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Edited Transcript of BKW.AX earnings conference call or presentation 26-Mar-20 1:30am GMT

Half Year 2020 Brickworks Ltd and Washington H Soul Pattinson and Company Ltd Joint Earnings Presentation

HORSLEY PARK , NSW Apr 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Brickworks Ltd earnings conference call or presentation Thursday, March 26, 2020 at 1:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Lindsay R. Partridge

Brickworks Limited - MD & Executive Director

* Robert Canvin Bakewell

Brickworks Limited - CFO

* Robert Dobson Millner

Brickworks Limited - Non Executive Chairman

* Todd James Barlow

Washington H. Soul Pattinson and Company Limited - MD, CEO & Executive Director

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Presentation

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [1]

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Well, good afternoon, everybody. And thanks for taking time out in these very difficult times we're all experiencing. I noticed by the numbers that we've got a lot of smaller shareholders as well as institutional investors and analysts. So welcome to everybody, particularly to the -- our smaller shareholders. And on that note, I'm very pleased to be able to report to you all that both companies have been able to increase their dividend slightly for you this morning.

So my name is Rob Millner, and I'm Chairman of Brickworks and Washington H. Soul Pattinson. And with me today, I have Lindsay Partridge, the Managing Director of Brickworks; and the financial man from Brickworks, Robert Bakewell; and our Managing Director at Soul Pattinson, Todd Barlow; and his financial guru, David Grbin.

So as I mentioned, we've been able to increase our dividend in these very difficult times. And generally speaking, in these difficult times, these 2 very good, sound companies tend to outperform, which I think you've all seen in the last month or 6 weeks.

I'm not going to take any more of your time up, but what we're going to do today, Lindsay will give you his presentation, followed by Todd, and then we will take questions. If we can have questions from Brickworks people first, and then people can ask Todd some questions on Soul's. So on that note, I'll hand you over to Lindsay.

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [2]

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Thank you, Chairman. Good afternoon, ladies and gentlemen. Today, I will be going through the impact of the COVID-19 virus on our operations, our first half of 2020's overview, divisional review, financials, outlook, then after Todd, we'll take questions. And if there are any staff on and you have a question, if you can e-mail me and we'll answer them that way. Let me just get myself organized here.

Well, the pandemic has resulted in significant uncertainty for Brickworks and the broader economy. The public health crisis continues to evolve with far-reaching consequences that are difficult to predict. Brickwork continues to monitor the situation closely, and our primary focus is on ensuring the safety and well-being of our employees and customers. We've put in place a range of procedures to protect employees, including self-isolation of at-risk employees, daily temperature checks at all sites of all employees and all visitors attending the sites, working from home where that is possible, cancellation of all international and domestic travel, social distancing at our workplaces and segregation of work teams. In other words, if we have 2 shifts in a facility, there's an 1-hour gap between them on the changeover, so that the site can be cleaned and we can make sure there's no cross-contamination between shifts.

As part of our risk management program, most of our sites were already equipped with biomedical kits and medical supplies, enabling us to quickly put in place procedures to protect our staff. This was greatly appreciated by our staff, the fact that we're able to take these steps.

We also have advanced video conferencing facilities between all of our sites, plus the use of laptops. And I can report to you, other than where we've been requested to close by various governments, particularly in Pennsylvania, we are continuing operations as per normal at this time.

In terms of direct impacts to date, the first point I'd like to make is that we do not have any confirmed cases of the virus amongst our staff or, for that fact, amongst any of our customers. Building Products North America has been significantly impacted, as previously announced. On the 19th of March, the Governor of Pennsylvania, Tom Wolf, ordered the closure of all nonlife-sustaining businesses. And as a result, our 5 brick factories in Pennsylvania had to be closed. Subsequent to that, in actual fact, overnight, they have relaxed that slightly and allowed us to dispatch from those 5 factories even though they remain closed, and we've been able to open our masonry supply centers. So at least now we're in operation, and we have enough stock on the ground to easily handle 3 or 4 months without restarting the factories. In addition, with -- in Illinois and Ohio, we are considered essential operations, and we continue working there, whereas in Michigan, we have had to close our one sales office in that state.

Elsewhere, some of our European suppliers of our premium imported products have indicated that operations have been or are likely to be suspended shortly. Although, amazingly, one of our suppliers, not too far from Venice, has been able to still run their operation and dispatch through this period of time. In the longer term, this may stop us from starting new jobs. But otherwise, I think we'll be able to work our way around it.

One of the great strengths of our operation is we are diverse. We're spread out over a lot of area. A lot of our raw materials come from our own sites. So we're able to keep production. My main concern is that we may have some specialist glaze stains, which might mean that we can't make certain colors, or there may be some part that breaks that we'd need to normally bring in from overseas. But having spent a lot of time over the last 10 years trying to standardize our equipment across our facilities, we have a significant depth of spare parts amongst ourselves, and I don't anticipate that we'll be impacted in that way. The Property Trust operation has not been affected at all.

Okay. Sorry, just checking my slides here. Okay. So -- but going forward, we recognize that there most probably will be -- it's almost inevitable that there'll be significant impact in the months ahead, and there's likely to be a downturn or a recession. The builders are reporting at the moment that there's reduced activity in their display centers and, in some cases, have reduced the number of trades on sites just to one. This morning, Simonds and Metricon announced that they have to close their display centers, but potential customers can attend by appointment, so they're still able to talk to their customers. And it appears initially that the orders that they're receiving and deposits that the builders are receiving are holding up. There's been no impact at that point of time. And as I've mentioned on previous occasions, many of the builders have very long lead times and are able to continue work if they're allowed to continue working for some time yet to come.

The potential for further plant closures, either imposed by government or a decision made by Brickworks to protect its staff or the safety of employees or control stock can't be dismissed -- are not going to be dismissed if this continues for some time that a number of customers may have difficulties paying their bills, and there may be the possibility for bad debts to emerge.

We have run -- we have some financial models that we've run and are running various scenarios of where we may go. We have, at this point of time, delayed all capital expenditure and all other nonessential expenditure. And any employees that need to take time off, we'll allow them to take their holidays and then their long service leave where they have that accrued. In the United States, I believe at the moment, we have something like 400 employees laid down. In that situation, 66% of their wages are paid by the government while they're stood down. So they have been taken care of.

But we have to make a comment: At this point, we have no choice to but to withdraw from any previous outlook statements and are unable to provide any earnings guidance at this stage due to these uncertain times. However, we do have a very diversified portfolio of attractive assets and robust balance sheet and puts us in a strong position to effectively confront and emerge from the challenged conditions ahead most probably stronger than when we went into them.

I'll now go to the overview for the first half of 2020. If I can get this slide to change. Right. While earnings in the first half were down on the record results achieved in the previous year, the company has continued to make steady progress on the implementation of our strategic initiatives. This is highlighted by strong performance and continued expansion in the United States, including the completion of the Sioux City Brick acquisition in August and the Redland acquisition in February just after the end of the period. I'm pleased to report that our expansion in the United States remains on track, and financial performance is encouraging, in other words, in front of our internal budgets. And I'll discuss this in more detail shortly.

Property has also delivered yet another great result with our prime industrial land assets continuing to increase in value. It's underpinned by long-term structural trends in the economy. During the half, the net assets of our share of the Property Trust assets increased by $77 million. However, we have faced some challenges in the Australian Building Products business as residential construction activity moves through the low point in the cycle. And my feeling that was most probably about September last year. As I'll discuss later during this period, we've taken the opportunity to complete maintenance and upgrade works on our plants to ensure that we're in the best possible shape for the future. I mean if we've known that the virus was going to come along, of course, we could have done that now. But hindsight is a wonderful thing. Pleasingly, within our Australian operations, we've achieved record-low lost time injuries.

Just looking at the highlights. The underlying EBITDA was $170 million, down 25%. The underlying profit was net $100 million. The statutory profit was $58 million. The net tangible asset was $12.62. It is down because of the change in the leasing standard. If it wasn't for the change in the leasing standard, it would have been the same as the prior period. Underlying earnings were $0.67. And as the Chairman mentioned, we were able to increase our dividend by 5% to $0.20 a share.

Looking at that dividend history there. It shows you the strength of having a diversified portfolio and robust balance sheet. And it's allowed us to overcome this period as we have many previous periods. And furthermore, the increasing rental from the Property Trust and the reliable dividends from Washington H. Soul Pattinson has given directors the confidence to increase those dividends to support our shareholders, many of whom rely on the income stream from the dividends particularly in these difficult times. So that dividend is -- the record date is the 14th of April, and the payment date is on the 5th of April. And the graph up there shows you that we've either kept our dividends the same or increased it for 44 years.

Looking at the value creation of Brickworks. It's another strong performance. We've averaged 13% per annum over 52 years, incorporating the dividends and the share price appreciation. So in other words, $1,000 invested in 1968 would be worth $500,000 today. It doesn't mean that we're not completely removed from the potential impact of market volatility. And we've seen, of course, the share price drop since the end of the period. We're down 24% versus the market. But interesting, if you compare Brickworks to our other building products peers, we're the best-performing stock since the 1st of January this year.

Looking at our diversification. Building Products includes Building Products in Australia, Building Products in North America, the industrial property and investment in Washington H. Soul Pattinson. If you look at each of those, the current value of inferred asset backing is AUD 3 billion. The value comprises the market value of Brickworks' stake in Washington H. Soul Pattinson, $1.8 billion; our net asset value of the Property Trust, $710 million; the net tangible assets held within our Building Products group, $759 million, which includes some land that is at the original purchase price, not the current market value; and in North America, $221 million, less the net -- the debt of $461 million.

Just looking at our safety performance. I'm pleased to report that in Australia, we have achieved a record-low injury rate for the last half. In our Australian operations, there was only one lost time injury during the period. That transfers into a rate of 0.8 compared to 1.7 in the prior period, performance that I think all my staff can be very proud of. It wasn't done easily. It's taken a long time, a lot of work over a lot of years with our management systems, our procedures, our leadership to make this happen. But it is a great result. And now we'll be working on bringing our American operations in line with what we achieved in Australia.

This is the first time I've had the opportunity to talk about sustainability. But in our 2019 annual report, we put the first detailed sustainability report out to our shareholders. From an environmental perspective, we've consistently reduced our carbon emissions over many years through a range of initiatives, including investment in fuel-efficient kilns, product redesign and utilization of alternative fuels such as landfill gas. Brickworks is active in the community and has a long-standing partnership with the Children's Cancer Institute having made direct and indirect contributions over $3.5 million since 2002. In January, Brickworks announced a bushfire support package for homeowners impacted by the devastating fires that swept across the East Coast of the country in December and January.

We also continue to focus on inclusion and diversity. Having established a Diversity Council in 2018, we are pleased to report that the percentage of women in our senior executive roles has increased to 27%, up from 7% in 2015. I think that's a fabulous effort. But I'm also pleased to announce the appointment of Robyn Stubbs to our Board on the 1st of January, increasing the number of female directors on the Brickworks Board.

Looking at the divisional review. As I mentioned before, we have a strong portfolio of businesses. Washington H. Soul Pattinson, and Todd will be talking about in a minute, has a strong portfolio of assets and has given us good returns over the longer term. Our property business consists of A-grade industrial property assets located in prime locations and leveraged to the growth of the new economy. And they're all held in our JV trust with the Goodman Group. Building Products Australia has our heritage business, Austral Bricks. It also has other businesses, Bristile Roofing, Austral Masonry and Austral Precast. In North America, our brick business, we have quickly established a leadership position in the northeast region of the country. Our brick business is differentiated from the other major players, both focusing on architectural products for the nonresidential and multi-residential sections.

I won't say too much about Soul's because Todd's talking in a minute other than to say the underlying contribution to Brickworks was $39 million for the period. We received $32 million in cash dividends, almost equal with the prior year, even though we had disposed of 7.9 million shares during the period. And the market cap at the end of the period of Soul's investment was just over $2 billion. And the return to us over the last 20 years have been 13.2%, which is absolutely outstanding.

I won't talk about the next because I'll leave that to Todd, and I'll come on to property. Property delivered an EBIT of $89 million for the period, down 33% in the prior period. The decrease in earnings is primarily due to there being no land sales compared to a $35 million profit from the sale and leaseback of the Punchbowl brick site in the prior period. The Property Trust delivered an EBIT contribution of $90 million. Net trust income was up 25% to $15 million, and you can see there it's one of the reasons that we're able to increase our dividend. And that included the rental contribution from 3 new facilities at Oakdale South and the rental increases across the balance of the portfolio. All the Property Trust assets were revalued during the first half. That wasn't the case last year. And the revaluation profit was $52 million, reflecting an average 25 to 50 basis points compression across the portfolio, and that followed a 50 point in the prior year. Now if you'd asked me last year, would we see further compression of cap rates, I most probably would have thought, maybe not. But now I've got to say it's a bit hard to call. On one side, we have virtually 0 interest rates at the reserve level, but whether or not there is increasing margins due to risk from the banking area, we're yet to see.

Development activity in Oakdale South continued during the period with the completion of 2 new facilities, resulting in $24 million of development profit. The total value of leased assets within the Property Trust was $1.7 billion at the end of the half, including $295 million worth of land to be developed. The total assets held was almost $2 billion, borrowings of $536 million within the trust, net assets of $1.4 million, resulting in Brickworks share of $710 million, and that was up 12% or the $77 million on the prior period.

After a decade of methodical investment development within the trust, we're very pleased with the progress that has been achieved. Since its inception in 2008, net asset value has increased at 18% per annum, generating significant value for shareholders. The total return on leased property assets for the period was 17%, comprising a revaluation return of 11% and a rental return of 6%. As a result of the increased valuation, gearing of the leased assets is reconciled at 32%.

The strong demand for our industrial land reflects structural changes across the industry as companies modernize their supply chains in response to consumer preferences such as online shopping. These trends are driving an evolution towards more sophisticated specialized facilities, incorporating features such as robotics, automation, temperature-controlled and multistory warehousing with these advanced facilities providing companies with a critical competitive advantage in the new economy. Well-located prime industrial land is becoming even more valuable with the lack of alternative investment options, the low interest rate driving down cap rates as investors try and chase returns.

To cater for the increasing demand and provide a pipeline of further development over the next 5 or more years, significant civil works are now underway at Oakdale West. Current progress is shown on the screen. Over $80 million of infrastructure work has already been committed to the site, including a new 4-lane road to the estate, which actually has got a bridge on it, which crosses the main water supply line for Sydney, an enormous amount of effort there. There's something like 80 or 90 pieces of equipment, bulldozers and scrapers working on that site, and they're very, very quickly getting that site ready so that we're going to have the pad for the 66,000 square meters Coles distribution facility available towards the end of this year, allowing construction to start early next year. Inquiries for other developments on the estate have been strong and is expected to increase further now that civil works are underway.

Now turning to Building Products Australia. Revenue from continuing operations for the period was $338 million, down 10% on the prior period. Demand was relatively resilient considering the average 24% decline in residential building activity. EBIT was $10 million, down 62%, and EBITDA was $39 million. Earnings for the period were impacted by the sharp slowdown in building activity across the country, particularly multi-res. This, in New South Wales and Queensland, had a significant impact on our Austral Precast and Austral Masonry business that are very much focused into that area. Also, we've found there's continued intense competition in Western Australia as Western Australia moves itself through possibly the worst downturn in 30 years. Numerous brick plant shutdowns on the East Coast were to complete significant amount of maintenance and upgrades, resulting in an impact of about $5 million, and energy impacted us to the tune of about $4 million. The performance of Austral Bricks on the East Coast was resilient with earnings approximately in line with the prior period after excluding impact of the higher gas costs and plant shutdowns.

Our decision to stop production across most of our brick plants -- brick kilns to complete significant upgrades and maintenance work was a deliberate strategy. Whilst these plant shutdowns had a significant negative impact on earnings in the first half, that will provide improved production reliability over the medium and longer term. Production reliability on the East Coast is particularly important for us over the medium term with our traditional backup facility, Plant 2 at Horsley Park, being unavailable due it's currently being upgraded.

Bristile Roofing earnings for the period were lower as was Austral Masonry and Austral Precast. We purchased one business during the period in there, the Aussie Concrete Products company. This company makes sleepers, concrete sleepers, reinforced sleepers for retaining walls. And this is a very fast and growing and exciting market. The standards have been changed for sleepers. A lot of people would use timber sleepers for their house, but they now must have a standard of 50 years of performance. And of course, timber sleepers can't give that level of performance. Our biggest customer in this -- for this business is Bunnings, and we distribute right across the East Coast of Australia.

Our -- construction of our Southern Cross Cement Terminal was completed during the period, and it's been fully commissioned. We've received 3 ships. We're about to receive our fourth ship, and we're very happy with the progress of that operation.

Looking at Building Products North America. As I mentioned earlier, we're very pleased with the progress so far. Sales revenue for the first half was AUD 110 million. That included 5 months from the Sioux City Brick acquisition that was completed in August. Demand has been particularly strong in the northeast region, underpinned by commercial and residential projects in New York City and surrounding areas such as Philadelphia, Cleveland, Baltimore and Washington. EBITDA for the period was $13 million and EBIT of $6 million. The North American earnings are highly seasonal, with the cold winter months in December and January characterized by reduced sales volume and plant shutdowns. Now last year, because we just bought the business, all the factories were closed. But the reorganization we had taken place during the year. This year, we were able to keep the Mid-Atlantic, Hanley, York and Sergeant Bluff plants online through winter. And that made a significant difference to our earnings that period, and it meant that we were able to achieve an EBITDA approximately breakeven. The second half, of course, normally would be 6 months without interruption.

Manufacturing costs were lower across most facilities as efficiency improvement initiatives were rolled out across the plant network. A particularly strong operational performance was achieved at the Landmark manufactured stone plant in Kentucky, with unit costs for this facility reducing by almost 30%. The installation of a new extruder at the Iberia Plant in Ohio was completed. And while this adversely impacted the cost during the period, it will support the increased efficiency and expanded product range at that plant going forward.

A significant progress has been made with the sales and marketing initiatives. Exclusive North American supply agreements are now in place with European suppliers of premium imported products. New design studios in Philadelphia and New York have been committed to, and we're going to start construction once we can. And there's been new marketing and promotional material developed.

In addition, we have a dedicated pricing team, which is now established to drive the new revenue opportunities and roll out our new pricing policies. A successful price rise on new orders was implemented towards the end of the period.

The acquisition of assets of Redland Brick was completed on the 10th of February this year, post the end of the half. Having now completed 3 acquisitions in the past 15 months, we have quickly established a business of significant scale in North America, able to make a meaningful contribution to group earnings and a platform for growth. Building Products North America now has market leadership in the key states across the Northeast, Midwest and Mid-Atlantic regions, a portfolio of recognized premium brands, almost 900 employees, 12 operating brick plants and 1 manufactured stone plant, annualized sales of approximately 400 million bricks or about AUD 290 million. We have an extensive reseller network and the company-operated outlets, which we have some 15 or 16 of. And we have a wonderful staff who are highly motivated and highly skilled.

I'll now hand over to Robert Bakewell, who will handle the financials.

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Robert Canvin Bakewell, Brickworks Limited - CFO [3]

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Thanks, Lindsay. Now as already mentioned, the total underlying group EBITDA for the half was $170 million, which was down 25%. Including depreciation, the underlying group EBIT was down 36% to $135 million. And now the new AASB 16 accounting standard for leases incorporates amortization costs with leased equipment. So restating earnings on a like-for-like basis, EBIT was 150 -- sorry, EBITDA was $154 million, which is down 32%, and EBIT was $133 million, which is down 37%. Total borrowing costs across the half were $12 million, and that includes $2 million of interest on lease liabilities in accordance with that new standard. And tax was $22 million. This resulted in an underlying net profit after tax from continuing operations of $100 million, which is down 37% on the prior period. Significant items further reduced the NPAT by $35 million, and I'll discuss these separately in a moment.

As a result, net profit after tax from continuing operations was $65 million, down 56% on the period. And during the half, the Auswest Timbers hardware assets, which were classified as discontinued operations, were sold. That was in October, and they contributed a further $7 million loss. Including these operations, the statutory NPAT was $58 million, which, as mentioned earlier, was down 49% on the prior half.

Just coming back to the significant items, a couple of key ones there. The after-tax transaction costs on the acquisitions we made in the half were $8 million. These were offset to a certain extent by a $4 million gain that we made on a bargain purchase, which means this is recognized on the acquisition of Sioux City and represents the excess of fair value of net assets compared to the purchase price. After-tax restructuring costs of $5 million were primarily associated with the plant closure at Redfield in Ohio, the mothballing of the Cardup plant in Western Australia and significant redundancy costs in Australian Building Products in response to the decreased activity. There were then significant items that we picked up through our equity accounting of the investment in W.H. Soul Pattinson of $33 million, and I'm sure Todd and David will speak about those. And there was a $6 million tax benefit related to the deferred taxes on our holding in W.H. Soul Pattinson.

So we'll then turn to the cash flow. Total operating cash flow for the half was an outflow of $18 million. The decrease in the prior period was mainly a result of the lower earnings from Building Products Australia, along with the payment of $54 million in capital gains tax on the December 2018 sale of 7.9 million shares in W.H. Soul Pattinson. And that sale delivered proceeds of $208 million at that time. Spending on acquisitions totaled $63 million during the period, representing the Sioux City Brick completion payment along with the deposit on the Redland Brick assets. And capital expenditure of $57 million was incurred in the period, with significant project spend on our new ERP system across Australia and the United States and the commencement of the new masonry plant at Oakdale East in New South Wales as well as major upgrades to brick plants in South Australia and Iberia in Ohio and dividends for $57 million in the period.

Looking at the -- a range of the key indicators. As Lindsay already mentioned, prima facie net tangible assets per share was down 5%, but that's really as a result of the new leasing standard. In fact, they were unchanged at $13.28 on a like-for-like basis. Shareholder equity increased by $17 million to almost $2.2 billion, and that represents $14.57 per share. Underlying return on shareholders' equity was 9%, which was down from 11% in the prior period. And I've mentioned the cash flow. The net debt increased to $461 million due primarily to the brick acquisitions that we made in the U.S. along with some lower operating cash flow. And this resulted in balance sheet gearing increasing to 21%.

Now given the uncertainty of the times, we've included this slide for the first time, which just gives a little bit more detail on our balance sheet and particularly on our debt maturity and key metrics and supports Lindsay's earlier statement about the robust nature of our balance sheet. So I'll just go through these methodically.

Brickworks currently has around $897 million in committed debt facilities. That includes a multicurrency facility of around $697 million, a bilateral cash advance facility of $100 million and an institutional term loan facility of $100 million. The syndicated multicurrency facility was secured in May 2019, and it consists of AUD 355 million or denominated in Australian dollars and USD 200 million denominated in U.S. dollars. There's varying tenor across those facilities, but the next maturity is not until the 2022 financial year. As I mentioned earlier, net debt was $461 million at 31 January 2020. Currently, today, we have close to $300 million in committed funding and cash on hand with gearing significantly below our banking covenant levels.

And with that, I'll hand back to Lindsay to talk about the outlook.

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [4]

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Thank you, Robert. As I mentioned at the start of the presentation, due to the uncertainty surrounding the coronavirus pandemic, Brickworks withdraws any previous outlook statements and are unable to provide any earnings guidance at this stage. However, I'd like to make some comments about the current performance of each business and how each is placed to confront the challenges that lay ahead.

I've already mentioned that in Washington H. Soul Pattinson, we have an investment that has a proven history of outperformance over the long term and across the business cycle. It has a diversified portfolio of businesses and a strong balance sheet. Within property, we expect the trend towards more sophisticated and higher-value facilities will support ongoing growth in asset values with the Property Trust. In fact, over the longer term, we believe that current events are likely to further accelerate these trends towards online businesses, and it's unlikely that things are returning to the way they were before this crisis. And we see the greater demand for -- increased demand for warehouse space. More specifically, in the second half of the current financial year, we are planning the sale of 10 hectares at Oakdale East into the trust.

Within Building Products Australia, trading in March has strengthened throughout the month in both sales and order intakes. And actual fact, on Monday, we had the best sales of this financial year. And this month, we're looking at very strong orders. Gross order is about 25% up on net sales. So businesses continue normal at this point in time. This might have been partly driven by customers wishing to ensure they had access to stock, but also, we've seen a surge in do-it-yourself demand, as I know other building product companies have seen -- or building supply companies have seen the same activity. However, we are preparing for a downturn in activity for the remainder of the financial year, including possible plant shutdowns to avoid excessive stock build and to preserve our cash.

The experience in North America has been similar. Prior to the impact of the coronavirus, sales volume was at record levels, with strong demand being boosted by the integration of Redland -- the Redland Brick operations. However, with many plants now closed, trading has been disrupted. Our focus for the short term is on ensuring the health and safety of the workforce, minimizing costs and putting in place plans so that the operations can quickly ramp up when conditions allow. More broadly, I've mentioned Brickworks has a diversified portfolio of attractive assets and a robust balance sheet. And this is particularly important as we face these current uncertainties.

I'd like to acknowledge all my staff at this point of time who have worked very hard to deliver this result and are now working under difficult conditions. But their morale is good, and we've been able to keep in contact with them all every day, and we'll work our way through this.

So thank you very much, ladies and gentlemen. And I'll hand over to Todd who will cover the sales performance, which I should better bring up. Oh, there's a few slides here, supplementaries. You can look at those if you look at the pack online. And we should have the next one? No? So just flopping -- swapping over now. Okay. Load this one obviously, like in here, Todd?

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Todd James Barlow, Washington H. Soul Pattinson and Company Limited - MD, CEO & Executive Director [5]

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Thank you very much.

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [6]

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Can't say had been indeed my best investment.

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Todd James Barlow, Washington H. Soul Pattinson and Company Limited - MD, CEO & Executive Director [7]

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Well, thanks very much, Lindsay, and good afternoon, ladies and gentlemen. Just while our slides are loading up, actually there they are, yes, I'd like to start with just a brief overview of our business. We always do. We have a diversified portfolio. And I hope to cover off on why we believe that diversification is very important and has been very beneficial to shareholders.

We've got a broad mandate to invest across a range of asset classes. And I think that's important particularly in times like these. We were able to shift our focus in recent times. When prices were high, we bought more private equity, provided more direct credit and invested in kind of cyclical hard assets like agriculture. In this market dislocation, our long-term approach means that we can hunt for mispriced companies with solid fundamental businesses where we can take a long-term view. Having a value-based approach to investing has been tough in recent years. The market has been extremely strong, but hopefully, we can execute well now that the market has presented the value investor with more opportunities. I hope to cover our approach to capital preservation with defensive businesses which generate strong cash flows so we can continue to pay stable and growing dividends to our shareholders.

I'll start with a look at the company performance through the first half of FY '20, which is the period ended 31 January. The group regular profit for the half was $124.7 million, down 33% on the first half of FY '19. Regular profit is more relevant because it removes one-off gains and losses. And in the first half of FY '19, we sold the head office building in Pitt Street, which generated a significant profit. That led to statutory profit in first half of FY '20 to be down 71%.

We don't believe that profit is a good indicator of our success. You can see, in the history of profits by half over the past 5 years in this chart, profit has grown overall. In the first half '20, profit was higher than the second half of '19. Profits were obviously higher in the middle there in 2017, 2018 when thermal coal prices were very high.

But what we focus on is the same thing that many investors focus on when they consider their portfolio. Firstly, we aim to grow the value of their capital. And during the half, we achieved a very modest gain of 0.2%. And secondly, we aim to improve the yield we receive, and we measure this by looking at the cash that we received from our investments, and this was up 0.7% for the half. Cash generation was very strong in FY '19 and increased 18% on the previous year.

Today, WHSP has declared an interim fully franked dividend of $0.25 per share, and the record date will be 23 April with payments due on 14 May. This is the 22nd consecutive increase to our interim dividend. And over the past 20 years, the interim dividend has grown at a 9% compound annual growth rate.

As I mentioned earlier, through the half, the net asset value of the portfolio was essentially flat, and we finished the half at just under $5.5 billion of assets pretax. Increases in TPG and Brickworks through the half were largely offset by a decrease in the value of New Hope. The only major investment we made was the agriculture investment in the private equity portfolio. And we've taken on more bank debt to fund recent acquisitions in agriculture, and we have more capacity to make further acquisitions if future opportunities arise.

This table shows the total shareholder returns for WHSP shareholders for various periods in comparison to the ASX All Ordinaries Accumulation Index. WHSP is focused on long-term growth. The TSR performance has been strong over the period shown above, with the exception of the last 12 months. Short-term TSR can be significantly or is significantly impacted by share price volatility. At this time last year, we were reporting a 1-year TSR of 56.5% for the 12 months to 31 January 2019, whereas the 1-year TSR to 31 January this year is negative 16%, reversing some of the strong share price gains that we saw in 2019 -- 2018, I should say.

However, if you look at even the last 3 years, there's been an outperformance despite WHSP being positioned defensively in a very strong growth market. We've always looked at longer-term performance, and our aim is to outperform over the long term. You can see here that over 20 years, WHSP has a total shareholder return of 13.2% per annum, which is 4.6% higher than the index. And the compound benefit of this outperformance can be seen in the graph where over 20 years a period -- a 20-year period, an investment in WHSP has grown over 11x, while an investment in the index has grown by just 4.2x.

During the half, we deployed capital into the agriculture sector. We've acquired a high-quality diversified portfolio of land- and water-based agricultural assets across Australia. The portfolio produces a range of commodities, including citrus, macadamias and cotton, all of which are commodities where Australia has a global competitive advantage stemming from its low cost of production, high product quality and ability to deliver counter-seasonal production. The portfolio is in the process of a comprehensive redevelopment plan, which is expected to return -- to result in a material lift in productivity, profitability and value.

The other event of note, which the Chairman mentioned earlier during the half, was that we welcomed over 5,000 new shareholders, which was a 25% increase in total shareholder numbers. Shareholder numbers have more than doubled over the last 5 years.

Of course, there's been major impacts to global markets in the economy since the end of our half on 31 January. I'll provide a brief update on how WHSP is performing since half year end. And when I discuss each of the portfolio investments, I'll also address how they are faring in light of the new business conditions we're experiencing.

Since the start of the second half FY '20, on the 1st of February this year, WHSP share price has been quite resilient. As our close of business yesterday, WHSP was down 10.6% while the All Ordinaries Index was down 29.7%. We believe our company is in good shape to weather the storm. We have a diversified portfolio of good quality assets, many of which are very defensive in nature. And it's interesting to look back in history, and over the last 20 years, the last 20 of our financial years ending 31 July 2019, the All Ordinaries Index have been negative just 3 of those 20-year periods. However, in each of those years, where the market was negative, WHSP's total shareholder return was actually positive in all 3 periods.

The recent events are making forecasting extremely difficult. But we do have good line of sight on the cash that we will receive in this financial year. The majority of our cash in the FY '20 year is comprised of the FY '19 final dividend and the FY '20 interim dividend from our major investments. TPG has declared a $0.03 per share dividend, which is up 50% on the previous year. Brickworks has today declared a $0.20 per share dividend, which is up 5%, and New Hope's $0.06 per share dividend is 25% below the FY '19 number. However, based on the EBITDA -- based on the dividends declared from our major investments, we believe that this year's cash generation will be in line with last year, which I should note was up 18% on the previous year. And this will support our ability to maintain or beat our previous dividends.

Our focus during this time is in ensuring our business is well managed through the crisis. We are deeply focused on protecting our employees and protecting the wealth of our shareholders. These events are unprecedented and causing massive disruption to business models and the broader economy. Every business will be impacted. We believe that our portfolio of quality businesses generating real cash flows should be resilient, but we're working very hard to manage our portfolio through this. We have available liquidity to take advantage of new opportunities, but we will be cautious. It's a time of great opportunity, but it's also a time of great risk.

Looking now at the components of our portfolio and starting with our largest investment, TPG, which reported in its first half '20 results that its revenue was in line with the previous half, and its business-as-usual EBITDA was down just 5%. TPG's business-as-usual earnings strip out the costs of the aborted Australian mobile network costs as well as the costs of the Singapore rollout. And you can see from the chart on the right that TPG continues to lose margin as customers migrate from TPG-owned infrastructure to the NBN. However, TPG is offsetting most of the NBN headwinds with growth in other earnings, which are primarily as a result of earnings growth in the corporate division, general overhead reductions and earnings from their Tech2 business. And most of the migration from TPG infrastructure to the NBN has now played out. The large majority of TPG's customers are now on NBN. So future margin compression should not be as significant.

The big news, of course, is that the recent Federal Court decision has allowed the merger with Vodafone to proceed. This was very welcome news though frustrating that the uncertainty effectively caused an 18-month delay. We now expect the merger to be implemented in July this year. Vodafone and TPG together will be a very strong company in the telecommunications industry. They each bring a network of owned infrastructure, which will be highly complementary to the other. The company should be able to achieve significant synergies and be in a very good position to win market share from the larger 2 operators in the industry. Before the merger, TPG is expected to make a special cash dividend to its shareholders as well as the spin-off of the Singapore mobile network -- the Singapore mobile business. We're also expecting an increase in the ordinary dividends of the business going forward.

TPG should not be impacted significantly by the COVID crisis or the follow-on economic slump. Telecommunications is a consumer staple. And if anything, we should see increased demand for the value-focused offerings of TPG and Vodafone. And since the 1st of February, TPG share price is down 7% compared to the market, down 30%.

I can skip through Brickworks because you've just heard from Lindsay. But I did want to mention, this slide in particular from Lindsay's presentation reflects how we think about Brickworks. Just 28% of the portfolio is exposed to Building Products, and that is both geographically across Australia and North America. It also holds a diversity of products. But the real diversification comes from the fact that property investments are almost as big as the Building Products business and should not only continue to perform during any downturn but should benefit from further cap rate compression. And 50% of the portfolio is in WHSP's business, which I've tried to outline today is defensive in nature.

So when I look at Brickworks share price and how it's performed relative to the All Ords and relative to other listed business -- building products businesses, it's no surprise that it has outperformed during this market turmoil. But given 72% of its investments are in WHSP and industrial properties, I would have expected the market to give greater recognition to this fact. Nevertheless, it has performed significantly better than its peers, which have all underperformed the market, some by a very wide margin.

New Hope released its results this week. Revenue was in line with the first half of FY '19 despite coal prices being on average 29% lower than those experienced in the first half of FY '19. The price reduction was offset by increased ownership of Bengalla and increased production at Bengalla. That price reduction, however, had an impact on profit, and regular EBITDA was down 25%.

New Hope continues to deliver strong operating cash flows and announced the $0.06 per share fully franked interim dividend. Since listing in 2003, New Hope has paid over $2.4 billion in dividends to shareholders. New Hope is still waiting for approvals for its new Acland Stage 3 extension. Unfortunately, people who object to the mine continue to engage in lawfare and hold up the process. New Hope has satisfied every technical requirement and succeeded at every decision-making level. We hope that in the short time, the government's ability to delay the final decision will be exhausted.

The demand for electricity is relatively stable and growing in our region, along with population growth, urbanization and economic development. In the 5 years to 2024, it is forecast that global electricity consumption will grow by 12%. And most of that growth is coming from Southeast Asia, South Asia and China. It's also true that renewables and other forms of electricity generation will generate some of the growth. However, 64% of this growth in electricity consumption in South Asia and Southeast Asia is expected to come from new coal generation. This is against the backdrop where we see limited new supply of thermal coal, particularly the good-quality, lower-emission coal that many customers are now demanding.

Recent events relating to the spread of COVID-19 and the sharp drop in oil prices have not had any immediate impacts for the demand -- on the demand for coal. In fact, demand is holding up quite well, and the thermal coal price in Australian dollar terms has risen over 10% since 1st of February. Factories are already returning to production in China. And in time, the rest of the world will be back online. It should be noted that following the GFC, when the global economy contracted around 1.7%, thermal coal had one of its best years.

The recent collapse in oil prices can be both a positive and a negative for New Hope. Falling oil prices are helpful to reduce the cost of mining where diesel consumption accounts for about 15% of cash costs. On the other hand, lower oil prices reduced the price of LNG, and some customers are able to switch from thermal coal consumption to LNG when prices are low. This switching ability is limited, however, by the ability to receive LNG imports and the infrastructure to generate the power from LNG.

Our Financial Services Portfolio will be the part of our portfolio which will be the most directly impacted by recent events. The portfolio comprises about 2/3 in listed investment companies, which will have reduced in value broadly in line with the market. The other part of the portfolio are involved in asset management where funds under management is the key driver to revenue. Lower FUM, as a result of market movements and potential redemptions will have an impact on profitability. However, we believe that our investees have resilient business models, and good quality managers who know how to invest through these types of events will ultimately do pretty well.

The Pharmaceutical Portfolio is comprised of investments in API and Apex, which is listed in Malaysia, as well as Palla Pharma. At 31 January, the portfolio was valued at $269 million and generated dividends of $4.6 million through the half. All of these Pharmaceutical Portfolio companies are doing pretty well in the current environment. The demand for health products produced and sold by Apex and API is very strong at the moment and likely to be resilient in the future. Pain relief medication produced by Palla is also in demand, and prices are rising. Offshore revenue of Palla and Apex is also benefiting from the weaker Australian dollar. API and Apex are the majority of the portfolio, and both have outperformed the index since the start of the second half.

Round Oak is currently mining 3 operations, the Jaguar mine in Western Australia and Mt. Colin and Barbara in Queensland. We're mining a combination of zinc and copper, and we expected copper prices to be a lot higher. However, last year, the trade wars impacted prices, and this year, prices have again retreated. Both zinc and copper prices have fallen below our expectations, and this is impacting profitability. The situation is not improving in the current environment, but at least the falling Australian dollar is providing some relief. We're also starting to see some falls in the zinc treatment charges, which had risen to very high levels. Mt. Colin and Barbara only commenced operations late in 2019, so we're really just starting to see the benefits of those operations coming online.

The Property Portfolio was stable through the half. We have just 3 assets: an industrial site in Castle Hill, which we expect to redevelop in time; an office building in Pennant Hills; and our smallest investment in the portfolio is a property in Penrith, which is primarily retail tenancies, which may come under some pressure as a result of recent events.

Our private equity portfolio is comprised of 16 unlisted investments with a total value of $239 million. This portfolio increased as a result of the $110 million new investment in agriculture, which I discussed earlier. We believe that this is an uncorrelated asset class benefiting from the opening up of foreign trade and demand for Australia's good quality produce. Ampcontrol is our second biggest investment and continues to benefit from strong infrastructure, resources and energy project spend. We don't at this time see material impacts on this business.

While the majority of the portfolio is currently unaffected by recent events, we will experience short-term impacts on a couple of our smaller investments. Aquatic Achievers is an investment that we thought was quite defensive because even in a recession, children still need to learn how to swim. However, it has been caught up in the current shutdowns, and all swim schools are now closed. Seven Miles distributes coffee to cafés. And again, we believed that coffee consumption is something that we would have thought would be quite recession-proof. Our experience is that people stop a lot of expenditure before they cut out their morning coffee. But of course, the closure of many cafés will have a short-term impact on that business.

Our equities portfolio totaled over $600 million at the end of the half. The portfolio is separated into small-cap portfolio and a large-cap portfolio. The small-cap portfolio has around 50 investments and had an outstanding performance through the period, generating over 18%, while the Small Ords Index returned just 2.8%. The large-cap portfolio also performed very well through the half. Total return was 6.9%, which beat the index by 1.7%.

Thank you very much for your time, and we'll now open it up to questions.

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Questions and Answers

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Unidentified Company Representative, [1]

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Yes. We've got a few questions for Brickworks for Lindsay and Robert. Sorry? The first question is from Peter Steyn from Macquarie.

Please, could you provide us with a sense of the fixed and variable cost split across your Building Products portfolio to understand the operational leverage? And how can you manage fixed costs?

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [2]

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Yes. Good question. I don't know if I can give that to you off the top of my head. I'm looking here at Robert. It's -- yes, look, I...

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Robert Canvin Bakewell, Brickworks Limited - CFO [3]

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Online, so I'd start with the...

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [4]

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Well, it has -- I mean it depends on how you look at cash costs, too, because if we were to stand down employees in Australia, we have to pay -- it wouldn't affect our P&L because they'd initially be on holidays and long service leave but affect our -- some cash, whereas in America, when you're standing down employees, the state is picking up 66% of the cost, and that's the only cost. So it's quite a different situation between the United States and Australia, number one.

But normally, the fixed cost for most factories is sort of about 30%, 35%, something like that, with the balance for spot-type wages being the biggest one. Gas is the second, but we have standing charges. We ran into some standing charges in Western Australia this year because we're just not burning enough gas. And so that sort of has an impact on us.

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Unidentified Company Representative, [5]

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Okay. The next question, again from Peter Steyn at Macquarie. Do you think you're at risk of shutdowns in Australia?

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [6]

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Well, look, I was hoping I was going to talk to the Minister for Housing this morning, but he was caught up in a cabinet meeting. I have to talk to him this afternoon and put our case. Manufacturing Australia has put their case to the government that they should not shut us down, and the reasons being this: If you take housing, housing is very geographically dispersed. You only have one -- usually one team, and a lot of companies have already implemented only one trade at a time per site. There's only 2 or 3 people working. And if the bricklayer's over here and the carpenter's over there, they're not really at risk. They drive to work. There's no really reason to shut these people down.

When you look at our manufacturing operations, we have a guy in an air-conditioned cabin, a front-end loader putting the clay in. The next employee -- person is about 200 or 300 meters away, making the bricks. The next person is 100 meters away, packaging the bricks. The next person is in an air-conditioned cabin, a forklift in a yard. I just can't see the reason to have to shut down our plants. We're separating the shifts, so there's no -- should be no cross-contamination there. And as I said, we've got no employees being impacted to date. The employees that are in the high-rise and commercial areas, these are all high-skilled people, and they've already experienced handling asbestos. And remember, the tolerance for asbestos is much less than this. 90-odd -- 7% or so people survive this, whereas if you get exposed to asbestos, I mean it's a death sentence. And so they're already handling asbestos. They're already handling silica. This is just an extra risk that they'd have to take in that environment, and it should be able to be properly managed.

So there's 1.2 million people employed in Australia in the construction industry, and it's the second biggest employer. It would be a big call to shut the construction industry down, so I hope that, that doesn't eventuate.

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Unidentified Company Representative, [7]

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Okay. Thanks, Lindsay. There's another question from Peter at Macquarie. Could you please give us a sense of the stability of your raw material into Southern Cross? Did you or do you expect to invoke any contingency plans?

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [8]

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No, not at all. We've got another ship on the water as we speak. It's coming out of -- we've got a reserve. So we've got 2 suppliers. And look, and if worse comes to worse, the local producers have offered us supply. So no, we don't anticipate there'd be any problems at all.

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Unidentified Company Representative, [9]

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Final question from Peter at Macquarie. Does the weak Australian dollar materially affect your economics?

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [10]

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Well, a couple of ways. Obviously, it both lifts the earnings from the U.S., but if there's losses, it'll also lift them. It had an impact on the net debt, actually on the cash flow because of the change in the currencies. There was a drop in Australian dollar. As far as import costs, we're in discussions with our European suppliers as to improving their prices because we've had a bit of a setback there as we have with the international shipping. But they have been the main impacts. Most of our raw materials, there's no -- come locally, are bought in local currency. So it doesn't really have a lot of impact.

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Robert Canvin Bakewell, Brickworks Limited - CFO [11]

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There's a balance between the 2 assets...

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [12]

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Yes, yes, yes, that's right. So the -- Robert is saying there's a balance between the 2 assets. And that's -- that helps us. It's a bit of a -- something we never had before actually, so it's a bit of an advantage.

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Unidentified Company Representative, [13]

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Okay. Question from Robyn Luu from Macquarie. Given the current market environment, what do you expect your CapEx would be in the second half of 2020?

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [14]

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Well, we've already made the decision to put back all capital that we can. Obviously, we've got a fair program that's already underway. The big one, the new factory at Plant 2, we put that back 90 to 120 days just to see what happens. We'll push it back further if we have to. We're only doing urgent or emergency capital. We've pushed back that to -- as we've tried to cut back all our expenses, anything that we're not absolutely committed to, we've pushed back.

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Unidentified Company Representative, [15]

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And again, from Robyn Luu at Macquarie. Pricing is likely to become more attractive. Would you be looking at M&A opportunities? And if so, please elaborate.

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [16]

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Well, only time can tell, but yes, there could be some distressed assets around that might turn up over the next 3 to 6 months, you wouldn't know. Yes, that's it?

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Unidentified Company Representative, [17]

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That's it for Brickworks, Lindsay.

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Lindsay R. Partridge, Brickworks Limited - MD & Executive Director [18]

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Okay. Thank you.

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Unidentified Company Representative, [19]

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Yes. The next question is actually for Robert Millner. This is from Vishal at Livewire Markets. It would be good to hear from Robert Millner, please. Investors would really love to have some insights about what's going on based on your experience. What do you think of COVID-19 and its impact on the economy and markets?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [20]

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Thank you very much. We're all in unchartered waters here, not only with the virus but the environment we're in with low interest rates. No one that's alive at the moment has been in an environment where the interest rates are the way they are. We have the viruses coming in on top of that. What concerns me greatly is the financial impact this is going to have on particularly our workforce, people's livelihoods. I don't know whether there's been enough thought given to the eventual consequences of what could happen. Example, underneath our building just across the road from where we are now, I think there would be probably 30 or 40 people working in cafés. They've all lost their jobs, and they're all casual workers. They've got mortgage payments. They've got families to look after. And the other main concern is how do we repay all the debt, massive amount of debt. It's going to build up. A lot of companies, a lot of governments have had far too much debt before this situation arrived. So to me, that's a great concern.

And even if you just go into a small business -- I was talking to Todd this morning, I've got a son-in-law in the hotel business until he started a shut down and work out what was in that hotel that he has leases on or finance on. It's quite staggering. So there's going to be a huge roll-on that's going to go forward. You look at Sydney Airport at the moment, that massive infrastructure out there, who's servicing the debt on that. Qantas clients, Virgin clients, there's a massive roll-on that's going to flow on from this. So if I'll give people a little bit of advice, I think everybody should try and keep as much cash as you have, be patient, and keep well.

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Unidentified Company Representative, [21]

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Thanks, Rob. How is Soul's portfolio placed?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [22]

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We've got a very good sound portfolio, as the boys have indicated during this presentation. Very defensive. Todd mentioned we've always outperformed in these periods of times. And we have very good people running this business. And again, as I just mentioned, these businesses are not stretched with debt. So -- and Soul is going to do very well out of this TPG merger when we finally get people to give us an approval to go ahead with it. We're now waiting on the Foreign Review Investment Board (sic) [Foreign Investment Review Board], who is now 3 weeks since the court gave us a tick. So we got to wait another month for them to make a decision. So this is one of the biggest problems we are all facing in Australia, is that the delay and interaction of bureaucrats and governments to get on and get the business rolling. But we -- as you can see by the dividend in both these companies, we're confident we will ride this outcome quite well.

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Unidentified Company Representative, [23]

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Do you expect rising dividends to continue?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [24]

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What was that?

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Unidentified Company Representative, [25]

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Do you expect rising dividends to continue?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [26]

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Do I expect rising dividends? We're in a very fortunate position that we can keep paying dividends. Again, I think some of our companies that we invest in, in our equity portfolio might struggle to pay dividends. You've already seen some companies delaying their dividends. But that's only a very small part of our business. We're very confident with the -- our main businesses that they'll continue to pay us dividends.

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Unidentified Company Representative, [27]

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And finally, what specific opportunities are you looking at?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [28]

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As I mentioned before, we've got some good -- we're in a position to move. We've got cash. We've always done very well out of picking people because without good people, it's very difficult to make money. We need businesses that generate cash because as Todd has highlighted in his presentation, that we need cash to come into us so we can pay on to our shareholders. So we need good generating businesses. And as you can see, over the years, we've gone from TV stations to coal mines to brickmaking, et cetera. So we're pretty flexible, but we need to have good people running those businesses. And I'm sure as this goes on further, there will be some opportunities for us.

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Unidentified Company Representative, [29]

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And finally, for Rob, sorry. Would you have -- this is from a shareholder. Would you have any comments on the recent investments in the retirement living sector?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [30]

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In what?

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Unidentified Company Representative, [31]

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Retirement living (inaudible)

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [32]

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Oh, sorry. Yes, we're very bullish on this market. Particularly at the top end, there's a drastic shortage of very good facilities. We're involved with the Moran family. They've got a very good track record in this department. And I think this is an area where we can really go ahead in leaps and bounds, and I'm very confident.

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Unidentified Company Representative, [33]

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Okay. And final question. Would Soul consider investments in gas, solar, wind as part of an energy mix?

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Robert Dobson Millner, Brickworks Limited - Non Executive Chairman [34]

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No, not at the moment. We've got a plateful in -- within our coal mining. We're very confident of that going forward in the future. It's still building, as we speak today, coal-fired power stations around the world. So we're quite confident that -- in the future of Australian thermal coal.

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Unidentified Company Representative, [35]

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Thanks, Rob. The next 2 questions are probably for Todd. It's Danny Younis from Shaw and Partners. With respect to Round Oak, what strategic steps need to be taken in the next 12 months to get this business to profitability given the lower zinc, copper prices and higher recovery costs in the half?

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Todd James Barlow, Washington H. Soul Pattinson and Company Limited - MD, CEO & Executive Director [36]

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Well, a lot of those strategic steps have already been taken through the course of the last 12 months. We've been putting a lot of steps in place in the Jaguar mine in Western Australia to open up new fronts, get some increasing production levels through, which helps mining costs and profitability. The other operations in Queensland have only just come online. So what we saw in the last 12 months were preproduction costs. We had a gold mine in Queensland which was operating unprofitably, and that's now being shut down. So I think most of the strategic initiatives have been achieved. But we are continuing to conduct strategic review of the assets to see whether there is things that we could do particularly with other parties to maximize the value of those assets.

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Unidentified Company Representative, [37]

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Thanks, Todd. And although relatively small investments, can you please shed more light on what we should expect in the next 12 months from 2 of your new investments, notably Provectus Care joint venture and AGI Investments?

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Todd James Barlow, Washington H. Soul Pattinson and Company Limited - MD, CEO & Executive Director [38]

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The Argyle Investments. So the Provectus Care, we have one asset at the moment, which we commenced in the joint venture, which is the development of a site in Cronulla. We are pressing ahead with that. We're going through the DA process at the moment. As the Chairman said, we see a very good and strong demand for good quality assets in retirement living space. And we would expect to develop that asset over the course of the next 12 to 18 months. And we'll continue to look for new opportunities and, I guess, look at the impact that the current environment might have on residential real estate prices.

Argyle is the manager of our agricultural assets. We're continuing to look for new opportunities in that space. We think that agriculture is a good uncorrelated asset class, perfect for this kind of environment. The returns that we're seeing out of that asset are very good and unaffected by what we're seeing in the markets at the moment.

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Unidentified Company Representative, [39]

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And final, thank you to the kind lady moderator. Thank you so much for answering all my questions. Okay.

That's all on the webcast, so we might just have people on the phone. We've got about 21 people over the phone. So...

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Todd James Barlow, Washington H. Soul Pattinson and Company Limited - MD, CEO & Executive Director [40]

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No further questions. All right. Well, thank you very much, everybody, for your time.