How Did London City Equities Turn $5.6M Capital Gain Into a Liquidity Boost?

Strong Capital Gains and Liquidity Boost

London City Equities Limited has delivered a mixed half-year financial performance for the period ending 31 December 2025. The company reported a 38% increase in revenue to $988,373, driven largely by interest income from a higher cash position and dividend income from its investment portfolio. However, net profit after tax declined by 40% to $175,891, reflecting increased operating expenses including litigation costs and accrued performance fees.

A highlight of the period was the realisation of a significant $5.6 million capital gain from the sale of the company’s remaining shares in Fiducian Group Limited. This transaction contributed substantially to the company’s realised capital gains reserve and underpinned a strategic shift towards liquidity.

Strategic Shift to Cash and Reduced Equity Exposure

London City Equities has markedly increased its liquidity, with cash and term deposits rising from $11 million to $17 million, now representing nearly 60% of the total $30 million portfolio. This move reflects a cautious stance amid volatile global markets and moderate gains in the Australian stock market, with the ASX All Ordinaries Index up only 2.8% over the period.

The company has reduced its equity holdings, including exiting Fiducian, and invested more heavily in bank term deposits and hybrid securities. This conservative approach aligns with London City’s long-standing policy of prioritising investments with strong market positions, quality management, and risk-averse profiles.

Litigation Resolution and Ongoing Uncertainties

During the half, London City ceased its litigation against Excelsior Capital Limited following the latter’s decision to enter liquidation and return funds to shareholders. London City holds a 9.5% stake in Excelsior, and while the litigation outcome was favourable in prompting liquidation, the final financial impact remains uncertain. The company is monitoring potential tax implications related to the liquidation payout, which could affect future earnings and shareholder returns.

Dividend Policy and Shareholder Returns

London City increased its fully franked dividend to 2.5 cents per share, including a special dividend of 1 cent, paid in October 2025. The Dividend Reinvestment Plan was reinstated without a discount, encouraging shareholders to reinvest dividends into new shares. No interim dividends were declared for the half-year period.

Net assets rose to a record $27.9 million, equating to 88 cents per share, reflecting the combined effects of capital gains, portfolio revaluation, and retained earnings. The board expressed confidence in the company’s liquidity and steady cash flow, while signalling a cautious approach to future investments amid ongoing market uncertainties.