Mirrabooka Investments Limited (MIR) has kicked off the Listed Investment company (LIC) reporting season with a weak 20.4% slide in interim profit to $3.9 million compared to the previous corresponding period.
The fall was principally due to lower returns from the company’s trading portfolio during the half year.
The company said revenue from operating activities was $5.1 million, down 4.0% on the previous corresponding period. This excludes capital gains on investments.
Despite the fall, directors have kept interim dividend at 3.5 cents a share fully franked.
The company, which is part of the group of LICs around Australian Foundation Investment Co – the country’s largest closed end fund – specialises in small to medium industrials, but CEO, Ross Barker says it is now on the hunt for small mining and resource companies.
Some of the most significant additions to Mirrabooka’s portfolio in the December half year included Isentia Group and Iluka Resources. It has also added a number of new companies including Carsales.com and Computershare.
Major sales included ASG Group which was taken over, the complete sale of Caltex (now a top 50 company in the index) and Ardent Leisure and a reduction in the Treasury Wine Estates holding, which had become very large in the portfolio and is now also a top 50 company.
Mr Barker said the the six-month portfolio return with franking was 6.3%, compared to its benchmark – a combined small- and mid-cap market index – of 7.3% with franking.
That under performance came from the company’s underweight position in the small-to mid-cap resource sectors, which were saw gains of 40.2% and 6.3% respectively in the half year period.
Mirrabooka said there was a rotation by investors out of highly priced mid and small industrial companies, back to larger companies which until recently had substantially underperformed. (Such as the big banks which staged a near 20% surge in the closing seven weeks of 2016)
The company said this move was accelerated by a number of the mid and small companies revising their previously robust profit outlook.
"In this environment, Mirrabooka’s short term portfolio performance was below its mid and small cap benchmark, particularly as the Company has few investments in the resource sector," it said.
However it said the longer term performance of Mirrabooka was still well ahead of its benchmark, noting that five year returns including the benefit of franking were 16.5% per annum compared with the benchmark of 10.7% a year.
Directors said the company had trimmed its portfolio significantly in the half year to 77 companies from 89 a year earlier, and was now sitting on a $26.2 million cash pile which it will use to make well priced new investments of top ups where necessary.
