Cadence turns gold gains into record profit and a larger cash buffer

• Record $7.99 million pre-tax profit and $5.66 million after tax
• Fund return of 30.3%, beating the All Ordinaries Accumulation Index by 24.6 percentage points
• Fully franked 7.5 cents final dividend and 2.0 cents special dividend
• More than 80% of gold and resource exposure sold during the second half
• Share purchase plan priced at $2.21, a 3.5% discount to market

Record Profit Follows Gold-Fuelled Investment Surge

Cadence Opportunities Fund Limited (ASX:CDO) has turned a powerful run in gold and resource stocks into its strongest annual result, reporting a record $7.99 million profit before tax and $5.66 million after tax for the year ended 30 June 2026. Earnings per share rose to 36.0 cents from 9.5 cents a year earlier.

The fund gained 30.3% during FY2026, outperforming the All Ordinaries Accumulation Index by 24.6 percentage points. Including dividends and franking, CDO’s share price return was 41.0%. The company says it has returned 22.1% a year since inception 7.6 years ago, although the latest result was heavily shaped by a sharp move in the gold market.

Gold began the financial year at about US$3,300 an ounce, climbed to almost US$5,600 in January and finished at US$4,000. Predictive Discovery and Robex Resources, EQ Resources, Kingsgate Consolidated, Endeavour Mining, Equinox Gold, New Gold and West African Resources were among the listed contributors identified in the report.

Portfolio Shifts From Gold to Cash and Quality Stocks

Cadence did not simply ride the commodity trade into the new financial year. As gold prices fell and resource-market trends changed, the manager sold down more than 80% of its gold and resource exposure during the second half. Cash and cash equivalents stood at $17.59 million at 30 June, while listed financial assets had fallen to $19.83 million from $30.92 million a year earlier.

The manager says it has since begun buying positions in CSL, Cochlear and Pro Medicus after material share-price declines. Those companies are described as high-quality businesses that had previously traded at valuations outside Cadence’s fundamental criteria. The report says positions were initiated in each and increased in some as share prices recovered, but it does not disclose their portfolio weights.

That repositioning leaves CDO with a more defensive balance-sheet posture, but also with a clear reinvestment question: how quickly, and into what sectors, will the cash be deployed? The company’s 30 June portfolio still included resource names such as Kingsgate, Lindian Resources, Metals X and Westgold Resources, alongside businesses including Cochlear, CSL, Pro Medicus, Samsung Electronics and Life360.

Dividends Supported by Reserves and New Share Issue

Shareholders will receive a fully franked final dividend of 7.5 cents per share, taking the full-year ordinary dividend to 15.0 cents. A further fully franked special dividend of 2.0 cents per share is scheduled for December. Based on the share price cited at the time of the dividend announcement, Cadence calculated an annualised fully franked yield of 7.4% and a gross yield of 10.5%, including the special payment.

The distribution is backed by a profits reserve of 73 cents per share, which Cadence says represents more than four years of dividends at the current final-dividend rate. It also reports 16.2 cents per share of franking credits, sufficient to fully frank about 2.5 years of dividends at that level. The ability to maintain franked distributions remains dependent on investment income and the company continuing to pay tax.

Cadence is also seeking to expand the company through a share purchase plan allowing eligible shareholders to subscribe for up to $30,000 of shares at $2.21 each. That price was set at the pre-tax net tangible asset value on 28 August, representing a 3.5% discount to the $2.29 market price. The board says the aim is to improve trading liquidity and reduce the fixed expense ratio. The offer is scheduled to close on 17 September.

Manager Fees Rise Alongside Investment Gains

The strong result also generated a much larger performance fee for Cadence Asset Management, whose beneficial owner and sole director is CDO chairman Karl Siegling. The manager was entitled to a $1.33 million performance fee for FY2026, compared with $308,258 a year earlier, while the annual report records $1.24 million of performance-fee expense in the income statement. Management fees were $483,779 in the accounts, up from $399,973.

That fee structure gives the manager 15% plus GST of increases in the portfolio’s value, adjusted for tax, dividends and capital movements, with no performance fee payable for a period in which the portfolio falls. Directors’ fees remained unchanged at $75,000 in total. The auditor issued an unqualified opinion, identifying the existence and valuation of cash and investments, financial liabilities, and management and performance fees as key audit matters.

Bottom Line?

The immediate dividend story is strong, but the next test is whether Cadence can turn its enlarged cash position and new investments into another year of returns without relying on the same gold surge.

Questions in the middle?

• How much of the share purchase plan will be taken up, and will the issue materially improve CDO’s trading liquidity?
• Where will Cadence redeploy the cash released from its sharp reduction in gold and resource exposure?
• Can the newly initiated positions in CSL, Cochlear and Pro Medicus deliver results after their recent share-price recoveries?