TIDMARGO
RNS Number : 2548J
ARGO Group Limited
08 September 2016
Argo Group Limited
("Argo" or the "Company")
Interim Results for the six months ended 30 June 2016
Argo today announces its interim results for the six months
ended 30 June 2016.
The Company will today make available its interim report for the
six month period ended 30 June 2016 on the Company's website
www.argogrouplimited.com.
Key highlights for the six month period ended 30 June 2016
This report sets out the results of Argo Group Limited (the
"Company") and its subsidiaries (collectively "the Group" or
"Argo") covering the six month period ended 30 June 2016.
- Revenues US$4.0 million (six months to 30 June 2015: US$3.1 million)
- Operating profit US$3.8 million (six months to 30 June 2015: profit US$0.2 million)
- Profit before tax US$4.9 million (six months to 30 June 2015: loss US$4.2 million)
- Net assets US$24.2 million (31 December 2015: US$22.4 million)
Commenting on the results and outlook, Kyriakos Rialas, Chief
Executive of Argo said:
"The performance of the first six months of 2016 is mainly
attributable to the monetisation of certain distressed positions,
with a sizeable contribution to profit also coming from the
resurgence in Emerging Market Debt. Moving forward we are now ready
to expand our marketing efforts with the key focus of relaunching
the flagship Argo Fund and boosting our AUM."
Enquiries
Argo Group Limited
Andreas Rialas
020 7016 7660
Panmure Gordon
Dominic Morley
020 7886 2500
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,
inter alia, fixed income, special situations, local currencies and
interest rate strategies, private equity, real estate, quoted
equities, high yield corporate debt and distressed debt, although
not every fund invests in each of these asset classes.
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 month period ended 30 June 2016 the Group generated
revenues of US$4.0 million (six months to 30 June 2015: US$3.1
million) with management fees accounting for US$2.0 million (six
months to 30 June 2015: US$2.8 million). The Group generated
incentive fees of US$1.7 million (six months to 30 June 2015:
US$Nil).
Total operating costs for the period, ignoring bad debt
provisions, are US$2.0 million compared to US$1.7 million for the
six months to 30 June 2015. During the period management fee
arrears of US$2.8 million were recovered from Argo Real Estate
Opportunities Fund Limited ("AREOF") against which a provision had
been raised in prior years. The Group has provided against
management fees of US$1,164,000 (EUR1,000,000) (six months to 30
June 2015: US$1,117,000 (EUR1,000,000)) 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 profit for
the period of US$3.8 million (six months to 30 June 2015: profit
US$0.2 million) and a profit before tax of US$4.9 million (six
months to 30 June 2015: loss US$4.2 million) reflecting the net
gain on investments of US$1.1 million (six months to 30 June 2015:
net loss US$4.5 million). The outstanding performance of The Argo
Fund Limited ("TAF") and Argo Distressed Credit Fund Limited
("ADCF") for the first six months contributed to substantial
performance fees which will be realisable at the year end provided
substantial losses do not occur in the last six months of the
year.
At the period end, the Group had net assets of US$24.2 million
(31 December 2015: US$22.4 million) and net current assets of
US$23.4 million (31 December 2015: US$15.7 million) including cash
reserves of US$9.0 million (31 December 2015: US$3.1 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$9.7 million (31 December 2015: US$10.2
million), US$0.1 million (31 December 2015: US$0.1 million),
US$0.02 million (31 December 2015: US$0.02 million) and US$2.6
million (31 December 2015: US$Nil) respectively.
At the period end the Argo funds (excluding AREOF) owed the
Group total management and performance fees of US$2,172,156 (31
December 2015: US$819,451).
The Argo funds (excluding AREOF) ended the period with Assets
under Management ("AUM") at US$104.8 million, 12.2% higher than at
the beginning of the period. The current level of AUM remains below
that required to ensure sustainable profits on a recurring
management fee basis in the absence of performance fees. This has
necessitated an ongoing review of the Group's cost basis.
Nevertheless, the Group has ensured that the operational framework
remains intact and that it retains the capacity to manage
additional fund inflows as and when they arise.
The number of employees of the Group at 30 June 2016 was 24 (30
June 2015: 24).
The Group has provided AREOF with a notice of deferral in
relation to amounts due from the provision of investment management
services, under which it will not demand payment of such amounts
until the Group judges that AREOF is in a position to pay the
outstanding liability. These amounts accrued or receivable at 30
June 2016 total US$ Nil (31 December 2015: Nil) after a bad debt
provision of US$5,629,179 (EUR5,069,505) (31 December 2015:
US$7,164,702, EUR6,569,505). AREOF continues to meet part of this
obligation to the Argo Group as and when liquidity allows. During
the six month period ended 30 June 2016 AREOF settled total fees of
US$2,776,000 (EUR2,500,000). In November 2013 AREOF offered Argo
Group Limited additional security for the continued support in the
form of debentures and guarantees by underlying intermediate
companies. The AREOF management contract has a fixed term expiring
on 31 July 2018.
Fund performance
Argo Funds
30 30
June June 2015
Launch 2016 2015 year Sharpe Down
Since Annualised
Fund date 6 months 6 months total inception performance ratio months AUM
----------- ------- ---------- ---------- ------------- --------------- ------------ ------- --------- ------
% % % % CAGR US$m
%
----------- ------- ---------- ---------- ------------- --------------- ------------ ------- --------- ------
57
The Argo of
Fund Oct-00 41.90 -1.45 -17.42 183.20 7.72 0.60 89 60.0
----------- ------- ---------- ---------- ------------- --------------- ------------ ------- --------- ------
Argo
Distressed 42
Credit of
Fund Oct-08 33.36 -0.44 -9.71 99.85 10.07 0.75 93 35.8
----------- ------- ---------- ---------- ------------- --------------- ------------ ------- --------- ------
Argo
Special 47
Situations of
Fund LP Feb-12 -31.15 -16.18 -76.21 -89.86 -44.27 -0.79 53 9.0
----------- ------- ---------- ---------- ------------- --------------- ------------ ------- --------- ------
Total 104.8
-------------------- ---------- ---------- ------------- --------------- ------------ ------- --------- ------
* NAV only officially measured once a year in September.
AREOF's adjusted Net Asset Value was minus US$23.4 million
(minus EUR20.9 million) as at 30 September 2015, compared with
minus US$6.7 million (minus EUR5.3 million) a year earlier. The
adjusted Net Asset Value per share at 30 September 2015 was minus
US$0.03 (minus EUR0.03) (30 September 2014: minus US$0.01 (minus
EUR0.01)). Although AREOF's consolidated statement of financial
position indicates the AREOF group is insolvent on a consolidated
basis, the structural ring-fencing of the underlying SPV's limits
the impact on the Group of negative equity at subsidiary level. On
this basis a restatement of the Net Asset Value would be US$0.01
(EUR0.01) (30 September 2014: US$0.05 (EUR0.04)).
At the start of 2016 emerging markets were particularly affected
by low oil prices but by March the markets were enjoying a stronger
period as oil prices began to recover and the US Federal Reserve
presented a more accommodating stance. At the beginning of the
second quarter the uncertainty surrounding the "Brexit" referendum
had cast a shadow over financial markets and permeated into a
global issue but by the end of the period the outlook was more
stable as central banks in developed countries indicated their
willingness to take added measures to boost economic growth.
This backdrop has created an opportunity to reinvest in emerging
markets at lower prices and we are now in a position to take
advantage of the opportunity as a result of a liquidity event in
AREOF (see below). In response to the prevailing attitudes towards
credit funds we are relaunching TAF and ADCF as two distinct
mandates with different liquidity profiles that will make them more
attractive propositions to new investors.
During the reporting period the Argo funds generated a positive
return from trades linked to the 2015 disposal of their stake in
the Indonesian oil refinery, TPPI. In June 2016 the Argo funds
further benefited from the sale by AREOF of one of its real estate
assets in Sibiu, Romania. This also contributed to the strong
performance of TAF and ADCF and provided much needed liquidity to
the funds and allowed AREOF to repay US$2,776,000 (EUR2,500,000) of
management fee arrears.
TAF is the Group's flagship fund and has a 16 year track record.
Going forward, TAF will focus on liquid bond securities, both
sovereign and corporate, and will be the centre of the Group's
marketing efforts. Following the declines experienced by emerging
markets over the past two years, the Board believes they offer
attractive investment opportunities. Furthermore, the economic
fundamentals in emerging markets are robust. They are expected to
deliver significantly stronger economic growth than developed
markets in 2016/2017 while enjoying attractive risk profiles thanks
to low levels of government indebtedness and high foreign exchange
reserves. The results of the first half of 2016 for TAF and ADCF
show a promising future.
The two markets in which AREOF operates were mixed. Conditions
in Romania were largely favourable as the local economy continued
to expand thereby boosting the local property market. In Ukraine
the political crisis finally ended with the replacement of almost
the entire government and the economy is now on a modest recovery
path.
The majority of AREOF's debt facilities were in default at some
point during the year. This situation has been addressed through
asset disposal and renegotiation with lending banks with a view to
restructuring debt commitments to better align these to the current
level of the AREOF group's cash flow. While discussions with the
relevant banks are ongoing to find an agreeable solution for all
parties AREOF continues to enjoy the forbearance of its banks and
support of its shareholders. In view of this, the directors of
AREOF have concluded that AREOF is a going concern.
The prevailing equity price of the AREOF shares at the time of
their suspension in 2013 (see note 8 to the financial statements)
was 2.0 euro cents. The valuation of Argo Group Limited's
investment in AREOF and that of the Argo funds was 1.0 euro cent
per share as at 30 June 2016.
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.
However during the period the Directors undertook a share
purchase programme and authorised the repurchase of 18,955,000
shares at a total cost of U$2.8 million which provided substantial
market liquidity for share trading. The Directors firmly believe
that a return of excess cash to shareholders through buy-backs will
send a positive message to investors and for this reason they
propose to undertake a further share buy-back programme over the
next 12 months.
Outlook
The Board remains optimistic about the Group's prospects
particularly in light of the significant increase in the liquidity
of the Argo funds following the asset sale in Romania. A
significant increase in AUM is still required to ensure sustainable
profits on a recurring management fee basis and the Group is well
placed with capacity to absorb such an increase in AUM with
negligible impact on operational costs.
Boosting AUM will be Argo's top priority in the next six months.
The Group's marketing efforts will continue to focus on the
re-launch of TAF which has a 16 year track record as well as
identifying acquisitions that are earnings enhancing. TAF's
prospectus was amended as of 1 March 2016 to eliminate trading in
level 3 illiquid assets and concentrate trading and investments in
emerging market bonds and other liquid assets.
Over the longer term, the Board believes there is significant
opportunity for growth in assets and profits and remains committed
to ensuring the Group's investment management capabilities and
resources are appropriate to meet its key objective of achieving a
consistent positive investment performance in the emerging markets
sector.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2016
Six months Six months
ended ended
30 June 30 June
2016 2015
Note US$'000 US$'000
Management fees 2,042 2,771
Performance fees 1,669 -
Other income 327 318
======================================== ===== =========== ===========
Revenue 4,038 3,089
======================================== ===== =========== ===========
Legal and professional expenses (375) (162)
Management and incentive
fees payable (34) (34)
Operational expenses (481) (454)
Employee costs (1,114) (1,123)
Bad debt provision 9 1,712 (1,121)
Foreign exchange gain 39 59
Depreciation 7 (21) (23)
Operating profit 3,764 231
======================================== ===== =========== ===========
Interest income on cash and
cash equivalents 44 88
Realised and unrealised gains/(losses)
on investments 8 1,094 (4,482)
======================================== ===== =========== ===========
Profit/(loss) on ordinary
activities before taxation 4,902 (4,163)
======================================== ===== =========== ===========
Taxation 5 (97) (31)
======================================== ===== =========== ===========
Profit/(loss) for the period
after taxation attributable
to members of the Company 6 4,805 (4,194)
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences on translation
of foreign operations (215) (261)
======================================== ===== =========== ===========
Total comprehensive income
for the period 4,590 (4,455)
======================================== ===== =========== ===========
Six months Six months
Ended Ended
30 June 30 June
2016 2015
US$ US$
Earnings per share (basic) 6 0.08 -0.06
======================================== ===== =========== ============
Earnings per share (diluted) 6 0.07 -0.06
======================================== ===== =========== ============
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
30 June At 31
December
2016 2015
Note US$'000 US$'000
Assets
Non-current assets
Fixtures, fittings and
equipment 7 42 64
Financial assets at fair
value through profit or
loss 8 136 4,896
Loans and advances receivable 10 683 1,783
=============================== ===== ========== ==========
Total non-current assets 861 6,743
=============================== ===== ========== ==========
Current assets
Financial assets at fair
value through profit or
loss 8 12,283 11,896
Trade and other receivables 9 2,350 966
Loans and advances receivable 10 87 -
Cash and cash equivalents 8,983 3,126
Total current assets 23,703 15,988
=============================== ===== ========== ==========
Total assets 24,564 22,731
=============================== ===== ========== ==========
Equity and liabilities
Equity
Issued share capital 11 485 674
Share premium 28,277 30,878
Revenue reserve (1,434) (6,239)
Foreign currency translation
reserve (3,091) (2,876)
=============================== ===== ========== ==========
Total equity 24,237 22,437
=============================== ===== ========== ==========
Current liabilities
Trade and other payables 265 236
Taxation payable 5 62 58
=============================== ===== ========== ==========
Total current liabilities 327 294
Total equity and liabilities 24,564 22,731
=============================== ===== ========== ==========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE SIX MONTHSED 30 JUNE 2016
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2015 2015 2015 2015 2015
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2015 674 30,878 (3,061) (2,496) 25,995
Total comprehensive
income
Loss for the period
after taxation - - (4,194) - (4,194)
Other comprehensive
income - - - (261) (261)
As at 30 June 2015 674 30,878 (7,255) (2,757) 21,540
===================== ========== ========== ================ =============== ========
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2016 2016 2016 2016 2016
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2016 674 30,878 (6,239) (2,876) 22,437
Total comprehensive
income
Profit for the
period after taxation - - 4,805 - 4,805
Other comprehensive
income - - - (215) (215)
Transactions with
owners recorded
directly in equity
Purchase of own
shares (note 11) (189) (2,601) - - (2,790)
As at 30 June 2016 485 28,277 (1,434) (3,091) 24,237
======================== ========== ========== ========== ================ ========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2016
Six months Six months
ended ended
30 June 30 June
2016 2015
Note US$'000 US$'000
Net cash inflow/(outflow)
from operating activities 12 3,311 (1,737)
=============================== ===== =========== ===========
Cash flows used in investing
activities
Interest received on cash
and cash equivalents 23 1
Purchase of fixtures,
fittings and equipment 7 (2) (4)
Purchase of current asset
investments 8 (2,000) -
Proceeds from disposal
of investments 8 7,467
Net cash generated from/(used
in) investing activities 5,488 (3)
=============================== ===== =========== ===========
Cash flows from financing
activities
Repurchase of own shares (2,795) -
Net cash used in financing (2,795) -
activities
=============================== ===== =========== ===========
Net increase/(decrease)
in cash and cash equivalents 6,004 (1,740)
Cash and cash equivalents
at 1 January 2016 and
1 January 2015 3,126 2,821
Foreign exchange loss
on cash and cash equivalents (147) (112)
Cash and cash equivalents
as at 30 June 2016 and
30 June 2015 8,983 969
=============================== ===== =========== ===========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six months ended 30 June 2016
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
2016 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 2015 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. The Group has 24
employees.
Wholly owned subsidiaries Country of incorporation
Argo Capital Management (Cyprus) Cyprus
Limited
Argo Capital Management Limited United Kingdom
Argo Capital Management Property Cayman Islands
Limited
Argo Property Management Srl Romania
North Asset Management Sarl Luxembourg
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 2015.
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 2015.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 7 September 2016.
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 set out in note 1 above
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 Argo
Capital Argo Capital
Argo Management Capital Management Six months
Group (Cyprus) Management Property ended
Ltd Ltd Ltd Ltd 30 June
2016 2016 2016 2016 2016
US$'000 US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments
customers 600 786 2,497 1,425 5,308
Intersegment
revenues 600 570 100 - 1,270
Total profit/(loss)
for reportable
segments 1,470 (136) 1,063 2,622 5,019
Intersegment
profit/(loss) 600 (128) (499) - (27)
Total assets
for reportable
segments
assets 14,899 1,213 3,934 5,090 25,136
Total liabilities
for reportable
segments 40 29 691 1,069 1,829
===================== ======== ============ ============= ============= ===========
Revenues, profit or loss, assets and Six months
liabilities may be reconciled as follows:
Ended
30 June
2016
US$'000
Revenues
Total revenues for reportable segments 5,308
Elimination of intersegment revenues (1,270)
============================================ ===========
Group revenues 4,038
============================================ ===========
Profit or loss
Total profit for reportable segments 5,019
Elimination of intersegment loss 27
Other unallocated amounts (144)
============================================ ===========
Profit on ordinary activities before
taxation 4,902
============================================ ===========
Assets
Total assets for reportable segments 25,136
Elimination of intersegment receivables (572)
Group assets 24,564
============================================ ===========
Liabilities
Total liabilities for reportable segments 1,829
Elimination of intersegment payables (1,502)
============================================ ===========
Group liabilities 327
============================================ ===========
Argo Capital Argo Capital
Argo Management Argo Capital Management Six months
Group (Cyprus) Management Property ended
Ltd Ltd Ltd Ltd 30 June
2015 2015 2015 2015 2015
US$'000 US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments 200 883 1,211 1,435 3,729
Intersegment
revenues 200 - 440 - 640
Total profit/(loss)
for reportable
segments (4,456) 29 248 (47) (4,226)
Intersegment
profit/(loss) 200 (641) 440 - (1)
Total assets
for reportable
segments 43,874 3,162 3,025 2,689 52,750
Total liabilities
for reportable
segments 99 1,259 264 75 1,697
===================== ======== ============= =============== =============== ===========
Revenues, profit or loss, assets and liabilities Six months
may be reconciled as follows:
ended
30 June
2015
US$'000
Revenues
Total revenues for reportable segments 3,729
Elimination of intersegment revenues (640)
================================================== ===========
Group revenues 3,089
================================================== ===========
Profit or loss
Total loss for reportable segments (4,226)
Elimination of intersegment loss 1
Other unallocated amounts 62
================================================== ===========
Loss on ordinary activities before taxation (4,163)
================================================== ===========
Assets
Total assets for reportable segments 52,750
Elimination of intersegment receivables (1,180)
Elimination of Company's cost of investments (29,598)
================================================== ===========
Group assets 21,972
================================================== ===========
Liabilities
Total liabilities for reportable segments 1,697
Elimination of intersegment payables (1,265)
================================================== ===========
Group liabilities 432
================================================== ===========
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 in four equal
tranches over a period of four years at an exercise price of 24p
per share.
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) 12.0
Weighted average option
life (years) 10.0
Expected volatility
(% p.a.) 2.11
Dividend yield (% p.a.) 10.0
Risk-free interest rate
(% p.a.) 5.0
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 due to
the differential in exercise price and share price.
The number and weighted average exercise price of the share
options during the period is as follows:
Weighted No. of share
average options
exercise
price
Outstanding at beginning
of period 24.0p 4,090,000
Granted during the period - 750,000
Forfeited during the period 24.0p -
============================= ========== =============
Outstanding at end of
period 24.0p 4,840,000
============================= ========== =============
Exercisable at end of
period 24.0p 4,840,000
============================= ========== =============
The options outstanding at 30 June 2016 have an exercise price
of 24p and a weighted average contractual life of 10 years, with
all tranches of shares now being exercisable. Outstanding share
options are contingent upon the option holder remaining an employee
of the Group. They expire after 10 years.
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
20% (2015: 0% to 22%).
Statement of profit or loss Six months Six months
ended ended
30 June 30 June
2016 2015
US$'000 US$'000
Taxation charge for the period
on Group companies 97 31
================================ =========== ===========
The charge for the period can be reconciled to the profit/(loss)
shown on the Condensed Consolidated Statement of Comprehensive
Income as follows:
Six months Six months
ended ended
30 June 30 June
2016 2015
US$'000 US$'000
Profit/(loss) before tax 4,902 (4,163)
================================== =========== ===========
Applicable Isle of Man tax - -
rate for Argo Group Limited
of 0%
Timing differences 2 2
Non-deductible expenses 6 3
Other adjustments (171) (57)
Tax effect of different tax
rates of subsidiaries operating
in other jurisdictions 260 83
================================== =========== ===========
Tax charge 97 31
================================== =========== ===========
Statement of financial position
30 June 31 December
2016 2015
US$'000 US$'000
Corporation tax payable 62 58
================================= ======== ============
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
2016 2015
US$'000 US$'000
Net profit/(loss) for the
period after taxation attributable
to members 4,805 (4,194)
===================================== ============= =============
No. of No. of
shares shares
Weighted average number of
ordinary shares for basic
earnings per share 62,509,327 67,428,494
Effect of dilution (Note 4) 4,840,000 4,090,000
===================================== ============= =============
Weighted average number of
ordinary shares for diluted
earnings per share 67,349,327 71,518,494
===================================== ============= =============
Six months Six months
Ended ended
30 June 30 June
2016 2015
US$ US$
Earnings per share (basic) 0.08 -0.06
Earnings per share (diluted) 0.07 -0.06
============================== =========== ===========
7. FIXTURES, FITTINGS AND EQUIPMENT
Fixtures,
fittings
& equipment
US$'000
Cost
At 1 January 2015 254
Additions 8
Foreign exchange movement (17)
================================ =============
At 31 December 2015 245
Additions 2
Foreign exchange movement (13)
================================ =============
At 30 June 2016 234
================================ =============
Accumulated Depreciation
At 1 January 2015 147
Depreciation charge for period 46
Foreign exchange movement (12)
================================ =============
At 31 December 2015 181
Depreciation charge for period 21
Foreign exchange movement (10)
================================ =============
At 30 June 2016 192
================================ =============
Net book value
At 31 December 2015 64
================================ =============
At 30 June 2016 42
================================ =============
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 30 June
2016 2016
Holding Investment in management Total cost Fair value
shares
US$'000 US$'000
10 The Argo Fund Ltd - -
100 Argo Distressed Credit - -
Fund Ltd
1 Argo Special Situations - -
Fund LP
- -
======== ========================= ============= =============
Holding Investment in ordinary Total cost Fair value
shares
US$'000 US$'000
33,963 The Argo Fund Ltd* 7,583 9,702
Argo Real Estate
Opportunities Fund
10,899,021 Ltd 988 119
Argo Special Situations
115 Fund LP 115 17
Argo Distressed Credit
1,291 Fund Limited* 2,000 2,581
=========== ======================== ============= =============
10,686 12,419
=========== ======================== ============= =============
31 December 31 December
2015 2015
Holding Investment in management Total cost Fair value
shares
US$'000 US$'000
10 The Argo Fund Ltd - -
100 Argo Distressed Credit - -
Fund Ltd
1 Argo Special Situations - -
Fund LP
1 Argo Local Markets - -
Fund
======== ========================= ============== ==============
- -
======== ========================= ============== ==============
Holding Investment in ordinary Total cost Fair value
shares
US$'000 US$'000
51,261 The Argo Fund Ltd* 11,583 10,230
Argo Real Estate
Opportunities Fund
10,899,021 Ltd 988 119
Argo Special Situations
115 Fund LP 115 17
Argo Local Markets
2,117 Fund Limited* 1,700 1,666
Sudan Recovery Fund
40,272 Limited 4,760 4,760
=========== ======================== ============= =============
19,146 16,792
=========== ======================== ============= =============
*Classified as current in the Statement of Financial
Position
On 3 March 2014 Argo Real Estate Opportunities Fund Limited
("AREOF") delisted from AIM as a result of default notices on its
loans creating uncertainty. The prevailing equity price of AREOF
shares at the time of the suspension in August 2013 was 2.0 euro
cents. The valuation of Argo Group Limited's investment in AREOF
and that of the Argo funds was 1.0 euro cent as at 30 June 2016.
This investment is classified as level 3 under IFRS fair value
hierarchy reflecting the non-market observable inputs to its
valuation. The audit report in respect of AREOF for the year ended
30 September 2015 was modified in respect of going concern.
During the reporting period the Group redeemed its entire
interests in Argo Local Markets Fund Limited and Sudan Recovery
Fund Limited for US$1,587,702 and US$ 1,879,262 respectively. The
Group also redeemed part of its interest in The Argo Fund Limited
for US$4,000,000 subsequently investing US$2,000,000 in the Argo
Distressed Credit Fund Limited.
9. TRADE AND OTHER RECEIVABLES
At 30 June At 31 December
2016 2015
US$ '000 US$ '000
Trade receivables 2,181 829
Other receivables 81 66
Prepayments and accrued
income 88 71
========================= ============= =================
2,350 966
========================= ============= =================
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.
The Group has provided Argo Real Estate Opportunities Fund
Limited ("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 2016
total US$ Nil (31 December 2015: Nil) after a bad debt provision of
US$5,629,179 (EUR5,069,505) (31 December 2015: US$7,164,702,
EUR6,569,505). AREOF continues to meet part of this obligation to
the Argo Group as and when liquidity allows. During the six month
period ended 30 June 2016 AREOF settled total fees of US$2,776,000
(EUR2,500,000). 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. In
the Directors' view these amounts are fully recoverable although
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.
At 30 June 2016 Argo Special Situations Fund LP owed the Group
total management fees of US$451,207 (31 December 2015: US$689,310).
This fund is currently facing liquidity issues due to the debt
financing arrangement put in place in 2014 however the management
continue to work to remedy this and the Directors are confident
that these fees may be recovered in the future. During the six
month period ended 30 June 2016 the Group received US$350,000 as
part settlement of these management fees.
In the audited consolidated financial statements of AREOF at 30
September 2015 a material uncertainty surrounding the refinancing
of bank debts was referred to in relation to the basis of
preparation of the financial statements. In the view of the
directors of AREOF, discussions with the banks are continuing
satisfactorily and they have therefore concluded that it is
appropriate to prepare those consolidated financial statements on a
going concern basis.
10. LOANS AND ADVANCES RECEIVABLE
At 30 At 31 December
June 2016 2015
US$'000 US$'000
Deposits on leased premises
- non-current (see below) 83 90
Other loans and advances 87 -
receivable - current
Other loans and advances
receivable - non-current
(see below) 600 1,693
============================= ============ ==========================
770 1,783
============================= ============ ==========================
The deposits on leased premises are retained by the lessor until
vacation of the premises at the end of the lease term as
follows:
At 30 June At 31 December
2016 2015
US$'000 US$'000
Non-current:
Lease expiring in second
year after reporting date 71 78
Lease expiring in fourth
year after reporting date 12 12
83 90
============================ =========== ===============
The non-current other loans and advances receivable
comprise:
At 30 June At 31 December
2016 2015
US$'000 US$'000
Loan to Bel Rom Trei (see
note (a) below) - 1,437
Loan to AREOF (see note
(b) below) 377 24
Loan to The Argo Fund Limited - 22
Loans to other AREOF Group
entities (see note (c) below) 216 208
Other loans 7 2
================================ =========== ===============
600 1,693
================================ =========== ===============
(a) In 2013 Argo Group advanced US$1,109,400 (EUR1,000,000) to
Bel Rom Trei ("Bel Rom"), an AREOF group entity based in Romania
that owns Sibiu Shopping City, in order to assist with its
operational cash requirements. The full amount of the loan and
accrued interest amounting to US$1,490,031 (EUR1,337,611) was
repaid during the six month period ended 30 June 2016.
(b) On 21 November 2013 the Argo Group provided a loan of
US$431,901 (EUR388,960) to AREOF at a rate of 10% per annum to
enable the company to service interest payments under a bank loan
agreement. A bad debt provision has been raised against the full
amount of the loan and accrued interest amounting to US$544,550
(EUR490,408).
The Argo Group has provided further loans totalling US$742,191
(EUR668,400) to AREOF to assist with its operational cash
requirements. These loans are repayable on demand and accrue
interest at 7%-10%. A bad debt provision of US$365,278 (EUR328,961)
has been raised against these debts.
(c) At 30 June 2016 the Argo Group was owed USD308,864
(EUR278,156) by various AREOF group entities being loans provided
to assist those entities with their operational cash requirements.
The loans are repayable on demand, accrue interest at 7% and remain
fully outstanding at 30 June 2016. A bad debt provision of
US$92,759 (EUR83,537) has been raised against these debts.
11. SHARE CAPITAL
The Company's authorised share capital is unlimited with a
nominal value of US$0.01.
30 June 30 June 31 December 31 December
2016 2016 2015 2015
No. US$'000 No. US$'000
Issued and fully
paid
Ordinary shares
of US$0.01 each 48,473,494 485 67,428,494 674
================== ============= ========== ============= ============
48,473,494 485 67,428,494 674
================== ============= ========== ============= ============
The Directors did not recommend the payment of a final dividend
for the year ended 31 December 2015 and do not recommend an interim
dividend in respect of the current period.
During the period the Directors authorised the repurchase of
18,955,000 shares at a total cost of US$2.8 million.
12. RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE
TAXATION
Six months Six months
ended ended
30 June 30 June
2016 2015
US$'000 US$'000
Profit/(loss) on ordinary
activities before taxation 4,902 (4,163)
Interest income (44) (88)
Depreciation 21 23
Realised and unrealised
(gains)/losses on investments (1,094) 4,482
Net foreign exchange gain (39) (59)
Increase in payables 29 40
Increase in receivables,
loans and advances (371) (1,959)
Income taxes paid (93) (13)
================================ ============= =============
Net cash inflow/(outflow)
from operating activities 3,311 (1,737)
================================ ============= =============
13. FAIR VALUE HIERARCY
The table below analyses financial instruments measured at fair
value at the end of the reporting period by the level of the fair
value hierarchy (note 2b).
At 30 June 2016
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Financial assets
at fair value
through profit
or loss - 12,283 136 12,419
================== ========== ========= ========= =========
At 31 December 2015
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Financial assets
at fair value
through profit
or loss - 11,896 4,896 16,792
================== ========== ========= ========= =========
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 Listed
closed open ended
ended investment investment
fund fund
Emerging
Markets
Real Estate Total
US$ '000 US$ '000 US$ '000
Balance as at 1 January
2016 119 4,777 4,896
Total loss recognized
in profit or loss - (2,881) (2,881)
Sales - (1,879) (1,879)
Balance as at 30
June 2016 119 17 136
========================= ==================== ============== ==========
14. RELATED PARTY TRANSACTIONS
All Group revenues derive from funds or entities in which two of
the Company's directors, Andreas Rialas and Kyriakos Rialas, have
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 Real Estate Opportunities Fund Limited
("AREOF"), Argo Special Situations Fund LP and Argo Distressed
Credit Fund Limited. These investments are reflected in the
accounts at a fair value of US$9,702,625, US$118,865, US$16,849 and
US$2,580,941 respectively.
The Group has provided AREOF with a notice of deferral in
relation to the amounts due from the provision of investment
management services, under which it will not demand payment of such
amounts until the Group judges that AREOF is in a position to pay
the outstanding liability. These amounts accrued or receivable at
30 June 2016 total US$Nil (31 December 2015:Nil) after a bad debt
provision of US$5,629,179 (EUR5,069,505) (31 December 2015:
US$7,164,702, EUR6,569,505). AREOF continues to meet part of this
obligation to the Argo Group as and when liquidity allows. During
the period AREOF settled total fees of US$2,776,000 (EUR2,500,000).
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 has a fixed term expiring on 31 July 2018.
On 21 November 2013 the Argo Group provided a loan of US$431,901
(EUR388,960) to AREOF at a rate of 10% per annum to enable the
company to service interest payments under a bank loan agreement. A
bad debt provision has been raised against the full amount of the
loan and accrued interest amounting to US$544,550 (EUR490,408).
At the period end the Argo Group was owed a further US$742,191
(EUR668,400) by AREOF comprising loans repayable on demand and
accruing interest at 7%-10%. A bad debt provision of US$365,278
(EUR328,961) has been raised against these debts.
At the period end the Argo Group was owed a total balance of
USD308,864 (EUR278,156) by other AREOF Group entities. This balance
comprises various loans that are all unsecured, repayable on demand
and accrue interest at 7%. A bad debt provision of US$92,759
(EUR83,537) has been raised against these debts.
In the audited consolidated financial statements of AREOF at 30
September 2015 a material uncertainty surrounding the refinancing
of bank debts was referred to in relation to the basis of
preparation of the consolidated financial statements. In the view
of the directors of AREOF, discussions with the banks are
continuing satisfactorily and they have therefore concluded that it
is appropriate to prepare those consolidated financial statements
on a going concern basis.
David Fisher, a non-executive director of the Company, is also a
non-executive director of AREOF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFLFADIDIIR
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September 08, 2016 02:00 ET (06:00 GMT)
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