Investment house Washington H. Soul Pattinson reported first-half profits plunged to a loss of $643.1 million, largely attributable to a one-time goodwill write-down following a merger with Milton. Corporation on October 5, 2021.
The acquisition of Milton created a goodwill charge of $954 million, which resulted in a loss of $643.1 million. That compares to profits of $68.9 million a year ago.
Excluding the Milton merger, the company’s regular after-tax profit rose 281% to $343.7 million.
The ASX-listed company posted a 117% increase in revenue to $1.28 billion from $589 million in the same period last year.
The company is paying an all-outright interim dividend of 29 cents per share, an increase of 12%.
Chairman Robert Millner described the merger with Milton as a “significant highlight” during the semester.
“One of the main advantages of WHSP is its flexible mandate to make long-term investment decisions and adjust the portfolio by changing the mix of investment categories over time,” he said.
“WHSP maintains a strong balance sheet with modest debt and strong liquidity. WHSP also has available profit reserves and postage credit balances,” he said.
The ASX-listed investment firm has invested in several companies across various industries, including TPG Telecom, Brickworks, Australian Pharmaceutical Industries (API), Round Oak Minerals, and more.
In terms of the outlook, Mr Millner said stock market valuations had returned to “long-term averages” after the sharp drop in late January. Before this drop, valuations were at “high levels” and markets were “likely to fall”.
“We expect investors to continue to reallocate from longer-dated bonds to equities and have ample cash reserves given above-average savings rates,” he said.
“This suggests equity markets will remain supported with a rising rate environment favoring profitable assets with strong cash flows.”
WHSP will seek to use its diversified portfolio to increase earnings and cash flow over the long term and “use periods of volatility to add to the portfolio in a disciplined manner.”