Milton/Lihir

Sydney, July 31, 2008 (ABN Newswire) - Listed investment company Milton Corporation seems to have done a bit better than its rivals, like Australian Foundation Investment Co.

Milton said net profit after significant items for 2007-08 was $122.02 million, up from $85.73 million the prior financial year.

Milton said that operating profit excluding realised gains (underlying profit) on investments was up 17.4% to $82.8 million.

Rivals like AFIC reported increases in bottom line profits after significant items, but on an operating or underlying basis, the profits were lower than 2007's outcomes.

AFIC on Monday for example, revealed an 8.5% drop in earnings before gains to $205.05 million, down from the $224.40 million earned in 2006-07.

AFIC said that annual profit after investment gains jumped 60% to $416.10 million, from $259.341 million in the previous year.

Milton said realised gains on investments surged 193.7% to $34.7 million, driven by corporate activity (which was the reason for AFIC and others reporting higher net profits after significant items).

Milton declared an increased fully franked final dividend of 45c per share after growth in investment revenue lifted underlying earnings from 91c to 98.5c per share.

This brings the 2008 full year ordinary dividend to 88c per share, an increase of 8.6% from 81c.

And the company expects to maintain the full year dividend of 88c per share this year.

And the company declared a fully franked special dividend of eight cents per share to mark the company's 50th year of listing.

Chairman Robert Millner boasted in a statement that none of Milton's full year ordinary dividends had ever been less than the previous one.

"Even in a period of economic uncertainty in which the market value of many companies has been adversely affected, Milton has been able to increase the ordinary dividend paid to its shareholders," he said.

But Mr Millner acknowledged market conditions would continue to be challenging in 2009.

"We expect many of the market issues that have become apparent during the past year will continue to be concerns throughout the coming year," he said.

Milton has included an LIC capital gain distribution of 12c per share as part of the final dividend.

Individuals, trusts and superannuation funds that receive distributions of LIC capital gains are able to claim deductions in their income tax return, in the year of receipt.

Milton's managing director Frank Gooch noted such gains were "likely to fluctuate each year as these are largely driven by corporate activity".

"Whilst Milton does own low yielding resource companies such as BHP and Rio, the investment philosophy has resulted in a portfolio of largely higher yielding industrial and financial companies," he said.

"The value of the market as a whole, but particularly the industrial and financials sectors, has fallen due to concerns regarding credit, energy costs and an uncertain outlook for both international and domestic economies.

"We expect most of the companies in the portfolio to at least maintain their dividends in the 2009 financial year and over the longer term they will provide increasing returns to their shareholders."

Milton's net assets before provision for tax on unrealised capital gains stood at $1.6 billion at 30 June 2008, or $19.03 per share.

Milton shares fell 15c in early trading to $17.70 but then bounced in the upbeat day's trading conditions to close 35c higher at $18.20.

Milton said its Total Portfolio Return, for the year was negative 15.3%. This Return compared with the pre expenses and pre tax Accumulation Return of the All Ordinaries Index of negative 12.1%.

During the year the acquisition of an unlisted investment company increased investments by $27 million and direct investments added a further $71 million to the portfolio.

New additions to the portfolio in excess of $0.5 million included Axa, Billabong, Cabcharge, Caltex, Essa, Goodman Fielder and Service Stream.

Cash from disposals, including acceptances of merger and takeover offers, amounted to $33 million.

The Share Purchase Plan will be offered to shareholders on the register as at 19 August 2008.

This will enable shareholders to purchase shares up to the value of $5,000 at a discount of 2.5% to the ex dividend market price and without incurring brokerage. Further details will be sent to shareholders with the dividend advice on 3 September 2008.

Lihir Gold remains confident it can continue to finance its expansion program after reporting a 27% rise in second quarter gold production.

The company told the ASX yesterday that production rose to 177,000 ounces in the three months to June 30, taking production for the half year to 316,000oz.

But the June quarter output was 3% lower than the same quarter in 2007.

Lihir said group production in calendar 2008 was expected to be over 850,000oz, in line with previous guidance.

But some analysts, especially those at Merrill Lynch have doubts this can be achieved.

Lihir CEO, Arthur Hood told a conference call that the company is "quite capable, as we see things at the moment, of funding our growth profile into the next few years.

"We have very strong cash flow, we have a very high margin and we are very comfortable with being able to put those debt lines in place.''

Lihir is spending $700 million expanding output at its Lihir Island mine in Papua New Guinea by more than 1 million ounces a year. That's a rise of more than 40%.

The company is reportedly to be after $400 million in funding from banks for the mine project.

Lihir shares rose to a high of $2.94 yesterday, before settling back at $2.81, down 8c on the day. A big overnight fall in the gold price took a lot of sting from the share price and the company's optimism.

Managing director Arthur Hood said the merger with Equigold, which was completed in mid June, would help Lihir meet its annual production guidance.

"The successful completion of the merger with Equigold firmly establishes a strong growth platform for Lihir as the ongoing transformation of the company continues," Mr Hood said.

Production from Lihir Island remained on track to produce between 700,000oz and 770,000oz in 2008, Lihir said.

An additional 40,000oz to 50,000oz would come from Ballarat, between 50,000oz and 60,000oz following the start-up of Bonikro, about 5,000oz from Kirkalocka and about 50,000oz from Mt Rawdon.

Lihir said that full plant commissioning at Bonikro in Ivory Coast, (bought in the Equigold transaction) is expected by next month and commercial production at Ballarat by the end of this year.

Mt Rawthorn near Bundaberg in Queensland was also picked up in the Equigold deal.

The Lihir Island upgrade of the operation is making good progress.

Lihir said unit costs increased across the mining industry during the June quarter due to increasing input prices, particularly fuel.

Unit costs at Lihir Island fell to $417 an ounce from $462, but the previous quarter was affected by a plant maintenance shutdown.

The average realised gold price for the second quarter was $900 an ounce, down from $928 in the first quarter.


 

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