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21-07-2014, 10:44 PM
Easy money trend no friend: AFIC boss
THE AUSTRALIAN JULY 22, 2014 12:00AM
Bridget Carter
Mergers and Acquisitions Editor
Sydney
Ross Barker
AFIC chief Ross Barker Source: News Corp Australia
ROSS Barker, the managing director of Australia’s largest listed investment company, has warned about a growing complacency among investors over sharp declines in the sharemarket.
An increasing reliance on low interest rates for growth was becoming too strong, despite potentially subdued earnings growth, Mr Barker said yesterday, as the Australian Foundation Investment Company posted a 4.8 per cent lift in its annual net profit to $254.2 million.
“Recent strong returns and low volatility suggest investors have become somewhat complacent about the potential for setbacks,” Mr Barker said. “However, we believe risks are elevated.”
At some point, interest rates will rise, he said, although the timing and impact still remained uncertain. Unanticipated geopolitical events were also a risk.
The $6.1 billion listed investment company has holdings in 75 of Australia’s largest stocks.
Its operating profit lifted 8.5 per cent to $254.2m for the year to June 30, compared with the previous corresponding period, while revenue gained 9.1 per cent from the previous year.
AFIC’s portfolio return in the 12 months was 17.3 per cent compared with that of the S&P/ASX 200 Accumulation Index of 17.4 per cent.
New additions to AFIC’s portfolio included Qube Holdings, Washington H. Soul Pattinson, James Hardie Industries, TPG Telecom, 21st Century Fox, Japara Healthcare and Resmed.
AFIC’s holdings were boosted in Transurban, CSL, Telstra and Equity Trustees and corporate activity during the year resulted in some portfolio changes.
The current financial year would continue to provide attractive opportunities to invest, Mr Barker said.
These opportunities could include additional initial public offerings and the privatisation of government assets.
AFIC has initiated a share purchase plan for shareholders, which is due to close on September 25.
A final fully franked dividend of 14c a share is to be paid to shareholders in August, unchanged on the final dividend last year.
Mr Barker runs four listed investment companies, each with a different investment strategy, including AFIC, Mirrabooka Investments, Djerriwarrh and AMCIL.
Last week Mirrabooka, which invests in small to medium capitalisation stocks, posted a 24 per cent fall in its annual net profit to $7.8m, as dividend income fell following a move to cash in investments.
Djerriwarrh, which makes its money from investments and call options, booked a 13.9 per cent net profit lift to $42.9m.
At the time, Mr Barker said the result reflected the investment approach of writing call options over 30 to 40 per cent of the portfolio and the tax paid on realised gains when some of the call options were exercised.
He said economic conditions would continue to be patchy, with interest rate settings unlikely to change materially in the near term.
Shares in AFIC closed down 3c to $6.15
THE AUSTRALIAN JULY 22, 2014 12:00AM
Bridget Carter
Mergers and Acquisitions Editor
Sydney
Ross Barker
AFIC chief Ross Barker Source: News Corp Australia
ROSS Barker, the managing director of Australia’s largest listed investment company, has warned about a growing complacency among investors over sharp declines in the sharemarket.
An increasing reliance on low interest rates for growth was becoming too strong, despite potentially subdued earnings growth, Mr Barker said yesterday, as the Australian Foundation Investment Company posted a 4.8 per cent lift in its annual net profit to $254.2 million.
“Recent strong returns and low volatility suggest investors have become somewhat complacent about the potential for setbacks,” Mr Barker said. “However, we believe risks are elevated.”
At some point, interest rates will rise, he said, although the timing and impact still remained uncertain. Unanticipated geopolitical events were also a risk.
The $6.1 billion listed investment company has holdings in 75 of Australia’s largest stocks.
Its operating profit lifted 8.5 per cent to $254.2m for the year to June 30, compared with the previous corresponding period, while revenue gained 9.1 per cent from the previous year.
AFIC’s portfolio return in the 12 months was 17.3 per cent compared with that of the S&P/ASX 200 Accumulation Index of 17.4 per cent.
New additions to AFIC’s portfolio included Qube Holdings, Washington H. Soul Pattinson, James Hardie Industries, TPG Telecom, 21st Century Fox, Japara Healthcare and Resmed.
AFIC’s holdings were boosted in Transurban, CSL, Telstra and Equity Trustees and corporate activity during the year resulted in some portfolio changes.
The current financial year would continue to provide attractive opportunities to invest, Mr Barker said.
These opportunities could include additional initial public offerings and the privatisation of government assets.
AFIC has initiated a share purchase plan for shareholders, which is due to close on September 25.
A final fully franked dividend of 14c a share is to be paid to shareholders in August, unchanged on the final dividend last year.
Mr Barker runs four listed investment companies, each with a different investment strategy, including AFIC, Mirrabooka Investments, Djerriwarrh and AMCIL.
Last week Mirrabooka, which invests in small to medium capitalisation stocks, posted a 24 per cent fall in its annual net profit to $7.8m, as dividend income fell following a move to cash in investments.
Djerriwarrh, which makes its money from investments and call options, booked a 13.9 per cent net profit lift to $42.9m.
At the time, Mr Barker said the result reflected the investment approach of writing call options over 30 to 40 per cent of the portfolio and the tax paid on realised gains when some of the call options were exercised.
He said economic conditions would continue to be patchy, with interest rate settings unlikely to change materially in the near term.
Shares in AFIC closed down 3c to $6.15