AMCIL has revealed it has finished the revamp its investment portfolio in a way similar to that revealed on Monday by its larger listed investment company stablemate, Australian Foundation Investment Co.
That has seen AMCIL cutting its exposure to banks and big resource stocks and looking for better returns from major industrials such as CSL, Macquarie, Wesfarmers and smaller cap stocks such as carsales.com and Xero.
AMCIL directors explained in yesterday’s half-yearly report “Over the past 18 months there has been a focus on reducing the number of holdings in the portfolio (down from 46 holdings to the current position of 36) with the view of strengthening existing positions in quality holdings, exiting positions where there was less conviction about the investment thesis and adding new holdings that better fitted the emphasis on quality companies with strong industry positions.
This has seen AMCIL rebalance its portfolio via major sales over the six months. These included positions in Westpac and National Australia Bank (“predominantly from the exercise of call options at higher than current prices,” the company explained on Tuesday) early in the half-year, AUB Group, Lifestyle Communities and a reduction in the holding in BHP Group. Wellcom Group was also exited as a result of a takeover.
“The proceeds from these sales were redeployed across a range of existing holdings, including companies such as Ramsay Health Care, CSL and Macquarie Group.
“Funds were also utilised to add new companies to the portfolio, the largest of these purchases being in Goodman Group, Macquarie Telecom, Cleanaway Waste Management, and Lendlease Group.
“Each of these companies has market-leading positions in their respective core business segments and in sectors that are expected to deliver solid growth into the future,“ AMCIL directors added.
The company’s profit for the half-year of $3.8 million, up 4.4% from the previous corresponding period. This was primarily due to an improved result from the trading portfolio this year, the company explained.
Revenue from investments eased 2.3% to $4.4 million from $4.5 million in the previous corresponding period. This excludes capital gains on investments.
As usual, AMCIL is not paying an interim dividend.
Last year, due to special circumstances, the Board declared an interim dividend of 2 cents and a special dividend of 1.5 cents, both fully franked. Those payments were to use the cash returns from the likes of BHP and the Coles spin-off from Wesfarmers, as well as using up surplus franking credits amid fears the ALP would win the May 2019 federal poll and change the rules on dividend imputation.
AMCIL said its total portfolio return, including franking, over the December half-year was 10.2% and 29.2% over calendar 2019 (franking credits are included in the total return figures as AMCIL’s dividend policy seeks to maximise the distribution of franking credits, including those arising from taxable realised gains). In contrast, the S&P/ASX 200 Accumulation Index, including franking, was up 3.8% over six months and 25.4% over 12 months to 31 December 2019.
“The performance of the portfolio can be attributed to the healthy exposure of the portfolio to large companies such as CSL, Macquarie Group, James Hardie Industries, and Wesfarmers. Smaller companies that also contributed strongly to performance were Carsales.com, Objective Corporation, Wellcom Group (which was taken over) and Xero,” directors explained
“AMCIL’s relative performance was also assisted by its small exposure to the major banks and the limited exposure to the real estate sector, which was flat over the six-month period,” they added.
AMCIL securities eased 1% to 98.5 cents.