BRM – June 2020 Quarterly Newsletter

Over the June quarter, Barramundi returned +25.6% (gross
performance) compared to +18.0% for the ASX 200 Index
(70% hedged into NZ$) and the Adjusted NAV return for the
quarter was +25.0%. Over the last 12 months Barramundi’s
gross performance is up +13.5%, compared with our market
benchmark which was down (6.6%).
Assisted by significant fiscal and monetary policy stimulus,
and better than originally anticipated COVID-19 healthcare
outcomes, this proved to be a strong quarter for the Australian
equity market, with all sectors finishing the period in the green.
The Australian fiscal stimulus alone has totalled A$165bn or a
whopping 9% of GDP, most of which is being dispensed over
the six months to September 2020. A lot of it is being used to
help businesses pay salaries of employees. The Reserve Bank
(RBA) has grudgingly added to this firepower by embarking
on quantitative easing measures for the first time. This has
lowered interest rates, reducing the mortgage and borrowing
costs for households and businesses. We have not witnessed
policy stimulus of this magnitude in our lifetime.
These actions have laid a foundation for an economic recovery in
Australia. It is too early to judge whether these efforts are enough
to ‘win the war’. After all, we have more recently seen signs of a
resurgence in COVID-19 cases in pockets across the world. This
includes an unsettling surge in Victorian cases in Australia.
High Quality & Growing Companies
Have Performed Well
Against this backdrop, Barramundi had a pleasing performance
in the period. The share prices of all our portfolio companies
rose over the quarter.
Feedback from a number of our companies suggests that the
early signs of recovery seen in April have continued to broaden
out and strengthen in May and June. Offsetting this good news
is that individual company fortunes will likely continue to be
buffeted, to varying degrees, by localised virus outbreaks.
Sound, sensible leadership is critical in this environment and
this has been no more evident than at AUB Group (+51% in
A$ over the quarter). AUB was in the midst of completing
an acquisition of one of its insurance broking partners when
the COVID-19 crisis hit in March. AUB acted decisively in
terminating the acquisition. This enabled them to retain
millions in cash which would otherwise have been paid out,
and enabled both parties to focus on their own businesses
and not be distracted by the transaction. AUB also withdrew
earnings guidance given the uncertain environment.
Since then, feedback from AUB and the insurance broking
industry indicates that broking activity has been resilient and
insurance premiums have continued to tick higher through
the quarter. In a trading update in late June, AUB reinstated
earnings guidance, (it now expects profit growth of 12-14%
for the year ending June 2020).
Given the improved and more settled conditions we may soon hear
more about a resumption in acquisition discussions with its partner.
Improvement in consumer spending has driven a strong rebound
in Australian house and car sales activity. We’ve also seen job
advertisements starting to pick up in Australia. This has buoyed
the share prices of our classified advertising companies, Carsales
(+51%), SEEK (+48%) and new addition to the portfolio,
property advertiser REA Group which rose +40% in the period.
In fact REA had 109 million visits to its website in May, an all
time monthly record for the company. By REA’s measure this
included a significant uptick in active buyer enquiry.
Glove and protective equipment manufacturer Ansell (+35%),
has done an exceptional job navigating the crisis. It has
successfully kept its employees safe while its manufacturing
facilities have largely remained open throughout. It has continued
to source the raw material inputs required for protective
equipment production despite disruption to supply chains.
The company continues to benefit from the sustained focus
on hygiene standards globally across the industrial sector and
particularly within healthcare. This is likely to drive increased
demand for its gloves and protective equipment for a long time
to come.
Portfolio Changes
Our investment philosophy is grounded in investing in high
quality companies, run by sound management teams that have
favourable long-term growth prospects. This stood us in good
stead going into the COVID-19 crisis. It has also served our
investors well as the economic recovery has taken root.
As we wrote about in the March quarterly, during the sell-off
we tilted the weighting of our portfolio positions in favour of
our highest quality businesses, strengthening the mix of our
portfolio. As part of this we added REA Group to the portfolio
in March. It has had a good start for our investors, rising +40%
in the quarter.
We have continued this process by adding Woolworths to the
portfolio in May. Since then it has returned +9.1% (A$), ahead
of the ASX 200 Index. Woolworths is not as fast growing as
some other portfolio holdings, but Woolworths is a high-
quality dominant supermarket operator in Australia and has
a strong presence in New Zealand. It benefits from a broad
scale advantage. Along with a rational, duopolistic competitive
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN AUSTRALIAN DOLLARS
AUB GROUP LTD
+51
%
CARSALES.COM
LT D
+51%
SEEK LTD
+48
%
OOH! MEDIA
LT D
+42
%
REA GROUP LTD
+40
%
1
¹ Share price premium to NAV (using NAV to four decimal places)
1 April 2020 – 30 June 2020
BRM NAV
$
0.6 8
$
0.6 9
Share Price
PREMIUM
1
1.8
%
as at 30 June 2020
QUARTERLY NEWSLETTER

education organisations. Revenue from these customers is
recurring and reliable.
However, the company’s growth is slow relative to what is
required in order to meet management’s stated longer-term
growth objectives. Linked to this, its valuation is stretched in our
view. Should management execution improve and/or valuation
adjusts to be reflective of this lower growth, we could well see
Technology One back in the portfolio in the future.
2
structure in both countries this is supportive of the company’s
pricing power and profitability. Under CEO Brad Banducci,
Woolworths has developed a credible track record over a
number of years.
An economic recovery does seem to be underway in Australia,
but the journey is likely to remain volatile and uneven. Being
invested in high quality businesses with defensive earnings
streams like Woolworths is important in building an all-weather
portfolio for this environment.
In May, we also exited our position in Technology One.
In this instance, we like the Technology One business and
business model. It provides mission critical software to its
customers including local council and government, and higher
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
20 July 2020
PERFORMANCE
as at 30 June 2020
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder
Return
+35.2%+15.6%+10.5%
Adjusted NAV Return +25.0%+12.7%+9.3%
Portfolio Performance
Gross Performance
Return
+25.6%+15.8%+12.8%
Benchmark Index¹+18.0%+5.8%+7.0%
1
Benchmark Index: S&P/ASX Small Ords Industrial Gross Index until 30 September 2015 &
S&P/ASX 200 Index (hedged 70% to NZD) from 1 October 2015
Non-GAAP Financial Information
Barramundi uses non-GAAP measures, including adjusted net asset value, adjusted NAV return, gross performance
return and total shareholder return. The rationale for using such non-GAAP measures is as follows:
»adjusted net asset value – the underlying value of the investment portfolio adjusted for capital allocation
decisions after expenses, fees and tax,
»adjusted NAV return – the return to an investor after expenses, fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and currency
hedging before expenses, fees and tax, and
»total shareholder return – the return to an investor who reinvests their dividends, and if in the money,
exercises their warrants at warrant maturity date for additional shares.
All references to adjusted net asset value, adjusted NAV return, gross performance return and total shareholder
return in this newsletter are to such non-GAAP measures. The calculations applied to non-GAAP measures are
described in the Barramundi Non-GAAP Financial Information Policy. A copy of the policy is available at http://
barramundi.co.nz/about-barramundi/barramundi-policies/
Company% Holding
Ansell3.2%
ANZ Banking Group4.3%
ARB Corporation3.1%
AUB Group4.5%
Brambles4.0%
Carsales7.5%
Commonwealth Bank6.5%
Credit Corp3.6%
CSL7.2%
Domino's Pizza2.7%
Link Administration Holdings2.2%
Nanosonics2.6%
National Australia Bank3.5%
NEXTDC3.5%
Ooh! Media1.7%
PWR Holdings2.2%
REA Group5.0%
ResMed3.6%
SEEK7.2%
Sonic Healthcare3.2%
Westpac4.0%
Wise Tech Global4.1%
Woolworths Group3.1%
Xero Limited6.0%
Equity Total98.5%
Australian cash1.3%
New Zealand cash0.4%
Total Cash1.7%
Centrebet Rights0.0%
Forwards foreign exchange contracts(0.2%)
TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 June 2020
COMPANY NEWS
Dividend Paid 26 June 2020
A dividend of 1.28 cents per share was paid to Barramundi
shareholders on 26 June 2020, under the quarterly
distribution policy. Interest in Barramundi’s dividend
reinvestment plan (DRP) remains high with 36% of
shareholders participating in the plan. Shares issued to DRP
participants are at a 3% discount to market price. If you
would like to participate in the DRP, please contact our share
registrar, Computershare on 09 488 8777.
Disclaimer: The information in this newsletter has been prepared as at the date noted on
the front page. The information has been prepared as a general summary of the matters
covered only, and it is by necessity brief. The information and opinions are based upon
sources which are believed to be reliable, but Barramundi Limited and its officers and
directors make no representation as to its accuracy or completeness. The newsletter is not
intended to constitute professional or investment advice and should not be relied upon in
making any investment decisions. Professional financial advice from an authorised financial
adviser should be taken before making an investment. To the extent that the newsletter
contains data relating to the historical performance of Barramundi Limited or its portfolio
companies, please note that fund performance can and will vary and that future results
may have no correlation with results historically achieved.
Barramundi Limited
Private Bag 93 502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 489 7074 | Fax: +64 9 489 7139
Email: enquire@barramundi.co.nz | www.barramundi.co.nz
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us at enquire@barramundi.co.nz