BKI Investment (ASX:BKI) share price slips as revenue surges 90%

BKI just reported its half-year results…

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Key points

  • BKI Investment has reported its half-year earnings
  • The LIC managed to double its revenues for the 6 months to 31 December
  • Shareholders will enjoy a hefty dividend raise too

The BKI Investment Co Ltd (ASX: BKI) share price is falling today, but not by as much as the broader market. BKI shares are currently down by 0.3%, trading at $1.68 at the time of writing.

That comes as the Listed Investment Company (LIC) released its earnings results for the half-year ending 31 December yesterday before market open.

BKI Investment share price steady after solid half-year result

  • Investment revenues of $31.5 million, up a pleasing 90% from the $16.6 million recorded for the first half of the 2021 financial year (1H21).
  • Revenues from operating activities also rose by 90%, going from $16.2 million in 1H21 to $32.2 million.
  • Net profit after tax boosted by 104% to $29.5 million.
  • That translates into an earnings per share (EPS) metric of 3.98 cents per share, up 103% from the previous 1.96 cents per share.
  • Including special investment revenue, BKI reported $55.7 million in net operating profit after tax of $55.7 million, up 273% from last year's $14.9 million. It also lifted the company's EPS to 7.53 cents per share, also up 273%
  • BKI's interim dividend to be 3.5 cents per share, a 75% increase on last year's interim payment of 2 cents per share. Additionally, BKI will be forking out a special dividend of 50 cents per share.
  • Dividends to be paid on 3 March (with the ex-date on 11 February).

What else happened in the first half?

As a LIC, BKI only invests in a portfolio of other ASX shares for the benefit of its shareholders. There weren't too many developments with BKI over the reporting period. However, the company did announce that its total shareholder return for the full 2021 calendar year came to 13%, almost exactly mirroring the S&P/ASX 200 Index (ASX: XJO). Including BKI's issued franking credits, this total return jumps to 14.6%.

Over the six months to 31 December, BKI also reported that it made several adjustments to its portfolio. These included buying Washington H. Soul Pattinson and Co Ltd (ASX: SOL). As well as adding to BHP Group Ltd (ASX: BHP) and APA Group (ASX: APA), amongst others.

In their place, BKI reduced positions in ASX Ltd (ASX: ASX), Commonwealth Bank of Australia (ASX: CBA) and Woolworths Group Ltd (ASX: WOW). It sold out of Brambles Limited (ASX: BXB), Platinum Asset Management Ltd (ASX: PTM) and Magellan Financial Group Ltd (ASX: MFG).

What did management say?

Here's some of what the company had to say on its 1H22 results:

During the first half of FY2022, we added to existing positions, all of which offered significant grossed up dividend yields. They are positions well known to the BKI Investment Committee and provided a very good opportunity to increase BKI's Investment Revenue and Net Profits…

BKI exited positions in Brambles, Platinum Asset Management and Magellan Financial, with these sales prompted by a reduction in our confidence for these companies to increase dividends over the short to medium term.

What's next?

Going forward, BKI's management says that the company is focused on investing in high-quality companies with pricing power that BKI believes will be best-placed to overcome "issues involving inflation, a lack of service and labour shortages".

Management says that the company "continues to be well positioned with a portfolio of high-quality dividend paying stocks, available cash and no debt'.

BKI Investment share price snapshot

BKI Investment is a LIC that was spun out of Brickworks Ltd (ASX: BKW) around 20 years ago. Since then, it has managed to give its investors a slow-and-steady return, averaging a total return of 8.6% per annum over the past 10 years.

The LIC charges a management fee of 0.17% per annum. At the current BKI Investment share price of $1.68, the company has a market capitalisation of $1.25 billion, with a trailing dividend yield of 2.97%.

Motley Fool contributor Sebastian Bowen owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended APA Group, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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