TIDMARGO
RNS Number : 6288A
ARGO Group Limited
30 September 2015
Argo Group Limited
("Argo" or the "Company")
Interim Results for the six months ended 30 June 2015
Argo today announces its interim results for the six months
ended 30 June 2015.
The Company will today make available its interim report for the
six month period ended 30 June 2015 on the Company's website
www.argogrouplimited.com.
Key highlights for the six month period ended 30 June 2015
- Revenues US$3.1 million (six months to 30 June 2014: US$3.9 million)
- Operating profit US$0.2 million (six months to 30 June 2014: loss US$0.5 million)
- Loss before tax US$4.2 million (six months to 30 June 2014: loss US$0.5 million)
- Net assets US$21.5 million (31 December 2014: US$26.0 million)
Commenting on the results and outlook, Kyriakos Rialas, Chief
Executive of Argo said:
"Such is the downward pressure in Emerging Markets that even the
US Federal Reserve hesitated in raising interest rates at its last
meeting. The old BRIC nations have experienced huge investment
outflows reflected mainly in the currencies of Brazil, Russia and
now China. Against this challenging backdrop Argo has not been very
active in sovereign credit, concentrating instead on creating
liquidity on its private equity assets. We are pleased to report
that we can see light at the end of the tunnel for a couple of
these positions."
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
This report sets out the interim results of Argo Group Limited
for the half year ended 30 June 2015.
For the six month period ended 30 June 2015 the Group generated
revenues of US$3.1 million (six months to 30 June 2014: US$3.9
million) with management fees accounting for US$2.8 million (six
months to 30 June 2014: US$3.5 million). The Group did not generate
incentive fees during the current or prior period.
Total core operating costs for the period are US$1.7 million
compared to US$2.7 million for the six months to 30 June 2014 as a
result of cost cutting initiatives implemented in the first half of
2014. Total operating costs have fallen by US$1.5 million to US$2.9
million (six months to 30 June 2014: US$4.4 million) after bad debt
provision. During the period the Group provided against management
fees of US$1,117,000 (EUR1,000,000) (six months to 30 June 2014:
US$1,371,000 (EUR1,000,000)) due from Argo Real Estate
Opportunities Fund Limited ("AREOF").
Overall, the financial statements show an operating profit for
the period of US$0.2 million (six months to 30 June 2014: loss
US$0.5 million) and a loss before tax of US$4.2 million (six months
to 30 June 2014: loss US$0.5 million) reflecting the unrealised
loss on non-current asset investments of US$4.5 million (six months
to 30 June 2014: unrealised loss US$0.1 million).
At the period end, the Group had net assets of US$21.5 million
(31 December 2014: US$26.0 million). The Group did not pay a
dividend during the period.
Net assets include investments in The Argo Fund Limited, AREOF
and Argo Special Situations Fund LP at fair values of US$13.8
million (31 December 2014: US$18.2 million), US$0.1 million (31
December 2014: US$0.2 million) and US$0.06 million (31 December
2014: US$0.07 million) respectively. Our continued investment in
our funds supports the liquidity of those funds and demonstrates
the commitment of the Group towards its fund investors. This close
alignment results in a high correlation between the performance of
the Company and the performance of its funds. It should be noted,
however, that the Group does not intend to and may not be able to
realise these investments in the immediate future due to the
illiquid nature of the assets held by these funds.
At the period end the Argo funds (excluding AREOF) owed the
Group total management fees of US$4,014,731 (31 December 2014:
US$2,361,599) after a bad debt provision of US$1,300,000 (31
December 2014: US$1,300,000). These funds have a substantial asset
base with few liabilities. They are currently facing a short term
liquidity issue which is being remedied and whilst a bad debt
provision has been raised against these management fees the
directors are confident that they are fully recoverable.
The Argo funds (excluding AREOF) ended the period with Assets
under Management ("AUM") at US$165.7 million, 6.6% lower than at
the beginning of the period. The current level of AUM remains below
that required to ensure sustainable profits on a recurring
management fee basis in the absence of performance fees. In line
with last year the Group's cost base will remain under constant
review ensuring that the operational framework remains intact and
that it retains the capacity to manage additional fund inflows as
and when they arise.
The number of employees of the Group at 30 June 2015 was 24 (30
June 2014: 30).
The Group has provided AREOF with a notice of deferral in
relation to amounts due from the provision of investment management
services, under which it will not demand payment of such amounts
until the Group judges that AREOF is in a position to pay the
outstanding liability. These amounts accrued or receivable at 30
June 2015 total US$ Nil (31 December 2014: Nil) after a bad debt
provision of US$6,178,809 (EUR5,569,505) (31 December 2014:
US$5,554,234 (EUR4,569,505)). AREOF continues to meet part of this
obligation to the Argo Group as and when liquidity allows. The
AREOF management contract has a fixed term expiring on 31 July
2018. In November 2013 AREOF offered Argo Group Limited additional
security for the continued support in the form of debentures and
guarantees by underlying intermediate companies.
Fund performance
Argo Funds
30 30
June June 2014
Launch 2015 2014 year Sharpe Down
Since Annualised
Fund date 6 months 6 months total inception performance ratio months AUM
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
% % % % CAGR US$m
%
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
51
The Argo of
Fund Oct-00 -1.45 -0.51 -4.94 138.17 6.78 0.59 177 87.7
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
Argo 36
Distressed of
Credit Fund Oct-08 -0.44 -0.28 -4.64 65.24 8.23 0.71 81 24.6
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
Argo Special 35
Situations of
Fund LP Feb-12 -16.18 -5.84 -17.16 -48.10 -17.49 -1.17 41 49.9
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
Argo Local 23
Markets of
Fund Nov-12 -5.35 -2.14 -6.19 -18.66 -7.38 -1.88 32 3.5
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
Argo Real
Estate 54
Opportunities of
Fund Aug-06 -111.07 21.30 -113.43 -100.8 n/a n/a 98 0*
-------------- -------- ---------- ----------- ------------- --------------- ------------ ------- --------- ------
Total 165.7
------------------------ ---------- ----------- ------------- --------------- ------------ ------- --------- ------
* NAV only officially measured once a year in September.
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 02:01 ET (06:01 GMT)
Emerging markets had a mixed start to the year with currencies
being particularly affected. A combination of factors including the
continuation of the Ukrainian conflict, the low but stabilizing oil
prices and the continued strength of the US economy saw further
falls in emerging currencies. By the end of the period emerging
markets were impacted by persistent fears over the consequences of
volatility in the Chinese stock markets and expectations of slower
global growth with the ever present risk of another Euro crisis
precipitated by a Greek default on their unsustainable debt
level.
Against this varied and challenging economic and market
backdrop, fund performance was lacklustre with all of the Argo
funds finishing behind at the period end. By comparison, the main
hedge fund indices showed a small positive return of 0.6% for the
same period.
During the period we progressed our discussions with a number of
investors in relation to various illiquid assets. Despite difficult
market conditions we are pleased to report that we expect The Argo
Fund Limited, Argo Distressed Credit Fund Limited and Argo Special
Situations Fund LP shortly to complete the sale of an important
asset with an interested buyer. On receipt of the proceeds of sale,
this would create a liquidity event for our investors. The carrying
value of the Group's investments in these funds is based on the
agreed sale price.
While macroeconomic conditions continue to improve, the effects
on the two core markets where AREOF operates remain mixed. In
Romania we are encouraged by economic growth in the first half of
the year compared to the same period in 2014 whilst continuing
political and economic uncertainty are impacting the Ukraine
market.
Following on from AREOF's delisting from AIM on 3 March 2014 the
Group's NAV is officially measured once a year in September.
AREOF's adjusted Net Asset Value was minus US$6.7 million (minus
EUR5.3 million) as at 30 September 2014, compared with US$65.7
million (EUR47.8 million) as at 31 March 2014. The adjusted Net
Asset Value per share at 30 September 2014 was minus US$0.01 (minus
EUR0.01) (31 March 2014: US$0.11 (EUR0.08)). Although AREOF's
balance sheet indicates the company 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 per share would be
US$0.05 (EUR0.04) at 30 September 2014.
The reduced level of cash flow within AREOF, while being
proactively managed, has resulted in breaches of terms and
covenants on certain loans. This situation is being addressed by
regular communication and negotiation with the lending banks with a
view to restructuring the 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 support of its banks.
In the view of the directors discussions with the banks are
continuing satisfactorily and they have therefore concluded that
AREOF is a going concern.
AREOF'S ordinary shares on AIM were suspended on 30 August 2013
following breach of a loan covenant and the subsequent loan
termination by the lending bank. On 3 March 2014 AREOF delisted
from AIM to allow loan restructuring discussions to proceed outside
of the extensive disclosure requirements that an AIM listing
entails. The valuation of the investment in AREOF held by Argo
Group Limited and the Argo funds has been based on the equity price
of 2.0 cents prevailing at the time of the suspension with a 50%
discount rate applied to that price.
Dividends
Argo is working towards the payment of a dividend which will
ultimately depend on the success of the initiatives described
above. The directors did not recommend a final dividend in respect
of the year ended 31 December 2014 but intend to pay an interim
dividend as soon as these initiatives are complete. Going forward,
the Company intends, subject to its financial performance, to pay a
final dividend each year.
Outlook
As investor sentiment is hit by Chinese volatility and
expectations of slower global growth the Board remains optimistic
about the Group's prospects. An 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 a significant
increase in AUM with negligible impact on operational costs.
Our strategy remains unchanged. The top priority in the next six
months will be to continue with our program to monetise certain of
our investments. In the very near term our growth rate will be
heavily influenced by the success of this program as well as events
in Europe and the Far East. 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 COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2015
Six months Six months
ended ended
30 June 30 June
2015 2014
Note US$'000 US$'000
Management fees 2,771 3,462
Other income 318 423
===================================== ===== =========== =================
Revenue 3,089 3,885
===================================== ===== =========== =================
Legal and professional expenses (162) (164)
Management and incentive
fees payable (34) (62)
Operational expenses (454) (572)
Employee costs (1,123) (1,663)
Bad debt provision 9 (1,121) (1,749)
Foreign exchange gain/(loss) 59 (129)
Depreciation 7 (23) (72)
Operating profit/(loss) 231 (526)
===================================== ===== =========== =================
Interest income on cash and
cash equivalents 88 115
Unrealised loss on investments 8 (4,482) (105)
===================================== ===== =========== =================
Loss on ordinary activities
before taxation (4,163) (516)
===================================== ===== =========== =================
Taxation 5 (31) (44)
===================================== ===== =========== =================
Loss for the period after
taxation attributable to
members of the Company 6 (4,194) (560)
Other comprehensive income
Exchange differences on translation
of foreign operations (261) 98
===================================== ===== =========== =================
Total comprehensive loss
for the period (4,455) (462)
===================================== ===== =========== =================
Six months Six months
Ended Ended
30 June 30 June
2015 2014
US$ US$
Earnings per share (basic) 6 -0.06 -0.01
===================================== ===== =========== ==================
Earnings per share (diluted) 6 -0.06 -0.01
===================================== ===== =========== ==================
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
30 June At 31
December
2015 2014
Note US$'000 US$'000
Assets
Non-current assets
Fixtures, fittings and
equipment 7 85 107
Investments 8 13,953 18,435
Loans and advances receivable 10 2,472 2,357
=============================== ===== ========== ==========
Total non-current assets 16,510 20,899
=============================== ===== ========== ==========
Current assets
Trade and other receivables 9 4,301 2,517
Cash and cash equivalents 969 2,821
Loans and advances receivable 10 192 132
=============================== ===== ========== ==========
Total current assets 5,462 5,470
=============================== ===== ========== ==========
Total assets 21,972 26,369
=============================== ===== ========== ==========
Equity and liabilities
Equity
Issued share capital 11 674 674
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September 30, 2015 02:01 ET (06:01 GMT)
Share premium 30,878 30,878
Revenue reserve (7,255) (3,061)
Foreign currency translation
reserve (2,757) (2,496)
=============================== ===== ========== ==========
Total equity 21,540 25,995
=============================== ===== ========== ==========
Current liabilities
Trade and other payables 361 321
Taxation payable 5 71 53
=============================== ===== ========== ==========
Total current liabilities 432 374
Total equity and liabilities 21,972 26,369
=============================== ===== ========== ==========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2015
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2014 2014 2014 2014 2014
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2014 674 30,878 (1,048) (2,009) 28,495
Total comprehensive
income
(Loss)/profit for
the period after
taxation - - (560) 98 (462)
As at 30 June 2014 674 30,878 (1,608) (1,911) 28,033
===================== ========== ========== ========== ============== ========
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2015 2015 2015 2015 2015
US$'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) (261) (4,455)
As at 30 June 2015 674 30,878 (7,255) (2,757) 21,540
===================== ========== ========== ========== ============== ========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2015
Six months Six months
ended ended
30 June 30 June
2015 2014
Note US$'000 US$'000
Net cash outflow from
operating activities 12 (1,737) (1,490)
Cash flows used in investing
activities
Interest received on cash
and cash equivalents 1 1
Purchase of fixtures,
fittings and equipment 7 (4) (34)
Net cash used in investing
activities (3) (33)
=============================== ===== =========== ===========
Net decrease in cash and
cash equivalents (1,740) (1,523)
Cash and cash equivalents
at 1 January 2015 and
1 January 2014 2,821 3,726
Foreign exchange (loss)/gain
on cash and cash equivalents (112) 82
Cash and cash equivalents
as at 30 June 2015 and
30 June 2014 969 2,285
=============================== ===== =========== ===========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six months ended 30 June 2015
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 Company as at and for the six months ended 30
June 2015 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 2014 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 2014.
The Directors have carried out a rigorous assessment of all the
factors affecting the business in deciding to adopt the going
concern basis for the preparation of the accounts. They have
reviewed and examined the Group's financial and other processes
including the annual budgeting process and expect the Group to have
sufficient cash resources available in the foreseeable future. This
has included the preparation of forecast financial information
focussed on cash flow requirements through to at least September
2016. These forecasts reflect current cost patterns of the Group
and take into consideration current liquidity constraints of funds
under management and therefore their ability to settle management
fees and other receivables (refer to notes 9 and 10).
On the basis of review of this forecast financial information,
the liquid assets currently held and forecast inflows during the
period, the Directors are confident that the Group has adequate
financial resources available to continue in operational existence
for the foreseeable future and therefore continue to adopt the
going concern basis for preparing the accounts. The key assumptions
within the forecast financial information include the conclusion of
a sale transaction for which a share purchase agreement has been
signed since the period end and settlement of management fee
arrears.
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 2014.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 29 September 2015.
b) Financial instruments and fair value hierarchy
The following represents the fair value hierarchy of financial
instruments measured at fair value in the 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
2015 2015 2015 2015 2015
US$'000 US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments
customers 200 883 1,211 1,435 3,729
Intersegment
revenues 200 - 440 - 640
Total profit/(loss)
for reportable
segments (4,456) 29 248 (47) (4,226)
Intersegment
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September 30, 2015 02:01 ET (06:01 GMT)
profit/(loss) 200 (641) 440 - (1)
Total assets
for reportable
segments
assets 43,874 3,162 3,025 2,689 52,750
Total liabilities
for reportable
segments 99 1,259 264 75 1,697
===================== ======== ============ ============= ============= ===========
Revenues, profit or loss, assets and Six months
liabilities may be reconciled as follows:
Ended
30 June
2015
US$'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
============================================== ===========
Argo Argo
Capital Argo Capital
Argo Management Capital Management Six months
Group (Cyprus) Management Property ended
Ltd Ltd Ltd Ltd Other 30 June
2014 2014 2014 2014 2014 2014
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments - 2,091 1,042 1,794 - 4,927
Intersegment
revenues - - 1,042 - - 1,042
Total profit/(loss)
for reportable
segments (339) 324 (237) (160) - (412)
Intersegment
profit/(loss) - (1,046) 1,042 - - (4)
Total assets
for reportable
segments 49,173 3,891 2,570 4,298 75 60,007
Total liabilities
for reportable
segments 77 1,740 221 172 26 2,236
===================== ======== ============ ============= ============= ======== ===========
Revenues, profit or loss, assets and liabilities Six months
may be reconciled as follows:
ended
30 June
2014
US$'000
Revenues
Total revenues for reportable segments 4,927
Elimination of intersegment revenues (1,042)
================================================== ===========
Group revenues 3,885
================================================== ===========
Profit or loss
Total loss for reportable segments (412)
Elimination of intersegment loss 4
Other unallocated amounts (108)
================================================== ===========
Loss on ordinary activities before taxation (516)
================================================== ===========
Assets
Total assets for reportable segments 60,007
Elimination of intersegment receivables (1,869)
Elimination of Company's cost of investments (29,599)
================================================== ===========
Group assets 28,539
================================================== ===========
Liabilities
Total liabilities for reportable segments 2,236
Elimination of intersegment payables (1,730)
)
================================================== ===========
Group liabilities 506
================================================== ===========
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 - -
Forfeited during the period 24.0p -
============================= ========== =============
Outstanding at end of
period 24.0p 4,090,000
============================= ========== =============
Exercisable at end of
period 24.0p 4,090,000
============================= ========== =============
The options outstanding at 30 June 2015 have an exercise price
of 24p and a weighted average contractual life of 10 years, with
the fourth and final tranche of shares being exercisable on or
after 1 May 2015. 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
22% (2014: 0% to 23%).
Income Statement Six months Six months
ended ended
30 June 30 June
2015 2014
US$'000 US$'000
Taxation charge for the period
on Group companies 31 44
================================ =========== ===========
The charge for the period can be reconciled to the loss shown on
the Condensed Consolidated Statement of Comprehensive Income as
follows:
Six months Six months
ended ended
30 June 30 June
2015 2014
US$'000 US$'000
Loss before tax (4,163) (516)
================================== =========== ===========
Applicable Isle of Man tax - -
rate for Argo Group Limited
of 0%
Timing differences 3 3
Non-deductible expenses 2 12
Other adjustments (57) 38
Tax effect of different tax
rates of subsidiaries operating
in other jurisdictions 83 (9)
================================== =========== ===========
Tax charge 31 44
================================== =========== ===========
Balance Sheet
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 02:01 ET (06:01 GMT)
30 June 31 December
2015 2014
US$'000 US$'000
Corporation tax payable 71 53
========================= ======== ============
6. EARNINGS PER SHARE
Earnings per share is calculated by dividing the net loss for
the period by the weighted average number of shares outstanding
during the period.
Six months Six months
ended ended
30 June 30 June
2015 2014
US$'000 US$'000
Net loss for the period after
taxation attributable to members (4,194) (560)
=================================== ============= =============
No. of No. of
shares shares
Weighted average number of
ordinary shares for basic
earnings per share 67,428,494 67,428,494
Effect of dilution (Note 4) 4,090,000 4,265,000
=================================== ============= =============
Weighted average number of
ordinary shares for diluted
earnings per share 71,518,494 71,693,494
=================================== ============= =============
Six months Six months
ended ended
30 June 30 June
2015 2014
US$ US$
Earnings per share (basic) -0.06 -0.01
Earnings per share (diluted) -0.06 -0.01
============================== =========== ===========
7. FIXTURES, FITTINGS AND EQUIPMENT
Fixtures,
fittings
& equipment
US$'000
Cost
At 1 January 2014 408
Additions 38
Disposals (161)
Foreign exchange movement (31)
================================ =======================
At 31 December 2014 254
Additions 4
Foreign exchange movement (9)
================================ =======================
At 30 June 2015 249
================================ =======================
Accumulated Depreciation
At 1 January 2014 231
Depreciation charge for period 98
Disposal (159)
Foreign exchange movement (23)
================================ =======================
At 31 December 2014 147
Depreciation charge for period 23
Foreign exchange movement (6)
================================ =======================
At 30 June 2015 164
================================ =======================
Net book value
At 31 December 2014 107
================================ =======================
At 30 June 2015 85
================================ =======================
8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 30 June
2015 2015
Holding Investment in management Total cost Fair value
shares
US$'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$'000
75,165 The Argo Fund Ltd 16,343 13,774
Argo Real Estate
Opportunities Fund
10,899,021 Ltd 988 119
Argo Special Situations
115 Fund LP 115 60
=========== ======================== ============= =============
17,446 13,953
=========== ======================== ============= =============
31 December 31 December
2014 2014
Holding Investment in management Total cost Fair value
shares
US$'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
75,165 The Argo Fund Ltd 16,343 18,165
Argo Real Estate
Opportunities Fund
10,899,021 Ltd 988 199
Argo Special Situations
115 Fund LP 115 71
=========== ======================== ============= =============
17,446 18,435
=========== ======================== ============= =============
The Argo Fund Limited holds a concentrated portfolio of Level 2
and Level 3 assets that are valued based on inputs other than
quoted prices in active markets. Inherently the assumptions backing
these valuations are subject to additional risks that can have a
positive or negative impact on valuation. The audit report in
respect of The Argo Fund Limited for the year ended 30 June 2014
was modified in respect of investment valuations.
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. At the period end it is carried at a
50% discount of the last quoted bid price on AIM from August 2013.
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 2014 was qualified in respect of investment property
valuations and modified in respect of going concern.
The investments held by the Group have been made in support of
the Group's funds under management and in support of their
liquidity profiles and as such they may not be realisable in the
immediate future. The valuations are subject to uncertain events,
for example, liquidity events or debt refinancing that may not be
wholly within the Group's control. We expect The Argo Fund Limited,
Argo Distressed Credit Fund Limited and Argo Special Situations
Fund LP shortly to complete the sale of an important asset with an
interested buyer. The carrying value of the Group's investments in
these funds is based on the agreed sale price. During the period
the carrying value of investments was reduced by USD4,482,405.
9. TRADE AND OTHER RECEIVABLES
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
balance sheet 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 2015
total US$ Nil (31 December 2014: Nil) after a bad debt provision of
US$6,178,809 (EUR5,569,505) (31 December 2014: US$5,554,234,
EUR4,569,505). AREOF continues to meet part of this obligation to
the Argo Group as and when liquidity allows. 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.
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 02:01 ET (06:01 GMT)
At the period end The Argo Fund Limited, Argo Special Situations
Fund LP, Argo Distressed Credit Fund Limited and Argo Local Markets
Fund Limited owed the Group total management fees of US$4,014,731
(31 December 2014: US$2,361,599) after a bad debt provision of
US$1,300,000 (2014: US$1,300,000). These funds have a substantial
asset base with few liabilities. They are currently facing
liquidity issues which management continue to work to remedy and
whilst a bad debt provision has been raised against these
management fees the Directors are confident that they may be
recovered in the future.
In the audited financial statements of AREOF at 30 September
2014 a material uncertainty surrounding the refinancing of bank
debts was referred to in relation to the basis of preparation of
the financial statements. In the view of the directors of AREOF,
discussions with the banks are continuing satisfactorily and they
have therefore concluded that it is appropriate to prepare those
financial statements on a going concern basis.
10. LOANS AND ADVANCES RECEIVABLE
At 30 June At 31 December
2015 2014
US$'000 US$'000
Loans and advances receivable
- current 192 132
Loans and advances receivable
- non-current (see below) 2,472 2,357
2,664 2,489
=============================== =========== ===============
At 30 June At 31 December
2015 2014
US$'000 US$'000
Loan to Bel Rom Trei (see
note (a) below) 1,395 1,456
Loan to AREOF (see note
(b) below) 557 552
Loan to The Argo Fund
Limited (see note (c)
below) 330 150
Loans to other AREOF Group
entities (see note (d)
below) 93 102
Deposits on leased premises 96 96
Other loans 1 1
============================= =========== ===============
2,472 2,357
============================= =========== ===============
(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. Challenging trading conditions have
impacted Bel Rom's cash flow and its ability to meet payments due
to lending banks as and when they fall due. The situation is being
addressed by way of discussions with the lending banks with a view
to restructuring these loans. While these discussions are on-going
to find an agreeable solution for both parties, Bel Rom continues
to enjoy the support of its banks. The loan is repayable on demand
and accrues interest at 12%. The full amount of the loan and
accrued interest amounting to US$1,394,987 (EUR1,257,424) remains
outstanding at the period end. The Directors consider this loan to
be fully recoverable on the basis that conditional offers to buy
the centre have been received that indicate a value in excess of
the debt attached to the project. Notwithstanding its repayable on
demand terms, the Directors have classified this amount as
non-current within the financial statements as it is not their
intention to demand repayment in the immediate future and it is
unlikely that Bel Rom will repay the amount in the next 12 months
even if it were demanded.
(b) On 21 November 2013 the Argo Group provided a loan of
US$431,512 (EUR388,960) to AREOF to enable the company to service
interest payments under a bank loan agreement. The loan is
repayable on demand and accrues interest at 10%. The full amount of
the loan and accrued interest amounting to USD500,908 (EUR451,513)
remains outstanding at the period end and is secured by debentures
and guarantees from underlying intermediate companies in the AREOF
Group
The Argo Group provided further loans totalling US$55,597
(EUR50,114) to AREOF to assist with its operational cash
requirements. These loans are repayable on demand and accrue
interest at 7%. The full amount of these loans remain outstanding
at the period end.
(c) On 5 December 2014 the Argo Group provided a loan of
USD150,000 to The Argo Fund Limited to assist with its operational
cash requirements. This was followed by a further loan of
USD180,000 on 24 March 2015. Both loans are repayable on demand,
accrue interest at 5% and remain outstanding at the period end.
(d) At the period end the Argo Group was owed USD93,329
(EUR84,126) 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 the period end.
11. SHARE CAPITAL
The Company's authorised share capital is unlimited with a
nominal value of US$0.01.
30 June 30 June 31 December 31 December
2015 2015 2014 2014
No. US$'000 No. US$'000
Issued and fully
paid
Ordinary shares
of US$0.01 each 67,428,494 674 67,428,494 674
================== ============= ========== ============= ============
67,428,494 674 67,428,494 674
================== ============= ========== ============= ============
The directors did not recommend the payment of a final dividend
for the year ended 31 December 2014 and do not recommend an interim
dividend in respect of the current period.
12. RECONCILIATION OF NET CASH OUTFLOW FROM OPERATING ACTIVITIES
TO LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
Six months Six months
ended ended
30 June 30 June
2015 2014
US$'000 US$'000
Loss on ordinary activities
before taxation (4,163) (516)
Interest income (88) (115)
Depreciation 23 72
Unrealised loss on investments 4,482 105
Net foreign exchange (gain)/loss (59) 129
Increase in payables 40 18
Increase in receivables,
loans and advances (1,959) (1,175)
Income taxes paid (13) (8)
================================== ============= =============
Net cash outflow from operating
activities (1,737) (1,490)
================================== ============= =============
13. FAIR VALUE HIERARCY
The table below analyses financial instruments measured at fair
value at the end of the reporting period by the level of the fair
value hierarchy (note 2).
At 30 June 2015
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Financial assets
at fair value
through profit
or loss - 13,774 179 13,953
================== ========== ========= ========= =========
At 31 December 2014
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Financial assets
at fair value
through profit
or loss - - 18,435 18,435
================== ========== ========== ========= =========
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 balance sheet date the Company holds investments in The
Argo Fund Limited, Argo Real Estate Opportunities Fund Limited
("AREOF") and Argo Special Situations Fund LP. These investments
are reflected in the accounts at a fair value of US$13,773,333,
US$119,366 and US$59,514 respectively.
The Group has provided AREOF with a notice of deferral in
relation to the amounts due from the provision of investment
management services, under which it will not demand payment of such
amounts until the Group judges that AREOF is in a position to pay
the outstanding liability. These amounts accrued or receivable at
30 June 2015 total US$ Nil (31 December 2014: US$ Nil) after a bad
debt provision of US$6,178,809 (EUR5,569,505) (31 December 2014:
US$5,554,234, EUR4,569,505). AREOF continues to meet part of this
obligation to the Argo Group as and when liquidity allows. 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.
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September 30, 2015 02:01 ET (06:01 GMT)
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