UPDATE: Infratil plans $120M return to shareholders; shares gain

Infratil shares rose to the highest in more than seven years after the infrastructure investor said it would return $120 million to investors via a special dividend and share buyback.

The capital return follows the sale of its Australian energy assets for a net $670 million. It's keeping a chunk of the funds for future investments and expects to return more capital to investors should its plans fail to pan out.

Wellington-based Infratil will pay $84 million to shareholders as a 15 cents per share special dividend and spend $36 million in an on-market share buyback after selling its Infratil Energy Australia assets Lumo Energy and Direct Connect to Snowy Hydro on Sept. 30, the company said in a statement. \

Infratil shares jumped 2.3 percent to $3.10, their highest since October 2007.

The jump in the share price "largely comes down to the signals on capital management," said Craig Stent, who holds Infratil among the $1.2 billion in equities he helps manage at Harbour Asset Management.

"They are keeping some capacity for other opportunities which they can see in their pipeline of business opportunities," he said. "They want to grow the business and find attractive opportunities where they can earn above their hurdle returns. They are trying to find a balance between appeasing shareholders and keeping some up their sleeve for acquisitions."

Infratil chief executive Marko Bogoievski told a briefing in Wellington that the company expects to provide an update on capital management as part of its full-year result in May, by which time it should know the outcome of some of its investment plans, however shareholders shouldn't expect a series of special dividends.

The company today posted a 73 percent rise in first-half earnings following the sale of its European airport investment in November 2013, its PayGlobal investment in August 2014 and the IEA Group in September 2014.

"The recent asset sales have resulted in Infratil having over $600 million on deposit with its banks and low net gearing," Bogoievski said. "Part of this capacity is earmarked for investment. Infratil continues to have a significant number of internal and external investment initiatives under development.

"If investment plans do not progress as hoped, consideration will be given to increasing the amount returned to shareholders in 2015/16."

Infratil said profit attributable to owners of the company rose to $398.8 million, or 71 cents a share, in the six months ended Sept. 30, from $230 million, or 39.3 cents, in the year earlier period. First half revenue rose 8.7 percent to $839.5 million.

The company will pay a 4.5 cent ordinary dividend, 20 percent ahead of the 3.75 cent dividend a year earlier. Both the interim and special dividend will be paid on Dec. 15.

Infratil said its cash flow growth and outlook supports continued growth in dividends per share, and signalled future dividend growth in the "double digits".

The on-market buyback is expected to occur via tender in the fourth quarter of the current financial year, it said. The combination of payments will improve capital efficiency while rewarding shareholders equitably, it said.

Infratil expects full-year earnings before interest, tax, depreciation, amortisation and asset valuation changes of $475 million to $500 million, it said.