REG - Argo Blockchain PLC - Interim Half Year Results 2022
25/08/2022 07:01
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220825:nRSY1200Xa&default-theme=true
RNS Number : 1200X Argo Blockchain PLC 25 August 2022
Press Release
25 August 2022
Argo Blockchain plc
("Argo" or "the Group")
Interim Half Year Results 2022
Argo Blockchain plc, a global leader in cryptocurrency mining (LSE: ARB;
NASDAQ: ARBK), is pleased to announce its results for the six months to 30
June 2022.
Financial Highlights
● Total number of Bitcoin and Bitcoin Equivalent ("BTC") mined during
H1 2022 was 939, a 6% increase over the BTC mined in H1 2021
● Revenues of £26.7 million ($32.5 million), a decrease of 14% from
H1 2021, driven primarily by a decrease in Bitcoin price and an increase in
the global hashrate and associated network difficulty level
● Adjusted EBITDA of £17.1 million ($20.9 million), a decrease of 28%
from H1 2021
● Mining margin of 71%, down from 81% in H1 2021. Similar to revenue,
this decrease is largely attributable to the decrease in Bitcoin price and an
increase in network difficulty
● Pre-tax loss of £36.9 million ($44.9 million), driven primarily by
a non-cash reduction in the fair value of digital currencies held on the
balance sheet
● Total number of BTC held at 30 June 2022 was 1,953, a 54% increase
from 1,268 BTC held at 30 June 2021
Operational Highlights
● Energized Phase 1 of the Helios facility in Dickens County, Texas
and commenced mining operations on 5 May 2022
● Increased hashrate capacity by 38% from 1.6 EH/s at the end of 2021
to 2.2 EH/s at the end of July 2022
● Obtained $26.7 million (£20.2 million) of financing from NYDIG
secured by certain electrical infrastructure equipment at Helios
● Obtained up to $70.6 million (£56.3 million) of additional
financing from NYDIG secured by certain Bitmain S19J Pro machines at Helios
● Executed an agreement with ePIC Blockchain Technologies to purchase
custom mining machines for use with Intel's Blockscale ASIC chip
Post Period End
● Strengthened balance sheet by reducing exposure on BTC-backed loan
with Galaxy Digital to £5.5 million ($6.7 million)
● Completed swap agreement with Core Scientific for approximately
10,000 S19J Pro machines, which completes the strategic pivot to a self-hosted
business model in which Argo owns and operates its own machines and
infrastructure
● Released the Group's 2021 Sustainability Report and maintained
climate positive status by producing no Scope 1 emissions and offsetting all
Scope 2 and Scope 3 emissions through renewable energy credits and verifiable
emissions reductions
Update to Mining Capacity Guidance
In response to current market conditions and to reduce near-term capital
intensity, the Group is updating its year end guidance for hashrate capacity.
The Group expects to achieve 3.2 EH/s of total hashrate capacity by the end of
2022 and to increase capacity in Q1 2023 to 4.1 EH/s.
Peter Wall, CEO of Argo, said: "The delivery and installation of the
approximately 20,000 S19J Pro machines from Bitmain continues to progress on
schedule, and we still expect to have all of these machines installed by
October 2022. The revision to our hashrate guidance reflects our current
expectations for delivery and deployment of the custom machines we are
developing with ePIC Blockchain Technologies ("ePIC") that utilize the Intel®
Blockscale™ ASIC chips. We have worked closely with ePIC and Intel to modify
the machine design to increase total mining efficiency, which has delayed our
expected deployment schedule. Further, we are preserving our optionality by
reducing our overall capital spending on these machines as market conditions
remain volatile. We remain confident in the performance of the custom machines
and are excited to deploy them starting in Q1 2023."
Non-IFRS Measures
The following table shows a reconciliation of gross margin to Bitcoin and
Bitcoin Equivalent Mining Margin, the most directly comparable IFRS measure,
for the periods ended 30 June 2022 and 30 June 2021.
Period ended Period ended
30 June 2022 30 June 2021
(unaudited) (unaudited)
£'000 £'000
Gross (loss)/profit (34,413) 14,533
Gross margin (129%) 47%
Depreciation of mining equipment 10,852 4,758
Change in fair value of digital currencies 36,025 6,407
Realised loss/(gain) on sale of digital currencies 6,372 (219)
Non mining revenue - (1,148)
Mining Profit 18,836 24,331
Bitcoin and Bitcoin Equivalent Mining Margin 71% 81%
The following table shows a reconciliation of Adjusted EBITDA to net income,
the most directly comparable IFRS measure, for the periods ended 30 June
2022 and 30 June 2021.
Period ended Period ended
30 June 2022 30 June 2021
(unaudited) (unaudited)
£'000 £'000
(Loss) / Profit after taxation (30,504) 7,214
Interest expense 3,477 411
Income tax (credit)/expense (6,386) 3,484
Depreciation/Amortisation 11,718 4,870
Share based payment 2,816 1,568
Change in fair value of digital currencies 36,025 6,407
Adjusted EBITDA 17,146 23,954
Inside Information and Forward-Looking Statements
This announcement contains inside information and includes forward-looking
statements which reflect the Company's or, as appropriate, the Directors'
current views, interpretations, beliefs or expectations with respect to the
Company's financial performance, business strategy and plans and objectives of
management for future operations. These statements include forward-looking
statements both with respect to the Company and the sector and industry in
which the Company operates. Statements which include the words "expects",
"intends", "plans", "believes", "projects", "anticipates", "will", "targets",
"aims", "may", "would", "could", "continue", "estimate", "future",
"opportunity", "potential" or, in each case, their negatives, and similar
statements of a future or forward-looking nature identify forward-looking
statements. All forward-looking statements address matters that involve risks
and uncertainties because they relate to events that may or may not occur in
the future. Forward-looking statements are not guarantees of future
performance. Accordingly, there are or will be important factors that could
cause the Company's actual results, prospects and performance to differ
materially from those indicated in these statements. In addition, even if the
Company's actual results, prospects and performance are consistent with the
forward-looking statements contained in this document, those results may not
be indicative of results in subsequent periods. These forward-looking
statements speak only as of the date of this announcement. Subject to any
obligations under the Prospectus Regulation Rules, the Market Abuse
Regulation, the Listing Rules and the Disclosure and Transparency Rules and
except as required by the FCA, the London Stock Exchange, the City Code or
applicable law and regulations, the Company undertakes no obligation publicly
to update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise. For a more complete discussion
of factors that could cause our actual results to differ from those described
in this announcement, please refer to the filings that Company makes from time
to time with the United States Securities and Exchange Commission and the
United Kingdom Financial Conduct Authority, including the section entitled
"Risk Factors" in the Company's Registration Statement on Form F-1.
For further information, please contact:
Argo Blockchain
Peter Wall via Tancredi +44 203 434 2334
Chief Executive
finnCap Ltd
Corporate Finance +44 207 220 0500
Jonny Franklin-Adams
Tim Harper
Joint Corporate Broker
Sunila de Silva
Tennyson Securities
Joint Corporate Broker +44 207 186 9030
Peter Krens
OTC Markets
Jonathan Dickson +44 204 526 4581
jonathan@otcmarkets.com +44 7731 815 896
Tancredi Intelligent Communication
UK & Europe Media Relations
Emma Valgimigli +44 7727 180 873
Fabio Galloni-Roversi Monaco +44 7888 672 701
Nasser Al-Sayed +44 7915 033 739
argoblock@tancredigroup.com
About Argo:
Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain
technology company focused on large-scale cryptocurrency mining. With its
flagship mining facility in Texas, and offices in the US, Canada, and the UK,
Argo's global, sustainable operations are predominantly powered by renewable
energy. In 2021, Argo became the first climate positive cryptocurrency mining
company, and a signatory to the Crypto Climate Accord. Argo also participates
in several Web 3.0, DeFi and GameFi projects through its Argo Labs division,
further contributing to its business operations, as well as the development of
the cryptocurrency markets. For more information, visit
www.argoblockchain.com.
Interim Management Report
Argo entered 2022 with two clear goals: to complete Phase 1 of the Group's
Helios facility in Dickens County, Texas while continuing to optimise the
performance of its existing mining fleet.
Argo is making significant progress towards the completion of Phase 1 of
Helios; on 5 May 2022, the Group energized the facility and commenced mining
operations. Argo commemorated this important milestone with an inauguration
ceremony attended by local, state, and federal elected officials, as well as
members of the local community. Since then, the Group has continued to install
new machines and is on track to complete the installation of its order of
20,000 S19 J Pro machines from Bitmain by October 2022. Additionally, in July
2022, Argo completed its machine swap agreement with Core Scientific, which
included the installation of an additional approximately 10,000 machines at
Helios.
Upon completion of the machine swap agreement, the Group now operates 100% of
its owned machines and has no third-party hosting arrangements. This is the
culmination of the strategic pivot away from hosting to a fully
vertically-integrated business model that began with the acquisition of two
data centres in Quebec in early 2021. Being vertically-integrated will allow
Argo's management to have more operational control over its mining machines
and drive increased performance. Additionally, controlling operational
expenses will be critical as the next Bitcoin halving cycle takes place in May
2024 and the Bitcoin block reward is reduced by 50%.
On the second goal, Argo is operating with a mining margin of 70% over the
period, which is among the highest of the Group's peers.
As the Group's fleet is upgraded to the newer and more efficient S19J Pro
machines, it continues to review the profitability and performance of the
older machines in its fleet. Post period end, the Group completed a
comprehensive review of its mining fleet and removed 460 PH/s of
non-operational mining capacity from its total hashrate. This primarily
comprises S17 and T17 machines, which despite a higher rate of failure, have
been profitable for the Group with a total aggregate ROI in excess of 260%.
Argo is also making progress on the custom mining machine it is developing in
collaboration with ePIC Blockchain that is specifically designed to utilize
the Intel Blockscale ASIC chip. Delivery and deployment of these machines is
expected to take place in the fourth quarter of 2022.
In January, the Group formally launched Argo Labs, its in-house innovation arm
established to identify opportunities within the broader Web3 and blockchain
ecosystem while supporting the decentralization of various blockchain
protocols. Argo allocated approximately 10% of the Group's crypto assets in
its "HODL" to Argo Labs. Argo Labs is primarily focused on two key areas:
network participation and strategic diversification through the efficient
deployment of the Group's crypto treasury assets. Network participation
consists of providing infrastructure support, running nodes and validators,
and staking innovative projects. Efficient deployment of the Group's crypto
treasury assets includes, among other things, supporting early-stage projects
and participating in decentralized finance (DeFi), as well as the NFT &
metaverse ecosystem, in each case in furtherance of the Group's general
business operations. By gaining exposure to the broader digital asset
ecosystem, Argo Labs will allow the Group to participate in disruptive
technologies and provide long-term value to its shareholders.
Despite the overall market drawdown and the decrease in Bitcoin price, the
Group has been able to raise significant capital via secured debt financing.
In March 2022, Argo obtained £20.2 million ($26.7 million) of debt financing
from NYDIG, the proceeds of which were used to continue the build out of
Helios. These borrowings are secured by certain electrical infrastructure
equipment at the Helios facility. Additionally, in May 2022, Argo announced
another debt financing agreement with NYDIG for up to £56.3 million ($70.6
million); these borrowings are secured by certain S19J Pro mining machines
located at Helios.
The Group is mindful of its carbon footprint and maintains a strong focus on
environmental sustainability. The Group's mining facilities in Quebec are
powered by hydroelectricity, and operations in Texas are located in the Texas
Panhandle where 85% of the generation capacity comes from wind power. In 2021,
the Group signed the Crypto Climate Accord, committing to achieve net-zero
carbon emissions by 2030. In 2021, Argo reached this goal, releasing a full
climate strategy and becoming the first Bitcoin mining company to announce
climate positive status through its use of renewable energy to power mining
operations, and by offsetting more scope 2 and 3 greenhouse gas emissions than
it emitted in both 2020 and 2021. Additionally, Argo was a founding member of
the Bitcoin Mining Council, which educates the public on the increasing amount
of renewable energy used for Bitcoin mining. It also seeks to improve
reporting and increase the amount of data available on the use of renewable
energy within the sector.
Argo's operations in Quebec and Texas also promote sustainability by helping
to stabilize the electrical grid. In Quebec, Argo participates in curtailment
programs to lower electricity usage during periods of extreme weather. In
Texas, the Helios facility will participate in demand response programs,
whereby it can reduce its electricity usage and increase availability of power
to the grid in times of peak demand. This flexibility in electricity load has
profound benefits for grid stability and helps to ensure equilibrium between
supply and demand. This was demonstrated in July 2022 when Argo, along with
most large-scale Bitcoin miners in Texas, voluntarily shut down operations in
response to a conservation alert from ERCOT. Bitcoin miners collectively
curtailed over 1,000 MW of electricity demand, which was then available during
a time of intense heat and peak electricity demand. This action enabled ERCOT
to avoid implementing rolling blackouts, which would have negatively impacted
residential and commercial electricity users across the state.
Having successfully energized the Helios facility and commenced mining
operations, the Group's strategic focus for the remainder of 2022 is to
complete the build out of Phase 1 and lay the groundwork for the development
of future phases at Helios.
Outlook
While the first half of 2022 presented many challenges, I am delighted with
the progress that we have made in developing Helios and positioning ourselves
as a leader in the Bitcoin mining industry. We designed and built a
world-class Bitcoin mining facility from the ground up, balancing prudent
growth with a volatile market. Furthermore, we continue to lead the industry
with our commitment to sustainability, and we were proud to publish the
Group's 2021 sustainability report which explains our climate positive status.
As operations at Helios continue to ramp up, there are certain milestones
which will enable us to optimise our operations and achieve greater
efficiency. We are evaluating several opportunities to execute a long-term,
fixed price power purchase agreement (PPA), which will lock in our electricity
prices and reduce our exposure to short term price fluctuations. Once the
fixed price PPA is in place, Helios will have more optionality to participate
in the demand response programs offered by ERCOT, which will further reduce
its overall electricity cost.
During the period, there has been a global macroeconomic pullback as investors
and central bankers grapple with inflation, the war in Ukraine, and rising
interest rates. These headwinds have impacted all financial assets, including
Bitcoin and the equity of publicly traded Bitcoin miners.
Argo is well positioned to weather the current downturn with its large and
highly efficient mining infrastructure, runway for growth, and experienced
management team, which has successfully navigated the Group through previous
crypto winters. In response to the challenging market environment, we have
adjusted our treasury management strategy. Throughout the period, we have been
steadily selling Bitcoin, utilizing derivatives to obtain a higher realized
price than simply selling into the market. In Q2 2022, we sold Bitcoin at an
average realized price of approximately $28,500, realizing hedge gains in
excess of $1,500 per Bitcoin. Proceeds from these sales have been used for
operating expenses, capital expenditures, and to reduce exposure on our
Bitcoin-backed loan.
Despite the challenging economic environment in 2022, we continue to focus on
our strategic priority of completing Phase 1 of Helios and laying the
groundwork to further scale operations.
On behalf of the Board, I would like to thank all shareholders and staff who
share in Argo's mission of powering the world's most innovative and
sustainable blockchain infrastructure.
Onwards and upwards!
Peter Wall
CEO & Interim Executive Chairman
Responsibility Statement
We confirm that to the best of our knowledge:
● the Interim Report has been prepared in accordance with
International Accounting Standards 34, Interim Financial Reporting; and
● gives a true and fair view of the assets, liabilities, financial
position and profit/loss of the Group; and
● the Interim Report includes a fair review of the information
required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the set of interim financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year.
● the Interim Report includes a fair review of the information
required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the
information required on related party transactions.
The Interim Report was approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Peter Wall
CEO & Interim Executive Chairman
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period ended Period ended
30 June 2022 30 June 2021
(unaudited) (unaudited)
Note £'000 £'000
Revenues 5 26,700 31,086
Direct costs (18,716) (10,365)
Change in fair value of digital currencies 12 (42,397) (6,188)
Gross (loss) / profit (34,413) 14,533
Operating costs and expenses (9,846) (2,293)
Share based payment (2,816) (1,568)
Foreign exchange 10,265 437
Operating (loss) / profit (36,810) 11,109
Gain on settlement of contingent consideration 4,038 -
Gain on sale of investment 133 -
Fair value (loss) of investments (284) -
Finance cost (3,477) (411)
Equity accounted loss from associate (490) -
(Loss) / profit before taxation (36,890) 10,698
Income tax credit / (expense) 7 6,386 (3,484)
(Loss) / Profit after taxation (30,504) 7,214
Other comprehensive income
Items which may be subsequently reclassified to profit or loss:
- Currency translation reserve (4,413) (361)
- Equity accounted OCI from associate
(8,318) -
- Fair value loss on intangible digital assets (414) -
Total other comprehensive income, net of tax (13,145) (361)
Total comprehensive income attributable to the equity holders of the Company (43,649) 6,853
Earnings per share attributable to equity owners (pence)
Basic earnings per share 6 (6.5p) 1.9p
Diluted earnings per share - restricted 6 (6.5p) 1.8p
The income statement has been prepared on the basis that all operations are
continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 2022 31 December 2021
(unaudited) (audited)
Note £'000 £'000
ASSETS
Non-current assets
Investments at fair value through income and loss 135 403
Investments accounted for using the equity method 8 5,009 13,817
Intangible fixed assets 9 3,602 5,604
Property, plant and equipment 10 157,795 111,604
Right of use assets 10 374 350
Total non-current assets 166,915 131,778
Current assets
Trade and other receivables 11 99,448 63,359
Digital assets 12 28,092 80,759
Cash and cash equivalents 9,210 11,803
Total current assets 136,750 155,921
Total assets 303,665 287,699
EQUITY AND LIABILITIES
Equity
Share capital 13 478 468
Share premium 13 143,752 139,581
Share based payment reserve 14 4,689 1,905
Currency translation reserve 14 (4,380) 33
Fair value reserve - 414
Other comprehensive (loss)/income of equity accounted associate (1,747) 6,571
Accumulated surplus 14 22,366 52,838
Total equity 165,158 201,810
Current liabilities
Trade and other payables 15 17,633 15,245
Contingent consideration - 8,071
Loans and borrowings 16 44,716 23,391
Income tax 2,439 7,679
Deferred tax - 286
Lease liability 11 7
Total current liabilities 64,799 54,679
Non-current liabilities
Deferred tax 442 541
Issued debt - bond 16 32,892 26,908
Loans and borrowings 16 39,989 3,391
Lease liability 385 370
Total liabilities 138,507 85,889
Total equity and liabilities 303,665 287,699
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Currency translation reserve Share based payment reserve Fair value reserve Other comprehensive income of associates Accumulated surplus/ Total
(deficit)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 468 139,581 33 1,905 414 6,571 52,838 201,810
Total comprehensive profit for the period:
Loss for the period - - - - - - (30,504) (30,504)
Other comprehensive income - - (4,413) - (414) (8,318) - (13,145)
Total comprehensive income for the period - - (4,413) - (414) (8,318) (30,504) (43,649)
Transactions with equity owners:
Stock based compensation charge - - - 2,816 - - - 2,816
Common stock options/warrants exercised 10 4,171 - (32) - - 32 4,181
Balance at 30 June 2022 478 143,752 (4,380) 4,689 - (1,747) 22,366 165,158
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Currency translation reserve Share based payment reserve Accumulated surplus/ Total
(deficit)
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 304 1,540 443 75 21,965 24,327
Total comprehensive income for the period:
Profit for the period - - - - 7,214 7,214
Other comprehensive income - - (361) - - (361)
Total comprehensive income for the period - - (361) - 7,214 6,853
Transactions with equity owners:
Common stock to be issued* - 11 - - - 11
Issue of common stock net of issue costs 78 53,766 - - - 53,844
Stock based compensation charge - - - 1,568 - 1,568
Common stock options/warrants exercised - - - (568) 568 -
Common stock options/warrants lapsed/expired - - - (83) 83 -
Total transactions with equity owners 78 53,777 - 917 651 55,423
Balance at 30 June 2021 382 55,317 82 992 29,830 86,603
*Shares to be issued relate to share options exercised and paid up pre period
end, however the shares were formally issued post period end.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Period ended Period ended
30 June 2022 30 June 2021
(unaudited) (unaudited)
Note £'000 £'000
Cash flows from operating activities
(Loss) / profit before taxation (36,890) 10,698
Adjustments for:
Depreciation/Amortisation 11,718 4,870
Foreign exchange movements (10,266) 25
Finance cost 3,477 411
Fair value change in digital assets through profit or loss 36,025 -
Investment fair value movement 284 -
Gain on investment (133) -
Impairment of intangible digital assets 3,009 -
Share of loss from associate 490 -
Gain on settlement of contingent consideration (4,038) -
Share based payment expense 2,816 1,568
Working capital changes:
(Increase) in trade and other receivables 11 (928) (2,095)
Increase in trade and other payables 15 2,388 15,246
Decrease/(increase) in digital assets 12 16,642 (28,351)
Net cash flow from operating activities 24,594 2,372
Investing activities
Acquisition of subsidiaries, net of cash acquired - (272)
Proceeds from sale of investment 133 -
Investment in associate 8 - (7,353)
Other investments - (219)
Purchase of tangible fixed assets* 9 (49,243) (6,883)
Mining equipment prepayments (35,431) (35,471)
Net cash used in investing activities (84,541) (50,198)
Financing activities
Proceeds from borrowings 16 66,331 14,375
Lease payments (13) (1,734)
Loan repayments (8,393) -
Interest paid (3,477) (411)
Proceeds from shares issued 116 49,593
Net cash generated from financing activities 54,564 61,823
Net (decrease)/increase in cash and cash equivalents (5,383) 13,997
Effect of foreign exchange changes in cash 2,790 -
Cash and cash equivalents at beginning of period 11,803 2,051
Cash and cash equivalents at end of period 9,210 16,048
Material non-cash movements:
*£7,277k of the machine additions were funded by the sale of machines, as
part of the Core Scientific swap deal arrangement
£1,648k purchase of intangible assets were acquired using Bitcoin
£4,362k payment to Bitmain in respect of machine prepayments paid in Bitcoin
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY INFORMATION
Argo Blockchain PLC ("the company") is a public company, limited by shares,
and incorporated in England and Wales. The registered office is 9th Floor,
16th Great Queen Street, London, England, WC2B 5DG. The company was
incorporated on 5 December 2017 as GoSun Blockchain Limited and changed its
name to Argo Blockchain Limited on 21 December 2017. Also on 21 December 2017,
the company re-registered as a public company, Argo Blockchain plc. Argo
Blockchain plc acquired a 100% subsidiary, Argo Innovation Labs Inc. (together
"the Group"), incorporated in Canada, on 12 January 2018.
On 4 March 2021 the Group acquired 100% of the share capital of DPN LLC and
was merged into new US entity Argo Innovation Facilities (US) Inc (also 100%
owned by Argo Blockchain plc).
On 11 May 2021 the Group acquired 100% of the share capital of 9377-2556
Quebec Inc and 9366-5230 Quebec Inc. These are held by Argo Innovation Labs
Inc. (Canada).
The principal activities of the group are that of crypto asset mining and
investing in crypto assets and non-fungible tokens.
The ordinary shares of the Group are listed under the trading symbol ARB on
the London Stock Exchange. The American Depositary Receipt of the Group are
listed under the trading symbol ARBK on Nasdaq. The Group bond is listed on
the Nasdaq Global Select Market under the trading symbol ARBKL.
2. BASIS OF PREPARATION
The condensed consolidated interim financial statements for the six months
ended 30 June 2022 have been prepared in accordance with IAS 34 'Interim
Financial Reporting' and presented in sterling. They do not include all of the
information required in annual financial statements in accordance with IFRS,
and should be read in conjunction with the consolidated financial statements
for the year ended 31 December 2021, which have been prepared in accordance
with UK-adopted international accounting standards and International Financial
Reporting Standards as issued by the IASB. The report of the auditors on those
financial statements was unqualified.
The financial statements have been prepared under the historical cost
convention, except for the measurement to fair value certain financial and
digital assets and financial instruments.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates. In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the financial statements for the year ended
31 December 2021.
3. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
condensed consolidated interim financial statements are consistent with those
of the previous financial year except as set out below.
Segmental reporting
The directors consider that the Group has only one significant reporting
segment being crypto mining which is fully earned by a Canadian subsidiary.
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to
commodity risks (namely the price of Bitcoin) arising from operating,
financing and investing activities. The Group does not hold or issue
derivative financial instruments for trading purposes.
Derivative financial instruments are recognised and stated at fair value.
4. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
The Group has adopted all recognition, measurement and disclosure requirements
of IFRS, including any new and revised standards and Interpretations of IFRS,
in effect for annual periods commencing on or after 1 January 2022. The
adoption of these standards and amendments did not have any material impact on
the financial result of position of the Group.
Standards which are in issue but not yet effective:
At the date of authorisation of these financial statements, the following
Standards and Interpretation, which have not yet been applied in these
financial statements, were in issue but not yet effective.
Standard or Interpretation Description Effective date for annual accounting period beginning on or after
IAS 1 Amendments - Presentation and Classification of Liabilities as Current or 1 January 2023
Non-current
IAS 8 Amendments - Definition of Accounting Estimates 1 January 2023
The Group has not early adopted any of the above standards and intends to
adopt them when they become effective.
5. REVENUES
Period ended Period ended
30 June 2022 (unaudited) 30 June 2021 (unaudited)
£'000 £'000
Crypto currency mining - worldwide 26,700 29,937
Crypto currency management fees - United States - 1,148
Total revenue 26,700 31,085
Due to the nature of Crypto currency mining, it is not possible to provide a
geographical split of the revenue stream.
Crypto currency mining revenues are recognised at a point in time.
Crypto currency management fees are services recognised over time.
6. EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the profit attributable
to equity shareholders by the weighted average number of shares in issue.
Period ended Period ended
30 June 2022 (unaudited) 30 June 2021 (unaudited)
Net (loss)/profit for the period attributable to ordinary equity holders from (30,504) 7,214
continuing operations (£000)
Weighted average number of ordinary shares in issue 469,182,463 381,832,335
Basic earnings per share for continuing operations (pence) (6.5) 1.9
Net (loss)/profit for the period attributable to ordinary equity holders for (30,504) 7,214
continuing operations (£000)
Diluted number of ordinary shares in issue 475,067,159 393,091,232
Diluted earnings per share for continuing operations (pence) - restricted (6.5) 1.8
The Group has in issue 18,396,397 warrants and options at 30 June 2022 (2021:
11,258,897).
7. TAXATION
Period ended Period ended
30 June 2022 (unaudited) 30 June 2021 (unaudited)
£'000 £'000
Income tax (credit)/expense - foreign tax (6,000) 3,484
Deferred tax (credit)/expense (386) -
Taxation charge in the financial statements (6,386) 3,484
No deferred tax asset has been recognised in respect of UK tax losses carried
forward on the basis that there is insufficient certainty over the level of
future profits to utilise against this amount.
Income tax expense
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
Period ended Period ended
30 June 2022 (unaudited) 30 June 2021 (unaudited)
£'000 £'000
(Loss)/Profit before taxation (36,890) 10,698
(16,404) 2,568
Expected tax (credit)/charge based on a weighted average of 25% (2020 - 24%)
(UK, US and Canada)
Effect of expenses not deductible in determining taxable profit 40 32
Capital allowances in excess of depreciation (5,589) 323
Other tax adjustments 11,588 1,838
Losses utilised re prior years* (7,005) (1,790)
Origination and reversal of temporary differences 3,936 256
Unutilised tax losses carried forward 7,048 257
Taxation (credit)/charge in the financial statements (6,386) 3,484
*During the period the tax charge in respect of the year ended 31 December
2021 in respect of the taxable charge for Argo Innovation Labs Inc was
finalised and it was agreed losses previously not accepted as deductible were
deductible and as a result the liability for that year was reduced.
8. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Period ended Year ended 31 December 2021 (audited)
30 June 2022 (unaudited)
£'000 £'000
Opening balance 13,817 -
Acquired during the period - 8,444
Share of loss (490) (1,198)
Share of fair value (loss)/gain on intangible assets through other (8,318) 6,571
comprehensive income
Total Associates 5,009 13,817
Set out below are the associates of the Group as at 30 June 2022, which, in
the opinion of the Directors, significant influence is held. The associate as
listed below has share capital consisting solely of ordinary shares, which are
held directly by the Group. The country of incorporation or registration is
also their principal place of business.
Nature of investment in associates 2022 and 2021:
Name of entity Address of the registered office % of ownership interest Nature of relationship Measurement method
Pluto Digital PLC Hill Dickinson LLP, 8th Floor The Broadgate Tower, 20 Primrose Street, London, 24.65% Refer below Equity
United Kingdom, EC2A 2EW
On 3 February 2021 Argo invested in Pluto Digital PLC ("Pluto"), a crypto
venture capital and technology company. The investment was satisfied with
75,000 Polkadot with a fair value at that date of £1,091,850. Further to this
in a second round of funding the Group invested an additional £7,352,970 on 8
March 2021.
Argo owns 24.65% of the total share capital and voting rights of the business
and is entitled to nominate one director to the Pluto Board of Directors.
Pluto is a crypto technology company that connects Web 3.0 decentralised
technologies to the global economy. Pluto identifies key emerging areas and
projects in the crypto sphere, then deploys its business, networks and
technical expertise to create value for crypto partners, projects and Pluto
shareholders.
Pluto incubates and advises digital asset projects based on decentralised
technologies, decentralised finance and networks such as Ethereum and
Polkadot. Additionally, Pluto supports the operation of proof-of-stake
networks by staking and operating validator nodes. Pluto represents a
strategic partnership for the Group as it diversifies its activities in the
crypto space.
Pluto Digital PLC is an unlisted company and there is no quoted market price
available for its shares.
There are no contingent liabilities relating to the Group's interest in the
associates.
Summarised financial information for associates
Set out below is the summarised financial information for Pluto Digital plc
which is accounted for using the equity method.
Pluto Digital plc
As at 30 June
2022
£000's
Net assets 18,033
Summarised Statement of Comprehensive Income, Pluto Digital plc
Period ended June 2022
£000's
Loss from continuing operations (3,046)
Interest expense, net of income (179)
Income tax expense 1,240
Post-tax loss from continuing operations (1,985)
Other comprehensive loss (33,736)
Total comprehensive Income (35,721)
The information above reflects the amounts presented in the management
accounts of the associate (and not Argo Blockchain Plc's share of those
amounts) adjusted for differences in accounting policies between the Group and
the associate.
9. INTANGIBLE FIXED ASSETS NOTE
Group Goodwill Digital assets Website 2022 Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 80 5,424 671 6,175
Additions - 5,841 - 5,841
Disposals - (4,087) - (4,087)
At 30 June 2022 80 7,178 671 7,929
Amortisation and impairment
At 1 January - 121 450 571
Foreign exchange movement 35 204 23 262
Impairment - 3,009 - 3,009
Fair value loss/(gain) - 413 - 413
Amortisation charged during the period - - 72 72
At 30 June 2022 35 3,747 545 4,327
Balance At 30 June 2022 45 3,431 126 3,602
Digital assets are cryptocurrencies not mined by the Group. The Group held
crypto assets during the year, which are recorded at cost on the day of
acquisition. Movements in fair value between acquisition (date mined) and
disposal (date sold), and the movement in fair value in crypto assets held at
the year end, impairment of the intangible assets and any increase in fair
value are recorded in the fair value reserve.
The digital assets held below are held in Argo Labs (a division of the Group)
as discussed above. The assets are all held in secure custodian wallets
controlled by the Group team and not by individuals within the Argo Labs team.
The assets detailed below are all accessible and liquid in nature. Those
assets (immaterial in total) held longer term are inaccessible for a period of
time have been valued either at cost or £nil depending upon the information
available as at the year end.
As at 30 June 2022 Coins/tokens Fair value
Crypto asset name £'000
Polkadot - DOT 120,886 693
Ethereum - ETH 605 526
Solana - SOL 9,365 256
Cosmos Hub - ATOM 27,938 183
ASTRA - 112
Alternative coins - 1,661
At 30 June 2022 3,431
10. TANGIBLE FIXED ASSETS
Group Right of use Assets Office Equipment Mining and Computer Equipment Assets Under Construction Leasehold Improvements Data centres Motor vehicles Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 358 49 58,499 61,306 85 10,466 - 130,763
Foreign exchange movement 32 - 2,476 6,805 8 975 - 10,296
Additions - 27 41,353 6,344 1 8,742 53 56,520
Disposals - - (12,340) - - - - (12,340)
Transfer to another class - - - (74,455) - 74,455 - -
At 30 June 2022 390 76 89,988 - 94 94,638 53 185,239
Depreciation and impairment
At 1 January 2022 8 - 18,507 - 65 229 18,809
Foreign exchange movement - - 1,612 - 6 59 - 1,677
On disposals - - (5,063) - - - - (5,063)
Depreciation charged during the period 8 5 10,839 - 10 782 2 11,646
At 30 June 2022 16 5 25,895 - 81 1,070 2 27,069
Carrying amount
At 1 January 2022 350 49 39,992 61,306 20 10,237 111,954
At 30 June 2022 374 71 64,093 - 13 93,568 51 158,170
Note: on the face of the balance sheet the Right of Use assets are disclosed
as a separate line but have been aggregated with other fixed assets above.
11. TRADE AND OTHER RECEIVABLES
As at As at 31 December 2021 (audited)
30 June 2022 (unaudited)
£'000 £'000
Mining equipment prepayments 82,587 47,426
Hedging instrument 1,608 -
Prepayments and other receivables 12,233 13,194
Other taxation and social security 3,020 2,739
Total trade and other receivables 99,448 63,359
Mining equipment prepayments consist of payments made and due on mining
equipment due to arrive by the end of 2022. Payments to ePIC ASIC Asia Limited
("ePIC") comprise £4.1m, Intel of £15.1m and the balance of £63.4m was paid
to Bitmain in advance of machine purchases to be received after the period
end.
Other taxation and social security consist of purchase tax recoverable in the
UK and Canada. GST and QST debtors are greater than 90 days as at 30 June
2022.
The directors consider that the carrying amount of trade and other receivables
is equal to their fair value.
12. DIGITAL ASSETS
Group Period ended Year ended 31 December 2021
30 June 2022 (audited)
(unaudited) £'000
£'000
At 1 January 2022 and 2021 80,759 4.637
Additions
Crypto assets mined 26,700 70,325
Crypto asset purchased and received - 16,569
Total additions 26,700 86.894
Disposals
Crypto assets sold (34,069) (12,400)
Total disposals (34,069) (12,400)
Fair value movements
Foreign exchange (2,901) -
Gain/(loss) on crypto asset sales (6,372) 437
Movements on crypto assets held at the period end (36,025) 1,191
Total fair value movements (45,298) 1,628
At 30 June 2022 & 31 December 2021 28,092 80,759
The Group mined crypto assets during the period, which are recorded at fair
value on the day of acquisition. Movements in fair value between acquisition
(date mined) and disposal (date sold), and the movement in fair value in
crypto assets held at the year end, are recorded in profit or loss. The Group
has used 1,178 as at 30 June 2022 and 1,504 Bitcoin as at 31 December 2021 as
collateral for a loan.
As at 30 June 2022 and 31 December 2021 the above digital assets solely
comprised 1,742 and 2,441 Bitcoin respectively.
13. ORDINARY SHARES
As at As at
30 June 2022 (unaudited) 31 December 2021 (audited)
£'000 £'000
Ordinary share capital
Issued and fully paid
468,082,335 Ordinary Shares of £0.001 each 468 303
Issued in the period
9,742,831 Ordinary Shares of £0.001 each 10 165
477,825,166 Ordinary Shares of £0.001 each 478 468
Share premium
At beginning of the period 139,581 1,540
Issued in the period 4,171 150,977
Issue Costs - (12,936)
At the end of period 143,752 139,581
Acquisition of DPN LLC
The acquisition of DPN LLC, effectively comprising the land acquisition in
west Texas, has been treated as an asset acquisition in these condensed
consolidated financial statements. In June 2022, the Company settled the
contingent consideration by issuing 8,147,831 new Ordinary Shares credited as
fully paid at a price per share of £0.495.
14. RESERVES
The following describes the nature and purpose of each reserve:
Reserve Description
Ordinary shares Represents the nominal value of equity shares
Share premium Amount subscribed for share capital in excess of nominal value
Share based payment Represents the fair value of options and warrants granted less amounts
transferred on exercise, lapse or expiry
Foreign currency translation reserve Cumulative effects of translation of opening balances on non-monetary assets
between subsidiary functional currency (Canadian dollars) and Group functional
and presentational currency (Sterling).
Fair value reserve Cumulative net gains on the fair value of intangible assets
Other comprehensive income of equity accounted associates The other comprehensive income of any associates is recognised in this reserve
Accumulated surplus Cumulative net gains and losses and other transactions with equity holders not
recognised elsewhere.
15. TRADE AND OTHER PAYABLES
As at As at
30 June 2022 (unaudited) 31 December 2021 (audited)
£'000 £'000
Trade payables 12,531 10,259
Accruals and other payables 5,102 4,986
Total trade and other creditors 17,633 15,245
Within trade payables is £2.2m (2021: £10.8m) for amounts due for mining
machines not yet received.
The directors consider that the carrying value of trade and other payables is
equal to their fair value.
16. LOANS AND BORROWINGS
Non-current liabilities As at As at
30 June 2022 (unaudited) 31 December 2021 (audited)
£'000 £'000
Issued debt - bond 32,892 26,908
Long term loans 37,081 -
Assumed mortgage on acquisition 2,908 3,391
Total 72,881 30,299
Current liabilities
Short term loans 43,876 22,239
Assumed mortgage on acquisition 840 1,152
Total 44,716 23,391
The mortgages are secured against the two buildings at Mirabel and Baie Comeau
and are repayable over periods from 52 months to 58 months at an interest rate
of lender prime + 0.6%.
The Company entered into several loans to acquire mining equipment for the
Helios facility in Texas. The loans are secured by the financed mining
equipment. The loans have terms from 2 years to 4 years and interest rates
from 8.25% to 12%.
17. FINANCIAL INSTRUMENTS
As at As at
30 June 2022 (unaudited) 31 December 2021 (audited)
£'000 £'000
Carrying amount of financial assets
Measured at amortised cost
- Mining equipment prepayments 82,587 47,426
- Trade and other receivables 5,496 13,194
- Cash and cash equivalents 9,210 11,803
Measured at fair value through profit or loss 1,608 403
Total carrying amount of financial assets 98,901 72,826
Carrying amount of financial liabilities
Measured at amortised cost
- Trade and other payables 17,633 10,259
- Short term loans 44,716 23,391
- Long term loans 39,989 3,391
- Issued Debt - bonds 32,892 26,908
- Lease liabilities 398 377
Measured at fair value through profit or loss - 8,071
Total carrying amount of financial liabilities 135,628 72,397
Fair Value Estimation
Fair value measurements are disclosed according to the following fair value
measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1)
- Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices),
or indirectly (that is, derived from prices) (Level 2)
- Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (Level 3). This is the case for
unlisted equity securities.
The following table presents the Group's assets and liabilities that are
measured at fair value at 30 June 2022 and 31 December 2021.
Level 1 Level 2 Level 3 Total
Assets £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss - - - -
Equity holdings 60 - 74 134
Hedging instruments 1,608 - - 1,608
Intangible assets - crypto assets - 3,431 - 3,431
Digital assets - 28,092 26,092
Total at 30 June 2022 1,668 31,523 74 33,265
Level 1 Level 2 Level 3 Total
Assets £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss - - - -
Equity holdings 329 - 73 402
Hedging instruments - - - -
Intangible assets - crypto assets - 5,424 - 5,424
Digital assets - 80,759 80,759
Total at 31 December 2021 329 86,183 73 86,585
Liabilities
Financial liabilities at fair value through profit or loss
-Deferred contingent consideration 8,071 8,071
Total at 31 December 2021 8,071 8,071
All financial assets are in listed/unlisted securities and digital assets.
There were no transfers between levels during the period.
The Group recognises the fair value of financial assets at fair value through
profit or loss relating to unlisted investments at the cost of investment
unless:
- There has been a specific change in the circumstances which, in the
Group's opinion, has permanently impaired the value of the financial asset.
The asset will be written down to the impaired value;
- There has been a significant change in the performance of the
investee compared with budgets, plans or milestones;
- There has been a change in expectation that the investee's technical
product milestones will be achieved or a change in the economic environment in
which the investee operates;
- There has been an equity transaction, subsequent to the Group's
investment, which crystallises a valuation for the financial asset which is
different to the valuation at which the Group invested. The asset's value will
be adjusted to reflect this revised valuation; or
- An independently prepared valuation report exists for the investee
within close proximity to the reporting date.
18. COMMITMENTS
The Group's material contractual commitments relate to the master services
agreement with Core Scientific, which provides hosting, power and support
services. This terminates shortly after the period end once the machine swap
deal is complete.
19. RELATED PARTY TRANSACTIONS
Key management compensation - all amounts in £000's
Key management includes Directors (executive and non-executive) and senior
management. The compensation paid to related parties in respect of key
management for employee services during the period was made only from Argo
Innovation Labs Inc, amounting to: £20k (2021 - £18k) paid to POMA
Enterprises Limited in respect of fees of Matthew Shaw (Non-executive
director); £142k (2021 - £106k) paid to Vernon Blockchain Inc in respect of
fees of Peter Wall (CEO); £nil (2021 - £68k) paid to Tenuous Holdings Ltd in
respect of fees of Ian MacLeod (ex Executive chairman). During the period,
James Savage (ex NED) was remunerated a gross salary of £nil (2021 - £15k),
Marco D'Attanasio was remunerated gross fees of £nil (2021 - £15k) and Alex
Appleton (CFO) through Appleton Business Advisors Limited was paid £97k (2021
- £60k) during the period.
Total director fees and remuneration, paid directly and indirectly, totalled
£313k (2021: £221k).
20. CONTROLLING PARTY
There is no controlling party of the Group.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR EALPLAAEAEFARecent news on Argo Blockchain
See all newsREG - Argo Blockchain PLC - Financial Update and Listing Suspension Request
AnnouncementREG - Argo Blockchain PLC - Argo Provides Financing Update
AnnouncementREG - Argo Blockchain PLC - Argo Enters into Term Sheets with Gem Mining
AnnouncementREG - Argo Blockchain PLC - Appointment of Chief Executive Officer
AnnouncementREG - Argo Blockchain PLC - Hosting Update
Announcement