Half-Year Report to 31 December 2024
AMCIL Limited’s investment strategy has delivered strong performance, with the portfolio outperforming its benchmark for the half-year ended 31 December 2024. Focusing on high-quality companies and strategic portfolio adjustments has driven these results, reflecting AMCIL’s commitment to delivering sustainable returns for shareholders. Despite market challenges, the portfolio's solid returns demonstrate the strength of AMCIL's approach and its ability to generate value for long-term investors.
Financial Overview
For the six months ending 31 December 2024, AMCIL reported a profit of $3.6 million, down 12.6% compared to the same period in the previous year. This decline was mainly attributed to low levels of activity in the trading and options portfolios, which underperformed during the period.
AMCIL’s revenue from operating activities increased slightly, rising by 1.2% to $5.0 million from $4.9 million in the previous corresponding period.
An interim dividend of 1.0 cent per share, fully franked (at 30%), will be paid on 26 February 2025 to ordinary shareholders on the register as of 5 February 2025. This dividend remains consistent with the interim dividend paid in the prior year.
For the six-month period, the portfolio delivered a return, including franking, of 8.7%, outperforming the S&P/ASX 200 Accumulation Index, which returned 7.6%. Over a 12-month period, the portfolio achieved a return of 17.3%, compared to the Index's return of 12.7%. These results reinforce AMCIL’s consistent track record of delivering outperformance, even amidst fluctuating market conditions.
The Board has declared a fully franked interim dividend of 1.0 cent per share, in line with the previous year’s interim dividend. This dividend will be paid to shareholders on 26 February 2025, who are on the register as of 5 February 2025. The net tangible asset (NTA) backing per share, before tax on unrealised gains, increased to $1.33 as of 31 December 2024, compared to $1.18 at the same time last year.
Mark Freeman, AMCIL’s Portfolio Manager and Managing Director, emphasised that “when considering long-term returns over a 5, 10, or even 15-year horizon, AMCIL’s portfolio has continued to deliver outperformance. This reflects the enduring strength of our investment philosophy and disciplined approach to managing the portfolio.”
Portfolio performance and highlights
The portfolio’s strong performance was underpinned by the addition of high-quality companies and strategic adjustments. Over the six-month period, new holdings such as Sigma Healthcare, Redox Limited, Technology One, and Block delivered solid returns. Long-term investments, including Netwealth Group and ResMed, continued to perform strongly.
Mark Freeman, AMCIL’s Portfolio Manager and Managing Director, reiterated the importance of maintaining a disciplined approach in a competitive market environment. “Our strategy is based on identifying high-quality companies with sustainable growth potential. By staying disciplined in our capital allocation, we have been able to navigate the challenges of a high-valuation environment and deliver strong returns for our shareholders,” Mark said.
While talking about reductions in holdings within the banking sector that looked to manage valuation risks, Mark explained, “Our performance during the period was impacted by some challenges, but we were able to offset that by making strategic adjustments across other areas of the portfolio. We exited our position in CBA, where we had a smaller holding, and reduced our exposure to Westpac due to concerns about extreme valuations. While we still maintain a small position in NAB and Westpac, it’s well underweight. Valuation discipline is at the core of our decision-making process. Even in sectors that perform well, it’s critical to reassess when share prices move beyond sustainable levels.
Our overall approach isn't driven by index weights; we prefer to spread our holdings across a diverse range of companies, including large caps like Wesfarmers and CSL, while also maintaining exposure to mid and small-cap stocks when we see opportunities that align with our strategy. Also, our decision to remain underweight in the resources sector, which faced headwinds due to concerns about China’s economic growth, contributed to relative outperformance.”
In terms of specific portfolio movements, a significant investment was made in Sigma Healthcare, acquired at attractive prices. The approval of its merger with Chemist Warehouse by the ACCC further enhanced its market position and growth potential. This investment reflects our strategy of focusing on founder-led companies with strong market positions, proven leadership, and robust growth prospects.
We increased our holding in WiseTech Global, taking advantage of a period of weakness in the company. Despite some short-term challenges, WiseTech’s solid fundamentals and market position make it a compelling choice for long-term growth.
ARB Corporation also saw an increased allocation, reflecting confidence in its resilience and consistent performance. Similarly, we added Amcor to the portfolio following its acquisition of Berry Global Group. Amcor has a good track record of delivering synergies from acquisitions, and this deal positions it for earnings growth over the coming years, making it a good investment aligned with our strategy.
A new position was taken in EVT, an operator of cinemas, hotels, resorts, and restaurants. With a strong asset base and founder-led culture, EVT stood out as a fundamentally undervalued business offering long-term potential.
We also initiated a smaller position in Region Group, primarily for its attractive dividend yield of over 6.5% at the time of purchase. While the company faced some headwinds due to high interest rates, we believe these challenges have largely been priced in, paving the way for potential growth. Life360, given its robust long-term growth prospects, was acquired at a favorable valuation.
We also made full exits from Mineral Resources, due to governance concerns, and PEXA Group, where performance failed to align with expectations.
Looking ahead
Our strong performance for the half-year to 31 December 2024 reflects the effectiveness of our investment strategy, which blends strategic portfolio adjustments with a focus on high-quality companies with strong and sustainable growth potential. While we recognise that short-term market fluctuations can present challenges, our long-term outlook remains positive.
“Opportunities will always come through, but you must be on the hunt for them, and I am sure this year will be no different. At this point, we remain patient, knowing that the right opportunities will arise—ones that align with our framework and long-term strategy. The key for us is to act decisively when we see them," says Mark Freeman, AMCIL’s Portfolio Manager and Managing Director.
With a well-diversified portfolio and a solid liquidity position, we are confident that AMCIL is well-equipped to navigate the market's challenges and continue delivering value to our shareholders in the years to come,” concludes Mark.