Mirrabooka outperforms benchmark and celebrates 25 years of successful investing

Our approach to investing in high-quality small and medium-sized companies is pivotal in generating good returns and income for our shareholders. This approach is reflected in our recent full-year financial results. In the following article, we provide an overview of our financial results for the full 2023-24 financial year (FY24) and explain some key movements in the portfolio over the last year and what they mean for investors.

Mirrabooka delivered a 17.4% portfolio return including franking to 30 June 2024, outperforming the S&P ASX Mid Cap 50 and Small Ordinaries Accumulation benchmark of 8.7%. The final dividend for shareholders was maintained at 6.5 cents per share fully franked, with a special dividend of 2.5 cents per share to celebrate our anniversary of 25 years of successful investing.

Total dividends for the year per ordinary share are 13.0 cents, made up of a final dividend of 6.5 cents per share fully franked, a special dividend of 2.5 cents per share, also fully franked, and our interim dividend of 4.0 cents per share. This total dividend figure is slightly down from 14.5 cents last year, which included a 4.5 special dividend. Both the final and special dividends are sourced from realised capital gains, enabling shareholders to potentially claim an LIC capital gain tax deduction in their tax returns.

Our profit for the period was $10.7 million, slightly down from $11.3 million in the corresponding period last year.

Our portfolio outperformed its benchmark

Our portfolio significantly outperformed the benchmark in the financial year, with a difference of eight percentage points, when you include the benefit of franking. Importantly for our shareholders, the long-term performance for Mirrabooka remains ahead of the benchmark. Over the 10 years to 30 June 2024, Mirrabooka’s return is 11.6% per annum, versus 9.7% 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.

Portfolio Performance – per annum returns to 30 June 2024

Portfolio Activity

FY24 saw selling in some of our longstanding investments as valuations on these companies reached very high levels. The most significant reductions in holdings due to elevated valuations were in Reece, Netwealth Group, JB Hi-Fi, CAR Group and REA Group. On a net basis, we sold $57 million in our Top 20 Investments from a year ago, but importantly we’ve maintained a significant holding in all these stocks. Given the consistent strength of returns across these larger holdings it’s a prudent approach to realise gains and look for better relative value in the market.

We redeployed some of this capital into other new opportunities. The most significant new additions to our portfolio included lithium miner IGO Limited, neighbourhood shopping centre trust Region Group, transport company Lindsay Australia, and radiopharmaceuticals business Telix Pharmaceuticals.

Our strongest contributors included Macquarie Technology Group, Temple & Webster, Netwealth Group, ARB Corporation and HUB 24.

A spectacular performer in the portfolio, and one of our largest holdings, is Gentrack, a billing software company for the utilities sector. It has consistently delivered excellent returns for our portfolio returning over 130% in the last 12 months and over 500% since our first purchase in May 2022.

FY25 Outlook

We have high confidence in our core portfolio holdings, with the underpinnings of these quality businesses setting them up to successfully navigate potentially volatile future global economic conditions. The key economic variables driving potential volatility continue to include the outlook for global inflation and interest rates and the flow-on effect on consumer spending. The added significant variable, that is now coming sharply into view, is the outcome and subsequent policy direction from the elections across major developed markets that are occurring in the next 12 months or have occurred more recently.

Notwithstanding this backdrop we will continue to hunt for value-adding investment opportunities. With the quality of the current portfolio in strong shape, the hurdle for new opportunities remains high, as we look to ensure that we don’t stray into reducing the portfolio’s quality in search of short-term value.

We remain active in identifying and holding good business for the long term, this has been the secret to Mirrabooka’s results since we were formed in 1999. We aim to maintain a diversified portfolio that balances risk and return, ensuring continued strong performance for our shareholders.