AMCIL’s half year results to 31 December 2023 delivered a portfolio return of 11.7% including franking compared to the S&P/ASX 200 Accumulation Index return including franking of 8.3%.
In the 12-months to 31 December 2023, AMCIL delivered a 21.2% compared to the Index’s 14.0%. Both of these figures also include the benefit of franking.
Profit for the half year was $4.1 million, in line with the profit of the previous corresponding period.
Shareholders will receive an interim dividend of 1.0 cent per share fully franked (at 30%), the same as last year’s interim dividend.
The annualised management expense ratio decreased to 0.46%, down from 0.64% in 2022, driven by reduced costs (following the refund of a charge from the services company, AICS) and the increase in the value of the portfolio in comparison to the corresponding period last year.
What’s driving performance?
Against a backdrop of a market heavily influenced by the direction of inflation and the consequent market expectations about interest rates, Australian equities experienced large negative falls in the early stages of the six-month period only to rebound quite significantly by the end of the calendar year.
The portfolio has benefited from its substantial repositioning throughout the calendar year, with eleven new stocks added to the portfolio and five holdings removed during this period.
As market perception globally and locally, that interest rates had peaked towards the end of the calendar year, we saw increased market valuations and share prices across several quality companies that we have large positions in. This movement was also in response to the underlying quality of their results announced through the period.
The strongest contributors to our outperformance were long term holdings such as James Hardie Industries, CAR Group, ARB Corporation, Goodman Group, REA Group and a relatively new holding Gentrack Group which was added to the portfolio in the first half of the calendar year.
New companies added in this time were Altium, Mineral Resources and Objective Corporation and IPD Group. These are examples of “owner driver” companies where the CEO has significant share ownership and a strong entrepreneurial approach to achieving profitable growth.
The most material sales in the half year were in Medibank Private, as the share price ran up to a point where it was appropriate to recycle capital from this position to pursue attractive buying opportunities elsewhere in the market.
We also exited FINEOS Corporation as the investment thesis has not matched our original expectations.
There was also a trimming of positions in James Hardie Industries and Woolworths Group as portfolio positions became larger than we wanted from a risk management perspective as share prices increased. They remain in our top 20 holdings given the quality of their respective franchises and industry positions.
AMCIL’s Outlook
In response to falling rates of inflation, market valuations have already rebounded strongly. We are cautious about the current environment and will continue to closely monitor the outlook for corporate earnings in the upcoming company reporting season. In an environment of higher costs and anticipated subdued economic activity, many companies are likely to be tested.
Despite this immediate caution, we view the long-term prospects of many of our preferred portfolio holdings as relatively good with the ability to generate attractive returns and market share gains through challenging economic conditions.