TPG Trick Helps Brickworks Boost Payout

By Glenn Dyer | More Articles by Glenn Dyer

A one-off change of accounting treatment for its indirect holding in telco, TPG saw Brickworks nearly doubled its full-year profit to $299 million and lifted its final payout.

It was that boost only that helped Brickworks in a year when sluggish housing activity and the coronavirus pandemic wreaked havoc on its normal operations.

The boost from TPG was triggered via its stake in Washington H. Soul Pattinson, which in turn gained a massive boost from the merger of its associate TPG with Vodafone.

The profit is a paper one, not actual cash or profits from selling things. It relates to the boost in the value of TPG generated by the merger with Vodafone.

Excluding the impact of the $244 million gain from the TPG deal, and a range of other significant items and discontinued operations, Brickworks’ underlying profit was $146 million for the 12 months to July 31, down 38%.

Brickworks management attempted to put the best possible spin on the earnings fall, saying the firm said was pleased with its performance across most businesses.

“Another strong contribution from property was a key feature of the result,” Brickworks told investors on Thursday.

“In addition, the building products businesses in Australia and the United States delivered strong operational performance, considering the significant disruption caused by COVID-19, and the associated impact on building activity.”

Directors declared a fully franked final dividend of 39 cents a share, an increase of one cent on a year ago. This brings the full-year dividend to 59 cents, up 2 cents from 2018-19.

The dividend will be paid on November 25.

Brickworks’ earnings from investments fell 51% to $51 million for the year, mainly due to the impact of lower coal prices and sharp fall in earnings (and no final dividends) from New Hope Corporation is controlled by Soul Patts.

Cash dividends totalling $56 million were received from WHSP during the year and the market value of Brickworks shareholding in WHSP was $1.844 billion at July 31.

Meanwhile Washington H. Soul Pattinson reported it had nearly quadrupled its net profit thanks to a $1.05 billion accounting gain following the TPG merger with Vodafone.

Leaving aside that one-off boost, WHSP’s adjusted profit fell 45% to $169.8 million in the 12 months to July 31, weighed down by lower contributions from its stake in New Hope Corporation, Brickworks, and TPG, though Round Oak saw increased revenues from its Barbara and Mt Colin mines.

Net cash inflow from investments for the year was $252.3 million, up 48.8% compared to 2019.

This increase was mainly due to the special dividend received from TPG Telecom as part of its merger with Vodafone.

Soul Patts lifted final dividend from 34 cents to 35 cents a share to take full-year dividends to 60 cents, up from 58 cents in 2018-19.

Soul Patts shares rose 0.8% to $23.68. Brickworks shares fell 0.9% to $18.68.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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