Argo Investments, the country’s second biggest Listed Investment Company, says it is cashed up and looking to invest if it sees opportunities.
The company’s attitude is similar to its bigger competitor, Australian Foundation, which said last month that it too was cashed up and looking to invest in the markets when it finds good prospects.
Argo has more than $200 million; AFI had just over $80 million in reserves.
Argo told the market in its 2011 interim profit letter and statement yesterday:
"With current cash reserves of about $225 million and no debt, Argo remains well placed to take advantage of opportunities as they present themselves in the share market.
"We look forward to continued modest growth in Australian corporate profits and dividends in the period ahead.
"Corporate activity continued to recover in the second half of calendar 2010 and is likely to increase during 2011.
"If markets remain steady, we anticipate that there will be an increase in the number of companies applying to list on the Australian Securities Exchange."
Like AFI and other LICs, Argo had a very solid first half to 2011, with operating profit after tax up 25.6% to $90.0 million, compared with $71.6 million in the previous corresponding half-year.
And, again like its competitors, it was a combination of higher dividend income, higher interest rates, a few takeovers and other corporate deals which helped in the half year.
"Dividend income strengthened during the period as a number of companies increased their dividend payments due to improved earnings.
"In addition, positive one-off transactions included the dividend received when DuluxGroup Ltd. demerged from Orica Ltd. and the Woolworths Ltd. share buy-back dividend.
"Also, the merger of Milton Corporation Ltd and Choiseul Investments Ltd resulted in the early declaration of their interim dividends and contributed to Argo’s improved first half result.
"These interim dividends normally would have been accounted for in the second half of the financial year," Argo said.
The Company said the improvement in investment revenue was also assisted by a strong recovery in interest income, "due to a larger cash balance which benefited from higher interest rates ".
Operating earnings per share was 14.8c, compared with 12.2c in the previous corresponding half-year. And the company has upped its interim dividend to 13c a share from 12c a share. AFI left its interim payout unchanged at 8c a share.
Directors said that despite a volatile year, the Australian market finished the 2010 calendar year on a positive note.
"The resource sector and associated industries performed particularly strongly with the re-emergence of the two speed domestic economy becoming evident.
"The additional stimulus in the U.S. and continued robust growth from China led to strong upward movements in both commodity prices and the Australian dollar. While fears of a double dip recession in the U.S. have receded, uncertainty over European sovereign debt continues to simmer.
"A series of recent natural disasters, including the floods and Cyclone Yasi, have ravaged the eastern states of Australia and will impact the prospects for certain sectors of the economy during 2011.
"Economists are revising down their economic growth forecasts for the nation and the direct costs of cleaning up and rebuilding will be significant.
"Flow on effects are likely to include some food inflation and labour scarcity as rebuilding competes with the continuing mining and LNG construction booms.
"The net effect is likely to be inflationary and may lead to some longer term policy challenges for the Reserve Bank.
"During the period, the larger equity purchases were $13.1 million in Australian United Investment Company Ltd., $12.8 million in Australia and New Zealand Banking Group Ltd., $10.2 million in BHP Billiton Ltd., $6.0 million in Asciano Group, $5.5 million in Woodside Petroleum Ltd. and $5.4 million in Washington H. Soul Pattinson and Company Ltd.
"We also received shares in DuluxGroup Ltd. following its demerger from Orica Ltd. and additional shares in Milton Corporation Ltd. following its merger with Choiseul Investments Ltd.
"A few smaller holdings were sold and we reduced our holding in Macquarie Group Ltd. Takeovers were accepted for our holdings in Aevum Ltd., Centennial Coal Company Ltd., Corporate Express Australia Ltd., Dexion Ltd., Intoll Group and Westpac Office Trust. "
Argo shares rose 5c to $6.52, then fell back to end the day down 2c at $6.45.
And we also had a small earnings downgrade from Coca Cola Amatil yesterday which said that the impact of colder and wetter weather across the eastern seaboard, in particular the flooding in Queensland, would result in earnings growth of 5% to 5.5% for the second half, which was below the 7% to 8% target previously advised.
But second-half net profit growth, which benefited from lower interest and tax costs, was expected to be 9% to 10%, which was ahead of target.
CCA managing director Terry Davis said trading conditions throughout summer had been challenging, with unseasonal weather and lower consumer demand affecting CCA’s
