Adelaide based Argo Investments lifted earnings by 11.8% for the year to June 2011 and says it is ready to take advantage of buying opportunities as they come along.
Net profit rose 20.5% to $172.06 million for the 12 months to June 30 from $153.9 million a year earlier, the Adelaide-based investment firm Argo said in a statement to the ASX yesterday.
The company said that operating profit, excluding the realised gain on the sale of long-term investments, rose by just over 20. Net profit in 2009-10 was boosted by the sales of investments.
The company declared a fully franked final dividend of 13c per share, the same as a year earlier.
That took the total for the year to 26c, up a cent from the 25c paid in 2009-10 because of the higher interim for the 2011 year.
That made Argo one of the few listed investment companies to boost their payout to shareholders for the 2011 financial year.
For example, Australian Foundation Investment Co, Argo’s big Melbourne – based competitor, kept its dividend payout steady for the June 30 year, despite a recovery in earnings.
In commentary on the market Argo said it had cash in hand and no debt.
"The new financial year has already seen some company profit warnings and forecasts of earnings for many sectors are being downgraded," directors said.
"Our meetings with the management of our investee companies in the forthcoming reporting season will be important as equity market conditions are likely to remain challenging for the foreseeable future.
"With current cash reserves of about $160 million and no debt, Argo as a long-term investor remains ready to take advantage of selective buying opportunities as they present themselves in the share market.
"In Australia, we have seen a softening of the Reserve Bank’s domestic growth outlook following recent weaker economic data.
"Confidence and consumer spending in the economy continue to remain fragile.
"The cost of the proposed Carbon Pricing Scheme recently announced by the Federal Government will be borne directly by a narrow range of industries and further uncertainty surrounds the transition arrangements to a market Emissions Trading Scheme in 2015.
"This is adding to the concern of both international and domestic investors already wary of the high level of government regulation currently overhanging the Australian economy and equity market," the company said.
Looking at the global economy, Argo said that despite "the level of economic stimulus provided by governments around the world over the past few years, the global macroeconomic environment continues to be difficult, with weak economic indicators across multiple regions, ongoing risk aversion and widening divergence in growth expectations between economies.
"Equity markets remain focussed on the European sovereign debt crisis, with the fear of further contagion still a major issue. The U.S. recovery is very patchy and tentative with concerns about a double dip recession paramount. Unemployment levels in the U.S. remain stubbornly high and the housing market has yet to show any sign of rebounding.
"The rapid growth of some emerging economies, such as India, has driven their inflation to high levels and these countries now face policy-driven slowdowns to return growth to a more sustainable pace. Importantly for the Australian equity market, China needs to manage the balance between growth and inflation in order to provide continued economic stability.
"If this is carried out successfully, it should provide support for commodity prices in the longer term."
Directors said that Argo’s profits during the year were boosted as a number of companies increased dividend payments.
And a further boost came from buy-backs conducted by Woolworths and BHP Billiton, as well as a special dividend that was paid during the demerger of DuluxGroup and Orica.
Argo said it added to its holdings of ANZ Bank, BHP Billiton and Commonwealth Bank of Australia, but it cut the number of stocks it owned as it sold into takeovers.
"Overall, the number of holdings in the Company’s portfolio was reduced during the year following the sale of some smaller investments and takeovers which were accepted for our holdings in Aevum Ltd., AXA Asia Pacific Holdings Ltd., Centennial Coal Company Ltd., Choiseul Investments Ltd., Corporate Express Australia Ltd., Crane Group Ltd., Dexion Ltd., International Coal Holdings Ltd., Intoll Group, Transfield Services Infrastructure Fund and Westpac Office Trust.
"Suncorp-Metway Ltd. reset convertible preference shares were redeemed and several other holdings were partially sold, including Macquarie Group Ltd.
"New holdings which were added to the portfolio as a result of corporate actions included DuluxGroup Ltd., Echo Entertainment Group Ltd., Treasury Wine Estates Ltd. and Westfield Retail Trust when they were demerged from Orica Ltd., Tabcorp Holdings Ltd., Foster’s Group Ltd. and Westfield Group respectively.
"In addition, Fletcher Building Ltd. was added to the portfolio when its scrip was offered as part consideration for the takeover of Crane Group Ltd," the company said.
Shares in the Bendigo and Adelaide Bank outperformed the wider market in yesterday’s sell-off after reporting a solid 2010-11 profit.
A small 2c a share lift in the annual payout no doubt helped confidenc
