HMC Capital Reports $111.6m Loss with Operating EPS of 40.4 Cents

Statutory Loss Masks Underlying Operational Strength

HMC Capital Limited (ASX:HMC) posted a statutory net loss of $111.6 million for the year ended 30 June 2026, a sharp reversal from the $265.2 million profit recorded in FY25. This swing was largely due to a $133.3 million net fair value loss on principal investments, a stark contrast to the prior year’s $269.7 million fair value gain. Despite this, the group’s operating earnings after tax held up at $199.4 million, only slightly down from $211.9 million in FY25, reflecting resilient core business performance.

Revenue from ordinary activities dropped 20% to $188.2 million, influenced by the winding down of certain fee streams and the reclassification of some assets. Yet, recurring funds management revenue surged 22% to $165.5 million, underpinned by growth across Real Estate and Digital Infrastructure platforms.

Strategic Moves and Capital Partnerships Redefine Portfolio

During FY26, HMC made significant portfolio adjustments. In August 2025, it acquired 100% of Neoen’s Victorian portfolio, contributing $105 million in profit (including a $174.2 million bargain purchase gain) for the period. Conversely, the group lost control of Illuma Energy in June 2026 following a strategic partnership with global investor KKR, which committed up to $603 million in capital. This deal reduced HMC’s invested capital in Illuma to approximately $200 million, while preserving exposure to future upside via an 80% retained interest and joint control. Illuma’s pipeline includes near-term battery energy storage system (BESS) projects such as the 300MW Moorabool BESS, positioning the platform as a key growth vehicle.

HMC’s Private Credit division secured $1.35 billion in new institutional mandates, boosting fee-generating AUM by 17% to $2.3 billion. The platform’s strong governance and risk management underpin continued origination momentum, with a $4 billion pipeline under evaluation. The Digital Infrastructure platform (DGT) maintained $4.1 billion in fee-generating AUM, successfully recycling US assets to fund the fully financed SYD1 52MW expansion, backed by Letters of Intent from high-quality customers.

Balance Sheet Strength and Dividend Stability

HMC’s balance sheet remains robust with net tangible assets per share at $2.86, down from $3.61 in FY25, reflecting fair value adjustments and portfolio changes. The group’s gearing ratio stands at a conservative 10.7%, supported by a $715 million secured syndicated debt facility maturing in November 2027, of which $219.5 million is drawn.

The board declared a final dividend of 6.0 cents per share, maintaining a full-year payout of 12.0 cents consistent with FY25. The dividend is unfranked, reflecting the group’s current tax position.

Executive Remuneration and Governance

Executive remuneration remained disciplined, with the Managing Director and CEO David Di Pilla receiving a 7.5% increase in fixed pay but no short-term incentive participation in FY26. The Group CFO’s STI outcome was 75% of target, reflecting threshold financial performance and significant contributions to strategic initiatives. The board introduced a more conventional incentive structure for FY27, including STI participation for the CEO and maintained challenging long-term incentive hurdles linked to operating earnings growth and relative total shareholder return.

Sustainability and Risk Management Embedded in Strategy

HMC Capital continues to embed sustainability into its operations, aligning its strategy with evolving platforms such as Illuma Energy and Digital Infrastructure. The group is a signatory to the UN Principles for Responsible Investment and participates in GRESB reporting. Environmental initiatives include solar installations across over 90% of feasible assets and Green Star certifications for key developments. Social commitments feature scholarships supporting First Nations and regional students, while governance improvements include enhanced board diversity and the publication of Modern Slavery Statements.

Key risks highlighted include market volatility, regulatory compliance, operational resilience, and cybersecurity, with robust mitigation measures overseen by the Audit and Risk Committee.

Looking Ahead: FY27 Guidance and Growth Catalysts

HMC Capital enters FY27 with strong momentum, forecasting at least 35 cents per share in underlying earnings (pre-tax), a 16% increase on FY26. This growth is expected to be driven by a >30% rise in recurring funds management revenue, particularly from Digital Infrastructure and Private Credit, alongside a 35% uplift in expected distributions from co-investments. The group also anticipates fixed cost leverage from simplification initiatives and additional cost savings.

The dividend guidance for FY27 is 15 cents per share, a 25% increase, reflecting confidence in sustainable earnings growth and the strategy to reinvest retained earnings for accretive opportunities. With over $5 billion in active growth opportunities across its verticals and a strengthened balance sheet, HMC is positioned to capitalise on long-term megatrends in real estate, energy transition, digital infrastructure, and private credit.