Insights
Market Insights
The rotation is underway: August 2026 reporting season in Australian small caps
August 2026
Important Information:
This webinar contains information specifically intended for institutional clients, asset consultants, advisers, platforms and researchers, who are professional investors and wholesale clients (as defined in the Corporations Act 2001).
I confirm that I am a professional or wholesale investor as defined by the Corporations Act 2001 and wish to proceed.
The strongest August results were not where the market was looking. The Bell Australian Small Companies team on why they think investment spending, not the consumer, is now driving growth.
The August reporting season was better than feared for Australian small companies. Not necessarily because earnings were strong, but because expectations had been lowered. Forecasts were reduced in the lead-in and valuations were broadly undemanding. It is unsurprising, then, that approximately 80 per cent of companies met or exceeded expectations.
The season reinforced two views we hold.
The first is that valuations across the small cap universe are modest. We would argue that view was confirmed by recent takeover activity, with offers for FleetPartners, Energy One, Reliance Worldwide, Equity Trustees and Austal’s US assets. As seen in prior cycles, industry players and private equity will take advantage of undemanding valuations.
The second is that the economy is in the midst of a rotation. Sentiment on the market outlook has been negative on the back of consumer softness, but this reporting season reaffirmed our view that investment spending, rather than household consumption, will be the key driver of economic growth.
Inflation pressure has not gone away
“Industry players and private equity will take advantage of undemanding valuations”
Inflation pressures remain a feature across the small cap universe, labour costs in particular. Since March, energy costs have been an additional source of pressure. Sectors with robust demand, such as resources and infrastructure, are passing this through with ease. It is proving more difficult elsewhere. Notably, in sectors supported by Government, such as healthcare and aged care, with no ability to recover higher costs through price, companies are looking at other levers.
All that said, margins to date have generally held up better than expected. We remain wary of businesses relying on cost cutting to support earnings growth, recognising that this has its limits.
The consumer has held up, but is running out of steam
Consumer demand has proven more resilient than many expected, but trading updates were broadly soft. Several management teams noted cautious spending behaviour, lower transaction frequency and greater value-seeking by consumers.
Given the known cost-of-living pressures, none of this is surprising. It would also appear, though, that the consumer has now exhausted either the capacity or the willingness to spend ahead of income growth.
Investment-led parts of the economy continue to outperform
“an economy increasingly supported by capital investment rather than consumer spending”
The strongest results were generally concentrated in businesses exposed to resources investment, infrastructure spending and electrification rather than household consumption. Mining services, engineering, industrial technology and selected energy transition names continued to report healthy backlogs and resilient demand, highlighting an economy increasingly supported by capital investment rather than consumer spending.
Notably, stock prices did not automatically follow the strong earnings results, highlighting once again that starting valuations are important.
What we heard from management
Management tone was generally constructive but noticeably more balanced than six months ago. Confidence was undoubtedly highest in the resources sector, where commodity producers’ prices and margins are as good as they have been, and where the pipeline of work for service providers will underpin a number of years of elevated activity levels.
Conversely, and understandably, consumer-facing companies were more selective in their commentary. Guidance and outlook statements were generally more cautious.
Three results worth examining
- MA Financial Group (MAF). MA Financial’s first-half FY26 result delivered to expectations across all key divisions and came with upgraded FY26 lending guidance. The market got quite excited about the medium-term targets management presented. In a clear sign of management confidence in the momentum of the business, robust FY29 targets for assets under management and loan book growth were provided, alongside management expectations for margins well above current levels, indicating that meaningful operating leverage is forecast as the business scales. This was well received by the market.
- Temple & Webster Group (TPW). Temple & Webster missed consensus expectations on margins in FY26 but disappointed the market with a weak trading update, with revenue down 13 per cent in the first seven weeks of trading in FY27. The net result was a 10 per cent reduction in FY27 estimates and a substantial de-rating.
- Zip Co (ZIP). One outcome that has perplexed us was the market’s volatile and counter-intuitive response to Zip’s result. The company beat expectations for FY26 on volumes, margins and bad debts, and provided strong FY27 guidance, including US growth of at least 30 per cent. It is growing market share in a growing segment with a long runway, which made the market reaction all the harder to reconcile.
Where this leaves us
“small cap earnings appear close to or at a cyclical low”
In our view, the biggest takeaway from reporting season is that small cap earnings appear close to or at a cyclical low. Higher commodity prices are beginning to flow through to earnings and we expect volume growth will add to that in coming years. Investment spending across resources and infrastructure should support broad economic growth.
The weakest near-term outlook remains in consumer discretionary, although those pressures are well understood and we would expect the outlook to improve as the interest rate cycle turns. Investors are starting to recognise the opportunity, and the valuations on offer.
Important information
Disclosure of interest. As at 26 August 2026, the Bell Australian Small Companies strategy held positions in MA Financial (MAF), Temple & Webster (TPW) and Zip Co (ZIP). Portfolio holdings are current as at that date and may change without notice.
Forward-looking statements. Views on market and economic conditions are Bell Asset Management’s opinions as at the date of this commentary and are subject to change. Forward-looking statements are not guarantees of future outcomes.
This document has been prepared by Bell Asset Management Limited (BAM) ABN 84 092 278 647, AFSL 231091 and is provided solely for information only purposes. This document does not take into consideration the investment objectives, financial circumstances or needs of any particular recipient – it contains general information only. This document does not take into account a recipient’s investment objectives, particular needs or financial situation. It is general information only and should not be considered as investment advice and should not be relied on as an investment recommendation. Before acting on any information, recipients should consider the appropriateness of it and of the relevant product or strategy having regard to their investment objectives, particular needs and financial situation. In particular, recipients should seek independent financial, legal and taxation advice and read the relevant disclosure document or agreement prior to acquiring a financial product or strategy.
No representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained in this presentation. To the maximum extent permitted by law, none of BAM and its directors, employees or agents accepts any liability for any loss arising, including from negligence, from the use of this document or its contents nor does BAM assume any obligation to update the information. BAM has made every effort to ensure the accuracy and currency of the information contained in this document; however, no warranty is given as to the accuracy or reliability of the information. An investment with BAM is subject to risk including loss of capital and no assurance is given that a BAM product or strategy will achieve its investment objective. Past performance is no guarantee of future performance.
Source: Bell Asset Management as at 31 August 2026
Important Information:
This video contains information specifically intended for institutional clients, asset consultants, advisers, platforms and researchers, who are professional investors and wholesale clients (as defined in the Corporations Act 2001).
I confirm that I am a professional or wholesale investor as defined by the Corporations Act 2001 and wish to proceed.
The strongest August results were not where the market was looking. The Bell Australian Small Companies team on why they think investment spending, not the consumer, is now driving growth.
The August reporting season was better than feared for Australian small companies. Not necessarily because earnings were strong, but because expectations had been lowered. Forecasts were reduced in the lead-in and valuations were broadly undemanding. It is unsurprising, then, that approximately 80 per cent of companies met or exceeded expectations.
The season reinforced two views we hold.
The first is that valuations across the small cap universe are modest. We would argue that view was confirmed by recent takeover activity, with offers for FleetPartners, Energy One, Reliance Worldwide, Equity Trustees and Austal’s US assets. As seen in prior cycles, industry players and private equity will take advantage of undemanding valuations.
The second is that the economy is in the midst of a rotation. Sentiment on the market outlook has been negative on the back of consumer softness, but this reporting season reaffirmed our view that investment spending, rather than household consumption, will be the key driver of economic growth.
Inflation pressure has not gone away
“Industry players and private equity will take advantage of undemanding valuations”
Inflation pressures remain a feature across the small cap universe, labour costs in particular. Since March, energy costs have been an additional source of pressure. Sectors with robust demand, such as resources and infrastructure, are passing this through with ease. It is proving more difficult elsewhere. Notably, in sectors supported by Government, such as healthcare and aged care, with no ability to recover higher costs through price, companies are looking at other levers.
All that said, margins to date have generally held up better than expected. We remain wary of businesses relying on cost cutting to support earnings growth, recognising that this has its limits.
The consumer has held up, but is running out of steam
Consumer demand has proven more resilient than many expected, but trading updates were broadly soft. Several management teams noted cautious spending behaviour, lower transaction frequency and greater value-seeking by consumers.
Given the known cost-of-living pressures, none of this is surprising. It would also appear, though, that the consumer has now exhausted either the capacity or the willingness to spend ahead of income growth.
Investment-led parts of the economy continue to outperform
“an economy increasingly supported by capital investment rather than consumer spending”
The strongest results were generally concentrated in businesses exposed to resources investment, infrastructure spending and electrification rather than household consumption. Mining services, engineering, industrial technology and selected energy transition names continued to report healthy backlogs and resilient demand, highlighting an economy increasingly supported by capital investment rather than consumer spending.
Notably, stock prices did not automatically follow the strong earnings results, highlighting once again that starting valuations are important.
What we heard from management
Management tone was generally constructive but noticeably more balanced than six months ago. Confidence was undoubtedly highest in the resources sector, where commodity producers’ prices and margins are as good as they have been, and where the pipeline of work for service providers will underpin a number of years of elevated activity levels.
Conversely, and understandably, consumer-facing companies were more selective in their commentary. Guidance and outlook statements were generally more cautious.
Three results worth examining
- MA Financial Group (MAF). MA Financial’s first-half FY26 result delivered to expectations across all key divisions and came with upgraded FY26 lending guidance. The market got quite excited about the medium-term targets management presented. In a clear sign of management confidence in the momentum of the business, robust FY29 targets for assets under management and loan book growth were provided, alongside management expectations for margins well above current levels, indicating that meaningful operating leverage is forecast as the business scales. This was well received by the market.
- Temple & Webster Group (TPW). Temple & Webster missed consensus expectations on margins in FY26 but disappointed the market with a weak trading update, with revenue down 13 per cent in the first seven weeks of trading in FY27. The net result was a 10 per cent reduction in FY27 estimates and a substantial de-rating.
- Zip Co (ZIP). One outcome that has perplexed us was the market’s volatile and counter-intuitive response to Zip’s result. The company beat expectations for FY26 on volumes, margins and bad debts, and provided strong FY27 guidance, including US growth of at least 30 per cent. It is growing market share in a growing segment with a long runway, which made the market reaction all the harder to reconcile.
Where this leaves us
“small cap earnings appear close to or at a cyclical low”
In our view, the biggest takeaway from reporting season is that small cap earnings appear close to or at a cyclical low. Higher commodity prices are beginning to flow through to earnings and we expect volume growth will add to that in coming years. Investment spending across resources and infrastructure should support broad economic growth.
The weakest near-term outlook remains in consumer discretionary, although those pressures are well understood and we would expect the outlook to improve as the interest rate cycle turns. Investors are starting to recognise the opportunity, and the valuations on offer.
Important information
Disclosure of interest. As at 26 August 2026, the Bell Australian Small Companies strategy held positions in MA Financial (MAF), Temple & Webster (TPW) and Zip Co (ZIP). Portfolio holdings are current as at that date and may change without notice.
Forward-looking statements. Views on market and economic conditions are Bell Asset Management’s opinions as at the date of this commentary and are subject to change. Forward-looking statements are not guarantees of future outcomes.
This document has been prepared by Bell Asset Management Limited (BAM) ABN 84 092 278 647, AFSL 231091 and is provided solely for information only purposes. This document does not take into consideration the investment objectives, financial circumstances or needs of any particular recipient – it contains general information only. This document does not take into account a recipient’s investment objectives, particular needs or financial situation. It is general information only and should not be considered as investment advice and should not be relied on as an investment recommendation. Before acting on any information, recipients should consider the appropriateness of it and of the relevant product or strategy having regard to their investment objectives, particular needs and financial situation. In particular, recipients should seek independent financial, legal and taxation advice and read the relevant disclosure document or agreement prior to acquiring a financial product or strategy.
No representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained in this presentation. To the maximum extent permitted by law, none of BAM and its directors, employees or agents accepts any liability for any loss arising, including from negligence, from the use of this document or its contents nor does BAM assume any obligation to update the information. BAM has made every effort to ensure the accuracy and currency of the information contained in this document; however, no warranty is given as to the accuracy or reliability of the information. An investment with BAM is subject to risk including loss of capital and no assurance is given that a BAM product or strategy will achieve its investment objective. Past performance is no guarantee of future performance.
Source: Bell Asset Management as at 31 August 2026
The strongest August results were not where the market was looking. The Bell Australian Small Companies team on why they think investment spending, not the consumer, is now driving growth.
The August reporting season was better than feared for Australian small companies. Not necessarily because earnings were strong, but because expectations had been lowered. Forecasts were reduced in the lead-in and valuations were broadly undemanding. It is unsurprising, then, that approximately 80 per cent of companies met or exceeded expectations.
The season reinforced two views we hold.
The first is that valuations across the small cap universe are modest. We would argue that view was confirmed by recent takeover activity, with offers for FleetPartners, Energy One, Reliance Worldwide, Equity Trustees and Austal’s US assets. As seen in prior cycles, industry players and private equity will take advantage of undemanding valuations.
The second is that the economy is in the midst of a rotation. Sentiment on the market outlook has been negative on the back of consumer softness, but this reporting season reaffirmed our view that investment spending, rather than household consumption, will be the key driver of economic growth.
Inflation pressure has not gone away
“Industry players and private equity will take advantage of undemanding valuations”
Inflation pressures remain a feature across the small cap universe, labour costs in particular. Since March, energy costs have been an additional source of pressure. Sectors with robust demand, such as resources and infrastructure, are passing this through with ease. It is proving more difficult elsewhere. Notably, in sectors supported by Government, such as healthcare and aged care, with no ability to recover higher costs through price, companies are looking at other levers.
All that said, margins to date have generally held up better than expected. We remain wary of businesses relying on cost cutting to support earnings growth, recognising that this has its limits.
The consumer has held up, but is running out of steam
Consumer demand has proven more resilient than many expected, but trading updates were broadly soft. Several management teams noted cautious spending behaviour, lower transaction frequency and greater value-seeking by consumers.
Given the known cost-of-living pressures, none of this is surprising. It would also appear, though, that the consumer has now exhausted either the capacity or the willingness to spend ahead of income growth.
Investment-led parts of the economy continue to outperform
“an economy increasingly supported by capital investment rather than consumer spending”
The strongest results were generally concentrated in businesses exposed to resources investment, infrastructure spending and electrification rather than household consumption. Mining services, engineering, industrial technology and selected energy transition names continued to report healthy backlogs and resilient demand, highlighting an economy increasingly supported by capital investment rather than consumer spending.
Notably, stock prices did not automatically follow the strong earnings results, highlighting once again that starting valuations are important.
What we heard from management
Management tone was generally constructive but noticeably more balanced than six months ago. Confidence was undoubtedly highest in the resources sector, where commodity producers’ prices and margins are as good as they have been, and where the pipeline of work for service providers will underpin a number of years of elevated activity levels.
Conversely, and understandably, consumer-facing companies were more selective in their commentary. Guidance and outlook statements were generally more cautious.
Three results worth examining
- MA Financial Group (MAF). MA Financial’s first-half FY26 result delivered to expectations across all key divisions and came with upgraded FY26 lending guidance. The market got quite excited about the medium-term targets management presented. In a clear sign of management confidence in the momentum of the business, robust FY29 targets for assets under management and loan book growth were provided, alongside management expectations for margins well above current levels, indicating that meaningful operating leverage is forecast as the business scales. This was well received by the market.
- Temple & Webster Group (TPW). Temple & Webster missed consensus expectations on margins in FY26 but disappointed the market with a weak trading update, with revenue down 13 per cent in the first seven weeks of trading in FY27. The net result was a 10 per cent reduction in FY27 estimates and a substantial de-rating.
- Zip Co (ZIP). One outcome that has perplexed us was the market’s volatile and counter-intuitive response to Zip’s result. The company beat expectations for FY26 on volumes, margins and bad debts, and provided strong FY27 guidance, including US growth of at least 30 per cent. It is growing market share in a growing segment with a long runway, which made the market reaction all the harder to reconcile.
Where this leaves us
“small cap earnings appear close to or at a cyclical low”
In our view, the biggest takeaway from reporting season is that small cap earnings appear close to or at a cyclical low. Higher commodity prices are beginning to flow through to earnings and we expect volume growth will add to that in coming years. Investment spending across resources and infrastructure should support broad economic growth.
The weakest near-term outlook remains in consumer discretionary, although those pressures are well understood and we would expect the outlook to improve as the interest rate cycle turns. Investors are starting to recognise the opportunity, and the valuations on offer.
Important information
Disclosure of interest. As at 26 August 2026, the Bell Australian Small Companies strategy held positions in MA Financial (MAF), Temple & Webster (TPW) and Zip Co (ZIP). Portfolio holdings are current as at that date and may change without notice.
Forward-looking statements. Views on market and economic conditions are Bell Asset Management’s opinions as at the date of this commentary and are subject to change. Forward-looking statements are not guarantees of future outcomes.
This document has been prepared by Bell Asset Management Limited (BAM) ABN 84 092 278 647, AFSL 231091 and is provided solely for information only purposes. This document does not take into consideration the investment objectives, financial circumstances or needs of any particular recipient – it contains general information only. This document does not take into account a recipient’s investment objectives, particular needs or financial situation. It is general information only and should not be considered as investment advice and should not be relied on as an investment recommendation. Before acting on any information, recipients should consider the appropriateness of it and of the relevant product or strategy having regard to their investment objectives, particular needs and financial situation. In particular, recipients should seek independent financial, legal and taxation advice and read the relevant disclosure document or agreement prior to acquiring a financial product or strategy.
No representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained in this presentation. To the maximum extent permitted by law, none of BAM and its directors, employees or agents accepts any liability for any loss arising, including from negligence, from the use of this document or its contents nor does BAM assume any obligation to update the information. BAM has made every effort to ensure the accuracy and currency of the information contained in this document; however, no warranty is given as to the accuracy or reliability of the information. An investment with BAM is subject to risk including loss of capital and no assurance is given that a BAM product or strategy will achieve its investment objective. Past performance is no guarantee of future performance.
Source: Bell Asset Management as at 31 August 2026
