Melbourne-based listed investment company, Djerriwarrh Investments (DJW) Ltd has posted a lower annual profit of $25 million for the June 30 year, down on a revised result from last year due to lower dividends.
The investment company said yesterday that earnings for the 12 months to June 30 fell from the previous corresponding year’s $30.7 million profit.
The 2009 result was revised from a loss of $14.1 million after the adoption of new accounting standards which changed the treatment of realised and unrealised gains and losses and impairment. (That has applied to other listed investment companies).
DJW is the second ton report from the group of LICs centred on the largest in the country, Australian Foundation Investment Co (it reports its 2009-10 results next Monday).
DJW said that net operating profit, a measure of underlying income generated from the group’s investment and trading portfolios, was $43.7 million in the year to June, down from $55.2 million in the previous year.
Dividends received fell 31% from the 2009 year due to cuts made by many companies during the global financial crisis, Djerriwarrh said in yesterday’s statement.
Revenue from operating activities (excluding capital gains) was $34.1 million, 29.1% down from the previous year.
The company maintained its final dividend at 16 cents per share, taking total dividends for the year to an unchanged 26 cents per share.
Mirrabooka, an affiliated investment company which reported last week, said it was suspending its dividend reinvestment plan and conducting a share purchase plan of up to $15,000 per shareholder.
But DJW is maintaining its reinvestment plan for shareholders.
Mirrabooka decided on the special purchase plan because it was nearly full invested in the market.
DJW said yesterday that it too was nearly fully invested, but had decided to raise more debt from its banks.
"During the year the remaining Convertible Notes were redeemed or converted to shares which reduced the Company’s overall level of debt from the previous financial year.
"However given Djerriwarrh is close to fully invested the Company recently drew down its debt facility by $50 million to take advantage of higher volatility and more attractive valuations.
"One of the challenges the Company faced during the year was the significant decline in dividends received.
"Whilst some recovery in dividends is expected in the near term the performance of the Company’s option writing activity and to a lesser extent the Trading Portfolio will have an important bearing on future income performance.
"As result, the Company will seek to increase its option coverage from the current level of 23 percent to higher levels as market conditions allow," directors said.
The company said that major sales through the year were predominantly as a result of the exercise of call options.
"In particular the strongly rising market in the first half of the year led to call option positions being exercised across a number of holdings, the largest being Commonwealth Bank, National Australia Bank, Westpac, ANZ and Rio Tinto.
"However, as the share prices of some of these companies fell during the second half of the financial year selected holdings were replenished.
"Other purchases through the year included Australian Infrastructure Fund, Hastings Diversified Utilities Fund, Perpetual Trustees, QBE Insurance, Transurban, Wesfarmers and Woodside Petroleum.
"The more cautious market sentiment and uplift in volatility allowed Djerriwarrh to replace a number of option positions that were close to being exercised toward the end of the financial year.
Djerriwarrh shares rose 3c to $4.17.
