Listed investment vehicle WAM Capital has reported a record profit for the full year as its investments outpaced a lacklustre broader market.
The group (WAM), chaired by renowned fund manager Geoff Wilson, said its after-tax operating profit jumped 81.5 per cent to $98 million in the 12 months to June 30 thanks to a 21.6 per cent increase in its core investment portfolio.
Mr Wilson said the group had outperformed the All Ordinaries Accumulation Index — which takes into account dividends as well as share price fluctuations — by 19.6 per cent during a year in which it held around one-third of its investments in cash due to worries about market volatility.
“The investment portfolio’s outperformance in the 2016 financial year demonstrates the strength of our investment process,” he said.
“The investment performance of 21.6 per cent was achieved while holding an average cash weighting of 35 per cent.”
WAM Capital’s chief investment officer Chris Stott pointed to the success of five stock picks for the strong result, with Smartgroup, A2 Milk, Blackmores, IPH and Mayne Pharma all outperforming.
He was subdued on the prospects for the market in fiscal 2017, however, labelling the outlook as “mixed” given political unease.
“Initial political uncertainty following the recent federal election eased after the Coalition claimed the requisite majority in the lower house to form government,” he said.
“While the uncertainty impacted consumer and business confidence in the short term, the impact has been modest and consumer sentiment is forecast to improve in the coming months.”
Mr Stott says potential tailwinds will come from lower interest rates in Australia as well as stimulus from central banks in the UK and Japan in the “near-term”.
“This low interest rate environment will be conducive to higher levels of economic activity, which is supportive of earnings growth,” he said.
WAM Capital declared a final dividend of 7.25c a share, bringing the full-year dividend to 14.5c.
The group also announced a share purchase plan that will tap retail investors for up to $15,000 as well as seek funds from institutions. The amount to be raised is unclear, with WAM Capital saying the funds would be used to boost its investment portfolio.
The new shares will be priced at $2.14, more than 6 per cent below its trading price at the time of the announcement.