letter to shareholders re half year report

7 February, 2005
Dear Shareholder,
The Directors of Argo Investments Limited, a leading Australian listed
investment company with total assets of $2.6 billion, are pleased to advise
a record profit and increased dividend for the six months ended 31
December, 2004.
Financial Report
Net profit after tax increased 37.6% to a record $53.1 million compared
with $38.6 million in the previous corresponding half-year. The strong
profit improvement was achieved due to many stocks held in the
Company’s investment portfolio increasing their distributions. In addition,
special distributions of $5.7 million (including $2.9 million from
Macquarie Infrastructure Group) were received, compared with only $1.5
million in the same period of the previous year. The current period also
included the income received from the $195 million of capital raised in the
1 for 10 rights issue at $4.40 per share in March 2004.
Earnings per share rose 22.1% from 9.5 cents to 11.6 cents, reflecting the
dilution impact of the March 2004 rights issue.
This result reflects the analytical strength and disciplined approach adopted
by management in evaluating and selecting long-term investment
opportunities in the Australian share market. Our operations continue to
reflect the benefit of having a widely diversified Australian investment
portfolio.
Interim Dividend and Special Dividend
An increased fully franked interim ordinary dividend of 9 cents per share
(last corresponding period 8 cents per share) together with a fully franked
special interim dividend of 1 cent per share (last corresponding period 0.5
cent per share) have been declared.
These dividends total 10 cents per share, absorbing $46.1 million and will
be paid on 11 March, 2005. The shares are expected to trade ex-dividend
on 21 February, 2005 and the record date to establish shareholder dividend
entitlements is 25 February, 2005.
Dividend Reinvestment Plan
The Company’s Dividend Reinvestment Plan (DRP) will operate for the
dividends totalling 10 cents per share payable on 11 March, 2005.
The Directors have resolved that the shares will be allotted at a discount of
2.5% from the market price of Argo shares, as defined by the DRP, to
eligible shareholders participating in the DRP.
-2-
Eligible shareholders, being those shareholders with registered addresses in Australia
or New Zealand, who wish to participate in the DRP and who have not already lodged
their intention, must do so by 25 February, 2005. Any variation to an existing election
must be lodged by this date.
Net Asset Backing
Net tangible asset backing per share rose to a record $5.66 as at 31 December, 2004
compared with $4.84 on 30 June, 2004.
As a long-term equity investor, Argo does not intend to dispose of its long-term
investment portfolio. However, if estimated tax on unrealised portfolio gains were to
be deducted, the net tangible asset backing per share would be $4.89 on 31 December,
2004 compared with $4.31 on 30 June, 2004.
These calculations are before providing for the interim and special dividends.
Investment Portfolio
The Company’s diversified portfolio of quality Australian shares produced a total
return of 27.7% for calendar 2004, as measured by the movement in net asset backing
per share plus dividends paid, compared with 27.5% from the ASX All Ordinaries
Accumulation Index.
A list of the Company’s principal investments as at 31 December, 2004 is set out
below:-
Market Value
$M
Macquarie Bank Ltd. 177.4
Milton Corporation Ltd. 128.3
Wesfarmers Ltd. 96.9
National Australia Bank Ltd. 92.0
Australia and New Zealand Banking Group Ltd. 87.7
Telstra Corporation Ltd. 84.0
Australian United Investment Company Ltd. 74.1
Westpac Banking Corporation 70.9
BHP Billiton Ltd. 70.5
St. George Bank Ltd. 62.5
Commonwealth Bank of Australia 56.4
Foster’s Group Ltd. 41.6
AMP Ltd. 40.3
Amcor Ltd. 36.6
Westfield Group 34.4
Rinker Group Ltd. 34.2
Insurance Australia Group Ltd. 33.4
Orica Ltd. 29.9
Australian Gas Light Company 28.6
Woolworths Ltd. 27.8
-3-
Share Purchase Plan
The Share Purchase Plan (SPP) will be offered in March 2005 to allow eligible
shareholders the opportunity to purchase additional Argo shares up to a maximum
value of $2,500. The maximum amount that a shareholder can invest in any twelve
month period pursuant to the SPP is $5,000 and it is the Directors’ current intention to
offer the SPP to shareholders each half-year at which time up to $2,500 can be
invested.
The record date to establish SPP entitlements is 25 February, 2005 and the shares are
expected to trade ex the SPP entitlements on 21 February, 2005.
An application form advising the issue price and other relevant information will be
mailed to all eligible shareholders on 11 March, 2005 at the time of payment of the
abovementioned dividends. The offer will close on 4 April, 2005.
Some features of the SPP are as follows:
- Participation in the SPP is entirely at the option of shareholders and is open
to all shareholders who hold shares before they trade ex the SPP
entitlements and are named in Argo’s share register on the relevant record
date, other than shareholders who have registered addresses in countries
outside Australia where regulatory requirements make participation by the
shareholder unlawful or impracticable. The Directors have determined that
shareholders whose registered addresses are outside Australia and New
Zealand will be unable to participate in the SPP. Entitlement to the SPP is
non-renounceable.
- Shares will be offered at a discount of 2.5% from the market price of Argo
shares, as defined by the SPP.
- No brokerage or any other transaction costs will be payable by shareholders
in respect of the application for, and the allotment of, shares purchased
through the SPP.
Yours faithfully,
ARGO INVESTMENTS LIMITED
R.J. Patterson
Managing Director