How Did NAOS Cut Losses by 63% and Still Declare a Dividend?
NAOS Small Cap Opportunities Company Limited reported a significantly reduced loss for FY25 and declared a final quarterly dividend, while outlining a cautiously optimistic outlook for FY26 driven by core portfolio improvements.
- Loss after tax narrowed 63% to $9.071 million in FY25
- Final quarterly dividend of 1.25 cents per share declared, unfranked
- Net tangible asset backing per share declined to $0.47 post-tax
- Investment portfolio returned -9.08% for FY25 but +12.2% over five years
- Disciplined capital management with on-market buybacks and dividend reinvestment plan
Financial Performance and Dividend
NAOS Small Cap Opportunities Company Limited (ASX – NSC) has reported a marked improvement in its financial results for the year ended 30 June 2025. The company narrowed its loss after tax to $9.071 million, a 63% reduction compared to the prior year. This improvement reflects a combination of portfolio gains and disciplined cost management amid a challenging market environment.
Despite the loss, the company declared a final quarterly dividend of 1.25 cents per share, continuing its commitment to providing a sustainable income stream to shareholders. Notably, this dividend is unfranked, reflecting the company’s current franking account position. The dividend reinvestment plan remains in operation, offering shareholders the option to reinvest dividends into additional shares.
Net Tangible Assets and Portfolio Performance
The net tangible asset (NTA) backing per share decreased to $0.47 post-tax at 30 June 2025, down from $0.59 the previous year. This decline aligns with the portfolio’s performance over the year, which saw a negative return of 9.08%. However, the longer-term investment horizon remains positive, with a five-year annualised return of 12.2%, outperforming the S&P/ASX Small Ordinaries Accumulation Index benchmark by 10 percentage points.
The portfolio is concentrated in emerging Australian and New Zealand companies, with key holdings including COG Financial Services, MaxiPARTS, Big River Industries, and AMA Group. These companies have been highlighted for their strategic resets, operational improvements, and growth potential, which underpin the company’s cautious optimism for the year ahead.
Capital Management and Board Alignment
NAOS continues to pursue a disciplined capital management strategy focused on enhancing shareholder value. This includes on-market share buybacks, which reduced shares on issue by approximately 1.3 million during the year, and the active use of the dividend reinvestment plan to avoid dilution. The board views these initiatives as effective tools to maintain net tangible asset integrity and support share price stability.
The board of directors, led by Independent Chair David Rickards OAM, comprises experienced professionals with deep equity market expertise and strong alignment to shareholders. Directors and key management collectively hold over 3.2 million shares, reinforcing their commitment to the company’s long-term success.
Outlook for FY26
Looking ahead, NAOS projects a cautiously optimistic outlook for FY26, anticipating portfolio growth in the range of 10-20%. The investment manager highlights early signs of recovery in emerging companies, supported by improving economic conditions and a more favourable risk-return environment. Key portfolio companies are expected to deliver more consistent earnings growth, with operational improvements and strategic initiatives gaining traction.
While the company acknowledges that share price re-ratings often lag fundamental improvements, it remains focused on its core investment philosophy of backing quality emerging companies with aligned management teams. The board and management reaffirm their commitment to delivering sustainable, positive returns for shareholders through a concentrated and actively managed portfolio.
Bottom Line?
NAOS Small Cap Opportunities’ improved FY25 results and strategic capital management set the stage for a potential turnaround, but investors will watch closely for sustained portfolio momentum and dividend sustainability.
Questions in the middle?
- How will NAOS navigate the challenges of unfranked dividends amid evolving tax positions?
- What operational milestones must key portfolio companies achieve to drive the anticipated FY26 growth?
- Could ongoing market volatility impact NAOS’s ability to maintain its disciplined buyback and dividend policies?