TIDMARGO
RNS Number : 7044M
ARGO Group Limited
01 August 2017
Argo Group Limited
("Argo" or the "Company")
Interim Results for the six months ended 30 June 2017
Argo today announces its interim results for the six months
ended 30 June 2017.
The Company will today make available its interim report for the
six month period ended 30 June 2017 on the Company's website
www.argogrouplimited.com.
Key highlights for the six months period ended 30 June 2017
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 2017.
- Revenues US$6.3 million (six months to 30 June 2016: US$4.0 million)
- Operating profit US$3.3 million (six months to 30 June 2016: profit US$3.8 million)
- Profit before tax US$5.1 million (six months to 30 June 2016: profit US$4.9 million)
- Net assets US$24.8 million (31 December 2016: US$20.1 million)
Commenting on the results and outlook, Kyriakos Rialas, Chief
Executive Officer of Argo said:
"The results of AGL's first six months are a reflection of
strong subscriptions and performance in the emerging markets.
Investors continue to seek yield in a consistently low global
interest rate regime despite recent tapering noise from ECB and
interest rate increases by the FED. AGL's results include a
significant element of performance fees from the workout of one of
the distressed assets. Continuous investor interest in the Argo
Fund is expected to materialize into more sizeable subscriptions in
the second half of the year. "
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,
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 months ended 30 June 2017 the Group generated
revenues of US$6.3 million (six months to 30 June 2016: US$4.0
million) with management fees accounting for US$2.1 million (six
months to 30 June 2016: US$2.0 million). The Group generated
performance fees of US$4.0 million (six months to 30 June 2016:
US$1.7 million).
Total operating costs for the period, ignoring bad debt
provisions, are US$1.9 million compared to US$2.0 million for the
six months to 30 June 2016. The Group has provided against
management fees of US$0.8 million (EUR0.8 million) (six months to
30 June 2016: US$1.2 million (EUR1.0 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 profit for
the period of US$3.3 million (six months to 30 June 2016: profit
US$3.8 million) and a profit before tax of US$5.1 million (six
months to 30 June 2016: profit US$4.9 million) reflecting the net
gain on investments of US$1.7 million (six months to 30 June 2016:
net gain US$1.1 million). Performance fees will be realisable at
the year-end if losses do not occur in the last six months of the
year.
At the period end, the Group had net assets of US$24.8 million
(31 December 2016: US$20.1 million) and net current assets of
US$24.5 million (31 December 2016: US$19.6 million) including cash
reserves of US$5.7 million (31 December 2016: US$6.1 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$10.2 million (31 December 2016: US$9.7
million), US$0.1 million (31 December 2016: US$0.1 million),
US$0.03 million (31 December 2016: US$0.01 million) and US$3.8
million (31 December 2016: US$2.5 million) respectively.
At the period end the Argo funds (excluding AREOF) owed the
Group total management and performance fees of US$5.1 million (31
December 2016: US$2.4 million).
The Argo funds (excluding AREOF) ended the period with Assets
under Management ("AUM") at US$136.2 million, 23.1% higher than at
the beginning of the period. The increase is mostly due to
performance but it includes a small net inflow of new cash. The
current level of AUM remains below that required to ensure
sustainable profits on a recurring management fee basis in the
absence of performance fees. This has necessitated an ongoing
review of the Group's cost basis. Nevertheless, the Group has
ensured that the operational framework remains intact and that it
retains the capacity to manage additional fund inflows as and when
they arise.
The average number of permanent employees of the Group for the
six months to 30 June 2017 was 23 (30 June 2016: 20).
The Group has provided AREOF with a notice of deferral in
relation to amounts due from the provision of investment management
services, under which it will not demand payment of such amounts
until the Group judges that AREOF is in a position to pay the
outstanding liability. These amounts accrued or receivable at 30
June 2017 total US$ Nil (31 December 2016: Nil) after a bad debt
provision of US$7.8 million (EUR6.8 million) (31 December 2016:
US$6.4 million, EUR6.1 million). AREOF continues to meet part of
this obligation to the Argo Group as and when liquidity allows. In
November 2013 AREOF offered Argo Group Limited additional security
for the continued support in the form of debentures and guarantees
by underlying intermediate companies. The AREOF management contract
has a fixed term expiring on 31 July 2018.
Fund performance
Argo Funds
30 30
June June 2016
Launch 2017 2016 year Sharpe Down
Since Annualised
Fund date 6 months 6 months total inception performance ratio months AUM
---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------
% % % % CAGR US$m
%
---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------
59
The Argo of
Fund Oct-00 4.67 41.90 52.30 218.14 8.00 0.50 101 64.0
---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------
50
Argo Distressed of
Credit Fund Oct-08 51.00 33.36 32.69 200.27 15.65 0.62 105 47.9
---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------
Argo Special 53
Situations of
Fund LP Feb-12 -12.03 -31.15 -12.03 -87.07 -7.87 -0.12 65 24.3
---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------
Total 136.2
------------------------- --------- --------- ------- ---------- ------------ ------ -------- ------
* NAV only officially measured once a year in September.
AREOF's Adjusted NAV at 30 September 2016* were minus US$36.4
million (minus EUR31.9 million), compared with minus US$23.4
million (minus EUR20.9 million) a year earlier. The Adjusted NAV
per share at 30 September 2016 of minus US$0.06 (minus EUR0.05)
(2015: minus US$0.03 (minus EUR0.03).
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.
Upon completion of the AREOF group restructuring in March 2017,
Argo Capital Management Property Limited reduced its annual
management fees receivable from AREOF from EUR2 million to EUR1
million.
Emerging markets had a mixed start to the year primarily due to
uncertainty in the US following the inauguration of President
Trump. A number of election campaign promises would, if enacted,
have had a detrimental impact on emerging market economies, most
notably Mexico and Asian exporters. In addition, tighter US
monetary policy - the Federal Reserve increased interest rates
twice during the period - weaker oil prices and local political
upheavals added to the volatility in certain countries such as
Brazil, Qatar and Venezuela. However, some of these pressures began
to abate towards the end of the period and it has become evident
that policy change and/or implementation in the US has become quite
difficult.
The long/short strategy pursued by TAF allows it to adjust
quickly to a fluid emerging market credit environment and it
recorded a respectable return of 4.67% in the first half. The
performance of ADCF, which concentrates on less liquid distressed
positions, was helped significantly by the revaluation prompted by
a reassessment of recovery prospects from an industrial asset in
Asia.
TAF is the Group's flagship fund and has a 17 year track record.
Going forward, TAF continues to 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 2017 while enjoying attractive risk profiles thanks to
low levels of government indebtedness and high foreign exchange
reserves.
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 situation has been stable and the economy is now on a
modest recovery path.
The majority of AREOF's debt facilities have been in default at
some point during the period. This situation has been addressed
through 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 2017.
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
1,065,616 shares at a total cost of U$0.2 million
(GBP0.2million).
Under the current Share Buyback Programme II, the Company
intends to use up to GBP2 million to acquire Ordinary Shares in the
market over a twelve month period commencing on 28 September 2016
and expiring no later than 19 September 2017 (one year from the
date of the 2016 AGM which authorised the 2016 Share Buyback
Programme II). The minimum price that Argo will pay is 8p per
Ordinary Share. The aggregate number of Ordinary Shares which may
be acquired on behalf of the Company in connection with the 2016
Share Buyback Programme II will not exceed 23,676,987 Ordinary
Shares, which broadly represents the number of shares in public
hands.
The Company has spent US$0.3million (GBP0.2 million) to buy back
1,440,616 Ordinary Shares on this programme so far.
The Directors firmly believe that a return of excess cash to
shareholders through buy-backs will send a positive message to
investors.
Outlook
The Board remains optimistic about the Group's prospects based
on the transactions in the pipeline and the Group's initiatives to
increase AUM. A significant increase in AUM is still required to
ensure sustainable profits on a recurring management fee basis and
the Group is well placed with capacity to absorb such an increase
in AUM with negligible impact on operational costs.
Boosting AUM will be Argo's top priority in the next six months.
The Group's marketing efforts will continue to focus on TAF which
has a 17 year track record as well as identifying acquisitions that
are earnings enhancing. TAF's prospectus was amended as of 1 March
2016 to eliminate trading in level 3 illiquid assets and
concentrate trading and investments in emerging market bonds and
other liquid assets.
Both TAF and ADCF are now registered with HM Revenue &
Customs as UK Reporting Funds. This status allows our UK investors
to be tax efficient with income or capital gains earned from our
Cayman funds.
Over the longer term, the Board believes there is significant
opportunity for growth in assets and profits and remains committed
to ensuring the Group's investment management capabilities and
resources are appropriate to meet its key objective of achieving a
consistent positive investment performance in the emerging markets
sector.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2017
Six months Six months
ended ended
30 June 30 June
2017 2016
Note US$'000 US$'000
Management fees 2,138 2,042
Performance fees 4,045 1,669
Other income 122 327
======================================== ===== =========== =================
Revenue 6,305 4,038
======================================== ===== =========== =================
Legal and professional expenses (126) (375)
Management and incentive
fees payable (33) (34)
Operational expenses (532) (481)
Employee costs (1,228) (1,114)
9,
Bad debt provision 10 (1,032) 1,712
Foreign exchange gain (7) 39
Depreciation 7 (15) (21)
Operating profit 3,332 3,764
======================================== ===== =========== =================
Interest income 88 44
Realised and unrealised gains/(losses)
on investments 8 1,728 1,094
======================================== ===== =========== =================
Profit/(loss) on ordinary
activities before taxation 5,148 4,902
======================================== ===== =========== =================
Taxation 5 (382) (97)
======================================== ===== =========== =================
Profit/(loss) for the period
after taxation attributable
to members of the Company 6 4,766 4,805
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences on translation
of foreign operations 202 (215)
======================================== ===== =========== =================
Total comprehensive income
for the period 4,968 4,590
======================================== ===== =========== =================
Six months Six months
Ended Ended
30 June 30 June
2017 2016
US$ US$
Earnings per share (basic) 6 0.10 0.08
======================================== ===== =========== ==================
Earnings per share (diluted) 6 0.09 0.07
======================================== ===== =========== ==================
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
30 June At 31
December
2017 2016
Note US$'000 US$'000
Assets
Non-current assets
Fixtures, fittings and
equipment 7 39 50
Financial assets at fair
value through profit or
loss 8 148 134
Loans and advances receivable 10 114 264
=============================== ===== ========== ==========
Total non-current assets 301 448
=============================== ===== ========== ==========
Current assets
Financial assets at fair
value through profit or
loss 8 13,982 12,267
Trade and other receivables 9 5,272 2,870
Loans and advances receivable 10 69 66
Cash and cash equivalents 5,742 6,126
Total current assets 25,065 21,329
=============================== ===== ========== ==========
Total assets 25,366 21,777
=============================== ===== ========== ==========
Equity and liabilities
Equity
Issued share capital 11 470 481
Share premium 28,022 28,211
Revenue reserve (902) (5,668)
Foreign currency translation
reserve (2,753) (2,955)
=============================== ===== ========== ==========
Total equity 24,837 20,069
=============================== ===== ========== ==========
Current liabilities
Trade and other payables 146 1,683
Taxation payable 5 383 25
=============================== ===== ========== ==========
Total current liabilities 529 1,708
Total equity and liabilities 25,366 21,777
=============================== ===== ========== ==========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE SIX MONTHSED 30 JUNE 2017
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$'000
As at 1 January
2016 674 30,878 (6,239) (2,876) 22,437
Total comprehensive
income
Profit for the
period after taxation - - 4,805 - 4,805
Other comprehensive
income - - - (215) (215)
Transaction with
owners
recorded directly
in equity
Purchase of own
shares (note 14) (189) (2,601) - - (2,790)
As at 30 June 2016 485 28,277 (1,434) (3,091) 24,237
======================== ========== ========== ================ =============== ========
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2017 2017 2017 2017 2017
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2017 481 28,211 (5,668) (2,955) 20,069
Total comprehensive
income
Profit for the
period after taxation - - 4,766 - 4,766
Other comprehensive
income - - - 202 202
Transactions with
owners recorded
directly in equity
Purchase of own
shares (note 11) (11) (189) - - (200)
As at 30 June 2017 470 28,022 (902) (2,753) 24,837
======================== ========== ========== ========== ================ ========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2017
Six months Six months
ended ended
30 June 30 June
2017 2016
Note US$'000 US$'000
Net cash (outflow)/inflow
from operating activities 12 (366) 3,311
=============================== ===== =========== ===========
Cash flows used in investing
activities
Interest received on cash
and cash equivalents 14 23
Purchase of fixtures,
fittings and equipment 7 (2) (2)
Purchase of current asset
investments 8 - (2,000)
Proceeds from disposal
of investments 8 - 7,467
Net cash generated from/(used
in) investing activities 12 5,488
=============================== ===== =========== ===========
Cash flows from financing
activities
Repurchase of own shares (200) (2,795)
Net cash used in financing
activities (200) (2,795)
=============================== ===== =========== ===========
Net increase/(decrease)
in cash and cash equivalents (554) 6,004
Cash and cash equivalents
at 1 January 2017 and
1 January 2016 6,126 3,126
Foreign exchange loss
on cash and cash equivalents 170 (147)
Cash and cash equivalents
as at 30 June 2017 and
30 June 2016 5,742 8,983
=============================== ===== =========== ===========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six months ended 30 June 2017
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
2017 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 2016 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) 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
A firm of solicitors was appointed on 30 June 2017 for the
dissolution of North Asset Management Sarl as this company has been
dormant since June 2016 and does no longer have a purpose.
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 2016.
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 2016.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 31 July 2017.
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
2017 2017 2017 2017 2017
US$'000 US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments
customers - 1,348 5,392 913 7,653
Intersegment
revenues - 1,348 - - 1,348
Total profit/(loss)
for reportable
segments 1,592 1,137 2,899 (480) 5,148
Intersegment
profit/(loss) - 1,348 (1,348) - -
Total assets
for reportable
segments
assets 17,071 2,135 5,683 2,448 27,337
Total liabilities
for reportable
segments 9 136 1,366 989 2,500
===================== ======== ============ ============= ============= ===========
Revenues, profit or loss, assets and Six months
liabilities may be reconciled as follows:
Ended
30 June
2017
US$'000
Revenues
Total revenues for reportable segments 7,653
Elimination of intersegment revenues (1,348)
============================================ ===========
Group revenues 6,305
============================================ ===========
Profit or loss
Total profit for reportable segments 5,148
Elimination of intersegment loss -
Other unallocated amounts -
============================================ ===========
Profit on ordinary activities before
taxation 5,148
============================================ ===========
Assets
Total assets for reportable segments 27,337
Elimination of intersegment receivables (1,971)
Group assets 25,366
============================================ ===========
Liabilities
Total liabilities for reportable segments 2,500
Elimination of intersegment payables (1,971)
============================================ ===========
Group liabilities 529
============================================ ===========
Argo Capital Argo Capital
Argo Management Argo 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$'000
Total revenues
for reportable
segments 600 786 2,497 1,425 5,308
Intersegment
revenues 600 570 100 - 1,270
Total profit/(loss)
for reportable
segments 1,470 (136) 1,063 2,622 5,019
Intersegment
profit/(loss) 600 (128) (499) - (27)
Total assets
for reportable
segments 14,899 1,213 3,934 5,090 25,136
Total liabilities
for reportable
segments 40 29 691 1,069 1,829
===================== ======== ============= =============== =============== ===========
Revenues, profit or loss, assets and liabilities Six months
may be reconciled as follows:
ended
30 June
2016
US$'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
================================================== ===========
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 4,840,000
Granted during the period - 450,000
Forfeited during the period 24.0p (750,000)
============================= ========== =============
Outstanding at end of
period 24.0p 4,540,000
============================= ========== =============
Exercisable at end of
period 24.0p 4,540,000
============================= ========== =============
The options outstanding at 30 June 2017 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
19.25% (2016: 0% to 20%).
Consolidated statement of
profit or loss Six months Six months
ended Ended
30 June 30 June
2017 2016
US$'000 US$'000
Taxation charge for the period
on Group companies 382 97
================================ =========== ===========
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
2017 2016
US$'000 US$'000
Profit/(loss) before tax 5,148 4,902
================================== =============== ===========
Applicable Isle of Man tax - -
rate for Argo Group Limited
of 0%
Timing differences - 2
Non-deductible expenses 5 6
Other adjustments (308) (171)
Tax effect of different tax
rates of subsidiaries operating
in other jurisdictions 685 260
================================== =============== ===========
Tax charge 382 97
================================== =============== ===========
Consolidated statement of
financial position
30 June 31 December
2017 2016
US$'000 US$'000
Corporation tax payable 383 25
=========================== ======== ============
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
2017 2016
US$'000 US$'000
Net profit/(loss) for the
period after taxation attributable
to members 4,766 4,805
===================================== ============= =============
No. of No. of
shares shares
Weighted average number of
ordinary shares for basic
earnings per share 47,582,353 62,509,327
Effect of dilution (Note 4) 4,540,000 4,840,000
===================================== ============= =============
Weighted average number of
ordinary shares for diluted
earnings per share 52,122,353 67,349,327
===================================== ============= =============
Six months Six months
ended ended
30 June 30 June
2017 2016
US$ US$
Earnings per share (basic) 0.10 0.08
Earnings per share (diluted) 0.09 0.07
============================== =========== ===========
7. FIXTURES, FITTINGS AND EQUIPMENT
Fixtures,
fittings
& equipment
US$'000
Cost
At 1 January 2016 245
Additions 31
Disposals (2)
Foreign exchange movement (24)
================================ =======================
At 31 December 2016 250
Additions 2
Foreign exchange movement 11
================================ =======================
At 30 June 2017 263
================================ =======================
Accumulated Depreciation
At 1 January 2016 181
Depreciation charge for period 41
Disposals (2)
Foreign exchange movement (20)
================================ =======================
At 31 December 2016 200
Depreciation charge for period 15
Foreign exchange movement 9
================================ =======================
At 30 June 2017 224
================================ =======================
Net book value
At 31 December 2016 50
================================ =======================
At 30 June 2017 39
================================ =======================
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 30 June
2017 2017
Holding Investment in management Total cost Fair value
shares
US$'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$'000
32,104 The Argo Fund Ltd* 7,159 10,192
Argo Real Estate
Opportunities Fund
10,899,021 Ltd 988 119
Argo Special Situations
115 Fund LP 115 29
Argo Distressed Credit
1,262 Fund Limited* 2,000 3,790
=========== ======================== ============= =============
10,262 14,130
=========== ======================== ============= =============
31 December 31 December
2016 2016
Holding Investment in management Total cost Fair value
shares
US$'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$'000
32,104 The Argo Fund Ltd* 7,159 9,758
Argo Real Estate
Opportunities Fund
10,899,021 Ltd 988 119
Argo Special Situations
115 Fund LP 115 15
Argo Distressed Credit
1,262 Fund Ltd* 2,000 2,509
=========== ======================== ============= =============
10,262 12,401
=========== ======================== ============= =============
*Classified as current in the consolidated statement of
Financial Position
9. TRADE AND OTHER RECEIVABLES
At 30 June At 31 December
2017 2016
US$ '000 US$ '000
Trade receivables - Gross 15,366 11,078
Less: provision for impairment
of trade receivables (10,264) (8,626)
-------------------------------- ------------- -----------------
Trade receivables - Net 5,102 2,452
Other receivables 87 354
Prepayments and accrued
income 83 64
================================ ============= =================
5,272 2,870
================================ ============= =================
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 have 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$10.1 million (EUR8.9 million) (31 December 2016: US$8.5
million, EUR8.1 million).
At 30 June 2017, Argo Special Situations Fund LP owed the Group
total management fees of US$0.9 million (31 December 2016: US$0.6
million). This fund is currently facing liquidity issues due to the
debt financing arrangement put in place in 2014 however Management
continues to work to remedy this and the Directors are confident
that these fees may be recovered in the future.
The movement in the Group's provision for impairment of trade
receivables is as follow:
At 30 June At 31 December
2017 2016
US$ '000 US$ '000
Opening balance 8,626 8,345
Bad debt recovered - (2,776)
Charged during the period 884 3,329
Foreign exchange movement 754 (272)
=========================== ============= =================
Closing balance 10,264 8,626
=========================== ============= =================
10. LOANS AND ADVANCES RECEIVABLE
At 30 At 31 December
June 2017 2016
US$'000 US$'000
Deposits on leased premises
- current 69 66
Deposits on leased premises
- non-current (see below) 15 13
9
Other loans and advances
receivable - non-current
(see below) 99 251
============================= ============ ==========================
183 330
============================= ============ ==========================
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
2017 2016
t 31 December
2016
US$'000 US$'000
Non-current:
Lease expiring in third
year after reporting date 15 13
15 13
============================ =========== ===============
The non-current other loans and advances receivable
comprise:
At 30 June At 31 December
2017 2016
US$'000 US$'000
Loan to AREOF 10 23
Loans to other AREOF Group
entities 89 226
Other loans - 2
============================ =========== ===============
99 251
============================ =========== ===============
In the period to 30 June 2017, a provision for bad debt for
US$0.2 million (31 December 2016: US$ Nil) was made for balances
with the AREOF Group for which settlement is considered uncertain.
The remaining exposure of US$0.1 million is considered recoverable
as these are advances made on behalf of the AREOF Group to third
parties and we expect settlement when the third parties repay.
11. SHARE CAPITAL
The Company's authorised share capital is unlimited with a
nominal value of US$0.01.
30 June 30 June 31 December 31 December
2017 2017 2016 2016
No. US$'000 No. US$'000
Issued and fully
paid
Ordinary shares
of US$0.01 each 47,032,878 470 48,098,494 481
================== ============= ========== ============= ============
47,032,878 470 48,098,494 481
================== ============= ========== ============= ============
The Directors did not recommend the payment of a final dividend
for the year ended 31 December 2016 and do not recommend an interim
dividend in respect of the current period.
During the period the Directors authorised the repurchase of
1,065,616 shares at a total cost of US$0.2 million
12. RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE
TAXATION
Six months Six months
ended ended
30 June 30 June
2017 2016
US$'000 US$'000
Profit on ordinary activities
before taxation 5,148 4,902
Interest income (88) (44)
Depreciation 15 21
Realised and unrealised
gains (1,729) (1,094)
Net foreign exchange loss/
(gain) 7 (39)
(Decrease)/increase in payables (1,538) 29
Increase in receivables,
loans and advances (2,181) (371)
Income taxes paid - (93)
================================= ============= =============
Net cash (outflow)/ inflow
from operating activities (366) 3,311
================================= ============= =============
13. FAIR VALUE HIERARCY
The table below analyses financial instruments measured at fair
value at the end of the reporting period by the level of the fair
value hierarchy (note 2b).
At 30 June 2017
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Financial assets
at fair value
through profit
or loss - 13,982 148 14,130
================== ========== ========= ========= =========
At 31 December 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 - 12,267 134 12,401
================== ========== ========= ========= =========
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
2017 119 15 134
Total loss recognized
in profit or loss - 14 14
Balance as at 30
June 2017 119 29 148
========================= ==================== ============== =========
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$10.2 million, US$0.1 million,
US$0.03 million and US$3.8 million respectively.
The Group has provided AREOF with a notice of deferral in
relation to the amounts due from the provision of investment
management services, under which it will not demand payment of such
amounts until the Group judges that AREOF is in a position to pay
the outstanding liability. These amounts accrued or receivable at
30 June 2017 total US$Nil (31 December 2016:Nil) after a bad debt
provision of US$7.8 million (EUR6.8 million) (31 December 2016:
US$6.4 million, EUR6.1 million). 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.
At the period end the Argo Group is also owed loans repayable on
demand of US$1.9 million (EUR1.7 million) (31 December 2016: US$1.7
million, EUR1.6 million) by AREOF accruing interest at 10%. A full
provision has been made in the consolidated financial statements
against this balance at the current and prior period.
At the period end the Argo Group was owed a total balance of
US$0.3 million (EUR0.3 million) (31 December 2016: US$0.2 million,
EUR0.2 million) by other AREOF Group entities. A provision for bad
debt of US$0.3 million (EUR0.1 million) (31 December 2016: US$0.1
million, EUR0.1 million) has been made in the accounts in respect
of these balances.
In addition to the above, the Argo Group is owed a further
US$0.3 million (EUR0.3 million) (31 December 2016: US$0.3 million
(EUR0.3 million) for expenses paid on behalf of AREOF, against
which a bad debt provision for US0.3 million (EUR0.3 million) (31
December 2016: US$0.3 million, EUR0.3 million)
In the audited consolidated financial statements of AREOF at 30
September 2016 a material uncertainty surrounding the refinancing
of bank debts was referred to in relation to the basis of
preparation of the consolidated financial statements. In the view
of the directors of AREOF, discussions with the banks are
continuing satisfactorily and they have therefore concluded that it
is appropriate to prepare those consolidated financial statements
on a going concern basis.
David Fisher, a non-executive director of the Company, is also a
non-executive director of AREOF.
15. COMMITMENTS
On 19th June 2017, the Board of Argo Property Management Limited
approved the purchase of a piece of land in Romania for US$ 223.233
(RON891,613). The 10% guarantee deposit in respect of the purchase
was paid in June 2017. The purchase completed on 4 July 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LIFFDTDILIID
(END) Dow Jones Newswires
August 01, 2017 03:36 ET (07:36 GMT)
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