):
Is a concentration risk.
Speaker 4 (16:03):
It is a big part of the portfolio. We've had
assets that have been a bigger proportion in the past.
So TrustPower is over fifty percent for a lot of
the early history of fort till I would say it's
about as big as you'd want it to be. If
you stood back over a long term period of time
we talked about the results. We try and manage the
(16:24):
stuff over you know, the medium term, rather than really
reacting really quickly to these things. And what we do
see is other opportunities within the business growing, having the
potential to grow quite quickly I think over the next
two or three years, which should balance CDC's weight in
the portfolio, if you like. But if I stand back,
(16:45):
you know, having a big proportion of your portfolio and
literally the most exciting investment sector in the world at
the moment is actually a pretty good place to be.
And you know, you just have to ask yourself, is
there going to be more or less AI tomorrow? And
you kind of know the answer right, And so I
think being right there in a business which, as I
(17:06):
said before, is incredibly well placed to just pick up
these contracts as and when they come, I'd still do
it every day of the week.
Speaker 1 (17:14):
But I is volatile and risky and rapidly changing, as
you know, So there are surely there are risks there,
but it's what you're prepared to trade off.
Speaker 4 (17:26):
Yeah, I think the risk is more timing, and even
then the risk is not very high, and that we
know where capacity is at with our clients. We know
that demand is growing incredibly strongly. Therefore there will be contracts,
and so really the question for us is we're doing
my weather contracts today, end of the year, early next year. No,
(17:47):
if you put that in a thirty year valuation model,
that it moves the valuation literally not at all. So as
long as you fundamentally believe AI is going to be
a thing and that CDC will pick up more thanutes
for his share, we're in an incredibly great spot. You know,
I would be patient personally.
Speaker 1 (18:04):
That brings me to the Morrison fee, which did create
a little bit of a flutter four hundred and fifty
six million, which actually is larger than the net loss.
It seems a little bit unfortunate that it came out
when it did, but it is what it is, and
it was due to CDC having a greater valuation. What
(18:28):
do you say to retail investors trying to get their
head around that?
Speaker 4 (18:32):
Yeah, so your four hundred and fifty six million, I
think is the three hundred and fifty million that was
accrued in performance fees, which is paid over three years,
and the one hundred of base fees, I'm guessing is
how you get that? MAT's. Yeah, So the base fees
are payable every quarter and that's for running the show.
The performance fees is really only due to good performance,
(18:53):
so we have to beat twelve percent returns in order
to get paid any incentive fee, and it's paid in
three installments, so that you can't earn fees for a
blip because if the valuation went up one year and
you got paid a fee a third of the fee,
it's very unlikely to stay there for three years, And
(19:16):
assuming it then came off the year after or the
year after that, the second two charges would never become
payable effectively. So the mechanism has a bunch of different safeguards.
And to make sure that for shareholders that Morrison's only
getting paid for performance that actually sticks around and turns
up in the portfolio. So we're only getting paid for performance.
(19:37):
And there are a number of structural elements to the
way the fee is paid to ensure it's only paid
for enduring value.
Speaker 1 (19:43):
If you like, let's look at future growth beyond the
current portfolio, if you like all the exciting stuff. Your
guidance was just over a billion, I think, and a
little bit more. Yeah, I know, exciting. What are we
looking at in terms of potential and what jurisdictions.
Speaker 4 (20:05):
So the one we're most excited about in the near
term is a business called guron Energy, which we established
in Southeast Asia. Singapore is the head office two or
three years ago. They have this huge project that they're
working on to export solar power effectively from Indonesia and
imported to Singapore. And what the Singapore government has done
(20:28):
is they've looked at their power system, which is all
based on gas that they import and burn, and they're
trying to support ways for more renewable power to get
into Singapore. They're incredibly land constrained, so they've asked for
people to effectively pitch these projects from Indonesia and other
countries to input power into Singapore. And we are one
(20:49):
of nine projects that were conditionally awarded, and since we
were awarded that kind of nod from the Singapore government,
where then one of only two projects that have advanced
the next stage of the Singapore project. So it's a
it's a proper thing. We've got seventy percent of the
land now under control in Indonesia where we're going to
(21:10):
build this thing, and that's partly why we've been progressed
through with this one other project. It's going to take
three years to build. We'll reach a final investment decision
on that on that in the next twelve months. But
because it's such a significant project, you're talking about a
three billion dollar US total capital cost and makes our
five hundred million New Zealand here look pretty reasonable, right,
(21:34):
And for that amount of capital we would expect to
be creating, you know, five hundred million dollars plus that's
US dollar terms of present value for the capital that
we put to work in that. So you know, it's
a dollar a share on a good day for us,
and significant. It's exciting.
Speaker 1 (21:53):
Does that mean there's going to be putting your hand
out for more funder and I assume more institutional shareholders
from overseas.
Speaker 4 (22:04):
Yeah, not for that project in particular, I don't think so.
One thing we talked about at the result is selling
more of our businesses that aren't able to scale in
our portfolio. And you know, there are a number of
ones that have been in the portfolio for a long
time that we could talk about that are kind of
obvious ones to go on that list. We would expect
(22:25):
to be reinvesting that money in a project like growing
rather than needing to do another equity raise anytime soon.
Speaker 1 (22:30):
So those that's a billion dollar question there and those
those business exactly, So.
Speaker 3 (22:36):
It's a billion dollars of essence. You said you will
divest over a period of three years. Yeah, so what
are we talking?
Speaker 4 (22:46):
So what we're the lens we were running over the
portfolio was really what can scale our own and our
ownership to be meaningful at a sort of ten billion
dollar market cap, things need to be quite big in
order to move the dark and the more small things
you have, the more complexity it makes for new investors
who are trying to figure out what's going on in
(23:06):
in for tool. Yeah, so you can sort of run
down the portfolio pretty easily and say, well, okay, that's clear.
That's been in the portfolio for a while, you've not
been allocating capital to it. That's probably something in a cycle.
We didn't actually name exactly which ones, because obviously there
are teams in those businesses. They have customers and things
like that, and all that needs to be work through
in a normal professional way like we do. But you
(23:27):
could probably figure out where we're thinking just by running
that lens over it.
Speaker 1 (23:32):
One thing I wanted to ask you about is healthcare.
We've talked a lot about energy. We've talked a lot
about data centers and the like, and some of the
old resets like Wellington you put here. We are the
imaging businesses both here and in Australia. Where do you
see the potential there?
Speaker 4 (23:49):
It's pretty high asually, I think those are a couple
of businesses that perform really well from an operating perspective.
As I said before, so you have fourteen percent growth
out of q scan and Australia. I've done forty or
fifty meetings since the result, and half of them would
have said that is an incredible outcome. How did you
do that because the other listed comps have not been
(24:11):
able to perform as well in that market. So it's
getting a lot of attension, which is really good. And
in New Zealand they went that far behind and then
nearly did ten percent and that was in a year
as we know living in New Zealand where Health and
Z was going through a lot of change. So it's
a very interesting part of the portfolio, and that it's
not correlated with anything else you're talking about concentration before.
(24:33):
It's actually quite provides quite a nice balance in the portfolio.
But how can it scale, as I said before, is
a bit of a question. One of our little plays
is this tally radiology idea, which is really where the
scan is read remotely from where it's taken. And that's
really good. If you go to a hospital at two
in the morning, you need a scan that will likely
(24:53):
be read off site. So it's things like that, and
because we have a big footprint, we have radiologists in
the UK for example, can read that stuff during their
day and they can do the reverse here. So and
that segment of radiology is growing really really fast. I
suspect to you get it really discover you're probably going
to have to merge it with something else and create
a bit of a more diversified healthcare portfolio. And we've
(25:17):
got a few ideas there as well. So yeah, I
think there is a few parts there that could make
it even more interesting and create a kind of nice
non digital, non power leg to the portfolio.
Speaker 1 (25:29):
Any airports that you could buy into around the world, Yeah, there.
Speaker 4 (25:33):
Are, actually, yeah, there are, and there's been quite a
few trading at the moment, So we have a few
airport investment ideas.
Speaker 3 (25:40):
So this may not be one of the ones on
the block, who.
Speaker 4 (25:43):
Knows, but the instruction and the direction should be clear.
Things need to scale, So our teams that are on
those assets, the teams that work here, it's clear what
the job is in order to continue to grow with
Infertile and that was really are objective on the day.
Lots of people listening on the for those things, those messages.
Speaker 1 (26:04):
Yeah, on Outlier, does seem to be retire Australia, I
mean it is.
Speaker 3 (26:08):
You looked at selling it a while back. We've talked
about that.
Speaker 1 (26:12):
It seems to be doing okay, but yeah, it does
seem a bit of an outline.
Speaker 4 (26:17):
I agree, and we did announce a strategic review on
that a couple of years ago and the timing didn't
work out very well. So I think that would be
in my it's pretty clear that area is that we
don't see ourselves in long term. That would definitely still
be one of the mere But the performance is good.
They provide a great service to their customers their residents,
So yeah, there's this is never or hardly ever about
(26:39):
bad performance in the businesses. It's really fit in the
portfolio and best long term owner.
Speaker 3 (26:44):
Yeah.
Speaker 1 (26:44):
Right, let's talk about shareholders. This year in Frattilla's now
included in the Global standard and x c I and
also in Australia the AX three hundred, so that gives
a broader scope or reach. If you're like four shareholders,
what are you hoping to have in terms of the
(27:06):
mix with retail and institutional.
Speaker 4 (27:09):
Yeah, we've spent a lot of time working on this
because we are an investment company. Actually the capital market
side of the business gets a lot of focus. Yeah. So,
as I said before, having done all of that work
with a lot of advisors, we still see retail as
being a really big part of the shareholder base. For
the foreseeable future. So I think I'm not sure of
(27:32):
the exact numbers now, but we would never see them
really getting below twenty percent, and more realistically, somewhere between
twenty and thirty is always really going to be in
New Zealand retail, So that you know, recommitting to the
dividend and finding a way to sustain it is all
comes out of that work. In fact, at the moment
half my team is in farm array at the Retail
(27:53):
Investor Show show YEP, and they'll be flying down to
christ Church for Wednesday and we're here in Wellington on
Thursday night. So a big part of the business right
is still making sure we're understandable to a retail investor base.
Having said that, we do know as the business grows
and if we just continue our historic performance, I think
(28:14):
our five year performance is over twenty percent per anum.
You just continue even fifteen percent, our target return for
five years will be a twenty billion dollar business and
in order to support that scale of register we will
need more international investors. So these in the ex editions
are really important for us and for retail shareholders so
that there is a buyer for their shares. Whenever they
(28:35):
choose to move in and out of them, right, So
we actively work on that. These index editions are meaningful.
And I said, I've had fifty meetings since the result.
Over half of them would have been in Australia. Now
talk to Australian investors and we'll be on the road
internationally later on in the year in Asia and the
UK and the US, just to build up that base.
(28:57):
But still we'll have a massive waiting here to New
Zealand forever.
Speaker 1 (29:00):
I think one thing we haven't talked about, Jason is
challenges and obviously the US and the sort of changes
there with the political situation and geopolitics around the world
as well, because you're in Europe as well as the US.
You know, you're many many jurisdictions. Yeah, what do you
see there? I mean, Long Road Energy seems to have
(29:22):
got it south together in terms of avoiding some of
the fallout from I don't know, it's a big beautiful bill.
It's now called instead of the Inflation Reduction Act. Yeah,
can you tell us what you're seeing there in terms
of the headwinds.
Speaker 4 (29:40):
Phenomenal volatility all year right for all investors. And that
was just the latest one four days before our result,
I think, to be honest, the share price reaction on
the day that came out surprised me. It barely barely
moved the dill at all. I think it caught up
after the result, to be honest, I think it was
people waiting for the result to move the shap to where.
(30:01):
To be honest, I thought it would be on the Friday,
not for any valuation reason, but I think it just
deserves it. Right, There's clearly a lot of volatility and uncertainty.
We're a long way away from there. How would you know,
as an investor sitting here in New Zealand what's really
going to happen. Of course, I'm there all the time,
and so I should know, and I do have a
really good, strong feel for it. The technical stuff we
(30:23):
talked about on the day is kind of getting done
in the weeds. But I think, really from my perspective
for shareholders, the most important thing to understand is that
the US is short of energy. When we took, for example,
in data centers, all the data center investments, so much
of it in fact is happening in the US now,
a lot of chips being absorbed there that all requires
(30:43):
power and it cannot be fulfilled with gas. All that
work has been done, everyone knows is not enough gas
and it can't be got to enough. Places in California
won't take another electron generator from gas. In normal Arizona.
There are plenty of states that absolutely want renewable energy
power and solar, which is mostly what we do, is
the cheapest and fastest. So we are well set through
(31:06):
this to be an incredibly good position to meet that demand.
And so you know, you've just got to get through this.
As we said our and your report, the theme this
year is navigating beyond the noise, and this is a
really prime example of an area where we're very high
convictions the states will need the power and that businesses
like these will be more valuable through this vit polatility
(31:29):
than less. Be careful on the way through. We've got
a great team. A lot of our money is protected
through the safe harboring and things like that that we've
talked about. So again, it's another area where I think
we just need to be patient and open our Christmas presents.
Speaker 1 (31:44):
Later on on that note, then, Jason, what excites you
about the year ahead?
Speaker 3 (31:51):
Not a late Christmas?
Speaker 4 (31:52):
Well, yeah, it comes when it comes, and there's only
so much you can control on a given day. I
do think that how AI rolls out is still incredibly
fascinating to me. Where it's going to go next. The
geopolitical angles now I feel a lot like energy always
used to feel. Energy has always been political and geopolitical,
and now it's now it's in chips as well, so
(32:14):
it doesn't feel unfamiliar. But I think that's really fascinating.
I do believe the trend is only one way, though,
and the genius out of the bottle. Countries have to
have this, Companies have to have it, and I do
believe that being in the infrastructure that delivers it is
one of the most attractive areas to be in. Doesn't
matter who's serving it, who's got the customer, they will
all have to have the type of infrastructure that we build,
(32:37):
and it's not easy to build it. So I still
think that is super fascinating. And then actually some of
the stuff that we talked about at the half year
around kind of getting our house in order, if you like,
or it's some tidy out of the portfolio. Actually that's
really exciting to finally have a clear plan We've done
a lot of thinking about that scale that we're at now,
what is the most meaningful next step from here? Where
(32:59):
is retail holds in our future? Right? And all that
work's been done now, so I think we've got a
clear set of principles. So getting through some of that
is actually quite exciting because when we get going on
some of that portfolio stuff, we're really good at it
and we tend to create a lot of value.
Speaker 1 (33:14):
Just one last question I've got for you, and we
talked about data centers. A lot of yours are in
Australia that there is movement in Auckland. Do you see
more data centers being built here?
Speaker 4 (33:25):
Yeah, we're building a very big one at the moment. Actually,
one of the biggest infrastructure projects in New Zealand is
being built by CDC. And actually, you know, the demand
outlook for in New Zealand in particular has been one
of the more stable areas of demand from our customers
over this whole since the half of you when I
started talking about this volatility, So that feels quite good
(33:48):
actually for the country. It's a really important issue. You've
seen over the last week or so big announcements out
of the Middle East UAE, and then there's an the
one coming. We understand big sovereign AI centers. You know,
billions of dollars of investment, and there are only so
(34:08):
many chips available in the world, and they're going to
go to countries that do make those investments thoughtfully and
get into the supply chain. So I think we're lucky
in New Zealand so far, but we should never take
any of that for granted, right, I think as a country.
So the more we can do to attract this really
important technology here and have it on our shore, on
(34:30):
our terms, rather than relying on somewhere else, I would
definitely encourage. In Australia, I think we'll be having the
same kind of discussions. I've seen stuff in the Afar.
I'm around this already. Yeah, it's really important.
Speaker 1 (34:43):
Well we should leave it there, Jason. We could talk forever.
In a way, I need to let you get your
flight so that you're not late.
Speaker 4 (34:50):
Thank you.
Speaker 3 (34:51):
That's so thanks for joining us today.
Speaker 4 (34:52):
Thanks so much for having it here as well at
wellty to.
Speaker 1 (34:54):
Newport and thanks everyone for joining in. You can watch
Shared Lunch on YouTube or listen to us on your
favorite podcast app. Leave us a rating and tell us
what you'd like to hear next. Until next time, Marto
wa
Jodder and welcome to Shared Lunch, brought to you by Chasea's.
I'm Helen Madison and today we're at Wellington Airport, which
is one of the oldest assets for infrastructure investment company
infratil now Vertill is super popular on Cheza's And in
a moment I'll be speak with Jason Boys, the CEO,
about the full year results, the challenges and the outlook.
(00:23):
Well also look at what's happening to Wellington Airport now
the eagles have gone.
Speaker 2 (00:28):
Investing involves a risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Speaker 3 (00:39):
Everything you're about.
Speaker 2 (00:40):
To see and here is current at the time of recording.
Speaker 1 (00:42):
Hi Jason, thank you for having us here at Wellington.
Speaker 4 (00:45):
Thanks you for coming Now.
Speaker 1 (00:47):
Wellington Airport is an iconic infrastructure piece for Wellington. That said,
poor old Wellington hasn't had the easiest time public service
cuts and the like, and yeah, it's been an adulgen
So what hecet does Wellington Airport play in that recovery?
Speaker 4 (01:05):
Yeah, yeah, I agree with both. Live in Wellington, we
we feel how the city has changed over the last
year or so. From our perspective in Wellington Airports, this
is the front door to the city and we take
that really seriously. And even though we've got a lot
of construction going on, which we'll go and have a
look at in a second, you know, we do stuff
(01:26):
like this to make it feel like, you know, this
is you've arrived in Wellington. I think we're going to
keep investing though. One thing that has been quite good.
I know domestic has been tough with what's been going
on with the government, but actually international has been an
incredible success story over the last years. So the team's
done incredibly well and there's more good stuff there to come,
and so we're continuing to invest to give us the
(01:48):
best of options for international growth, which we can talk
about in a minute and sort of get ready for
when domestic returns.
Speaker 1 (01:55):
So quantus they decided they will increase their three you're
like thirty one percent for summer.
Speaker 3 (02:02):
Yeah, so that will be quite a boon for the airport.
Speaker 4 (02:04):
Pretty exciting. So at the moment, if you want to
fly to Sydney from here, right, everybody's got up at
three thirty in the morning and slipped their way down
here and all that sort of stuff. But now they
are talking about putting on or they are going to
put on one that I think they live around nine
or something in the morning, like much more civilized and
civilized times. And you can fly back in the afternoon
from Sydney as well. I think you leave at one
and you'll get back at.
Speaker 3 (02:24):
Six or something like that, not the midnight.
Speaker 4 (02:26):
Not even the midnight one if you don't want to
so or you know, come back on the morning flight.
But your whole day's gone, yes as well. So that's
pretty exciting I think for the city.
Speaker 1 (02:36):
In terms of Lloyd Morrison's vision that he was the
founder of Infantil and way back thirty plus years ago
he always liked the es sat but although it was
always not the Crown and the Jewel, but it was
kind of nostalgic. It was one that he couldn't see selling.
Things have changed though, the world is different. Where does
(02:59):
in patrol position Wellington Airport longer term?
Speaker 4 (03:04):
So airports are a great asset to own and it's
in the stable cashlow generating part of our portfolio that
we talk about and does a great job. So if
we could have more airports and good value. You know,
I think there would be a great place to be
putting all our money frankly. But also we talked to
the full year results a couple of weeks ago about
(03:24):
the fact that as the portfolio grows, the cash flow
generating parts of the portfolio need to grow with it.
So that would need to happen in around the airport
and we have a few ideas about how that can happen.
But eventually you can sort of outgrow some of the
assets over time. It's not the case for Wellington Airport today,
but it could be in the future. Agree.
Speaker 1 (03:41):
One thing a lot of people want to know though,
is that Eagles are gone, small is still here?
Speaker 3 (03:48):
Is there anything else coming?
Speaker 4 (03:49):
There is and it's pretty exciting actually, but Macluk CEO
has swam media secrecy, so can't tell you just now.
Speaker 1 (03:58):
So, Jason, the airport has a five hundred million dollar
five year infrastructure project that's underway. Can you tell us
a bit about what that means, particularly for the runway
that was always a bit of bone of contention because
it wasn't long enough and it did prevent some overseas
carriers coming.
Speaker 4 (04:20):
It was pretty exciting actually of that five hundred, the
team has already invested over one hundred of that in
just the last year. The big bulk of the capital
program is kind of getting Wellington Airport set for that
future international growth that you mentioned. So the first stuff
that's happened a little bit boring is the car parks
(04:41):
been moved across the back, which then creates room for
the taxiway where the planes are to move wider, and
that means we can move more domestic round that way
and international in the future. And then there's a big
baggage facility investment that needs to happen in our baggage
belt sometimes break down sadly, so finally having the opportunity
(05:04):
to get that in the plan and replaced with our
airline partners who ultimately end up paying for all of this,
which is what we've agreed is a fantastic I think
development for the city. And then the last pieces you
mentioned is the runway length and that was a big
project and what the team are installing is what is
called EMASS, which is a way of slowing down planes
(05:26):
if they need to be slowed down in the runoff
areas of the runway, and that means you actually get
more operating link out of the runway than we currently have,
but also that you effectively get more operating length for
these long range aircraft. So I think when it's done,
we'll be able to take aircraft, some of the new
aircraft that can fly from Asia or even from the
(05:47):
States and land and depart fully loaded from here, which
will be finally kind of the vision for the airport
really with a lot less investment and a lot less
intrusive on the bay of.
Speaker 1 (05:57):
Listening in terms of the actual land around the airport
that's also in development. I know that the city council
have sold you for properties on the Lyle Bay Parade
if you like, near the surf beach.
Speaker 3 (06:11):
And there's all sorts of things.
Speaker 1 (06:13):
I think it's a surfing hub, other recreational aspects, hospitality,
you name it.
Speaker 3 (06:18):
How does that work in with what fatils vision. It's
for the airport.
Speaker 4 (06:24):
So within the airport, and this goes back to Lloyd,
our founder and his philosophy around the airport's. His idea
really was that as the airport owner, we're the best
developer of the land around it. And that is both
in terms of things that serve the airport, but also
building in flexibility so if the airport needs to expand
like we're doing now, you can have that land bag
(06:45):
later on. So that's not unusue for us to invest
in the land around the airport, be the developer, but
do it in a way that we know is not
going to affect the airport's operations, but enables us that
flexibility later on.
Speaker 1 (06:56):
That's a nice sad way into thinking about the full
year results which came out, you know.
Speaker 3 (07:01):
A few days ago.
Speaker 1 (07:04):
From one I could see it was quite a challenging
time optically and particularly for the understanding of retail investors,
which is our audience, and that you know, there was
a net loss, there was a big management fee, there
was a concern about cash flow, a number of things
which even though underlying earnings you know, were quite a robust,
(07:28):
that's quite a hard story to tell. So what was
your sort of strategy with that.
Speaker 4 (07:34):
We always look at it in two ways. One is
the underlying operating performance of the businesses, which always needs
to be strong, and then there's this strategic kind of
initiatives around the portfolio, how it's made up and what
you're doing with the bits and pieces. So always on
the first part, you're looking to see that underlying earnings
grow on the basis that we calculated, on the basis
(07:55):
that people use it to value those businesses. And actually
over the period, as you say, the performance was pretty
good across the business. I think pretty much everyone got
on guide and succept Manawa, who was tied up in
a transaction. So I think I think most people that
I've talked to anyway since then thought that actually, when
you look around the economy, a lot of double digit
(08:16):
growth in the portfolio on an underlying earning spasis was
a pretty good outcome. So that was the first part.
Then a lot of strategic indisties that we talked about
which was showing good progress in the portfolio.
Speaker 1 (08:26):
If we look at the loss, though, that's an accounting loss,
so how does that But I mean, are we going
to see more of those or is it just one
of those things with business.
Speaker 4 (08:37):
For us all the way down to the bottom the
net profit or loss that's often influenced now by whether
or not you're selling something in a given year, and
that is what was the case, I think two or
three years in a row beforehand, there really wasn't something
turning up there. I think as we get the operating
(08:58):
cash flow back end balance, which is what we've talked about,
you should see that more naturally even out I think
over time, and that sort of goes to that strategic
initiatives I mentioned just on.
Speaker 1 (09:08):
That cash flow, because that has been a concern that
has been talked about. At the moment, you're unable to
maybe fulfill the dividend promise and other things too, and
cash flow is pretty important. Yeah, So it's out of
kilter at the moment. You're not being able to live
within your means if you like, how long before you
(09:29):
can get it back in balance.
Speaker 4 (09:31):
So we've said a ticket for that of the next
two or three years in a medium term, we have
pretty strong set of plans in order to get that
in place. Actually, we could have done that in multiple
times in my time here. Anyway. I don't think the
operating cash flow has covered the dividend. Certainly wasn't covering
it when I became the CEOs. Really, since we invested
in one end Z, I think that we've been finding
(09:54):
our way back to that position. Really, we've kind of
drawn a lot in the sand this year saying actually
are going to do this. What you effectively do is
you trade off reinvesting that cash for future growth versus
something like making sure you're covering your dividend on an
annual basis out of your operating earning. So we've been
(10:14):
able to do it a number of ways over my time,
and we've just sort of drawn along the sound saying
let's do that. We will forego a little bit of
future earnings. But I don't think future growth is really
our problem where the portfolio is configured. I think it's
more making it more sustainable and more kind of this
long term growth engine, which is where we've made our
kind of best returns over time.
Speaker 1 (10:35):
So what is the longer term or the dividend approach
then for we used to come is it? Will we
have a difference next year? I mean, how we'll retail
investors sort of be guided in that.
Speaker 4 (10:49):
Yeah, I think they should take a lot of comfort
from the fact that we're openly saying now that we
believe the dividend is important for the business going into
the future. We think we tell shareholders for whom that
is most valuable, are an important mix in our shareholder
base as we continue to grow. So reaffirming that commitment
to the dividend. You should see it continue to at
(11:13):
least cover inflation, I would say, in terms of its
growth in the years ahead, and then we'll get it
back in balance and we can kind of give some
more messages from there.
Speaker 1 (11:22):
I think so this year we had I think you
announced fifteen point five cents was the interim, and then
the full year's twenty five plus.
Speaker 4 (11:31):
Is that mar right?
Speaker 3 (11:32):
So it's slightly up, yeah, exactly.
Speaker 4 (11:34):
I think it's about two percent. I think it's sort
of what we're trying to aim for to at least
give an inflation coverage, which investing in infrastructure asset should
give you. Yes, but we're not trying to get the
percentage yield on the share price, for example, back into
a range. That's not something we were aiming to do.
Speaker 1 (11:50):
The good old share price every CEOs read when somebody
asks them. It's fair to say that it had a
bit of a beating when you did release your consolidated earnings.
I think it was down nearly six percent on the day.
I think it's recovered somewhat since. If we do look
at that, though, the shareholder return is minus two point
(12:11):
six percent.
Speaker 3 (12:12):
I think is what I saw. I think it was
in the annual report.
Speaker 4 (12:17):
I think was the twelve months to thirty or March.
Speaker 1 (12:19):
Yeah, Now that does seem to be a discount, and
you do talk about this in the annual report, between
the share price and the assets values. What can be
done about that.
Speaker 4 (12:33):
Discount? And there is an interesting topic I'd talk to
at least a third of people I'd talk to. So
there's no discount because the market's always rome, which there's
some truth to that rome. And there's definitely a difference
between the value for one share today versus a majority
or the whole business in five years time. Really the
listed price is the price today for any given volume
(12:56):
of shares, right, So it's not really the long term
value of the assets, and it's the different between that
long term value and the current value that people talk
about the discount. For us, it's really a signal for
us to think about, is there something about our business
that's not understood well and should we therefore be issuing
some communications or bringing people into c our assets so
(13:18):
that we can take that stuff off the table and over.
I think the start of this year there was a
lot of worries about AI and deep seek and the
implications for CDC, which we thought was what was going
on with a number of share prices in our sector
at the time, and so through April we had a
number of we had to site visit to our big
(13:39):
development in Melbourne for CDC and a few other communications
with the team to try and make sure people understood
how CDC was placed and actually you saw actually I
think the market react quite nicely to that and the
share pers kind of move up. So really it is
for us it's where we should focus our communications and
tensions where we first go to. Obviously, every day, like
(13:59):
any normal human, you re examine every decision you made
the day before, so you do a bit of that
as well, but mostly it's for communications.
Speaker 1 (14:07):
Thinking of a CDC, though I did think endless this
time with the release of the four year results, we're
a little bit worried about the RePhase praising of the
contracts and the revenue coming in it not being linear,
I think is what some of them had expected, and
there was a bit of disappointment there.
Speaker 3 (14:28):
What do you say to that.
Speaker 4 (14:29):
I think we've been pretty clear even actually since the
half year last year so November that customer demand for
these particularly AI related workloads was changing very quickly day
to day, month to month, and a lot of it
was to do with how the customers were kind of
(14:50):
equipping themselves and growing to understand the new technology and
how the infrastructure needed to be built around it. And
so the result that we we released last week really
just was a continuation of the same message from November.
And I can understand it. As an investor, You'd hope
that had changed in the meantime, but I'm here telling
(15:10):
everybody now, no, it hasn't changed. We've made some really
good progress. We signed like a ton of contracts in January,
which no one else in the market has sign on
one hundred megawats of contracts in January like we have,
and all the messages that we were trying to get
out earlier this year and in the last week around
(15:31):
CDC's point of difference, it's very strong position in the
Australian market and being really well placed to when I
would say more than it's fair share of contracts when
our customers decide they need them, is actually still very strong.
So everybody wants their Christmas presents opened earlier, don't they,
But it's always better if you wait a bit, I think.
(15:53):
So we're in that mode at the moment.
Speaker 1 (15:54):
Right and see kind of thing day Well, CDC is
now forty percent of the portfolio.
Speaker 3 (16:00):
Is a concentration risk.
Speaker 4 (16:03):
It is a big part of the portfolio. We've had
assets that have been a bigger proportion in the past.
So TrustPower is over fifty percent for a lot of
the early history of fort till I would say it's
about as big as you'd want it to be. If
you stood back over a long term period of time
we talked about the results. We try and manage the
(16:24):
stuff over you know, the medium term, rather than really
reacting really quickly to these things. And what we do
see is other opportunities within the business growing, having the
potential to grow quite quickly I think over the next
two or three years, which should balance CDC's weight in
the portfolio, if you like. But if I stand back,
(16:45):
you know, having a big proportion of your portfolio and
literally the most exciting investment sector in the world at
the moment is actually a pretty good place to be.
And you know, you just have to ask yourself, is
there going to be more or less AI tomorrow? And
you kind of know the answer right, And so I
think being right there in a business which, as I
(17:06):
said before, is incredibly well placed to just pick up
these contracts as and when they come, I'd still do
it every day of the week.
Speaker 1 (17:14):
But I is volatile and risky and rapidly changing, as
you know, So there are surely there are risks there,
but it's what you're prepared to trade off.
Speaker 4 (17:26):
Yeah, I think the risk is more timing, and even
then the risk is not very high, and that we
know where capacity is at with our clients. We know
that demand is growing incredibly strongly. Therefore there will be contracts,
and so really the question for us is we're doing
my weather contracts today, end of the year, early next year. No,
(17:47):
if you put that in a thirty year valuation model,
that it moves the valuation literally not at all. So as
long as you fundamentally believe AI is going to be
a thing and that CDC will pick up more thanutes
for his share, we're in an incredibly great spot. You know,
I would be patient personally.
Speaker 1 (18:04):
That brings me to the Morrison fee, which did create
a little bit of a flutter four hundred and fifty
six million, which actually is larger than the net loss.
It seems a little bit unfortunate that it came out
when it did, but it is what it is, and
it was due to CDC having a greater valuation. What
(18:28):
do you say to retail investors trying to get their
head around that?
Speaker 4 (18:32):
Yeah, so your four hundred and fifty six million, I
think is the three hundred and fifty million that was
accrued in performance fees, which is paid over three years,
and the one hundred of base fees, I'm guessing is
how you get that? MAT's. Yeah, So the base fees
are payable every quarter and that's for running the show.
The performance fees is really only due to good performance,
(18:53):
so we have to beat twelve percent returns in order
to get paid any incentive fee, and it's paid in
three installments, so that you can't earn fees for a
blip because if the valuation went up one year and
you got paid a fee a third of the fee,
it's very unlikely to stay there for three years, And
(19:16):
assuming it then came off the year after or the
year after that, the second two charges would never become
payable effectively. So the mechanism has a bunch of different safeguards.
And to make sure that for shareholders that Morrison's only
getting paid for performance that actually sticks around and turns
up in the portfolio. So we're only getting paid for performance.
(19:37):
And there are a number of structural elements to the
way the fee is paid to ensure it's only paid
for enduring value.
Speaker 1 (19:43):
If you like, let's look at future growth beyond the
current portfolio, if you like all the exciting stuff. Your
guidance was just over a billion, I think, and a
little bit more. Yeah, I know, exciting. What are we
looking at in terms of potential and what jurisdictions.
Speaker 4 (20:05):
So the one we're most excited about in the near
term is a business called guron Energy, which we established
in Southeast Asia. Singapore is the head office two or
three years ago. They have this huge project that they're
working on to export solar power effectively from Indonesia and
imported to Singapore. And what the Singapore government has done
(20:28):
is they've looked at their power system, which is all
based on gas that they import and burn, and they're
trying to support ways for more renewable power to get
into Singapore. They're incredibly land constrained, so they've asked for
people to effectively pitch these projects from Indonesia and other
countries to input power into Singapore. And we are one
(20:49):
of nine projects that were conditionally awarded, and since we
were awarded that kind of nod from the Singapore government,
where then one of only two projects that have advanced
the next stage of the Singapore project. So it's a
it's a proper thing. We've got seventy percent of the
land now under control in Indonesia where we're going to
(21:10):
build this thing, and that's partly why we've been progressed
through with this one other project. It's going to take
three years to build. We'll reach a final investment decision
on that on that in the next twelve months. But
because it's such a significant project, you're talking about a
three billion dollar US total capital cost and makes our
five hundred million New Zealand here look pretty reasonable, right,
(21:34):
And for that amount of capital we would expect to
be creating, you know, five hundred million dollars plus that's
US dollar terms of present value for the capital that
we put to work in that. So you know, it's
a dollar a share on a good day for us,
and significant. It's exciting.
Speaker 1 (21:53):
Does that mean there's going to be putting your hand
out for more funder and I assume more institutional shareholders
from overseas.
Speaker 4 (22:04):
Yeah, not for that project in particular, I don't think so.
One thing we talked about at the result is selling
more of our businesses that aren't able to scale in
our portfolio. And you know, there are a number of
ones that have been in the portfolio for a long
time that we could talk about that are kind of
obvious ones to go on that list. We would expect
(22:25):
to be reinvesting that money in a project like growing
rather than needing to do another equity raise anytime soon.
Speaker 1 (22:30):
So those that's a billion dollar question there and those
those business exactly, So.
Speaker 3 (22:36):
It's a billion dollars of essence. You said you will
divest over a period of three years. Yeah, so what
are we talking?
Speaker 4 (22:46):
So what we're the lens we were running over the
portfolio was really what can scale our own and our
ownership to be meaningful at a sort of ten billion
dollar market cap, things need to be quite big in
order to move the dark and the more small things
you have, the more complexity it makes for new investors
who are trying to figure out what's going on in
(23:06):
in for tool. Yeah, so you can sort of run
down the portfolio pretty easily and say, well, okay, that's clear.
That's been in the portfolio for a while, you've not
been allocating capital to it. That's probably something in a cycle.
We didn't actually name exactly which ones, because obviously there
are teams in those businesses. They have customers and things
like that, and all that needs to be work through
in a normal professional way like we do. But you
(23:27):
could probably figure out where we're thinking just by running
that lens over it.
Speaker 1 (23:32):
One thing I wanted to ask you about is healthcare.
We've talked a lot about energy. We've talked a lot
about data centers and the like, and some of the
old resets like Wellington you put here. We are the
imaging businesses both here and in Australia. Where do you
see the potential there?
Speaker 4 (23:49):
It's pretty high asually, I think those are a couple
of businesses that perform really well from an operating perspective.
As I said before, so you have fourteen percent growth
out of q scan and Australia. I've done forty or
fifty meetings since the result, and half of them would
have said that is an incredible outcome. How did you
do that because the other listed comps have not been
(24:11):
able to perform as well in that market. So it's
getting a lot of attension, which is really good. And
in New Zealand they went that far behind and then
nearly did ten percent and that was in a year
as we know living in New Zealand where Health and
Z was going through a lot of change. So it's
a very interesting part of the portfolio, and that it's
not correlated with anything else you're talking about concentration before.
(24:33):
It's actually quite provides quite a nice balance in the portfolio.
But how can it scale, as I said before, is
a bit of a question. One of our little plays
is this tally radiology idea, which is really where the
scan is read remotely from where it's taken. And that's
really good. If you go to a hospital at two
in the morning, you need a scan that will likely
(24:53):
be read off site. So it's things like that, and
because we have a big footprint, we have radiologists in
the UK for example, can read that stuff during their
day and they can do the reverse here. So and
that segment of radiology is growing really really fast. I
suspect to you get it really discover you're probably going
to have to merge it with something else and create
a bit of a more diversified healthcare portfolio. And we've
(25:17):
got a few ideas there as well. So yeah, I
think there is a few parts there that could make
it even more interesting and create a kind of nice
non digital, non power leg to the portfolio.
Speaker 1 (25:29):
Any airports that you could buy into around the world, Yeah, there.
Speaker 4 (25:33):
Are, actually, yeah, there are, and there's been quite a
few trading at the moment, So we have a few
airport investment ideas.
Speaker 3 (25:40):
So this may not be one of the ones on
the block, who.
Speaker 4 (25:43):
Knows, but the instruction and the direction should be clear.
Things need to scale, So our teams that are on
those assets, the teams that work here, it's clear what
the job is in order to continue to grow with
Infertile and that was really are objective on the day.
Lots of people listening on the for those things, those messages.
Speaker 1 (26:04):
Yeah, on Outlier, does seem to be retire Australia, I
mean it is.
Speaker 3 (26:08):
You looked at selling it a while back. We've talked
about that.
Speaker 1 (26:12):
It seems to be doing okay, but yeah, it does
seem a bit of an outline.
Speaker 4 (26:17):
I agree, and we did announce a strategic review on
that a couple of years ago and the timing didn't
work out very well. So I think that would be
in my it's pretty clear that area is that we
don't see ourselves in long term. That would definitely still
be one of the mere But the performance is good.
They provide a great service to their customers their residents,
So yeah, there's this is never or hardly ever about
(26:39):
bad performance in the businesses. It's really fit in the
portfolio and best long term owner.
Speaker 3 (26:44):
Yeah.
Speaker 1 (26:44):
Right, let's talk about shareholders. This year in Frattilla's now
included in the Global standard and x c I and
also in Australia the AX three hundred, so that gives
a broader scope or reach. If you're like four shareholders,
what are you hoping to have in terms of the
(27:06):
mix with retail and institutional.
Speaker 4 (27:09):
Yeah, we've spent a lot of time working on this
because we are an investment company. Actually the capital market
side of the business gets a lot of focus. Yeah. So,
as I said before, having done all of that work
with a lot of advisors, we still see retail as
being a really big part of the shareholder base. For
the foreseeable future. So I think I'm not sure of
(27:32):
the exact numbers now, but we would never see them
really getting below twenty percent, and more realistically, somewhere between
twenty and thirty is always really going to be in
New Zealand retail, So that you know, recommitting to the
dividend and finding a way to sustain it is all
comes out of that work. In fact, at the moment
half my team is in farm array at the Retail
(27:53):
Investor Show show YEP, and they'll be flying down to
christ Church for Wednesday and we're here in Wellington on
Thursday night. So a big part of the business right
is still making sure we're understandable to a retail investor base.
Having said that, we do know as the business grows
and if we just continue our historic performance, I think
(28:14):
our five year performance is over twenty percent per anum.
You just continue even fifteen percent, our target return for
five years will be a twenty billion dollar business and
in order to support that scale of register we will
need more international investors. So these in the ex editions
are really important for us and for retail shareholders so
that there is a buyer for their shares. Whenever they
(28:35):
choose to move in and out of them, right, So
we actively work on that. These index editions are meaningful.
And I said, I've had fifty meetings since the result.
Over half of them would have been in Australia. Now
talk to Australian investors and we'll be on the road
internationally later on in the year in Asia and the
UK and the US, just to build up that base.
(28:57):
But still we'll have a massive waiting here to New
Zealand forever.
Speaker 1 (29:00):
I think one thing we haven't talked about, Jason is
challenges and obviously the US and the sort of changes
there with the political situation and geopolitics around the world
as well, because you're in Europe as well as the US.
You know, you're many many jurisdictions. Yeah, what do you
see there? I mean, Long Road Energy seems to have
(29:22):
got it south together in terms of avoiding some of
the fallout from I don't know, it's a big beautiful bill.
It's now called instead of the Inflation Reduction Act. Yeah,
can you tell us what you're seeing there in terms
of the headwinds.
Speaker 4 (29:40):
Phenomenal volatility all year right for all investors. And that
was just the latest one four days before our result,
I think, to be honest, the share price reaction on
the day that came out surprised me. It barely barely
moved the dill at all. I think it caught up
after the result, to be honest, I think it was
people waiting for the result to move the shap to where.
(30:01):
To be honest, I thought it would be on the Friday,
not for any valuation reason, but I think it just
deserves it. Right, There's clearly a lot of volatility and uncertainty.
We're a long way away from there. How would you know,
as an investor sitting here in New Zealand what's really
going to happen. Of course, I'm there all the time,
and so I should know, and I do have a
really good, strong feel for it. The technical stuff we
(30:23):
talked about on the day is kind of getting done
in the weeds. But I think, really from my perspective
for shareholders, the most important thing to understand is that
the US is short of energy. When we took, for example,
in data centers, all the data center investments, so much
of it in fact is happening in the US now,
a lot of chips being absorbed there that all requires
(30:43):
power and it cannot be fulfilled with gas. All that
work has been done, everyone knows is not enough gas
and it can't be got to enough. Places in California
won't take another electron generator from gas. In normal Arizona.
There are plenty of states that absolutely want renewable energy
power and solar, which is mostly what we do, is
the cheapest and fastest. So we are well set through
(31:06):
this to be an incredibly good position to meet that demand.
And so you know, you've just got to get through this.
As we said our and your report, the theme this
year is navigating beyond the noise, and this is a
really prime example of an area where we're very high
convictions the states will need the power and that businesses
like these will be more valuable through this vit polatility
(31:29):
than less. Be careful on the way through. We've got
a great team. A lot of our money is protected
through the safe harboring and things like that that we've
talked about. So again, it's another area where I think
we just need to be patient and open our Christmas presents.
Speaker 1 (31:44):
Later on on that note, then, Jason, what excites you
about the year ahead?
Speaker 3 (31:51):
Not a late Christmas?
Speaker 4 (31:52):
Well, yeah, it comes when it comes, and there's only
so much you can control on a given day. I
do think that how AI rolls out is still incredibly
fascinating to me. Where it's going to go next. The
geopolitical angles now I feel a lot like energy always
used to feel. Energy has always been political and geopolitical,
and now it's now it's in chips as well, so
(32:14):
it doesn't feel unfamiliar. But I think that's really fascinating.
I do believe the trend is only one way, though,
and the genius out of the bottle. Countries have to
have this, Companies have to have it, and I do
believe that being in the infrastructure that delivers it is
one of the most attractive areas to be in. Doesn't
matter who's serving it, who's got the customer, they will
all have to have the type of infrastructure that we build,
(32:37):
and it's not easy to build it. So I still
think that is super fascinating. And then actually some of
the stuff that we talked about at the half year
around kind of getting our house in order, if you like,
or it's some tidy out of the portfolio. Actually that's
really exciting to finally have a clear plan We've done
a lot of thinking about that scale that we're at now,
what is the most meaningful next step from here? Where
(32:59):
is retail holds in our future? Right? And all that
work's been done now, so I think we've got a
clear set of principles. So getting through some of that
is actually quite exciting because when we get going on
some of that portfolio stuff, we're really good at it
and we tend to create a lot of value.
Speaker 1 (33:14):
Just one last question I've got for you, and we
talked about data centers. A lot of yours are in
Australia that there is movement in Auckland. Do you see
more data centers being built here?
Speaker 4 (33:25):
Yeah, we're building a very big one at the moment. Actually,
one of the biggest infrastructure projects in New Zealand is
being built by CDC. And actually, you know, the demand
outlook for in New Zealand in particular has been one
of the more stable areas of demand from our customers
over this whole since the half of you when I
started talking about this volatility, So that feels quite good
(33:48):
actually for the country. It's a really important issue. You've
seen over the last week or so big announcements out
of the Middle East UAE, and then there's an the
one coming. We understand big sovereign AI centers. You know,
billions of dollars of investment, and there are only so
(34:08):
many chips available in the world, and they're going to
go to countries that do make those investments thoughtfully and
get into the supply chain. So I think we're lucky
in New Zealand so far, but we should never take
any of that for granted, right, I think as a country.
So the more we can do to attract this really
important technology here and have it on our shore, on
(34:30):
our terms, rather than relying on somewhere else, I would
definitely encourage. In Australia, I think we'll be having the
same kind of discussions. I've seen stuff in the Afar.
I'm around this already. Yeah, it's really important.
Speaker 1 (34:43):
Well we should leave it there, Jason. We could talk forever.
In a way, I need to let you get your
flight so that you're not late.
Speaker 4 (34:50):
Thank you.
Speaker 3 (34:51):
That's so thanks for joining us today.
Speaker 4 (34:52):
Thanks so much for having it here as well at
wellty to.
Speaker 1 (34:54):
Newport and thanks everyone for joining in. You can watch
Shared Lunch on YouTube or listen to us on your
favorite podcast app. Leave us a rating and tell us
what you'd like to hear next. Until next time, Marto
wa
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