AMCIL Limited (AMH) Earnings Call Transcript

Good afternoon, ladies and gentlemen, please make your way into the auditorium. Welcome to the 31st Annual General Meeting of AMCIL Limited. My name is Rupert Myer, and I'm the Chairman of your company. The company Secretary has confirmed that a quorum is present, and I will now open the meeting. I'd like to begin by acknowledging the traditional owners on whose land we meet and pay respects to elders past and present. I'll now introduce those on the stage with me. We have our Managing Director, Alison Gibson. My fellow nonexecutive directors, Roger Brown, Paula Dwyer, Michael Hirst and Jon Webster. We also have our company Secretary, [ Matthew Rowe ], on my right, your left, our Chief Financial Officer, Andrew Porter, on my left; and our Head of Business Development and Investor Relations, Claire Aitchison, also on my right. A couple of new faces on the lectern this afternoon. Ali and Claire, we're delighted to have you joining us at this AMCIL meeting for the first time in your present roles. In due course, we'll be hearing from the portfolio manager, Winston Chong and investment analyst, Jaye Guy. We're also joined by other members of the investment team in the front row of the audience. To my left, your right, and the entire investment team will be available for questions, comments and discussion after the meeting. I'll also take this opportunity to introduce Kate Logan. Kate is our partner of the company's auditors, PricewaterhouseCoopers, who is also available to answer questions today on the audit and the preparation and content of the auditor's report at the end of the presentation. Today's meeting is being held as a hybrid meeting, and will be recorded. Today's presentation has been released already to the ASX and made available on the company's website. I remind shareholders using the online platform. So for those of you in the room, please listen, if you'd like to, but you can tune out for a moment, that whilst questions can be submitted at any time, I will not address them until the relevant time in the meeting. To ask a question, click on the ask a question button at the top or bottom of your screen. If you've not entered your shareholder number or proxy number, you will be required to provide these details before you can proceed. Once your shareholder or proxy number has been verified, you can choose to ask your question in writing or verbally. If you require further guidance, please click on the virtual meeting online guide link on your screen. Please also note your questions may be moderated if we receive multiple questions on one topic, amalgamated together. I declare the voting open on all items of business. I will give you a warning before I move to close voting. To cast your vote, click on the Get a Voting Card button on your screen. We are prompted, please provide your shareholder or proxy number and follow the prompts. Once verified a voting card will be issued and you will be able to lodge your votes. Click submit those at the bottom of the voting card to lodge of us. If you have multiple holdings, I regret to inform you that you will need to obtain a voting part for each holding. Shareholders authorized representatives and appointed proxies in attendance here in Melbourne would have been issued a yellow card to vote on each resolution. If you are eligible to vote and you have not received a yellow card, or have any questions on voting, please see a representative of the share registry, MUFG Corporate Markets in the foyer. For those in the room on the reverse of your yellow admission card is your voting paper and instructions. Much easier if you're in the room, but we welcome everyone online as well. Before we move to the business of the meeting, I'd like to provide some introductory comments. Mark Freeman, retired as Chief Executive Officer and Managing Director at the end of the 2026 financial year. As this is the first AGM of the company since Mark's retirement from that role, and further to the remarks made at the time, the Board would like to acknowledge and thank Mark for his leadership and for the many roles he performed in the business since its inception. We wish Mark all the very best for his future endeavors. Alison Gibson was appointed Chief Executive Officer and Managing Director of the company with effect from July 2026. Prior to taking on the role of CEO, Alison as an experienced investment professional established and managed the Australian equities team at [ Hester ]. Alison is well known to the company having previously worked with the AMCIL Group of LICs for 10 years until 2021. Alison has been using her first few months to connect with shareholders, their advisers and the team. The Board and I are excited to work with Alison to deliver improved performance outcomes for all shareholders. I know that she's looking forward to speaking today and to meeting shareholders at the conclusion of today's Annual General Meeting. In August, the company announced that Roger Brown would be retiring as a director at the conclusion of this AGM. Since joining the Board in February 2014, Roger has made a terrific contribution to the company and his perspectives on Australian and international business have enriched Board discussions. I'd like to thank Roger for his contributions to the company over the last 12.5 years, and we wish you, Roger, well with your future endeavors.

Thanks, Rupert. The future endeavors are heading towards retirement and getting dull. So I was mentioning to someone before that this is the first job I've left in 51 years, so it's pretty impressive and I've still got the other one that started 51 years ago similar things. So it's been a good -- great to be on the Board. It's been great to be involved and -- but my time has come. So I'm moving on, and I'm sure we'll find better people or younger people to rule for sure. All the best. Thank you.

Thank you very much, Roger, and thank you for all your support. With Roger's retirement, the Board will now comprise 4 nonexecutive directors. Given the size of AMCIL, we view this number of directors to be sufficient to satisfy the oversight requirements while remaining cognizant of costs. It's relevant to that the investment team has access to nonexecutive directors across the 4 LICs for general market input. However, appointing a future director will remain under consideration. Later in the meeting, both Paula Dwyer and Jon Webster will offer themselves for reelection as directors for a further term, and I look forward to inviting them to make some remarks when that item comes. In addition to the changes in the Board and executive team, Winston Chong was appointed as portfolio manager for the AMCIL portfolio in July, following Mark Freeman's retirement. Winston has been with the team for 2 years as an assistant portfolio manager for the AFIC portfolio. We have full confidence in the direction in which Winston is taking the portfolio to deliver on the investment objectives of the company. Financial year 2026 was a difficult and challenging one for the AMCIL portfolio. The portfolio return for the year was negative 10%, including the benefit of franking compared with a return of 7.2%, including franking for the S&P ASX 200 Accumulation Index. AMCIL's underweight exposure to the materials energy sector and overweight exposure to the information technology and health care sectors weighed heavily on the relative performance of the portfolio this year. Since taking over as portfolio manager, Winston has reviewed the portfolio and processes is actively streamlining the portfolio, reducing the number of stocks in the portfolio to ensure the portfolio reflects our highest conviction views and strengthening the overall risk framework. Winston will provide further details on his observations and changes being made to the positioning of the portfolio later in the meeting. We acknowledge the portfolio performance has been well below expectations. However, we believe with a more concentrated portfolio and a sharper approach to risk, we are well positioned to navigate what lies ahead. Our confidence in the underlying quality of our holdings remains high, and we look forward to the year ahead. Moving on to the business of the meeting. I will take the notice of meeting as read. With regards to the minutes of the [ 30th ] Annual General Meeting, they have been signed as a correct record and are available to shareholders for in section today. The first agenda item is the consideration of the financial statements and reports for the year ended 30 June 2026. We will do this via a presentation, after which I will 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 Alison, Andrew and the investment team to go through the presentation. Would you join me in welcoming them.

Thank you, Rupert, and good afternoon, everyone. It's a real privilege to be here serving you, our shareholders, as CEO and Managing Director of AMCIL. Thank you to those in the room for coming today, and I think the weather is still holding out. So that's pleasing. And thank you to those joining online. I'll now turn to our presentation and the usual disclaimer which really just says that we're here to talk about the company and not to give the individual financial advice. Turning to our agenda. I'll say a few words to begin with and then pass to Andrew Porter, our CFO, to talk about the financial results. Winston Chong, our portfolio manager, will give an update on the portfolio, and then he and Jaye Guy will provide an update on the market and the outlook. As Rupert mentioned, I'm returning to the group, having previously worked in the business for 10 years until 2021. In the last 5 years, I worked to establish and run the internal Australian equities portfolio at Hester. I've been in the business now a few months. And in that time, I've had a number of questions that have been asked. And I wanted to spend a little time talking to 2 key questions being why did I rejoin the group? And what am I looking to improve? Firstly, why did I rejoin the business? Firstly, it's about purpose. AMCIL was set up to work solely for its shareholders. The aim was to give them an actively managed high conviction portfolio of quality companies that is differentiated from the market with no external fees. And I think that point is really important to make. Most fund managers exist to make money for themselves. We work directly for shareholders. And that purpose is really important to me personally. Secondly, it's about the people. Some of you may have heard this story earlier, but early on in my career as an infrastructure analyst at [ J.B. Weier ]. I was asked to come up and present to Bruce Teele and the Board of AMCIL to talk about my views on the infrastructure sector. And I nervously went up to talk to the Board and went through my investment thesis and talked about the prospect for earnings and dividends for companies like Transurban and a lot of other infrastructure companies at the time. And when I finished Bruce Teele said to me, "That's very good, Alison. Thank you for that information. But tell me about the people, who's on the Board and who's in the management and what's their track record in looking after shareholders?" And that insight has stayed with me my entire investing journey. And I think the team today, they still do the same thing in terms of looking at the Board and the management team and making an assessment about whether they are good allocators of capital. That's really important for when we're making assessments of businesses that we invest in. But equally important, I think it's about the people that you work with every day. Are these people of high integrity? Do they have a shared sense of purpose that brings them to work each day? And that's one of the reasons -- the key reasons that I've rejoined the group because we have highly experienced board of directors who work in your interests and a team that is dedicated and committed to serving you, our shareholders. AMCIL has solid foundations. As a listed investment company with a fixed capital structure, it can look past short-term volatility and take a long-term view. I believe in active management, not just buying the index. I also believe in the power of compounding that owning quality businesses over the long term is how real wealth is built, whatever stage of life our shareholders are at. Finally, in terms of the ability to make a difference, I do think that AMCIL does have very strong foundations. And we have the ability to make a difference to shareholders, whatever stage of life they are at. And so I'm really excited to be to have rejoined the business. Turning to what I'm looking to improve. First and foremost, performance. And you heard this year's performance has been particularly disappointing and we do absolutely acknowledge that. AMCIL has delivered outperformance over the long term as this chart shows. But in recent years, it has been more challenging. The market structure has changed. Passive and systematic investing has grown, which has meant sharp share price moves on short-term news and big swings between sectors. This has created challenges for active managers across the industry and AMCIL is not alone. I see that volatility though, as an opportunity for an investor like AMCIL that can truly take a long-term view and step into that volatility and buy quality companies at discounted prices. It's important to say at this juncture that our investment philosophy won't change. We do believe in investing in quality companies that have strong returns on capital, good management and sound balance sheets and that has served shareholders well over the long term. Where I do see room for improvement is in sharpening our investment process, enhancing our risk management and being more deliberate about where we take positions away from the index. We have a highly capable team and my priority as CEO is to ensure that the environment they have supports them and enables them to be wholly focused on investing for you, our shareholders. Winston Chong will talk a little later about the portfolio and the changes he has made to drive improved performance for shareholders since taking over in July. The second area that I believe needs to improve is in how we communicate AMCIL's value. AMCIL currently trades at a discount to its net tangible assets or NTA that means investors can buy a high conviction portfolio of high-quality companies for about $0.85 in the dollar. Our experience across market cycles, our team and our LIC structure which enables us to take a long-term view are real advantages. We need to explain them more clearly to current and future shareholders. Looking ahead, we start from a position of strength, built on patient, long-term investing and trust from our shareholders. My focus is sitting on -- setting up AMCIL for the next generation of Australian investors. Active management does face real challenges today, but I'm confident AMCIL is well placed. It offers a focused, high-conviction portfolio of high-quality companies. AMCIL has a distinct role in the 4 LICs in our group. It's the most agile and has a mandate to [ pick ] its conviction in companies and sectors through the cycle. That gives shareholders a different risk and return profile to the rest of the market. It also draws on the insights of our broader investment team and the director network across all of our 4 companies. The company's permanent capital structure enables us to take a long-term view in an environment where many can't. I look forward with a great deal of confidence and optimism about what comes next. With that, I want to say thank you for trusting us to manage your company. And I look forward to your questions later on and hopefully a cup of tea. I'll hand over now to Andrew Porter, our CFO, to talk through the financial results.

Thank you, Alison. And I should note that when Alison said she was looking forward with great optimism to what's coming next, she wasn't meaning me. But good afternoon, ladies and gentlemen. I will briefly run through the figures here on the screen. Much of this we went through during the results briefing for those of you who did attend online. But I will be around, of course, after the AGM, if anybody has any further questions or want clarification on anything. As you can see, profit for the year was slightly up. Dividends received were actually down, mainly from reduced holdings in Wesfarmers and the banks, but the interest that we received was up, and we had a larger contribution from options written and expenses were roughly 10% or $200,000 down on the prior year. Despite that, the MER management expense ratio ticked up to 0.57% from 0.56%. This is calculated as the ratio of the expense over the average portfolio value for the year. So although expenses were down, the MER was slightly up because of the fall in the portfolio value, which Alison has touched on. Despite this slight increase, the MER is in line with or even below years when the MER has been much higher, for instance, in 2023, it was 0.66% and 2019 0.72%. So we think that this still -- the costs are still within the bound where Board and management would like them to be. As for dividends, the realized gains were [ 6.1 million ] in 2026 down from [ $13.7 million ] in 2025. So this reduced the amount of special dividend that could be paid down from $0.03 for 2025 to $0.05 this year. So down on 2025, but actually the same as 2024. We were active in buying back shares, as you can see. The current discount meant that for existing shareholders buying back the shares is an attractive investment proposition. Some shareholders appreciate having the DRP, so we do keep it on, but we did neutralize that issue of shares, buying back on market. And the on-market buyback is still ongoing. That was it. As I said, we'll be here after the presentation. But meanwhile, I'll pass over to Winston. Thank you.

Thank you, Andrew. And it's a privilege to be here with you today, serving you, our shareholders. For those I haven't met, my name is Winston Chong. And in July, I was delighted to be appointed as portfolio manager of your company. I joined the group 2 years ago as Deputy Portfolio Manager of AFIC after nearly 15 years in markets, working costs, equities research, funds management and family offices. I'm energized by the opportunity ahead to deliver strong long-term returns for AMCIL shareholders by investing with conviction in quality businesses where we see value, engaging closely with the companies we invest in, and with our team working every day in your interest as fellow shareholders. In coming in as a new portfolio manager, I'm excited by the genuine advantages the company has to generate long-term value. Using those advantage as well will be critical in AMCIL delivering differentiated long-term returns. Those advantages really sit around 3 factors, being: one, our resourcing; two, our size, and three -- sorry, our structure; and three, our size. First, our resourcing allows AMCIL to leverage the research effort of the broader team and invest significantly behind our highest conviction ideas. Second, our structure enables us to take advantage of market volatility rather than to be a victim of it. And third, our size, which permits us to be more active around sharp short-term share price movements that are becoming more prevalent in the market today. Underpinning all of this is conviction and discipline both in terms of how we invest and how we manage risk. And over the next few slides, I'll bring these advantages to life with some examples. Conviction sits at the heart of AMCIL's strategy. Our conviction is based on the fundamentals of our investment thesis, the people, the business and the valuation where all 3 are attractive, we have a high conviction idea. Our conviction is built from our research efforts. Company visits, industry work, travel, channel checks, financial analysis, modeling and valuation. When we find those ideas, we want meaningful capital behind them so that our research translates into differentiated returns. Over the past 6 months, we've reviewed the thesis and our conviction on every single stock in the portfolio. The result is fewer stocks and on average, larger active overweights being the difference between a stocks weight in the portfolio and its weight in the index. This does 2 things for your portfolio. Firstly, it ensures there are no stale positions. Everything we own has a live thesis, which guards against thesis drift. Second, it enforces discipline, if we have conviction, it must carry meaningful weight. Our positions are continually reviewed as conviction shifts. We'll add where our conviction is increasing and trim or exit where our conviction is reducing or deteriorating. The result is a focused dynamic portfolio of quality companies that always reflect our best ideas and support our investment objectives. AMCIL structure allows us to be disciplined in only acting when we have conviction. We are never forced to sell quality assets to fund redemptions or to buy at the wrong time to deploy inflows. So when markets are volatile, we can look through the noise and behave as genuine long-term owners. We can add when others are fearful, hold true uncertainty and stay focused on the fundamentals. As these charts highlight here, our buying in [ Technology One ] and AUB Group earlier this year are good examples of this. Both sold off heavily went fears about disruption from artificial intelligence were at their peak. [ Technology One ] is a high-quality compounder as a provider of software to local governments and educational institutions with a strong competitive position and a good track record of execution in Australia and the U.K. It also has a very defensible AI strategy. When the stock fell, we retested the thesis and concluded that its customer base, its data and pace of innovation stood it up very well against coming disruption. That gave us the conviction to add meaningfully at a point where -- meaningfully at a point of maximum year in January and February. Insurance Broker AUB Group was a new position for AMCIL earlier this year. Similarly, AI concerns and a softening commercial premium rate cycle were weighing on the share price and gave us the opportunity to add a quality business to the portfolio at an attractive price. While cyclical headwinds and AI's impact on AUB's role as an intermediary were real, our work showed that the industry's highly regulated, high stack nature and AUB's own investments meant disruption was far from certain spot the market pricing as such. This gave us the convictions added to the portfolio in late February and early March when AUB was trading on a trough earnings multiple, while offering a healthy yield partially compensate us to wait out the cycle. Our size advantage lets us move quickly on short, sharp dislocations that are becoming more frequent in the market. As many of you will be aware, oil has been volatile this year since the wall breakout as the dark blue lines in these charts show. This presented opportunities to add to 2 of our portfolio stocks at times where oil price was dominating sentiment around them. Auckland Airport understandably sold off when the war breakout as oil prices clients in the market became concerned about airlines cutting routes. As a long-duration asset, however, Auckland Airport's valuation is much more closely tied to its capacity for long-term growth and its optionality around its undeveloped land bank. As such, we're able to use this opportunity to add to our position in this very high-quality asset at attractive valuations. Similarly, in July, as a resolution was looking more likely and the oil price started retreating, shares in Woodside understandably fell due to its exposure to the oil price. However, our research showed that even at lower oil prices, Woodside was set to generate meaningful cash flow growth and maintain a strong balance sheet as its project started to come online over the medium term. At the levels we bought at, the dividend yield was very attractive, which, in our view, also compensated for some of the short-term oil price risk. In both cases, the share prices didn't stay down for long, but it shows how AMCIL can move nimbly to increase its exposure to quality companies in the portfolio using the short-term share price dislocatIonis. Slide 20 here outlines a summary of the changes to the portfolio over the last 6 months as we retest the conviction on every stock in the portfolio and these transactions are the outflowing of that. I don't propose to go through each logo in a great amount of detail, but the key message I wanted to leave with you is that it's been a busy period of transactions with the portfolio now shaped into fewer stocks at higher wages. Overlaying this going forward is an enhanced focus on risk management. We believe this sets up AMCIL to deliver on its investment objectives over the medium to long term. And with that, I'll pass to Jaye to talk to a market update and thoughts on outlook.

Thank you, Winston. By way of introduction, my name is Jaye. I'm an investment in the -- I'm an analyst in the investment team and I work closely with Winston on the AMCIL portfolio. So just moving on to the next slide. Our focus is on the long-term prospects of the businesses that we invest in and that we also consider to add to the portfolio. But reporting season in August is always useful as a health check for the businesses that we're looking at. During the recent reporting season, there was 4 key themes that stood out to us as we've outlaid on this slide. The first one was relief rallies. So there was several holdings in the AMCIL portfolio that had been under fairly significant pressure, including CSL and cochlea. They performed quite well after their results. So expectations were quite low, leading into the results and the outlooks were a bit better than the market was expecting. So pleasingly, we got some of that performance back long may that continue. [ Ramsay Health ] care also performed particularly well during reporting season. The second one is consumer softness. So I'm sure, as everyone in the room is well aware, the pressures are rising on consumers, inflation is increasing, petrol prices are moving higher, and central banks are responding by increasing interest rates. We saw results from the consumer staple businesses, the supermarkets, Woolworths, which we hold in AMCIL, they both had really good results. They were gaining share in the market, and we were really pleased by that. The discretionary retailers had it a bit tougher though. We have less exposure than the market to the discretionary retailers in our portfolio. And the headwinds they're facing seem to be continuing. But as Winston mentioned, I think some of the advantages that AMCIL has is when we see industries like that under pressure, there's a number of quality companies within those industries. And while the timing might not be right now, it becomes interesting for us when we see these industries where the market might be overly pessimistic or negative and from an AMCIL perspective, we can take advantage of that with our long-term view and our willingness to wear some of the volatility. As always, though, we'll focus on the quality end of the industry. Also note that the banks had a bit of a tougher time, and there has been some proposed tax changes and higher interest rates, which saw mortgage applications lower. Our portfolio is underweight the banks. We do have a modest position in Commonwealth Bank, and we do have a larger position in Macquarie. They do have a retail operation, but that's just a portion of the broader business. The third theme was takeover activity. So this isn't strictly a reporting season theme, but there was just a heightened level during the period. So there was a number of takeover offers from offshore companies or private capital like private equity. So some of the names were -- some of these are household names, some of them are not, but we saw steadfast, clean away, [ Reliance, Perpetual Equity ] trustees and most recently, Northern Star Resources. While these companies weren't held in AMCIL, I think what was interesting to us is these were companies where the market wasn't willing to attribute value, but someone else was. So to the point about patient capital, we have that in the back of our mind. We don't deliberately target take over companies, but that's in the back of our mind when we look at valuations. And then finally, dividends. Pleasingly, the dividends that we received from our portfolio companies were better than expected. Notable ones were Woolworths, Telstra, Transurban and BHP. And we just think that this reflects our focus on strong balance sheet and resilient earnings. And it obviously supports the dividend income that we pay on to you. And just on the next slide, I appreciate there's a lot of kind of squiggly lines here, but I think the key thing to focus on is the chart on the left. So we use this as a proxy for valuation in the market and it effectively shows what is the market willing to pay for $1 of earnings or forward earnings for the market? And then the chart on the right is what's the expected forward dividend yield. So based on these charts here, we can see that the market looks modestly expensive, and that's against the backdrop of rising interest rates as well. This is the whole Australian market within industries, we do see a wide dispersion of valuations. And in our mind, that represents opportunity. I think one of the biggest things that we're kind of focusing on now and the market is focusing on is inflation. And I guess, how interest rates and central banks respond. While we don't try to seek to predict what the next move in interest rates is, I think, again, the important message is it will potentially create volatility and opportunity for the portfolio. And now I'll pass back to Winston to talk through a summary on the AMCIL portfolio.

Thanks, Jaye. Just to close with the summary of the portfolio. As of 31st of August 2026, we had 39 stocks in the portfolio with a total portfolio value of $342 million and a net tangible asset backing of $1.09. As you can see in our top 20 holdings, we have a mix of companies across different industries, all of which represent the team's highest condition ideas. We think we have a good mix of quality companies that positions AMCIL well to deliver on its investment objectives over the medium and long term in a variety of conditions. Thank you for your time and attention today. And with that, I'll hand back to our Chair.

Well, thank you, Alison, and Andrew and Winston and Jaye for the presentation that's been made at the meeting. Alison, I picked up the comment about Bruce Teele, and I know a couple of shareholders often ask me at these meetings about how Bruce is doing. Alison and I actually called on Bruce 10 days or so ago. We spent about 90 minutes with him. His interest in AMCIL is undiminished. His interest in the market is undiminished, and we had a really terrific conversation with him and if his online. I wish him well.

We'll now deal with any questions on the financial statements and reports for the year ended the 30th of June 2026. I'd like to invite questions from shareholders. For those in the room, we have microphones available, and if shareholders could please state their name when addressing the meeting and ask all questions through the chair. That would be appreciated. And we also have questions online. Claire, do we have any questions pre-advice. I think there were a couple pre-advice. Why did we deal with those first, and if we may.

Yes. Chairman, we've got 2 presubmitted questions. The first of which is the shareholder asking if we would move to paying quarterly dividends?

Thank you. I'm aware that earlier in the day, there were some comments made on the subject of quarterly dividends of the [ FIC ] meeting. It's only comparatively recently that AMCIL introduced an interim dividend. And I think it's probably a little way off before we consider quarterly dividends. The dividends themselves are [ $0.025 ]. And plus a special if it's paid plus the interim of 1. So it would be -- I think it's probably a bit early to be considering quarterly dividends within AMCIL.

Thank you. We have an online question, which is very similar to one of our pre-submitted questions about considering a merger with any of the AFIC family. And specifically, [ Jerry Ware ], which joins 4% of the company and have -- would we consider or have we considered a merger with [ Jerry Warra ] to unlock some intrinsic value?

Well, thank you for that question. The 4 individual companies do exist with a very different mandate for each. They have different boards, and they do act independently of each other. AFIC, I suppose, is a broad-based investment company with a diversified portfolio. [ Jerry Warra ], as investors would know as a high franked dividend investment company, which is quite well suited to some of the superannuation funds. [ Mirrabooka ] is a company that focuses on the smaller end of the market, small mid-cap exposures. AMCIL is a high conviction and more concentrated fund, as you've just heard from the presentation. So there is a different reason for each of those companies for being. I would make the comment that we've obviously observed the sole [ Pets Group ]. We've observed the merger that's occurred between DUI and AUI during the course of the year. So we're not completely ignoring the fact that these sorts of corporate activities are happening in the market. But for now, there's nothing further that I wish to add.

Chairman, in a year where portfolio returns were poor and NTA fell significantly. To what extent are the distributions being funded by liquidating the underlying capital base rather than organic portfolio earnings. How can we expect the [ NDA ] to grow when capital appreciation is being paid out to fund dividends. And why is management refusing to deploy capital far more aggressively with a significant discount?

So look, I might ask Andrew to make a couple of comments on those 3 questions in a moment. But I would make the comment that the Board considers all of these matters during the course of its deliberations. In particular, the quantum of dividend. The amount of use of retained earnings, the use of the franking account as well as capital gains and careful considerations given to quantum relating to all of those matters. But Andrew, perhaps you'd make a comment or 2 on those questions.

Thank you, Chairman. I would say that AMCIL has always paid out a portion of its dividends from capital gains. And those capital gains arise through the normal course of business through investment decisions that the team making that Winston and Jaye have been through. We don't sell stocks in order to be able to pay a dividend. We sell stocks because we don't believe they fit the investment thesis anymore. But those decisions do have consequences. With regards to the buyback, there is always a tension between shrinking your way to greatness and taking advantage of the fact that there is a substantial discount on offer. At the moment, the discount is such that Winston and the team think it is a good use of shareholders' money to buy back the shares. I would say in terms of why not do it even more. We are somewhat constrained by the liquidity in the AMCIL share price even if we did wish to do that. But at the moment, those -- the discount is such that we are proceeding in an orderly fashion, particularly to neutralize, as I said in my remarks, the DRP and the DSSP.

Thanks, Andrew.

Chairman, a shareholder currently has 0.5% of the company and would like to know why should I be voting for directors who are over the age of 50? I feel the AMCIL Board is too old and although experienced, they steer the company into the position it is in today. What are we doing about bringing younger new life into the company?

Thank you. Being one of those that's over 50. I make a comment. I'm reminded with that question of [ Ronald Reagan's ] response when he was asked about his age, and he said he didn't wish to make age and experience an issue in the election campaign. So I mean there is something relevant about having a diversity of skills and experience, having lived through cycles and bringing the combination of all of those factors into deliberations around boardroom. What we are pleased that we have is a young investment team who are able to challenge and work together very collaboratively with us and the combination of Asian experience, I think then becomes a very relevant and more potent combination than just to have some younger folks in the room with us.

Okay. And we just have another question on the buyback and why does AMCIL not buy back more shares at the vast discount. A free 20% discount doesn't come around very often, if you'd like to make any further comments on that.

Look, we've had a number of discussions about a buyback, and there is a consequence of a buyback over time, reducing the size of the company, which I don't think is in shareholders' interest for issues of liquidity and long-term performance. However, in the short term, clearly, it does make sense to cover the DRP if we're able to acquire shares at a lower price to the price at which they issued through the DRP, that just makes good sense. But expanding it beyond that, we frankly would prefer to see liquidity coming from other sources than simply the company's own resources.

Chairman, nothing has happened strategically within the AFIC table since the 2000 AMCIL RPO. Meanwhile, [ Argo ] created an infrastructure fund, [ Sol pats ] took over Milton, AUI and DUI merged, and [ Jeff Wilson Stable ] took over 14 smaller [indiscernible]. Could the new CEO, Alison Gibson, comment as to whether she has any sort of strategic mandate at the [indiscernible] table? Or is it just business as usual with some tweaks to personnel and investment processes being the biggest change she'll be allowed to bring to the group even at AMCIL, the most agile of the 4 legs.

Before perhaps asking Alison to make a couple of remarks. I think we've dealt with parts of that question in the earlier question around the 4 independent companies and observation that we're making of others within the sector. But Alison, would you like to make some specific remarks in response to the question?

Thank you, Rupert. Yes. As the CEO, you would imagine that I worked closely with the Board on strategy, and we're having an upcoming strategy discussion as we do regularly in the coming months, and you'd expect us to talk about all things strategy at that. But first and foremost, as I discussed today, we need to focus on what we're doing right now, which is improving performance. And that is absolutely mine and the team's focus over the next little while and also communicating our value more clearly to current and future shareholders. So that's the key areas of focus at the moment. I'm extremely confident that we can deliver on those 2 objectives. And so when we do we will be in a really strong position to consider other things strategically at that point. But first and foremost, we are focusing on improving performance and communicating our value more broadly.

Thank you. I want to know should we give someone in the room a go. There's a question here with microphone is coming to you.

Thank you, Mr. Chairman. Yes, my name is [ Steve Anemic ], I'm the company [indiscernible] the [ Opic ] Group Companies for the Australian Shareholders Association. Yes. Well, thanks, firstly, for those that have given their proxy votes to the ASA, much appreciated. It's good to see on a positive rate, it's good to see most Board members with substantial shareholdings and increasing [indiscernible] so that's great. Maybe the current depressed price might be good time for others that don't have a lot of shares to buy you. I've got 3 questions. First question. The last 2 years, our profits per share around [ 2,003 ] and dividends around $0.04 to $0.06 per share. How sustainable are the frank dividends. And if you keep going at these earnings rates, when are you going to have to cut dividends?

I think -- well, firstly, thank you for coming to the [indiscernible]. I appreciate that. And I should say it is terrific having people in the room with us. I think Andrew may have commented already on that question.

I'd note that the ordinary dividend, as Rupert has said, is [ $0.035 ]. And currently, in terms of frank dividend reserves, we've got reserves of $0.04 after we pay last year's final. So as ever, it's something we continue to watch.

Thank you Yes.

Yes. Next question. Obviously, yes, disappointing performance last year, and it's a high-conviction portfolio. So I guess track the index some year is good. Some is not so good. I'm a professional investor have been for a couple of decades. So I know it's nice to think about the good times and look at things that have worked out well. You've spoken in general terms about, I guess, lessons you've learned, things you're doing a bit differently. What about specifics, like what mistakes have you made in terms of stock selection or timing? Because I guess that's where of most of the learnings come from.

Look, perhaps before asking Alison or Winston to make a comment on that. I certainly share the view in a high conviction portfolio, there are going to be periods of time where the performance of the company is out of alignment with the market. We select the ASX 200 Accumulation Index as the as a relevant index against which to measure our performance. But clearly, we are underweight in a lot of positions and overweight in others. So we don't attempt to sort of match that index. So that is what will happen over time and there will be periods where the alignment doesn't follow very clearly. But perhaps Alison, would you like to say something?

Yes. Firstly, we'll hand to Winston because he will have the details. But I would say there's been, in my 3 months back with the business, there's been a lot of reflections that the team has done. And I think that's really important to do at a point when you had a poorer period of performance that you do have a look and learn from what's happened. And I've certainly seen the team really diving into that and understanding what's happened. And so maybe to Winston for some specific examples.

Yes, sure. I think if we reflect on performance for FY '26 year and the kind of underlying drivers of the disappointing performance. There's certainly 2 to 3 key points. And a lot of these are kind of the flip sides addressing some of the strategy I outlined going forward. The first is around the positioning of the portfolio between different sectors. So as many of you will be aware, Materials had a very strong year last year, up 50% to 60% and the portfolio didn't have much exposure there. We had some but not nearly enough. And then on the flip side, we had heavy exposure to areas like technology and health care, which had very disappointing years last year. So issue number one was around the degree of positioning in different sectors. Number two, there were a number of disappointing stock-specific calls in the portfolio. These are stocks like CSL, ARB and others where, from a bottom-up perspective, some of the changes to those businesses as they were either the macro outlook was deteriorating or management changes within the business or acquisitions being made. The dynamism in our conviction didn't change appropriately, and that's what I was talking about where we've now gone through the portfolio we defined [indiscernible] tested every thesis, tested our conviction in each position to ensure that where we sit today, the portfolio does reflect those changes as they occur, and we'll continue to do that going forward. So they are probably the 2 main areas that we're focused on. And of course, we've got the benefit of having an experienced director network and also the broader team to have a robust -- more robust discussion around those ideas, which is one of the changes, I think Alison has brought forward.

Thanks, Winston. And I think you have a third question.

Yes. Well, I think I might just follow up on that one. Just, I guess, in terms of the sector part of it, is that a permanent thing that you don't tend to invest in the resources area as much? Or is that something that's changed? I mean Australia, it's resources would be part of the market. I know a lot of it is dependent on commodity prices that are outside the companies in trial. So maybe quality that was good. But yes, maybe just interested in that.

That's a great question. Alison, do you want to make any remarks before I go? What I'd say about the resources actually is, it is one of Australia's one of the industries globally that Australia is competitive in. So it's not something that we'd rule out. What we are looking for, though, in resources is the same as what we look across any of our industrials, financials that we're looking for quality companies at attractive valuations with strong management hands, good balance sheets and resilient earnings. And so -- it probably means in that space, in the material space, a lot of the smaller mid-cap miners, which have been particularly strong over the last year, don't really fit the wheelhouse of what we're looking for. But there are assets that we are looking quite closely at the moment, where the valuations started to become a lot more attractive, and they do have high-quality, world-class assets run by really disciplined management team. So it's certainly a space we do consider. So no, it's not a permanent feature that we be underinvested in that sector.

Thanks Winston. Third question?

I'll give someone else a go.

Thank you. Are there any other questions in the room before we -- there's a question here. Here comes the mic.

Thank you. I guess I should explain that I have been a shareholder for a very long time. And I have far more shares than I wish I had.

Would you mind sharing your name so...

Yes, my name is [ George McGregor ], the shareholder is a [indiscernible] nominee for [ Part ] Limited, wholly owned by my wife and myself.