Underwood Capital Posts $0.243m Profit, Cuts Costs, and Raises NTA per Share

• Profit of $0.243 million reversing prior year loss
• Net tangible asset backing per share increased from 9.1 to 9.3 cents
• Operating expenses reduced to $0.9 million from $1.1 million
• On-market share buyback reduced issued shares by 4.5 million
• Investment strategy revised to focus on value-oriented, concentrated long-term positions

Return to Profitability

Underwood Capital Limited (ASX, UWC) has announced a profit of $0.243 million for the financial year ended 30 June 2025, a notable turnaround from a loss of $0.131 million in the prior year. This improvement was primarily driven by positive changes in the market value of its investments in listed Australian securities, reflecting a more favourable market environment and effective portfolio management.

Strategic Share Buyback Enhances Shareholder Value

The company undertook an on-market share buyback during the year, acquiring approximately 4.5 million shares at a total cost of $0.23 million. This reduction in the number of issued shares contributed to an increase in net tangible asset backing per share from 9.1 cents to 9.3 cents, despite the total net tangible assets remaining steady at around $19.2 million. The board viewed the buyback as a prudent capital management move, especially given the discount at which the shares were trading relative to their underlying asset value.

Cost Management and Operational Efficiency

Operating expenses fell to $0.9 million from $1.1 million in the previous year, reflecting ongoing efforts to streamline the company’s cost structure. Directors also voluntarily reduced their fees further in November 2024, underscoring a commitment to cost discipline. These savings have helped improve the company’s bottom line and provide greater flexibility for future investments.

Investment Strategy Shift

Underwood Capital has revised its investment approach to focus on concentrated, long-term positions in undervalued and overlooked companies, aiming to outperform global equity markets over rolling five-year periods. Since implementing this strategy in July 2023, nearly $11 million has been deployed, generating an approximate 29% annual return for the year ended June 2025. The portfolio is managed by HD Capital Partners under a five-year agreement, emphasizing capital growth while managing risk through diversification.

Dividend Policy and Outlook

The company did not declare or pay dividends during the year, citing a lack of material franking credits and a desire to maintain capital allocation flexibility. Underwood Capital’s board indicated dividends will be considered when appropriate, balancing shareholder returns with investment opportunities. Looking ahead, the company’s performance remains closely tied to global equity market conditions, with ongoing risk management policies in place to navigate market volatility.

Bottom Line?

Underwood Capital’s return to profit and strategic capital management signal a cautious but optimistic path forward amid evolving market conditions.

Questions in the middle?

• How will Underwood Capital’s revised investment strategy perform in more volatile markets?
• What is the potential impact of the share buyback on liquidity and future capital raising?
• When might the company consider resuming dividend payments to shareholders?