Adelaide-based listed investment company, Argo Investments, has reported an 18.9% rise in 2007's net earnings to $171.537 million.
That compares to $144.3 million earned in 2006.
Net operating profit after tax (but before realised gains on the sale of long term investments) was up 20.1% to a record $147.9 million, compared to the $123.1 million earned in 2006.
The result wasn't up as much as some of its peers, such as Australian Foundation or Milton Corporation, but it was nevertheless a solid outcome for what was a year of records for most listed investors and the market as a whole.
Argo said it had a record amount of funds for investment, with total assets of $4.6 billion at June 30.
"The result also reflects the analytical strength and disciplined approach adopted by the company in evaluating and selecting long-term investment opportunities in the Australian sharemarket," Argo said in a statement accompanying the profit announcement to the ASX.
The company said that while the positive outlook for Australian and global economic growth should underpin world financial markets, there currently is some concern about the U.S. subprime lending market.
"Specifically for Australia, China's strong demand for our natural resources, a likely pick-up in rural conditions following an easing in the drought and the massive recent inflows into superannuation will continue to provide support for Australian equities.
"On the other hand, the strong Australian dollar is hurting some exporters and currency translation of U.S. dollar earnings will adversely affect many companies with international operations.
"Also, energy prices are very high, labour shortages exist in many industries and it is possible that interest rates may need to be raised in response to inflationary concerns."
Argo said against this backdrop, it "continues to be well placed with no debt, a diversified portfolio covering many different industry sectors and $424 million in cash assets available for investment as at 30 June, 2007.
"Argo's management will be closely monitoring the current company reporting period to assess the future outlook for the profitability of Australian companies and to identify further attractive investment opportunities."
2007 saw the company earn a 28.5% return on its portfolio in the last year with several significant investments recorded including BHP Billiton, Telstra, Rio Tinto, Woodside and Santos.
There were no major sales, Argo said.
The shares finished down 5c at $8.05, so those shareholders who took up the rights issue in March (1 for 8 at $7.20 a share) are still in front.
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Argo said that "It should be noted that the realised gains on the sale of long-term investments after tax reported for the half-year ended 31 December, 2006, included gains made following the Brambles Industries Ltd and Alinta Ltd/Australian Gas Light Company corporate actions.
"These transactions were non-cash, scrip based, deemed sales that are eligible for rollover relief and the accounting treatment was accepted by the Company's Auditor at that time.
"Further advice has now been received regarding the accounting for these transactions, which concludes that it is not necessary under current Accounting Standards to report them in the Company's Income Statement.
"Therefore, the earlier transactions involving these corporate actions have been reversed when preparing the result for the full year and the net amount totalling $40.7 million now remains in the Company's Investment Revaluation Reserve. The Company's Auditor agrees with the amended accounting treatment for these corporate actions."
Operating earnings per share, excluding realised gains on the sale of long-term investments, rose 13.8% to 28.9 cents, compared with 25.4 cents in the previous year after adjusting for the March 2007 rights issue.
Following the increased interim dividend payment of 12 cents per share, the directors have declared a final dividend of 13c, up 1c from last year, on the capital base enlarged by the March rights issue:
Also, there is a 2 cents per share Listed Investment Company capital gain dividend (last year 1 cent per share).
This dividend will give rise to an attributable part of 2.86 cents per share, which will allow eligible shareholders to claim a portion of the attributable part as a deduction in their 2007/2008 income tax returns.
The amount which eligible shareholders may be able to claim as a tax deduction depends on their individual situation.
These fully franked dividends totalling 15 cents per share will be paid on 5 September, 2007 and absorb $83.0 million.
That brings the total fully franked dividends for the year amount to a record 27 cents per share, compared with fully franked dividends of 24 cents per share for 2006.
Significant investment purchases made by the company during the year were: BHP Billiton, $33.2m; Telstra (including partly paid instalment receipts) $22.8m; Rio Tinto $20.3m; Woodside Petroleum $20.1m; Santos $10.7 m.
There were no major sales. Adsteam Marine Ltd., Alinta Infrastructure Holdings, Chiquita Brands South Pacific Ltd., DCA Group Ltd., Excel Coal Ltd., Gasnet Australia Group, Integrated Group Ltd., Promentum Ltd., Repco Corporation Ltd., Sydney Roads Group and UNiTAB Ltd. were taken over.
Here is the major part of the Argo portfolio at June 30:
