Interim Results

RNS Number : 2840H
ARGO Group Limited
31 July 2019
 

Argo Group Limited

("Argo" or the "Company")

 

Interim Results for the six months ended 30 June 2019

 

Argo today announces its interim results for the six months ended 30 June 2019.

The Company will today make available its interim report for the six months period ended 30 June 2019 on the Company's website www.argogrouplimited.com.

 

 

Key highlights for the six months period ended 30 June 2019

 

This report sets out the results of Argo Group Limited (the "Company") and its subsidiaries (collectively "the Group" or "Argo") covering the six months ended 30 June 2019.

 

-     Revenues US$2.4 million (six months to 30 June 2018: US$2.2 million)

-     Operating loss US$0.03 million (six months to 30 June 2018: loss US$0.6 million)

-     Profit before tax US$1.5 million (six months to 30 June 2018: loss US$0.7 million)

-     Net assets US$22.0 million (31 December 2018: US$23.3 million)

 

Commenting on the results and outlook, Kyriakos Rialas, Chief Executive Officer of Argo said:

 

 

"In the first six months of 2019 Argo has been active on several fronts.  Firstly, it completed a successful shareholder buyback providing liquidity to those shareholders who wished to exit.  Secondly at fund level we have completed the monetisation of our long-term investment in the Indonesian Refinery Company Tuban Petrochemical (TPPI) by selling and closing a position that has been in our books for around 15 years.  Our flagship Fund, The Argo Fund, returned to profitability with over 4% net return in the first six months following a disappointing 2018 for the EM industry.  Furthermore, The Argo Fund has grown to above US$90 million making it more attractive to potential investors."

 

 

Enquiries

 

Argo Group Limited

Andreas Rialas

020 7016 7660

 

Panmure Gordon

Dominic Morley

020 7886 2500

 

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

 

 

 

 

 

 

 

 

 

CHAIRMAN'S STATEMENT

 

The Group and its investment objective

 

Argo's investment objective is to provide investors with absolute returns in the funds that it manages by investing in multi strategy investments in emerging markets.

 

Argo was listed on the AIM market in November 2008 and has a performance track record dating back to 2000.

 

Business and operational review

 

For the six months ended 30 June 2019 the Group generated revenues of US$2.4 million (six months to 30 June 2018: US$2.2 million) with management fees accounting for US$2.0 million (six months to 30 June 2018: US$2.1 million).

 

Total operating costs for the period, ignoring bad debt provisions, are US$2.2 million compared to US$2.1 million for the six months to 30 June 2018. The Group has provided against management fees of US$0.3 million (€0.2 million) (six months to 30 June 2018: US$0.6 million (€0.5 million)) due from AREOF. In the Directors' view these amounts are fully recoverable however they have concluded that it would not be appropriate to continue to recognise income without provision from these investment management services as the timing of such receipts may be outside the control of the Company and AREOF.

 

Overall, the financial statements show an operating loss for the period of US$0.03 million (six months to 30 June 2018: loss US$0.6 million) and a profit before tax of US$1.5 million (six months to 30 June 2018: loss US$0.7 million) reflecting the net profit on investments of US$1.4 million (six months to 30 June 2018: net loss US$0.2 million).

 

At the period end, the Group had net assets of US$22.0 million (31 December 2018: US$23.3 million) and net current assets of US$21.6 million (31 December 2018: US$22.8 million) including cash reserves of US$1.2 million (31 December 2018: US$4.0 million).

 

Net assets include investments in TAF, AREOF, Argo Special Situations Fund LP and ADCF (together referred to as "the Argo Funds") at fair values of US$19.0 million (31 December 2018: US$18.2 million), US$ nil  (31 December 2018: US$0.1 million), US$0.04 million (31 December 2018: US$0.04 million) and US$0.8 million (31 December 2018: US$ nil) respectively.

 

At the period end the Argo Funds (excluding AREOF) owed the Group total management and performance fees of US$0.7 million (31 December 2018: US$0.6 million).

 

The Argo Funds (excluding AREOF) ended the period with Assets under Management ("AUM") at US$151.2 million. The current level of AUM remains below that required to ensure sustainable profits on a recurring management fee basis in the absence of performance fees. This has necessitated an ongoing review of the Group's cost basis. Nevertheless, the Group has ensured that the operational framework remains intact and that it retains the capacity to manage additional fund inflows as and when they arise.

 

The average number of permanent employees of the Group for the six months to 30 June 2019 was 21 (30 June 2018: 20).

 

The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2019 total US$ Nil (31 December 2018: US$ Nil) after a bad debt provision of US$9.1 million (€8.0 million) (31 December 2018: US$8.9 million, €7.8 million). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. AREOF paid US$0.3 million (€0.3 million) towards management fees owed to the Group in June 2019. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. The AREOF management contract expires on the later of its termination or the sale of all assets in the Portfolio. The life of the Fund is due to expire on 30 June 2034.

Fund performance

The Argo Funds

Fund

Launch

date

30 June

2019

6 months

30 June

2018

6 months

2018

year

total

Since inception

Annualised  performance

Sharpe

ratio

 

Down

months

AUM

 

 

%

%

%

%

CAGR %

 

 

US$m

The Argo Fund

Oct-00

4.25

-1.95

 -5.65

230.94

7.36

0.47

70 of 225

   92.8

Argo Distressed Credit Fund

Oct-08

5.18

-0.40

 

      1.58

251.83

14.30

0.63

59 of 129

   49.2

Argo Special Situations Fund LP

Feb-12

12.08

-1.91

26.8

-60.41

1.02

0.02

71 of 95

9.2

Total

 

 

 

 

 

 

 

 

151.2

 

* NAV only officially measured once a year in September.

 

AREOF's adjusted NAV at 30 September 2018* was US$15.0 million (€13.1 million), compared with US$0.7 million (€0.6 million) a year earlier.  The Adjusted NAV per share at 30 September 2018 was US$0.0247 (€0.0216) (2017: US$0.001 (€0.001)). The improvement in NAV follows the completion of the restructuring of the loan supporting Riviera Shopping City in June 2018.

 

The main shareholder in AREOF:

Entity

No of Shares

%

 

 

 

Argo Distressed Credit Fund

504,466,674

83%

 

 

 

 

 

 

Following the disappointing performance last year, markets recovered strongly in the first half of 2019. Safe-haven assets such as government bonds and gold were amongst the best performers, particularly in the second quarter, whilst risk assets also recorded year-to-date gains.

 

Both equities and bonds benefited from the dovish shift in tone from global monetary policymakers, notably the US Federal Reserve and the European Central Bank, that many investors hoped would lead to lower policy interest rates and the maintenance or even expansion of liquidity. The gains came about despite the escalation of the US-China trade dispute as well as rising trade tension between other countries. The US economy is now widely believed to be in the late-cycle phase but with low near-term risk of recession and with slowing growth elsewhere, including China, it appears that global economic momentum has peaked.

 

Historically, emerging markets have been vulnerable to swings -particularly strengthening-in the value of the US dollar and a weakening of world trade and growth. However, consumption remains resilient in several EM economies, despite a global manufacturing slowdown, and there appears scope for central banks in many EMs to lower interest rates, leading to further compression in local yields. As always, political events remain to the fore in EM investing. President Jokowi was re-elected in Indonesia and in South Africa, the re-election of the African National Congress Party was positive, despite a decrease in the size of its majority. Meanwhile, in Turkey the heterodox policies pursued by President Erdogan and the recent dismissal of the central bank governor have unsettled investors and the markets await the outcome of the elections in Argentina in the Autumn; the Macri administration has enjoyed considerable support from the IMF for its economic programme and is hoping to be elected for an additional term.

 

The Argo Fund, the group's flagship fund, deploys a long-short EM bond and forex strategy. Its Net Asset Value ("NAV") rose by 4.25% in the first six months of 2019 largely due to the performance of high beta sovereign and corporate bonds in the portfolio; perhaps unsurprisingly, the Fund's short positions were the biggest detractors. The AUM of this fund increased to US$92.8 million at the end of June 2019, within sight of the targeted US$100 million which we believe is important for raising additional external funding. The NAV of the Argo Distressed Credit Fund rose by 5.18% in the first half and we are planning to re-launch this fund to attract additional capital. The NAV of the Argo Special Situations Fund increased by 12.08%. The latter funds have now completed the realisation of their remaining exposure to the refinery in Indonesia.

 

Dividends and share purchase programme

The Group did not pay a dividend during the current or prior period. The Directors intend to restart dividend payments as soon as the Group's performance provides a consistent track record of profitability.

 

During the period, the Directors authorised the repurchase of 8,072,892 shares for a total cost of US$2.7 million (£2.1 million) by way of a tender offer. The Board is currently evaluating the merits of a further tender offer later this year.

 

Outlook

The Board remains optimistic about the Group's prospects based on the transactions in the pipeline and the Group's initiatives to increase AUM. A significant increase in AUM is still required to ensure sustainable profits on a recurring management fee basis and the Group is well placed with capacity to absorb such an increase in AUM with negligible impact on operational costs.

 

Boosting AUM will be Argo's top priority in the next six months. The Group's marketing efforts will continue to focus on TAF which has an 18-year track record as well as identifying acquisitions that are earnings enhancing.

 

Over the longer term, the Board believes there is significant opportunity for growth in assets and profits and remains committed to ensuring the Group's investment management capabilities and resources are appropriate to meet its key objective of achieving a consistent positive investment performance in the emerging markets sector.

 

 

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2019

 

 

 

Six months

 

Six months

 

 

 

ended

 

ended

 

 

 

30 June

 

30 June

 

 

 

2019

 

2018

 

 

 

Note

US$'000

 

US$'000

 

 

 

 

 

 

 

Management fees

 

2,013

 

2,115

 

Performance fees

 

300

 

-

 

Other income

 

122

 

125

 

Revenue

 

2,435

 

2,240

 

 

 

 

 

 

 

Legal and professional expenses

 

(303)

 

(177)

 

Management and incentive fees payable

 

(34)

 

(35)

 

Operational expenses

 

(520)

 

(559)

 

Employee costs

 

(1,291)

 

(1,347)

 

Bad debt provision

9, 10

(295)

 

(692)

 

Foreign exchange (loss)/gain

 

(20)

 

1

 

Depreciation

7

(5)

 

(6)

 

Operating loss

 

(33)

 

(575)

 

 

 

 

 

 

 

Interest income

 

90

 

99

 

Realised and unrealised gain/(losses) on investments

8

1,438

 

(238)

 

 Profit/(loss) on ordinary activities before taxation

 

1,495

 

(714)

 

 

 

 

 

 

 

Taxation

5

(19)

 

    (11)      

 

Profit/(loss) for the period after taxation attributable to members of the Company

6

1,476

 

(725)

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Exchange differences on translation of foreign operations

 

(44)

 

(98)

 

Total comprehensive income for the period

 

1,432

 

(823)

 

 

 

 

 

 

 

 

 

Six months

 

Six months

 

 

 

Ended

 

Ended

 

 

 

30 June

 

30 June

 

 

 

2018

 

2018

 

 

 

US$

 

US$

 

Earnings per share (basic)

6

0.03

 

(0.02)

 

Earnings per share (diluted)

6

0.03

 

(0.01)

 

                   

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

 

30 June

 

31 December

 

 

 

2019

 

2018

 

 

Note

US$'000

 

US$'000

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

Land, fixtures, fittings and equipment

7

207

 

212

 

Financial assets at fair value through profit or loss

8

45

 

159

 

Loans and advances receivable

10

103

 

118

 

Total non-current assets

 

355

 

489

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Financial assets at fair value through profit or loss

8

19,745

 

18,193

 

Trade and other receivables

9

887

 

757

 

Loans and advances receivable

10

15

 

-

 

Tax receivable

5

-

 

5

 

Cash and cash equivalents

 

1,168

 

4,005

 

Total current assets

 

21,815

 

22,960

 

 

 

 

 

 

 

Total assets

 

22,170

 

23,449

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Issued share capital

11

390

 

470

 

Share premium

 

25,353

 

28,022

 

Revenue reserve

 

(887)

 

(2,363)                  

 

Foreign currency translation reserve

 

(2,904)

 

(2,860)

 

Total equity

 

21,952

 

23,269

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

214

 

180

 

Tax payable

 

4

 

-

 

Total current liabilities

 

218

 

180

 

Total equity and liabilities

 

22,170

 

23,449

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2019

 

 

 

Issued share capital

 

 

Share premium

 

 

Revenue reserve

 Foreign currency translation reserve

 

 

 

Total

 

2018

2018

2018

2018

2018

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

As at 1 January 2018

470

28,022

(1,127)

(2,705)

24,660

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

Loss for the period after taxation

-

-

(725)

              -

(725)

Other comprehensive income

-

-

               -

(98)

(98)

 

 

 

 

 

 

As at 30 June 2018

470

28,022

(1,852)

(2,803)

21,044

 

              

            

           

            

            

 

 

 

 

 

Issued share capital

 

 

Share premium

 

 

Revenue reserve

 Foreign currency translation reserve

 

 

 

Total

 

2019

2019

2019

2019

2019

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

As at 1 January 2019

470

28,022

(2,363)

(2,860)

23,269

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

Profit for the period after taxation

-

-

1,476

               -

1,476

Other comprehensive income

-

-

-

(44)

(44)

Transaction with owners

recorded directly in equity

 

 

 

 

 

Purchase of own shares

(80)

 

(2,669)

-

-

(2,749)

 

 

 

 

 

 

As at 30 June 2019

390

25,353

(887)

(2,904)

21,952

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2019

 

 

 

 

Six months ended

 

Six months ended

 

 

30 June

 

30 June

 

 

2019

 

2018

 

Note

US$'000

 

US$'000

 

 

 

 

 

Net cash (outflow)/inflow from operating activities

12

(32)

 

3,365

 

 

 

 

 

Cash flows used in investing activities

 

 

 

 

Interest received on cash and cash equivalents

 

8

 

11

Purchase of fixtures, fittings and equipment

7

(1)

 

(1)

Purchase of current asset investments

8

-

 

(4,000)

 

 

 

 

 

 

 

 

 

 

Net cash generated from/(used in) investing activities

 

7

 

(3,990)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Repurchase of own shares

 

(2,749)

 

-

 

 

 

 

 

Net cash used in financing activities

 

(2,749)

 

-

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(2,774)

 

(625)

 

 

 

 

 

Cash and cash equivalents at 1 January 2019 and

    1 January 2018

 

4,005

 

5,031

 

 

 

 

 

Foreign exchange loss on cash and cash equivalents

 

(63)

 

(91)

 

 

 

 

 

Cash and cash equivalents as at 30 June 2019 and 30 June 2018

 

1,168

 

4,315

 

 

 

1.       CORPORATE INFORMATION

 

          The Company is domiciled in the Isle of Man under the Companies Act 2006.  Its registered office is at 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB. The condensed consolidated interim financial statements of the Group as at and for the six months ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as the "Group").

 

          The consolidated financial statements of the Group as at and for the year ended 31 December 2018 are available upon request from the Company's registered office or at www.argogrouplimited.com.

 

          The principal activity of the Company is that of a holding company and the principal activity of the wider Group is that of an investment management business. The functional and presentational currency of the Group undertakings is US dollars.

 

         Wholly owned subsidiaries                                                              Country of incorporation

 

Argo Capital Management (Cyprus) Limited

Cyprus

Argo Capital Management Limited

United Kingdom

Argo Capital Management Property Limited

Cayman Islands

Argo Property Management Srl

Romania

 

2.       ACCOUNTING POLICIES

 

(a)     Basis of preparation

 

          These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2018.

 

          The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2018.

 

          These condensed consolidated interim financial statements were approved by the Board of Directors on 30 July 2019.       

                 

b)      Financial instruments and fair value hierarchy

 

The following represents the fair value hierarchy of financial instruments measured at fair value in the Condensed Consolidated Statement of Financial Position. The hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement

 

 

3.      SEGMENTAL ANALYSIS

 

The Group operates as a single asset management business.

The operating results of the companies are regularly reviewed by the Directors of the Group for the purposes of making decisions about resources to be allocated to each company and to assess performance. The following summary analyses revenues, profit or loss, assets and liabilities:

 

 

Argo Group Ltd

Argo Capital Management (Cyprus) Ltd

 

Argo Capital Management Ltd

 

Argo Capital Management Property Ltd

Six months ended

 30 June      

 

2019

2019

2019

2019

2019

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

Total revenues for reportable segments customers

-

437

1,748

687

2,872

Intersegment revenues

-

437

-

-

437

 

 

 

 

 

 

Total profit/(loss) for reportable segments

1,114

135

157

70

1,476

Intersegment profit/(loss)

-

437

(437)

-

-

 

 

 

 

 

 

Total assets for reportable segments assets

20,034

346

1,100

690

22,170

Total liabilities for reportable segments

6

10

92

110

218

 

Revenues, profit or loss, assets and liabilities may be reconciled as follows:

 

Six months

 

Ended

 

30 June 2019

 

US$'000

Revenues

 

Total revenues for reportable segments

2,872

Elimination of intersegment revenues

(437)

Group revenues

2,435

 

 

Profit or loss

 

Total profit for reportable segments

1,495

Elimination of intersegment loss

-

Other unallocated amounts

-

Profit on ordinary activities before taxation

1,495

 

 

Assets

 

Total assets for reportable segments

22,546

Elimination of intersegment receivables

(376)

Group assets

22,170

 

 

Liabilities

 

Total liabilities for reportable segments

594

Elimination of intersegment payables

(376)

Group liabilities

218

 

 

 

Argo Group Ltd

Argo Capital Management (Cyprus) Ltd

 

Argo Capital Management Ltd

 

Argo Capital Management Property Ltd

Six months ended

30 June      

 

2018

2018

2018

2018

2018

 

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

Total revenues for reportable segments

-

377

1,510

730

2,617   

Intersegment revenues

-

377

-

-

    377

 

 

 

 

 

 

Total profit/(loss) for reportable segments

(419)

141

(115)

(321)

(714)    

Intersegment profit/(loss)

-

377

(377)

-

-

 

 

 

 

 

 

Total assets for reportable segments

20,127

1,440

1,467

2,222

25,256  

Total liabilities for reportable segments

6

32

392

989

1,419    

 

Revenues, profit or loss, assets and liabilities may be reconciled as follows:

 

Six months

 

ended

 

30 June 2018

 

US$'000

Revenues

 

Total revenues for reportable segments

2,617

Elimination of intersegment revenues

  (377)

Group revenues

2,240

 

 

Profit or loss

 

Total loss for reportable segments

 (714)

Elimination of intersegment loss

-

Other unallocated amounts

-

Loss on ordinary activities before taxation

(714)

 

 

Assets

 

Total assets for reportable segments

25,256

Elimination of intersegment receivables

(1,233)

Group assets

24,023

 

 

Liabilities

 

Total liabilities for reportable segments

 

1,419

Elimination of intersegment payables

(1,233)

Group liabilities

186

 

 

4.   SHARE-BASED INCENTIVE PLANS

        

         On 14 March 2011 the Group granted options over 5,900,000 shares to directors and employees under The Argo Group Limited Employee Stock Option Plan. All options are exercisable at 24p per share within 10 years of the grant date.

 

         The fair value of the options granted was measured at the grant date using a Black-Scholes model that takes into account the effect of certain financial assumptions, including the option exercise price, current share price and volatility, dividend yield and the risk-free interest rate. The fair value of the options granted is spread over the vesting period of the scheme and the value is adjusted to reflect the actual number of shares that are expected to vest.

 

The principal assumptions for valuing the options are:

 

Exercise price (pence)

24.0

Weighted average share price at grant date (pence)

17.0

Weighted average option life (years)

10.0

Expected volatility (% p.a.)

15.0

Dividend yield (% p.a.)

10.0

Risk-free interest rate (% p.a.)

0.907

 

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The total charge to employee costs in respect of this incentive plan is £nil (30 June 2018: £nil)

           

The number and weighted average exercise price of the share options during the period is as follows:

 

 

Weighted average exercise price

No. of share options

Outstanding at beginning of period

24.0p

4,340,000

Granted during the period

-

   -

Forfeited during the period

-

-

Outstanding at end of period

24.0p

4,340,000

Exercisable at end of period

24.0p

4,340,000

 

The options outstanding at 30 June 2019 have an exercise price of 24p and a weighted average contractual life of 2 years.  Outstanding share options are contingent upon the option holder remaining an employee of the Group.

 

No share options were issued during the period.

 

5.      TAXATION

 

         Taxation rates applicable to the parent company and the Cypriot, UK, Luxembourg, Cayman and Romanian subsidiaries range from 0% to 19% (2018: 0% to 19%).

        

Consolidated statement of profit or loss

Six months

 

Six months

 

ended

 

Ended

 

30 June

 

30 June

 

2019

 

2018

 

US$'000

 

US$'000

 

 

 

 

Taxation charge for the period on Group companies

19

 

11

 

The charge for the period can be reconciled to the profit/(loss) shown on the Condensed Consolidated Statement of profit or loss as follows:

 

Six months

 

Six months

 

ended

 

Ended

 

30 June

 

30 June

 

2019

 

2018

 

US$'000

 

US$'000

 

 

 

 

Profit/(loss) before tax

1,495

 

(714)

 

 

 

 

Applicable Isle of Man tax rate for Argo Group Limited of 0%

-

 

-

Timing differences

-

 

-

Non-deductible expenses

-

 

-

Other adjustments

(31)

 

22

Tax effect of different tax rates of subsidiaries operating in other jurisdictions

50

 

(11)

Tax charge

          19

 

11

 

Consolidated statement of financial position

 

 

 

 

30 June

 

31 December

 

2019

 

2018

 

US$'000

 

US$'000

 

 

 

 

Corporation tax (payable)/receivable

(4)

 

5

 

6.      EARNINGS PER SHARE

 

         Earnings per share is calculated by dividing the net profit/(loss) for the period by the weighted average number of shares outstanding during the period.

 

Six months

 

Six months

 

 

ended

 

ended

 

 

30 June

 

30 June

 

 

2019

 

2018

 

 

US$'000

 

US$'000

 

 

 

 

 

 

Net profit/(loss) for the period after taxation attributable to members

1,476

 

(725)

 

 

 

 

 

 

 

No. of shares

 

No. of shares

 

 

 

 

 

 

Weighted average number of ordinary shares for basic earnings per share

42,996,432

 

47,032,878

 

Effect of dilution (Note 4)

4,340,000

 

4,340,000

 

Weighted average number of ordinary shares for diluted earnings per share

47,336,432

 

52,372,878

 

 

 

Six months

 

Six months

 

Ended

 

ended

 

30 June

 

30 June

 

2019

 

2018

 

US$

 

US$

 

 

 

 

Earnings per share (basic)

0.03

 

(0.02)

Earnings per share (diluted)

0.03

 

(0.01)

 

 

7.      LAND, FIXTURES, FITTINGS AND EQUIPMENT

 

Fixtures, fittings and equipment

 

 

 

Land

 

 

Total

 

US$'000

US$'000

US$'000

Cost

 

 

 

At 1 January 2018

269

193

462

Additions

8

-

8

Disposals

-

-

-

Foreign exchange movement

(11)

(9)

(20)

At 31 December 2018

266

184

450

Additions

1

-

1

Foreign exchange movement

(3)

(1)

(4)

At 30 June 2019

264

183

447

 

 

 

 

Accumulated Depreciation

 

 

 

At 1 January 2018

 

235

 

-

                  235

Depreciation charge for period

12

-

26

Disposals

-

-

-

Foreign exchange movement

(9)

-

9

At 31 December 2018

238

-

238

Depreciation charge for period

5

-

5

Foreign exchange movement

(3)

-

(3)

At 30 June 2019

240

-

240

 

 

 

 

Net book value

 

 

 

At 31 December 2018

28

28

184

212

At 30 June 2019

24

183

207

 

 

8.       FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

 

 

 

 

 

 

30 June 2019

 

30 June 2019

Holding

Investment in management shares

Total cost

 

Fair value

 

 

US$'000

 

US$'000

 

 

 

 

 

10

The Argo Fund Ltd

-

 

-

100

Argo Distressed Credit Fund Ltd

-

 

-

1

Argo Special Situations Fund LP

-

 

-

 

 

-

 

-

 

Holding

Investment in ordinary shares

Total cost

 

Fair value

 

 

US$'000

 

US$'000

 

 

 

 

 

57,310

The Argo Fund Ltd*

15,472

 

18,966

-

Argo Real Estate Opportunities Fund Ltd

-

 

-

115

Argo Special Situations Fund LP

115

 

45

221

Argo Distressed Credit Fund Limited*

786

 

779

 

 

14,262

 

19,790

 

 

 

31 December

 

31 December

 

 

2018

 

2018

Holding

Investment in management shares

Total cost

 

Fair value

 

 

US$'000

 

US$'000

 

 

 

 

 

10

The Argo Fund Ltd

-

 

-

100

Argo Distressed Credit Fund Ltd

-

 

-

1

Argo Special Situations Fund LP

-

 

-

 

 

-

 

-

 

Holding

Investment in ordinary shares

Total cost

 

Fair value

 

 

US$'000

 

US$'000

 

 

 

 

 

57,309

The Argo Fund Ltd*

15,472

 

18,193

30,056,500

Argo Real Estate Opportunities Fund Ltd

988

 

119

115

Argo Special Situations Fund LP

115

 

40

-

Argo Distressed Credit Fund Ltd*

-

 

-

 

 

16,575

 

18,352

*Classified as current in the consolidated statement of Financial Position

Note that some of the Argo Funds listed above may have investments in each other.

During the period, the Group sold its investment of 30,056,500 shares in AREOF at €0.02 each for 221 shares in ADCF in consideration.

 

9.   TRADE AND OTHER RECEIVABLES

 

 

US$ '000

 

US$ '000

 

 

 

 

Trade receivables - Gross

9,873

 

9,752

Less: provision for impairment of trade receivables

(9,196)

 

(9,188)

Trade receivables - Net

677

 

564

Other receivables

121

 

111

Prepayments and accrued income

89

 

82

 

887

 

757

The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All trade receivable balances are recoverable within one year from the reporting date except as disclosed below.

 

A provision for impairment has been raised for all balances owed by the AREOF Group under trade and other receivables. These balances include all management fees and other loans and advances made by the investment manager to the AREOF Group. These amounted to US$11.8 million (€10.3 million) (31 December 2018: US$11.6 million, €10.1 million).

 

         The movement in the Group's provision for impairment of trade and loan receivables is as follow:

 

 

 

US$ '000

 

US$ '000

 

 

 

 

Opening balance

11,803

 

10,992

Bad debt recovered

(338)

 

-

Charged during the period

633

 

1,350

Foreign exchange movement

 

 

(90)

 

(539)

Closing balance

12,008

 

11,803

     

10.  LOANS AND ADVANCES RECEIVABLE

 

 

 At 30 June 2019

 

At 31 December 2018

 

 

US$'000

 

US$'000

 

 

 

 

 

 

Deposits on leased premises - current

15

 

-

 

Deposits on leased premises - non-current (see below)

103

 

                       118

9

 

Other loans and advances receivable - non-current

 

-

 

-

 

 

118

 

118

 

 

The deposits on leased premises are retained by the lessor until vacation of the premises at the end of the lease term as follows:

 

 

US$'000

 

US$'000

Non-current:

 

 

 

Lease expiring in second year after the reporting date

-

 

14

Lease expiring in fourth year after the reporting date

103

 

-

Lease expiring in fifth year after reporting date

-

 

104

 

103

 

118

 

11.     SHARE CAPITAL

 

   The Company's authorised share capital is unlimited with a nominal value of US$0.01.

 

 

30 June

30 June

31 December

31 December

 

2019

2019

2018

2018

 

No.

US$'000

No.

US$'000

Issued and fully paid

 

 

 

 

Ordinary shares of US$0.01 each

38,959,986

390

47,032,878

470

 

38,959,986

390

47,032,878

470

The Directors did not recommend the payment of a final dividend for the year ended 31 December 2018 and do not recommend an interim dividend in respect of the current period.

 

12.     RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

 

 

Six months ended

30 June 2019

 

Six months ended

30 June 2018

 

US$'000

 

US$'000

 

 

 

 

Profit/(loss) on ordinary activities before taxation

1,495

 

(714)

 

 

 

 

Interest income

(90)

 

(99)

Depreciation

5

 

6

Realised and unrealised (gain)/loss

(1,438)

 

238

Net foreign exchange loss/(gain)

20

 

(1)

Increase/(decrease) in payables

34

 

(1,943)

(Increase)/decrease in receivables, loans and advances

(48)

 

5,878

Corporation tax paid

(10)

 

 

-

Net cash (outflow)/inflow from operating activities

(32)

 

3,365

 

13.     FAIR VALUE HIERARCY

 

The table below analyses financial instruments measured at fair value at the end of the reporting period by the level of the fair value hierarchy (note 2b).

 

                                                               At 30 June 2019

 

Level 1

Level 2

Level 3

Total

 

US$ '000

US$ '000

US$ '000

US$ '000

Financial assets at fair value through profit or loss

 

 

-

19,745

45

19,790

 

                                                               At 31 December 2018

 

Level 1

Level 2

Level 3

Total

 

US$ '000

US$ '000

US$ '000

US$ '000

Financial assets at fair value through profit or loss

 

 

-

 

18,193

 

159

 

18,352

 

The following table shows a reconciliation from the opening balances to the closing balances for fair

value measurements in Level 3 of the fair value hierarchy:

                                          

 

Unlisted closed ended investment fund

 

Listed open ended investment fund

Emerging Markets

 

 

Real Estate

 

 

Total

 

US$ '000

 

US$ '000

US$ '000

 

 

 

 

 

Balance as at 1 January 2019

119

 

40

159

Total profit recognized in profit or loss

667

 

5

672

Transfer to ADCF

(786)

 

-

(786)

Balance as at 30 June 2019

-

 

45

45

 

 

14.   RELATED PARTY TRANSACTIONS

 

Most Group revenues derive from funds or entities in which one of the Company's directors, Kyriakos Rialas, has an influence through directorships and the provision of investment advisory services.

 

At the reporting date the Company holds investments in The Argo Fund Limited, Argo Special Situations Fund LP and Argo Distressed Credit Fund Limited. These investments are reflected in the accounts at fair value of US$18.9 million, US$0.04 million and US$0.8 million respectively.

 

The Group has provided AREOF with a notice of deferral in relation to the amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2019 total US$ Nil (31 December 2018: US$ Nil) after a bad debt provision of US$9.1 million (€8.0 million) (31 December 2018: US$8.9 million, €7.8 million). AREOF paid US$0.3 million (€0.3 million) towards management fees owed to the Group in June 2019. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. Argo Group Limited retains this additional security.

 

At the period end the Argo Group is also owed loans repayable on demand of US$2.3 million (€2.0 million) (31 December 2018: US$2.2 million, €1.9 million) by AREOF accruing interest at 10%. The Company is also owed a further amount of US$0.4 million (€0.3 million) (31 December 2018: US$0.4 million, €0.4 million) by other AREOF Group entities. A full provision has been made in the consolidated financial statements against these balances at the current and prior period end.

 

          David Fisher, a non-executive director of the Company, is also a non-executive director of AREOF.

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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