WAM increased its ownership of Premium from 2.7 per cent to 100 per cent at 31 December 2012, with the acquisition adding profit before tax of $1.3 million to WAM’s results, according to the company's annual report.
The total $86.7 million consideration included $28.9 million in cash and $55.3 million in WAM shares. Total cash outflow on acquisition was $26.5 million, WAM stated.
However, the boost to the portfolio size of the group in a year of strong market performance had a big impact, according to WAM.
“The significant increase in the profit reflects the change in the size and value of the investment portfolio due to the strong performance of the investment portfolio and capital management initiatives, including the merger with Premium Investors Limited, option issue and placement,” WAM stated.
The final fully franked dividend increased from 11.0 cents in 2012 to 12.0 cents. The manager’s investment portfolio returned 17.9 per cent per annum over 14 years since its August 1999 listing, according to the results.
In his chairman’s letter, WAM chair Geoff Wilson pointed to an increase in shareholder equity of 191 per cent to $486.7 million.
During the year, the board had implemented “a number of capital management initiatives” to grow assets and increase shareholder value, he said.
These included an option issue that raised $246.0 million and a placement raising $37.0 million, as well as the Premium merger.
“The merger has led to a reduction in the fixed administration expense ratio of the group. There are also benefits from tax losses and franking credit balances which were assets of Premium Investors,” Mr Wilson said.
Mr Wilson reiterated his opinion that Future of Financial Advice changes are benefiting listed investment companies such as WAM by levelling the playing field. “The reforms have had a positive impact in raising the awareness of LICs and the benefits of their structure and increased the level of interest in WAM Capital,” he said.
