WAM Microcap (WMI) H2 2024 earnings summary

Executive summary

• All four managed funds outperformed their benchmarks in FY2024, with WAM Capital and WAM Research notably outperforming the All Ordinaries Index by 14% and 18%, and the Small Ordinaries Index by 17% and 21% respectively.

• WAM Microcap delivered a 21.6% return, outperforming its benchmark by 12.3% for the seventh consecutive year.

• WAM Active achieved a 25.8% portfolio performance, with a 29.4% total shareholder return.

• Dividends remained robust and highly franked across all funds, with substantial profit reserves maintained.

• Operating profit before tax rose 32.7% to $46.9 million, and after tax to $34.2 million, both up year-over-year.

Financial highlights

• WAM Capital: 26.4% portfolio performance, 17.1% outperformance vs. S&P/ASX Small Ordinaries, 15.5 cps full year dividend (60% franked), and a fully franked dividend yield of around 10%.

• WAM Microcap: 21.6% portfolio return, 12.3% outperformance, 10.5 cps fully franked dividend, 7.3% yield, and 3.9 years of dividend coverage.

• WAM Research: 30.7% portfolio performance, 21.4% outperformance, 10.0 cps full year dividend (60% franked).

• WAM Active: 25.8% portfolio performance, 6.0 cps fully franked dividend, 7.1% dividend yield.

• Net tangible assets (NTA) have declined by about 5% per year over five years due to high dividend payouts, despite market outperformance.

Outlook and guidance

• The team remains bullish on small and micro caps, expecting improved performance if market conditions turn favorable and interest rates fall.

• Positive outlook for increased IPOs and capital raisings in FY2025, with a focus on undervalued opportunities.

• Dividend increases are unlikely in the near term due to already high payout ratios and the need to balance capital preservation.

• Investment process emphasizes diligent research, free cash flow, and market catalysts to identify mispricing opportunities.