Australian Foundation Investment Company, the last of the Goldman Sachs JBWere-associated listed investment companies to report its June 30 figures, showed resilience in what was a volatile year.
Full-year net profit slumped 75 per cent as the fund manager took an impairment charge as the value of stocks slumped, the company reported yesterday.
The fall in net profit fell to $103.5 million for the 12 months to June 30, from $416.1 million the year before, however, was very misleading.
The 2008 profit figure (after one off and other items) had been boosted after AFI sold its holdings in Coles and Rinker in takeovers.
It received hundreds of millions of dollars for its stakes, much of it profit because the deals were done at such high prices for both companies.That boosted 2008’s one off profits.
But not this year, with the impairment charges adding to more than the profits gained from a number of takeovers and issues, such as the Westpac takeover of St George..
The 2009 earnings figures were similar in many respects to reports from stablemates, Mirrabooka, Amcil and Djerriwarrh to varying degrees: big capital profits from asset sales and takeovers, offset by market linked losses.
The companies were forced to take impairment charges on their portfolios because of the market slump, which was greater than the drop in the value of the various portfolios.
AFI’s impairment charge for the year was $107.8 million.
Profit figure excluding unrealised gains and losses due to market fluctuations, on fell 2.7% in the year to June, to $199.6 million, which was a better indicator of the performance of the company.
AFI shares rose 8 cents to $4.64 yesterday after the result was released.
AFI said it maintained a relatively high cash balance whilst taking advantage of the large number of capital raisings to buy shares at a discount.
AFI said it remained " relatively cautious in the present environment, particularly now the market has made some gains since the very low market levels experienced in March."
"Economic conditions in Australia and globally are likely to remain subdued in the medium term.
"The ability of companies to generate reasonable returns in this environment is likely to be severely tested.
"As a result, we will be looking to the upcoming reporting season to make an assessment of how companies are dealing with these challenges and the immediate term outlook for dividends.
"However, we believe AFIC’s portfolio is well positioned with a number of companies likely to emerge from this period with stronger operations and with the underlying value of their business franchises well intact.
"At 30 June 2009 AFIC had $249.1 million of cash available for investment into the market," the company said in its statement..
The fund manager’s portfolio fell 16.9% in value in the 12 months to June 30, while the ASX 200 Accumulation Index fell 20.1 per cent.
AFI declared a second-half dividend of 13 cents per share, unchanged from the previous half. With the interim of 8 cents a share, that made for a steady payout of 21 cents a share for 2008-09,
Major sales during the 12-month period included St George Bank, following the takeover by Westpac Banking Corporation, Queensland Gas Company, after the takeover by BG Group Plc, and Suncorp-Metway and James Hardie Industries NV, on concerns about gearing levels and dividend payments.
AFI increased its holdings in Westpac, (partly because of the takeover of St George), Rio Tinto, Santos and National Australia Bank, taking advantage of new share sales.
The fund manager’s three biggest holdings at June 30 were BHP Billiton, Westpac and Commonwealth Bank of Australia.
