TIDMARGO

RNS Number : 2840H

ARGO Group Limited

31 July 2019

Argo Group Limited

("Argo" or the "Company")

Interim Results for the six months ended 30 June 2019

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

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

Key highlights for the six months period ended 30 June 2019

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

   -     Revenues US$2.4 million (six months to 30 June 2018: US$2.2 million) 
   -     Operating loss US$0.03 million (six months to 30 June 2018: loss US$0.6 million) 
   -     Profit before tax US$1.5 million (six months to 30 June 2018: loss US$0.7 million) 
   -     Net assets US$22.0 million (31 December 2018: US$23.3 million) 

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

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

Enquiries

Argo Group Limited

Andreas Rialas

020 7016 7660

Panmure Gordon

Dominic Morley

020 7886 2500

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

CHAIRMAN'S STATEMENT

The Group and its investment objective

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

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

Business and operational review

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

Total operating costs for the period, ignoring bad debt provisions, are US$2.2 million compared to US$2.1 million for the six months to 30 June 2018. The Group has provided against management fees of US$0.3 million (EUR0.2 million) (six months to 30 June 2018: US$0.6 million (EUR0.5 million)) due from AREOF. In the Directors' view these amounts are fully recoverable however they have concluded that it would not be appropriate to continue to recognise income without provision from these investment management services as the timing of such receipts may be outside the control of the Company and AREOF.

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

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

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

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

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

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

The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2019 total US$ Nil (31 December 2018: US$ Nil) after a bad debt provision of US$9.1 million (EUR8.0 million) (31 December 2018: US$8.9 million, EUR7.8 million). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. AREOF paid US$0.3 million (EUR0.3 million) towards management fees owed to the Group in June 2019. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. The AREOF management contract expires on the later of its termination or the sale of all assets in the Portfolio. The life of the Fund is due to expire on 30 June 2034.

Fund performance

The Argo Funds

 
                           30 June    30 June    2018 
                  Launch    2019       2018       year                             Sharpe   Down 
                                                         Since       Annualised 
Fund               date     6 months   6 months   total   inception   performance   ratio    months  AUM 
                           %          %          %       %           CAGR %                          US$m 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------ 
                                                                                              70 of 
The Argo Fund     Oct-00        4.25      -1.95   -5.65      230.94          7.36    0.47       225    92.8 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------ 
Argo Distressed                                                                               59 of 
 Credit Fund      Oct-08        5.18      -0.40    1.58      251.83         14.30    0.63       129    49.2 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------ 
Argo Special 
 Situations                                                                                   71 of 
 Fund LP          Feb-12       12.08      -1.91    26.8      -60.41          1.02    0.02        95     9.2 
                  -------  ---------  ---------  ------  ----------  ------------  ------  --------  ------ 
Total                                                                                                 151.2 
                           ---------  ---------  ------  ----------  ------------  ------  --------  ------ 
 

* NAV only officially measured once a year in September.

AREOF's adjusted NAV at 30 September 2018* was US$15.0 million (EUR13.1 million), compared with US$0.7 million (EUR0.6 million) a year earlier. The Adjusted NAV per share at 30 September 2018 was US$0.0247 (EUR0.0216) (2017: US$0.001 (EUR0.001)). The improvement in NAV follows the completion of the restructuring of the loan supporting Riviera Shopping City in June 2018.

The main shareholder in AREOF:

 
 Entity                    No of Shares     % 
------------------------  -------------  ---- 
 
 Argo Distressed Credit 
  Fund                      504,466,674   83% 
 

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

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

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

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

Dividends and share purchase programme

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

During the period, the Directors authorised the repurchase of 8,072,892 shares for a total cost of US$2.7 million (GBP2.1 million) by way of a tender offer. The Board is currently evaluating the merits of a further tender offer later this year.

Outlook

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

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

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

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

FOR THE SIX MONTHSED 30 JUNE 2019

 
                                                       Six months           Six months 
                                                            ended                ended 
                                                          30 June              30 June 
                                                             2019                 2018 
                                                Note      US$'000              US$'000 
 
 Management fees                                            2,013                2,115 
 Performance fees                                             300                    - 
 Other income                                                 122                  125 
=============================================  =====  ===========  ======  =========== 
 Revenue                                                    2,435                2,240 
=============================================  =====  ===========  ======  =========== 
 
 Legal and professional expenses                            (303)                (177) 
 Management and incentive fees payable                       (34)                 (35) 
 Operational expenses                                       (520)                (559) 
 Employee costs                                           (1,291)              (1,347) 
                                                 9, 
 Bad debt provision                              10         (295)                (692) 
 Foreign exchange (loss)/gain                                (20)                    1 
 Depreciation                                    7            (5)                  (6) 
 Operating loss                                              (33)                (575) 
=============================================  =====  ===========  ======  =========== 
 
 Interest income                                               90                   99 
 Realised and unrealised gain/(losses) 
  on investments                                 8          1,438                (238) 
=============================================  =====  ===========  ======  =========== 
  Profit/(loss) on ordinary activities 
   before taxation                                          1,495                (714) 
=============================================  =====  ===========  ======  =========== 
 
 Taxation                                        5           (19)                 (11) 
=============================================  =====  ===========  ======  =========== 
 Profit/(loss) for the period after 
  taxation attributable to members of 
  the Company                                    6          1,476                (725) 
 
 Other comprehensive income 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Exchange differences on translation 
  of foreign operations                                      (44)                 (98) 
=============================================  =====  ===========  ======  =========== 
 Total comprehensive income for the 
  period                                                    1,432                (823) 
=============================================  =====  ===========  ======  =========== 
 
                                                       Six months           Six months 
                                                            Ended                Ended 
                                                          30 June              30 June 
                                                             2018                 2018 
                                                              US$                  US$ 
 Earnings per share (basic)                      6           0.03               (0.02) 
=============================================  =====  ===========      =============== 
 Earnings per share (diluted)                    6           0.03               (0.01) 
=============================================  =====  ===========      =============== 
 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 
                                            30 June   31 December 
                                               2019          2018 
                                   Note     US$'000       US$'000 
 
 Assets 
 
 Non-current assets 
 Land, fixtures, fittings and 
  equipment                         7           207           212 
 Financial assets at fair value 
  through profit or loss            8            45           159 
 Loans and advances receivable      10          103           118 
================================  =====  ==========  ============ 
 Total non-current assets                       355           489 
================================  =====  ==========  ============ 
 
 Current assets 
 Financial assets at fair value 
  through profit or loss            8        19,745        18,193 
 Trade and other receivables        9           887           757 
 Loans and advances receivable      10           15             - 
 Tax receivable                     5             -             5 
 Cash and cash equivalents                    1,168         4,005 
 Total current assets                        21,815        22,960 
================================  =====  ==========  ============ 
 
 Total assets                                22,170        23,449 
================================  =====  ==========  ============ 
 
 Equity and liabilities 
 
 Equity 
 Issued share capital               11          390           470 
 Share premium                               25,353        28,022 
 Revenue reserve                              (887)       (2,363) 
 Foreign currency translation 
  reserve                                   (2,904)       (2,860) 
================================  =====  ==========  ============ 
 Total equity                                21,952        23,269 
================================  =====  ==========  ============ 
 
 Current liabilities 
 Trade and other payables                       214           180 
 Tax payable                                      4             - 
 Total current liabilities                      218           180 
 Total equity and liabilities                22,170        23,449 
================================  =====  ==========  ============ 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHSED 30 JUNE 2019

 
                                                                          Foreign 
                            Issued                                       currency 
                             share       Share           Revenue      translation 
                           capital     premium           reserve          reserve     Total 
                              2018        2018              2018             2018      2018 
                           US$'000     US$'000           US$'000          US$'000   US$'000 
 
 As at 1 January 2018          470      28,022           (1,127)          (2,705)    24,660 
 
 Total comprehensive 
  income 
 Loss for the period 
  after taxation                 -           -             (725)                -     (725) 
 Other comprehensive 
  income                         -           -                 -             (98)      (98) 
 
 As at 30 June 2018            470      28,022           (1,852)          (2,803)    21,044 
======================  ==========  ==========  ================  ===============  ======== 
 
 
 
                                                                        Foreign 
                               Issued                                  currency 
                                share       Share     Revenue       translation 
                              capital     premium     reserve           reserve     Total 
                                 2019        2019        2019              2019      2019 
                              US$'000     US$'000     US$'000           US$'000   US$'000 
 
 As at 1 January 2019             470      28,022     (2,363)           (2,860)    23,269 
 
 Total comprehensive 
  income 
 Profit for the period 
  after taxation                    -           -       1,476                 -     1,476 
 Other comprehensive 
  income                            -           -           -              (44)      (44) 
 Transaction with owners 
  recorded directly in 
  equity 
 Purchase of own shares          (80)     (2,669)           -                 -   (2,749) 
 
 As at 30 June 2019               390      25,353       (887)           (2,904)    21,952 
=========================  ==========  ==========  ==========  ================  ======== 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHSED 30 JUNE 2019

 
                                                   Six months   Six months 
                                                        ended        ended 
                                                      30 June      30 June 
                                                         2019         2018 
                                            Note      US$'000      US$'000 
 
 Net cash (outflow)/inflow from 
  operating activities                       12          (32)        3,365 
=========================================  =====  ===========  =========== 
 
 Cash flows used in investing activities 
 Interest received on cash and 
  cash equivalents                                          8           11 
 Purchase of fixtures, fittings 
  and equipment                              7            (1)          (1) 
 Purchase of current asset investments       8              -      (4,000) 
 
 
 Net cash generated from/(used 
  in) investing activities                                  7      (3,990) 
=========================================  =====  ===========  =========== 
 
 Cash flows from financing activities 
 Repurchase of own shares                             (2,749)            - 
 
 Net cash used in financing activities                (2,749)            - 
=========================================  =====  ===========  =========== 
 
 Net decrease in cash and cash 
  equivalents                                         (2,774)        (625) 
 
 Cash and cash equivalents at 1 
  January 2019 and 
  1 January 2018                                        4,005        5,031 
 
 Foreign exchange loss on cash 
  and cash equivalents                                   (63)         (91) 
 
 Cash and cash equivalents as at 
  30 June 2019 and 30 June 2018                         1,168        4,315 
=========================================  =====  ===========  =========== 
 
   1.       CORPORATE INFORMATION 

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

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

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

Wholly owned subsidiaries Country of incorporation

 
 Argo Capital Management (Cyprus) Limited   Cyprus 
 Argo Capital Management Limited            United Kingdom 
 Argo Capital Management Property Limited   Cayman Islands 
 Argo Property Management Srl               Romania 
 
   2.       ACCOUNTING POLICIES 
   (a)     Basis of preparation 

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

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

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

   b)      Financial instruments and fair value hierarchy 

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

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

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

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

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

   3.      SEGMENTAL ANALYSIS 

The Group operates as a single asset management business.

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

 
 
                                       Argo Capital                      Argo Capital 
                                         Management     Argo Capital       Management   Six months 
                          Argo Group       (Cyprus)       Management         Property        ended 
                                 Ltd            Ltd              Ltd              Ltd      30 June 
                                2019           2019             2019             2019         2019 
                             US$'000        US$'000          US$'000          US$'000      US$'000 
 
 Total revenues 
  for reportable 
  segments customers               -            437            1,748              687        2,872 
 Intersegment 
  revenues                         -            437                -                -          437 
 
 Total profit/(loss) 
  for reportable 
  segments                     1,114            135              157               70        1,476 
 Intersegment 
  profit/(loss)                    -            437            (437)                -            - 
 
 Total assets 
  for reportable 
  segments assets             20,034            346            1,100              690       22,170 
 Total liabilities 
  for reportable 
  segments                         6             10               92              110          218 
=====================  =============  =============  ===============  ===============  =========== 
 
 
 Revenues, profit or loss, assets and liabilities    Six months 
  may be reconciled as follows: 
                                                          Ended 
                                                        30 June 
                                                           2019 
                                                        US$'000 
 Revenues 
 Total revenues for reportable segments                   2,872 
 Elimination of intersegment revenues                     (437) 
==================================================  =========== 
 Group revenues                                           2,435 
==================================================  =========== 
 
 Profit or loss 
 Total profit for reportable segments                     1,495 
 Elimination of intersegment loss                             - 
 Other unallocated amounts                                    - 
==================================================  =========== 
 Profit on ordinary activities before taxation            1,495 
==================================================  =========== 
 
 Assets 
 Total assets for reportable segments                    22,546 
 Elimination of intersegment receivables                  (376) 
 Group assets                                            22,170 
==================================================  =========== 
 
 Liabilities 
 Total liabilities for reportable segments                  594 
 Elimination of intersegment payables                     (376) 
==================================================  =========== 
 Group liabilities                                          218 
==================================================  =========== 
 
 
 
                                       Argo Capital                      Argo Capital 
                                         Management     Argo Capital       Management   Six months 
                          Argo Group       (Cyprus)       Management         Property        ended 
                                 Ltd            Ltd              Ltd              Ltd      30 June 
                                2018           2018             2018             2018         2018 
                             US$'000        US$'000          US$'000          US$'000      US$'000 
 
 Total revenues 
  for reportable 
  segments                         -            377            1,510              730        2,617 
 Intersegment 
  revenues                         -            377                -                -          377 
 
 Total profit/(loss) 
  for reportable 
  segments                     (419)            141            (115)            (321)        (714) 
 Intersegment 
  profit/(loss)                    -            377            (377)                -            - 
 
 Total assets 
  for reportable 
  segments                    20,127          1,440            1,467            2,222       25,256 
 Total liabilities 
  for reportable 
  segments                         6             32              392              989        1,419 
=====================  =============  =============  ===============  ===============  =========== 
 
 
 Revenues, profit or loss, assets and liabilities    Six months 
  may be reconciled as follows: 
                                                          ended 
                                                        30 June 
                                                           2018 
                                                        US$'000 
 Revenues 
 Total revenues for reportable segments                   2,617 
 Elimination of intersegment revenues                     (377) 
==================================================  =========== 
 Group revenues                                           2,240 
==================================================  =========== 
 
 Profit or loss 
 Total loss for reportable segments                       (714) 
 Elimination of intersegment loss                             - 
 Other unallocated amounts                                    - 
==================================================  =========== 
 Loss on ordinary activities before taxation              (714) 
==================================================  =========== 
 
 Assets 
 Total assets for reportable segments                    25,256 
 Elimination of intersegment receivables                (1,233) 
 Group assets                                            24,023 
==================================================  =========== 
 
 Liabilities 
 Total liabilities for reportable segments                1,419 
 Elimination of intersegment payables                   (1,233) 
==================================================  =========== 
 Group liabilities                                          186 
==================================================  =========== 
 
   4.   SHARE-BASED INCENTIVE PLANS 

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

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

The principal assumptions for valuing the options are:

 
 Exercise price (pence)          24.0 
 Weighted average share price 
  at grant date (pence)          17.0 
 Weighted average option life 
  (years)                        10.0 
 Expected volatility (% p.a.)    15.0 
 Dividend yield (% p.a.)         10.0 
 Risk-free interest rate (% 
  p.a.)                          0.907 
 

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

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

 
                                       Weighted average   No. of share 
                                        exercise price       options 
 Outstanding at beginning of period         24.0p          4,340,000 
 Granted during the period                    -                 - 
 Forfeited during the period                  -                - 
====================================  =================  ============= 
 Outstanding at end of period               24.0p          4,340,000 
====================================  =================  ============= 
 Exercisable at end of period               24.0p          4,340,000 
====================================  =================  ============= 
 

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

No share options were issued during the period.

   5.      TAXATION 

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

 
 Consolidated statement of profit or 
  loss                                      Six months   Six months 
                                                 ended        Ended 
                                               30 June      30 June 
                                                  2019         2018 
                                               US$'000      US$'000 
 
 Taxation charge for the period on Group 
  companies                                         19           11 
=========================================  ===========  =========== 
 

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

 
                                                      Six months   Six months 
                                                           ended        Ended 
                                                         30 June      30 June 
                                                            2019         2018 
                                                         US$'000      US$'000 
 
 Profit/(loss) before tax                                  1,495        (714) 
================================================  ==============  =========== 
 
 Applicable Isle of Man tax rate for                           -            - 
  Argo Group Limited of 0% 
 Timing differences                                            -            - 
 Non-deductible expenses                                       -            - 
 Other adjustments                                          (31)           22 
 Tax effect of different tax rates of 
  subsidiaries operating in other jurisdictions               50         (11) 
================================================  ==============  =========== 
 Tax charge                                                   19           11 
================================================  ==============  =========== 
 
 
 Consolidated statement of financial 
  position 
                                         30 June   31 December 
                                            2019          2018 
                                         US$'000       US$'000 
 
 Corporation tax (payable)/receivable        (4)             5 
======================================  ========  ============ 
 
   6.      EARNINGS PER SHARE 

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

 
                                             Six months     Six months 
                                                  ended          ended 
                                                30 June        30 June 
                                                   2019           2018 
                                                US$'000        US$'000 
 
 Net profit/(loss) for the period after 
  taxation attributable to members                1,476          (725) 
========================================  =============  ============= 
 
                                                 No. of         No. of 
                                                 shares         shares 
 
 Weighted average number of ordinary 
  shares for basic earnings per share        42,996,432     47,032,878 
 Effect of dilution (Note 4)                  4,340,000      4,340,000 
========================================  =============  ============= 
 Weighted average number of ordinary 
  shares for diluted earnings per share      47,336,432     52,372,878 
========================================  =============  ============= 
 
 
                                 Six months   Six months 
                                      Ended        ended 
                                    30 June      30 June 
                                       2019         2018 
                                        US$          US$ 
 
 Earnings per share (basic)            0.03       (0.02) 
 Earnings per share (diluted)          0.03       (0.01) 
==============================  ===========  =========== 
 
   7.      LAND, FIXTURES, FITTINGS AND EQUIPMENT 
 
                                        Fixtures, 
                                         fittings 
                                    and equipment                              Total 
                                                       Land 
                                          US$'000   US$'000                  US$'000 
 Cost 
 At 1 January 2018                            269       193                      462 
 Additions                                      8         -                        8 
 Disposals                                      -         -                        - 
 Foreign exchange movement                   (11)       (9)                     (20) 
================================  ===============  ========  ======================= 
 At 31 December 2018                          266       184                      450 
 Additions                                      1         -                        1 
 Foreign exchange movement                    (3)       (1)                      (4) 
================================  ===============  ========  ======================= 
 At 30 June 2019                              264       183                      447 
================================  ===============  ========  ======================= 
 
 Accumulated Depreciation 
 
 At 1 January 2018                            235         -                      235 
 Depreciation charge for period                12         -                       26 
 Disposals                                      -         -                        - 
 Foreign exchange movement                    (9)         -                        9 
================================  ===============  ========  ======================= 
 At 31 December 2018                          238         -                      238 
 Depreciation charge for period                 5         -                        5 
 Foreign exchange movement                    (3)         -                      (3) 
================================  ===============  ========  ======================= 
 At 30 June 2019                              240         -                      240 
================================  ===============  ========  ======================= 
 
 Net book value 
 At 31 December 2018                           28       184                      212 
                                               28 
================================  ===============  ========  ======================= 
 At 30 June 2019                               24       183                      207 
================================  ===============  ========  ======================= 
 
   8.       FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 
 
 
                                        30 June 2019       30 June 2019 
 Holding   Investment in management       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 
 
 57,310    The Argo Fund Ltd*                     15,472           18,966 
    -      Argo Real Estate Opportunities              -                - 
            Fund Ltd 
           Argo Special Situations 
   115      Fund LP                                  115               45 
           Argo Distressed Credit 
   221      Fund Limited*                            786              779 
========  ===============================  =============    ============= 
                                                  14,262           19,790 
========  ===============================  =============    ============= 
 
 
                                        31 December       31 December 
                                               2018              2018 
 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 
 
   57,309     The Argo Fund Ltd*                     15,472           18,193 
              Argo Real Estate Opportunities 
 30,056,500    Fund Ltd                                 988              119 
              Argo Special Situations 
    115        Fund LP                                  115               40 
     -        Argo Distressed Credit                      -                - 
               Fund Ltd* 
===========  ===============================  =============    ============= 
                                                     16,575           18,352 
===========  ===============================  =============    ============= 
 

*Classified as current in the consolidated statement of Financial Position

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

During the period, the Group sold its investment of 30,056,500 shares in AREOF at EUR0.02 each for 221 shares in ADCF in consideration.

   9.   TRADE AND OTHER RECEIVABLES 
 
                                     At 30 June     At 31 December 
                                           2019               2018 
                                       US$ '000           US$ '000 
 
 Trade receivables - Gross                9,873              9,752 
 Less: provision for impairment 
  of trade receivables                  (9,196)            (9,188) 
--------------------------------  -------------  ----------------- 
 Trade receivables - Net                    677                564 
 Other receivables                          121                111 
 Prepayments and accrued income              89                 82 
================================  =============  ================= 
                                            887                757 
================================  =============  ================= 
 

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

A provision for impairment has been raised for all balances owed by the AREOF Group under trade and other receivables. These balances include all management fees and other loans and advances made by the investment manager to the AREOF Group. These amounted to US$11.8 million (EUR10.3 million) (31 December 2018: US$11.6 million, EUR10.1 million).

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

 
                                At 30 June     At 31 December 
                                      2019               2018 
                                  US$ '000           US$ '000 
 
 Opening balance                    11,803             10,992 
 Bad debt recovered                  (338)                  - 
 Charged during the period             633              1,350 
 Foreign exchange movement            (90)              (539) 
===========================  =============  ================= 
 Closing balance                    12,008             11,803 
===========================  =============  ================= 
 

10. LOANS AND ADVANCES RECEIVABLE

 
                                         At 30 June        At 31 December 
                                               2019         2018 
                                            US$'000                           US$'000 
 
 Deposits on leased premises -                   15                                 - 
  current 
 Deposits on leased premises - 
  non-current (see below)                       103                               118 
                                                                                    9 
 Other loans and advances receivable              -                                 - 
  - non-current 
=====================================  ============  ===  =========================== 
                                                118                               118 
=====================================  ============  ===  =========================== 
 

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

 
                                       At 30 June   At 31 December 
                                             2019    2018 
                                                     t 31 December 
                                                     2016 
                                          US$'000          US$'000 
 Non-current: 
 Lease expiring in second year 
  after the reporting date                      -               14 
 Lease expiring in fourth year                103                - 
  after the reporting date 
 Lease expiring in fifth year after 
  reporting date                                -              104 
                                              103              118 
====================================  ===========  =============== 
 
   11.     SHARE CAPITAL 

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

 
                               30 June     30 June    31 December   31 December 
                                  2019        2019           2018          2018 
                                   No.     US$'000            No.       US$'000 
 Issued and fully paid 
 Ordinary shares of 
  US$0.01 each              38,959,986         390     47,032,878           470 
=======================  =============  ==========  =============  ============ 
                            38,959,986         390     47,032,878           470 
=======================  =============  ==========  =============  ============ 
 

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

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

 
                                                  Six months     Six months 
                                                       ended          ended 
                                                30 June 2019        30 June 
                                                                       2018 
                                                     US$'000        US$'000 
 
 Profit/(loss) on ordinary activities 
  before taxation                                      1,495          (714) 
 
 Interest income                                        (90)           (99) 
 Depreciation                                              5              6 
 Realised and unrealised (gain)/loss                 (1,438)            238 
 Net foreign exchange loss/(gain)                         20            (1) 
 Increase/(decrease) in payables                          34        (1,943) 
 (Increase)/decrease in receivables, 
  loans and advances                                    (48)          5,878 
 Corporation tax paid                                   (10)              - 
 Net cash (outflow)/inflow from operating 
  activities                                            (32)          3,365 
==========================================  ================  ============= 
 
   13.     FAIR VALUE HIERARCY 

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

At 30 June 2019

 
                             Level 1    Level 2    Level 3      Total 
                            US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets 
  at fair value through 
  profit or loss                   -     19,745         45     19,790 
========================  ==========  =========  =========  ========= 
 

At 31 December 2018

 
                             Level 1    Level 2    Level 3      Total 
                            US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets 
  at fair value through 
  profit or loss                   -     18,193        159     18,352 
========================  ==========  =========  =========  ========= 
 

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

value measurements in Level 3 of the fair value hierarchy:

 
                                   Unlisted           Listed open 
                               closed ended      ended investment 
                                 investment                  fund 
                                       fund      Emerging Markets 
                                Real Estate                            Total 
                                   US$ '000              US$ '000   US$ '000 
 
 Balance as at 1 January 
  2019                                  119                    40        159 
 Total profit recognized 
  in profit or loss                     667                     5        672 
 Transfer to ADCF                     (786)                     -      (786) 
 Balance as at 30 June 
  2019                                    -                    45         45 
=========================  ================  ====================  ========= 
 
   14.   RELATED PARTY TRANSACTIONS 

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

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

The Group has provided AREOF with a notice of deferral in relation to the amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2019 total US$ Nil (31 December 2018: US$ Nil) after a bad debt provision of US$9.1 million (EUR8.0 million) (31 December 2018: US$8.9 million, EUR7.8 million). AREOF paid US$0.3 million (EUR0.3 million) towards management fees owed to the Group in June 2019. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. Argo Group Limited retains this additional security.

At the period end the Argo Group is also owed loans repayable on demand of US$2.3 million (EUR2.0 million) (31 December 2018: US$2.2 million, EUR1.9 million) by AREOF accruing interest at 10%. The Company is also owed a further amount of US$0.4 million (EUR0.3 million) (31 December 2018: US$0.4 million, EUR0.4 million) by other AREOF Group entities. A full provision has been made in the consolidated financial statements against these balances at the current and prior period end.

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

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

END

IR SDWEESFUSELW

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July 31, 2019 02:02 ET (06:02 GMT)

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