Underwood Capital Posts $0.193m Profit, NTA Per Share Rises to 9.46 Cents

Profit Falls as Weed Me Investment Drags

Underwood Capital Limited (ASX:UWC) reported a modest profit of $0.193 million for the year ended 30 June 2026, down 21% from $0.243 million the prior year. Revenues from ordinary activities dropped 27% to $0.684 million. The decline was largely driven by a $1.8 million loss on its unlisted investment in Weed Me Inc, offset by a $2.5 million gain from listed ASX securities.

The company’s operating expenses edged down slightly to $0.84 million from $0.89 million the previous year, reflecting ongoing efforts to manage costs in a small investment company structure.

Net Tangible Assets Stable Despite Share Buybacks

Underwood's net tangible assets (NTA) remained largely unchanged at $19.3 million as at 30 June 2026. However, net tangible asset backing per share increased from 9.3 cents to 9.46 cents, thanks to a reduction in issued shares via on-market buybacks. The company repurchased approximately 2.2 million shares during the financial year, continuing its strategy to capitalise on the persistent discount at which its shares trade relative to NTA.

Portfolio Focused on Listed B2B Service Companies

Underwood’s investment portfolio, managed by HD Capital Partners since July 2023, is now predominantly composed of listed Australian B2B service companies known for strong cash flows and competitive advantages. The portfolio has shifted away from illiquid holdings, with Weed Me representing the final legacy unlisted investment, valued at around $7 million. The company remains actively engaged in seeking monetisation options for this stake.

HD Capital Partners highlighted a 22.9% gross return on available capital from listed investments during FY26, despite market volatility linked to the so-called "SaaSpocalypse" and uncertainties around AI sector impacts. The managers continue to pursue a value-oriented approach focusing on downside protection and asymmetric return profiles.

Share Price Discount Persists Despite Portfolio Improvements

Despite improvements in portfolio quality and liquidity, Underwood’s share price continues to trade significantly below its NTA, even before factoring in the Weed Me investment. This disconnect has prompted ongoing share buybacks, with the company acquiring shares at an average price of approximately 5.25 cents during the period.

The board has signalled that buybacks will remain active while the discount persists, viewing this as an appropriate use of capital given the company’s strong balance sheet and cash position.

Corporate and Governance Updates

During the year, Underwood voluntarily wound up its non-operating UK subsidiary, Phytotech Medical, simplifying its corporate structure. The company did not declare or pay any dividends for FY26 or FY25, consistent with its focus on capital growth.

Directors Warwick Sauer (Non-Executive Chair), David Prescott, and Jason Byrne continued their roles, supported by CFO and Company Secretary James Hallam. The remuneration framework remains aligned with shareholder interests, emphasizing fixed remuneration without performance-linked incentives or equity grants during the period.

Audit oversight transitioned to Stannards Audit Pty Ltd in March 2026, with an unqualified opinion on the FY26 financial statements.