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IMPQ September Monthly Report & Update

IMPQ Monthly Report
  • The Fund finished the month up 2.9% net of fees, outperforming the benchmark by 0.3%. Since inception in May 2019, the Fund has delivered +6.7% return net of fees, outperforming the benchmark by +3.9% p.a after fees.
  • Positive contributors this month included Kathmandu Holdings (+20.2%), Netwealth Group (+19.4%), Blackmores (+18.8%), City Chic Collective (+16.6%) and Genex Power (+16.3%).
  • Negative contributors this month included Bravura Solutions (-14.5%), Imricor Medial (-9.7%) and Sims Metal Management (-9.5%).
Performance
Month (%)Quarter (%)FYTD (%)1 Year (% p.a.)Since Inception* (%)
eInvest Future Impact Small Caps Fund2.95.55.5-6.7
S&P/ASX Small Ordinaries Index2.63.13.1-2.8
Added value (detracted)0.32.42.4-3.9

^Inception date was 23 May 2019. Fund returns are calculated using net asset value per unit at the start and end of the specified period and do not reflect the brokerage or the bid ask spread that investors incur when buying and selling units on the ASX. Past performance is not a reliable indicator of future performance.

Monthly Highlight

During the month Fund holding Kathmandu announced that it is now a “Certified B Corporation”.  Certification is carried out by B Lab that is a global non-profit that promotes the use of profits and growth as a means to a greater end.

The B Corp website states “Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose.  B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.”  Kathmandu is the largest Certified B Corp in Australia and New Zealand.

IMPQ Review

The Fund finished the month up 2.9% net of fees, outperforming the benchmark by 0.3%. Since inception in May 2019, the Fund has delivered +6.7% return net of fees, outperforming the benchmark by +3.9% p.a after fees.

Positive contributors this month included Kathmandu Holdings (+20.2%), Netwealth Group (+19.4%), Blackmores (+18.8%), City Chic Collective (+16.6%) and Genex Power (+16.3%).

Negative contributors this month included Bravura Solutions (-14.5%), Imricor Medical (-9.7%) and Sims Metal Management (-9.5%).

In addition to announcing that it had achieved B Corp certification (see page 1), Kathmandu delivered a better than expected full year 2019 result with NPAT +14.0%.  Pleasingly, FY20 is off to a solid start with same store sales growth running at 6.0% for the Group.

The Company’s CEO Xavier Simonet highlighted that the company’s focus on sustainability was a key part of the success, saying in the Australian Financial Review “We think it adds value and we think it’s a hugely motivational factor for team members…We don’t see any direct contradiction between being a profitable company listed on the stock market that delivers value to its shareholders and at the same time [being} a company that is focused on ethical practices and sustainability.”

Genex Power (+16.3%) confirmed that construction of the company’s 50MW Jemalong Solar project is expected to commence in September and the company’s K2 Hydro Battery project is on track to commence construction this year pending finalization of the recently announced transmission line arrangements and partner final board approvals.

Sims Metal Management (-9.5%) fell after providing a trading update which suggested that the company’s first half result will be materially lower than last year due to the impact of trade wars on the pricing of the company’s recycled iron and aluminum products.

In terms of trading activity, during the month we took profits in Mercury Energy, Imricor, Netwealth and NIB Health and added to positions in Sims Metals Management, Ororaand Pendal.

The Fund participated in a capital raising for Calix.  Calix raised capital to acquire Inland Environmental Resources, a U.S business which complements the company’s Australian Magnesium Hydroxide Liquid business in the environmentally friendly treatment of waste water.

At month end, IMPQ held 41 stocks and cash is at 4.9%.

Our focus continues to be on investing in companies that are making a positive contribution to creating a sustainable future.

Our focus continues to be on investing in companies that are making a positive contribution to creating a sustainable future.

Activity

Recent ESG-related engagement included:

  • Synlait (held) – discussed the company’s approach to reducing on-farm GHG emissions and the company’s recent ESG linked-loan under which the interest rate paid by the company varies according to the company’s independently assessed ESG performance.
  • Cleanaway (held) – we engaged in relation to the company’s approach to the circular economy and recycling projects, efforts on waste-to-energy and landfill energy projects, improvements in relation to sustainability disclosure, key safety issues and governance.
  • Kathmandu (held) – discussed the company’s approach to sustainability in product design and due diligence on the supply chain of Rip Curl as part of the company’s acquisition of the business.
  • Genex (held) – engaged with the company in relation to  improving board structure.
  • Ingenia (held) – discussed the company’s approach to supply chain and initiatives to install solar panels in villages.
  • Baby Bunting (not held) – we engaged with the company in relation to remuneration and provided the company with suggestions for consideration.
  • Nearmap (not held) – we discussed the company’s approach to improve ESG reporting.
  • Adairs (not held) – discussed the company’s approach to Modern Slavery Act reporting and phasing out the use of plastics in the business.

To read more about eInvest Future Impact Small Caps Fund (Managed Fund) ASX: IMPQ, click here.

Past performance is not a reliable indicator of future performance. Please read the PDS prior to investing. This information is general in nature and is subject to the terms and conditions outlined here.