Dear Shareholder,
Dividend Payment
The 17.0 cent per share fully franked interim dividend has been paid today, by way of cheque,
notification of direct banking, or notification of allotment of shares under the Dividend Reinvestment
Plan, according to your instructions.
Net Asset Backing 28 February 2022: $10.02 per share
At 28 February 2022 the unaudited net tangible asset backing of the Company’s ordinary shares,
based on investments at market value, after tax on realised gains, before any future tax benefit of
realised losses, and before estimated tax on net unrealised gains and losses and after provision for
the interim dividend of 17.0 cents per share, was $10.02 per share, or $8.46 per share after
providing for estimated tax on unrealised portfolio gains.
Results for Half Year Ended 31 December 2021
On 18 February 2022, the Directors made the following report to the Australian Securities Exchange
concerning the Company’s performance and the interim dividend:
Financial Results and Dividend Announcement
for the Half Year Ended 31 December 2021
The Directors make the following report concerning the Company’s performance and interim
dividend.
Profit and Realised Capital Gains/Losses
Profit after income tax for the half year ended 31 December 2021 was $26,995,000 (previous
corresponding period: $14,113,000).
Profit after tax includes special dividends of $1,880,000 (previous corresponding period:
$249,000). Excluding these items profit after tax rose 81.2%1
.
1 Additional non-IFRS information.
Australian United Investment Company Limited
Half Yearly Report to Shareholders 2
Net profit has improved as a result of the broader recovery in dividend income seen throughout the
market and significant dividends received from BHP and Rio Tinto following strong commodity
prices.
Net realised gains on the investment portfolio after tax were $1,400,000 (previous corresponding
period: losses of $10,845,000), which under accounting standards are transferred directly to the
Realisation Reserve and are not included in Net Profit.
Earnings Per Share
Earnings per share based on the weighted average number of shares on issue for the half year
were 21.6 cents per share compared to 11.3 cents for the previous corresponding period.
Excluding special dividends, earnings per share rose 81.1% to 20.1 cents1
.
The weighted average number of ordinary shares for the half year rose 0.3% to 125,044,480 after
taking into account the shares issued in the dividend reinvestment plan.
Dividends
The Directors declare an interim dividend of 17.0 cents per share fully franked at 30% to
shareholders registered on 24 February 2022, to be paid on 18 March 2022. The comparable 2021
interim dividend was 17.0 cents per share fully franked at 30%.
LIC Capital Gains
The interim dividend will not include any Listed Investment Company capital gain dividend.
Dividend Reinvestment Plan
The Company operates a Dividend Reinvestment Plan (“DRP”) under which shareholders may
elect to have all or part of their dividend payment reinvested in new ordinary shares. Pricing of the
new DRP shares will be at the volume weighted average selling price of shares traded on the
Australian Securities Exchange in the five trading days beginning from the day the shares start
trading on an ex-dividend basis, without any discount. The last day for the receipt of an election
notice for participation in the plan is 25 February 2022.
Asset Backing
The net tangible asset backing per share based on the market valuation of investments was
$10.49 at 31 December 2021 and $9.94 at 31 January 2022. These calculations are after tax on
net realised gains, before any future tax benefit of net realised losses, before estimated tax on net
unrealised gains/losses, and before provision for the interim dividend.
The Company is a long-term investor and does not intend disposing of its total portfolio. If
estimated tax on unrealised portfolio gains were to be deducted, the above figures would be $8.81
at 31 December 2021 and $8.42 at 31 January 2022.
Australian United Investment Company Limited
Half Yearly Report to Shareholders 3
Performance
The Company’s net asset backing accumulation performance for the six months to 31 December
2021 (assuming all dividends were reinvested) was a rise of 2.1%, compared to the rise of 3.8% in
the S&P ASX 200 Accumulation index. The Company’s returns are after tax and expenses and the
impact of the Company’s gearing for which no allowance is made in the index.
Including the value of franking credits for shareholders who can fully utilise them, the Company’s
accumulation return for the half year to 31 December 2021 was an increase of 2.8% compared to
an increase of 4.6% in the S&P/ASX 200 Franking Credit Adjusted Total Return Index.
The Company’s relative performance for the half year was assisted by overweight allocations to
Sydney Airport, Carsales and Event Hospitality, and underweight allocation to the Information
Technology sector.
Relative performance was held back by overweight allocations to Rio Tinto, Washington Soul
Pattinson and Transurban, and underweight allocation to the Utilities and Real Estate sectors.
Management Expense Ratio
At 31 December 2021, annualised operating expenses (excluding finance costs) were 0.10% of the
average market value of the portfolio (previous corresponding period: 0.12%), reflecting the
increased value in the share portfolio.
Portfolio
The Company made net investments during the half year of around $40M financed by an increase
in borrowings of $30M and available cash of $10M.
Portfolio turnover for the half year to 31 December 2021 was 3.2%. The largest additions to and
sales from the portfolio for the half year were as follows:
Purchases
Northern Star (1) $12.1M
Worley (1) $10.7M
Aristocrat (1) $8.7M
BHP (1) $7.6M
Ramsay Healthcare (1) $7.0M
Sales
Aurizon (3) $15.7M
Invocare (3) $11.9M
Santos (3) $6.8M
Napier Ports (3) $6.0M
Washington Soul Pattinson (2) $5.4M
(1) Additions to existing positions.
(2) Partial disposal of holding.
(3) Fully disposed of holding.
At 31 December bank facilities were $170M drawn to $165M and cash and short term receivables
were $5.9M.
Australian United Investment Company Limited
Half Yearly Report to Shareholders 4
Outlook
We are transitioning from an unreal environment of money creation, record low interest rates and
negative real interest rates, large government deficits and asset inflation to a more “normal world”
of 2% – 3% inflation, 2% – 3% interest rates and lower government deficits.
The transition to “normal conditions” can be uncomfortable and it also contains the risks of higher
inflation and stagnation.
We are cautious on the outlook for the Australian share market this financial year as it is at
historically high levels in an environment of broad economic growth but with worries in respect to
inflation, interest rates, government deficits, COVID and geopolitical tensions.
We believe the AUI portfolio is well positioned for the environment described. The portfolio is
conservatively positioned and has significant holdings in Resources and Banks which typically
benefit from rising rates and inflation and is underweight high priced technology stocks.
DYOR
i do not hold AUI ( but MIGHT buy into them sometime in the future )
of the shares mentioned
i hold NST ( added to in the last 6 months )
i hold WOR ( bought into during the last 6 months )
i hold BHP ( no recent moves )
i hold SOL ( no recent moves )
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