Mirrabooka Reports 63.6% Profit Increase with Portfolio Return at -10.8%

Profit Growth Masks Portfolio Underperformance

Mirrabooka Investments Limited (ASX:MIR) reported a net profit of $13.0 million for the 2026 financial year, a strong 63.6% increase from $7.9 million in 2025. This profit growth was driven by higher income from investments, which rose to $13.4 million from $10.7 million, alongside improved contributions from the trading and options portfolios.

However, the total portfolio return including franking credits was a disappointing negative 10.8%, significantly trailing the combined S&P/ASX 200 Small Ordinaries and Mid Cap 50 Accumulation Index benchmark return of 7.8%. This underperformance was largely attributed to sector rotation and a marked de-rating of technology-related holdings, exacerbated by global concerns over artificial intelligence investments by US tech giants.

Dividend Boost and Capital Gains Distribution

In response to the year's results, Mirrabooka declared a fully franked final dividend of 6.5 cents per share plus a special dividend of 3.0 cents, bringing the total dividend for the year to 14.0 cents per share, up from 11.0 cents in 2025. Notably, the entire dividend is sourced from capital gains on which the company has paid or will pay tax, with an attributable LIC capital gain of 13.57 cents per share. This structure may allow some shareholders to claim tax deductions.

Realised gains after tax from profitable sales during the year amounted to $20.4 million, down from $26.5 million the previous year. The company maintains a franking reserve of 27 cents per share after the dividend payment, supporting its long-standing commitment to fully franked dividends.

Portfolio Moves Reflect Market Realities

Mirrabooka’s portfolio, focused on small and mid-cap companies in Australia and New Zealand, experienced significant sector divergence. The fund has minimal exposure to mining companies, a deliberate strategy that contributed to its underperformance given the strong returns in resources sectors like lithium, gold, copper, and uranium.

Key portfolio changes included the exit of Lynas Rare Earths following its inclusion in the ASX 50 Leaders Index and the sale of Infomedia after its takeover. Conversely, the company made notable new investments in ASX, attracted by its fallen share price amid regulatory challenges, and Web Travel Group, capitalising on travel sector disruption. Several previously sold stocks were repurchased, including Temple & Webster Group, Macquarie Technology Group, and CAR Group, although some buybacks were considered premature and weighed on short-term returns.

Leadership Transition Marks New Chapter

After over 31 years with Mirrabooka, including eight as CEO and Managing Director, Mark Freeman retired at the end of the 2026 financial year. His tenure was marked by steady leadership and a deep understanding of the investment landscape. Alison Gibson, an experienced investment professional with over 25 years in portfolio management and equity research, succeeded Freeman effective 13 July 2026. Gibson is well known to shareholders, having previously managed portfolios for Mirrabooka and related LICs.

Share Price Discount Widens Amid Market Volatility

At year-end, Mirrabooka’s shares traded at a 12.5% discount to net asset backing per share, a widening gap that contributed to a share price return of negative 20.7% including franking, underperforming the portfolio return. Since its listing in 2001, the company has delivered an annualised share price return of 11.3% including franking, outperforming its benchmark and the broader S&P/ASX 200 index.

Market headwinds included geopolitical tensions in the Middle East, inflationary pressures, and subdued consumer confidence in Australia, which collectively weighed on profit expectations for many holdings. Technology and growth stocks faced particular pressure amid concerns over disruption risks and valuation uncertainties.

Long-Term Track Record and Outlook

Despite the challenging year, Mirrabooka’s 27-year track record remains robust, with an 11.6% per annum return including franking since inception, outperforming its benchmark indices. The company emphasises its medium to long-term investment philosophy focused on quality small and mid-sized companies with sustainable earnings growth and attractive fully franked dividends.

Looking ahead, the company acknowledges limited near-term visibility due to volatile macroeconomic and geopolitical conditions, as well as momentum-driven investor behaviour. Nevertheless, Mirrabooka remains confident in the portfolio’s diversified exposure and the potential for earnings growth from businesses with durable competitive advantages to translate into attractive shareholder returns over time.