Diversified United Investment : Appendix 4D - Half Yearly Report to 31 December 2021

For personal use only

Diversified United

Investment Limited

APPENDIX 4D

FOR THE HALF YEAR ENDED 31 DECEMBER 2021

CONTENTS

• Results for Announcement to the Market
• Media Release
• Financial Statements
• Independent Auditor's Review Report

This announcement was authorised for release by the Board of Directors

of Diversified United Investment Limited (ABN 33 006 713 177)

RESULTS FOR ANNOUNCEMENT TO THE MARKET

For personal use only

The reporting period is the half year ended 31 December 2021 with the prior corresponding period being the half year ended 31 December 2020.

The Report is based on audit reviewed financial statements. A copy of the Auditor's Review Report can be found on page 15.

Results for announcement to the market

• Revenue from operating activities was $22.9 million, a rise of 82.3% from the prior corresponding period.
• Profit after tax was $19.2 million, an increase of 47.2% from the prior corresponding period. Net realised gains and losses on the direct investment portfolio are recorded in the Realisation Reserve.
• Profit after tax includes unrealised losses on unlisted managed fund investments of $720,000 after tax (prior corresponding period gains: $3,801,000) and special dividends received of $1,178,000 after tax (prior corresponding period $88,000). Excluding these items profit after tax rose 104.5%1.
• Earnings per share based on profit after tax rose 45.2% to 9.0 cents (prior corresponding period 6.2 cents). Excluding unrealised losses on unlisted managed fund investments and special dividends received, earnings per share rose 104.7%1 to 8.8 cents. The weighted average number of ordinary shares for the period was 213,132,809 compared with 212,224,731 in the prior corresponding period, an increase of 0.4%.
• The interim dividend is 7.0 cents per share (7.0 cents for the prior corresponding period) fully franked payable on 18 March 2022. The record date for determining entitlement to the interim dividend is 24 February 2022.
• The interim dividend will not include any Listed Investment Company capital gain dividend.
• 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 on the Dividend ex-date of 23 February 2022 and the following four business days, without any discount. The last day for receipt of an election notice for participation in the plan is 25 February 2022.
• The net tangible asset backing per share based on the market valuation of investments was $5.45 at 31 December 2021, compared with $4.81 at the end of the prior corresponding period, an increase of 13.3%. 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.

1 Additional non-IFRS information.
Diversified United Investment Limited
Appendix 4D - for the half year ended 31	December 2021	1

	DIVERSIFIED UNITED INVESTMENT LIMITED
	ABN 33 006 713 177
LEVEL 20	TEL [phone]
101 COLLINS STREET	EMAIL [e-mail]
MELBOURNE VIC 3000
AUSTRALIA

For personal use only

16 February 2022

ASX Announcement

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

Profit after income tax for the half year ended 31 December 2021 was $19,238,000 (previous corresponding period: $13,073,000), an increase of 47.2%.

Profit after tax includes unrealised losses on unlisted managed fund investments of $720,000 after tax (previous corresponding period: gain of $3,801,000) and special dividends of $1,178,000 after tax (previous corresponding period: $88,000). Excluding these items, profit after tax rose by 104.5%1.

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 iron ore prices through early to mid 2021.

The profit for the half year excludes net realised gains and losses on listed investments which are transferred directly to the Realisation Reserve. The net realised losses on the listed investment portfolio after tax for the half year were $2,216,000 (previous corresponding period: loss of $9,013,000).

Earnings Per Share

Earnings per share based on profit after tax was 9.0 cents (previous corresponding period: 6.2 cents). Excluding unrealised losses on unlisted managed fund investments and special dividends received, earnings per share increased 104.7% to 8.81 cents per share (previous corresponding period: 4.3 cents).

The weighted average number of ordinary shares for the half year was 213,132,809 (previous corresponding period: 212,224,731) taking into account the shares issued in the dividend reinvestment plan.

1 Additional non-IFRS information.
Diversified United Investment Limited
Appendix 4D - for the half year ended 31	December 2021	2

Dividends

For personal use only

The Directors have declared an interim dividend of 7.0 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 7.0 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 on the Dividend ex-date of 23 February 2022 and the four business days immediately following that date. 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 $5.45 at 31 December 2021 and $5.15 at 31 January 2022. These calculations are after tax on net realised gains, but before any future tax benefit of net realised losses and before estimated tax on net unrealised gains and losses. They are also 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 net unrealised gains were to be deducted, the above figures would be $4.49 at 31 December 2021 and $4.28 at 31 January 2022.

Performance

The Company's net asset backing accumulation performance (assuming all dividends paid by the Company were reinvested in its shares, and after all expenses and tax) for the half year to 31 December 2021 was a rise of 3.4% while the S&P/ASX 200 accumulation index rose 3.8% over the same period. The Company's accumulation performance is after tax, all expenses, and the impact of the Company's gearing. Such items are not included in the S&P/ASX 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 4.1% 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, IDP Education and exposure to US markets, and underweight allocation to the domestic 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.

Diversified United Investment Limited
Appendix 4D - for the half year ended 31 December 2021	3

Management Expense Ratio

For personal use only

At 31 December 2021, annualised operating expenses (excluding finance costs) were 0.12% of the average market value of the portfolio (previous corresponding period: 0.13%). Including the management fees of the international exchange traded funds and managed funds in which the Company is invested, the expense ratio was 0.17% (previous corresponding period: 0.18%).

Portfolio

The Company made net investments during the half year of around $41M financed by reducing our funds held in cash and short-term receivables by around $13.5M and increasing borrowings by $27.5M.

Portfolio turnover for the half year to 31 December 2021 was 2.8%. The largest additions to and sales from the portfolio for the half year were as follows:

Purchases		Sales
BHP (1)	$20.3M	LendLease (2)	$9.7M
Perpetual (1)	$11.4M	Origin Energy (2)	$6.2M
Transurban (1)	$9.9M	Aurizon (2)	$6.1M
Ramsay Health (1)	$9.7M	Australian Unity Office Fund (2)	$4.9M
CSL (1)	$8.0M	Napier Ports (2)	$4.5M

1. Additions to existing positions.
2. Fully disposed of holding.

At 31 December bank facilities were $150M, drawn as to $145M, and cash and short-term receivables were $6.1M. 19.3% of the portfolio was invested in international equities through Exchange Traded Index Funds and four unlisted managed funds.

Outlook

The outlook for the current financial year is considered to be a cautionary one, with economic recovery from the COVID-19 pandemic and higher oil, gas and metal prices in an environment of concern as to inflation, higher interest rates, government deficits and geopolitical tensions.

Diversified United Investment Limited
Appendix 4D - for the half year ended 31 December 2021	4