Shareholders in Adelaide-based Argo Investments Limited will get an unchanged final dividend of 16 cents a share after reporting a full year profit of $218.9 million for the year to June.
That took the full payout for year to a record 31.5 cents a share against 31 cents paid for 2016-17. The interim was up half a cent to 15.5 cents.
Argo shares rose 0.2% to $8.27 in a market that weak all day.
Net tangible asset backing for each Argo share was $8.16 as at June 30 2018 compared with $7.71 at the end of the 2016017 financial year.
Argo’s Management Expense Ratio, which is a measure of the costs required to run the Company relative to its assets, declined to just 0.15%, which it says "is significantly lower than the cost of most other actively managed investment products.”
Argo said Argo’s investment performance returned +10.2% after all costs and tax over the year.
"Argo’s straightforward and resilient business model continues to produce increasing fully franked dividends and solid capital gains. We keep operating costs low and manage the portfolio in a tax-aware manner to focus on maximising long-term returns to our shareholders," managing director Jason Beddow was quoted in a release.
"Dividend increases from Macquarie Group, BHP Billiton and Rio Tinto boosted our revenue this year, which helped to deliver Argo’s highest ever full year dividend" he said.
During the financial year, Argo purchased $259 million of long-term investments and sold $201 million worth of shares in long-term investment sales.
Purchases during the year were Boral, Event Hospitality & Entertainment, Nufarm, Oil Search, Ramsay Health Care, Suncorp Group, Tabcorp and Westpac.
Sales included shares in BHP Billiton, Milton Corporation, Rio Tinto, Wesfarmers, Westfield Corporation (via takeover) Woolworths and WorleyParsons (sale of complete position).
New stocks introduced to the portfolio were Oil Search, Nufarm, Paragon Care, Bega Cheese and Novonix.
"We also added to 30 existing holdings. The total number of stocks held reduced by 5 to 93,” the company revealed.
In its statement yesterday, Argo revealed that that revelations from the banking royal commission were worse than it (one of the country’s biggest listed investment companies) had expected.
"Domestically, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has dominated headlines since the second round of public hearings commenced.
“The scope and fallout from the Royal Commission is much worse than we or the market may have been expecting, with major repercussions for executive management teams and Boards, reflected by the negative share price reactions in the financial services sector.
"The current timetable sees a final report of recommendations due in February, which is of particular importance to the Australian listed market due to the large proportion this sector represents.
"Compounding the increased regulation and scrutiny for the banks, is the potential slowing of credit growth in the future, due to a combination of tighter lending standards, record household debt and softening house prices,” directors warned.
While this is pretty dramatic, it should be pointed out that bank shares have risen since mid June and the Commonwealth Bank’s have led the way with a rise of more that 10%.
But Argo’s warning should be noted by investors, especially those in the banks.
