BRM – August 2024 monthly update

1
A WORD FROM THE MANAGER
Barramundi’s gross performance return for July was up +3.4% and
the adjusted NAV return was up +3.2%. This compares to the S&P/
ASX200 Index (70% hedged into NZ$) which rose +4.6% over the
month.
Ahead of reporting season, which kicks off in earnest in August,
company specific news flow was light during July. Most of the
share price moves were therefore influenced by market rather
than company specific factors in the month. The majority of
market sectors registered gains during the month with Consumer
Discretionary (+9%), Real Estate (+7%) and Financials (+6%) leading
the gains. The Utilities (-3%), Energy (-0.5%) and Materials (0%)
sectors lagged.
Portfolio News
Credit Corp (+16.4%) delivered earnings towards the lower end
of its guidance range for FY24. Banks have been selling off lower
amounts of defaulted debt as default rates have been low. This
caused Credit Corp’s Australian purchased debt ledger (“PDL”) book
to shrink. Encouragingly, at its result release it signalled that PDL
volumes have now stabilised in Australia. In addition, Credit Corp
has improved the operational efficiency of its US PDL division which
has increased its confidence when bidding for PDLs in the US. It has
been successful in purchasing a good volume of PDLs in July and has
guided for US related earnings to increase by 25% in FY25, which
the market liked. Its consumer lending division also has momentum
going into FY25 with lending earnings expected to grow 27% in
2025. Overall, Credit Corp starts the year with good momentum and
has guided for after tax profits at the group level to rise between
11-23% in FY25.
Resmed’s share price rebounded by 11.7% in July having suffered
a 7.3% fall in June when expanded data from Eli Lilly’s SURMOUNT-
OSA trial on the use of tirzepatide (the active ingredient in its
diabetes/obesity drugs) to treat obstructive sleep apnea (“OSA”)
was published. The initial kneejerk response to this data was fear
that a significant proportion of OSA patients might have “disease
resolution” (Lilly’s press release terminology) and therefore not
require other treatment, including the gold standard positive airway
pressure (“PAP”) treatment Resmed’s devices provide. Subsequently,
more measured scrutiny of the data has dissipated this fear. Most
trial participants’ OSA, while significantly reduced in severity, would
still warrant treatment. Recent channel checks we have participated
in have suggested that increasing awareness of GLP-1 weight
loss drugs is bringing more people into primary caregivers. This is
leading to increased diagnosis of OSA which has a strong correlation
with obesity. Certainly, Resmed’s Q4 FY24 result, released in early
August, shows no ill effects from GLP-1s. The company reported a
10% (constant FX) increase in revenue against a very demanding
comparable period (Q3 FY23 +23% constant FX). Bottom line
earnings for the quarter jumped by 30% as the increase in revenue
was boosted by materially better gross margins and lower operating
costs relative to sales. Resmed has signalled further gross margin
improvement in FY25.
During the month Fineos (-1.8%) announced it had signed one
new US customer, while being named the preferred vendor for a
further two smaller insurance vendors. Somewhat offsetting this,
two customers chose to terminate their contracts citing the Fineos’
product was no longer aligned to the nature of their business
requirements. Also, in the month Fineos announced ACC New
Zealand and a Canadian based customer had signed agreements to
migrate from Fineos’ on-premise product to its Cloud-based product.
This is part of an on-going process of migrating its customers to its
Cloud product. Once complete, it will allow Fineos to fully focus its
R&D spend on its Cloud-based product.
During July Domino’s (-8.7%) updated the market on steps it is
taking to remediate performance in its two problematic regions,
France and Japan. This includes closing a significant number of
underperforming stores. Up to 80 Japanese stores will be shut. This
is 20% of openings over the last four years and 8% of total stores.
With hindsight, Domino’s badly misjudged how much of its Japanese
sales surge when COVID restrictions were in place, would prove to
be sticky. The savings from closing these stores, many of which are
owned by Domino’s (not franchisees), will be reinvested in marketing
which will help drive sales for the rest of the network. In France,
20-30 stores (mainly franchised) will be closed, 5% of the network.
This will improve Domino’s French earnings. Store count growth will
lag its medium-term target of 7-9% pa for the next couple of years.
The medium-term target of 3-6% pa same store sales growth has
been retained. This latest announcement is obviously disappointing.
However, having taken these difficult, yet sensible decisions,
management’s attention should now be laser focused on driving
same store sales performance. This ultimately determines franchisee
profitability, which in turn encourages them to open new stores.
We, and the market, will be looking for same store sales to improve
over FY25 to restore our dented confidence in management and in
Domino’s long-term prospects.
Portfolio Changes
After having been invested in Nanosonics (flat for the period we
held it in the month) for over 14 years, we reduced our holding over
the year and completely exited our shareholding in July. Nanosonics
has performed well over the time that we’ve been shareholders. Its
novel technology has revolutionised the industry standard for high
1
Share Price Discount to NAV (including warrant price on a pro-rated basis and using the net asset value per share, after expenses, fees and tax, to four decimal places).
MONTHLY UPDATE
August 2024
$
0.73
Share Price
as at 31 July 2024
DISCOUNT
1
5.5
%

BRM NAV
$
0.79
$
0.06
Warrant Price

SECTOR SPLIT
as at 31 July 2024
KEY DETAILS
as at 31 July 2024
FUND TYPE
Listed Investment Company
INVESTS IN
Growing Australian companies
LISTING DATE
26 October 2006
FINANCIAL YEAR END
30 June
TYPICAL PORTFOLIO SIZE
20-35 stocks
INVESTMENT CRITERIA
Long-term growth
PERFORMANCE OBJECTIVE
Long-term growth of capital and
dividends
TAX STATUS
Portfolio Investment Entity (PIE)
MANAGER
Fisher Funds Management Limited
MANAGEMENT FEE RATE
1.25% of gross asset value
(reduced by 0.10% for every 1%
of underperformance relative to
the change in the NZ 90 Day Bank
Bill Index with a floor of 0.75%)
PERFORMANCE FEE
HURDLE
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE FEE
10% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$0.76
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
283m
MARKET CAPITALISATION
$206m
GEARING
None (maximum permitted 20%
of gross asset value)
3
%
18
%
21
%

CONSUMER
DISCRETIONARY
16
%
COMMUNICATION
SERVICES
24
%
2
%
3
%

FINANCIALS
CONSUMER
STAPLES
MATERIALS
5
%
level disinfection of ultrasound probes. However, based on the track
record of the past few years we think its core market, the US is now
a mature market for Nanosonics. For its earnings growth to continue
at the pace we’ve seen in the past decade, it needs to replicate its US
success in European and Asian markets. Despite the clear benefits to
using Nanosonics’ products, for a variety of reasons (many outside
of its control), the company has been unable to sustainably ramp up
its expansion in these markets. Until this changes, we do not see a
clear path for Nanosonics to sustainably increase its pace of earnings
growth looking forward.
The company has developed a new product that could transform
the way reusable endoscopes are cleaned in hospitals. This could
provide Nanosonics with a new avenue to reinvigorate earnings
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
growth. However, this product is still going through the regulatory
approval processes, and it will take several years before it makes any
meaningful difference to earnings.
We also increased our weighting in SEEK and reduced our weighting
in CBA during the month – both on valuation grounds.
2
8
%
INDUSTRIALS
CASH &
DERIVATIVES
INFORMATION
TECHNOLOGY

HEALTH CARE

JULY’S SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO
during the month in Australian dollar terms
CREDIT CORP
GROUP
+16
%
JAMES HARDIE
+16
%
RESMED
+12
%
DOMINO’S
-9
%
PWR HOLDINGS
+8
%
5 LARGEST PORTFOLIO POSITIONS as at 31 July 2024
WISETECH
8
%
CSL LIMITED
11
%
SEEK
6
%
AUB GROUP
5
%
XERO
5
%
The remaining portfolio is made up of another 19 stocks and cash.
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+6.4%+5.2%+10.9%(2.7%)+13.9%
Adjusted NAV Return+3.2%+4.8%+13.9%+7.2%+12.2%
Portfolio Performance
Gross Performance Return+3.4%+5.3%+16.7%+9.3%+14.8%
Benchmark Index^+4.6%+6.4%+15.0%+8.5%+8.4%
PERFORMANCE to 31 July 2024
3
TOTAL SHAREHOLDER RETURN to 31 July 2024
^Benchmark Index: S&P/ASX 200 Index (hedged 70% to NZD)
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 dividends (and other capital management initiatives) and after expenses, fees and tax,
»adjusted NAV return – the percentage change in the adjusted NAV,
»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 combines the share price performance, the warrant price performance, the net value of converting any warrants into shares, and the dividends paid to shareholders. It
assumes all dividends are reinvested in the company’s dividend reinvestment plan, and that shareholders exercise their warrants, (if they were in the money), at warrant expiry date.
All references to adjusted net asset value, adjusted NAV return, gross performance return and total shareholder return in this monthly update 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 barramundi.co.nz/about-barramundi/barramundi-policies.
Share Price/Total Shareholder Return
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
Oct
2006
Oct
2007
Oct
2011
Oct
2013
Oct
2014
Oct
2015
Oct
2008
Oct
2009
Oct
2010
Oct
2016
Oct
2020
Oct
2012
Oct
2022
Share Price Total Shareholder Return
Oct
2017
Oct
2018
Oct
2019
Oct
2021
Oct
2023

Disclaimer: The information in this update 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 update is not intended to constitute professional or investment advice and should not be relied upon in making any investment decisions. Professional financial advice from a financial
adviser should be taken before making an investment. To the extent that the update 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 93502, Takapuna, Auckland 0740
Phone: +64 9 489 7074
Email: enquire@barramundi.co.nz | www.barramundi.co.nz
4
Computershare Investor Services Limited
Private Bag 92119, Auckland 1142
Phone: +64 9 488 8777
Email: enquiry@computershare.co.nz | www.computershare.com/nz
ABOUT BARRAMUNDI
Barramundi is an investment
company listed on the New Zealand
Stock Exchange. The company
gives shareholders an opportunity
to invest in a diversified portfolio
of between 20 and 35 quality
growing Australian companies
through a single, professionally
managed investment. The aim of
Barramundi is to offer investors
competitive returns through capital
growth and dividends.
CAPITAL MANAGEMENT STRATEGIES
Regular Dividends
»Quarterly distribution policy introduced in
August 2009
»Under this policy, 2% of average NAV is targeted to be
paid to shareholders quarterly
»Dividends paid by Barramundi may include dividends
received, interest income, investment gains and/or
return of capital
»Shareholders who prefer to have increased capital rather
than a regular income stream have the opportunity to
participate in the company’s dividend reinvestment plan
(DRP)
»Shares issued to DRP participants are at a 3% discount
to market price
»Barramundi became a portfolio investment entity on
1 October 2007. As a result, dividends paid to New
Zealand tax resident shareholders have not been subject
to further tax
Share Buyback Programme
»Barramundi has a buyback programme in place allowing
it (if it elects to do so) to acquire its shares on market
»Shares bought back by the company are held as treasury
stock
»Shares held as treasury stock are available to be utilised
for the dividend reinvestment plan
MANAGEMENT
The Manager has authority delegated
to it from the Board to invest according
to the Management Agreement and
other written policies. Barramundi’s
portfolio is managed by Fisher Funds
Management Limited. Robbie Urquhart
(Senior Portfolio Manager), Terry Tolich
and Delano Gallagher (Senior Investment
Analysts) have prime responsibility for
managing the Barramundi portfolio.
Together they have significant combined
experience and are very capable of
researching and investing in the quality
Australian companies that Barramundi
targets. Fisher Funds is based in
Takapuna, Auckland.
BOARD
The Board of Barramundi
comprises independent
directors Andy Coupe (Chair),
Carol Campbell, David
McClatchy and Fiona Oliver.
Warrants
»Barramundi announced an issue of warrants (BRMWH)
on 9 October 2023
»Information pertaining to the warrants was mailed/
emailed to all shareholders on Tuesday 17 October 2023
»The warrants were issued at no cost to eligible
shareholders in the ratio of one warrant for every four
Barramundi shares held, based on the record date of
25 October 2023
»The warrants were allotted to shareholders on
26 October 2023 and listed on the NZX Main Board
from 27 October 2023
»The Exercise Price of each warrant is $0.69, adjusted
down for the aggregate amount per Share of any cash
dividends declared on the shares with a record date
during the period commencing on the date of allotment
of the warrants and ending on the last Business
Day before the final Exercise Price is announced by
Barramundi
»The Exercise Date for the warrants is 25 October 2024