Argo Investments profit drop
Argo Investments has reported a decrease in profits and earnings per share, attributing the performance to lower dividends from its mining interests.
Argo Investments – Adelaide’s second largest company according to the 2023 South Australian Business Index – recorded a 6.9 per cent decrease in profit for FY24 to $252.9 million, down $18.7 million from FY23.
Earnings per share fell to 33.3 cents from FY23’s 36.1 cents, with Argo’s investment performance achieving an 11 per cent return, compared to the S&P/ASX 200 Accumulation Index, which saw a 12.1 per cent lift in returns.
Investment performance is determined through the net tangible asset return after management costs and tax.
The company said its final shareholder dividend had been maintained at a record high, with a fully franked final dividend of 18 cents per share.
Argo said its holding in Clarity Pharmaceuticals was the largest positive contributor to its performance in the financial year, with the company’s share price rising by 677 per cent.
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“However, holdings in several other Healthcare stocks and APA Group offset this to some extent,” Argo said.
“More significantly, not owning Goodman Group and our underweight exposure to the big four banks weighed on Argo’s relative performance over the 2024 financial year.”
Argo purchased $344 million of investments in FY24, including new portfolio positions for BHP Group, Woolworths Group, and Santos. The company received $287 million in sales from investments, including ADBRI (due to a takeover deal), Wesfarmers, and National Australia Bank.
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Argo Investments’ total investment portfolio stocks decreased from 89 to 86, which it said reflected “considerable merger and acquisition activity in the Australian share market over the period”.
The company recorded $7.4 billion worth of total assets as of June 30, an increase from the $6.9 billion recorded the previous financial year.
Liabilities saw an increase, with Argo’s current tax liabilities as of June 30 reaching $26.7 million, an increase from $14.4 million in FY23. This brought the company’s total current liabilities up to $37.7 million, from $24.9 million in FY23.
Argo saw a $28.1 million net decrease in cash held during the financial year, down to $97.2 million as of June 30, compared to $125.3 million at the same time last year.
The report follows a decrease in Argo’s profits in Fy23, with 12.3 per cent less profit recorded than in FY22, and an 8.5 per cent profit decrease in the six months to December 31 2023.
“Looking ahead, we expect the same macroeconomic factors that have shaped global equity markets over the last 12-18 months will remain dominant – namely, inflation, interest rates and the geopolitical environment, including the upcoming US election,” Argo said.
“Domestic inflation remains stubbornly high, although last week’s Consumer Price Index figure showed that it is moderating.
“Following this latest inflation reading, all eyes will be on the Reserve Bank of Australia’s meeting tomorrow.”
Argo said it expected China’s economy to continue having a “major bearing” on Australia’s economic outlook.
“Chinese fiscal indicators paint a gloomy economic picture with domestic demand remaining subdued amid a continued construction downturn,” Argo said.
“This has seen commodity prices slump in recent months, as reflected in the falling share prices of BHP Group and Rio Tinto.”
