Adelaide-based listed investment group Argo Investments (ARG) has boosted its final dividend by nearly 7% to 15.5 cents a share, after reporting a solid result for the year to June 30.
Argo said yesterday net profit rose 16.5% rise in annual net profit to a record $228.1 million. Final dividend was up one cent a share on 2013-14’s level and the final for the year was 28.5 cents a share, up 5.4% on the previous year.
The result and the higher dividend saw Argo shares edge up 0.7% to $8.34 in yesterday’s mostly weak market.
The company, which is the country’s second biggest listed investment company after Australian Foundation Investment Co, said its investment portfolio outperformed the broader Australian share market over the year to June, returning a total gain of 6.1%, against the 5.7% rise in the ASX 200 Accumulation Index.
Argo’s investment performance also topped that of its larger rival, the Melbourne-based AFIC which last month reported 3.9% for the year. AFIC’s 2014-15 net profit was up 15.5% to $293.5 million.
In a letter to shareholders, Argo directors said the improved result eased due to higher dividends and distributions from its long-term investment portfolio, “partially offset by reduced interest income on cash deposits due to a combination of generally lower cash balances on hand and the lower interest rates available during the year”.
"The headline result was boosted by an $18.6 million item of non-cash, one-off income, being the demerger dividend resulting from BHP Billiton’s demerger of South32.” (That has helped other LICs, such as AFIC and its affiliated companies).
"The share market’s overall performance for the year was hampered by significant falls in a number of commodity prices, including oil.
"As a result, Argo’s portfolio performance relative to the market index was positively impacted by underweight positions in BHP Billiton and Woodside Petroleum, and similarly benefited from not owning any shares in Fortescue Metals Group or Oil Search.
"However, this outperformance was offset to some extent by our holdings in MMA Offshore, Santos and Origin Energy. Our relatively large positions in Macquarie Group, A.P. Eagers, Ramsay Health Care and APA Group all positively added to Argo’s performance.” Argo said.
During the year, Argo said it spent $283 million on long-term investment purchases, partly funded by $129 million in disposals and takeover proceeds. The larger movements in the portfolio during the year included (purchases of $10 million or more): Medibank Private, Argo Global Listed Infrastructure, APA Group, Santos, Commonwealth Bank of Australia, National Australia Bank, Asaleo Care and Affinity Education Group.
Sales of $10 million or more included: Milton Corporation, Toll Holdings (takeover), David Jones (takeover), Newcrest Mining, Echo Entertainment Group, Orora, Southern Cross Media and ASX.
Argo said the shares of Toll and David Jones were sold out completely because of takeovers, but shares in Southern Cross Media, Orora and Echo Entertainment were quit in their entirety, along with News Corp, Fleetwood Corporation, Arrium and 3P Learning. Besides Medibank Private and Argo Global Infrastructure, new positions were built up in Australian Careers Network, Regis Healthcare, Surfstitch Holdings and Amaysim, and in South32, via its spin-off from BHP Billiton.
Argo said that overall, the number of stocks held in the portfolio decreased slightly to 101. The cash balance at year end was $78 million, or 1.5% of the Company’s total assets of $5 billion.
