Perpetual Wholesale Geared Australian aims to enhance long-term capital growth through borrowing (gearing) to invest predominantly in quality Australian industrial and resource shares. To Outperform the S&P/ASX 300 Accumulation Index (before fees and taxes) over rolling three-year periods. Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual’s priority is to select those companies that represent the best investment quality and are appropriately priced.
The portfolio’s largest overweight positions include, Insurance Australia Group Ltd, BHP Group Ltd and Flutter Entertainment Plc. Conversely, the portfolio’s largest underweight positions include Macquarie Group Ltd, Woolworths Group Ltd, and Rio Tinto Limited all of which are not held in the Fund.
The overweight position in mining royalty firm Deterra Royalties Ltd (+7.64%) contributed to relative performance. Deterra Royalties performed strongly as Iron ore prices remained resilient through the month defying other commodities which in large ended the month lower. Despite BHP’s Q3 operational review reporting a decrease in production of 3.9% compared to the prior quarter, in general MAC continues to ramp up as expected with full production expected to be reached by end FY24. The company receives an ongoing royalty of 1.232% of Australian dollar-denominated quarterly free on board revenue from the MAC royalty area. The business has growth levers through M&A however they are yet to execute on any to date. Santos contributed to performance in the month (+3.00%) as the price of oil rallied. In addition, Santos sold an initial of 2.6% of PNG LNG (Papua New Guinea Liquefied Natural Gas) to Kumul with an option for Kumul to acquire another 2.4%. The total consideration from the 2.6% is $576 million cash and the assumption of approximately $160 million of project finance debt. Santos is our favoured oil and gas producer with material growth prospects that are attainable. Santos is a global energy company with strategic assets across Australia, Papau New Gunea, Timor Leste and the United States of America that aims to play a key role in helping the world decarbonise to reach net-zero emissions through reliable, affordable and sustainable energy.
The overweight to Healius detracted from performance in September (-17.86%) as the market continued to speculate that the bid by smaller rival ACL could be blocked by the ACCC. Healius’ assets have attracted interest from private equity and there are activist investors on the register. With the combined value of Healius’ radiology and pathology businesses estimated to be around $2.6 billion this represents a substantial uplift from the current market capitalisation of $1.7 billion. We are encouraged with the progress Healius has made with improvements in their radiology business under new leadership. Pathology segment continues to track below what the business could achieve given in person GP visits are still around 20% below pre pandemic, which leads to lower pathology requests. We believe some of the co-pay introduction are deterring GP visits, consumers continue to defer and there are evidence that primary care screenings are being deferred. We believe GP visits and Pathology volumes will re-bound in the future and that we will start to see pathology segment margins improve from here. The overweight position in casino operator Star Entertainment Group (-34.02%) detracted from relative performance. The stock ended the month lower after the casino operator engaged the equity markets to raise $750m priced at $0.60 a share following Star also recently securing a $450 million debt package with the aim of paying off Star’s existing loans and handling costs at Queens Wharf in Brisbane. The offer price was also lower than the $1.20 a share at which Star last raised $800 million at in February. The raise has provided further clarity on the balance sheet and we are still seeing value in Star’s conservatively stated net tangible asset value.
What is Perpetual Wholesale Geared Australian Perpetual Wholesale Geared Australian is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Geared Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Perpetual Wholesale Geared Australian has Assets Under Management of 413.92 M with a management fee of 1.17%, a performance fee of 0 and a buy/sell spread fee of 0.38%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Perpetual Wholesale Geared Australian has returned 13.22% in the last month. The previous three years have returned 15.31% annualised and 30.77% each year since inception, which is when the Perpetual Wholesale Geared Australian first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Perpetual Wholesale Geared Australian first started, the Sharpe ratio is 0.42 with an annualised volatility of 30.77%. The maximum drawdown of the investment product in the last 12 months is -23.35% and -79.66% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Perpetual Wholesale Geared Australian has a 12-month excess return when compared to the Domestic Equity - Large Geared Index of -9.32% and 1.39% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Perpetual Wholesale Geared Australian has produced Alpha over the Domestic Equity - Large Geared Index of -0.86% in the last 12 months and -0.07% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Large Geared Index category, you can click here for the Peer Investment Report.
What level of diversification will Perpetual Wholesale Geared Australian provide?
Perpetual Wholesale Geared Australian has a correlation coefficient of 0.97 and a beta of 1.07 when compared to the Domestic Equity - Large Geared Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Perpetual Wholesale Geared Australian and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Perpetual Wholesale Geared Australian with the ASX Index 200 Index?
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Comments from SMSF Mates
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Performance Commentary - August 31, 2023 The Fund’s largest overweight positions include, Insurance Australia Group Ltd, Flutter Entertainment Plc, and Santos Limited. Conversely, the Fund’s largest underweight positions include Macquarie Group Ltd, Woolworths Group Ltd, and Transurban Group Ltd all of which are not held in the Fund.
The overweight to Goodman Group contributed strongly to performance in August (+13.73%) as the company reported a solid result and provided an upbeat update highlighting their current and potential investments into data-centre development. We took the opportunity to establish a position in Goodman Group late last year when the market was generally worried about large property groups’ performance in a rising rate environment. However, Goodman’s focus on the Industrial & logistics segment has delivered strong results driven by tenants’ ecommerce expansion and supply chain optimisation in an environment of limited supply of modern and well-located warehouses. We believe that Goodman will continue to grow earnings across its global portfolio supported by profitable development and ongoing rental increases with a conservatively geared balance sheet. Goodman’s management team has consistently demonstrated their ability to identify strategic locations, secure long-term leases with blue-chip clients, and maximize property value through efficient operations through the cycle. Finally, Goodman Group is committed to sustainability and responsible corporate practices, aligning with evolving investor values and regulatory requirements.
Their green initiatives not only reduce environmental impact but is aligned with blue-chip tenants’ requirements. In conclusion, Goodman Group’s best-in-class status, focus on the booming industrial and logistics sector, financial stability, exceptional management team, and commitment to sustainability make it a compelling long-term investment choice in the Australian property market for the right price. The overweight to Premier Investments (+16.14%) strongly contributed during August. Premier like most retail has struggled with its share-price since early May as pressures on the consumer increased resulting in negative industry sales, not aided by significant cost headwinds. All while cycling very strong comparative trading outcomes. Market analysts were very uncertain about just how bad FY23 & FY24 outcomes might be. PMV has long been part of our core retail investments- it is a quality business, supported by a particularly strong net cash balance sheet and overseen by engaged and experienced executive leadership personnel. The business also has future growth potential across several offshore geographies with the retail sector normalising post the widespread 2020/2021 covid restrictions. On 21st August 2023, PMV surprised the market with three separate announcements. Firstly with FY23 sales and profit guidance modestly ahead of market consensus but very reassuring nonetheless. Secondly that CEO Richard Murray has resigned effective 15 September 2023 with CFO John Bryce to act as interim CEO for the foreseeable future. Given Solomon Lew’s executive chairmanship and exceedingly strong divisional leadership and Richard’s relatively short tenure in the role, there is little for the market to be concerned with here. And finally, PMV announced a strategic review is to be initiated focussing on the corporate, operating and capital structure of the various brands and businesses held by the company. Future conclusions of this review are difficult to narrow down at this time and are potentially very wide ranging but including that there may be no change at all. Iluka Resources fell -16.54% during August due to growing concerns over the health of the Chinese property market and destocking from global pigment producers. This comes after an exceptional rise in the share price over the past few years. Iluka is the worlds largest producer of rutile that is used to produce pigment (paint) and zircon that is used to produce ceramics (tiles etc). These minerals generate the earnings and cashflow for the company currently, and the company has responded to soft near-term demand by idling some production to avoid inventory and working capital build. Iluka has a very strong balance sheet (net cash) and also owns a valuable stake in Deterra Royalties, which was spunoff in an IPO, so is able to buffer these periods of demand distortion that is a feature of these markets. Risk of a capex increase for the fully integrated rare earths refinery being built in WA to break China’s stronghold on these markets also dominated market attention, although we would highlight that construction is funded from a non-recourse loan of more than $1 billion from the federal government that has a $200m overrun facility.
The overweight position in healthcare services and hospital operator Ramsay Health Care (-12.66%) detracted from relative performance. Ramsay Health Care has announced its preliminary NPAT (net profit after tax) for the first nine months of FY23, which stands at A$235.1M. This marks an increase of 17% compared to the same period last year.. The revenue for the 9M period was A$11.24B, which is an 11% increase from the previous year. Looking ahead, the company expects a gradual recovery in earnings through FY23 and more normalised conditions in FY24. Activity levels in July indicate trends are normalising, however, nursing wage pressure is a headwind and the company is negotiating with the payors to achieve a net neutral outcome on this headwind. We feel that the Balance sheet will look much better once we see the conclusion of sale of Sime Darby. In our meeting with CEO and CFO we have imparted with the company the need to actively consider ROIC metrics in their consideration of capex deployment. We are engaging with the Chairman and head of remuneration of RHC before AGM to share with them our analysis on ROIC returns, which has been below par over the last 4 years and the need to reconsider capex deployment and their stake and investment in France. We are doing proprietary research work on mental bed capacity within Australia to come to any conclusion as to whether capex growth in this segment is the right use of shareholders capital.
Performance Commentary - July 31, 2023 The Fund’s largest overweight positions include, Insurance Australia Group Ltd, Flutter Entertainment Plc, and Santos Limited. Conversely, the Fund’s largest underweight positions include Macquarie Group Ltd, Woolworths Group Ltd, and Transurban Group Ltd all of which are not held in the Fund.
Domino’s Pizza Inc (NYSE:DPZ) was the largest positive contributor to performance in July with the stock rising +16.3%. While we have avoided the ASX listed Domino’s Pizza Enterprises (ASX:DMP) on valuation and earnings sustainability concerns, we have watched its US counterpart for a few years through the lens of the Australian business. Domino’s Pizza Inc is a high quality business model with a strong global brand and healthy franchisee economics driving a long growth runway for store openings and ultimately Domino’s earnings. Whilst inflationary pressures over the past 12-18 months have put pressure on the delivery business, we saw no change to the long-term potential for the company and used the share price volatility to establish a position. Dominos has a fantastic long term track record of earnings growth and shareholder returns and we see a favourable outlook ahead.
Orica rose 6% over the month. Our favourable investment view of the world’s biggest supplier of commercial explosives has been driven by a belief that it would be able to re-price customer supply contracts to more than offset cost inflation. Indeed we saw this in May when the company reported a 31% increase in 1H FY23 revenue to $4bn and a 32% increase in earnings to $323m, exceeding analyst forecasts. Orica has also benefitted from its investment in Digital Solutions, including the acquisition of Axis Mining Technology, as its mining customers look for productivity gains.
Iluka Resources fell -8% during July due to growing concerns over the health of the Chinese property market and destocking from global pigment producers, although this comes after an exceptional rise in the share price over the past few years. Iluka is the worlds largest producer of rutile that is used to produce pigment (paint) and zircon that is used to produce ceramics (tiles etc). These minerals generate the cashflow underpinning the bulk of the current valuation of the company. Iluka also owns a valuable stake in Deterra Royalties, which was spun-off in an IPO, as well as a substantial amount of cash. Iluka is also the recipient of a non -recourse loan of more than $1 billion from the federal government to develop a fully integrated rare earths refinery, making it one of only two outside of China. We believe that this will be the key driver of future value for the company in the decade ahead.
Healius fell -9.8% in July as the market speculated that the bid by smaller rival ACL could be blocked by the ACCC. Healius’ assets have attracted interest from private equity and there are activist investors on the register. With the combined value of Healius’ radiology and pathology businesses estimated to be around $2.6 billion this represents a substantial uplift from the current market capitalisation of $1.7 billion.
Performance Commentary - May 31, 2023 The Fund’s largest overweight positions include, Insurance Australia Group Ltd, Flutter Entertainment Plc, and Santos Limited. Conversely, the Fund’s largest underweight positions include Transurban Group Ltd, Macquarie Group, and Woolworths Group Ltd, all of which are not held in the Fund.
The overweight position in insurance provider Insurance Australia Group Ltd (+4.2%) contributed to relative performance. The stock finished higher after being upgraded to ‘overweight’ from ‘neutral’ at JPMorgan, with its target price increased to A$5.75 from A$5, representing a 20% upside to its price at the time of the upgrade.
The overweight position in mineral sands miner Iluka Resources (+2.5%) contributed to relative performance. The stock price rose sharply after being upgraded to ‘outperform’ from ‘neutral’ by Macquarie analysts, with its target price increasing to A$12.30 from A$12, representing a 12% upside to its price at the time of the upgrade.
The overweight position in healthcare technology solutions provider Healius (+5.7%) contributed to relative performance. During the month, the Healius Board unanimously decided to recommend that Healius shareholders reject an unsolicited, all scrip takeover offer received from ACL on 20 March 2023 (the ACL Offer). The Healius Board believes that the ACL Offer is plainly inadequate, highly conditional and highly uncertain. The Healius Board reiterated that it is not opposed to engaging in discussions with ACL, or another party, in relation to a control transaction or merger proposal that is in the best interests of Healius shareholders.
The overweight position in retail outlet investment company Premier Investments Ltd (-13.9%) detracted from relative performance. The stock fell on the back of signals of a deteriorating consumer environment from Apr/May-23, as discretionary retail conditions deteriorated in April/May-23, evidenced by four listed retail updates showing sales, on average, moving from -1% y/y in January/February 2023 to -14% y/y in March-May 2023.
The overweight position in gold and copper miner Newcrest Mining (-11.7%) detracted from relative performance. The stock was hampered after announcing that its Cadia mine was under investigation regarding its management of emissions of dust and other pollutants. Newcrest’s Cadia Holdings mine in Central West NSW has been issued with a draft pollution Prevention Notice and a draft licence variation regarding the management of the emissions of dust and other pollutants as part of a new investigation commenced by the NSW Environment Protection Authority. The EPA has also written to the NSW Chief Health Officer requesting a full health risk analysis to determine if mine dust is impacting the health of the community.
The overweight position in healthcare services and hospital operator Ramsay Health Care (-11.3%) detracted from relative performance. Ramsay Health Care has announced its preliminary NPAT (net profit after tax) for the first nine months of FY23, which stands at A$235.1M. This marks an increase of 17% compared to the same period last year, where it was A$201.6M. The revenue for the 9M period was A$11.24B, which is an 11% increase from A$10.14B in the previous year. Additionally, EBITDA for the period was A$1.47B, a 7% increase from A$1.38B in the previous year.
Looking ahead, the company expects a gradual recovery in earnings through FY23 and more normalised conditions in FY24.
Performance Commentary - April 30, 2023 The Fund’s largest overweight positions include, Insurance Australia Group Ltd, Flutter Entertainment Plc, and Santos Limited. Conversely, the Fund’s largest underweight positions include Transurban Group Ltd, Macquarie Group, and Woolworths Group Ltd, all of which are not held in the Fund. The overweight position in online betting and gaming provider Flutter Entertainment Plc (+12.1%) contributed to relative performance. During the month, it was revealed that the Company is said to be in talks to appoint John Bryant as its new chairman. Bryant is based in the US and serves on Ball Corp and Macy’s boards. Reports speculate that this could lead to Flutter giving up its listing on the London Stock Exchange. The overweight position in insurance provider Insurance Australia Group Ltd (+6.2%) contributed to relative performance. The stock finished higher on speculation that IAG is in talks to acquire RACQ’s insurance business. The Australian notes that RACQ’s insurance operations were purchased for ~A$500M. However, sources indicate that RACQ may offload the division for ~A$200M.
The overweight position in supply chain services provider Brambles (+6.1%) contributed to relative performance. The Firm reported sales of $9 million in its 9-month trading update after noting its pricing strategy has helped to offset cost increases across all regions, despite macroeconomic challenges and inventory optimisation by retailers and manufacturers. Brambles has also revised its FY23 guidance, projecting sales revenue growth of 14-15% and underlying profit growth of 17-19%. The overweight position in healthcare technology solutions provider Healius (-5.4%) detracted from relative performance. The stock ended the month lower following denial by The Takeovers Panel to conduct proceedings on an application from Healius relating to its takeover bid by Australian Clinical Labs. Healius alleged in its submission to the panel that ACL’s letter of offer to merge the two ASX-listed diagnostic companies was “misleading, including by omission, and inadequate in a number of respects”. The overweight position in mining royalty firm Deterra Royalties Ltd (-4.2%) detracted from relative performance. Deterra Royalties ended the month lower after acknowledging BHP’s Q3 operational review, which reported that its Mining Area C royalty achieved production for the March quarter of 29.7 million wet metric tonnes, a decrease of 3.9% compared to the prior quarter. The company receives an ongoing royalty of 1.232% of Australian dollar-denominated quarterly FOB revenue from the MAC royalty area.
The overweight position in dairy producer a2 Milk Company (-6.5%) detracted from relative performance. Despite the earnings-guidance downgrade by NZ milk company Synlait’s, a2 Milk has confirmed that its own FY2023 outlook will remain largely unchanged. The company still expects around 10% revenue growth, aligning with their previous low double-digit growth projection. While its infant milk formula revenue for the English market is estimated to decrease by mid-single digits, a2 anticipates double-digit growth in China.
Performance Commentary - March 31, 2023 The Fund’s largest overweight positions include, Insurance Australia Group Ltd, Flutter Entertainment Plc, and Brambles Limited. Conversely, the Fund’s largest underweight positions include Transurban Group Ltd, Macquarie Group, and Woolworths Group Ltd, all of which are not held in the Fund.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+34.9%) contributed to relative performance. The stock benefitted during the quarter after announcing that it will commence shareholder consultation on an optimal share listing structure based on the Board’s view that an additional US listing will yield several long-term strategic and capital market benefits, including; enhancing the group’s profile in the US, better enabling the recruitment and retention of US talent, providing access to deeper capital markets and to new US domestic investors, providing greater overall liquidity, and optionality to pursue a primary US listing (one of the criteria for access to US indices). The overweight position in gold and copper miner Newcrest Mining (+33.0%) contributed to relative performance. Newcrest and Newmont Mining have reportedly agreed to terms for talks after Newcrest rejected the latter’s $22.4B takeover offer. Reports indicated that Newmont has decided to engage in talks and standstill agreements during the quarter, allowing the two companies to meet and better understand why Newcrest rejected the prior acquisition proposal. The agreements also facilitated discussions about the potential price that Newcrest and its Board might be willing to consider proceeding with official due diligence.
The overweight position in Iluka Resources (+13.5%) contributed to relative performance. The mineral sands miner announcing a December-quarter combined zircon, rutile, and synthetic rutile production of 157Kt (vs consensus estimate of 155kt). Specifically, zircon production of 76.3kt beat consensus of 70kt, and rutile production of 16.6kt beat consensus of 14kt. Synthetic rutile production of 63.9kt, however, missed consensus of 67kt, whereas ilmenite production came in at 151.1kt (vs consensus estimate of 130kt). Mineral sands revenue of $415.2M fell short of a $423M consensus, however, its full-year unit cash production costs fell in line with previous guidance.
Performance Commentary - October 31, 2022 The Fund’s largest overweight positions include, Santos Limited, Insurance Australia Group Limited, and Flutter Entertainment Plc. Conversely, the Fund’s largest underweight positions include Woodside Petroleum Ltd, Macquarie Group Limited, and Transurban Group Ltd., all of which are not held in the Fund.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+20.8%) contributed to relative performance. The stock was assisted by the announcement that its CFO, Jonathan Hill, is to take on the new Group COO role. Paul Edgecliffe-Johnson, currently CFO and Group Head of Strategy at InterContinental Hotels Group, will join as CFO and Executive Director of the group in H1 of 2023. The company indicated that given Jonathan’s expertise, knowledge of the business, and role in shaping Flutter’s strategy, he is well placed to set up the new Group COO function for success.
The overweight position in Westpac Bank (+16.8%) contributed to relative performance. The stock was boosted over the month from a rallying banking sector, supported by a further rise in interest rates early on. The bank’s stock price was also assisted by the announcement that it is in preliminary discussions with Australian payment terminals business Tyro Payments Ltd to acquire 100% of its shares, and has hired investment bank, JP Morgan, to advise it on a bid. Tyro has since confirmed that it has received approaches from several parties expressing interest in a potential change of control transaction; however, these approaches are non-binding and highly conditional.
The overweight position in air transportation services provider Qantas (+16.3%) contributed to relative performance. The stock price was supported by a optimistic trading update with management revealing that due to its forward bookings, current fuel prices, and second-quarter assumptions, it now expects its underlying profit before tax to be well ahead of the market’s previous expectations of between $1.2B and $1.3B for the first half of FY2023. Management also expects the company’s net debt to fall to between $3.2B and $3.4B by 31 December, which is below its target of $3.9B.
The overweight position in mineral sands miner Iluka Resources (-4.5%) detracted from relative performance. The miner reported Zircon production of 69.7 Kt vs quarter-ago 80.4 Kt, Rutile 24.9 Kt (vs quarter-ago 48.3 Kt), Synthetic Rutile 59.2 Kt (vs quarter-ago 59.8 Kt), and Ilmenite 150.9 Kt (vs quarter-ago 170.7 Kt). Mineral sands revenue of $357.3M fell from $540.9M a quarter ago despite robust zircon demand from Iluka customers. Sales were also impacted by production and logistics constraints, softness in the Chinese ceramics market, and high energy costs affecting tile production.
The overweight position in the a2 Milk Company (-2.6%) detracted from relative performance. During the month, the dairy producer repeated its FY23 guidance of generating high single-digit revenue growth this year and noted that it remains on track to grow sales to NZ$2.00B in the medium term (before FY26). This followed the company’s announcement that Shareef Khan has resigned from his position as COO and will finish up in his role at the end of December. The Company plans to introduce a new Chief Supply Chain Officer role to lead a2’s end-to-end supply chain in all categories and markets.
Performance Commentary - September 30, 2022 The Fund’s largest overweight positions include, Santos Limited, Insurance Australia Group Limited, and Flutter Entertainment Plc. Conversely, the Fund’s largest underweight positions include Woodside Petroleum Ltd, Macquarie Group Limited, and Woolworths Group Ltd, all of which are not held in the Fund.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+18.5%) contributed to relative performance. The stock rallied upon release of a stronger-than-expected half year result. Flutter saw an 11% rise in revenue compared to the first half of 2021, however, adjusted EBITDA fell 19%. Positive revenue momentum was driven by recreational player growth, with average monthly players up 14% at the group level. In the US, its sports betting market share accelerated to 51% in the June quarter, driven by FanDuel’s efficient customer acquisition and strong operational execution. However, its UK & Ireland June-half performance reflected safer gambling initiatives.
The overweight position in dairy producer a2 Milk Company (+23.0%) contributed to relative performance. During the quarter, the company reported a 19.8% increase in its full-year FY2022 revenue to NZ$1.446.2M, leading to a 42.3% jump in net profit after tax to NZ$114.7M and beating the market consensus estimate of NZ$113.9M. This was driven mainly by double-digit infant formula sales growth from both its China and English label products, reflecting a2’s significant increase in marketing investment, which prompted further gains in brand health metrics and record market shares. Investors were further pleased with the announcement of a NZ$150M on-market share buyback. The overweight position in insurance provider Insurance Australia Group Ltd (+6.7%) contributed to relative performance. The stock rallied hard late in the quarter to recover most of its earlier losses incurred leading up to the release of its preliminary full-year financial results. While IAG’s growth of 5.7% was in line with its mid-single digit growth guidance, its reported insurance profit margin came in at 7.4%, down 6.1% year-on-year and missing its 10% to 12% guidance. Management blamed the miss on its net natural peril costs of $1.119B, which were $354M above the original allowance of $765M.
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