AMCIL recorded an 85.7 per cent profit growth for the half-year ended 31 December 2021, compared to the prior corresponding period. The portfolio outperformed the S&P/ASX 200 Accumulation Index over the period and reflects AMCIL’s focus on investing in high-quality large, mid-sized and small companies.
Mark Freeman, AMCIL’s Managing Director, discusses the results and AMCIL’s investment outlook in this article.
Despite the challenges for many businesses of the ongoing COVID pandemic and the subsequent supply chain disruptions, our focus on investing in high-quality large, mid-sized and small companies has benefited our portfolio and placed us in a position to deliver above-market growth over the long term.
Our investments generated $4.6 million in revenue, up 78.8 per cent, as companies increased or reinstated dividends amid improved but volatile trading conditions.
The total portfolio return including franking and dividends, was 10.4 per cent compared to the S&P/ASX200 Accumulation Index’s return of 4.6 per cent including franking. Our total portfolio return over 12 months, including dividends and franking, was 22.6 per cent – above the benchmark index’s return of 18.7 per cent including franking.
The best performers in the portfolio were Mainfreight, Macquarie Group, Macquarie Telecom, Sydney Airport, Goodman Group, ARB Group and James Hardie Industries.
We exited or reduced some of our investments as we considered the investment risk of high valuations in an environment where interest rates are expected to rise. We exited NEXTDC and SEEK and reduced investments in Sydney Airport, ARB Corporation, Macquarie Telecom, Objective Corporation and Xero.
We made new investments in Netwealth Group and Domino’s Pizza. These companies operate in strong market sectors and have strong long-term growth prospects and quality management. In the emerging part of our portfolio, we invested in Lark Distilling and Beamtree. Our most material transaction was to switch our holding in NAB to Westpac.
We’re pleased to deliver an interim dividend to shareholders of one cent per share, fully franked after no interim dividend being paid last year. The management expense ratio of 0.46 per cent, was lower compared to 0.53 per cent in 2020.
Outlook
AMCIL remains focused on long term opportunities in high-quality companies and we’re confident that with patience, future market volatility will provide additional opportunities to invest.
A fall in the share price of some companies in our portfolio with heightened valuations, has the potential to provide short term headwinds to performance. However, as buoyant economic demand has intersected with the supply chain challenges to create a significant bout of inflation, our positioning in quality companies has seen us well placed to navigate what is potentially a challenging outlook. The ability for a business to pass on cost pressures in its pricing is growing in importance, as is the calibre of executives managing the challenges faced by businesses in their supply chains and accessing labour.
Overall, we believe we are well placed to navigate a potentially challenging outlook.