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