THIS DOCUMENT IS NOT A PROSPECTUS AND DOES NOT SEEK
TO INVITE APPLICATIONS FOR SHARES IN THE COMPANY.
Annual Review
2020
Highlights
- Fully franked dividends:
Final fully franked ordinary dividend of 8.5 cents per share down 18.3%
Full year ordinary dividends of 17.5 cents per share down 9.8%
-
Earnings per share:
Down 21.4% to 17.45 cents
(including special investment revenue)
Down 17.3% to 16.60 cents
(excluding special investment revenue)
- Profit after tax:
Down 20.8% to $116.9 million (including special investment revenue)
Down 16.7% to $111.3 million (excluding special investment revenue)
- Net tangible asset backing per share (NTA):
Down 13.4% to $4.26 (before provision for tax on unrealised capital gains)
Down 10.9% to $3.83 (after provision for tax on unrealised capital gains)
- Management Expense Ratio (MER):
Milton's annualised MER as at 30 June 2020 was 0.14%
Dividend Reinvestment Plan (DRP)
The DRP is in operation for the final dividend. The last day for receipt of an election notice for participation in the plan is 17 August 2020.
You may elect to participate online by visiting https://investorcentre.linkmarketservices.com.au
Notes
Comparative figures refer to results for the year ended 30 June 2019.
Our Value Proposition
Milton is a long term investor in equities, interest bearing securities and real property
Assets are not sold to increase profits for distributions Portfolio turnover is low
Milton pays fully franked dividends semi annually
An ordinary dividend has been paid every year since listing in 1958
Dividends are paid from income received from Milton's long term investment portfolio
Milton holds a diverse portfolio of Australian listed companies
Equity investment portfolio at 30 June 2020 was valued at $2.7 billion
Total assets at 30 June 2020 were valued at $2.9 billion
Milton is an efficient and low cost manager of investments
Operating costs represent 0.14% of average total assets
Milton is internally managed and no management or performance fees are charged
Dividend and Investment Growth over 20 years
70,000 | 25 | |||||||||||||||||||||
60,000 | Ordinary dividend | |||||||||||||||||||||
Special dividend | 20 | Dividend (Cents per Share) | ||||||||||||||||||||
Investment Value ($) | 50,000 | Investment value with | ||||||||||||||||||||
dividends re-invested | ||||||||||||||||||||||
40,000 | 15 | |||||||||||||||||||||
30,000 | 10 | |||||||||||||||||||||
20,000 | ||||||||||||||||||||||
10,000 | 5 | |||||||||||||||||||||
0 | 2014 | 0 | ||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
If $10,000 invested in MLT in June 2000, and if dividends were re-invested over the 20 years, the value of the investment in June 2020 would be worth $54,670.
Results for the year to 30 June 2020
2020 | 2019 | |||
$m | $m | |||
Ordinary investment revenue | 117.2 | 138.1 | ||
Interest | 1.5 | 2.6 | ||
Net trading gains | 0.8 | 0.2 | ||
Other revenue | 0.6 | 0.5 | ||
Net profits of joint ventures | 0.9 | 1.5 | ||
Administration costs(1) | (4.5) | (4.2) | ||
Operating profit before tax | 116.5 | 138.7 | ||
Tax expense | (5.2) | (5.1) | ||
Underlying operating profit after tax | 111.3 | 133.6 | ||
Special dividends after tax | 5.6 | 14.1 | ||
Net profit after tax | 116.9 | 147.7 | ||
Balance Sheet at 30 June 2020
2020 | 2019 | |
$m | $m | |
Investments | 2,706 | 3,141 |
Cash & liquids | 114 | 110 |
Joint Ventures | 25 | 23 |
Other assets | 20 | 20 |
Total Assets | 2,865 | 3,294 |
Liabilities | (2) | (2) |
Net assets before provision for | 2,863 | 3,292 |
tax on unrealised capital gains | ||
Provision for tax on unrealised | (289) | (417) |
capital gains | ||
Net assets | 2,574 | 2,875 |
Net Tangible Assets per share (NTA) |
Before provision for tax on unrealised capital gains
After provision for tax on unrealised capital gains
$4.26 $4.92
$3.83 $4.30
(1) Administration costs represented 0.14% per annum of average total assets.
Commentary
Net profit after tax for the year ended 30 June 2020 was $116.9 million on operating revenues of $120.1 million with earnings per share of 17.45 cents.
Underlying profit, which excludes special dividends received, decreased by 16.7% to $111.3 million with underlying earnings per share decreasing by 17.3% to 16.6 cents per share.
Milton declared a fully franked final dividend of 8.5 cents per share bringing the full year ordinary dividends to 17.5 cents per share.
The full year dividends represents a payout ratio of 105.5% of underlying profit.
Sharply lower dividends were received on Milton's investment portfolio in 2020 as many companies reduced dividends to preserve cash. These cash flow concerns arising from COVID19 mandated business lockdowns and elevated uncertainty. Proactive measures were taken by Milton's investment team to reduce exposures to banks and make other targeted portfolio adjustments to reduce this impact.
Reduced liquidity income was received on Milton's cash balances due to reductions in term deposit rates.
Cash balances (before provision for the final dividend) of $114.1 million were held at 30 June 2020.
Milton has no debt on its balance sheet and net tangible assets before provision for tax on unrealised capital gains of $2.7 billion at 30 June 2020.
Total Portfolio Return
Milton's equity portfolio is not aligned with any stock market index, rather it reflects Milton's investment philosophy
to invest in quality companies that are expected to grow earnings and dividends over the long term.
Milton's total portfolio return (TPR) for the last 12 months was -9.84% which is net of all operational expenses and tax.
Milton's returns do not include the impact of franking credits which may be of benefit to certain shareholders.
1 | 5 | 10 | 15 | 20 | |||
year | years | years | years | years | |||
% | % | % | % | % | |||
TPR | -9.84 | 3.76 | 7.10 | 6.10 | 8.66 | ||
TSR | -9.40 | 2.47 | 7.16 | 6.09 | 8.91 | ||
Portfolio
2020 was a transformative year for Milton's investment portfolio with bank weightings reduced from 28% at 30 June 2019 to 17% at year-end.
Bank investments were reduced due to concerns over weaker long-term earnings growth from declining credit quality, increased compliance costs and the effects of technology based disruption.
Milton's $2.9 billion Australian listed equity portfolio is currently comprised of 71 companies.
Investments were increased by $269.8 million over the year with increases in Macquarie Group, Transurban, BHP, Cleanaway, Sonic Healthcare, Amcor, Altium, REA and Qube and included new investments in Pro Medicus, Johns Lyng and Magellan.
Disposals amounted to $276.2 million and included complete sales of Milton's holdings in ANZ, Bendigo Bank, Bank of Queensland, Blackmores, New Hope and Adelaide Brighton. Holdings in Westpac and QBE were also reduced.
The 20 Largest Investments | Share | ||||
Market | of Total | Total | |||
Value | Assets | Return | |||
At 30 June 2020 | $m | % | % | ||
Commonwealth Bank | 218.0 | 7.6 | (10.9) | ||
Macquarie Group Limited | 192.8 | 6.7 | 1.9 | ||
Westpac Banking Corporation | 179.2 | 6.3 | (32.3) | ||
W H Soul Pattinson | 179.2 | 6.3 | (8.5) | ||
BHP Group Limited | 173.9 | 6.1 | (6.1) | ||
CSL Limited | 172.5 | 6.0 | 34.8 | ||
Wesfarmers Limited | 129.0 | 4.5 | 28.2 | ||
Woolworths Group Limited | 109.5 | 3.8 | 15.3 | ||
National Australia Bank Limited | 88.7 | 3.1 | (27.6) | ||
Transurban Group Limited | 82.2 | 2.9 | (0.8) | ||
Rio Tinto Limited | 65.5 | 2.3 | 0.7 | ||
AGL Energy Limited | 60.9 | 2.1 | (9.2) | ||
Brickworks Limited | 51.2 | 1.8 | 0.7 | ||
Coles Group Limited | 49.4 | 1.7 | 33.5 | ||
Telstra Corporation Limited | 47.7 | 1.7 | (14.5) | ||
ASX Limited | 46.9 | 1.6 | 8.0 | ||
A P Eagers Limited | 45.9 | 1.6 | (27.3) | ||
ALS Limited | 39.9 | 1.4 | (8.2) | ||
Perpetual Limited | 36.6 | 1.3 | (24.3) | ||
Amcor PLC | 35.2 | 1.2 | (3.9) | ||
Total value of Top 20 | 2004.2 | 70.0 | |||
Total assets | 2,866.1 | ||||
Outlook
Milton forecasts that company earnings and dividend growth this year will remain limited as uncertainty regarding the impact of COVID19 persists. As a result we expect that Milton's earnings will be lower again in 2021. We note however, that reliable forecasting in such an uncertain environment is very challenging.
A disconnect currently exists between elevated asset prices and this highly uncertain earnings environment. The recent increases in prices seem to have been driven by confidence in the impact of government actions to support individuals and businesses and the effect of historically low interest rates.
It is reasonable to expect that, against this backdrop, the next period will be one of heightened volatility. Milton's investment team will continue to monitor our portfolio and search for opportunities for new investments and income growth.
Milton maintains a strong balance sheet with no debt and sufficient cash on hand. Milton also has available profit reserves and franking credit balances which provide confidence that the fully franked dividend is well supported.
Key Dates
Dividend Dates
Ex dividend date: | 13 August 2020 |
Record date: | 14 August 2020 |
Payment date: | 2 September 2020 |
DRP application closing date: | 17 August 2020 |
Annual General Meeting
The AGM will be conducted as a virtual meeting and the link will be posted on our website.
Meeting date: | 20 October 2020 |
at 3.00pm |
Corporate Information
Directors
R.D. Millner Chairman
B.J. O'Dea Managing Director
G.L. Crampton
K.J. Eley
J.E. Jarvinen
I.A. Pollard
Senior executives
B.J. O'Dea CEO and Managing Director
D.N. Seneviratne CFO and Company Secretary
Share registry
Shareholders can manage their holding details by visiting
www.linkmarketservices.com.au
Alternatively, you can call Link Market Services on
(02) 8280 7111 or Toll Free on 1800 641 024
ABN: 18 000 041 421
Level 4, 50 Pitt Street, Sydney NSW 2000 PO Box R1836, Royal Exchange NSW 1225
- (02) 8006 5357 E: general@milton.com.au www.milton.com.au
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Disclaimer
Milton Corporation Limited published this content on 23 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 July 2020 23:15:08 UTC