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Argo profits but sounds bushfires, virus warning


South Australia’s largest listed investment company Argo Investments has reported a half-year profit of $118.8 million, down $38.4 million on the previous year.

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However, Argo blamed the 24.4 per cent profit decline on a $36.1 million demerger dividend it received in the half-year to December 31 2018 due to Wesfarmers divesting the Coles Group.

Excluding the one-off non-cash income item the first half profit fell by $2.3 million.  The interim dividend of 16 cents per share fully franked is unchanged from last year, which the company says has been maintained despite significant dividend cuts from Westpac, National Australia Bank and Telstra.

Argo purchased $93 million of long-term stocks during the half-year including investments in Corporate Travel Management, Freedom Foods, Rural Funds Group and a new portfolio position in Treasury Wine Estates.

It also received proceeds of $65 million from sales and takeovers of long-term investments in a number of companies including Incitec Pivot, Nufarm and DuluxGroup, which has been taken over by Nippon Paint.

In a statement to the Australian Securities Exchange this morning, the company says the growing threat of coronavirus is creating some market volatility, particularly in some sectors.

“Tourism operators, education providers and some exporters to China are among those businesses currently most exposed,” the statement says.

“At this stage, the severity of the outbreak and the impact on China’s economy remains unknown.

As China is the world’s second largest economy and Australia’s largest trading partner, the flow-on effects domestically could be significant if the health crisis escalates further.

“Notwithstanding the coronavirus threat, the Australian market rose 5 per cent in January despite a dour outlook for the economy and company profits. As we enter the local corporate results reporting season, company valuations remain stretched as markets have rallied while earnings continue to be downgraded.

“In our view, the impacts of Australia’s tragic bushfires and the unfolding coronavirus outbreak could dent the second half outlook for a number of companies and potentially lead to additional short-term market volatility.”

Argo investments has a market cap of $6.28 billion and ranked second behind Santos in Indaily’s 2019 SA Business Index. Its share price was $8.70 this morning.

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