Mirrabooka Investments Limited (MIR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the 26th Annual General Meeting of Mirrabooka Investments Limited. My name is Greg Richards, Chairman of the company. The company's Secretary has confirmed that a quorum is present. I'll now open the meeting. I'd like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today and pay my respect to the elders past and present. I will now introduce those on the stage with me. We have our Managing Director, Mark Freeman.

Good afternoon, everyone.

And my fellow nonexecutive directors, Paul Dwyer, who joined the Board in May.

Good afternoon.

Jackie Fairley.

Good afternoon.

Antoinette Kimmitt.

Good afternoon.

And Tony Walls.

Hi.

We also have our Company Secretary, Matthew Rowe.

Good afternoon.

Our Chief Financial Officer, Andrew Porter.

Good afternoon.

And our General Manager of Business Development and Investor Relations, Geoff Driver.

Good afternoon.

In due course, we'll be hearing from Portfolio Manager, Kieran Kennedy and assistant portfolio manager, Stuart Low. We're also joined by other members of the investment team in the front row of the audience. I'll also take this opportunity to introduce Kate Logan, partner of the company's auditors, PricewaterhouseCoopers, who is available to answer questions today on the audit and the preparation and content of the auditor's report at the end of the presentation. Before we move into the proceedings of the meeting, I'd like to take this opportunity to acknowledge the retirement of Ian Campbell. Ian, who retired as a non-Executive Director in May this year, I was appointed as a Director of Mirrabooka Investors Limited on 15 November 2007. He was a member of the Audit Committee and a member of the Investment Committee. I know everyone on the team has appreciated his thorough and practical approach in his time as a director, and we wish him all the best for the future. Thanks, Ian. Before we move on to the more formal part of the meeting, I think it's worthwhile reflecting on the unique position Mirrabooka has in the broader listed investment company landscape and for that matter, the broader investment market in Australia. The company is internally managed, meaning there is no external fund manager taking a management fee. As a result, it operates at a relatively low cost with no performance fees. This year is the 25th anniversary of the company that was established in April 1999. Over a 25-year history, the management expense ratio, or MER, has fallen from 1.2% per annum to the current 0.56% per annum. This cost to shareholders is much lower than comparable investment vehicles, both listed and unlisted. That focus on small and midsized listed companies in Australia and New Zealand markets. In its 25th financial year, Mirrabooka delivered further financial portfolio outperformance, which the investment team will discuss in detail on the presentation later today. Since its inception in 1999, Mirrabooka has delivered a portfolio return of 12.4% per annum compared with its benchmark return of 8.4% per annum and the ASX 200 Accumulation Index return of 9.7% per annum. These figures include the full benefit of franking credits distributed with the dividend. Mirrabooka has also been able to pay a total of $2.625 per share in fully franked dividends to shareholders over 25 years, an average of $0.105 per share each year. Mirrabooka's average dividend yield has been superior to benchmark indices as we have supplemented the dividends that we received in our portfolio -- on our portfolio with realized capital gains. As we look forward to the next 25 years, we remain committed to uncovering compelling emerging listed Australian companies, while maintaining a long-term investment in high-quality growing businesses. We remain particularly focused on continuing to build relationships with outstanding executives and business founders, the likes which have driven our most successful investments to date. Today's meeting is being held as a hybrid meeting. Today's presentation has been released to the ASX and made available on the company's website. I remind shareholders using the online platform that whilst questions can be submitted at any time, I will not address them until the relevant time in the meeting. [Operator Instructions] Please also note that your questions may be moderated or if we receive multiple questions on one topic, amalgamate it together. To cast your vote, simply select one of the options. There is no need to hit submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. I now declare voting open on all items of business, and I will give you notice before I move to close voting. Moving on to the business of the meeting. I will take the notice of meeting as read. With regards to the minutes of the 25th Annual General Meeting, they have been signed as a correct record and are available to shareholders for inspection today. The first agenda item is consideration of the financial statements and reports for the year ended 30 June 2024. We will do this by our presentation, after which I'll ask shareholders to comment or to raise any questions either about the presentation or of the auditors if they have any questions about the audit. I'll now hand over to Mark, Kieran and Stuart to go through the presentation.

Okay. Thanks, Greg, and good afternoon, everyone. I'll just be doing one slide today, which is a bit of an overview of how we go about investing and thinking about stocks and then I'll pass to Andrew Porter, our CFO, to give an overview of results. And then Kieran and Stuart will talk through the portfolio and the activity. So just thinking about what we're doing in Mirrabooka, the first thing we think about when we look at companies is the quality of the business. So we're looking to invest in companies that we think have the prospects or the ability to earn attractive return on capital. So when a company invests in that business, what we're looking to find businesses that make great returns, great returning businesses then have the ability to reinvest and grow the company and generate strong earnings per share over time. We look for companies that have ability to grow. We talk about our businesses where there's no impediment to growth. Ultimately, share prices follow profits and earnings. So businesses that we can see that they have the ability to keep running their business as well, there's nothing to stop them growing their businesses that we like. Financial strength has always been important part of our process. We want balance sheets that are strong. We don't like companies that carry too much debt. Businesses with too much debt inevitably get into trouble, and that's always has been the case and always will be the case. We like companies that produce strong cash flows and also importantly, strong management teams are critical. We want management teams and Boards that act like substantial shareholders and often are. We talk about owner driver of founder-led companies -- we've got lots of those businesses in our portfolio. And when you find companies that are run by the founder that run great companies, we get great long-term return from those. So just about how we approach the management to the portfolio, we do take a long-term view of companies when we first invest. We will pay fair value for quality. We understand that good companies don't come cheap, but we are wary of overpaying at the same time. Then we look to grow holdings either through the strength of the business. We are very happy to add more to holdings, even at higher prices than we first bought, if we're still comfortable with the business or if we see dips in the share price. But you're also aware that, particularly in this part of the market, stocks can get overbought, and we use those times to risk manage the portfolio and sometimes take the top of holdings. And we're certainly willing to sell if the investment case changes. Just finally, we do like to have a spread of holdings. We are looking for more consistent returns throughout a cycle. And I think the track record of Mirrabooka shows that. So with that, I'll pass, I think, to Andrew first to talk about the results.

Thank you, Mark, and good afternoon again, ladies and gentlemen. So for many of you, the format of this slide is very familiar. So I'll raise through it fairly quickly, and we can get on to the meat and veg of the investments. So profit for the year, $10.7 million, slightly down on the year. That's because last year, we had -- the year before in 2023, we had a very strong contribution from the trading portfolio, particularly AMP and Medibank positions in there that were sold for AMP during the year and Medibank the year after. Dividends, interestingly enough for Mirrabooka, we're actually up, dividends that we received for the year. That was contrary to what happens in the ASX 200, where dividends overall are down for 2024 and 2023. So that's largely caused by a change in the mix of the stock, which is very impressive because in 2023, for instance, OZ Minerals paid a special dividend. And companies like Auckland International Airport, which we hold in the portfolio, started paying a dividend. So that helped. The dividend, I'm sure most shareholders are aware, was $0.13 for the year and $0.09 at the final, including a $0.025 special dividend, and that, of course, is combined with a $0.04 interim dividend. The portfolio return of 17.4% is there that obviously outperformed the comparative market, but we'll have some more updated performance figures later on. The management expense ratio, Greg mentioned this $0.56 for every $100. We believe that to be very competitive in this area of the market. So expenses were marginally up, but the portfolio was up more, hence, the MER was down. One thing on the franked dividend I should mention, -- after we paid the final dividend, using those figures that are in the annual report at the end of June, we had roughly $0.33 worth of franked dividend that we could pay. In other words, the franking reserves would enable us to pay $0.33 of dividend. We'd call that comfortable, Mirrabooka has to rely on realized gains and reserves in order to maintain its dividend. You'll see from the earnings per share due to the sector of the market that is in that barring some extraordinary performance from the trading or options portfolio, it does need to draw on those reserves and realize gains in order to make up the dividend. So we do need to take a cautious approach to how we pay those frank credits out so that they can be maintained. If we move on to the next slide, Mirrabooka is in a very unique position or a relatively unique position amongst LICs and it's actually trading at a premium. Most LICs are trading at a discount. Mirrabooka is rare in that it is trading at a premium. But as you will see, that premium has come off considerably from the heights of '22 and '21 when it was trading at a much more significant premium. So with that, I will hand over to Kieran and to Stuart.

Thank you, Andrew, and good afternoon, everybody. As Greg mentioned earlier, 2024 marked the 25th year of Mirrabooka's existence. So we thought today we might share a few more slides looking back on the history and some of the drivers of our performance to date. In doing so, we're conscious that the return you're most interested in is the one you're going to get on your investment from here looking forward. So I'll make sure there's plenty of time at the end for Stuart to cover the portfolio, recent transactions and then how we're seeing the outlook. So just starting with the performance slide that we always produced at these meetings, and we send out with our monthly NTA release. People who have been to these meetings before will be familiar with the way we like to look at these. We think we really should be looking at it from the right to the left, the returns we're most interested in managing for are those in the long term. And pleasingly, there's been a consistent track record of outperformance on that basis. The 1-year return is a good outcome. It's obviously welcome, but it's not something we're looking to optimize because we think if you do that, you do in the end, run the risk of limiting the returns you get in the long term by being too short term in nature. The other feature of this slide is just to look at the 3-year number that stand out somewhat. I mean that it's quite low, both absolute and it is underperforming the market. I think it's important to read that in the context of the 5 years. So 3 years ago, we were at a very high level in our return cycle. And you'll see that over the 5 years, that's been well made up for with a good return over that period. So moving on to the return since inception. We think it's important to represent these figures in this sort of chart because it really brings to life what outperformance can do over a long period of time when you can compound it through for a period such as 25 years. So looking at this slide, in dark blue, you see Mirrabooka. What that's saying is a $10,000 investment assuming reinvestment of all your dividends and receipt of franking credits through the period, but not reinvesting those. You've had about 14x your money as a return on that investment over 25 years. That's almost double what you receive in the benchmark, mid and small cap indices, which is something we're obviously very proud of. But also importantly, it's well ahead of the sort of $87,000 around 9x return on investment in the ASX 200. So while we're not benchmarked to the ASX 200, we think the whole point of investing in this part of the market in Mirrabooka is to try and achieve better returns than you can in the ASX 200 for the long term. So it's been pleasing to do so. So now we might touch on some of the factors we think that have driven that. And those factors that we think can sustain going forward and hopefully add to your confidence in your investment in Mirrabooka from here. So in doing so, I guess the first question to ask is, well, why invest in emerging companies? What is the point of this area of the market. I actually spent a bit of time with the Founding Chairman, Terry Campbell, last week. It was interesting again to hear him recount why Mirrabooka was created, the gap in the market that we were looking at that time. And really, it sort of touches on the points on this slide. It's hard for private investors to really get into the depth of this part of the market and really access the intelligence on all the businesses that are out there. But when you're doing so, what you're looking for is that sort of early discovery of companies before others in the market have seen them, and therefore, you can get some really attractive valuation when you do that. And when you do it well and you do it early, you then get to own those businesses for more of their years and their early stage where they're really growing at a higher rate. So you get a longer period of higher compound earnings growth from a good point of discovering the company before others. That's the appeal. The flip side of that is the single stock outcomes in this area of the market, they're wider ranging. You do have more failure, not all the things work out as you planned. So we manage that through diversification. And hopefully, over time, just picking more good long-term winners to overcome those ones that do not work out as we planned when we bought them. The other point on this slide to note is we don't emphasize the word "can." This is the theory that this is why you invest in emerging companies. Interestingly, as we turn to the next slide. When you look at it from an index point of view, that theory has actually not worked out. So over 25 years since Mirrabooka has started, if you invested in the ASX 200, there's many ways to do that at a very low fee level, you've had around 9.8% return per annum over 25 years, whereas a small ordinaries index, which is supposed to be capturing those benefits that I described on the slide earlier, has only achieved 6.1%. Now if you look at that over 25 years, that means that the small ordinaries has been a 4x return on your investment a bit over, whereas out of the ASX 200, it's been 10x. So that sort of difference over 25 years is very significant, which really tells you something has been going on in the small ordinaries that really hasn't worked. It hasn't been a particularly great investment. And there are a number of investors that are really targeting this space, that aren't really delivering the returns that the broader market has been able to achieve. Pleasingly, as we showed on the earlier slide, Mirrabooka's returns have been well ahead of both of these benchmarks. So what has driven that outperformance for Mirrabooka, what are some of the competitive advantages that we think we hold that we hope can give you some confidence looking forward with your investment in Mirrabooka. The first 2 things we always look at when we're looking at a company is the people and the strategy they have. That's always the basis of all our initial questions. It's the thing we reassess first, when we're catching up with all our companies multiple times per year when we hold them. And we like to think that's why you attend meetings like today so that you can form those views on your Mirrabooka investment as well. This is a very important first lens. It's critical in getting this right. If you don't have these 2 pillars in your investment, you're more often than not going to fail. But we think in the case of Mirrabooka, they're really only the start of what you're looking at. We think is looking beyond these factors to say what are the other things that Mirrabooka uniquely hold that says that we have a competitive advantage that the playing field is tilted in our direction, so that we are well placed to deliver outperformance over the long term. And we'll touch on 4 of those on the next slide. So the first one, investment duration is to do with our structure. So as a listed investment company, that is quite a different structure to most professional investors in the market. The more common structure is that people subscribe to invest in a fund, and when they decide to add to or reduce their holding, that changes the capital base that fund manager is managing going forward. In our case, if you decide to change your investment, you'll transact with another shareholder and it doesn't impact on the capital that we hold. The reason that's important is because it allows us to really genuinely be long term. We know that our capital will remain. We don't have to spend all our time to making sure that next quarter's returns are as good as they can be, to keep the capital that we're managing and to keep the investors on site. The second unique advantage is we think Mirrabooka is really well set up with a broader universe of investments to consider by not defining ourselves as just the small ordinaries index, but including the mid-cap index, we think that's been a real key to driving some really good performance, and we've got a slide on this to show when you own those really good businesses in their early stage, you want to hold them for longer and get a fuller return on your investment, and there's been some really stark examples of that in our portfolio. Thirdly is our portfolio size. Again, we've been able to optimize the way we run this portfolio. We stick to a size that we think best balances keeping the fees as low as they can be, but staying at a portfolio size so we can get the best return on investment we think we can for shareholders. The other model in the market is professional fund managers running a business for their fees. And in their case, their incentive is to make the fund as large as they can while not compromising returns, so they make as much money as they can as a fund manager. That is not their incentive. And then finally, with company access, we're in a unique position we can stay at a really good size to perform. But at the same time, because we're part of the broader AFIC group, we get all the benefits of scale. All the companies that we want to see, we can meet with regularly, and we have all the things access to travel and all the things we need to do to manage the portfolio as best we can on your behalf. So in subsequent slides, we're just bringing out a few examples to really bring these different competitive advantages to life. So firstly, on duration and being a long-term investor, we picked 2 examples on the slide, and we'll just describe what we mean by being a long-term investor and why it's helped in these instances. Macquarie Technology Group was a company we first acquired in 2017. What we saw at the time was a business with an earnings base that was dominated by Telco earnings. The Telco earnings were in decline. A great founding family. We're looking to reinvest more of that cash flow into growing their data center earnings. If you're a shorter-term fund manager that was not going to be a compelling investment to look at. There's no way that would have got to the top of your list and what's going to perform in the next 6 months and drive your business forward. But we could see as that reinvestment happens, you're putting money into a better quality earnings stream and there's really backable people doing it. So for us, that met our criteria. We had no idea when that was going to really bear fruit, but we felt on a 5-year view, there was really good latent value in that strategy. The other thing that we had no idea on is just how much data centers would really explode through that period. So that's the fortunate thing that comes along behind that. And that's been enough of a tailwind to grow this business from a reasonably modest holding initially to now be the largest position in the Mirrabooka portfolio and one we're still really confident on looking forward from here. IDP Education is a more recent example. It's not one that's working at this point. But again, our long-term lens, we look at this, we think quite differently in many in the market. We first bought in 2021. Obviously, since then, if you've read the papers, there's a lot of negative policy that's come their way. A lot of their destination markets for students have seen a raining in year of immigration and that's meant that the numbers of students flowing to those markets have fallen across the board, which has put real pressure on their sector and the earnings of IDP Education. Looking through that, we just continue to observe the market share this company continues to win. We don't know when this turns in terms of the policy settings. We're really only looking for that to level out and stop declining. And we think once that's flattened out, then you really see the growth in earnings that's coming from those market share gains. But by being long term, we feel it's much easier not to have to look to the next 6 months to pick that point when it's improving, but to look beyond that 3 and 5 years from now and consider where this business is going to be. So then moving on to the broader universe, both small and mid-caps. As I mentioned earlier, we picked out 3 examples here: Car Group, REA, Reece, which have all been fantastic holdings for the portfolio. Just to explain the colors, so firstly, in orange, this is when these businesses were not yet in an index. And blue represents when they're in the small ordinaries index, and then in gray represents when they're a mid-cap index. Now the way the industry often works is people look to allocate money to different fund managers to do different things and most people investing in small caps are defined to be a small cap investor. When they do that, they're effectively getting to own these companies until Car Group is about $10. And then it's time for them to move on and find something else and go back into that small ordinaries index, and good luck trying to find a company as good as Car Group when you're doing that. In the case of REA, that was below $50. In the case of Reece, around $12 a share. You look at what's happened subsequent in the gray we've kept owning those businesses as mid-caps, and we do retain the flexibility to own them if we think they've still got compelling upside even when they graduate into the 50 [indiscernible], and if you think about the compound return you get when you do that, we think that's been a real key to the performance of Mirrabooka and a real weapon we have in our arsenal going forward. So then moving on to optimal portfolio size. So Mirrabooka, at the moment is around $650 million. We think that's a nice manageable size to really optimize performance. Other investors in this space in the market can be multiples of that. What that's meant for us is we can go hunting really small companies before others are even looking at them. And we've got some really interesting examples on this slide. So starting with The Environmental Group. This is one we bought as recently as 2021 when we first purchased that, the market capitalization, the value of the company around $50 million. It's fair to say there's not many institutional investors that are bothering with companies of that size. At the time, there was one broker covering it. And I'd say that coverage was fairly high level. They weren't putting a lot of resources into that. We've seen that one really start to get some traction recently and is now at around $150 million in market capitalization. Another example is Objective Corporation. This is a company that we first met Tony in North Sydney in 2014. I still remember the meeting when Mark and I walked into the building. At that stage, the market capitalization, $117 million. Again, one broker covering the stock, again, a very high-level surface sort of coverage of the business, not a lot of information out there on them. There's now 6 brokers covering the stock, and it's now got a market valuation of about $1.4 billion. So again, getting in really early has been fantastic for us. And then the best example is HUB24, which when we first bought into this company way back in 2015, the market capitalization was $80 million or just under. That's now $4.8 billion, which really goes to show the rewards. If you're getting into these early. Again, one broker covering it, not really, I'd argue. Amazingly, there's now 13 brokers covering HUB24, so that shows you the reward for that early discovery and getting those years of extra earnings growth out of these businesses. And then just on to my final slide, just with company access and retaining those benefits of scale. We're in a really unique position that we get really good access to companies. People really desire us on their register we feel, and we get to meet companies and really take that long-term view and go on that journey with them. Gentrack has been a really good example of that for us. We met the company a couple of times a year for many years before we'd even put a dollar of investment into it. We understood the business well, and we observed from the sidelines when they had some real troubles back in 2020. They went through a period where a number of their customers in the U.K. electricity market went broke. So it's not really they're doing, but it really hit their earnings quite hard. They also had a founder who had some health issues and moved on. So they had new management and earnings under pressure, and we had some history beating the company. We sat down with management and rather than asking them about what's the next result going to look like, we've talked to management about what that software looked like in its market and what was going on in the market and what that could mean on a 5- to 10-year basis. And he was describing that the electricity market was changing. There's a lot more regular metering. There's a lot more intellect now that's needed in the software. And there's a lot of legacy products out there that are not going to be able to keep up with that. We thought that was really interesting worth taking a position and we've been amazed at just how quickly that's flowed through to recognition in the market, but growth in their earnings more particularly. So from buying it at $1.60, not that long ago, it's now well over $10. And it's just great testament to regularly meeting these companies and the access we're getting. Temple & Webster is my final one. We bought this just leading into COVID period. We didn't know that was going to happen, of course. That was back in 2020, our first purchase -- we had the COVID period. Obviously, all the retail stores closed and it was a boon for online retailers. It took the shares up to very high levels. And then as that was cycled, they came all the way back down again. The important point for us with our access is our company meetings with management were all about how they were going as a business, not the fear of what the next result could look like. And that really helped us to maintain and add to an investment that we thought had really good potential in the long term. And as you've seen recently, that's played out very well for us. So with that, I'll hand over to Stuart and obviously, be available for any questions you have on any of those at the end of the presentation.

Thanks very much, Kieran, and good afternoon, all. I'll now move to some of the slides on how we've recently been investing. I think that's probably a little bit more interest to people now what's currently in the portfolio and what we've been doing. So we might just start with the companies that we have sold out of the portfolio and exited starting firstly with Computershare. Computershare is a very large business now. It's moved outside of our index. It's well in truly a top 50 size company. So therefore, as we mentioned, we don't have to sell that, but this is a business that is -- it does really well when interest rates are rising, less so when they begin to tail off and come down. So as we've seen the interest rate cycle peak, that became the natural time for us to exit that position. The next one, JB Hi-Fi. This is a great business. I think probably we did sell too early. This is now trading at record highs. I think it was $80 the other day. So sort of a little bit of regret that we didn't hold on a little bit longer. We saw it a couple of months ago. It had a really good result in reporting season. I guess the only reason why I think we're regretting that sale is that JB's outstanding management, great execution, but it's getting a little bit more mature now than what it was in the past. It's got over 300 stores. It's no longer rolling out those stores. It's pretty mature from its footprint. And it's had a tremendous run over the last 20 years. It's won a lot of market share, especially from Harvey Norman. So it's probably now 20% to 25% of the market. So it will trade a little bit more with what's happening in consumer sentiment, what's happening with the cost of living, et cetera. So we think of that one at sort of record highs and a little bit of a stretch valuation. It was a time to exit the portfolio, obviously, a little bit early. But is the sort of quality of business that when we get what we think is a better valuation, I think we'd be a buyer of that business again. And the last one, I guess, which is of note is Domino's Pizza. That has been a pretty poor investment for us. We won't sort of shy away from that. I think when we reflect upon what we got wrong, there's no doubt that this business is over earned during COVID, a lot of people couldn't access food and it really over earned for a number of years. And I think the mask, a few issues they had in the business as well. They went with a pretty heavy rollout strategy in that period, and especially in overseas markets, we've now seen that France and Japan have issues in both of those markets, and that has been a distraction for management trying to turn those around. Normally, we talk about duration as being one of our competitive advantages. We know our businesses aren't always going to be performing well, and we tend to sort of stick with them. But in this case, throughout that period where it underperformed, they also stretched their balance sheet. They made a couple of acquisitions funded by debt. And has now meant that the balance sheet is in a relatively precarious position, and that removes the ability for us to be patient because once you've lost control of your balance sheet, it's susceptible to emergency capital raisings and stuff like that. So that's probably the main reason that we've had to sell the business, take the loss. It doesn't mean we won't ever be there again, but I think we'll just need to see a better balance sheet before we could invest again in that one. Moving to some of the trimmed positions. And I guess we've selected too, but there's a couple of others that could be in this box as well. I think we approached the trimming with a little bit of hesitation. We talked about duration about competitive advantage, they sort of say, should you be trimming great businesses like Fisher & Paykel or in Reece or just leaving them compound. And that's something we grapple with on a daily basis. Because you don't want to sell, you write businesses when you think they're a little bit expensive and find out 10 years later, they've compounded like some of the ones on the slides previously. But in these 2 cases, we still retain core positions in both Reece and Fisher & Paykel. We've done a little bit of trimming just because we're starting to see some really excessive valuations in a couple of stocks, and these would be priced [ PE ] as an example, well into the 40s and 50s. So I think just taking a little bit of capital out at these levels and reallocating it into a couple of other business is prudent. And it does give us the ability to buy more when and if they do come off a little bit. So where is that capital going? I think maybe I'll just start with the positions we currently hold in the portfolio that we're adding to. I think Kieran articulated the IDP case pretty clearly. And I thought maybe just making a distinction between something like a Domino's, which has been share price has been falling under pressure, so is IDP, why did you sell Domino's and why you buy IDP? I think the while the main difference, as I said, is the balance sheet for IDP is really robust. That gives them time to withstand some of the pressures in their business. But I'd also make the point that IDP is the external environment that's changed for them is in regulations from a macro setting. The business itself is executing really well. It's probably getting stronger in terms of its industry position, whereas Domino's, I'd argue that a lot of these things are self-inflicted management is distracted and haven't executed well. So a difference between what's actually going on in the businesses and why you're buying one and selling the other. The other one that we've added to is a Cobram Estate. This is a business that has probably 50% market share in the Olive Oil market in Australia. So it's a great Australian brand. And I'm hoping there's a few shareholders that are nodding and then have a few on the shelves at home. It's done really well. And a very unique business in that it has quite often you're the producer, you might have the assets, the acreage, the Olives, but you don't own the brand or vice versa. And this is a fully integrated business. It has -- I've been out to visit it. It's got a huge acreage position in Northern Victoria, and it actually owns the Cobram Estate brand, which is a very successful brand they've been able to take to the U.S. as well. So it's a really interesting business. As I said, they've got 50% market share. We've seen that Olive oil, especially Extra Virgin Olive Oil is really healthy oil and it's getting a lot of winning a lot of share from some of the traditional vegetable oils, et cetera. So we think that one is -- it doesn't get talked about a lot, really interesting business, still 30%, 40% owned by its founders and potentially on the cusp of some excess in the U.S. as well, where it's now the eighth largest Olive Oil brands. So we've topped up there. Maybe moving to some of the new positions. I know this one is always a favorite for a lot of people that want to know what we've been buying. I do want to caveat that these companies can often be much more earlier in their life than some of our other investments. So we tend to take quite a modest starting position. We need to earn trust with the management teams to really understand and learn these businesses. So we take potentially less than 1% of the assets in terms of our starting position, and we look to grow over time. But in terms of the new ones, probably I doubt many people would have heard of Aroa Biosurgery. That's a microcap company based in New Zealand. They produce wound care, soft tissue products. So if you think about serious leg ulcers, hernia reconstruction, breast reconstruction, they've got a number of products in that space, very well regarded. We've done a lot of calls with the doctors and the surgeons that use these products, and they're really gaining market share. It's growing quite significantly, sort of 20% to 30% growth, still microcap and importantly for us, it's now profitable and reached cash flow profitability. And that's something we really look for these early-stage businesses that they have a balance sheet and there are profitability. So I think that one looks quite interesting. It is very early, so we've taken a modest position. One of the others that may or may not be familiar to people Life360, this came to market about 6 years ago in an IPO, started as a tracking app, a little bit like Find My iPhone. But over that period of time, it's built out a much more robust product suite, it now has roadside assistance, insurance products, theft protect products, driver reports. And it's -- it has a freemium model, so you can download it, track your family for free. It has a staggering 70 million users on a monthly basis. So that's sort of -- yes, those numbers -- it's easy to say, but when you sort of put that in the context of an Australian population, they've obviously been very successful in the U.S. and now other markets internationally as well. So we really like some of the attributes about it. It's run by its founder, has a really strong net cash balance sheet. The revenues are substantial. It does have $500 million in revenue. It produces free cash flow and we think it's got a lot of potential growth in other international markets. And even more recently, they're exploring some ways to advertise and monetize the other sort of 60 million people that aren't paying for the app, but using it on a free basis. Once again, the caveat, it does compete against Apple with some of the great tech companies. So we will keep that position modest, but we do think it's got a pretty exciting future and is executing really well. Maybe the last on this page, SiteMinder, this is a company that produces software for the hotel industry. It's used quite a lot by some of the smaller chains, some of the independent operators. They have a lot of ways to fill their hotel rooms, Expedia, Booking.com on their own websites and the SiteMinder technology really helps them to maximize the best ways to get inventory sold and at the best prices. So once again, we think this is really interesting. It's now -- we're going to watch for a couple of years. It's now profitable, producing free cash, which is important for us as a net cash balance sheet and this is a global business in a very fragmented market. So once again, this is something that's growing 20% to 30%, looks really interesting. So we've taken a starting position there. I will say that this list of companies is we've selected some. This is not an exhaustive list. There has been other transactions there, but these are the main ones in terms of the capital. Moving to the next slide. Maybe just discussion on the top 20 holdings. I love this slide, we put it in every year because we do talk about being a long-term investor. Everyone says they're a long-term investor, no one says they're a short-time investor. So it's good to actually have some examples of that. And if you look through the top 20, many years of consecutive ownership. And I guess, this is what we're saying with being a long-duration investor, we're just trying to give these companies time to compound and execute reduce the trading costs, reduce the tax burden and just let them compound. So a lot of years of hiring for these top 20. We've talked about a few -- we're happy to take questions on these and any of the stocks in the portfolio. But yes, something like equity trustees, 19 years of consecutive ownership would be pretty rare in the small cap market. Maybe moving now to the outlook, and I guess, sort of what's being talked about in the newspapers in investment markets. The news, as we read every day tends to be sort of very macro focused. A lot of the news has been around interest rates, what's happening geopolitically, what's happening with China, so we do pay attention to it. It is important. So I guess we've seen the U.S. They've been able to navigate a lot of inflationary pressures. They put up interest rates, but they have done it in a way, which appears at the moment to have avoided a recession. So they've obviously handled that economic situation quite well, and that's now being reflected in record levels for their market in the U.S. NASDAQ is very strong, as you're probably already aware. I guess, domestically here, our economic situation a little bit less certain with still got rates holding, even though they are at historically low levels, they haven't been cut as yet. I think a lot of people are waiting to find that will happen there. We are seeing some price pressures hurting some consumer areas. Cost of living is talked about quite a lot. And more recently, we've seen some of the issues in China impacting what could be the demand for resources. Interestingly, we wrote these slides a week ago, we got an announcement that China was going to kick off some stimulus. Now a lot of people are out buying resource stocks. So I guess that illustrates for us it's very hard to pick what's going to happen with macroeconomic factors. It's not one of our core skill sets or competitive advantages. It's not one of the sort of 4 attributes you talked about earlier in the slide deck. But I guess it -- we do have to be aware of it because it drives sentiment in the market. And at the moment, we're seeing record highs in the ASX 200, record highs in the U.S. market and implicit and that means some of the valuations and the stocks as a bottom-up investor are looking quite stretch for us. So we think yes, the settings look okay, but then at a bottom-up fundamental basis, the company valuations are a little bit stretched. So we do have some caution there. But we're the first to say that we have no competitive advantage in trying to understand any of these macro drivers, which way they may go because there's just so uncertain and they do move around pretty quickly. What we do think we have a competitive advantage of is talking to companies, and we do a lot of it in the reporting season. So I guess, through the last slide, I just wanted to leave you with a bit of a taste of the things we're talking about with some of our key holdings through our reporting season, which I think on balance was a really positive for our stocks. Macquarie Technology, Kieran mentioned that before. Their main and largest data center has begun construction. They're turning dirt there. And that's a sort of quadruple the size of their data center capacity. And something like that data center probably underpins 10 years of earnings growth. Coming online in 2027 and really good to see that they've got the approvals, and they're turning to it there. So really positive. ARB, one we've had in the portfolio for years, we love it. They've announced more recently that they've acquired or conditionally acquired former parts chain in the states. The U.S. has been a good growth area for them, but -- and they've done it in a cautious and deliberate manner this -- if the transaction goes through, it gives them another 40 stores there, which hopefully accelerates their store rollout and their penetration into that market because they do have great products. So we're very excited about that. Pinnacle is an investment management business. They acquired a very well-regarded investment team out of the U.K. called Royal London. This was a team of individuals who are managing a lot of money, I think, $13 billion of global equities. So the hope is that they've been able to acquire that on a very cheap basis. That team has been very well regarded. And over time, we think they could be managing a substantial amount of money, which would be very beneficial to Pinnacle over the next couple of years. And maybe finally, Cobram Estate, as I mentioned, a really interesting business. A lot of people don't look at these agricultural type stocks because there's some variability. I think they did a fair bit of work in the latest reporting season, just showing the maturity of the Olive grows and how that translates to the next 10 years of cash flow and quite a lot of free cash flow coming out of that business just by waiting for those trees to mature. So as I said, as a bottom up manager, we focus a lot more on these drivers and trying to understand what will happen with interest rates very hard to do that. And we do think our competitive advantage is really focusing on the bottom-up stuff. So with that said, I'll probably turn back now to Kieran and Mark for some Q&A or Greg.

Thanks, Stuart, and thank you to Mark, Andrew and Kieran. If you have any questions on this item or the financial statements, please submit them now via the online platform or raise your hand if you're in the room.

I've got a couple here, Greg. The first is available franking credits are considerable and increasing. Are there plans to pass these credits back to shareholders?

I'll probably pass that one.

Look, there's been a consistent track record of Mirrabooka, I guess, gradually distributing the franking credit. So over time, and as Andrew pointed out, we do like to be an ability to sustain dividends through tough times. And we've certainly got enough to cope with that. But I think our current approach has been pretty good. But we do have the intent to get it out, but we're also are aware we want to take our time doing it. But it does get discussed regularly Andrew, do you have any... ?

I'd say comfortable rather than considerable.

Yes. Comfortable. So -- but it does come up with rig and we understand that franking credit is important to our investors now and in the future. Yes.

I guess the other point too is we keep that money in the portfolio. So rather than paying out lots of dividends, it helps to generate those compounding growth that we've seen in terms of the investment performance.

Another question here in situations where there is a small free float of an attractive company, does Mirrabooka ever approach insiders of the company with a view to taking an ownership interest? Are there any portfolio companies with where this scenario has occurred?

My initial response to that is it's generally hard to do that because most of the time, if you're on a really good company, and you ask them if you can buy some shares off them, the answer would be no. I think there are times where some of those lines do get dealt in the market. And obviously, brokers make people aware that you're buying off an insider -- and we've had instances, I do remember buying some shares off the Brown family at ARB for instance, and that's worked out really well for us. So we definitely consider it, but it's typically, we'll find the shares from somewhere else in those companies rather than the founder, will be my answer to that.

Yes. I'm Steve [indiscernible] from the Australian Shareholders Association. I've got about 57 proxies to 1.8 million odd votes, thanks to people that have passed their proxies on to us, we're generally voting for. We support low-cost LIC companies and fantastic presentation. And I thought, great to see people talking about competitive advantages just after they've had a 25-year graph of showing our performance. A lot of people will talk about competitive advantage. Not a lot of people deliver. So that's congratulations, I'd say. I guess 2 questions. First question is, given that outperformance and maybe an outperformance compared to the other AFIC funds. What lessons can be learned, I guess, across the AFIC group? And I know they're different sized funds and have different reasons for being, but is that experience something that can be shared and how does that work in practice?

Okay. Well, I mean there are 4 listed investment companies, Australian Foundation is the biggest -- and then we've got Djerriwarrh Investments that focuses more on income. And the other one is [ AMS ], which is more of a high conviction fund. So I really think about it in terms of risk reward. And so if you push into more smaller midsized companies, you are taking a bigger risk, but you do that with the prospects of better rewards. So you would hope that being in Mirrabooka, it produces better long-term performance because it will be more volatile and it will be riskier, but the performance can be great if you stick with the frameworks, which Kieran talked about. And so -- but then if you go down to AFIC, is very large, very broad based. We've got a disproportional -- a bigger exposure to large companies. We do have smaller companies as well. So it is more diverse and we're looking to sort of just beat the index over the long term. So you would say, therefore, lower risk, therefore, potentially lower return in Mirrabooka. And Djerriwarrh is focused more on income. It still one's good capital growth, but you do give up some of the capital gains to produce high yield. So -- and [ AMS ] is our high conviction fund. So when you put that all together, you would theoretically expect to see better performance from Mirrabooka than perhaps an AFIC and then Jerry, and that's exactly the way it's played out. So given the nature and the risk exposure of each of the returns you're seeing are really commensurate to the intent of each of the funds.