Melbourne-based listed investment company Mirrabooka Investments (MIR) saw its 2014 profit slip 9% as it made big changes to its share portfolio. First half profit was down 16%. But that rebalancing generated some very tasty profits which resulted in the company rewarding shareholders with a special 7 cents share special dividend, on top of the unchanged 10 cents a share payout for the year.
The company (which is linked to Australian Foundation Investment Co and managed by it) focuses on small and mid-sized stocks, and said that sector was in high demand in the year to June 30, increasing the valuations of companies with reliable earnings.
The portfolio changes were forced on it by the rise in the share prices of some of its long term holdings (for example Ramsay Healthcare, Boral and Domino’s Pizza) which pushed them into the top echelon of listed companies and out of range of its small and medium midcap mandate.
Mirrabooka said it took advantage of these conditions to rebalance its investment portfolio, selling some stocks that moved up into the top 50 and taking part in several of the many new market listings.
That resulted in lower dividend revenue, a major factor in its profit falling to $7.1 million, from $7.8 million in the previous year. But that was misleading, as the dividend decision shows.
Despite the fall in profit, Mirrabooka maintained a fully-franked final dividend of 6.5 cents a share, along with a special dividend of 7 cents a share.
With the interim of 3.5 cents a share, the total ordinary payout for the year is a steady 10 cents a share.as well as the 7 cents a share special payment. The special dividend was sourced from after-tax realised gains of $18.6 million.
As part of the rebalancing Mirrabooka added a number of companies to its portfolio during the year to June, either from the secondary market or by participating in floats. Key additions included Sims Metal Management, AMA Group, Cover-More Group, iSelect, Veda and Citadel Group.
Mirrabooka said the full-year return, including dividends and full benefit of franking credits, was 6.8%, compared with a return of 6.3% in the combined small and midcap market index benchmark.
Portfolio changes for the year included sales in James Hardie, Oil Search and the complete sale of Coca Cola Amatil, Ramsay Health Care, Boral, Bega Cheese, Domino’s Pizza and Ingenia Communities Group, as they are all now top 50 stocks, and therefore larger than the group’s target group. The fund also sold its stake in Toll Holdings into the takeover offer by Japan Post.
New holdings include Healthscope, Energy Developments, Federation Centres, Capitol Health and Ashley Services Group. Mirrabooka said it remains in a healthy cash position to take advantage of investment opportunities, especially if the market falls.
Shares in Mirrabooka were up 4 cents to $2.75.
