WAM Capital is expected to unveil half year net profits of $74.6 million on Monday – more than triple its earnings in 2014.
WAM Capital, which is chaired by LIC veteran Geoff Wilson, will report an operating profit before tax of $103 million for the six months to December, which is more than three times the $29.5 million posted in 2014.
The LIC is also expected to announce on the Australian Securities Exchange that it would table a 25¢-per-share increase to its interim dividend, bringing the company’s payout to 7.25¢ a share.
The group’s profit boost can be traced back to the performance of the LIC, which gained 25.6 per cent for the period compared with the 0.4 per cent rise of the S&P/ASX All Ordinaries Accumulation Index.
Mr Wilson said companies such as vitamin manufacturer Blackmores and infant formula maker A2 Milk, whose shares have skyrocketed thanks to insatiable Chinese demand for Australian products, helped with the LIC’s performance.
“In a tough market, it’s been a good result,” Mr Wilson said. “Ideally we keep looking for growth companies, and that’s where groups like Blackmores and A2 fit in.”
Other companies that contributed to the LIC’s gains for the period include salary packaging administrator Smartgroup Corporation, intellectual property services group IPH, and motor vehicle fleet management business SG Fleet Group.
WAM’s performance during the six months to December came before the shock market crash in January as spooked investors dumped stock on China worries.
Half portfolio in cash
WAM, which has a market valuation of $1 billion, currently holds $450 million in cash – nearly half of its portfolio – as it buffers against falling markets.
“Throughout January 2016 we have taken profits on a number of positions and increased our cash weighting to 44.8 per cent,” WAM chief investment officer Chris Stott said.
“This provides a safeguard against the falling market while allowing us to take advantage of opportunities as they present themselves.”
WAM Capital’s results will come a week after its underlying investment manager, Wilson Asset Management, continues to expand its LIC footprint.
Throughout January 2016 we have taken profits on a number of positions and increased our cash weighting to 44.8 per cent.
On Wednesday, the manager proposed a restructure of Century Investment Australia’s business into a large-cap-focused LIC called WAM Leaders.
The board of Century was presented with a proposal from WAM to buy 100 per cent of the LIC’s shares through a buyback. Robert Turner, chairman at Century, said on Wednesday that the board would consider the advice of an independent expert over the offer and urged shareholders to consider WAM’s pitch.
Last year, WAM established the Future Generation Global Investment Company – an LIC aimed at giving investors exposure to global equities while donating 1 per cent of its assets each year to charities.
WAM Capital, the group’s biggest LIC, said it would maintain a conservative balance sheet this year with a high cash weighting and no debt. “WAM Capital is well positioned to capitalise on opportunities in the market as they arise,” it said.