TIDMARGO

RNS Number : 8510V

ARGO Group Limited

12 August 2022

Argo Group Limited

("Argo" or the "Company")

Interim Results for the six months ended 30 June 2022

Argo today announces its interim results for the six months ended 30 June 2022.

The Company will today make available its interim report for the six months period ended 30 June 2022 on the Company's website www.argogrouplimited.com.

Key highlights for the six months period ended 30 June 2022

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 2022.

   -     Revenues US$1.3 million (six months to 30 June 2021: US$1.7 million) 
   -     Operating loss US$1.5 million (six months to 30 June 2021: US$0.7 million) 
   -     Loss before tax US$3.5 million (six months to 30 June 2021: loss before tax US$0.2 million) 
   -     Net assets US$19.4 million (31 December 2021: US$23.1 million) 

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

"The first six months of 2022 have been devastating for Emerging market Bonds as global interest rates have been rising and outflows accelerated especially for EM bonds. Coupled with an illiquid and dysfunctional market we saw many bonds marked down several points for no good reason. Argo through a combination of short hedges mitigated such losses but still lost around 14.5% in The Argo Fund compared to a loss of 26% for the EMBI+ index. The situation in Ukraine is of some concern with the shopping mall in Odessa suffering some collateral damage and repairs are underway so that some of the shops affected open again. With inflationary pressures projected to soften going forward and interest rates curve inverting we believe the second half will improve . "

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 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

CHAIRMAN'S STATEMENT

Key highlights for the six months ended 30 June 2022

   -     Revenues US$1.3 million (six months to 30 June 2021: US$1.7 million) 
   -     Operating loss US$1.5 million (six months to 30 June 2021: US$0.7 million) 
   -     Loss before tax US$3.5 million (six months to 30 June 2021: loss before tax US$0.2 million) 
   -     Net assets US$19.4 million (31 December 2021: US$23.1 million) 

The Group and its 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 2022 the Group generated revenues of US$1.3 million (six months to 30 June 2021: US$1.7 million) with management fees accounting for US$1.1 million (six months to 30 June 2021: US$1.2 million).

Total operating costs for the period, ignoring bad debt provisions, are US$2.5 million compared to US$2.0 million for the six months to 30 June 2021 . The Group has provided against management fees of US$0.3 million due from the Designated share class in The Argo Fund ("TAF") (six months to 30 June 2021: US$0.4 million). In the Directors' view these amounts are fully recoverable however they have concluded that it would only be appropriate to recognise income without provision from these investment management services once a liquidity event occurs in this share class.

Overall, the financial statements show an operating loss for the period of US$1.5 million (six months to 30 June 2021: US$0.7 million) and a loss before tax of US$3.5 million (six months to 30 June 2021: loss before tax of US$0.2 million). Net loss on investments of US$2.5 million (six months to 30 June 2021: net loss on investments US$0.04 million) and interest income of US$0.5 million (six months to 30 June 2021: US$0.5 million).

At the period end, the Group had net assets of US$19.4 million (31 December 2021: US$23.1 million) and net current assets of US$6.7 million (31 December 2021: US$9.1 million) including cash reserves of US$1.2 million (31 December 2021: US$1.7 million).

Net assets include investments in The Argo Fund ("TAF") at fair values of US$5.2 million (31 December 2021: US$6.1 million).

At the period end TAF owed the Group total fees of US$1.7 million ( 31 December 2021 : US$2.6 million). At 30 June 2022, a provision for US$1.6 million was made against this amount as the timing of the receipt of the fees from the designated share class in TAF is unknown.

TAF ended the period with Assets under Management ("AUM") at US$107.5 million (31 December 2021: US$122.6 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 2022 was 20 ( 30 June 2021 : 19).

Fund performance

The Argo Funds

 
                           30 June     30 June     2021 
                 Launch     2022        2021        year                              Sharpe    Down 
                                                            Since       Annualised 
 Fund             date      6 months    6 months    total   inception   performance    ratio     months 
                          %           %           %        %           CAGR % 
                --------  ----------  ----------  -------  ----------  ------------  -------  --------- 
The Argo Fund                                                                                     86 of 
 - A class      Oct-00        -14.25        4.28     5.29      209.03          6.07     0.41        261 
                --------  ----------  ----------  -------  ----------  ------------  -------  --------- 
The Argo Fund                                                                                      7 of 
 - X2 class     Feb21         -21.39        5.69    11.86      -12.08         -7.61    -0.51         17 
                --------  ----------  ----------  -------  ----------  ------------  -------  --------- 
 

In contrast to last year when the focus was on the anticipated recovery from the Covid pandemic, the first half of 2022 witnessed an accelerated deterioration in global economic conditions as inflation concerns prompted a tightening of monetary policy. To exacerbate matters further, the Ukraine-Russia conflict threatened international stability and triggered supply chain issues, trade frictions, and increased commodity prices, notably of energy and wheat.

The annual rate of inflation in both the US and Europe was recorded in excess of 9 per cent in June with food and fuel having a sizeable impact. In attempting to address the highest price rises for decades, the US Federal Reserve increased interest rates three times in the first half of 2022, the last hike by a rarely seen 75bps. US Treasury yields continued on their upward path for most of the period although the ten-year bond dipped to 3 per cent at the end of the period -and subsequently below that-as recessionary fears encouraged the belief that central banks would tighten less aggressively in future. Europe has been slower to increase rates, reflecting the divergence of growth projections especially in the Eurozone and also the specific pressures arising from the interruption of gas flow from Russia and the desire to reduce the bloc's reliance on that country for energy supplies. Nevertheless, yields on ten-year Bunds turned positive for the first time since early 2019 and ended June at 1.3 per cent.

Gas and oil prices remain elevated but below the spikes seen periodically since Russia initiated its invasion of Ukraine. From a low of US$86, Brent oil traded up at nearly US$128 before dropping back to US$100. Gas prices have fluctuated with uncertainty over reliability of supply through the pipelines from the East, but demand has been much reduced because of the warmer weather. Interestingly, copper prices have declined roughly 30 per cent from their most recent highs in 2022 and historically bear markets in copper are regarded as a predictor of recessions.

Unsurprisingly, the first six months of 2022 have proven unsatisfactory for investors, with significant drawdowns in equity and bond markets. Both the Euro Stoxx 50 and the S&P 500 lost around 20 per cent of their value and for the latter, it was its worst start since 1970. Rising yields on developed market bonds, a stronger dollar- the DXY index rose 9.4 per cent in the period- and worsening terms of trade all combined to have a detrimental impact on emerging markets and sentiment towards them, and the JP Morgan EMBI+ index fell by 26.7 percent in the six months to end-June.

The NAV of the Class A shares of the TAF decreased by 14.25% in the first half of 2022, compared to a rise of 4.28% in the same period of the previous year. The fund was adversely affected by the conflict in Ukraine and the failure of Argentina to capitalise on its renegotiated IMF programme but, more generally, the "risk-off" environment hit several long sovereign and corporate positions. Class A shares issued by TAF continue to be invested in a diversified debt and macro positions which seek to capture alpha through long and short investment in liquid EM corporate and sovereign bonds and FX. In addition, there are other share classes within the TAF master/feeder structure which offer investors exposure to distressed debt portfolio (Class X2 launched last year) and also special situations where the timeline to investment realisation will be longer

Following the sell-off in the first half, many EM assets now offer better value than has been the case for some time and the fund hopes that more stable macro circumstances will help it to recoup losses during the second half.

Loan to Argo Real Estate Limited Partnership

On 9th May 2022, Riviera Shopping Centre was partially damaged by a Russian combat missile. The Shopping Centre is currently closed until the necessary repairs are completed. Based on the preliminary assessments, experts expect the centre to reopen in February 2023 after completion of Phase 1 works which will enable the Centre to generate up to 95% of its full revenue capacity. Consequently, there will be a delay in the repayment of the loan receivable from Argo Real Estate Limited Partnership, while the Company continues to accrue interest at 9% per annum. As the loan receivable from Argo Real Estate Limited Partnership is exposed to the performance of this investment property held in Ukraine, the Group has made an IFRS 9 valuation adjustment for US$0.5 million for expected losses at the reporting date (note 10).

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.

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 continue to focus on TAF which has a 21-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 2022

 
                                                       Six months       Six months 
                                                            ended            ended 
                                                          30 June          30 June 
                                                             2022             2021 
                                                Note      US$'000          US$'000 
 
 Management fees                                            1,140            1,250 
 Performance fees                                               -              283 
 Other income                                                 125              131 
=============================================  =====  ===========      =========== 
 Revenue                                                    1,265            1,664 
=============================================  =====  ===========      =========== 
 
 Legal and professional expenses                            (128)            (249) 
 Management fees payable                                    (180)            (157) 
 Operational expenses                                       (362)            (339) 
 Employee costs                                           (1,752)          (1,129) 
                                                 9, 
 Bad debt provision                              10         (320)            (365) 
 Foreign exchange profit/(loss)                                 9              (4) 
 Depreciation                                    7           (71)            (103) 
 Operating loss                                           (1,539)            (682) 
=============================================  =====  ===========      =========== 
 
 Interest income                                              499              519 
 Realised and unrealised (loss)/gain 
  on investments                                          (2,507)             (38) 
=============================================  =====  ===========      =========== 
 Loss on ordinary activities before 
  taxation                                                (3,547)            (201) 
=============================================  =====  ===========      =========== 
 
 Taxation                                        5              -                - 
=============================================  =====  ===========      =========== 
 Loss for the period after taxation 
  attributable to members of the Company         6        (3,547)            (201) 
 Other comprehensive income 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Exchange differences on translation 
  of foreign operations                                     (107)             (10) 
=============================================  =====  ===========      =========== 
 Total comprehensive income for the 
  period                                                  (3,654)            (211) 
=============================================  =====  ===========      =========== 
 
                                                       Six months       Six months 
                                                            Ended            Ended 
                                                          30 June          30 June 
                                                             2022             2021 
                                                              US$              US$ 
 Earnings per share (basic)                      6         (0.09)          (0.005) 
=============================================  =====  ===========      =========== 
 Earnings per share (diluted)                    6         (0.08)          (0.005) 
=============================================  =====  ===========      =========== 
 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2022

 
                                            30 June   31 December 
                                               2022          2021 
                                   Note     US$'000       US$'000 
 Assets 
 Non-current assets 
 Land, fixtures, fittings and 
  equipment                         7           200           290 
 Loans and advances receivable      10       12,502        13,641 
================================  =====  ==========  ============ 
 Total non-current assets                    12,702        13,931 
================================  =====  ==========  ============ 
 
 Current assets 
 Financial assets at fair value 
  through profit or loss            8         5,229         6,098 
 Loan and advances receivable       10          110           122 
 Trade and other receivables        9           259         1,453 
 Cash and cash equivalents                    1,232         1,709 
 Total current assets                         6,830         9,382 
================================  =====  ==========  ============ 
 
 Total assets                                19,532        23,313 
================================  =====  ==========  ============ 
 
 Equity and liabilities 
 
 Equity 
 Issued share capital               11          390           390 
 Share premium                               25,353        25,353 
 Revenue reserve                            (3,127)           420 
 Foreign currency translation 
  reserve                                   (3,193)       (3,086) 
================================  =====  ==========  ============ 
 Total equity                                19,423        23,077 
================================  =====  ==========  ============ 
 
 Current liabilities 
 Trade and other payables                       109           236 
 Total current liabilities                      109           236 
--------------------------------  -----  ----------  ------------ 
 
   Non-current liabilities 
 Trade and other payables           15            -             - 
--------------------------------  -----  ----------  ------------ 
 Total non-current liabilities                    -             - 
--------------------------------  -----  ----------  ------------ 
 
 Total equity and liabilities                19,532        23,313 
--------------------------------  -----  ----------  ------------ 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHSED 30 JUNE 2022

 
                                                                     Foreign 
                            Issued                                  currency 
                             share       Share     Revenue       translation 
                           capital     premium     reserve           reserve     Total 
                              2021        2021        2021              2021      2021 
                           US$'000     US$'000     US$'000           US$'000   US$'000 
 
 As at 1 January 2021          390      25,353         122           (3,055)    22,810 
 
 Total comprehensive 
  income 
 Loss for the period 
  after taxation                 -           -       (201)                 -     (201) 
 Other comprehensive 
  income                         -           -           -              (10)      (10) 
 As at 30 June 2021            390      25,353        (79)           (3,065)    21,599 
======================  ==========  ==========  ==========  ================  ======== 
 
 
                                                                           Foreign 
                                  Issued                                  currency 
                                   share       Share     Revenue       translation 
                                 capital     premium     reserve           reserve     Total 
                                    2022        2022        2022              2022      2022 
                                 US$'000     US$'000     US$'000           US$'000   US$'000 
 
 As at 1 January 2022                390      25,353         420           (3,086)    23,077 
 
 Total comprehensive income 
 Loss for the period after 
  taxation                             -           -     (3,547)                 -   (3,547) 
 Other comprehensive income            -           -           -             (107)     (107) 
 As at 30 June 2022                  390      25,353     (3,127)           (3,193)    19,423 
============================  ==========  ==========  ==========  ================  ======== 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHSED 30 JUNE 2022

 
                                                 Six months   Six months 
                                                      ended        ended 
                                                    30 June      30 June 
                                                       2022         2021 
                                          Note      US$'000      US$'000 
 
 Net cash (outflow)/inflow from 
  operating activities                     12         (332)        (300) 
=======================================  =====  ===========  =========== 
 
 Cash flows used in investing 
  activities 
 Interest received on cash and 
  cash equivalents                                        -            1 
 Purchase of fixtures, fittings 
  and equipment                            7            (4)          (2) 
 Proceeds from sale of financial 
  assets at fair value through profit 
  or loss                                                 -        1,001 
 
 
 Net cash (used)/ generated from 
  investing activities                                  (4)        1,000 
=======================================  =====  ===========  =========== 
 
 Cash flows from financing activities 
 Payment of lease liabilities                          (78)        (119) 
 
 Net cash used in financing activities                 (78)        (119) 
=======================================  =====  ===========  =========== 
 
 Net decrease in cash and cash 
  equivalents                                         (414)          581 
 
 Cash and cash equivalents at 1 
  January 2022 and 
  1 January 2021                                      1,709          675 
 
 Foreign exchange loss on cash 
  and cash equivalents                                 (63)         (20) 
 
 Cash and cash equivalents as 
  at 30 June 2022 and 30 June 2021                    1,232        1,236 
=======================================  =====  ===========  =========== 
 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2022

   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 2022 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 2021 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 currency of the Group undertakings are US dollars, Sterling and Romanian Lei. The presentational currency is US dollars.

Wholly owned subsidiaries Country of incorporation

 
 Argo Capital Management Limited   United Kingdom 
 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 2021.

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 2021.

These condensed consolidated interim financial statements were approved by the Board of Directors on 11 August 2022.

   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     Argo Capital     Argo Property   Six months 
                               Group       Management        Management        ended 
                                 Ltd              Ltd               Srl      30 June 
                                2022             2022              2022         2022 
                             US$'000          US$'000           US$'000      US$'000 
 
 Total revenues for 
  reportable segments 
  customers                        -            1,140               125        1,265 
 Intersegment revenues             -                -                              - 
                                                                      - 
 
 Total profit/(loss) 
  for reportable segments    (2,329)          (1,215)             (211)      (3,755) 
 Intersegment loss               208                -                 -          208 
 
 Total assets for 
  reportable segments 
  assets                      18,046            1,279               207       19,532 
 Total liabilities 
  for reportable segments          6               77                26          109 
==========================  ========  ===============  ================  =========== 
 
 
 Revenues, profit or loss, assets and liabilities    Six months 
  may be reconciled as follows: 
                                                          Ended 
                                                        30 June 
                                                           2022 
                                                        US$'000 
 Revenues 
 Total revenues for reportable segments                   1,265 
 Elimination of intersegment revenues                         - 
==================================================  =========== 
 Group revenues                                           1,265 
==================================================  =========== 
 
 Profit or loss 
 Loss for reportable segments                           (3,755) 
 Elimination of intersegment loss                           208 
 Other unallocated amounts                                    - 
==================================================  =========== 
 Loss on ordinary activities before taxation            (3,547) 
==================================================  =========== 
 
 Assets 
 Total assets for reportable segments                    19,536 
 Elimination of intersegment receivables                    (4) 
 Group assets                                            19,532 
==================================================  =========== 
 
 Liabilities 
 Total liabilities for reportable segments                3,466 
 Elimination of intersegment payables                   (3,357) 
==================================================  =========== 
 Group liabilities                                          109 
==================================================  =========== 
 
 
 
                                                            Argo Capital 
                                           Argo Capital       Management   Six months 
                            Argo Group       Management         Property        ended 
                                   Ltd              Ltd              Ltd      30 June 
                                  2021             2021             2021         2021 
                               US$'000          US$'000          US$'000      US$'000 
 
 Total revenues 
  for reportable 
  segments customers                 -            1,533              131        1,664 
 Intersegment revenues               -                -                -            - 
 
 Total profit/(loss) 
  for reportable 
  segments                          86            (316)            (193)        (423) 
 Intersegment loss                 222                -                -          222 
 
 Total assets for 
  reportable segments 
  assets                        21,561            1,066              305       22,932 
 Total liabilities 
  for reportable 
  segments                           7              275               51          333 
=======================  =============  ===============  ===============  =========== 
 
 
 Revenues, profit or loss, assets and liabilities    Six months 
  may be reconciled as follows: 
                                                          Ended 
                                                        30 June 
                                                           2021 
                                                        US$'000 
 Revenues 
 Total revenues for reportable segments                   1,664 
 Elimination of intersegment revenues                         - 
==================================================  =========== 
 Group revenues                                           1,664 
==================================================  =========== 
 
 Profit or loss 
 Loss for reportable segments                             (423) 
 Elimination of intersegment loss                           222 
 Other unallocated amounts                                    - 
==================================================  =========== 
 Loss on ordinary activities before taxation              (201) 
==================================================  =========== 
 
 Assets 
 Total assets for reportable segments                    22,936 
 Elimination of intersegment receivables                    (4) 
 Group assets                                            22,932 
==================================================  =========== 
 
 Liabilities 
 Total liabilities for reportable segments                3,716 
 Elimination of intersegment payables                   (3,383) 
==================================================  =========== 
 Group liabilities                                          333 
==================================================  =========== 
 
   4.   SHARE-BASED INCENTIVE PLANS 

To incentivise personnel and to align their interests with those of the shareholders of Argo Group Limited, Argo Group Limited has granted share options to directors and employees under The Argo Group Limited Employee Stock Option Plan. The options are exercisable within 10 years of the grant date.

The fair value of the options granted during the period 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)               21.0 
      Weighted average share price 
       at grant date (pence)               19.0 
      Average option life at date 
       of grant (years)                    10.0 
      Expected volatility (% p.a.)         15.0 
      Dividend yield (% p.a.)              10.0 
      Risk-free interest rate (% 
       p.a.)                               2 
 

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 (2021: 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                              21.2p          3,895,998 
 Granted during the period              -                - 
 Forfeited during the period            -                - 
==============================  =================  ============= 
 Outstanding at end of period         21.2p          3,895,998 
==============================  =================  ============= 
 Exercisable at end of period         21.2p          3,895,998 
==============================  =================  ============= 
 

Outstanding share options are contingent upon the option holder remaining an employee of the Group.

The weighted average fair value of the options issued during the period was GBPNil (2021: GBPNil).

No share options were issued during the period.

   5.      TAXATION 

Taxation rates applicable to the parent company and the UK and Romanian subsidiaries range from 0% to 19% (2021: 0% to 19%).

 
 Consolidated statement of profit or 
  loss                                      Six months   Six months 
                                                 ended        Ended 
                                               30 June      30 June 
                                                  2022         2021 
                                               US$'000      US$'000 
 
 Taxation charge for the period on Group             -            - 
  companies 
=========================================  ===========  =========== 
 

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

 
                                                     Six months   Six months 
                                                          Ended        Ended 
                                                        30 June      30 June 
                                                           2022         2021 
                                                        US$'000      US$'000 
 
 Loss before tax                                        (3,547)        (201) 
================================================  =============  =========== 
 
 Applicable Isle of Man tax rate for                          -            - 
  Argo Group Limited of 0% 
 Timing differences                                           -            - 
 Non-deductible expenses                                      -            - 
 Other adjustments                                            -            - 
 Tax effect of different tax rates of                         -            - 
  subsidiaries operating in other jurisdictions 
================================================  =============  =========== 
 Tax charge                                                   -            - 
================================================  =============  =========== 
 
 
 Consolidated statement of financial 
  position 
                                        30 June   31 December 
                                           2022          2021 
                                        US$'000       US$'000 
 
 Corporation tax payable                      -             - 
=====================================  ========  ============ 
 
   6.      EARNINGS PER SHARE 

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

 
                                             Six months     Six months 
                                                  ended          Ended 
                                                30 June        30 June 
                                                   2022           2021 
                                                US$'000        US$'000 
 
 Net loss for the period after taxation 
  attributable to members                       (3,547)          (201) 
========================================  =============  ============= 
 
                                                 No. of         No. of 
                                                 shares         shares 
 
 Weighted average number of ordinary 
  shares for basic earnings per share        38,959,986     38,959,986 
 Effect of dilution (Note 4)                 3,895,9898        250,000 
========================================  =============  ============= 
 Weighted average number of ordinary 
  shares for diluted earnings per share      42,855,984     39,209,986 
========================================  =============  ============= 
 
 
                                 Six months   Six months 
                                      Ended        ended 
                                    30 June      30 June 
                                       2022         2021 
                                        US$          US$ 
 
 Earnings per share (basic)          (0.09)      (0.005) 
 Earnings per share (diluted)        (0.08)      (0.005) 
==============================  ===========  =========== 
 
   7.      LAND, FIXTURES, FITTINGS AND EQUIPMENT 
 
                                                  Fixtures, 
                                     Right         fittings 
                                    of use    and equipment                              Total 
                                    assets                       Land 
                                USD'000000          US$'000   US$'000                  US$'000 
 Cost 
 At 1 January 2021                     833              266       196                    1,295 
 Additions                               -                1         -                        1 
 Disposals                            (92)             (62)         -                    (154) 
 Foreign exchange movement             (9)              (4)      (14)                     (27) 
===========================  =============  ===============  ========  ======================= 
 At 31 December 2021                   732              201       182                    1,115 
 Additions                               -                4         -                        4 
 Disposals                               -                -         -                        - 
 Foreign exchange movement            (74)             (19)      (15)                    (108) 
===========================  =============  ===============  ========  ======================= 
 At 30 June 2022                       658              186       167                    1,011 
===========================  =============  ===============  ========  ======================= 
 
 Accumulated Depreciation 
 
 At 1 January 2021                     555              256         -                      811 
 Depreciation charge for 
  period                               179                7         -                      186 
 Disposals                            (92)             (62)         -                    (154) 
 Foreign exchange movement             (8)             (10)         -                     (18) 
===========================  =============  ===============  ========  ======================= 
 At 31 December 2021                   634              191         -                      825 
 Depreciation charge for 
  period                                68                3         -                       71 
 Disposals                               -                -         -                        - 
 Foreign exchange movement            (67)             (18)         -                     (85) 
===========================  =============  ===============  ========  ======================= 
 At 30 June 2022                       635              176         -                      811 
===========================  =============  ===============  ========  ======================= 
 
 Net book value 
  At 31 December 2021                   98               10       182                      290 
                                                         28 
===========================  =============  ===============  ========  ======================= 
 At 30 June 2022                        23               10       167                      200 
===========================  =============  ===============  ========  ======================= 
 
   8.       FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 
 
 
                                           30 June          30 June 
                                              2022             2022 
 Holding   Investment in management     Total cost       Fair value 
            shares 
                                           US$'000          US$'000 
 
   10      The Argo Fund Ltd                     -                - 
                                                 -                - 
========  =========================  =============    ============= 
 
 
 Holding   Investment in ordinary     Total cost       Fair value 
            shares 
                                         US$'000          US$'000 
 
 16,920    The Argo Fund Ltd*              4,648            5,229 
                                           4,648            5,229 
========  =======================  =============    ============= 
 
 
                                          31 December     31 December 
                                                 2021            2021 
 Holding    Investment in management       Total cost      Fair value 
             shares 
                                              US$'000         US$'000 
 
    10      The Argo Fund Ltd                       -               - 
                                                    -               - 
 ====================================  ==============  ============== 
 
 
 Holding   Investment in ordinary     Total cost       Fair value 
            shares 
                                         US$'000          US$'000 
 
 16,920    The Argo Fund Ltd*              4,648            6,098 
                                           4,648            6,098 
========  =======================  =============    ============= 
 

*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.

   9.   TRADE AND OTHER RECEIVABLES 
 
                                     At 30 June     At 31 December 
                                           2022               2021 
                                       US$ '000           US$ '000 
 
 Trade receivables - Gross                1,923              2,814 
 Less: provision for impairment 
  of trade receivables                  (1,800)            (1,499) 
--------------------------------  -------------  ----------------- 
 Trade receivables - Net                    123              1,315 
 Other receivables                           31                 34 
 Prepayments and accrued income             105                 99 
================================  =============  ================= 
                                            259              1,448 
================================  =============  ================= 
 

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

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

 
                                At 30 June     At 31 December 
                                      2022               2021 
                                  US$ '000           US$ '000 
 
 As at 1 January                    14,252             14,101 
 Bad debt recovered                      -                  - 
 Charged during the period             320                740 
 Foreign exchange movement         (1,040)              (589) 
===========================  =============  ================= 
 Closing balance                    13,532             14,252 
===========================  =============  ================= 
 

10. LOANS AND ADVANCES RECEIVABLE

 
                                                At 30 June              At 31 December 
                                                      2022                        2021 
                                                   US$'000                     US$'000 
 
 Deposits on leased premises - current                  11                         122 
 Deposits on leased premises - non-current                                           - 
  (see below)                                           99                           9 
 Other loans and advances receivable 
  - non-current (note 14)                           12,502                      13,641 
===============================================  =========   ========================= 
                                                    12,612                      13,763 
===============================================  =========   ========================= 
 
 

The deposits on leased premises relate to the Group's offices in London and Romania.

Other loans and advances receivable relates to a loan for $12.1 million (EUR10.2 million) principal made by Argo Group Limited to Argo Real Estate Limited Partnership in February 2020, an entity that is 100% owned by Andreas Rialas. Riviera Shopping Centre was partially damaged by a Russian combat missile. The Shopping Centre is currently closed until the necessary repairs are completed. Based on the preliminary assessments, experts expect the centre to reopen in February 2023 after completion of Phase 1 works which will enable the Centre to generate up to 95% of its full revenue capacity. Consequently, there will be a delay in the repayment of the loan receivable from Argo Real Estate Limited Partnership, while the Company continues to accrue interest at 9% per annum. As this loan is exposed to the performance of an investment property held in Ukraine, the Group has made an IFRS 9 valuation adjustment for US$0.5 million for expected losses at the reporting date.

The Group also has a balance receivable for $11.7 million (EUR11.2 million) from Argo Real Estate Limited Partnership that was assigned from Argo Real Estate Opportunities Fund Limited during 2021. The carrying value of this balance is $nil.

   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 
                                  2022        2022           2021          2021 
                                   No.     US$'000            No.       US$'000 
 Issued and fully paid 
 Ordinary shares of 
  US$0.01 each              38,959,986         390     38,959,986           390 
=======================  =============  ==========  =============  ============ 
                            38,959,986         390     38,959,986           390 
=======================  =============  ==========  =============  ============ 
 

The Directors did not recommend the payment of a final dividend for the year ended 31 December 2021 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        30 June 
                                               2022           2021 
                                            US$'000        US$'000 
 
 Loss on ordinary activities before 
  taxation                                  (3,547)          (201) 
 
 Interest income                              (499)          (519) 
 Depreciation on fixtures, fittings 
  and equipment                                   3              4 
 Depreciation on right of use asset              68             99 
 Realised and unrealised loss on 
  investments                                 2,507             38 
 Net foreign exchange (profit)/loss             (9)              4 
 Decrease in payables                          (49)           (42) 
 Decrease in receivables, loans and 
  advances                                    1,194            317 
 Corporation tax paid                             -              - 
 Net cash outflow from operating 
  activities                                  (332)          (300) 
====================================  =============  ============= 
 
   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 2022

 
                             Level 1    Level 2      Level      Total 
                                                         3 
                            US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets 
  at fair value through 
  profit or loss                   -      5,229          -      5,229 
========================  ==========  =========  =========  ========= 
 

At 31 December 2021

 
                             Level 1    Level 2      Level      Total 
                                                         3 
                            US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets 
  at fair value through 
  profit or loss                   -      6,098          -      6,098 
========================  ==========  =========  =========  ========= 
 
   14.   RELATED PARTY TRANSACTIONS 

Most Group revenues derive from The Argo Fund in which two of the Company's directors, Kyriakos Rialas and Kenneth Watterson, have influence through directorships and the provision of investment management services.

At the reporting date the Company holds investments in The Argo Fund Limited. These investments are reflected in the accounts at fair value of US$5.2 million (31 December 2021: $6.1 million).

At the period end, the Group was owed $13 million (note 10) by ARE LP, an entity that is 100% owned by Andreas Rialas. The adjusted IFRS 9 valuation of the loan after providing for expected losses was US$12.5 million. This balance relates to a loan made to ARE LP in February 2020 that was lent onwards for the refinancing of Riviera Shopping City in Odessa, Ukraine. The Group has a fixed charge security on the back to back loan in ARE LP. The loan carries an interest rate of 9% per annum.

The Group is also owed US$11.7 million (EUR11.2 million) (31 December 2021: US$12.8 million (EUR11.2 million)) by ARE LP, which were previously owed by the now liquidated Argo Real Estate Opportunities Fund Limited. These balances are carried at US$ nil (31 December 2020: US$ nil) in the financial statements.

15. TRADE AND OTHER PAYABLES

 
                                  At 30 June   At 31 December 
                                        2022             2021 
                                    US$ '000         US$ '000 
 
 Trade creditors                          72               37 
 Other creditors and accruals             37              199 
===============================  ===========  =============== 
 Total current trade and other 
  payables                               109              236 
===============================  ===========  =============== 
 

Trade creditors are normally settled on 30-day terms.

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END

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August 12, 2022 03:45 ET (07:45 GMT)

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