Once again a major listed investment company has signalled an investment stance by what it didn’t do in relation to a solid rise in profit for its latest financial year.
Djerriwarrh Investments Ltd more than doubled its 2011 profit to $56.85 million for the year to June 30, up 127% from $25 million a year earlier.
(The company earned around $25 million in the first six months of the year to December 31).
Total revenue climbed to $53.6 million from $34.11 million the previous year.
The sharp rise in earnings was made to look better than it was because the 2009-10 profit was due to subdued market volatility that year, combined with big cuts to dividends from companies and unrealised losses on investments.
In the year to June this year though, there was a recovery in dividends paid by companies in which Djerriwarrh invests and share buybacks, which also boosted its latest result.
"Djerriwarrh participated in the off market share buy-backs by BHP Billiton and Woolworths," directors said yesterday.
"There was also a recovery during the year in dividends paid by companies in which Djerriwarrh invests, particularly the major banks. The Company also sells option coverage to enhance income."
Net operating profit measures income generated from the company’s investment, trading and options portfolios was up 25.7% to $54.9 million
But despite the solid result, Djerriwarrh’s board declared an unchanged final dividend of 16 cents per share, fully franked.
Six cents of the 16 cent final dividend will be paid from capital gains.
The final dividend takes total dividends for the year to 26 cents per share.
Annual dividend has been held at the 26c a share rate now for the last four years.
That could be seen as an indicator of conservatism, and confidence.
It wasn’t cut during the tough 12 to 18 months in late 2008-09 and in 2009-10 when many of its listed investments fell in price or cut dividends.
But with the market looking weaker than the subdued nature of the wider economy (except resources), the stance to conserve cash is probably understandable.
Directors explained their stance in yesterday’s statement:
"With a large number of options having expired in June, Djerriwarrh will be seeking to increase its option coverage as opportunities arise.
"However given current market conditions, we are conscious of the risk to capital growth in the portfolio of doing so during market low points.
"We will therefore be patient in our approach."
The interim report in February revealed that the company had been very active in the options market in the six months to December.
The slump in the past couple of months has seen the company become more conservative.
The company had cash of $54.9 million on hand at June 30, down from the $69.7 million a year earlier.
But its trading portfolio was valued at $23.3 million, up from nearly $10.5 million.
Djerriwarrh boosted its bank credit line from $50 million at the end of the 2010 financial year, to $100 million at the end of June this year.
The shares rose 4c to $3.90 after hitting a day’s high of $3.98.
