FSI Eyes Pre-IPO Growth Amid Mixed FY2025 Returns

Mixed Performance in a Volatile Market

FSI’s FY2025 portfolio delivered a positive return of 5.0%, yet this result fell short of the ASX All Ordinaries Index’s 9.5% gain by 4.5 percentage points. Despite this underperformance, the company highlights that its long-term track record remains robust, with an annualised return of 12.2% since inception, comfortably outpacing the index’s 4.3% over the same period.

The underwhelming year was largely shaped by specific headwinds affecting key holdings. Stocks such as IDP Education and CSL were notably impacted by the ongoing uncertainty surrounding US trade policies, while Domino’s Pizza Enterprises faced challenges from weak earnings, leadership transitions, and sluggish sales momentum. These factors combined to dampen investor confidence and weigh on portfolio returns.

Dividend Growth and Shareholder Value

Amid market turbulence, FSI maintained a steady commitment to rewarding shareholders. The company increased its fully franked dividend by 2.5% to a total of 10.35 cents per share for the year, representing a yield of 4.95% based on the closing share price as of September 30, 2025. This dividend growth underscores FSI’s focus on delivering tangible income benefits, particularly appealing to yield-seeking investors.

Strategic Shift Toward Pre-IPO Opportunities

Looking ahead, FSI is proposing a capital commitment to the ECP Private Growth Fund, a strategic vehicle designed to invest in high-quality private companies with plans to list within three years. This move aligns with FSI’s investment philosophy of targeting businesses with strong fundamentals and long-term growth potential. By gaining early access to pre-IPO opportunities, FSI aims to capture upside from IPO events while diversifying its portfolio beyond listed equities.

The fund’s focus is not limited to any specific industry but prioritises companies demonstrating the rigorous quality metrics that FSI applies to its public market investments. The Board believes this selective approach could provide a performance edge over time, complementing the existing portfolio.

Optimistic Outlook Supported by Valuation and Fundamentals

FSI’s management expresses confidence in the portfolio’s prospects, citing recent improvements in price-to-earnings ratios from prior lows and strong short-term financial metrics such as organic sales growth, earnings, and dividend increases among portfolio companies. These factors are expected to drive a meaningful uplift in valuations and future dividend payments, setting the stage for potential outperformance.

Chairman Dominic McGann acknowledged the challenges of the past year but remains optimistic about the company’s strategic direction and the support of its shareholders. The upcoming shareholder vote on the capital commitment to the ECP Private Growth Fund will be a key milestone in FSI’s evolving investment agenda.