Selector March 2013 Quarterly Newsletter

8/13/2019 Selector March 2013 Quarterly Newsletter

1/19

In this quarterly edition we review performance and attribution. We do a roundup of the recent reporting season. Our macro focus is on the new global war. At home we take a look at the Federal Government and our miners and finally we discuss some global developments in executive pay. Photo: Currency Wars.

Selector Funds Management Limited ACN 102756347 AFSL 225316 Level 3, 10 Bridge Street Sydney NSW 2000 Australia Tel 612 8090 3612 www.selectorfund.com.au

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March 20

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13 Selector Aus

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Newsletter #33

.au

13 in a classi

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a good unde

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at 40,968,

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ons rise, the

ned to proce

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in a real an

s with the

ailout facilit

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ond holders

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option of

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te the Fund

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taking losses

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f these. In t

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results.

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l, optimism

fety sought

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he latter day

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us


4/19

March 20


Table o

Page 1:

Page 4:

Page 4:

Page 4:

Page 5:

Page 1

Page 13

Page 15

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The risInvest

from th

to be o

industr

self ma

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per we

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made t

modifie

And at

income

Govern

experts

SFM

13 Selector Aus


f Contents Letter to inv

Performanc

Performanc

Portfolio To

Selector – R

: Governme

: The new gl

: Executive p

Company vi

: Portfolio st

of super ent experts

e current $1.

e and a half

funds will f

naged super

llion. In addit

k, with total

le wonder th

hat the curr

d, with

the

e

stake is a hi

s above $3

ment’s grow

in tinkering

tralian Equities


stors

March Qua

table since i

10

porting seas

t and our mi

bal war

ay

sit diary Mar

atistics Marc

predict that

5 trillion to

times larger

rm a large

funds (SMSF

ion, applicat

SMSF’s likel

at the Gove

nt tax conc

xtra raised

e

gher contrib

0,000. Don’

ing budget

ith somethi

Fund Quarterly


ter 2013

nception

on round up

ners

h Quarter 2

h Quarter 20

by 2030 the

figure close

than the gro

ercentage o

). These SMS

ions for your

to hit 500,0

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essions offe

rmarked for

utions tax, s

t be surpri

deficit when

ng working

Newsletter #33

.au

13

13

local supera

r to $5.0 trill

s domestic p

this figure,

F’s currently

new SMSF’s

0 in the ver

rimed the i

ed to those

the Govern

uggested to

ed that thi

it reports i

ell in order t

nnuation fu

ion. At that p

roduct (GDP

he industry

represent a

have been p

near term.

dustry for a

earning hig

ent’s consol

be 30% rath

threshold

n May. Unf

o plug holes

ds industry

oint the ind

) of our local

has also witn

out $450 mi

ouring in at t

tax grab. Ar

sums of in

idated reven

er than the

is lowered,

rtunately G

in things wor

will have gr

stry is expe

economy. W

essed a surg

llion of the t

he rate of 1,

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come should

ue bucket.

current 15%,

judging by

overnments

king not so

2

wn

ted

hile

e in

otal

000

l be

be

on

the

are

ell.


5/19

March 20


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13 Selector Aus


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2013, the

the All Ordi

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run‐of ‐the‐

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Newsletter #33

.au

und deliver

naries Accu

oss Fund eturn % +8.51

+33.26

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6/19

March 20


Perfor Top 5 SEEK

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for inv

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above which

years a

way, th

date, t

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seeking

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has enj

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tough r

sales a

10% to

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notably

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price v

years.

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manag

acquisit

industr

IOOF e

locally,

13 Selector Aus


ance attribstock contriCentre

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es

ill discuss fu

stors. A tou

an dollar im

ighlights, th

harmaxis ha

s the compa

e path has b

e company

a, however,

further dat

der its US str

ase of Sirtex,

oyed over th

es to execut

e current

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etail environ

d market sh

$28.5 million

plus side, a

SEEK, Fligh

and have all

particular c

luations app

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remaiment confi

ions. With a

that is unde

njoys the be

behind the b

tralian Equities


tion for the utors

rther in this

gh economic

pacted and

main detra

s been the

y sought to

en longer, p

has succee

the very im

a. This has

tegy and fu

the share pr

e past few

e on a long t

vage patient

ment, which

are. Offsetti

during the h

number of l

Centre, an

successfully

ntinues to

ear full, we s

Super Retail

ns

domesticmed the g

rebounding

rgoing struct

nefits that c

ig four banks

Fund Quarterly


quarter %

+2.17

+1.41

+1.31

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+1.08

report, the l

backdrop a

in some cas

tors for

the

ost disappoi

bring its cys

oven more c

ed in gainin

portant US

impacted i

ding arrang

ice respite is

onths. The

erm busines

use

to

a fir

has seen th

g this has b

alf, although

ng held inv

d ResMed.

expanded of

ake sizable

uspect these

Group in mo

ally

based

od progres

share mark

ural regulato

omes with s

and AMP. S

Newsletter #33

.au

Top 5 stPharmax

Sirtex M

Blackmo

Breville

AMA Gro

test reporti

d a number

s unduly m

quarter wer

nting. It is a

tic fibrosis d

ostly and del

g approval

arket has

vestor expe

ments.

more a funct

company’s i

plan to ele

t line

treat

e business p

een the grou

muted by a

stments co

Pleasingly, t

fshore to pro

investments

markets will

re detail furt

ithin

the

fis achieved

et, IOOF is

ry change vi

cale, rankin

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ck detractoris

dical

es

roup

up

g period al

of external

sked the re

largely

rest

investment

rug Bronchit

ayed by a nu

nd reimbur

et to be ac

ctations an

ion of the str

terim result

ate its sir‐sp

ent therapy.

rovide great

p’s strong A

tronger curr

tinued to sh

ese busines

vide greater

in new mar

provide am

er in this re

nancial

servifollowing a

ell placed t

legislated s

within the

s

ays provide

factors, incl

sults deliver

icted to

thr

that we hav

ol to market

mber of regu

sement in b

hieved, with

required t

ong price m

was solid a

heres liver c

Blackmores

er store reb

ian expansio

ency.

ine during t

ses have so

depth and e

ets and whi

le room for

ort.

ces

space.

number of

o deliver sol

perannuatio

top six fina

% ‐1.61

‐0.94

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some surpr

ding the str

d. As the t

e businesses

e held for m

. As is often

latory issues

oth Europe

regulators

he compan

ve the comp

d managem

ancer treatm

suffered fro

tes to main

n, with sales

e quarter

ught to re

rnings diver

le current s

growth in fut

uring

the

recent bolt

id growth in

n requireme

cial instituti

4

ises

ong

ble

, of

any

the

. To

and

ow

to

any

ent

ent

m a ain

up

ost

ain

ity.

are

ure

alf,

‐on

an

nts.

ons


7/19

March 20


Reporti

For th

shareh

manag

profits

negativ

adversi

be don

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under t

do thin

approa

opport

those t

disapp

the day

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and rea

our pa

occasio

the fou

1. 2. 3. 4.

Our se

busines

increasi

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them t

It is oft

becaus

mind

manag

under c

13 Selector Aus


ng season ro most part,

lders on ho

ment to spi

are down.

e surprises.

y and prepa

.

September 2

he heading

gs at Select

h every

inv

nity present

hat caught

inted. As al

.

usinesses an

ffirm a busin

t we try no

nal stumbles

r business qu

Strongly alig

Business wit

Balance she

Shareholder

arch for the

ses have bot

ngly clear to

y does it all

invest for th

en lost on in

when

you

b

e listened t

ment teams

onsideration

tralian Equities


und up reporting s

things are

things their

ut above al

However, in

ing for grow

012 quarterl

ewsletters,

r. Under th

estment dec

ed at the ti

our eye dur

ays investor

d managem

ess plan that

to judge t

. As we disc

alities we se

ned manage

h best of bre

t, conservat

returns trea

se “best of

h the drive a

us is the i

w them to

e future.

vestors that

uy into

a bu

o, reviewed

during the p

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Fund Quarterly


ason provid

travelling.

way. No inv

l what inves

business, go

th are illustr

y newsletter

e outlined t

heading “L

ision and

ev

e. With thi

ing the late

s are quick t

nt teams de

they believe

o harshly c

ssed in our

k in any inv

ent team

ed qualities

ively position

ed with para

breed” busi

nd products

portance th

ight a good

investing fo

iness, you

a

and in so

ast quarter.

Newsletter #33

.au

es business

e say for t

stor wants t

tors dislike

od and bad

tive of good

, of which p

he investme

ooking up ra

ery business

in mind, th

st profit ro

o judge and

livering the n

will deliver t

ompanies th

revious new

stment oppo

ed

mount impo

nesses is no

to succeed a

t incumben

ight with a

r tomorrow i

e paying

for

e cases vis

ome of thes

leaders with

he most par

o really hear

most are su

go hand in

managemen

ast copies a

nt philosoph

ther than d

review

on

e next secti

nd up. Som

share prices

ot so good n

he returns e

at have a p

sletters, this

rtunity consi

rtance

t restricted

nd many do.

y and scale

arket leadi

s more criti

its future

ea

ited the foll

the Fund al

the opport

t as there is

that things a

rprises, or

hand. Dealin

t teams doin

e accessible

that under

wn”, we di

the individu

n brings int

e were goo

react sharpl

ews, aim to

pected. It is

oven track

approach is

dered;

to the larg

However,

bestows on

g position b

al than the

rnings strea

owing comp

ready owns,

unity to up

a tendency

re tough or t

ore specific

g with busi

g what need

on our web

pins the way

cussed how

l merits

of

focus som

d, while ot

to the new

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not easy and

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hat is beco

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profits of to

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with

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8/19

March 20


1. SAI Busine

with in

improv

endors

floated

hallmar

A good

previou

shares

with th

Standa

We are

result

the gro

busines

propert

can be

evident

Our vieOur iss

debt?

and ne

net pro

multipl

To dat

division

unques

current

stock w

busines

13 Selector Aus


lobal (SAI): ss backgroun

SAI Glob

ormation ser

ment.” Eve

s independ

onto the sto

ks of a great

business ca

s managem

on issue. Th

e very best

ds regulatio

mindful of t

e have pref

up’s latest re

s provides a

y servicing h

sorted out a

in

future

pe

w e has alway

s things curr

debt of abo

fits are fore

of 13 and a

the group

and the roa

tionably ope

shareholderorth watchin

s couldn’t be

tralian Equities


hare price $

al’s website

vices and sol

those unf

nt assessm

ck market in

investment ‐

n be

put

at

nt embarkin

new mana

f intentions

, product ce

he pitfalls t

rred to watc

sults failing t

dependabl

ave added c

d that the e

iods.

s been, can

ently stand,

ut $200 mill

ast to reac

fully franked

has struggle

d ahead will

rates three

s will

contin

g and shoul

ruled out.

Fund Quarterly


.37 | market

outlines its

utions for m

miliar with

nt of produ

2003. There

simple, mon

risk from

po

g on a serie

ement team

to build thr

tification an

at can befal

h from the si

o meet inves

earnings b

sts and exe

xpected stro

managemen

SAI has over

ion. Group r

$41 million

yield of 4.4

d with bed

require cons

high quality

e to

give

m

it stumble

Newsletter #33

.au

capitalisatio

usiness as “

naging risk,

SAI would r

cts and serv

was much to

opoly and an

or execution

s of acquisiti

, led by CEO

ee stand alo

compliance

l a business

delines. Our

tor expectati

se, the ne

ution risk. M

ng growth th

avoid the p

$550 million

venue is ex

. On this ba

.

ing down a

iderable tim

businesses,

nagement t

urther the a

n $693 millio

roviding or

chieving co

ecognise th

ices. This is

like back th

annuity inco

. And

the

e

ons, increasi

Tony Scotto

ne formidab

risk manage

seeking to g

patience has

ons. In short

er earnings

anagement i

at underpinn

erils of grow

worth of int

ected to hit

is SAI is tra

quisitions u

and will tes

however it r

e benefit

of

set quality i

n

anisations a

pliance and

group’s “5

the core bu

n as the bus

me stream

rly signs

we

ng both the

n continued

le businesse

ment.

row by acqu

been rewar

while the o

streams of

s confident t

ed these inv

ing too fast

angibles on i

$480 million

elling on a

ndertaken i

t manageme

emains to b

the

doubt.

s such that a

round the w

driving busi

tick logo t

siness that

iness had all

odel.

ren’t good

debt levels

along this p

, encompas

isitions and

ed thus far

iginal Stand

compliance

hat these iss

estments wil

whilst takin

ts balance s

for 2013, w

prospective

its complia

nt’s resolve.

e seen whet

AI is

certain

takeover of

6

rld

ess

hat

as

the

ith

and

ath,

ing

s a

ith

rds

and

ues

l be

on

eet

hile

PER

nce

SAI

her

ly a

the


9/19

March 20


2. Jum Busine

activiti

online l

largest

playing

busines

billion

wager t

For gov

in tech

provide

Australi

relation

a risk t

cannot

In the

current

global

lottery

require

Our vieWe ack

their c

investe

remain

3. IRES

Busine

who op

core o

market

and ma

of the

the low

A case i

of mon

excelle

13 Selector Aus


o Interactivs backgrous, other tha

ottery busin

shareholder

in much the

s is valued a

f this total. I

o earn a con

ernments it r

ology, the

rs to

exploit

a, Jumbo ha

ship with lot

hat future a

be ruled out,

ean time, t

cash balanc

arkets of th

playing is gr

ments are rel

w nowledge th

re compete

d in Jumbo s

on board.

(IRE): shars backgrounerate in fina

fering as a

s. The busine

rket incumb

usiness des

er full year r

n point is th

ey to execut

t financial o

tralian Equities


(JIN): share d : The na

to suggest

ss that has

Mike Vever

same way th

$250 billio

mportantly, l

iderable pay

epresents a

mergence o

this significa

built a $100

tery provide

greements

although th

e business

e of $16 mil

e US, Mexic

wing in size

atively small

at the risks i

cy, remaine

me time ba

e price $7.75

: We profile

cial markets

leading soft

ss has evolv

ncy. Manag

ite the shor

ported profi

group’s pre

e the plan.

tcomes wit

Fund Quarterly


price $2.50 |

e Jumbo In

something b

een in oper

a is successf

at online has

, while onlin

ottery playin

out, despite

aluable sou

online playi

nt global

op

million loca

Tatts Grou

ay not be

group is pr

as grown ra

lion, CEO Ve

and Germa

and Jumbo s

and the busi

n Jumbo are

d debt free

ck and despi

|market cap

d the IRESS b

or financial

are supplie

d since its fo

ment is

not

term finan

t for 2012.

paredness t

his is a stra

out taking u

Newsletter #33

.au

market capi

teractive gi

ig. In short,

tion for ove

ully exploitin

emerged in

e is currentl

g is played s

he long odd

ce of revenu

ng has open

ortunity. Fr

l online lotte

under existi

enewed. M

pared shoul

pidly over th

verka has m

ny. These ar

eems to hav

ness is in str

higher but a

nd executed

e the strong

italisation $9

usiness in ou

lanning busi

r of service

unding in 19

ashamed of

ial impacts t

target new

egy that has

due risk. To

alisation $1

es little aw

the compan

a decade. T

g the growi

most walks

in its infan

cially and a

.

e and in kee

ed the door

m its

origins

ry business.

ng reseller a

nagement i

this ever ev

e past five y

oved to sec

early days

e a well tho

ng shape to

lso note tha

on a strate

move in the

92 million

r March 201

nesses woul

and tradin

93 and impo

oing what’s

hat such dec

overseas ma

served the

ay, the IRES

0 million ay to the g

has develo

he group’s fo

g adoption

f life. The to

y and repre

cepted for

ing with the

for Jumbo a

stretching

s

he group en

greements, a

candid tha

entuate.

ears and wit

re new opp

but the onli

ght out stra

undertake th

manageme

y that appe

company’s

quarterly n

be familiar

g platforms

tantly now e

right for

the

isions carry,

rkets by inve

company w

S trading plat

roup’s busi

ed a succes

unding CEO

of online lot

al global lot

ents about

hat it is, a s

changing tre

nd other lot

ome 13

year

joys a long t

lthough ther

such an e

h no debt a

ortunities in

e emergenc

egy. The ca

e task.

nt have stuc

ars realistic.

arket value

ewsletter. Th

with the gro

to the finan

njoys both s

long term

he

as evidence

sting small s

ll and deliv

form domin

7

ess

sful

and

ery

ery

2.5

all

nds

ery

s in

rm

e is

ent

d a

the

of

ital

to

We

we

ose

p’s

cial

ale

alth

by

ms

red

tes


10/19

March 20


the loc

gain ac

key to t

As such

compa

On this

reflecte

IRESS h

manag

a mark

the mo

Our vieWe ap

long te

focus a

2008 in

have c

stream

that cu

4. Com In man

has no

net pro

the bu

allowe

group s

registry

At its

charges

and w

increasi

last fe

positivenjoys

the glo

Our vieWe ha

and a

13 Selector Aus


l market, all

cess to live d

he IRESS bus

IRESS is a m

y delivers.

point, the c

d in the mo

as beaten th

ment group

t opportunit

ey thus far i

w laud the bus

m and their

nd a conserv

very good s

ntinued to i

has allowed

rently repre

utershare ( areas Com

become

th

fits exceedin

iness but hi

the group t

ervices over

managemen

eart, the C

on a per cus

en financial

ng numbers

years have

health of

t

scale, incum

al financial c

w e held a pos

usiness like

tralian Equities


owing stock

ata feeds w

iness is that

ust have ser

mpany has

st recent an

e incumbent

in the coun

y multiple ti

nvested will

iness ethos t

financial rec

ative approa

ape, despit

vest for to

the group t

ents a 5.0%

PU): share utershare h

e largest

glo

$300 millio

s initial app

act as an a

30,000 glob

t.

mputershar

tomer basis.

markets are

of sharehold

een tough o

he equity

m

ency and an

risis whilst al

itive view on

Computersh

Fund Quarterly


rokers, fun

ile also pro

it is a subscri

vice that will

orked hard

nouncement

s to supply S

ry, with IRE

es larger th

eliver excell

hat underpi

ord stands a

ch is applied

the drop in

orrow, a de

reward exi

ield.

rice $10.10|

s similarities

bal share

re

n. The found

roach to bui

ggregator of

al clients, pr

business i

As such, the

positive, as

ers that req

n companies

arkets. How

annuity typ

so taking ad

global shar

are is not o

Newsletter #33

.au

managers, f

iding all the ption based

live or die b

to develop lo

s from its n

esame Bank

S’s XPLAN fi

an Australia

ent returns o

s IRESS and i

s public reco

sensibly. Th

client dema

t free balan

sting shareh

market capit

to IRESS. A

istry player

er and now c

ld and oper

registry busi

dominately

volves a sca

company be

this invaria

ire the servi

like IRESS an

ver unlike

e income str

antage of ac

markets an

ly a best of

inancial plan

necessary c

odel delive

ased on wh

ng lasting re

west marke

all and Tow

ancial plann

nd provides

ver the ensu

ts managem

rd of what c

e business s

d. More im

e sheet and

lders with a

alisation $5,

business whi

ith revenue

hairman Chri

te a propri

esses both

around fina

lable inform

nefits enorm

ly leads to

ce. It would

d Computers

ther cyclical

am. This ha

quisition opp

d in particul

breed busin

ners and ind

mpliance re

ing time crit

t the client

lationships a

t the United

ry, two of th

ing business

considerable

ing years.

ent team. Th

an be achie

urvived the f

ortantly, wh

a high annui

n attractive

17 million ch had its or

s approachi

s Morris is n

tary softwa

ere and abr

cial markets

ation gather

ously from e

more corpor

come as no

hare, who re

businesses,

s seen the c

ortunities.

r the US for

ss, it also e

ividual client

quirements. ical informat

equires and

nd this has b

Kingdom. H

e largest we

software. Th

confidence

ey think and

ed when vis

inancial crisi

ile managem

ty type earni

dividend str

igins in Austr

g $2

billion

o longer run

re platform

oad. Today,

and specific

ing service

conomic gro

ate activity

urprise that

ly heavily on

Computersmpany weat

some time

njoys wonde

8

s to

The ion.

the

een

ere

alth

is is

hat

act

ion,

s of

ent

ngs

am

alia

and

ing

has

the

ally

hat

th

and

the

the

are

her

ow

rful


11/19

March 20


earning

capital season

5. Skill

Busine

service

require

speciali

infrastr

expand

CEO un

A serie

resultin

during

equity

current

group.

With a

McMah

financi

impres

A no n

structu

McMah

below

and the

Our vieThis is

attenti

custom

five yea

cash.

efficien

the eco

come.

13 Selector Aus


s leverage

employed th

.

d Engineerins backgroun. A national

ments and s

sts covering

ucture. The

ing nationall

il retiring an

of acquisitio

g in a geari

008 severel

t $1.50 per

CEO Mick M

background

on appears t

lly prepare

ed us but his

nsense app

e and drivi

on’s tenure

70 million, n

recommenc

w a tough busi

n. That sai

er contracts

rs. The busin

cMahon cle

cy, lowering

nomic swing

tralian Equities


hen conditi

us far and o

g (SKE): shar: The Skille

operator w

killed labour

a wide range

business w

in subsequ

d passing the

ns during th

g ratio of o

tested the

share. CEO

cMahon has

that includ

o have the

it for the

actions to d

oach exemp

g greater

to date. His

et profits are

ement of divi

ness, where

, Skilled do

xtending ou

ess requires

rly underst

cost and kee

, we suggest

Fund Quarterly


ons allow.

ur view rem

e price $3.50

group is Au

ith over 17

needs. As s

of industrie

s founded

ent years. T

baton onto

period 200

ver 50%. Th

usiness and

reg Hargrav

restored mu

s food grou

ecessary skil

ore difficul

te are what

lified by a f

se of tech

success can

set to hit a

dend payme

managing p

minates in

t two years f

little in the

nds what

n

ping debt to

that having

Newsletter #33

.au

anagement

ains that Co

|market capi

tralia’s and

offices, Ski

uch Skilled

s including m

by Frank Ha

e company

son Greg Har

and 2008 s

financial cr

managemen

es resigned i

ch needed fi

p Coles Gro

l sets to not

t times ahe

counts and t

cus on cutti

ology to lif

be seen in t

ew high of o

nts.

ople and m

any segme

or 50% of cli

ay of capital

eds to

be

d

a minimum.

placed the g

has deliver

mputershare

talisation $8

ew Zealand

lled assists

mploys ove

ining, oil an

rgraves in

listed in 199

graves in 200

w company

isis and do

t was forced

n 2010 and

ancial discip

up and priv

only run a la

d. Our me

that end he

ng waste, r

efficiency

e numbers,

ver $50 milli

eting custo

ts of the

nts, with an

and generat

one and

the

While Skilled

oup on a fir

d excellent

is a share t

47 million

s leading pr

clients with

50,000 tra

gas, transp

964, in Me

4, with Harg

3.

net debt blo

nturn that

to restructu

the external

line and busi

te equity fi

rge people b

tings with

has not disa

moving a bl

has been t

with debt l

n, along wit

er needs r

arket and

other 18% st

s significant

importance

will always

er footing, t

returns on

o own for

vider of staf

their workf

e and techn

rt, defence

lbourne, be

raves remai

out to $30

it the econ

e and raise

appointmen

ness rigor to

rm TPG Cap

usiness but

McMahon h

ppointed.

oated corpo

e hallmarks

vels now sit

higher mar

quires const

olds long t

retching bey

amounts of

of driving

m

e susceptibl

he best is ye

9

the

ost

fing

rce

ical

and

ore

ing

0m,

my

ew

t of

the

ital,

lso

ave

ate

of

ing

ins

ant

rm

ond

ree

ore

to

t to


12/19

March 20


6. Supe

Backgr

the diff

kicked

Super

The rol

and led

market

expect

The ab

survey

with th

over fi

The rol

named

attenti

The gr

accordi

retail c

where

the wa

improv

It might

Over th

the ma

million.

transac

this pu

market

Howev

Manag

tomorr

is too

e

Retail

establis

Even m

conser

receive

13 Selector Aus


r Retail Grouund busineerence betw

off a mail or

heap Auto b

lout model,

to the com

capitalisatio

tions were h

upt departu

d the circu

e appointme

e years and

lout of Supe

Boating, Ca

n.

up underto

ng to plan. It

nditions pos

irtles and hi

they appro

on costs an

sound

simpl

e ensuing ye

rket with th

Accompany

tion. In short

rchase. Desp

s applause. B

r, things are

ment has sh

w. The inter

arly to

deter

roup has co

hed retail b

ore impressi

atively gear

s.

tralian Equities


p (SUL): shars: The story

een a busine

der automot

usiness that

hich typifie

pany listing

n of $210 m

igh that the

re of respect

stances beh

t of

the

gro

ith strong

Cheap Aut

ping and

k acquisitio

s move into

t the 2008 gl

s team have

ach their tas

d lift margin

e but

many

r

ars, the grou

purchase o

ing the bu

, the compa

ite initial in

irtles is quick

never that si

own an abilit

net’s growin

mine how

w

ntinued to

ands includi

e, they have

d balance s

Fund Quarterly


e price $12.2

of Super Ret

ss that is go

ives busines

eventually e

s most retail

onto the sto

illion and 2

est was yet

ed CEO Tho

ind the mo

p’s CFO

Pet

etail experie

continued

ishing (BCF)

ns to provid

cycling in 2

obal crisis ha

really excell

k. No big ba

by adoptin

etailers fail

t

p continued

Rebel Spor

, the group

ny was askin

estor conce

to point out

mple.

y to deal wit

g penetratio

ell the

grou

eliver year

ng Harvey N

achieved th

eet. On this

Newsletter #33

.au

5|market ca

ail Group ex

d and one t

s from Quee

panded inte

concepts to

ck exchange

0 Super Ch

o come.

rn in 2006 p

e. However,

r Birtles

to

t

nce working

t pace, whil

, that began

e additional

08 has prov

s required a

d. If the Sup

ng sales pitc

better tech

jump

this

i

to lift reven

s from priva

also anno

g shareholde

rns, Birtles a

that what th

h the issues

is both a th

is

placed

to

n year, driv

orman, Mye

se results wi

score alone,

pitalisation $

emplifies wh

hat is great.

nsland. It b

rstate under

day, continu

in 2004. Wi

ap Auto sto

t a tempor

any concer

he top

job.

in the UK, Bi

e the newer

under Tho

scale althou

en a toughe

reater focus

er Retail Gro

h but a lon

ology and d

portant hur

es and mar

te equity fo

nced a larg

rs to trust

nd his team

ey have don

f today whil

reat and an

deal with

t

ing like for l

r and David

th a minimu

the group d

2,389 million

y managem

In 1972 Reg

came the fo

the leadersh

d well into

th a listing

res already

ry lid on thi

s should ha

aving worke

rtles hit the

outdoor ret

n’s watch,

gh not ever

ride while t

on costs. An

up has a key

term consis

elivering on

dle.

ins. In 2011

a total cas

e rights iss

anagement

have justifi

at Rebel is

t investing a

pportunity a

ese issues.

S

ike sales gro

Jones have

of fuss whi

eserves the

nt can ofte

and Hazel R

rerunner to

ip of Bob Th

the new dec

rice of $1.9

up and runn

ngs as inves

ve been alla

d with

Thorn

ground runn

il offering a

as given m

thing has g

he slowdow

d perhaps th

strength, it i

tent strateg

ustomer ne

Birtles surpri

outlay of $

e to fund

on the merit

ably earned

imply sales

nd preparing

nd once aga

o far,

the

Su

wth while m

stumbled ba

lst maintaini

attention it

10

be

we

the

rn.

ade

7, a

ing,

ors

yed

for

ing.

ptly

ore

one

in

is is

s in

to

ds.

sed

610

the

s of

the

01.

for

in it

per

ore

dly.

g a

ow


13/19

March 20


7. Brevi

Busine

you. Th

provide

with th

Howev

times a

penalty

The Br

home

Interna

Breville

At its c

mass m

the Kit

Cream

its role

Unfort

Breville

the eco

$12.5

coverinsome c

full yea

require

should

ones. T

brands,

Our vieManag

clearly i

group

sheet,

weaken

busines

13 Selector Aus


lle Group: shs Backgroune group’s we

r of small el

e brand wo

r, managem

head. Unde

, dropping th

ville busines

ares. It lis

ional in 200

Group name

re, manage

arket. Produ

hen Wizz Pr

Maker. In ad

as distributo

nately succe

’s distributio

nomics no l

illion in co

g overhead

c

ntext, Brevil

r, so the loss

managemen

’t come as

hese events

a point not l

w ment has d

s at a crossr

ontinues to

arrying net

ing share pr

s. SFM

tralian Equities


are price $5.

d : If you are

bsite describ

ctrical appli

ld have not

ent’s comm

those circu

e shares fro

s has history,

ed in 1999,

1. The busi

was

restore

ent has set

cts that hav

o Food Proc

dition, the g

of Keurig’s s

ss can often

n margin eff

nger justifie

mission rev

osts, some

le is forecast

of the contr

t to restruct

complete s

however rei

ost on mana

livered exce

ads as it dea

invest and

ash of

$50

ice provides

Fund Quarterly


34|market c

a whiz in t

es itself as “

nces in the

iced the gro

entary at th

mstances it

a high of $

dating back

before it

ess focus s

.

a strategy, t

flowed fro

essor, the Y

oup’s North

ingle serve c

bring its ow

ctively forc

d an ongoin

enue and fo

8 million

is

to generate

ct at the en

re its North

urprise that

force the i

ement.

llent results

ls with the lo

xpand the B

illion and

a

the ideal op

Newsletter #33

.au

pitalisation

e kitchen th

n Australian

consumer pr

up’s stellar

e interim so

didn’t take

.34. So what

to 1957 whe

as acquire

ifted towar

o develop pr

the group’s

uBrew Drip

America op

offee brewin

challenges.

d Breville m

investment.

r the full ye

xpected to

f

$73 million i

of 2013 wil

American op

distribution

portance of

or sharehold

ss of the Keu

reville owne

focus on

de

portunity to

694 million

e name Bre

publicly liste

oducts indus

inancial per

unded a wa

long for the

do we make

n it operate

by anothe

s electrical

emium bran

research an

Coffee Mak

rations hav

g system.

In the case

anagement t

During the

r close to $

lows to

the

n earnings b

l deliver a si

rations. Wh

eals can be

building and

ers over a n

rig distributi

d products.

livering long

re‐examine

ille may me

d company

try.” Even th

ormance ov

rning of pot

market to

of it?

as a small i

r listed gro

appliances a

ed products

d developm

er, and the

benefited e

f Keurig, th

o hand back

half, this bu

20 million is

ottom line.

efore interes

nificant dent

ile this has c

axed, partic

promoting

mber of yea

n deal. In th

With a cons

term sustain

the merits o

n somethin

hich is a lea

ose less fam

er recent ti

entially tou

impose its

porter of b

p, Housew

nd in 2008,

by avoiding

nt area incl

mart Scoop

normously f

decision to

the busines

iness genera

expected. A

To put

that

i

t and tax for

in earnings

me as a blo

ularly succes

ompany ow

rs. The busi

e meantime,

rvative bala

able earning

f this consu

11

to

ing

iliar

es.

her

wn

asic

res

the

the

de,

Ice

om

cut

s as

ted

fter

nto

the

and

, it

sful

ned

ess

the

nce

s, a

er


14/19

March 20


Govern

It may

BHP Bil

the att

Kloppe

outlinin

next th

to prot

As for

makes

positio

surplus

combin

So rath

big mi

expend

shareh

tomorr

that ou

should

more d

Table 1

Rio TintSales RNet ProEPS USDPS USPayout Net De

BHP BillSales RNet ProEPS USDPS USPayout Net De

Here it

cruisin

May an

13 Selector Aus


ment and oue a strange

liton and Rio

ntion of lat

s and Tom A

g long term

y are have e

ct the intere

he Prime M

it that far is

s of both th

in 2013,

the

ation of over

er than bank

ers are no

iture and ac

lder focus.

w. Well not

r miners co

prices drop s

ifficult.

: Financial sto venue US$’M fit After Tax US (ordinary) % t US$’M liton venue US$’M fit After Tax US (ordinary) % t US$’M helps to loo

along. As t

d October 2

tralian Equities


r big miners way to think

Tinto have i

. In the cas

lbanese hav

apital expen

xited, replac

sts of shareh

inister, the

still a long

e miners an

Treasurer

h

spending an

ing surpluses

different.

uisitions ha

o why hav

quite, but th

ldn’t ignore

harply, maki

nding of ou

$’M

$’M

k back on t

ings would

07 respecti

Fund Quarterly


about it but

common?

of both BH

moved on,

diture budge

d by new m

olders.

mens are n

way off. Ho

the Gover

as had

to

co

lower reven

, we now ne

aving enjoy

e dominate

things cha

e recent shar

. As price t

ng the task

r miners Full Year Dec25,400

7,800

5.50

1.04

19

2,800

Full Year June 47,500

13,700

2.340.47

20

8,700

e financial

ave it, both

ely. As the a

Newsletter #33

.au

what do the

or one thing

P Billiton an

extraordinar

ts to coincid

nagement,

t looking go

wever, mor

ment’s bud

ncede that

it

ues has forc

ed to conten

ed the fruit

the agenda

ged so fast,

p drop in iro

kers, our m

f funding ad

ember 2007

2007

standing of

Albanese a

ccompanyin

Federal Gov

, leadership i

Rio Tinto

as that ma

with ongoi

ow intent o

od although

startling ar

et position.

won’t get

w

d the inevita

d with cuts,

s of a stro

at the expe

surely the

ore prices

iners have

ditional long

Full Year De55,600

9,300

5.03

1.67

33

19,300

Full Year June72,200

17,100

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35

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oth these b

d Kloppers,

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ernment an

ssues have b

e already k

seem. One

g resources

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a Septembe

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cuts and mo

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se of financi

esources bo

as an impor

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term resour

cember 2012

2012

usinesses w

took over th

hlights, whils

our big min

een grabbin

ow that Ma

minute both

demand and

cash and loo

r election if

orating finan

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of that

targe

tening.

re cuts. Our

boom, ca

al prudence

om isn't en

tant wakeup

side protec

ce projects e

en things

eir CEO rein

t revenues h

12

ers,

all

rius

are

the

ing

she

cial

to

t. A

wo

ital

and

ing

call

ion

ven

ere

s in

ave


15/19

March 20


continu

billion, little be

debt ju

In isola

were a

worse

not dis

seen b

in both

In fina

and Rio

with a

favoura

turnaro

assets i

$US34

renewe

swiftly

of bot

Govern

expect The ne

Tensio

that is

of cour

Germa

agreem

Enough

Hindsig

many

pretty

each, t

the ec

process

In man

and w

other n

13 Selector Aus


ed to rise, so

while net d

tter, with ne

ping from

ion even at t

hieved durin

y ongoing la

imilar to the

th Rio and B

instances thi

cial markets

Tinto on

no

limited buffe

ble, with th

und can be

n boom time

billion since

d focus on f

o address th

companies

ment and Pri

d to be. SFM global war s have been

ard to conta

e talking ab

deutschma

ent that the

has been sa

ht is a wond

thers shoul

lear – no. A

e short

ans

nomic condi

involved.

ways curre

ile there ar

ations it app

tralian Equities


has net deb

bt has incre

t earnings o

S$8.7 billion

hese elevate

g times whe

rge capital e

Governmen

HP running

s is not the c

this hasn't

ice. In

the

c

r, action wa

e group’s A

sheeted ho

s. In the cas

2008. It is lit

inancial pru

e changing

so long to

me Minister

rising and b

in and wher

ut the globa

k, the Chine

gloves are w

id and writte

rful thing an

have aban

d without

er from

our

tions of the

cies reflect

significant

ars very wel

Fund Quarterly


. In the case

ased seven er the perio

to US$23.5

d debt level

mineral pri

penditure p

, during this

onservative

se and the t

one unnotic

se of

BHP,

t

needed to

rating revis

e to manag

of Rio, shar

tle wonder t

ence and s

conomic cli

see and do

will also hav

ehind closed

the conseq

l currency w

e yuan, the

ll and truly

n about the

d on reflecti

oned their

anting to ge

perspective i

day. They a

he underlyin

economic is

l placed. Tha

Newsletter #33

.au

of Rio, net p

old from US

rising from

illion.

coverage ap

es were at t

ojects that t

point of the

debt levels a

rue consequ

ed with rati

he group's

A

maintain thi

ed from sta

ment makin

eholders hav

hat new CE

areholder r

ate, but wh

what was

to make wa

doors gover

ences of in‐a

rs. Whether

US dollar or

ff.

euro fallout

n, whether c

own currenc

t into any le

s that

floatin

t as a self c

g strength o

ues that ne

t said, if and

ofits are up

$2.8 billion t

US$13.7 billi

pears adequ

eir peak. Thi

e miners ar

cycle, the pr

nd a tight co

nces of each

g agency St

rating was

l

rating. For

ble to nega

g the cardin

e endured w

's are usher

turns. It's cl

did it take

so obvious.

y, having de

nments are i

ction can lea

it’s the Swis

ur own Aust

nd the econ

ountries suc

ies for the

ngthy debat

g currencies

orrecting m

a nation. A

d addressin

when condit

rom US$7.8

o US$19.3 b

n to US$17.

ate, howeve

s is no longe

committed

eferred posi

ntrol on cost

are yet to pl

ndard & Po

ft intact

but

Rio Tinto th

ive. What t

al mistake o

rite‐offs tota

ed in at this

ear that act

management

Time will t

iated so far

n deep disc

d to many o

franc, the J

ralian dollar,

omic pain th

as Greece,

uro appears

s as to the

llow countri

chanism de

stralia has a

g, when co

ions deterior

billion to US

illion. BHP f

1 billion and

, these earni

r the case, m

to fund. In

ion should h

s. Unfortuna

ay out in full

or's placing

it did

warn

t

result was

riggered suc

f overpaying

ling a stagge

juncture wit

ion was nee

and the bo

ll whether

rom where t

ssions on a

tcomes. We

panese yen,

there is gen

at has follo

Portugal, Ital

on the sur

ros and con

es to

readjus

pite the pai

strong curre

pared to m

ate our curre

13

9.3

res net

ngs

ade

ays

ave

tely

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HP

hat

less

h a

for

ring

h a

ded

rds

this

hey

ar

are

the

eral

ed.

or

ace

s of

t to

nful

ncy

any

ncy


16/19

March 20


will no

interfer

process

compet

currenc

domest

restruc

up and

Our poi

going o

attemp

that it

to the

foreign

zone c

market

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interve

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Graph

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interfer

13 Selector Aus


doubt follo

ing with an is that chan

e effectively

y interventi

ic manufact

uring brings,

learn to com

nt of view m

n 6 Septemb

to protect t

ould no lon

euro. In

ord

currencies t

isis, the Swi

s analyst at B

ned during Bl

n months on

how long?

tion can wo

ble – a lesso

: Swiss fran

ger in all th

e with norm

tralian Equities


w suit. It’s

economy’s e is inevitab

without pro

n are quic

ring are all

the re‐direc

pete more ef

ay sound sen

er 2011 whe

he economy

ger allow on

er to

achiev

force its val

ss felt the

GC Partners,

ack Wednes

and as Gra

s Cooper no

rk in the ver

that the UK

v euro

is is the tit

al market w

Fund Quarterly


not perfect

self correcti

le and aimin

tection, is in

to denote

valid reason

ion of capit

fectively.

sible but it h

the Swiss G

. In pegging

e Swiss franc

e this,

the

B

ue down. Ha

eed to act

warned “th

ay in Septe

h 1 illustrat

ted "The Jap

y short term

learned fro

or tat ment

orkings. This

Newsletter #33

.au

but govern

g mechanis

to protect i

the long ru

why help is

s for assista

l to more pr

asn’t stoppe

overnment s

he franc to

to be worth

ank would

ing become

however, no

t central ba

ber 1992.”

s, the Swiss

anese exam

but changin

George Sor

lity that inv

need to ac

ents that t

m. What is dustries or

a flawed st

needed. Lo

ce but who

oductive are

countries t

tepped in to

he euro the

more than

ave to

purc

a safe haven

t everyone i

ks do not h

have kept t

le with yen

g long‐term

s".

riably result

and to pro

inker with t

often lost i

usinesses th

rategy. Thos

st jobs, mo

measures t

s and the in

king action.

devalue the

Swiss Natio

0.83 – equi

hase unlimit

from the rav

s convinced.

ve unlimite

e franc peg

intervention

global curre

s when one

tect is largel

his are dire

the discus

at can no lo

e who argue

re imports,

e benefits t

dustries that

Things really

Swiss franc i

al Bank war

alent to SFr

ed quantitie

ages of the e

Louise Coo

power – as

ed to the e

teaches us t

cy flows is

country trie

y driven by

14

ctly

ion ger

for

less

hat

set

got

an

ned

.20

of

uro

er,

the

ro.

hat

ear

s to

self


17/19

March 20


interest

things a

Japan,

moribu

that pr

export

action

countri

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expect

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the hit

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worth

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should

many r

devote

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its cor

foremo

before

The ne

financi

culmin

Swiss v

compa

set by

bonuse

It soun

manag

Swiss h

soon. S

13 Selector Aus


, that gover

re escalating

now under n

nd economy

int money a

demand. The

to compete

es including t

on effects

more of the s

ve pay ood thing m

ng on from t

list are the b

a may not b

stepped do

75 million.

reholders ca

be paid and

emuneration

to what exe

't begrudge

nt of interes

, remunera

st, rewardin

seeking grow

Swiss appr

l collapse of

ting in a nati

ters appear

y board me

shareholders and payme

s quite revo

ment teams

ave the righ

M

tralian Equities


ments are s

.

ewly install

by ordering

e invariably

Japanese in

for busines

he Chinese.

rom currenc

ame as each

any of our l

e European

ankers but w

that far aw

wn from BH

n judge whe

over what ti

packages a

cutives are p

paying top

t is in our o

ion policies

performan

th.

oach is still

Swissair in 2

onal referen

d to back hi

ber mandat

and

not

t

ts received

lutionary, bu

, with little

answer is u

Fund Quarterly


een to be d

d Prime Mi

he country’

signing up f

taking this a

. The weak

lready tensi

y wars are h

country loo

ocal executi

crisis, execut

hat the Swis

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e frame ha

nd unfortun

aid rather th

dollar for a

inion the ke

should enc

e that achie

in draft for

001, parliam

dum to corre

m and the o

es restricted

e board

an

or takeovers

t for too lon

kin in the g

p for debat

Newsletter #33

.au

ing somethi

ister Shinzo

central ban

or a weaker

tion have se

ning yen is

ons are high

rd to quanti

s to protect t

es don't rel

ive remuner

s are contem

y the reacti

cash, share

value for m

no easy sol

tely the an

an the busin

y managem

and measu

ourage man

ves the twin

but already

entarian Tho

ct what he c

tcome, shou

to one year

d certain

co

banned.

investors h

ame and a p

but this is

g to protect

Abe, appear

to be more

domestic cu

t a very clea

now placin

and some fo

y however it

heir own pat

on the Sw

ation has be

plating has f

n that greet

s and perfor

ney howeve

tion. We st

ual reports

ss itself.

ent team th

ing that is n

agement to

aims of pro

it has caus

mas Minder

lls the "rip

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erms, salari

mpensation

ve been pay

ropensity to

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jobs and in

s determine

expansiona

rrency in or

r message t

g pressure

rm of retalia

is safe to sa

ch of the wo

iss to set th

ome a very

ar reaching r

ed Marius Kl

ance rights

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uggle to act

of today ha

at delivers f

t a one size

think as o

tecting the

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has waged a

ff merchant

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s of executi

payments in

ing top dolla

chase grow

is unlikely t

ustries. Alre

to stimulat

y. Governm

er to stimu

at they will t

n neighbou

ion is expec

that we sh

rld. SFM

eir pay pack

ot topic. To

amifications

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r sharehold

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18/19

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13 Selector Aus


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Newsletter #33

.au

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Selector March 2013 Quarterly Newsletter

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