Amcil: Another Good Investment Result

By Glenn Dyer | More Articles by Glenn Dyer

Like its stablemates, Mirrabooka and Djerriwarrah Investments, Amcil has had a great year in the 2007 financial year to June 30.

It's the smallest of the four investment companies linked to broker Goldman Sachs JBWere. The largest, Australian Foundation, produces its 2007 figures tomorrow.

Amcil is paying a final dividend of 6 cents a share, fully-franked, up from last year's final dividend of 2 cents after operating profit after tax jumped sharply to $4.2 million.

Net Profit attributable to members (including capital gains) was $9.3 million, up 179% from 2006, and revenue from ordinary activities (excluding capital gains) was $3.9 million, up 47% from the previous financial year.

Net tangible assets at June 30, 2007 were 84 cents a share, up from 65 cents (fully diluted for the outstanding options) at the end of the 2006 year, before allowing for any final dividend, and before the provision for deferred tax on unrealised gains in the investment portfolio. After the provision for deferred tax, the figure is 80 cents (2006: 65 cents).

No interim dividend was declared to shareholders in respect of the half year ended December 31, 2006.

Chairman, Bruce Teele, said in a statement accompanying the figures that: "In summary, it was another very successful year for AMCIL with operating profit after tax increasing 137% to $4.2 million.

"Whilst part of this increase is due to the investment of its additional capital during the year, the Company also enjoyed a strong underlying increase in distributions received from the companies it invests in as well as a strong lift in revenue from the trading portfolio.

"It also has been a significant year for the Company as the vast majority of outstanding options were exercised by the expiry date of 28 February 2007 raising $39.1 million of new capital. This completes the final part of this stage of the recapitalisation of the Company which began in January 2004.

"In addition to the attractive investment opportunities the Board considered was available at the time of recapitalising the Company, there were two other key objectives the Board thought were important for shareholders.

"The first was to be in a position to utilise the carry forward capital losses in the portfolio over time and secondly, to be able to access the existing franking account balance.

"In the context of the objective of accessing these franking credits we are pleased to advise that AMCIL has increased its final dividend to 6.0 cents per share. This dividend is funded from profits and allows for the distribution of the majority of the balance of the franking account. The Company has also introduced a Dividend Reinvestment Plan."

The company said that total portfolio return (measured by the change in net asset backing plus reinvested dividends and adjusting for the additional cash received during the period from the exercise of options) increased 36.4% over the year with significant increases across a large number of stocks within the portfolio.

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The key factors driving this out-performance were:

The strong returns in the Investment Portfolio generated by AMCIL's holdings in Bradken, ASG Group, Oakton, ConnectEast Group, Rio Tinto and BHP Billiton.

Net gains in the Trading Portfolio. The major contributors to this return were positions in Queensland Gas, Rinker Group and Transpacific Industries.

The major net acquisitions in the Investment Portfolio during the twelve month period that enjoyed very good share price returns over the year. In particular, Queensland Gas, Transpacific Industries (which took over Baxter Group via a scrip offer), Santos, and the Telstra Instalment Receipts (under the institutional entitlement). Other major new additions to the Investment Portfolio during the year included:

Amcor Limited, a packaging company undergoing significant restructuring in a competitive environment.

Mitchell Communication Group, a media planning and buying agency with a specialist division focusing on interactive and online media

Energy Developments, provider of renewable energy and low green house gas emission energy.

Asciano (as a result of its de-merger from Toll Holdings), a transport infrastructure business

Tox Free Solutions, a Perth-based waste management company

Mr Teele said the company (like its stablemates), will be looking with interest to the upcoming release of company results to substantiate the positive expectations which are currently supporting the market.

"Of particular focus is whether the strong profit margins have been maintained in light of cost pressures such as wages, material and energy prices and, in some instances, the impact of the strong Australian Dollar.

"Without further significant uplift in profitability we are not expecting a repeat of the extraordinary returns that have been evident over recent years.

"We will continue to look for companies which are temporarily out of favour with the market but which have strong business footprints and/or have strategic positions in selected sectors of the economy."

Total assets at market value at 30 June 2007 were $142 million, up from $74 million last year and management expense ratio was 0.92% compared to 1.28% for the previous year.

The shares traded up 5c at 84c yesterday.

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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