Argo Investments Sees Profits Slide in First Half of FY24

Adelaide’s second largest company, Argo Investments, experienced a decline in profits and earnings per share during the first half of FY24. The company reported an 8.5% decrease in profits, amounting to $125.3 million, for the six-month period ending on December 31. This decline was attributed to lower dividends received from its mining interests within its investment portfolio.

Earnings per share also dropped by 9.3% in the first half, while the company’s investment performance, as measured by net tangible assets return after management costs and tax, increased by 5.6%. However, this still fell short of the return achieved by the top 200 listed Australian companies, which saw a rise of 7.6% in the same period.

Argo Investments highlighted the significant gains made from its holdings in Clarity Pharmaceuticals, which rose by 170%. Another notable performer in the portfolio was Stanmore Resources, experiencing a 60% increase. These positive contributions were offset by negative returns from other holdings, including healthcare provider Healius. The company acknowledged that Australian healthcare providers have faced challenges due to higher costs and lower utilization rates. Additionally, Argo noted that its relative performance was affected by not owning Fortescue and having lower exposure to major banks.

The total number of stocks in Argo’s portfolio slightly decreased from 89 to 86 over the half. Notable divestments included Liontown Resources and Insurance Australia Group, while positions in Estia Health and Invocare were fully exited due to takeover deals.

Looking ahead, Argo Investments acknowledged the recent global equity market rally and bullish sentiment among investors, which has led to overlooking consensus expectations of lower company earnings in 2024. Australia’s economic fundamentals were described as solid, with strong employment and moderating inflation supporting the outlook. However, the company warned that price increases and higher mortgage payments are impacting many consumers and anticipate a significant dispersion in profit results during this reporting season.

Argo Investments emphasized the benefit of its highly diversified portfolio in navigating such challenges. With a strong balance sheet, no debt, and cash on hand, the company believes it is well-positioned for the new calendar year.