Future Generation Australia (FGX) H1 2024 earnings summary

Executive summary

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

• Operating profit before tax rose 18.2% to $29.6 million, with after-tax profit at $23.3 million, up from $20.8 million year-over-year.

• Total shareholder return reached 9.8% (11.1% including franking credits), aided by share price appreciation and narrowing of the share price discount to NTA from 17.1% to 12.8%.

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

• Maintains a diversified portfolio focused on small, mid, and micro-cap Australian equities, with ongoing commitment to social impact investments.

Financial highlights

• Fully franked interim dividend increased to 3.5 cents per share, with an annualized yield of 5.9% (8.4% grossed up).

• Profits reserve stands at $132.9 million, providing five years of dividend coverage.

• Net profit after tax: $23.3 million; earnings per share: 5.73 cents.

• Pre-tax NTA per share: $1.35; after-tax NTA per share: $1.31.

• Dividends paid during the period: $13.6 million.

Outlook and guidance

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

• 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.

• To maintain the annualized grossed-up dividend yield of 7.4% on pre-tax NTA, portfolio must grow more than 8.4% per annum.