AFIC raises dividend after $242m result
Australia's oldest listed investment company has had a 10.4 per cent rise in full-year profit, and an increase in dividends for the first time in years.
The Australian Foundation Investment Company also announced the retirement of two of its longest-serving board members, former BHP Billiton chairman Don Argus, and its chairman, Bruce Teele, who joined the board in 1966.
AFIC is Australia's biggest listed investment group, with $5.7 billion under management.
It made a net profit in the year to June 30 of $242.7 million, compared to $219.9 million in the previous corresponding period.
Ross Barker, AFIC's managing director, said falling local interest rates and an improving US equity market gave the fund a boost this year, and he was happy with the 1¢ increase in the company's dividend (to 14¢ fully franked) which came after a number of years of no increases.
However, he warned that business and consumer confidence had become subdued in recent months, with the outlook for corporate profitability and the looming federal election weighing on investor sentiment.
He also warned of potential "headwinds" hitting global markets in the medium term.
"One of the biggest things we're thinking about is how the US and Europe deal with their huge government debt situations," Mr Barker said.
"You can't have continuing record-low interest rates forever. That'll change at some point and how that unravels is going to be a very important thing for global markets."
AFIC's portfolio return for the 12 months was 24.4 per cent, compared with the S&P ASX 200 Index of 22.8 per cent.
The fund's net operating result, which measures the underlying income from its portfolio, was $234.3 million, up 14.4 per cent from $204.8 million the previous year.
The performance was largely helped by its major bank holdings, and other high-yielding stocks such as Wesfarmers and Telstra.
Some of the fund's major transactions in the period included QBE Insurance, Suncorp, Coca-Cola Amatil, CSL and Sonic Healthcare.
"Healthcare's been a theme that we've wanted to increase in our portfolio over recent years, but it's always been fairly expensive," Mr Barker said.
"We've been following QBE for quite a while, and we think there's some positives there for the company in the medium to long term."
AFIC's Australian Infrastructure Fund was sold as a result of its assets being acquired by the Future Fund. Other sales included holdings in Metcash and CFS Retail Property.
After denying rumours in recent weeks, Don Argus and Bruce Teele have told AFIC's board that they plan to retire at the fund's annual general meeting on October 9.
It means Mr Argus's retreat from corporate life continues. He retired as chairman of Brambles in 2008, and stepped down as chairman of BHP Billiton in 2010.