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Mirrabooka lifts profits and dividends, outperforms benchmark

Mirrabooka lifts profits and dividends, outperforms benchmark

Mirrabooka lifts profits and dividends, outperforms benchmark

At a time when the cost of living is at the forefront of the minds of many, providing an attractive and steady income to our shareholders has never been more important. Our continued investment over the long term in high-quality small and medium-sized companies is pivotal in generating this income and is reflected in our recent full-year financial results.

Our profit for the 2022-23 financial year increased 68.2% to $11.3 million, driven by an increased contribution from investment income which included a large special dividend from Oz Minerals. There was also a significant contribution from our trading portfolio, primarily from a newly initiated holding in Medibank Private, and income from call option activity.

We have declared a final dividend of 6.5 cents per share fully franked, in line with last year, and our shareholders will also receive a special dividend of 4.5 cents per share, up from 2.0 cents last year (also fully franked). Both the final dividend and the special dividend are sourced from strong realised capital gains. Including our interim dividend of 3.5 cents per share, total dividends for the year per ordinary share are 14.5 cents, up from 12 cents last year.

Reflecting our commitment to providing shareholders with income over the long term, we have paid in total 46.5 cents per share in fully franked special dividends over the last 10 years.

Our portfolio outperformed its benchmark

The 12-month portfolio return for Mirrabooka, including franking, to 30 June 2023 was 17.9% compared to the combined S&P/ASX Mid Cap 50 and Small Ordinaries Accumulation benchmark return of 14.2%, including franking.

Our portfolio significantly outperformed the benchmark in the second half of the financial year, with a difference of seven percentage points, including the benefit of franking.

Importantly for our shareholders, the long-term performance for Mirrabooka remains very positive. Over the 10 years to 30 June 2023, Mirrabooka’s return is 12.4% per annum, versus 10.6% for the benchmark. Both figures include the full benefit of franking, with Mirrabooka’s returns after costs.

This performance is a result of our investment approach seeking out companies that are well managed, consistently deliver a good operating performance, have good growth prospects, and an ability to navigate challenging economic conditions.

Companies in our portfolio

Our portfolio benefitted from the recent additions of electrical components supplier IPD Group and Gentrack, a software provider to utility customers. We acquired them at exceptional valuations, and their earnings growth surpassed expectations. Long-standing holdings in vehicle marketplace company and financial services company AUB Group continued to deliver attractive earnings growth, which boosted their valuations.

Our patience as long-term investors focused on company fundamentals was rewarded. We stuck by Temple & Webster, Reece and Pinnacle Investment Management Group, all of which experienced strong share price recovery over the financial year.

We also continued to seek new opportunities, bringing foreign currency provider OFX, theme park operator Ardent Leisure Group, and cinema software provider Vista Group back into the portfolio as they presented new value opportunities. We also added campervan rental and sales business Tourism Holdings and rare earths producer Lynas Rare Earths.

Our largest purchase overall was adding to our existing holding in IDP Education, which has compelling prospects as the global leader in placing international students in universities in Australia, Canada, the UK, and US.

We sold our holdings in IRESS, InvoCare (including into a takeover offer), NEXTDC, and Ansell as their respective businesses are maturing and suggesting less compelling growth and return on capital.

We also sold our successful investment in Oz Minerals into a takeover offer by BHP.

FY24 market outlook

We were surprised by the continued resilience and strength in markets over the 2022-23 financial year given that inflation remains high and that consumers are under significant cost-of-living pressure. Consequently, we view current valuations following this market strength with some caution.

We don’t believe those valuations fully reflect the heightened near-term corporate earnings risk arising from higher interest rates.

But looking at the longer term, we continue to take significant comfort from the quality of the companies in which we have invested, and their management teams.

Despite the significant economic and market volatility over the past few years, we have increased conviction in the quality of our portfolio and the ability of key holdings to successfully weather a wide range of economic outcomes.

As we enter the 2023-24 financial year, we remain alert for new investment opportunities that offer value.

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