The Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, share price is under the spotlight after reporting its FY25 result.
AFIC is a listed investment company (LIC) focused on owning ASX blue chip shares.
AFIC FY25 result
Here are some of the highlights for AFIC shares:
- Net profit for shareholders declined 3.8% to $284.9 million
- The portfolio returned 10.7% in FY25, underperforming the S&P/ASX 200 Accumulation Index return of 15.1%, including franking credits.
- Management expense ratio (MER) was 0.16% in FY25, down from 0.15% in FY24
- Fully franked final dividend of $0.145 per share, the same as last year
- A special dividend per share of $0.05 declared
- The HY25 interim dividend was $0.12 per share, up from $0.115 per share
Investment insights
AFIC said activity in the portfolio was focused primarily on recycling capital into existing holdings by trimming some positions where companies were trading at “extreme” valuations during the year, such as Commonwealth Bank of Australia (ASX: CBA) shares, and selling positions in companies where the LIC felt they were “facing significant challenges.”
It was the sale of some CBA shares that spurred the LIC to pay a special dividend for shareholders.
Some of the companies that it thinks have strong long-term prospects include ARB Corporation Ltd (ASX: ARB) and James Hardie Industries plc (ASX: JHX), CSL Ltd (ASX: CSL) and Reece Ltd (ASX: REH).
AFIC said its performance was partially impacted by its lack of exposure to the gold sector, which rose by around 60% in FY25.
Outlook for the investment market and AFIC share price
The LIC said the market conditions remain “unpredictable” with the outlook for economic growth “unclear” and the consumer confidence is softening.
In this environment, AFIC is expecting corporate earnings to slow as revenue growth becomes harder to achieve.
AFIC suggested that the difference in market prices between the winners and losers is “extremely wide” and is “likely to exacerbate volatility” as it anticipates that the market’s tolerance for earnings disappointment won’t be high.
It said that patient deployment of capital is required in times like these.
AFIC concluded:
While we are aware of the volatile geopolitical environment our focus continues to remain on the fundamentals of the companies we seek to invest in.
We consider the portfolio remains invested in quality companies forecast to deliver an appropriate mix of income and growth returns positioning us well to deliver our long term investment objectives.
If the AFIC portfolio continues to deliver pleasing returns, then the AFIC share price itself could perform for investors.
