WAM Microcap Posts 27% Net Profit Rise, Declares 5.3c Fully Franked Dividend
WAM Microcap Limited reported a robust 27% increase in net profit for FY2025, driven by strong portfolio returns and sustained dividend payments. The company’s investment strategy continues to outperform the market, underpinning an optimistic outlook for micro-cap equities.
- Net profit after tax rises 27.4% to $43.6 million
- Investment portfolio returns 18.8%, beating benchmark by 6.5%
- Fully franked full year dividend maintained at 10.6 cents per share
- Net tangible asset backing per share increases to $1.43 before tax
- Board optimistic on micro-cap outlook amid easing interest rates
Strong Financial Performance
WAM Microcap Limited has announced a significant uplift in its financial results for the year ended 30 June 2025. The company reported revenue of $69.36 million, an operating profit before tax of $59.71 million, and a net profit after tax of $43.58 million. These figures represent increases of approximately 21%, 27%, and 27% respectively compared to the prior year, underscoring the strength of its investment portfolio and operational execution.
The company’s net tangible asset (NTA) backing per share rose to $1.43 before tax, reflecting solid asset growth and effective capital management. This growth in NTA is a key indicator of value creation for shareholders, particularly in the context of a listed investment company (LIC) structure.
Investment Portfolio Outperformance
Central to WAM Microcap’s success is its investment portfolio, which returned 18.8% for the financial year, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 6.5%. Since its inception in June 2017, the portfolio has delivered an impressive annualised return of 16.3%, exceeding the benchmark by 9.5% per annum.
This consistent outperformance is attributed to the company’s disciplined investment approach, focusing on undervalued Australian micro-cap growth companies with market capitalisations under $300 million at acquisition. The portfolio is diversified across sectors, with notable contributions from financial services, industrials, consumer discretionary, and information technology.
Dividend Policy and Shareholder Returns
Reflecting the company’s strong earnings and cash flow, the Board declared a fully franked final dividend of 5.3 cents per share, maintaining the full year dividend at 10.6 cents per share. This dividend is fully franked at the 30% corporate tax rate, providing shareholders with valuable tax credits.
The dividend yield stands at a robust 7.3% based on the 30 June 2025 share price, with a grossed-up yield of 10.4% when accounting for franking credits. Since listing in 2017, WAM Microcap has paid over 100 cents per share in dividends and franking credits, delivering attractive income alongside capital growth.
Strategic Outlook and Market Environment
Chairman Geoff Wilson AO and Lead Portfolio Manager Oscar Oberg CFA expressed confidence in the outlook for Australian micro-cap companies. They highlighted the benefits of easing inflation, falling interest rates, and an improving capital markets environment as catalysts for renewed capital raisings and takeover activity in the sector.
The investment team remains committed to its research-driven and market-driven investment processes, targeting undervalued growth businesses with clear catalysts for re-rating. Recent successful investments and takeovers, including Generation Development Group, Tuas Limited, and Service Stream, exemplify the portfolio’s dynamic approach.
Governance and Risk Management
WAM Microcap maintains rigorous governance standards, with an experienced Board and oversight of risk management practices. The company’s auditor, Pitcher Partners Sydney, provided an unqualified audit opinion, affirming the integrity of the financial statements and disclosures.
Management fees and performance fees are structured to align interests with shareholders, with performance fees payable only when the portfolio outperforms its benchmark. The company’s cash holdings and diversified portfolio help mitigate liquidity and market risks.
Bottom Line?
With a strong track record and a healthy dividend yield, WAM Microcap is well positioned to capitalise on the evolving micro-cap landscape in FY2026.
Questions in the middle?
- How will WAM Microcap navigate potential market volatility amid geopolitical tensions?
- What new micro-cap sectors or companies might the investment team target next?
- How might regulatory changes impact the company’s dividend franking and capital management?