Investment Matters

Pacific Brands

The Pacific Brands result, however, was the most notable, coming in ahead of our expectations (which had been upgraded in June) and with profit guidance +30%(!!) ahead of our expectations for FY-16. Pacific Brands expects profit growth in FY-16, which is remarkable given the significant headwinds a lower A$ has on the business (it now imports most of its product).

The gratifying thing about Pacific Brands is that after several years of hard work by management (divestments and restructuring) the business is lean and much focused.  As we have always said, it is only really Bonds and Sheridan that drive the business. Now that the company is simplified and clean the market is beginning to see this and it likes what it sees. This is very similar to what has occurred at QBE and Suncorp in the past two years.

This turnaround of Pacific Brands is heartening to us, and gives us confidence that the similar exercises we are seeing at EmecoAusencoSouth32 and Transpacific will also end up bearing strong fruit.  The market will soon cotton-on to the real strength and positive futures they also have.  Presently they are priced for eternal doom.

As important, however, we saw strong performers from our more recognised positions. AveoChallengerIngenia, the 360 Companies and sadly (given its takeover) Energy Developments. These are all terrific businesses that are reliable and in the case of the first three with strong long term structural growth drivers. We especially love seeing our good businesses working hard and getting better every year. This is the largest part of our portfolio.