Future Generation Australia (FGX) H1 2024 earnings summary

Executive summary

• Operating profit before tax rose 18.2% to $29.6 million for the half year ended 30 June 2024, with after-tax profit at $23.3 million, up from $20.8 million year-over-year.

• Investment portfolio delivered a 6.6% return over the six-month period, outperforming benchmarks with lower risk and strong active management from 18 leading fund managers.

• Six-month total shareholder return reached 9.8% (11.1% including franking credits), driven by share price appreciation and dividend payments.

• The company maintains a unique model combining investment returns with significant social impact, donating AUD 43.3 million to youth-focused not-for-profits since inception, including AUD 5.4 million this year.

• Increased fully franked interim dividend to 3.5 cents per share, providing an annualised yield of 5.7% and grossed-up yield of 8.1%.

Financial highlights

• Net profit after tax: $23.3 million (HY2023: $20.8 million); earnings per share: 5.73 cents (HY2023: 5.13 cents).

• Profits reserve at 31 July 2024 stood at 35.1 cents per share, covering 5.0 years of dividends before the latest interim payment.

• Since inception, 66.4 cents per share paid in fully franked dividends.

• Share price discount to NTA narrowed to 12.8% from 17.1% at end-2023.

• Fully franked interim dividend increased to 3.5 cents per share, annualised yield 5.7% (grossed-up 8.1%).

Outlook and guidance

• Active management in small, mid, and micro-cap sectors expected to drive long-term outperformance.

• To maintain a 7.4% annualised grossed-up dividend yield, portfolio must grow over 8.4% per annum.

• Rate cuts in Australia anticipated next year, with a shallow cycle expected; cyclical strength in small/mid-caps may be delayed.

• U.S. Fed likely to begin rate cuts in September, but no major cyclical upturn expected.