Milton’s Boom Year

By Glenn Dyer | More Articles by Glenn Dyer

Milton Corp is another of the listed investment companies to report a very strong performance in the year to June 30.

Full-year profit rose 35.9 per cent rise, compared to the 25 per cent rise in the All Ords.

Net profit rose to $85.73 million in 2006-07, from $63.07 million in the previous year.

Underlying net profit was $70.5 million, up 25.9 per cent.

But while the company, like its peers (such as Australian Foundation Investment Co and Mirrabooka), had a great 2007, it has seen the promising start to 2007 crunched by the turmoil in US credit markets and the fall off in private buyouts and worries about defaults.

The All Ords has given up all the gains of May through to the middle of July and is back around the levels of four months ago.

Still, Milton, like its peers, has a more conservative portfolio (see table below).

It says the 2007 profit rise was underpinned by strong growth in the investment revenue derived from its diversified asset portfolio.

"Strong economic conditions both in Australia and offshore have provided an excellent platform for Australian companies to increase earnings and pay increased dividends", Milton's chairman Robert Millner said in a statement to the ASX yesterday.

"Certainly the majority of companies within the Milton portfolio have increased their dividends."

In addition to the underlying profit, Milton received $3.4 million in non-recurring special dividends and realised $11.8 million in capital gains on disposals, which were mostly due to mergers and acquisitions that were completed during the year.

The investment portfolio was increased by $191 million through the acquisition of unlisted investment companies and an additional $61 million was invested directly.

During the year, Milton increased its capital base by $20 million through the Share Purchase Plan and by $203 million through the acquisition of eight unlisted investment companies, each with long-term investment portfolios that complement Milton's portfolio. Milton shares were issued as consideration for each acquisition.

"The larger additions to the portfolio through the company acquisitions were ANZ, BHP Billiton, Commonwealth Bank, National Australia Bank, Rio Tinto and Westpac," Milton said.

"The larger direct investments included AMP, IAG, Suncorp-Metway, Telstra Instalment Receipts and Woodside Petroleum."

Cash from disposals, including acceptances of merger and takeover offers, amounted to $38 million.

Merger and takeover related disposals included DCA Group, Colorado and Rural Press.

Looking ahead, Mr Millner said Milton expected its portfolio of investments in companies and trusts to continue to generate increasing investment revenue.

"With the favourable economic conditions that have continued throughout the past year, we expect most companies to report increased profits and dividends in this upcoming reporting season," Mr Millner said.

"Consequently, in the absence of unforeseen circumstances, we would expect to be able to maintain Milton's record of paying increasing fully franked dividends."

Milton declared a final dividend of 43 cents, up 15.2 per cent from the same period in 2005-06, taking the full-year dividend to 81 cents.

Milton has included a listed investment company (LIC) capital gain distribution of six cents per share as part of the final dividend.

Individuals, trusts and superannuation funds that receive distributions of LIC capital gains are able to claim deductions in their tax return in the year of receipt.

Milton said that administration expenses, net of management fee recoveries, represented 0.13 per cent of total assets at June 30, 2007.

"Net assets before provision for tax on unrealised capital gains grew by 35 per cent over the year to $1.9 billion at 30 June 2007, due to an increase in the value of the underlying investments in issued capital."

Net asset backing before provision for tax on unrealised capital gains at June 30 was $23.41 per share, up from $19.09 one year earlier, an increase of 22.6%.

The shares fell 25c to $23.25 in yesterday's sell-off.

Here's MLT's major investments:

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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