Argo Investments Limited (ASX: ARG) this morning announced its preliminary final report for the financial year ended 30 June 2016, with the share price up 7 cents in response.
The key highlights of its annual results are as follows:
- Net profit was down 2% to $216.3m when compared to the previous year's figure of $228.1m
- Revenue was down 7% to $228.035m from $241.9m,
- Earnings-per-share were down to 32 cents from 34.3 cents,
- The dividend for the half-year was held steady at $0.155 (the total dividend was increased by 1 cent from 29.5 cents to 30.5 cents), and
- The Net Tangible Asset backing (NTA) per share fell to $7.11 from $7.52
However, the results announcement went on to explain that, whilst the headline profit was down on last year, the previous year's profit of $228.1m included a one-off, non-cash income item of $18.6m due to the demerger of South32 Ltd (ASX: S32) from BHP Billiton Limited (ASX: BHP) which artificially boosted last year's results.
If this were to be excluded, Argo's net profit actually increased by 3.2% and earnings-per-share increased by 1.6%.
There were some minor changes to Argo's portfolio during the year which included:
- sales of Medibank Private Ltd (ASX: MPL), Cimic Group Ltd (ASX: CIM) and the National Australia Bank Ltd (ASX: NAB) offshoot, CYBG PLC CDI 1:1 (ASX: CYB), and
- purchases including Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA) and Estia Health Ltd (ASX: EHE)
If you exclude the one-off item from 2014-15, you could say that Argo's results were very workman-like given the S&P ASX 200 Accumulation Index was up only 0.6% for the same period.
With cash on the balance sheet increasing from $77.6m to $93.1m, it's clear management is keeping some of its powder dry in anticipation of future market corrections and potential buying opportunities.
It will continue to hold its investments with the view to generating strong levels of dividend income over the very long-term for the remainder of its portfolio.
Like its counterpart, Australian Foundation Investment Co.Ltd. (ASX: AFI), you shouldn't expect miracle returns due to the diversified nature of its portfolio.
However, if you can buy these shares with the anticipation of letting your dollars work for at least the next decade, listed investment companies like Argo (and Australian Foundation Investment Co.) would certainly slot quite easily into the core of anyone's portfolio at today's price, even for the more experienced investor.
