Listed investment company Djerriwarrh Investments has chopped its interim dividend by 40% after a slump in revenue and earnings triggered by the suspension or dropping of dividends by many companies because of the pandemic.
Profit for the half-year (including unrealised gains or losses on open option positions) was $8.1 million, 66.4% down from $24.1 million in the December half of 2019.
Net Operating Result for the half-year was $11.8 million, 31.3% down from $17.1 million in the previous corresponding period.
The company said that because this measure excludes the impact of open option positions “it is therefore a better measure of the Company’s income from investment activities.”
Revenue from operating activities fell 46.5% to $9.6 million, from $17.9 million in the previous corresponding period. This excludes trading and option income and capital gains on investments.
The interim dividend of 5.25 cents per share fully franked, down from 8.75 cents the previous interim period and the same as the final for the 2019-20 year.
Directors said in the statement on Monday the fall in revenue and earnings was easy to explain.
“Dividend income for the half year was down significantly, as many companies suspended or reduced dividends through the period.
“The biggest reductions came from the major banks (because of APRA’s directive to limit dividend payout ratios and difficult economic conditions) and BHP, whilst Sydney Airport was amongst a number of companies in the portfolio that did not pay a dividend during the half.
“There was an improvement in the amount of option income generated for the half, $6.1 million versus $3.3 million in the corresponding period last year, as the Company took advantage of temporary spikes in volatility.
“However, the negative impact of very low interest rates on option income continues to be a headwind for this activity and is not expected to change in the foreseeable future.“There were no distributable realised capital gains generated during the half,” the company told the ASX on Monday.
Like its stablemate, Mirrabooka, Djerriwarrh will run a Share Purchase Plan (SPP).
The shares fell 3.50% to $3.03. The SPP will be priced at $2.98 or the lower of a five day average of the share price over five days ending on February, 22. Shares issued under the SPP will be entitled to half the final dividend for the year to June 30 and will trade separately until the final dividend is paid in August. Shareholders can buy a maximum of $30,000 shares.
Djerriwarrh said it took advantage of market volatility to increase its income from options from $3.3 million in the last six months of 2019 to $6.1 million in 2020.
It is currently invested in 50 companies. During the half it invested in Mirvac Group, Pinnacle Investments, Fineos Corp, ResMed, and Equity Trustees for the first time.
It also bought a further $20 million worth of CSL (taking its total position to nearly $50 million), $18 million worth of ASX, and $12 million of Woolworths Group. Its largest holding is a $57 million stake in BHP.
It sold off $12.4 million worth of ANZ shares (to $20 million) and $11.2 million worth of National Australia Bank shares. And it exited a $6 million position in miner South32, “given Djerriwarrh is fully invested and there were other opportunities to deploy these funds”.