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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Argo Group Limited | LSE:ARGO | London | Ordinary Share | IM00B2RDSS92 | ORD USD0.01 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.50 | 4.00 | 7.00 | 5.50 | 5.50 | 5.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Finance Services | 1.46M | -3.4M | -0.0872 | -0.63 | 2.14M |
TIDMARGO
RNS Number : 7044M
ARGO Group Limited
01 August 2017
Argo Group Limited
("Argo" or the "Company")
Interim Results for the six months ended 30 June 2017
Argo today announces its interim results for the six months ended 30 June 2017.
The Company will today make available its interim report for the six month period ended 30 June 2017 on the Company's website www.argogrouplimited.com.
Key highlights for the six months period ended 30 June 2017
This report sets out the results of Argo Group Limited (the "Company") and its subsidiaries (collectively "the Group" or "Argo") covering the six months ended 30 June 2017.
- Revenues US$6.3 million (six months to 30 June 2016: US$4.0 million) - Operating profit US$3.3 million (six months to 30 June 2016: profit US$3.8 million) - Profit before tax US$5.1 million (six months to 30 June 2016: profit US$4.9 million) - Net assets US$24.8 million (31 December 2016: US$20.1 million)
Commenting on the results and outlook, Kyriakos Rialas, Chief Executive Officer of Argo said:
"The results of AGL's first six months are a reflection of strong subscriptions and performance in the emerging markets. Investors continue to seek yield in a consistently low global interest rate regime despite recent tapering noise from ECB and interest rate increases by the FED. AGL's results include a significant element of performance fees from the workout of one of the distressed assets. Continuous investor interest in the Argo Fund is expected to materialize into more sizeable subscriptions in the second half of the year. "
Enquiries
Argo Group Limited
Andreas Rialas
020 7016 7660
Panmure Gordon
Dominic Morley
020 7886 2500
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.
CHAIRMAN'S STATEMENT
The Group and its investment objective
Argo's investment objective is to provide investors with absolute returns in the funds that it manages by investing in, inter alia, fixed income, special situations, local currencies and interest rate strategies, private equity, real estate, quoted equities, high yield corporate debt and distressed debt, although not every fund invests in each of these asset classes.
Argo was listed on the AIM market in November 2008 and has a performance track record dating back to 2000.
Business and operational review
For the six months ended 30 June 2017 the Group generated revenues of US$6.3 million (six months to 30 June 2016: US$4.0 million) with management fees accounting for US$2.1 million (six months to 30 June 2016: US$2.0 million). The Group generated performance fees of US$4.0 million (six months to 30 June 2016: US$1.7 million).
Total operating costs for the period, ignoring bad debt provisions, are US$1.9 million compared to US$2.0 million for the six months to 30 June 2016. The Group has provided against management fees of US$0.8 million (EUR0.8 million) (six months to 30 June 2016: US$1.2 million (EUR1.0 million)) due from AREOF. In the Directors' view these amounts are fully recoverable however they have concluded that it would not be appropriate to continue to recognise income without provision from these investment management services as the timing of such receipts may be outside the control of the Company and AREOF.
Overall, the financial statements show an operating profit for the period of US$3.3 million (six months to 30 June 2016: profit US$3.8 million) and a profit before tax of US$5.1 million (six months to 30 June 2016: profit US$4.9 million) reflecting the net gain on investments of US$1.7 million (six months to 30 June 2016: net gain US$1.1 million). Performance fees will be realisable at the year-end if losses do not occur in the last six months of the year.
At the period end, the Group had net assets of US$24.8 million (31 December 2016: US$20.1 million) and net current assets of US$24.5 million (31 December 2016: US$19.6 million) including cash reserves of US$5.7 million (31 December 2016: US$6.1 million).
Net assets include investments in TAF, AREOF, Argo Special Situations Fund LP and ADCF (together referred to as "the Argo funds") at fair values of US$10.2 million (31 December 2016: US$9.7 million), US$0.1 million (31 December 2016: US$0.1 million), US$0.03 million (31 December 2016: US$0.01 million) and US$3.8 million (31 December 2016: US$2.5 million) respectively.
At the period end the Argo funds (excluding AREOF) owed the Group total management and performance fees of US$5.1 million (31 December 2016: US$2.4 million).
The Argo funds (excluding AREOF) ended the period with Assets under Management ("AUM") at US$136.2 million, 23.1% higher than at the beginning of the period. The increase is mostly due to performance but it includes a small net inflow of new cash. The current level of AUM remains below that required to ensure sustainable profits on a recurring management fee basis in the absence of performance fees. This has necessitated an ongoing review of the Group's cost basis. Nevertheless, the Group has ensured that the operational framework remains intact and that it retains the capacity to manage additional fund inflows as and when they arise.
The average number of permanent employees of the Group for the six months to 30 June 2017 was 23 (30 June 2016: 20).
The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2017 total US$ Nil (31 December 2016: Nil) after a bad debt provision of US$7.8 million (EUR6.8 million) (31 December 2016: US$6.4 million, EUR6.1 million). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. The AREOF management contract has a fixed term expiring on 31 July 2018.
Fund performance
Argo Funds
30 30 June June 2016 Launch 2017 2016 year Sharpe Down Since Annualised Fund date 6 months 6 months total inception performance ratio months AUM ---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------ % % % % CAGR US$m % ---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------ 59 The Argo of Fund Oct-00 4.67 41.90 52.30 218.14 8.00 0.50 101 64.0 ---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------ 50 Argo Distressed of Credit Fund Oct-08 51.00 33.36 32.69 200.27 15.65 0.62 105 47.9 ---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------ Argo Special 53 Situations of Fund LP Feb-12 -12.03 -31.15 -12.03 -87.07 -7.87 -0.12 65 24.3 ---------------- ------- --------- --------- ------- ---------- ------------ ------ -------- ------ Total 136.2 ------------------------- --------- --------- ------- ---------- ------------ ------ -------- ------
* NAV only officially measured once a year in September.
AREOF's Adjusted NAV at 30 September 2016* were minus US$36.4 million (minus EUR31.9 million), compared with minus US$23.4 million (minus EUR20.9 million) a year earlier. The Adjusted NAV per share at 30 September 2016 of minus US$0.06 (minus EUR0.05) (2015: minus US$0.03 (minus EUR0.03).
Although AREOF's consolidated statement of financial position indicates the AREOF group is insolvent on a
consolidated basis, the structural ring-fencing of the underlying SPV's limits the impact on the Group of negative equity at subsidiary level.
Upon completion of the AREOF group restructuring in March 2017, Argo Capital Management Property Limited reduced its annual management fees receivable from AREOF from EUR2 million to EUR1 million.
Emerging markets had a mixed start to the year primarily due to uncertainty in the US following the inauguration of President Trump. A number of election campaign promises would, if enacted, have had a detrimental impact on emerging market economies, most notably Mexico and Asian exporters. In addition, tighter US monetary policy - the Federal Reserve increased interest rates twice during the period - weaker oil prices and local political upheavals added to the volatility in certain countries such as Brazil, Qatar and Venezuela. However, some of these pressures began to abate towards the end of the period and it has become evident that policy change and/or implementation in the US has become quite difficult.
The long/short strategy pursued by TAF allows it to adjust quickly to a fluid emerging market credit environment and it recorded a respectable return of 4.67% in the first half. The performance of ADCF, which concentrates on less liquid distressed positions, was helped significantly by the revaluation prompted by a reassessment of recovery prospects from an industrial asset in Asia.
TAF is the Group's flagship fund and has a 17 year track record. Going forward, TAF continues to focus on liquid bond securities, both sovereign and corporate, and will be the centre of the Group's marketing efforts. Following the declines experienced by emerging markets over the past two years, the Board believes they offer attractive investment opportunities. Furthermore, the economic fundamentals in emerging markets are robust. They are expected to deliver significantly stronger economic growth than developed markets in 2017 while enjoying attractive risk profiles thanks to low levels of government indebtedness and high foreign exchange reserves.
The two markets in which AREOF operates were mixed. Conditions in Romania were largely favourable as the local economy continued to expand thereby boosting the local property market. In Ukraine, the political situation has been stable and the economy is now on a modest recovery path.
The majority of AREOF's debt facilities have been in default at some point during the period. This situation has been addressed through renegotiation with lending banks with a view to restructuring debt commitments to better align these to the current level of the AREOF group's cash flow. While discussions with the relevant banks are ongoing to find an agreeable solution for all parties AREOF continues to enjoy the forbearance of its banks and support of its shareholders. In view of this, the directors of AREOF have concluded that AREOF is a going concern.
The prevailing equity price of the AREOF shares at the time of their suspension in 2013 (see note 8 to the financial statements) was 2.0 euro cents. The valuation of Argo Group Limited's investment in AREOF and that of the Argo funds was 1.0 euro cent per share as at 30 June 2017.
Dividends and share purchase programme
The Group did not pay a dividend during the current or prior period. The Directors intend to restart dividend payments as soon as the Group's performance provides a consistent track record of profitability.
During the period the Directors authorised the repurchase of 1,065,616 shares at a total cost of U$0.2 million (GBP0.2million).
Under the current Share Buyback Programme II, the Company intends to use up to GBP2 million to acquire Ordinary Shares in the market over a twelve month period commencing on 28 September 2016 and expiring no later than 19 September 2017 (one year from the date of the 2016 AGM which authorised the 2016 Share Buyback Programme II). The minimum price that Argo will pay is 8p per Ordinary Share. The aggregate number of Ordinary Shares which may be acquired on behalf of the Company in connection with the 2016 Share Buyback Programme II will not exceed 23,676,987 Ordinary Shares, which broadly represents the number of shares in public hands.
The Company has spent US$0.3million (GBP0.2 million) to buy back 1,440,616 Ordinary Shares on this programme so far.
The Directors firmly believe that a return of excess cash to shareholders through buy-backs will send a positive message to investors.
Outlook
The Board remains optimistic about the Group's prospects based on the transactions in the pipeline and the Group's initiatives to increase AUM. A significant increase in AUM is still required to ensure sustainable profits on a recurring management fee basis and the Group is well placed with capacity to absorb such an increase in AUM with negligible impact on operational costs.
Boosting AUM will be Argo's top priority in the next six months. The Group's marketing efforts will continue to focus on TAF which has a 17 year track record as well as identifying acquisitions that are earnings enhancing. TAF's prospectus was amended as of 1 March 2016 to eliminate trading in level 3 illiquid assets and concentrate trading and investments in emerging market bonds and other liquid assets.
Both TAF and ADCF are now registered with HM Revenue & Customs as UK Reporting Funds. This status allows our UK investors to be tax efficient with income or capital gains earned from our Cayman funds.
Over the longer term, the Board believes there is significant opportunity for growth in assets and profits and remains committed to ensuring the Group's investment management capabilities and resources are appropriate to meet its key objective of achieving a consistent positive investment performance in the emerging markets sector.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2017
Six months Six months ended ended 30 June 30 June 2017 2016 Note US$'000 US$'000 Management fees 2,138 2,042 Performance fees 4,045 1,669 Other income 122 327 ======================================== ===== =========== ================= Revenue 6,305 4,038 ======================================== ===== =========== ================= Legal and professional expenses (126) (375) Management and incentive fees payable (33) (34) Operational expenses (532) (481) Employee costs (1,228) (1,114) 9, Bad debt provision 10 (1,032) 1,712 Foreign exchange gain (7) 39 Depreciation 7 (15) (21) Operating profit 3,332 3,764 ======================================== ===== =========== ================= Interest income 88 44 Realised and unrealised gains/(losses) on investments 8 1,728 1,094 ======================================== ===== =========== ================= Profit/(loss) on ordinary activities before taxation 5,148 4,902 ======================================== ===== =========== ================= Taxation 5 (382) (97) ======================================== ===== =========== ================= Profit/(loss) for the period after taxation attributable to members of the Company 6 4,766 4,805 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations 202 (215) ======================================== ===== =========== ================= Total comprehensive income for the period 4,968 4,590 ======================================== ===== =========== ================= Six months Six months Ended Ended 30 June 30 June 2017 2016 US$ US$ Earnings per share (basic) 6 0.10 0.08 ======================================== ===== =========== ================== Earnings per share (diluted) 6 0.09 0.07 ======================================== ===== =========== ==================
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
30 June At 31 December 2017 2016 Note US$'000 US$'000 Assets Non-current assets Fixtures, fittings and equipment 7 39 50 Financial assets at fair value through profit or loss 8 148 134 Loans and advances receivable 10 114 264 =============================== ===== ========== ========== Total non-current assets 301 448 =============================== ===== ========== ========== Current assets Financial assets at fair value through profit or loss 8 13,982 12,267 Trade and other receivables 9 5,272 2,870 Loans and advances receivable 10 69 66 Cash and cash equivalents 5,742 6,126 Total current assets 25,065 21,329 =============================== ===== ========== ========== Total assets 25,366 21,777 =============================== ===== ========== ========== Equity and liabilities
Equity Issued share capital 11 470 481 Share premium 28,022 28,211 Revenue reserve (902) (5,668) Foreign currency translation reserve (2,753) (2,955) =============================== ===== ========== ========== Total equity 24,837 20,069 =============================== ===== ========== ========== Current liabilities Trade and other payables 146 1,683 Taxation payable 5 383 25 =============================== ===== ========== ========== Total current liabilities 529 1,708 Total equity and liabilities 25,366 21,777 =============================== ===== ========== ==========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHSED 30 JUNE 2017
Foreign Issued currency share Share Revenue translation capital premium reserve reserve Total 2016 2016 2016 2016 2016 US$'000 US$'000 US$'000 US$'000 US$'000 As at 1 January 2016 674 30,878 (6,239) (2,876) 22,437 Total comprehensive income Profit for the period after taxation - - 4,805 - 4,805 Other comprehensive income - - - (215) (215) Transaction with owners recorded directly in equity Purchase of own shares (note 14) (189) (2,601) - - (2,790) As at 30 June 2016 485 28,277 (1,434) (3,091) 24,237 ======================== ========== ========== ================ =============== ======== Foreign Issued currency share Share Revenue translation capital premium reserve reserve Total 2017 2017 2017 2017 2017 US$'000 US$'000 US$'000 US$'000 US$'000 As at 1 January 2017 481 28,211 (5,668) (2,955) 20,069 Total comprehensive income Profit for the period after taxation - - 4,766 - 4,766 Other comprehensive income - - - 202 202 Transactions with owners recorded directly in equity Purchase of own shares (note 11) (11) (189) - - (200) As at 30 June 2017 470 28,022 (902) (2,753) 24,837 ======================== ========== ========== ========== ================ ========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2017
Six months Six months ended ended 30 June 30 June 2017 2016 Note US$'000 US$'000 Net cash (outflow)/inflow from operating activities 12 (366) 3,311 =============================== ===== =========== =========== Cash flows used in investing activities Interest received on cash and cash equivalents 14 23 Purchase of fixtures, fittings and equipment 7 (2) (2) Purchase of current asset investments 8 - (2,000) Proceeds from disposal of investments 8 - 7,467 Net cash generated from/(used in) investing activities 12 5,488 =============================== ===== =========== =========== Cash flows from financing activities Repurchase of own shares (200) (2,795) Net cash used in financing activities (200) (2,795) =============================== ===== =========== =========== Net increase/(decrease) in cash and cash equivalents (554) 6,004 Cash and cash equivalents at 1 January 2017 and 1 January 2016 6,126 3,126 Foreign exchange loss on cash and cash equivalents 170 (147) Cash and cash equivalents as at 30 June 2017 and 30 June 2016 5,742 8,983 =============================== ===== =========== ===========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2017
1. CORPORATE INFORMATION
The Company is domiciled in the Isle of Man under the Companies Act 2006. Its registered office is at 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB. The condensed consolidated interim financial statements of the Group as at and for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the "Group").
The consolidated financial statements of the Group as at and for the year ended 31 December 2016 are available upon request from the Company's registered office or at www.argogrouplimited.com.
The principal activity of the Company is that of a holding company and the principal activity of the wider Group is that of an investment management business. The functional and presentational currency of the Group undertakings is US dollars.
Wholly owned subsidiaries Country of incorporation
Argo Capital Management (Cyprus) Cyprus Limited Argo Capital Management Limited United Kingdom Argo Capital Management Property Cayman Islands Limited Argo Property Management Srl Romania North Asset Management Sarl Luxembourg
A firm of solicitors was appointed on 30 June 2017 for the dissolution of North Asset Management Sarl as this company has been dormant since June 2016 and does no longer have a purpose.
2. ACCOUNTING POLICIES (a) Basis of preparation
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2016.
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016.
These condensed consolidated interim financial statements were approved by the Board of Directors on 31 July 2017.
b) Financial instruments and fair value hierarchy
The following represents the fair value hierarchy of financial instruments measured at fair value in the Condensed Consolidated Statement of Financial Position. The hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement
3. SEGMENTAL ANALYSIS
The Group operates as a single asset management business.
The operating results of the companies set out in note 1 above are regularly reviewed by the Directors of the Group for the purposes of making decisions about resources to be allocated to each company and to assess performance. The following summary analyses revenues, profit or loss, assets and liabilities:
Argo Argo Capital Argo Capital Argo Management Capital Management Six months Group (Cyprus) Management Property ended Ltd Ltd Ltd Ltd 30 June 2017 2017 2017 2017 2017 US$'000 US$'000 US$'000 US$'000 US$'000 Total revenues for reportable segments customers - 1,348 5,392 913 7,653 Intersegment revenues - 1,348 - - 1,348 Total profit/(loss) for reportable
segments 1,592 1,137 2,899 (480) 5,148 Intersegment profit/(loss) - 1,348 (1,348) - - Total assets for reportable segments assets 17,071 2,135 5,683 2,448 27,337 Total liabilities for reportable segments 9 136 1,366 989 2,500 ===================== ======== ============ ============= ============= =========== Revenues, profit or loss, assets and Six months liabilities may be reconciled as follows: Ended 30 June 2017 US$'000 Revenues Total revenues for reportable segments 7,653 Elimination of intersegment revenues (1,348) ============================================ =========== Group revenues 6,305 ============================================ =========== Profit or loss Total profit for reportable segments 5,148 Elimination of intersegment loss - Other unallocated amounts - ============================================ =========== Profit on ordinary activities before taxation 5,148 ============================================ =========== Assets Total assets for reportable segments 27,337 Elimination of intersegment receivables (1,971) Group assets 25,366 ============================================ =========== Liabilities Total liabilities for reportable segments 2,500 Elimination of intersegment payables (1,971) ============================================ =========== Group liabilities 529 ============================================ =========== Argo Capital Argo Capital Argo Management Argo Capital Management Six months Group (Cyprus) Management Property ended Ltd Ltd Ltd Ltd 30 June 2016 2016 2016 2016 2016 US$'000 US$'000 US$'000 US$'000 US$'000 Total revenues for reportable segments 600 786 2,497 1,425 5,308 Intersegment revenues 600 570 100 - 1,270 Total profit/(loss) for reportable segments 1,470 (136) 1,063 2,622 5,019 Intersegment profit/(loss) 600 (128) (499) - (27) Total assets for reportable segments 14,899 1,213 3,934 5,090 25,136 Total liabilities for reportable segments 40 29 691 1,069 1,829 ===================== ======== ============= =============== =============== =========== Revenues, profit or loss, assets and liabilities Six months may be reconciled as follows: ended 30 June 2016 US$'000 Revenues Total revenues for reportable segments 5,308 Elimination of intersegment revenues (1,270) ================================================== =========== Group revenues 4,038 ================================================== =========== Profit or loss Total profit for reportable segments 5,019 Elimination of intersegment loss 27 Other unallocated amounts (144) ================================================== =========== Profit on ordinary activities before taxation 4,902 ================================================== =========== Assets Total assets for reportable segments 25,136 Elimination of intersegment receivables (572) Group assets 24,564 ================================================== =========== Liabilities Total liabilities for reportable segments 1,829 Elimination of intersegment payables (1,502) ================================================== =========== Group liabilities 327 ================================================== =========== 4. SHARE-BASED INCENTIVE PLANS
On 14 March 2011 the Group granted options over 5,900,000 shares to directors and employees under The Argo Group Limited Employee Stock Option Plan. All options are exercisable in four equal tranches over a period of four years at an exercise price of 24p per share.
The fair value of the options granted was measured at the grant date using a Black-Scholes model that takes into account the effect of certain financial assumptions, including the option exercise price, current share price and volatility, dividend yield and the risk-free interest rate. The fair value of the options granted is spread over the vesting period of the scheme and the value is adjusted to reflect the actual number of shares that are expected to vest.
The principal assumptions for valuing the options are:
Exercise price (pence) 24.0 Weighted average share price at grant date (pence) 12.0 Weighted average option life (years) 10.0 Expected volatility (% p.a.) 2.11 Dividend yield (% p.a.) 10.0 Risk-free interest rate (% p.a.) 5.0
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The total charge to employee costs in respect of this incentive plan is nil due to the differential in exercise price and share price.
The number and weighted average exercise price of the share options during the period is as follows:
Weighted No. of share average options exercise price Outstanding at beginning of period 24.0p 4,840,000 Granted during the period - 450,000 Forfeited during the period 24.0p (750,000) ============================= ========== ============= Outstanding at end of period 24.0p 4,540,000 ============================= ========== ============= Exercisable at end of period 24.0p 4,540,000 ============================= ========== =============
The options outstanding at 30 June 2017 have an exercise price of 24p and a weighted average contractual life of 10 years, with all tranches of shares now being exercisable. Outstanding share options are contingent upon the option holder remaining an employee of the Group. They expire after 10 years.
No share options were issued during the period.
5. TAXATION
Taxation rates applicable to the parent company and the Cypriot, UK, Luxembourg, Cayman and Romanian subsidiaries range from 0% to 19.25% (2016: 0% to 20%).
Consolidated statement of profit or loss Six months Six months ended Ended 30 June 30 June 2017 2016 US$'000 US$'000 Taxation charge for the period on Group companies 382 97 ================================ =========== ===========
The charge for the period can be reconciled to the profit/(loss) shown on the Condensed Consolidated Statement of profit or loss as follows:
Six months Six months ended Ended 30 June 30 June 2017 2016 US$'000 US$'000 Profit/(loss) before tax 5,148 4,902 ================================== =============== =========== Applicable Isle of Man tax - - rate for Argo Group Limited of 0% Timing differences - 2 Non-deductible expenses 5 6 Other adjustments (308) (171) Tax effect of different tax rates of subsidiaries operating in other jurisdictions 685 260 ================================== =============== =========== Tax charge 382 97 ================================== =============== =========== Consolidated statement of financial position 30 June 31 December 2017 2016 US$'000 US$'000 Corporation tax payable 383 25 =========================== ======== ============ 6. EARNINGS PER SHARE
Earnings per share is calculated by dividing the net profit/(loss) for the period by the weighted average number of shares outstanding during the period.
Six months Six months ended ended 30 June 30 June 2017 2016 US$'000 US$'000 Net profit/(loss) for the period after taxation attributable to members 4,766 4,805 ===================================== ============= ============= No. of No. of shares shares Weighted average number of ordinary shares for basic earnings per share 47,582,353 62,509,327 Effect of dilution (Note 4) 4,540,000 4,840,000 ===================================== ============= ============= Weighted average number of ordinary shares for diluted earnings per share 52,122,353 67,349,327 ===================================== ============= ============= Six months Six months ended ended 30 June 30 June 2017 2016 US$ US$ Earnings per share (basic) 0.10 0.08 Earnings per share (diluted) 0.09 0.07 ============================== =========== =========== 7. FIXTURES, FITTINGS AND EQUIPMENT Fixtures, fittings & equipment US$'000 Cost At 1 January 2016 245 Additions 31 Disposals (2) Foreign exchange movement (24) ================================ ======================= At 31 December 2016 250 Additions 2 Foreign exchange movement 11 ================================ ======================= At 30 June 2017 263 ================================ ======================= Accumulated Depreciation At 1 January 2016 181 Depreciation charge for period 41 Disposals (2) Foreign exchange movement (20) ================================ ======================= At 31 December 2016 200 Depreciation charge for period 15 Foreign exchange movement 9 ================================ ======================= At 30 June 2017 224 ================================ ======================= Net book value At 31 December 2016 50 ================================ ======================= At 30 June 2017 39 ================================ ======================= 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 30 June 30 June 2017 2017 Holding Investment in management Total cost Fair value shares US$'000 US$'000 10 The Argo Fund Ltd - - 100 Argo Distressed Credit - - Fund Ltd 1 Argo Special Situations - - Fund LP - - ======== ========================= ============= ============= Holding Investment in ordinary Total cost Fair value shares US$'000 US$'000 32,104 The Argo Fund Ltd* 7,159 10,192 Argo Real Estate Opportunities Fund 10,899,021 Ltd 988 119 Argo Special Situations 115 Fund LP 115 29 Argo Distressed Credit 1,262 Fund Limited* 2,000 3,790 =========== ======================== ============= ============= 10,262 14,130 =========== ======================== ============= ============= 31 December 31 December 2016 2016 Holding Investment in management Total cost Fair value shares US$'000 US$'000 10 The Argo Fund Ltd - - 100 Argo Distressed Credit - - Fund Ltd 1 Argo Special Situations - - Fund LP - - ======== ========================= ============== ============== Holding Investment in ordinary Total cost Fair value shares US$'000 US$'000 32,104 The Argo Fund Ltd* 7,159 9,758 Argo Real Estate Opportunities Fund 10,899,021 Ltd 988 119 Argo Special Situations 115 Fund LP 115 15 Argo Distressed Credit 1,262 Fund Ltd* 2,000 2,509 =========== ======================== ============= ============= 10,262 12,401 =========== ======================== ============= =============
*Classified as current in the consolidated statement of Financial Position
9. TRADE AND OTHER RECEIVABLES At 30 June At 31 December 2017 2016 US$ '000 US$ '000 Trade receivables - Gross 15,366 11,078 Less: provision for impairment of trade receivables (10,264) (8,626) -------------------------------- ------------- ----------------- Trade receivables - Net 5,102 2,452 Other receivables 87 354 Prepayments and accrued income 83 64 ================================ ============= ================= 5,272 2,870 ================================ ============= =================
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All trade receivable balances are recoverable within one year from the reporting date except as disclosed below.
A provision for impairment have been raised for all balances owed by the AREOF Group under trade and other receivables. These balances include all management fees and other loans and advances made by the investment manager to the AREOF Group. These amounted to US$10.1 million (EUR8.9 million) (31 December 2016: US$8.5 million, EUR8.1 million).
At 30 June 2017, Argo Special Situations Fund LP owed the Group total management fees of US$0.9 million (31 December 2016: US$0.6 million). This fund is currently facing liquidity issues due to the debt financing arrangement put in place in 2014 however Management continues to work to remedy this and the Directors are confident that these fees may be recovered in the future.
The movement in the Group's provision for impairment of trade receivables is as follow:
At 30 June At 31 December 2017 2016 US$ '000 US$ '000 Opening balance 8,626 8,345 Bad debt recovered - (2,776) Charged during the period 884 3,329 Foreign exchange movement 754 (272) =========================== ============= ================= Closing balance 10,264 8,626 =========================== ============= ================= 10. LOANS AND ADVANCES RECEIVABLE At 30 At 31 December June 2017 2016 US$'000 US$'000 Deposits on leased premises - current 69 66 Deposits on leased premises - non-current (see below) 15 13 9 Other loans and advances receivable - non-current (see below) 99 251
============================= ============ ========================== 183 330 ============================= ============ ==========================
The deposits on leased premises are retained by the lessor until vacation of the premises at the end of the lease term as follows:
At 30 June At 31 December 2017 2016 t 31 December 2016 US$'000 US$'000 Non-current: Lease expiring in third year after reporting date 15 13 15 13 ============================ =========== ===============
The non-current other loans and advances receivable comprise:
At 30 June At 31 December 2017 2016 US$'000 US$'000 Loan to AREOF 10 23 Loans to other AREOF Group entities 89 226 Other loans - 2 ============================ =========== =============== 99 251 ============================ =========== ===============
In the period to 30 June 2017, a provision for bad debt for US$0.2 million (31 December 2016: US$ Nil) was made for balances with the AREOF Group for which settlement is considered uncertain. The remaining exposure of US$0.1 million is considered recoverable as these are advances made on behalf of the AREOF Group to third parties and we expect settlement when the third parties repay.
11. SHARE CAPITAL
The Company's authorised share capital is unlimited with a nominal value of US$0.01.
30 June 30 June 31 December 31 December 2017 2017 2016 2016 No. US$'000 No. US$'000 Issued and fully paid Ordinary shares of US$0.01 each 47,032,878 470 48,098,494 481 ================== ============= ========== ============= ============ 47,032,878 470 48,098,494 481 ================== ============= ========== ============= ============
The Directors did not recommend the payment of a final dividend for the year ended 31 December 2016 and do not recommend an interim dividend in respect of the current period.
During the period the Directors authorised the repurchase of 1,065,616 shares at a total cost of US$0.2 million
12. RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
Six months Six months ended ended 30 June 30 June 2017 2016 US$'000 US$'000 Profit on ordinary activities before taxation 5,148 4,902 Interest income (88) (44) Depreciation 15 21 Realised and unrealised gains (1,729) (1,094) Net foreign exchange loss/ (gain) 7 (39) (Decrease)/increase in payables (1,538) 29 Increase in receivables, loans and advances (2,181) (371) Income taxes paid - (93) ================================= ============= ============= Net cash (outflow)/ inflow from operating activities (366) 3,311 ================================= ============= ============= 13. FAIR VALUE HIERARCY
The table below analyses financial instruments measured at fair value at the end of the reporting period by the level of the fair value hierarchy (note 2b).
At 30 June 2017
Level Level Level Total 1 2 3 US$ '000 US$ '000 US$ '000 US$ '000 Financial assets at fair value through profit or loss - 13,982 148 14,130 ================== ========== ========= ========= =========
At 31 December 2016
Level Level Level Total 1 2 3 US$ '000 US$ '000 US$ '000 US$ '000 Financial assets at fair value through profit or loss - 12,267 134 12,401 ================== ========== ========= ========= =========
The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy:
Unlisted Listed closed open ended ended investment investment fund fund Emerging Markets Real Estate Total US$ '000 US$ '000 US$ '000 Balance as at 1 January 2017 119 15 134 Total loss recognized in profit or loss - 14 14 Balance as at 30 June 2017 119 29 148 ========================= ==================== ============== ========= 14. RELATED PARTY TRANSACTIONS
All Group revenues derive from funds or entities in which two of the Company's directors, Andreas Rialas and Kyriakos Rialas, have an influence through directorships and the provision of investment advisory services.
At the reporting date the Company holds investments in The Argo Fund Limited, Argo Real Estate Opportunities Fund Limited ("AREOF"), Argo Special Situations Fund LP and Argo Distressed Credit Fund Limited. These investments are reflected in the accounts at a fair value of US$10.2 million, US$0.1 million, US$0.03 million and US$3.8 million respectively.
The Group has provided AREOF with a notice of deferral in relation to the amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2017 total US$Nil (31 December 2016:Nil) after a bad debt provision of US$7.8 million (EUR6.8 million) (31 December 2016: US$6.4 million, EUR6.1 million). In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. The AREOF management contract has a fixed term expiring on 31 July 2018.
At the period end the Argo Group is also owed loans repayable on demand of US$1.9 million (EUR1.7 million) (31 December 2016: US$1.7 million, EUR1.6 million) by AREOF accruing interest at 10%. A full provision has been made in the consolidated financial statements against this balance at the current and prior period.
At the period end the Argo Group was owed a total balance of US$0.3 million (EUR0.3 million) (31 December 2016: US$0.2 million, EUR0.2 million) by other AREOF Group entities. A provision for bad debt of US$0.3 million (EUR0.1 million) (31 December 2016: US$0.1 million, EUR0.1 million) has been made in the accounts in respect of these balances.
In addition to the above, the Argo Group is owed a further US$0.3 million (EUR0.3 million) (31 December 2016: US$0.3 million (EUR0.3 million) for expenses paid on behalf of AREOF, against which a bad debt provision for US0.3 million (EUR0.3 million) (31 December 2016: US$0.3 million, EUR0.3 million)
In the audited consolidated financial statements of AREOF at 30 September 2016 a material uncertainty surrounding the refinancing of bank debts was referred to in relation to the basis of preparation of the consolidated financial statements. In the view of the directors of AREOF, discussions with the banks are continuing satisfactorily and they have therefore concluded that it is appropriate to prepare those consolidated financial statements on a going concern basis.
David Fisher, a non-executive director of the Company, is also a non-executive director of AREOF.
15. COMMITMENTS
On 19th June 2017, the Board of Argo Property Management Limited approved the purchase of a piece of land in Romania for US$ 223.233 (RON891,613). The 10% guarantee deposit in respect of the purchase was paid in June 2017. The purchase completed on 4 July 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LIFFDTDILIID
(END) Dow Jones Newswires
August 01, 2017 03:36 ET (07:36 GMT)
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