Announcement PDF Appendix 4D Half-year report 2024 Results for announcement to the market Half -year ended 31 December 2023 Comparative figures being the half-year ended 31 December 2022 Argo Investments Limited ABN 35 007 519 520 2023 $A’000 2022 $A’000 Income from operating activities down 8.3% to 139,014 151,554 Profit for the half-year down 8.5% to 125,273 136,985 Dividends Interim fully franked dividend payable 8 March 2024 16.5 cents (previous corresponding period 16.5 cents fully franked) The Company’s Dividend Reinvestment Plan (DRP) and Dividend Substitution Share Plan (DSSP) will operate for the interim dividend. The Directors have resolved that the shares will be allotted at the market price of Argo shares, which will be the volume weighted average ex-dividend market price of the shares traded on the record date and the three business days following the record date. No discount will apply. The record date for determining entitlements to the interim dividend 19 February 2024 The election date for determining participation in the DRP and DSSP 20 February 2024 Final fully franked dividend for year ended 30 June 2023 paid 15 September 2023 18.0 cents Net Tangible Asset Backing NTA per share1 NTA after unrealised tax provision 2 1. 2. December 2023 December 2022 $9.33 $8.75 $8.15 $7.73 After all costs, including tax payable. As required under the ASX Listing Rules, theoretical NTA per share after providing for estimated tax on unrealised gains/losses in the portfolio. That is, after tax that may arise if the entire portfolio was sold. argoinvestments.com.au | 2 Contents Directors’ Report Auditor’s Independence Declaration 4 5 Financial Report Consolidated Statement of Profit or Loss Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Review Report 6 6 7 8 9 10 12 13 argoinvestments.com.au | 3 Directors' Report The Directors present the financial report of the consolidated entity, consisting of Argo Investments Limited and its controlled entity (Argo or Company), for the half-year ended 31 December 2023. The Company’s objective is to maximise long-term returns to shareholders through a balance of capital and dividend growth. It does this by investing in a diversified Australian equities portfolio which is actively managed in a tax-aware manner within a low-cost structure. Review of operations Profit for the half-year under review decreased by 8.5% on the previous corresponding period to $125.3 million and earnings per share decreased 9.3% to 16.5 cents per share. The fall in profit was primarily due to reduced investment income received from trading investments in the portfolio. The Directors have declared a fully franked interim dividend of 16.5 cents per share compared with 16.5 cents per share paid for the half-year to 31 December 2022. This dividend totals $125.2 million, compared with $124.2 million in the previous corresponding period and will be paid on 8 March 2024. Net tangible asset backing per Argo share was $9.33 as at 31 December 2023, compared with $9.03 as at 30 June 2023 and $8.75 as at 31 December 2022. During the half-year, $26.0 million of additional capital was raised for investment from the Dividend Reinvestment Plan. The following persons were Directors during the half-year and are in office at the date of this report: Name Period of Directorship Russell Higgins AO (Chairman) Jason Beddow (Managing Director) Lianne Buck Christopher Cuffe AO Melissa Holzberger Elizabeth Lewin Peter Warne Director since 1 September 2011 Director since 3 February 2014 Director since 1 July 2022 Director since 25 August 2016 Director since 1 October 2023 Director since 1 July 2018 Director since 1 November 2022 Auditor’s Independence Declaration The Auditor’s Independence Declaration, as required under Section 307C of the Corporations Act 2001, is set out on page 5. Rounding of amounts Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 applies to the Company and accordingly amounts have been rounded to the nearest one thousand dollars in accordance with that Instrument, unless otherwise stated. This report is made in accordance with a resolution of the Board of Directors. On behalf of the Board R.A. Higgins AO Chairman 5 February 2024 argoinvestments.com.au | 4 Auditor’s Independence Declaration As lead auditor for the review of Argo Investments Limited for the half-year ended 31 December 2023, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and (b) no contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Argo Investments Limited and the entities it controlled during the period. Julian McCarthy Partner PricewaterhouseCoopers Adelaide 5 February 2024 PricewaterhouseCoopers, ABN 52 780 433 757 Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001 T +61 8 8218 7000, F +61 8 8218 7999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. argoinvestments.com.au | 5 Consolidated Statement of Profit or Loss for the half-year ended 31 December 2023 Note Dividends and distributions Other income Net (losses)/gains on trading investments Income from operating activities Administration expenses Profit before income tax expense Income tax expense thereon Profit for the half-year Basic and diluted earnings per share 2 2023 $’000 132,645 6,697 (328) 139,014 (5,203) 2022 $’000 135,676 3,663 12,215 151,554 (5,241) 133,811 (8,538) 125,273 146,313 (9,328) 136,985 cents 16.5 cents 18.2 Consolidated Statement of Comprehensive Income for the half-year ended 31 December 2023 Profit for the half-year 2023 $’000 125,273 2022 $’000 136,985 242,789 (75,542) 167,247 292,520 220,460 (68,633) 151,827 288,812 Other comprehensive income: Items that will not be reclassified to profit or loss Revaluation of long-term investments Provision for deferred tax expense on revaluation of long-term investments Other comprehensive income for the half-year Total comprehensive income for the half-year (To be read in conjunction with the accompanying notes) argoinvestments.com.au | 6 Consolidated Statement of Financial Position at 31 December 2023 December 2023 $’000 June 2023 $’000 146,197 12,013 15,328 173,538 125,255 36,890 10,452 172,597 6,971,937 515 6,972,452 7,145,990 6,713,768 599 6,714,367 6,886,964 1,085 16,725 14,339 986 33,135 1,487 8,062 14,375 1,021 24,945 113 932,967 179 933,259 966,394 6,179,596 167 863,783 158 864,108 889,053 5,997,911 3,230,018 2,207,280 742,298 6,179,596 3,204,096 2,040,788 753,027 5,997,911 Current Assets Cash and cash equivalents Receivables Investments Total Current Assets Non-Current Assets Investments Property, plant and equipment Total Non-Current Assets Total Assets Current Liabilities Payables Derivative financial instruments Current tax liabilities Provisions Total Current Liabilities Non-Current Liabilities Payables Deferred tax liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Shareholders’ Equity Contributed equity Reserves Retained profits Total Shareholders’ Equity (To be read in conjunction with the accompanying notes) argoinvestments.com.au | 7 Consolidated Statement of Changes in Equity for the half-year ended 31 December 2023 Balance as at 1 July 2023 Profit for the half-year Other comprehensive income Contributed Equity $’000 3,204,096 - Reserves $’000 2,040,788 167,247 Retained Profits $’000 753,027 125,273 - Total $’000 5,997,911 125,273 167,247 - 167,247 125,273 292,520 25,969 (47) 25,922 3,230,018 (755) (755) 2,207,280 (136,002) (136,002) 742,298 25,969 (47) (755) (136,002) (110,835) 6,179,596 3,155,136 - 1,861,010 151,827 620,545 136,985 - 5,636,691 136,985 151,827 - 151,827 136,985 288,812 24,828 (45) 24,783 3,179,919 (298) (112,520) (112,818) 1,900,019 (15,003) (15,003) 742,527 24,828 (45) (298) (127,523) (103,038) 5,822,465 Total comprehensive income for the half-year Transactions with shareholders: Dividend Reinvestment Plan Cost of share issues net of tax Executive performance rights reserve Dividend paid Total transactions with shareholders Balance as at 31 December 2023 for the half-year ended 31 December 2022 Balance as at 1 July 2022 Profit for the half-year Other comprehensive income Total comprehensive income for the half-year Transactions with shareholders: Dividend Reinvestment Plan Cost of share issues net of tax Executive performance rights reserve Dividend paid Total transactions with shareholders Balance as at 31 December 2022 (To be read in conjunction with the accompanying notes) argoinvestments.com.au | 8 Consolidated Statement of Cash Flows for the half-year ended 31 December 2023 2023 $’000 2022 $’000 157,438 2,765 3,933 5,258 (1,800) (6,396) (14,830) 146,368 148,864 2,191 1,533 22,609 (11,628) (6,251) (48,324) 108,994 136,425 (151,429) (128) (15,132) 94,656 (57,781) 25,000 (21) 61,854 (194) (67) (110,033) (110,294) 20,942 125,255 146,197 (185) (64) (102,695) (102,944) 67,904 134,718 202,622 Cash flows from operating activities Dividends and distributions received Interest received Other receipts Proceeds from trading investments Payments for trading investments Other payments Income tax paid Net operating cash inflows Cash flows from investing activities Proceeds from sale of long-term investments Payments for long-term investments Proceeds from other financial cash assets Payments for fixed assets Net investing cash (outflows)/inflows Cash flows from financing activities Payments for lease liabilities Cost of share issues Dividends paid–net of Dividend Reinvestment Plan Net financing cash outflows Net increase in cash held Cash at the beginning of the half-year Cash at the end of the half-year (To be read in conjunction with the accompanying notes) argoinvestments.com.au | 9 Notes to the Financial Statements for the half-year ended 31 December 2023 1. Basis of preparation The general purpose financial report for the half-year ended 31 December 2023 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. The half-year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this half-yearly report is to be read in conjunction with the Annual Report for the year ended 30 June 2023 and any public announcements made by Argo Investments Limited (Company) during the half-year, in accordance with any continuous disclosure obligations arising under the Corporations Act 2001. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. 2. Earnings per share 2023 number ’000 2022 number ’000 Weighted average number of ordinary shares on issue used in the calculation of earnings per share 757,306 751,708 Profit for the half-year $’000 125,273 $’000 136,985 cents 16.5 cents 18.2 2023 $’000 2022 $’000 136,002 127,523 Basic and diluted earnings per share 3. Dividends Dividends paid during the half-year Final dividend for the year ended 30 June 2023 of 18.0 cents fully franked at 30% tax rate paid 15 September 2023 (2022: 17.0 cents fully franked at 30% tax rate) The final dividend paid did not contain a listed investment company (LIC) capital gain component (2022: 15.0 cents per share). 2023 $’000 2022 $’000 125,162 124,223 Dividend declared after balance date Since the end of the half-year, the Directors have declared the following dividend which has not been recognised as a liability at the end of the half-year: Interim dividend for the year ended 30 June 2024 of 16.5 cents fully franked at 30% tax rate payable 8 March 2024 (previous corresponding period: 16.5 cents fully franked at 30% tax rate) The interim dividend declared will not contain a LIC capital gain component (previous corresponding period: nil). argoinvestments.com.au | 10 Notes to the Financial Statements 4. Contributed equity Ordinary shares rank pari passu, have no par value and entitle the holder to participate in dividends and the proceeds on winding up of the Company in the proportion to the number of the shares held. The Company does not have a limited amount of authorised capital. 2023 No. of shares 2022 No. of shares 2023 $’000 2022 $’000 755,564,117 2,995,232 750,132,378 2,734,348 758,559,349 752,866,726 3,204,096 25,969 (47) 3,230,018 3,155,136 24,828 (45) 3,179,919 Issued and fully paid ordinary shares: Opening balance Dividend reinvestment plan(a) Cost of share issues net of tax Closing balance (a) On 15 September 2023, 2,995,232 shares were allotted at $8.67 per share pursuant to the Dividend Reinvestment Plan in operation for the final dividend paid for the year ended 30 June 2023. 5. Financial reporting by segments The Company operates in the investment industry predominately within Australia. The Company is managed as a whole and is considered to have a single operating segment. There is no further division of the Company or internal segment reporting used by the Directors when making strategic, investment or resource allocation decisions. The Company is domiciled in Australia and derives its income from the investment portfolio through the receipt of dividends, distributions, interest and other income. Argo has a diversified portfolio of investments, with no single investment accounting for more than 10% of income. There has been no change to the operating segments during the half-year. 6. Events after balance date Since 31 December 2023, to the date of this report, there have been no events specific to the Company of which the Directors are aware which has had a material effect on the Company or its financial position. 7. Contingencies At balance date the Company is not aware of any material contingent liabilities or contingent assets. argoinvestments.com.au | 11 Directors' Declaration In the opinion of the Directors of Argo Investments Limited (Company): (a) the consolidated financial statements and notes set out on pages 6 to 11 are in accordance with the Corporations Act 2001 including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2023 and of its performance for the half-year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the Directors. R.A. Higgins AO Chairman 5 February 2024 argoinvestments.com.au | 12 Independent auditor's review report to the members of Argo Investments Limited Report on the half-year financial report Conclusion We have reviewed the half-year financial report of Argo Investments Limited (the Company) and the entities it controlled during the half-year (together the Consolidated Entity), which comprises the consolidated statement of financial position as at 31 December 2023, consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows, for the half-year ended on that date, the notes to the financial statements and the directors' declaration. Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the accompanying half-year financial report of Argo Investments Limited does not comply with the Corporations Act 2001 including: 1. giving a true and fair view of the Consolidated Entity's financial position as at 31 December 2023 and of its performance for the half-year ended on that date 2. complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. Basis for conclusion We conducted our review in accordance with ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity (ASRE 2410). Our responsibilities are further described in the Auditor’s responsibilities for the review of the half-year financial report section of our report. We are independent of the Consolidated Entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the annual financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. PricewaterhouseCoopers, ABN 52 780 433 757 Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001 T +61 8 8218 7000, F +61 8 8218 7999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. argoinvestments.com.au | 13 Responsibility of the directors for the half-year financial report The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement whether due to fraud or error. Auditor's responsibility for the review of the half-year financial report Our responsibility is to express a conclusion on the half-year financial report based on our review. ASRE 2410 requires us to conclude whether we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Consolidated Entity's financial position as at 31 December 2023 and of its performance for the halfyear ended on that date, and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. PricewaterhouseCoopers Julian McCarthy Partner PricewaterhouseCoopers Adelaide 5 February 2024 PricewaterhouseCoopers, ABN 52 780 433 757 Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001 T +61 8 8218 7000, F +61 8 8218 7999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. argoinvestments.com.au | 14