REG - ARGO Group Limited - Half Yearly Report <Origin Href="QuoteRef">ARGOA.L</Origin> - Part 2

ArgoAnnouncement

29/10/2014 14:19

- Part 2: For the preceding part double click  ID:nRSY5520Sa 

whilst a bad debt provision has been raised against these
management fees the directors are confident that they are fully recoverable.
Since the period end US$2,388,000 of these arrears have been settled. 
 
In the audited financial statements of AREOF at 30 September 2013 and the
interim report of AREOF at 31 March 2014, a material uncertainty surrounding
ongoing discussions with its bankers and the prevailing trading environment
was referred to in relation to the basis of preparation of the financial
statements. In the view of the directors of AREOF, discussions with the banks
are continuing satisfactorily and they have therefore concluded that it is
appropriate to prepare those financial statements on a going concern basis. 
 
10.     LOANS AND ADVANCES RECEIVABLE 
 
During the prior period Argo Group advanced US$1,364,500 (E1,000,000) to Bel
Rom Trei ("Bel Rom"), an AREOF Group entity based in Romania that owns Sibiu
Shopping City, in order to assist with its operational cash requirements.
Challenging trading conditions have impacted Bel Rom's cash flow and its
ability to meet payments due to lending banks as and when they fall due. The
situation is being addressed by way of discussions with the lending banks with
a view to restructuring these loans. While these discussions are on-going to
find an agreeable solution for both parties, Bel Rom continues to enjoy the
support of its banks. The loan is repayable on demand and accrues interest at
12%. The full amount of the loan and accrued interest remains outstanding at
the year end. The Directors consider this loan to be fully recoverable on the
basis that conditional offers to buy the centre have been received that
indicate a value in excess of the debt attached to the project.
Notwithstanding its repayable on demand terms, the Directors have classified
this amount as non-current within the financial statements as it is not their
intention to demand repayment in the immediate future and it is unlikely that
Bel Rom will repay the amount in the next 12 months even if it were demanded. 
 
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  
                                  2014        2014     2013         2013         
                                  No.         US$'000  No.          US$'000      
 Issued and fully paid                                                           
 Ordinary shares of US$0.01 each  67,428,494  674      67,428,494   674          
                                  67,428,494  674      67,428,494   674          
 
 
The directors did not recommend the payment of a final dividend for the year
ended 31 December 2013 and do not recommend an interim dividend in respect of
the current period. The final dividend for the year ended 31 December 2012 of
US$1,348,287 (GBP876,570) was paid on 26 April 2013 to ordinary shareholders
who were on the Register of Members on 2 April 2013. Going forward, the
Company intends, subject to its financial performance, to pay a final dividend
each year. 
 
12.     RECONCILIATION OF NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
TO (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 
 
                                                       Six months ended 30 June 2014    Six months ended 30 June 2013  
                                                       US$'000                          US$'000                        
                                                                                                                       
 (Loss)/profit on ordinary activities before taxation  (516)                            1,731                          
                                                                                                                       
 Interest income                                       (115)                            (9)                            
 Depreciation                                          72                               65                             
 Unrealised loss/(gain) on investments                 105                              (958)                          
 Net foreign exchange loss/(gain)                      129                              (37)                           
 Increase/(decrease) in payables                       18                               (34)                           
 Increase in receivables, loans and advances           (1,175)                          (45)                           
 Income taxes paid                                     (8)                              (94)                           
 Net cash (outflow)/inflow from operating activities   (1,490)                          619                            
 
 
13.     FAIR VALUE HIERARCY 
 
The table below analyses financial instruments measured at fair value at the
end of the reporting period by the level of the fair value hierarchy (note
2). 
 
At 30 June 2014 
 
                                                        Level 1   Level 2   Level 3   Total     
                                                        US$ '000  US$ '000  US$ '000  US$ '000  
 Financial assets at fair value through profit or loss  -         -         19,315    19,315    
 
 
At 31 December 2013 
 
                                                        Level 1   Level 2   Level 3   Total     
                                                        US$ '000  US$ '000  US$ '000  US$ '000  
 Financial assets at fair value through profit or loss  -         19,195    225       19,420    
 
 
14.     RELATED PARTY TRANSACTIONS 
 
All Group revenues derive from funds or entities in which two of the Company's
directors, Andreas Rialas and Kyriakos Rialas, have an influence through
directorships and the provision of investment advisory services. 
 
At the balance sheet date the Company holds investments in The Argo Fund
Limited, Argo Real Estate Opportunities Fund Limited ("AREOF") and Argo
Special Situations Fund LP. These investments are reflected in the accounts at
a fair value of US$19,011,287, US$223,076 and US$80,702 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 2014 total US$777,090 (E569,505) (31 December 2013:
US$1,265,791, E919,505) after a bad debt provision of US$4,093,500
(E3,000,000) (31 December 2013: US$2,753,200, E2,000,000). AREOF continues to
meet part of this obligation to the Argo Group as and when liquidity allows.
In November 2013 AREOF offered Argo Group Limited additional security for the
continued support in the form of debentures and guarantees by underlying
intermediate companies. 
 
In the audited financial statements of AREOF at 30 September 2013 and the
interim report of AREOF at 31 March 2014, a material uncertainty surrounding
ongoing discussions with its bankers and the prevailing trading environment
was referred to in relation to the basis of preparation of the financial
statements. In the view of the directors of AREOF, discussions with the banks
are continuing satisfactorily and they have therefore concluded that it is
appropriate to prepare those financial statements on a going concern basis. 
 
During the prior period Argo Group advanced US$1,364,500 (E1,000,000) to Bel
Rom Trei Srl ("Bel Rom"), an AREOF Group entity based in Romania that owns
Sibiu Shopping City, in order to assist with its operational cash
requirements. The loan is repayable on demand and accrues interest at 12%. The
full amount of the loan and accrued interest remains outstanding at the period
end. The Directors consider this loan to be fully recoverable on the basis
that conditional offers to buy the centre have been received that indicate a
value in excess of the debt attached to the project. Notwithstanding its
repayable on demand terms, the Directors have classified this amount as
non-current within the financial statements as it is not their intention to
demand repayment in the immediate future and it is unlikely that Bel Rom will
repay the amount in the next 12 months even if it were demanded. 
 
David Fisher, a non-executive director of the Company, is also a non-executive
director of AREOF. 
 
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