AMCIL Limited (AMH) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Amcil Limited shareholder briefing. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Rupert Myer, Chairman. Please go ahead.

Thank you, and good afternoon, everyone. It's Rupert Myer, Chair of Amcil Limited, and welcome to the shareholder briefing, and thank you all for joining us. As many of you would appreciate, we have every March until the onset of COVID, been having shareholder meetings around the state capital cities. And we've been planned -- we had planned to try and restart this March, but given COVID still remains a strong presence in the community, we've opted once again to hold a webinar, which we've done now over the last 2 years. And we'll hope that this might be the last time that we are able to get together physically in 12 months' time. And we will resume a direct contact with you when that is possible. At this point, we're certainly anticipating this to be in October in association with the Annual General Meeting. In turning to the details of today's webinar, I have joining me today, Mark Freeman, CEO and Managing Director; Kieran Kennedy, a portfolio manager from the investment team; Olga Kosciuczyk from the investment team Matthew Rowe, our Company Secretary; and Geoff Driver, GM of Business Development. So before we start the presentation, a bit of housekeeping on the webinar, this briefing is based on the material available on the company's website. Using your computer to access the presentation via the webcast. The slides will change automatically. If you are accessing by phone only, the PDF of the slides with page numbers is available on the website. [Operator Instructions] So here is the agenda for today's presentation. Mark Freeman is going to speak shortly on our purpose and approach. Geoff is going to deliver the financial results. Kieran and Olga are going to present the portfolio performance and equity market performance over the period. They will also then feature or provide some features of Amcil's portfolio and recent investment activity, and Kieran will provide a portfolio outlook towards the conclusion of the meeting. And then, of course, we'll be open for questions. So before I hand over to Mark and the rest of the team, I am just reminding participants that this disclaimer -- or the disclaimer that the presentation is providing real information on how the company is managed for shareholders it's not to be taken or intended as personal and investment advice. So with that disclaimer, Mark, over to you to start the presentation with a section on our purpose and approach. Thank you.

Okay. Thanks, Rupert. Good afternoon, everyone. So just referring to the slide pack. We're now on Slide #5. So just starting with our purpose, to deliver returns from the Australian and New Zealand equity markets, which exceeds the market over the medium to long term, and we want to do that through strong capital growth and also paying out fully franked dividends. Our approach. We want to steer towards quality companies that we think can grow above the market levels. We want to invest with conviction. We want to have a focused portfolio, but we also want one that's diversified and a good mix between large, medium and smaller companies. So on to Slide 6. We see the benefits of Amcil is a combination of consistency of long-term returns. And alignment of interest, comparatively low management costs, no performance fees. We want to have a bias towards being low turnover, which, therefore, will mean being tax effective. And the basis for that is to be a long-term investor. Moving to Slide 7. We've just highlighted the members of the investment team and also to highlight the significant experience they have in markets. On to Slide 8, a bit on our investment approach. We do have a focus or bias on investing in quality companies that can grow. So some of the aspects we're seeking in terms of what quality means. So businesses that have leadership in their industry or a developing one, have a sustainable competitive advantage and/or a uniqueness to their assets. We like companies that reinvest to defend their position. We like our companies to make a good return on invested capital. So that means above their own cost of capital, which means they create shareholder value for their investors. We like our companies to have a conservative balance sheet, and we don't like companies that carry high levels of debt. And importantly, we want our companies to be run by passionate management teams who are good towards of capital. This often means owner-driver companies who have a deep understanding of the industry and their businesses. And of course, we want the companies to be able to grow. So this often means businesses that have large market opportunities or an ability to take share. And we have a preference for companies that have more consistent earnings growth or this -- but sometimes it's not always the case to find this in its purest form, but it's just our preference. So to wrap all that up, so it's quality companies that we think have the ability to grow. And just as importantly, we want to invest when we see value in the share prices of those companies. So the team is on the hunt to find value amongst the quality companies in the market. So on to Slide 9, just one on ESG. We want to highlight that ESG. We don't see that as a separate issue. It's actually integrated into our investment frameworks. So our approach. So ESG is an important part of our process. One of the key factors we consider is the sustainability of a business, and that becomes a key input into assessment of a company. We want companies that have strong governance and risk management processes and that includes any consideration of environmental and social risks, and we regularly review our companies to ensure alignment with our frameworks. Engagement in the companies we invest in is a very important part of our process. As part of that voting on resolutions is a key function that shareholders have, and we take that responsibility seriously. We connect our own evaluation of resolutions, but we do take input from our proxy adviser, but that's purely to suppliers with information. As I stated, we vote on the resolutions, and we will engage actively with companies when we have concerns that those resolutions or any resolution is not aligned with shareholder interest. So with that background, I'll pass over to Geoff to comment on the most recent financial results.

Thanks, Mark, and I'll move to Slide 11, which is the highlights for the half year to 31 December 2021. It's a little bit of an [indiscernible]. So there's only a couple of pieces of information I'll highlight here. One was, obviously, the half year profit was up very strongly. This is a result of an increase in revenue from investments as in companies increase or reinstated dividend payments because of the improved trading conditions despite the ongoing disruptions from the COVID pandemic. The other point I wanted to highlight here, which is really a first for Amcil in some ways is the payment of an interim fully franked interim dividend. As shareholders, maybe remember, with the full results of the financial year ending 2021, the Board announced a change in dividend policy. So in summary, that change meant that the Amcil will no longer be paying out all of our franking credits at the end of each financial year as was the case under the previous policy. Dividends will now be assessed at each result and will be the outcome of the income received, the amount of realized capital gains we generate and the level of franking credits generated and investment reduces at a particular point of time. Now importantly, this change in policy also provides greater flexibility in paying interim dividend. So as I said, as a result, the Board declared interim dividend of $0.01 per share fully franked, which we're very pleased about. And as going forward, it's expected subject to financial performance at the time, the company will continue to provide an interim dividend to shareholders. So this is quite in change from where we've been probably since the company was first to recapitalize back in 2004. The other point I wanted to make here is with the management expense ratio for a portfolio that's managed in the way that it's done, a very focused portfolio of best ideas, an MER of 0.46%, we're very pleased that, that still remains very, very low. The next slide, Slide 12, talks about the results of the share purchase plan. We were pleased with the results of the share purchase plan. It didn't raise quite as much as we had done in the previous year. We obviously had the issues around market volatility concern with the Russian invasion of Ukraine. But again, pleased that 16% of shareholders participated in the share purchase plan. And importantly, the shares were issued pretty close to NTA, $1.15 per share. So that was fair for all shareholders, those who participated and those who didn't. The only other comment I'd make here is that over the last [ 2 and a bit ] Years, it actually grows close to $28 million. So we've actually increased the size of the amount of capital that the team has to invest, and this is obviously important both in terms of the investment approach, but also reducing the management expense ratio over time. And the final slide that I'll speak about is on Slide 13, which is the share price premium discount to net asset backing. You can see there that we actually had -- we are trading -- at the end of February, at least anyway, we're trading quite a significant well, as significant a premium, a 5% premium for Amcil. This can occur quite often when markets move quite dramatically as they did through February, that the share price relative to NTA can get a little bit out of kilter. But I think importantly, from our perspective, we have been trading at a discount for quite some period of time. So it's nice to see all other things being equal, we're trading relatively close to net asset backing at this point in time. And hopefully, remains the case going forward. So with that, I'll hand over to Kieran and Olga to talk about portfolio performance and equity market conditions.

Thanks, Geoff, and good afternoon all. This is Kieran Kennedy speaking. I'm starting on Slide 15 on our portfolio performance updated to the end of February. Starting from the long term, our 10-year return of approximately 11% per annum, assuming the reinvestment of dividends and associated franking credits, is consistent with the benchmark ASX 200 return on the same basis. Figures for 3 and 5 years show both healthy outperformance and attractive double-digit returns per annum. On a 1-year basis, the Amcil portfolio returned 8.3% and versus 11.8% for the ASX 200. This underperformance reflects both the market rotation that has occurred in equity markets in recent months. which has effectively seen quality companies that are in the Amcil portfolio experienced a valuation reduction at the same time as we've seen commodity and other cyclical companies benefit from some short-term gains. We've also experienced a drag from capital gains tax of approximately 2% as Amcil's return only includes the benefit of franking credits when we actually distribute the shareholders as a dividend, and share market index returns don't incur any tax even though investors would, if they were looking to replicate those returns. So on to Slide 16 and taking our focus back to the long term. This chart plots the 10-year return of both Amcil and the ASX 200 benchmark for every month then since the 10-year anniversary of Amcil's recapitalization back in 2004. We focus on a long-term 10-year view as for those in a position to look out beyond shorter-term horizons, the benefits from compound investment returns are particularly valuable and volatility in market returns is significantly reduced. The gray section on the chart represents the 10-year returns from investment in the ASX 200 including the reinvestment of dividends and associated franking credits. Amcil has consistently added to this index return through our performance, as shown in blue. The return to the Amcil investor is expressed on the chart as the combination of gray and blue a range of approximately 8% to 15% per annum when measured over 10 years. In today's volatile world, this perspective provides some reassurance on the ability of a portfolio of quality companies to consistently grow and prosper. On Slide 17 and 18, we reflect on the dynamic economic environment seen over the past 3 years. The backdrop for our investing in the year immediately preceding the COVID pandemic, marked 1 on the side, saw broadly supportive economic convenience with the uncertainty surrounding the next Trump tweet the most significant external factor. Period 2 reflected the collapse in business activity and sentiment as the world began to appreciate the full magnitude of COVID-19. Period 3 reflects the stunning subsequent market recovery as the unprecedented injection of both fiscal and monetary stimulus proved extremely effective. Period 4 on the chart marks the shift that we've seen in calendar 2022. Late 2021 saw a stimulus supported economic demand begin to overwhelm the supply challenges of a still COVID disrupted global economy. This has seen inflation quickly escalate to levels not seen in decades, which, in turn, has seen central banks first slowly, but lately abruptly realized that interest rates and other settings are far too stimulative for the current economic conditions. The addition of Russia's recent invasion into the Ukraine has only added to these inflationary pressures and the complexity of the policy pathway forward for central banks. So on to Slide 18, what impact has this volatile world had on our portfolio performance? In the pre-pandemic year, marked 1, the portfolio returned a strong and outperforming 24% and as our businesses were broadly performing well and were well supported in the market. The COVID-induced correction, marked period 2, saw a very sharp decline of approximately 25% over 2 months. And then from the low point, period 3 shows the magnitude of the recovery. Without our portfolio returning an exceptional 76% over 21 months, strongly outperforming still very strong, 57% for the ASX 200. This period of stimulus saw a double benefit as earnings rebounded very quickly and higher valuations were applied to these earnings. As financial conditions have commenced tightening in 2022, we have seen equity markets become much tougher. Our portfolio fell 13% over the months of January and February compared to 4% for our benchmark. Again, to cover these -- the factors driving this, they've been twofold and are described typically as the market rotating. We've seen an adjustment down of the appropriate valuation for the sorts of quality companies that we own and commodity prices have been spiking to the benefit of many cyclical companies that we don't own. In isolation, this underperformance is significant, but the experience of the last 3 years provides valuable context. Importantly, even after including these challenging last few months, our 3-year total return of 45% versus the benchmark at 32% remains very strong. I'm now on Slide 19, and will pass to my colleague, Olga, who will commence a discussion on the current state of the portfolio from Slide 20.

Thank you, Kieran, and good afternoon, everyone. On this slide we demonstrate how our investment approach, as outlined by Mark earlier, translates to our portfolio's quality and diversification. On the left side of the slide, we show some of our portfolio's key quality indicators. Over 30% of unfilled companies are run by owner drivers who have deep understanding of their business and industry they operate in. They often have a multigenerational vision for their business, which aligns well with our long-term investment horizon. Most of the companies in Amcil grow faster than index. This is an outcome of our focus on investing in current and emerging market leaders who grow ahead of the market. We also look to invest in companies who have conservative balance sheet and over 1/4 of our portfolio has a net cash position. Our companies delivered excellent returns over long term demonstrated by Amcil's higher return on equity than our benchmarks. The pie chart on the left shows that Amcil's sector exposure is almost evenly spread across technology, industrial, consumer, financial and health care companies. This diversification allows us to maintain long-term focus and for our portfolio to outperform in a variety of market conditions. Our portfolio is also well diversified in terms of the size of the companies we invest in, as shown on the pie chart on the right side of the slide. The market capitalization of our companies ranges from $83 million to $250 billion. And this spread gives our shareholders exposure to large companies with already established leadership positions as well as to smaller companies with long growth runway to our future leaders. On the next 2 slides, we will talk about companies we invest in that have or are developing a leadership position in their respective industry. These high-quality businesses represents 85% of our portfolio. Starting on Slide 21. 16% of Amcil is invested in world-leading healthcare companies, CSL, Cochlear, Fisher & Paykel and ResMed, which provides people globally with life-saving therapies and life-altering devices. These companies have established leadership positions and generate excellent shareholder returns and earnings growth. We think this can be sustained for years to come as there is plenty of unmet demand for their unique offerings, and they continue to invest in research and development well ahead of their competitors. In financial year 2021 alone, these 4 companies spent between 7% to 12% of their total revenue on R&D to enhance their competitive position, which was over $1.5 billion. 4% of our portfolio is invested across 2 dominant online classified businesses in Australia, REA Group and Carsales. These marketplaces are go-to destinations for consumers to buy and sell the largest and most valuable assets. In FY '21, these 2 companies had over 500 million visits on their platform each month, multiple times more than their nearest competitors. REA and Carsales continue to extract value and leverage their large, unique and engaged audiences, which translates to solid and consistent profit growth in their core Australian businesses. Longer term, both companies have been investing in international opportunities for their next leg of growth. Some of Australia's most trusted and well-recognized consumer brands make up 22% of Amcil. Our investment in this space ranges from smaller companies that are developing their leadership positions in Australia, like Temple & Webster and Breville to ASX top 20 companies, who've established dominant positions like Woolworths and Wesfarmers. Some of our investments are replicating their winning domestic strategies in much larger offshore markets, which provide them with exceptionally long growth runway. ARB is a great example. This owner-driver business is Australia's largest manufacturer and distributor of high-quality four-wheel drive products. They also have a growing international presence and brand recognition. ARB's recent partnership with Ford in the U.S. to accessorize a range of their vehicles is a testament to management's offshore efforts bearing fruit. Moving to Slide 22. of Amcil is invested in infrastructure and unique assets that play a critical role in supporting a growing economy. Their dominant market position give us confidence in their ability to sustain solid returns on invested capital given the capital intensity of real asset sector. 10% of our portfolio is invested in 2 high-quality owner-driver businesses, Goodman Group and Mainfreight that are key logistics partners for their customers across global markets. Both companies have exceptional track records in delivering shareholder returns and profit growth. Hence, they have been mainstays of our portfolio. And finally, we lease our emerging companies. These companies drive productivity and automation for their customers in health care, insurance, financial and public sectors. All these businesses are deeply embedded into the day-to-day practices of their customers, which translates to a reliable revenue stream and low customer churn. And with that, I will now hand back to Kieran.

Thanks, Olga. We were becoming increasingly cautious on valuations of some of our holdings throughout 2021. This saw more of our investment activity than usual involved trimming some of our long-standing successful investments to deal with the heightened investment risk of stretched valuations. On Slide 23, we can see that the subsequent drawdown in several of these holdings has been quite significant and much larger than the correction in the broader market. On Slide 24, we show that proceeds from this portfolio trimming has been reinvested into quality businesses as market volatility has thrown up opportunities. I will cover several of these before handing you back to Olga. Auckland Airport is an asset that we have long admired due to its monopoly characteristics and very long life surrounding land assets. While the depths of the COVID crisis in 2020 provided a compelling opportunity to purchase the stock for the portfolio, lingering uncertainty about the medium-term path to passenger recovery provided an attractive opportunity to add to the holding in recent months. Carsales has yet again proven the resilience in its business model in recent times. Growth prospects are strengthening from international expansion and the evolution of its business model to reduce friction around fully completing card transactions online. The recent rotation in the market has provided an opportunity to add to our holdings. James Hardie has been very successfully adding to its market share of U.S. house siding for many years, reinvestment in innovative product is providing the opportunity to grow their addressable market as they broaden from products that compete with wood and vinyl to competing with other materials like stucco and brick. We see the recent share price performance of James Hardie as overly focused on the near-term fortunes of the U.S. housing market and not enough on the long-term significance of this evolving strategy. ResMed also has a very impressive track record of growth in the U.S. market, in their case, in the treatment of sleep apnea. While they are currently benefiting from product recalls of their largest competitor, Philips, which will likely fade at some point, we see ResMed's market leadership position strengthen in an attractive market as the prevalence of sleep apnea continues to grow. I'll now pass you back to Olga.

Thank you, Kieran. We have also added to our Cochlear holdings. The company has been a global leader in implantable hearing solutions for over 40 years. Despite this, their growth runway remains long as there is considerable unmet demand for Cochlear's implants. Hearing loss is still significantly undertreated, and they continue to invest in R&D ahead of their competitors. The company's recent share price underperformance was a bump in a road in their otherwise excellent track record over the past 15 years. We use this as an opportunity to add to our position, and the share prices has since recovered strongly. We also added to our CSL position. CSL is a global leader in the development of therapies to treat rare diseases. The company's recent share price has underperformed significantly from COVID-19 impacted plasma collection volumes, putting pressure on the company's revenue and margins. This is a short-term headwind, and we are already seeing promising signs of recovery. The market was also concerned about CSL's recent acquisition of Vifor Pharma. Vifor is a leader in treatment of -- for kidney diseases and iron deficiency, conditions that are expected to continue to grow. While the true value of the acquisition remains to be seen, it is a step away from the core business. We're highly encouraged by CSL's strong track record in allocating capital over a long period of time. Transurban owns a high-quality diversified toll road portfolio that has strong pricing power, inflation resiliency and long-term optionality. The company is very well positioned to deliver strong free cash flow and dividend growth over the next 5 years as traffic recovers post-COVID. We saw recent underperformance as an attractive opportunity to add to this high-quality company. I'll now hand back to Kieran.

Thanks, Olga. On Slide 25, we cover the balance of our transaction activity with stocks that have been introduced and exited from the portfolio during this financial year. Sydney Airport was sold due to a takeover offer. Seek, NEXTDC, InvoCare and Ramsay Health Care were all exited due to our investment conviction, moderating somewhat to see them rank below other opportunities. All remain good quality companies. We also recalibrated the banking exposure in the portfolio, exiting NAB and buying Westpac. While NAB is currently operating the bank more effectively at Westpac, we saw opportunity opening up in Westpac as they pass through their current period of dealing with legacy regulatory issues. Our assessment is that the underlying franchise value of Westpac remains strong, and this is not being reflected in the current share price. Other new stocks introduced are businesses that we have been tracking for some time. Netwealth is building a leading position as an independent wealth management platform. They are winning a significant large share of flows of funds in their current platform market share, which gives excellent long-term visibility to continued earnings growth. As these qualities have long been recognized by others in the market, we've been waiting for an opportunity to buy the stock at fair value or better. Equity market concerns on the path of near-term profit margins has provided this opening. We are confident in the founding Heine family being the need for reinvestment and growth given their excellent track record. Domino's Pizza also has excellent growth track record under CEO, Don Meij. In the long term, we are confident in the store rollout potential in relatively underpenetrated large markets like Germany and Japan. Return metrics in the business are excellent, and their scale provides for a strong competitive position. And Nanosonics is a business we've admired for both the global standard of care status they have been establishing disinfecting ultrasound probes as well as the business model, which carries a high margin consumable revenue stream. Difficulties in accessing new hospital customers who have been prioritizing dealing with COVID pressures, and conjecture in a change around the distribution model with GE has provided an attractive share price opportunity recently. For those who follow our releases more closely, they will note there is a stock not appearing on this slide, Lark, the whiskey business, which we did disclose was the purchase we've made in our half yearly release in February. We have since exited this position following a well-documented CEO departure. Without getting into the personal details of that situation, we felt that our conviction around the strong execution this company needed to pull off to monetize the valuable whiskey bank that they've been building up had diminished to the extent where it was prudent to move on from that position decisively. So on to the outlook on Slide 27, a challenging task in such an unpredictable world. We try to limit our outlook to areas that we think we can bring some insight to, which is really to consider the value and offer in the market currently as this forms a critical element in future returns. The recent market setback, particularly in the quality companies that we focus on provides a more constructive base level for future returns and better opportunities for us to further invest in our preferred businesses. This was the thinking behind our recent share purchase plan. While the recent market rotation could well have further to play out, on a 1- to 2-year horizon, we'd expect to return to an environment where the earnings of our holdings becomes a key driver of their share price performance again. In a longer-term sense, while valuations remain somewhat elevated even after recent falls, we struggled to identify an asset class that provides a better prospect for returns than a portfolio of high-quality equities like we have assembled in Amcil. And with that, I'll hand the presentation back to Geoff to assemble questions.

Thank you, Kieran. [Operator Instructions] So the first question, I'll take here, Kieran, is about Santos, do we contain Santos in the portfolio? And more broadly, do we have any exposure to the energy sector?

That's right. Thanks, Geoff. Yes, look, we do have Santos. It's a position that we have effectively inherited. We were owners of Oil Search leading into the takeover by Santos. And look, it's a position that given the price-taking nature of that industry, the cyclical nature of that industry is not what we call a long-term mainstay in a quality portfolio such as this. we really felt that, that Oil Search PNG asset base was globally unique and therefore, have sufficient quality to get into this portfolio. Having said that, as an owner of the business, we're keen to ensure we maximize the value of that position. So given the cyclical benefit that company is receiving at the moment from buoyant energy market conditions, we're managing that position. We have been reducing it, but we're not in any great rush to do so.

Thank you, Kieran. Question in regards the final dividend. Given the interim dividend has been paid, is it expected that you'll be able to pay a dividend of $0.02 or $0.025 in August, as usual. What is the estimate of the August dividend that you would expect to make at this time? So Rupert or Mark, do you want to comment on that?

Look, I'll just jump in. It's Mark Freeman here. Look, we paid an interim. And I guess, we'll -- my interpretation of that is that we wouldn't pay it unless it wasn't an intention to try and maintain that interim going forward. But obviously, we're at the mercy of markets and the profits we received from our companies. Now ultimately, that's the key determinant, we're having said that we have paid interim, our final dividend is obviously a key part of our returns to shareholders. But the dividend policy is really set by the Board after seeing the final accounts and results for the full year. So we can't really make any comment on it at this point.

Okay. Thank you, Mark. Operator, I'm just checking, are there any questions on the phone at this point of time.

I'm showing no questions from our phone line.

[Operator Instructions] Another question here. Because the portfolio is overweight technology and health care and the recent trends for growth stocks is downward, the NTA has fallen 40% in the first 2 months of the year. Due to the company's concentrated focus on growth stocks, the company is now highly risky. Any comments from perhaps the investment team?

Yes. Thanks, Geoff. It's Kieran here. I'll take that one. Look, I guess that's really the question we were looking to address in the slide presentation to really provide that perspective around time horizon effectively. We think markets can be volatile in short-term periods. The more powerful driver of share price performance over short-term periods can be the rating around stocks, which is sentiment-driven. But in the long run, which is really our focus as investors, it is the earnings and the delivery of performance of the underlying companies that determine where share prices go over long-term period. So while in isolation, you look at that 2 months and see risk. I guess what we would also comment, we haven't seen any real deterioration in the fundamental performance of the businesses underlying in the portfolio. It's really been around valuation and sentiment. So we think that will settle down at a point in time. And over the longer term, we think it's less risky to be involved with the best companies in the market because they can control their own fortunes better and deliver the best fundamental performance and growth.

I think the other thing, too, is that if you look at the movement, I mean, given some of our stocks have come off, or were some lofty peak. So you have to remember, if you put into context the first 6 months of the financial year, our stocks went up a lot. And now they're giving some of that back and some of the areas of the market we're not in. So if you look at some of the commodity stocks, those companies have been very strong, and they've gone up a lot. And to me, they're starting to look riskier to me because they're trading at very high prices and at the whims of commodity prices. So if you look at say the oil price in the last 30 or 40 years, there's really been 5 key oil spikes. This is one of them. And from that point onwards, certainly, historically, the movement has only been one way. Now it's not to say that the oil price won't go up higher in the short term. I can't make that prediction, but at $120, this is a pretty large peak. And it does look like a time to sort of buy into that sector to me. So yes, just really highlighting the areas that we're not in have also run very hard and those areas of the market are very exposed to the cyclicality of those sectors. Businesses we're in are legitimate areas that the companies can grow and develop their business over time without relying on an external input such as a commodity price to drive earnings.

Thanks, Mark. So whilst we're talking about petrol prices and Mainfreight has been a mainstay for a while in the portfolio, how do we think they're currently traveling with the rise in fuel prices and, I guess, also some of the logistics issues that many companies are having at this point of time.

Yes. Thanks, Geoff. It's Kieran here. Look, it's a good question. And I guess, ordinarily, you think about a transport company, think about the inflationary pressures building and I guess, the very competitive nature of that industry and you could see some prospects of margin pressure. I think in our view, with that Mainfreight, this will be a testament to the way they run the business. I guess the first principle of their business is to only really engage with customers that value their service. So what they're looking for is people that are not looking to pay the lowest rate in market but are looking to have the best certainty they can with a provider that they can get goods delivered on time to the right place. So that service element that Mainfreight pushes means that in times such as this, they have better ability to pass through cost pressures through to customers because they're not a price-led offering to that customer base. The other point is that there are a number of actual tailwinds effectively for the business. This struggle for customers to just get goods to where they need to be to service customer demand means that in a world where so many problems, a problem-solving sort of company like Mainfreight, I can sniff out opportunities and effectively charge more for some of their services, and we've seen that through recent results. So from a financial aspect, I think the company has been doing really well. I'm sure within the business, they've got a lot of challenges to deal with day to day. But I guess that's what they pride themselves on doing for their customer base.

You noticed that, I mean, the stock has just drifted off what was quite a very good run it had in the market, but we did notice a month or so ago, the CEO was buying stock for what it's worth. I mean, we can -- I mean we don't know what's going on in the company in terms of until we see the next result. But it is interesting that someone who's already allowed shareholders willing to go in and buy more stock. We have [indiscernible].

Thanks, Mark and Kieran. Back to Lark. So the question is how did Lark make it through our screening -- quality screening process?

Yes. Thanks. It's Kieran again. Thanks for the question, Geoff. Look, so I guess, as Olga pointed out through the presentation, part of what we're trying to feature in Amcil is a spread of companies. You want some small businesses that are emerging, you want very well-established leading businesses as well. We think that's been a feature of Amcil that's delivered really good results through its history with some great emerging companies delivering exceptional results for the portfolio. Lark was certainly in that emerging category, quite a small business. But I guess we were looking at that first, the, I guess, the popularity of Tasmanian whiskey growing, they were getting their hands on good supply with good reviews for their product and really starting to open up that premium market within Australia. And then we've seen this playbook before in other companies where if you do that well, you achieve that premium price, the world is receptive to quality Australian food and beverage. We've seen that in a number of instances. So that was, I guess, what we were the vision we had in mind for this business. When you're investing in smaller emerging companies, your quality assessment needs to be with an eye to the future and not just based on what we're seeing today because if you are do it, you will miss some opportunities because the price will have effectively gone up by the time it's ticking all your boxes. So that was the way we're assessing it. I guess the other thing, the managing director was very effective in his time in the company. He came into the business when it was in -- it was going nowhere really, had really unlocked a lot of the value as I mentioned, not here to comment on the personal situation of that individual, but as it related to the business have been achieving very well. But as you can imagine, with the media disclosure of the situation with the CEO, we had to do some quick decisive thinking on how our conviction stood. And really, it was a decision then to move away from that and move on to other opportunities.

Thanks, Kieran. With the proceeds from the Sydney Airport takeover, has that been reinvested yet? And I guess the question becomes sort of what level of cash are we currently carrying at this point in time?

Yes. I guess the simple way to answer that, Geoff. Sorry, it's Kieran again, is through the presentation, the slide that disclosed the stocks that we've added to the portfolio and those that we've taken out are roughly equal. So that Sydney Airport disposal, what it was through a takeover, that helps to fund things like the Netwealth and Nanosonics and those other stocks that we've introduced into the portfolio. So when we did the share purchase plan, we -- through that period, we had seen some volatility. So we did dip into some of our debt facilities, which is what they're there for, but we're really pretty much fully invested as those funds started to come into the portfolio. So now we're effectively, the money we raised from the SPP is effectively our cash balance. And we're taking a view that it's a volatile world. We've got a good portfolio of stocks, but we're open-minded as to how far this rotation could go, what outcomes we could see in the portfolio and in the market as opportunities. So we want to be reasonably patient with that money going forward. And we are in a debt-free position following the SPP as well.

Thanks, Kieran. So comment -- there's a comment here coming back to performance, the graph showing the comparison of the Amcil margin against the ASX over time has declined, sorry, more recently. I think you explained this, but perhaps you just might reiterate the reasons behind this.

Yes. So I think to be clear, my interpretation of that question is that 10-year return chart we're looking at the blue and gray. You might just give me the slide number there, Matthew, if that's okay. So effectively, yes, so that's showing -- 16, Slide 16. Thanks, Matthew. So that's showing the at each month then the relative return of Amcil versus the ASX 200, and that's correct. So on a 10-year basis to the end of February, we're pretty much in line with the ASX 200, which is a decline compared to past measures going back in time. But I guess, we'd look at that and say, that's really part of the cycle. It's the experience we've got after 2 months where we did underperform by quite an amount. But with those 2 months in the numbers on a 10-year basis, we're still achieving a return equivalent to the ASX 200. And again, with some of the way we measure our performance, some of the tax implications, the franking we do have, it's not recognized until it's paid out. The fact that index doesn't pay tax, we think that's still not a bad outcome. Obviously, we pride ourselves on delivering outperformance in the long term. That's what we'll keep working hard to do.

Thanks, Kieran. A question here about PEXA. So PEXA looks to be an exciting monopoly player. Is it the next realestate.com?

Yes. So it's Kieran again on that one. Look, it's -- it certainly has some very strong market share characteristics. I don't think they'd like the word monopoly being thrown around. That's always something that a management team can do without. And it is a space in the market that is fairly scrutinized by the regulator because they had such a strong position. There is an emerging player part owned by the ASX called Simply that are looking to establish a position in the market, but there needs to be mechanisms work through to see how that will work because for PEXA, where they're actually dealing with the digital settlement of residential property when it's bought and sold the prospects for fraud in that instance are high and there's a lot of value at stake. So it's really important to have a very robust system, which PEXA effectively have been running themselves to date. One of the differences to something like an REA is it doesn't have anything like the pricing power. This is a business that was created by governments getting together and seeing that this is something that the country needed. And in return for that, they didn't want a monopoly provider who could extract more and more price each year. So we don't think it will be a price-led growth story within Australia. But where we think the growth of this business is exciting is to take what's happened in Australia and use that experience and take it to offshore markets in similar Westminster countries. They're at the early stages at the moment of working in the U.K. market to bring similar innovation to bear there. and that's a much larger market. So work to be done. But given the excellent cash flow it generates, the experience they've got, the referenceability they've got and the need for this technology to deliver the efficiencies in these other countries, and we think on a 10-year view, there's definitely some really interesting parts they can open up in different markets.

Thank you, Kieran. So a question about another one of our sort of more innovative stocks is Carsales. It sounds like they're now competing with their car dealer customers. How do they do this without setting -- upsetting, I should say, existing customers?

Yes. Look, that's actually a really astute question because that's exactly what's on Carsales' mind and exactly what they don't want to do. So really what they're about is saying for a car dealer rather than just being a listing service and referring a lead, which is obviously extremely valuable. If they can think through how they can achieve a full sale online for those dealers with all the friction points in place from that. And effectively, the dealer will be prepared to pay them more if they could prove up that value. So you can think through, how do you do test drives when you're doing it online, car inspections, how does that work? Is there a cooling off period and the delivery of the vehicle, a number of those items alongside the finance and other things that Carsales are already providing because there's clearly a shift and that shift in the mindset, particularly the younger customers coming through is not the same reluctance and hesitancy as they might have once been. I think COVID has been a real trigger for that. And we're seeing in offshore markets that there is a developing market here. So one of the things we really like about these businesses, it goes back to their own history is they were the disruptors and you've got a lot of extremely smart people thinking about how they can be disrupted and evolving their business model rather than standing still and just extracting full margin and patting themselves on the back for how much money they can make. They're really thinking through what should this business look like in 10 years' time. And this is another iteration for Carsales on that front.

Okay. Thanks, Kieran. A question about how does the investment team work together to provide the ideas for a portfolio such as Amcil, which is really our sort of best ideas portfolio.

Yes. Thanks, Geoff. Kieran, again. So look, it is our best ideas portfolio, and it sits alongside the other 3 portfolios we manage in this team AFIC, Mirrabooka and [Jerry Warra]. So really, by its nature being best ideas, it's more collaborative. We really need to have everyone on the team thinking about the stocks that they're responsible for on a day-to-day basis and really separating the ones that they think are the best ideas for the long term and really making sure they're putting those forward and really seeking out the opportunity to buy more of those in Amcil. So we do draw on the team more here on a day-to-day basis than we may do in some of our other funds. And thankfully, as shown on the earlier slide, we've got really good experience, a really committed team that know their stocks very well, so we can cover a lot of ground. So we think for the management expense ratio of less than 50 basis points, no performance fees to be able to draw on that experience across a team that's covering a lot of ground. We think it's a good proposition.

Okay. Thank you, Kieran. Rupert, we don't appear to have any more questions either on the phone or via the webcast that we haven't already addressed. So I might hand it back to you now to conclude the meeting.

Well, look, thank you, Geoff, and thank you, everyone, for being on the call, for your interest and your questions and comments through the feedback channels. They are all noted. The Board is certainly very conscious that with the rotation that's taken place in the market the start of calendar 2022 has been a bit disappointing, but we're also very mindful of the actual underlying investment performance -- individual company performance and some of the very good reporting that's come through the portfolio positions. I'd like to acknowledge the investment team and indeed the whole team at Amcil and the support that's been given. I reiterate my earlier remarks, I look forward as the Board does as well to seeing shareholders at the AGM this year. We hope it's going to be one of those sort of meetings, and it will be terrific to be have an opportunity to meet firsthand. And in the meantime, of course, if there are any queries or questions or commentary to share with us, please don't hesitate connecting with us through the normal channel. So I thank you all for being on the call today and look forward to the occasion of getting together later in the year. Thank you.

Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.