VG1’s $43M Loss Raises Questions on Dividend Sustainability and Buy-Back Impact

Financial Performance and Portfolio Returns

VGI Partners Global Investments Limited (ASX: VG1) has revealed a challenging half-year financial performance for the six months ended 31 December 2024. The company reported a significant operating loss before tax of $61.9 million, translating to a net loss after tax of $43.1 million, a stark deterioration compared to a $4.6 million loss in the prior corresponding period. This downturn was driven by a portfolio return of -9.7% net of fees, reflecting difficult market conditions and investment headwinds.

The company’s share price return also declined by 4.4% over the half-year, underperforming the portfolio’s net asset value movement. The net tangible assets (NTA) per share, post-tax and excluding deferred tax on unrealised gains and losses, fell to $2.01 from $2.23 at the previous half-year, highlighting the impact of the negative returns on shareholder value.

Dividend Policy and Capital Management

Despite the losses, VG1 has announced an increase in its interim fully franked dividend to 6.0 cents per share, up from the previous 5.0 cents. This dividend will be paid on 24 March 2025 and qualifies for the company’s Dividend Reinvestment Plan (DRP), which remains in operation. The board has updated its dividend policy to target a minimum of 6.0 cents per share on a six-monthly basis, signaling a commitment to returning capital to shareholders even amid volatility.

Capital management remains a key focus, with the company actively pursuing an on-market share buy-back program. During the half-year, VG1 repurchased over 30 million shares at a cost of approximately $57.7 million. Following shareholder approval at the 2024 AGM, the company now has the capacity to buy back up to 67.4 million shares over the next 12 months, representing about 25% of shares on issue as of October 2024. This buy-back strategy aims to enhance shareholder value by reducing share count and supporting the share price.

Portfolio Positioning and Investment Strategy

VG1’s portfolio remains actively managed with a net equity exposure of approximately 95%, achieved through a gross long position of 147% and short positions totaling 51%. This leverage and hedging approach reflects the company’s strategy to generate alpha through concentrated global equity investments, both long and short. The investment manager, Regal Partners Limited, continues to align closely with shareholders, covering the majority of operating costs to support the company’s financial position.

Outlook and Subsequent Developments

Post the reporting period, VG1’s portfolio rebounded with an 8.4% return in January 2025, suggesting a potential recovery trajectory. The company’s net assets stood at $528.4 million as of 31 December 2024, down from $643.1 million six months earlier. The board’s decision to increase the dividend and maintain an aggressive buy-back program underscores confidence in the company’s long-term strategy despite near-term challenges.

VG1’s transition to KPMG as its auditor during the period also marks a governance update, with the new auditor confirming no independence issues. Investors will be watching closely how VG1 navigates market volatility and whether the enhanced dividend and buy-back initiatives can restore shareholder confidence and value.