WAM Microcap (WMI) H2 2024 earnings summary

Executive summary

• All four managed funds delivered strong FY2024 investment performances, with WAM Capital (+26.4%), WAM Research (+30.7%), WAM Microcap (+21.6%), and WAM Active (+25.8%) significantly outperforming relevant ASX indices.

• WAM Capital and WAM Research exceeded the Small Ordinaries Index by 17% and 21.4%, respectively, marking their best results in over a decade.

• WAM Microcap outperformed by 12.3% for the seventh consecutive year, maintaining a 15.9% annualized return since inception.

• WAM Active achieved a 29.4% total shareholder return and outperformed its benchmark by 25.8%.

• Dividends remained robust across all funds, with high franking levels and substantial profit reserves.

Financial highlights

• WAM Capital paid a 15.5 cps full year dividend (60% franked), while WAM Microcap paid 10.5 cps fully franked, and WAM Research paid 10.0 cps (60% franked).

• Dividend yields: WAM Capital 10% fully franked (grossed-up 12.3%), WAM Microcap 7.3% fully franked (grossed-up 10.4%), WAM Research 10.7%, WAM Active 10.1%.

• Profit reserves: WAM Capital 18.8 cps, WAM Research 45.1 cps, WAM Microcap 41.1 cps (covering 3.9 years of dividends).

• WAM Capital's NTA declined ~5% per year over five years, mainly due to high dividend payouts.

• Operating profit before tax rose 32.7% to $46.9 million, and after tax to $34.2 million.

Outlook and guidance

• Small cap underperformance is viewed as cyclical, with expectations of a rebound once interest rate cuts materialize.

• Positive outlook for increased IPOs, capital raisings, and corporate activity in FY2025, with portfolios positioned for opportunities at decade-low valuations.

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

• Reporting season was mixed; large caps outperformed small caps, with only 8% of small cap companies upgrading guidance.

• Sectors with positive outlooks include healthcare, financial services, and select industrials.