Glennon’s Portfolio Underperformance Raises Dividend Sustainability Questions

Half-Year Financial Results Reveal Portfolio Struggles

Glennon Small Companies Limited (ASX, GC1) has reported a challenging half-year ending 31 December 2025, posting a loss before tax of $1.208 million and a net loss after tax of $868,000. This marks a significant reversal from the prior corresponding period, which saw a profit before tax of $4.919 million. The downturn was primarily driven by realised and unrealised losses on the company’s investment portfolio, which returned -5.04% over the six months, trailing the S&P/ASX Small Ordinaries Accumulation Index benchmark by more than 22 percentage points.

Dividend Policy Maintains Shareholder Support

Despite the loss, Glennon declared an interim dividend of 1 cent per fully paid ordinary share, fully franked at 25%, payable on 31 March 2026. Additionally, an unfranked dividend of 34 cents per Resettable Redeemable Convertible Preference Share (RRCPS) was announced for the same date. The company continues to offer a Dividend Reinvestment Plan (DRP) with shares issued at a 3% discount, providing shareholders with flexible options amid the volatile market environment.

Balance Sheet and Asset Backing

The net tangible asset (NTA) backing per share declined slightly to $0.7511 before tax, down from $0.7925 a year earlier. This figure includes a deferred tax asset component related to prior and current year tax losses. The company’s total assets stood at $41.3 million, with liabilities of $5.9 million, resulting in net assets of $35.4 million. The capital structure remains robust, with ordinary shares issued totaling approximately 48.5 million and RRCPS valued at $5.75 million.

Metgasco Convertible Loan Extension

A notable development during the period was the extension of the repayment date for the convertible loan to investee company Metgasco (ASX, MEL) to 30 June 2026. This loan, secured against Metgasco’s assets and linked to its Vali and Odin gas field projects, represents a significant Level 3 financial asset on Glennon’s balance sheet. The extension provides Metgasco with additional flexibility to manage production and revenue challenges, while Glennon maintains exposure to potential upside through conversion rights.

Management and Governance

Glennon Capital Pty Ltd continues to manage the investment portfolio, receiving a management fee of 1% per annum of net asset value. No performance fees were earned during the half-year, reflecting the portfolio’s underperformance relative to its benchmark. The company’s independent auditor, Pitcher Partners Sydney, completed a review with no qualifications or concerns raised, affirming the integrity of the financial statements.

Looking Ahead

While the half-year results highlight the challenges faced by Glennon Small Companies Limited amid volatile market conditions and specific investment setbacks, the company’s dividend declarations and capital management initiatives signal a commitment to shareholder value. Investors will be watching closely how the portfolio recovers and how the Metgasco loan extension plays out in the coming months.