After listening in on the conference call and reading through all of the materials I am ready to provide some thoughts on the latest set of SOL results.
Overall Investment Strategy
I've come away from this latest set of results still confident in the direction that SOL seems to be heading.
It's clear from their commentary that the key areas of focus going forward are private credit and private markets but this is the first time that global partnerships have been highlighted as a third area for potential expansion.
I think that when many of us (myself included) hear the word private equity it brings up memories of the disastrous Myer float etc. and just a general short term focus as those more conventional firms tend to come in, rip costs out and try and sell the business on again before the negative impacts of their cost cutting actually fully show up in the financial results.
What SOL is doing is more like being a patient capital provider/incubator that allows these businesses to think longer term. Todd Barlow outright stated there aren't any immediate plans to float these businesses and the best place for them may always just be under the SOL banner. It was interesting to see their results actually be somewhat separated out for the first time with strong EBITDA growth over the last 3 years for Ironbark, Acquatic Achievers and Ampcontrol.
A couple of other recent posts have pointed out the liquidity risk here and also the reliance on directors valuations which are definitely potential drawbacks to consider I just broadly feel comfortable with them considering the strong SOL culture
The private equity investments contributed twice as much net cash flow as this time last year and Todd Barlow stated they will now "start generating a lot of cash"
Interesting Figures
Just some interesting stuff I picked up
Private credit is 10% of the portfolio but amazingly produced 32.5% of net cash flow. NHC dividends also produced 25% of net cash flow which is the most vulnerable to dropping off if coal prices stay reasonably low
Interesting how little dividends have actually grown across the all ords in the last 5 years. SOL has grown it's dividend by 68% vs the all ords at 6% (keeping in mind SOL was coming off quite a low base)
Only 55% of net cash flow was actually paid out in dividends which is pretty promising for some further growth in the future and also means they've got plenty of opportunity to be reinvesting in other opportunities
I think it was a good result and that's been reflected in a positive market response.
SOL Price at posting:
$35.13 Sentiment: Hold Disclosure: Held
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(20min delay)