Djerriwarrh profits fall 9% in soft conditions

THE listed Melbourne investment company Djerriwarrh Investments has fallen victim to last year's market decline, with net losses on its trading portfolio dragging down first-half profit by 9.5 per cent.

By InvestSMART · 17 Jan 2012

By InvestSMART ·
17 Jan 2012

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The long-term, large capitalisation investor yesterday reported an interim net profit of $23.1 million for the six months to December 31, which was down from $25.6 million a year earlier.

Shareholders will pocket an interim dividend of 10? a share, fully franked, unchanged from a year ago.

Djerriwarrh blamed a slump in the local equity market, which has wiped 12 per cent off the benchmark S&P/ASX 200 since July last year, and drove a 7.9 per cent loss on its $714.6 million investment portfolio.

But dividends and distributions from investments increased slightly during the period, leaving finance and tax costs, and $2.2 million in net losses on its trading portfolio, the key drivers of a 18.2 per cent fall in net operating profit.

Trading portfolio losses cut 17.2 per cent off first-half net operating profit for Djerriwarrh's sister investor, Mirrabooka Investments Ltd, which last week reported a 9.5 per cent fall to $6.9 million.

"From a longer-term perspective, we think conditions are likely

to remain tough for a period of time," the general manager, Geoff Driver, said.

"The factors external to Australia are really impacting it a lot."

Djerriwarrh's investment portfolio is dominated by big names in the top ASX 50 stocks. Its biggest holding remained BHP Billiton at December 31, with shares worth $81.5 million compared with $100.5 million six months earlier.

Djerriwarrh's shares closed up 3? at $3.73.

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Frequently Asked Questions about this Article…

Why did Djerriwarrh Investments' interim profit fall?

Djerriwarrh reported an interim net profit of $23.1 million, down from $25.6 million a year earlier (a 9.5% decline). The main reason was net losses on its trading portfolio combined with a fall in the local equity market, which reduced the value of its investment portfolio.

How much did Djerriwarrh lose on its investment and trading portfolios?

Djerriwarrh recorded a 7.9% loss on its $714.6 million investment portfolio and $2.2 million in net losses on its trading portfolio—losses that were key drivers of an 18.2% fall in net operating profit.

Is Djerriwarrh still paying a dividend after the profit decline?

Yes. Djerriwarrh declared an interim dividend of 10 cents a share, fully franked—unchanged from the prior year.

How has the wider market affected Djerriwarrh's results?

Djerriwarrh cited a slump in the local equity market—the S&P/ASX 200 had fallen about 12% since July—as a major factor reducing portfolio values and contributing to the company’s first-half losses.

What are Djerriwarrh's largest holdings and how did they perform?

Djerriwarrh’s portfolio is dominated by large-cap ASX 50 stocks. Its biggest holding at December 31 was BHP Billiton, valued at $81.5 million, down from $100.5 million six months earlier.

What did Djerriwarrh’s management say about the outlook for investment conditions?

General manager Geoff Driver said that from a longer-term perspective conditions are likely to remain tough for a period, with factors external to Australia having a significant impact.

Did Djerriwarrh’s sister company Mirrabooka Investments report similar results?

Yes. Mirrabooka Investments also saw trading portfolio losses hit results—these losses reduced first-half net operating profit and Mirrabooka reported a 9.5% fall to $46.9 million.

How did the market react to Djerriwarrh’s announcement?

Djerriwarrh’s shares closed up 3% at $3.73 following the announcement.