REG - ARGO Group Limited - Interim Results for six months ended 30 June 2022
12/08/2022 09:00
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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
Fund Launch 30 June 30 June 2021 Since inception Annualised performance Sharpe
date 2022 2021 year ratio Down
6 months 6 months total months
% % % % CAGR %
The Argo Fund - A class Oct-00 -14.25 4.28 5.29 209.03 6.07 0.41 86 of 261
The Argo Fund - X2 class Feb21 -21.39 5.69 11.86 -12.08 -7.61 -0.51 7 of 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$0.5
million for expected losses at the reporting date (note 10).
Dividends and share purchase programme
The Group did not pay a dividend during the current or prior period. The
Directors intend to restart dividend payments as soon as the Group's
performance provides a consistent track record of profitability.
Outlook
The Board remains optimistic about the Group's prospects based on the
transactions in the pipeline and the Group's initiatives to increase AUM. A
significant increase in AUM is still required to ensure sustainable profits on
a recurring management fee basis and the Group is well placed with capacity to
absorb such an increase in AUM with negligible impact on operational costs.
Boosting AUM will be Argo's top priority in the next six months. The Group's
marketing efforts continue to focus on TAF which has a 21-year track record as
well as identifying acquisitions that are earnings enhancing.
Over the longer term, the Board believes there is significant opportunity for
growth in assets and profits and remains committed to ensuring the Group's
investment management capabilities and resources are appropriate to meet its
key objective of achieving a consistent positive investment performance in the
emerging markets sector.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six months Six months
ended ended
30 June 30 June
2022 2021
Note US$'000 US$'000
Management fees 1,140 1,250
Performance fees - 283
Other income 125 131
Revenue 1,265 1,664
Legal and professional expenses (128) (249)
Management fees payable (180) (157)
Operational expenses (362) (339)
Employee costs (1,752) (1,129)
Bad debt provision 9, 10 (320) (365)
Foreign exchange profit/(loss) 9 (4)
Depreciation 7 (71) (103)
Operating loss (1,539) (682)
Interest income 499 519
Realised and unrealised (loss)/gain on investments (2,507) (38)
Loss on ordinary activities before taxation (3,547) (201)
Taxation 5 - -
Loss for the period after taxation attributable to members of the Company 6 (3,547) (201)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (107) (10)
Total comprehensive income for the period (3,654) (211)
Six months Six months
Ended Ended
30 June 30 June
2022 2021
US$ 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 MONTHS ENDED 30 JUNE 2022
Foreign currency translation reserve
Issued share capital
Share premium Revenue reserve
Total
2021 2021 2021 2021 2021
US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2021 390 25,353 122 (3,055) 22,810
Total comprehensive income
Loss for the period after taxation - - (201) - (201)
Other comprehensive income - - - (10) (10)
As at 30 June 2021 390 25,353 (79) (3,065) 21,599
Foreign currency translation reserve
Issued share capital
Share premium Revenue reserve
Total
2022 2022 2022 2022 2022
US$'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 MONTHS ENDED 30 JUNE 2022
Six months ended Six months 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 1,709 675
1 January 2021
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:
Six months ended
Argo Group Ltd Argo Capital Management Ltd Argo Property Management 30 June
Srl
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 may be reconciled as follows: Six months
Ended
30 June 2022
US$'000
Revenues
Total revenues for reportable segments 1,265
Elimination of intersegment revenues -
Group revenues 1,265
Profit or loss
Loss for reportable segments (3,755)
Elimination of intersegment loss 208
Other unallocated amounts -
Loss on ordinary activities before taxation (3,547)
Assets
Total assets for reportable segments 19,536
Elimination of intersegment receivables (4)
Group assets 19,532
Liabilities
Total liabilities for reportable segments 3,466
Elimination of intersegment payables (3,357)
Group liabilities 109
Six months ended
Argo Group Ltd Argo Capital Management Ltd Argo Capital Management Property Ltd 30 June
2021 2021 2021 2021
US$'000 US$'000 US$'000 US$'000
Total revenues for reportable segments customers - 1,533 131 1,664
Intersegment revenues - - - -
Total profit/(loss) for reportable segments 86 (316) (193) (423)
Intersegment loss 222 - - 222
Total assets for reportable segments assets 21,561 1,066 305 22,932
Total liabilities for reportable segments 7 275 51 333
Revenues, profit or loss, assets and liabilities may be reconciled as follows: Six months
Ended
30 June 2021
US$'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 £nil (2021: £nil).
The number and weighted average exercise price of the share options during the
period is as follows:
Weighted average exercise price No. of share 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
£Nil (2021: £Nil).
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 shares No. of 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, fittings and equipment
Right
of use Total
assets Land
USD'000000 US$'000 US$'000 US$'000
Cost
At 1 January 2021 833 266 196 1,295
Additions - 1 - 1
Disposals (92) (62) - (154)
Foreign exchange movement (9) (4) (14) (27)
At 31 December 2021 732 201 182 1,115
Additions - 4 - 4
Disposals - - - -
Foreign exchange movement (74) (19) (15) (108)
At 30 June 2022 658 186 167 1,011
Accumulated Depreciation
At 1 January 2021 811
555 256 -
Depreciation charge for period 179 7 - 186
Disposals (92) (62) - (154)
Foreign exchange movement (8) (10) - (18)
At 31 December 2021 634 191 - 825
Depreciation charge for period 68 3 - 71
Disposals - - - -
Foreign exchange movement (67) (18) - (85)
At 30 June 2022 635 176 - 811
Net book value
At 31 December 2021 98 10 182 290
28
At 30 June 2022 23 10 167 200
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 2022 30 June 2022
Holding Investment in management shares Total cost Fair value
US$'000 US$'000
10 The Argo Fund Ltd - -
- -
Holding Investment in ordinary shares Total cost Fair value
US$'000 US$'000
16,920 The Argo Fund Ltd* 4,648 5,229
4,648 5,229
31 December 31 December
2021 2021
Holding Investment in management shares Total cost Fair value
US$'000 US$'000
10 The Argo Fund Ltd - -
- -
Holding Investment in ordinary shares Total cost Fair value
US$'000 US$'000
16,920 The Argo Fund Ltd* 4,648 6,098
4,648 6,098
*Classified as current in the consolidated statement of Financial Position
Note that some of the Argo Funds listed above may have investments in each
other.
9. TRADE AND OTHER RECEIVABLES
At 30 June 2022 At 31 December 2021
US$ '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 2022 At 31 December 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
(€10.2 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 (€11.2 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$0.01 each 38,959,986 390 38,959,986 390
38,959,986 390 38,959,986 390
The Directors did not recommend the payment of a final dividend for the year
ended 31 December 2021 and do not recommend an interim dividend in respect of
the current period.
12. RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
Six months ended Six months ended
30 June 2022 30 June 2021
US$'000 US$'000
Loss on ordinary activities before taxation (3,547) (201)
Interest income (499) (519)
Depreciation on fixtures, fittings and equipment 3 4
Depreciation on right of use asset 68 99
Realised and unrealised loss on investments 2,507 38
Net foreign exchange (profit)/loss (9) 4
Decrease in payables (49) (42)
Decrease in receivables, loans and advances 1,194 317
Corporation tax paid - -
Net cash outflow from operating activities (332) (300)
13. FAIR VALUE HIERARCY
The table below analyses financial instruments measured at fair value at the
end of the reporting period by the level of the fair value hierarchy (note
2b).
At 30 June 2022
Level 1 Level 2 Level 3 Total
US$ '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 3 Total
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 (€11.2 million) (31 December 2021:
US$12.8 million (€11.2 million)) by ARE LP, which were previously owed by
the now liquidated Argo Real Estate Opportunities Fund Limited. These balances
are carried at US$ 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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