TIDMARGO
RNS Number : 8514U
ARGO Group Limited
31 March 2023
Argo Group Limited
("Argo" or the "Company")
Annual Report and Accounts for the Year ended 31 December
2022
Argo today announces its final results for the year ended 31
December 2022.
The Company will today make available its report and accounts
for the year ended 31 December 2022 on the Company's website
www.argogrouplimited.com . These will be sent by post to
shareholders no later than 30 April 2023.
Key highlights for the twelve months ended 31 December 2022
- Revenues US$2.5 million (2021: US$4.4 million)
- Operating loss US$2.3 million (2021: operating loss US$0.2 million)
- Loss before tax US$3.4 million (2021: profit before tax of US$0.3million)
- Net assets US$19.6 million (2021: US$23.1 million)
Commenting on the results and outlook, Kyriakos Rialas, Chief
Executive of Argo said:
" The last financial year has been very difficult especially for
Emerging Markets that experienced huge outflows closed to US$100
billion. Increasing interest rates to combat inflation has been the
dominant global theme with the USA leading the way. Inevitably this
influenced the performance of The Argo Fund Ltd that saw a loss for
the year of 12.5% mitigated by active management and macro hedges
which compares favourably to the JPM EMBI+ index that saw a loss of
24.7%. Consequently, with steady assets under management, Argo
group had to rely only on management fees in 2022 to cover its
expenses. In the second half of 2022 Argo Group took over the
management of two US Hedged funds managed accounts with first loss
provisions that doubled its assets under management. January 2023
started very well in line with most markets and with indications
that inflation and interest rates are peaking. Finally, Riviera,
the shopping mall in Odessa, Ukraine partially reopened in November
2022 while the restoration of the damages caused by the combat
rocket in May 22 is being completed. "
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 twelve months ended 31 December 2022
- Revenues US$2.5 million (2021: US$4.4 million)
- Operating loss US$2.3 million (2021: operating loss US$0.2 million)
- Loss before tax US$3.4 million (2021: profit before tax of US$0.3million)
- Net assets US$19.6 million (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
This report sets out the results of Argo Group Limited for the
year ended 31 December 2022.
For the year ended 31 December 2022 the Group generated revenues
of US$2.5 million (2021: US$4.4 million) with management fees
accounting for US$2.2 million (2021: US$2.5 million). The Group
also generated incentive fees of US$ nil (2021: US$1.6 million)
during the year.
Total operating costs, ignoring bad debt provisions, are US$4.2
million (2021: US$3.8 million). The Group has provided against
management fees of US$0.6 million (2021: US$0.7 million) from the
Designated Investment share class in TAF. In the Directors' view
these amounts are fully recoverable however they have concluded
that it would be appropriate to carry a provision against these
receivables as the timing of the receipts should match the exit
from the investments in this share class.
Overall, the financial statements show an operating loss for the
year of US$2.3 million (2021: operating loss US$0.2 million) and a
loss before tax of US$3.4 million (2021: profit before tax of
US$0.3 million) reflecting the realised and unrealised loss on
current asset investments of US$2.1 million (2021: unrealised loss
of US$0.6 million) and interest income of $1.0 million (2021: $1.1
million).
At the year end, the Group had net assets of US$19.6 million
(2021: US$23.1 million) and net current assets of US$6.0 million
(2021: US$9.1million) including cash reserves of US$1.6 million
(2021: US$1.7 million). The Directors are not declaring a final
dividend.
Net assets include investment in TAF at fair value of US$4.4
million (2021: US$6.1 million).
At the year end, The Argo Fund owed the Group total management
and performance fees of US$2.1 million ( 31 December 2021 : US$2.6
million). The Group received $0.2 million of these fees in January
and February 2023. The remaining fees of $1.9 million relates to
the Designated Investment share class which will be paid when the
investments are sold and against which a full provision has been
made in these financial statements.
The Argo Funds ended the year with Assets under Management
("AUM") at US$109.8 million (2021: US$122.6). 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 number of permanent employees of the Group at 31 December
2022 was 18 ( 2021 : 18).
Fund performance
2022 2021
Launch Year Year Since Annualised Sharpe Down
Fund Date Total Total inception performance ratio months
% % % CAGR %
------- ------- ------- ------------ ------------- ------- --------
The Argo Fund:
------- ------- ------- ------------ ------------- ------- --------
89 of
A class Oct-00 -12.54 5.29 215.19 6.04 0.40 267
------- ------- ------- ------------ ------------- ------- --------
9 of
X2 class Feb-21 -16.83 11.86 -6.97 -3.55 -0.20 23
------- ------- ------- ------------ ------------- ------- --------
Designated Investment
class Jan-20 -2.82 5.45 89.18 NA NA NA
------- ------- ------- ------------ ------------- ------- --------
After the turbulence stemming from Covid, any hopes that 2022
would be a rather uneventful year were quickly dispelled. The
decision by Russia to launch military action in Ukraine not only
had a detrimental impact on the population and economy of the
latter country but also sparked a crisis in global energy and food
markets. Sanctions on Russian energy exports and retaliatory
measures led to a scramble, particularly by Europe, to secure
alternative gas and oil supplies often at higher cost and
necessitating additional outlays on infrastructure. Grain and other
foodstuffs shipped from the Black Sea region were also disrupted by
the conflict causing harm in the form of escalating food prices to
consumers across the world.
After a prolonged period of quantitative easing and negative
real interest rates, last year witnessed a major shift in monetary
policy in many countries. Alarmed by inflation figures last seen 40
years ago, the world's central banks began to focus on the supply
constraints and concomitant price rises by raising interest rates.
The US Federal Reserve led the way, increasing the discount rate on
seven occasions from a starting point of 0.25% to end the year at
4.5%. The European Central Bank, the Bank of England and others all
followed in its wake. However, this pressure to prioritize price
stability over economic expansion which, in turn, cast a cloud over
the outlook for corporate profits and asset prices did not bode
well for markets as recession fears surfaced.
Unusually, both equity and bond markets recorded significant
negative returns in 2022. For example, US equities had their worst
year since 2008 with the S&P 500 index sinking over 19 per
cent. Developed government debt as measured by the Bloomberg
Barclays Global Treasury Index fell by 17.5 per cent; commodities
and cash were the only asset classes yielding positive returns.
However, these annual figures mask volatility within the year as
sentiment in both equity and debt markets improved in the fourth
quarter amidst hopes that inflationary pressures had peaked, rate
rises were nearing an end and recessions could be avoided.
It is difficult to imagine a more challenging backdrop for
emerging markets debt than the one that unfolded over the course of
last year. Stubbornly high inflation, aggressive monetary
tightening, slowing global growth, the war in Ukraine, and record
investor outflows all contributed to one of the worst drawdowns
ever for the asset class: emerging market debt (EMBI Global)
dropped by 16.5 percent whilst local currency debt fared a little
better, limiting losses to under 12 per cent. A number of emerging
countries have seen their borrowing costs soar and/or difficulties
in accessing the market in 2022 leading to defaults such as Sri
Lanka and Ghana whilst other countries including Egypt, Tunisia and
Pakistan have sought assistance from the International Monetary
Fund.
The Argo Fund also had a difficult year. The Net Asset Value of
the Class A shares fell by 12.54 per cent in 2022, from US$360.39
to US$315.19. There were positive contributions to this performance
from macro hedges and short positions but the main detractors were
Ukrainian sovereign bonds -now largely exited- and exposure to
countries facing an imbalance between financing requirements and
sources. The NAV of the X2 Class, which was launched in February
2021 and is a carve-out of the TAF distressed debt strategy,
declined by 16.83 per cent in the period up to December due in part
to a variety of corporates undergoing restructuring. It is
currently funded internally but efforts continue to be made to
market this share class to external investors. Units in the
Designated Investment Class - holding a position in distressed
sovereign debt - fell by 2.82 per cent during 2022.
Dividends
The Directors are not declaring a final dividend but intend to
restart dividend payments as soon as the Group's performance
provides a consistent track record of profitability.
Loan receivable from Argo Real Estate Limited Partnership
The Directors would like to draw the attention of the
shareholders to the limitation of scope qualification of the audit
report on page 14. Details of this loan and the related expected
credit loss provision are set out in Note 12.
Outlook
As previously stated, a significant increase in AUM is still
required to ensure sustainable profits on a recurring management
fee basis. The Group is well placed with capacity to absorb such an
increase in AUM with negligible impact on operational costs.
Raising AUM remains Argo's top priority over the coming year.
The Group's marketing efforts continues to focus on TAF which has
22 years of track record. However, the Group continues to seek
opportunities to increase AUM either through existing fund
structures or by identifying external partners with whom to
cooperate.
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.
Independent Auditor's Report (as provided by the Auditors in the
annual report)
To the Members of Argo Group Limited
Qualified Opinion
We have audited the consolidated financial statements of Argo
Group Limited (the "Company"), and its subsidiaries ("the Group"),
which are presented in pages 17 to 42 and comprise the consolidated
statement of financial position as at 31 December 2022, and the
consolidated statements of profit or loss and other comprehensive
income, changes in equity and cash flows for the year then ended,
and notes to the consolidated financial statements, including a
summary of significant accounting policies .
In our opinion, except for the possible effects of the matter
described in the Basis for Qualified Opinion section of our report,
the accompanying consolidated financial statements give a true and
fair view of the financial position of the Group as at 31 December
2022, and of its financial performance and its cash flows for the
year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the IASB.
Basis for Qualified Opinion
As described in Note 12 to the consolidated financial
statements, other loans and advances receivable with a carrying
value of US$13,320 thousand relate to a loan that is exposed to the
performance of an investment property in Ukraine. An expected
credit loss of US$0.5 million has been recognised in relation to
this loan as at 31 December 2022. Due to the current war in
Ukraine, it was not possible for Management obtain an independent
fair value of the underlying collateral for the loan order for us
to reliably assess the assumptions used for the calculation of the
Group's estimate of expected credit loss. Consequently, we were
unable to determine whether any adjustments to this amount were
necessary.
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor's Responsibilities
for the Audit of the Financial Statements section of our report. We
are independent of the Group in accordance with the International
Ethics Standards Board for Accountants' Code of Ethics for
Professional Accountants (IESBA Code) and we have fulfilled our
other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters. In addition to the matter described in the Basis for
Qualified Opinion section of our report, we have determined that
there are no such matters to report.
Other information
The Board of Directors is responsible for the other information.
The other information comprises the following:
-- Chairman's statement
-- Director's report
-- Statement of Director's Responsibilities in respect of the consolidated financial statements
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the Board of Directors for the Consolidated
Financial Statements
The Board of Directors is responsible for the preparation of
financial statements that give a true and fair view in accordance
with International Financial Reporting Standards as adopted by the
IASB, and for such internal control as the Board of Directors
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the Board of
Directors is responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Board of Directors either intends to
liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
The Board of Directors is responsible for overseeing the Group's
financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the Board of Directors.
-- Conclude on the appropriateness of the Board of Directors'
use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
the Group's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a
going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves a true and fair view.
-- We communicate with the Board of Directors regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
-- We also provide the Board of Directors with a statement that
we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
-- From the matters communicated with the Board of Directors, we
determine those matters that were of most significance in the audit
of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor's
report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication
Other Matter
This report, including the opinion, has been prepared for and
only for the Company's members as a body and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whose knowledge
this report may come to.
The engagement partner on the audit resulting in this
independent auditor's report is Maria Kaffa.
Maria Kaffa
Certified Public Accountant and Registered Auditor
for and on behalf of
Baker Tilly Klitou and Partners Ltd
Certified Public Accountants and Registered Auditors
Corner C Hatzopoulou & 30 Griva Digheni Avenue
CY-1066 Nicosia
Cyprus
Nicosia, 30 March 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
YEARED 31 DECEMBER 2022
Year ended Year ended
31 December 31 December
2022 2021
Note US$'000 US$'000
Management fees 2,193 2,548
Performance fees 2 1,582
Other income 351 252
========================================= ====== ============ ====================
2(e),
Revenue 3 2,546 4,382
========================================= ====== ============ ====================
Legal and professional expenses (272) (411)
Management and incentive fees payable (312) (312)
Operational expenses (728) (698)
Employee costs 4 (2,782) (2,220)
Foreign exchange gain/(loss) 20 (8)
Bad debts 11 (636) (740)
Depreciation 9 (125) (186)
========================================= ====== ============ ====================
Operating loss 6 (2,289) (193)
========================================= ====== ============ ====================
Interest income 971 1,091
Realised and unrealized losses on
investments (2,079) (600)
========================================= ====== ============ ====================
(Loss)/profit on ordinary activities
before taxation 3 (3,397) 298
========================================= ====== ============ ====================
Taxation 7 - -
========================================= ====== ============ ====================
Profit for the year after taxation
attributable to members of the Company 8 (3,397) 298
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations (123) (31)
========================================= ====== ============ ====================
Total comprehensive income for
the year (3,520) 267
========================================= ====== ============ ====================
Year ended Year ended
31 December 31 December
2022 2021
US$ US$
Earnings per share (basic) 8 (0.09) 0.01
============================== ============ ============
Earnings per share (diluted) 8 (0.08) 0.01
============================== ============ ============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
At 31 December 2022 At 31 December 2021
Note US$'000 US$'000
Assets
Non-current assets
Land, fixtures, fittings and equipment 9 607 290
Loans and advances receivable 12 13,320 13,641
======================================================= ===== ==================== ====================
Total non-current assets 13,927 13,931
======================================================= ===== ==================== ====================
Current assets
Financial assets at fair value through profit or loss 10 4,387 6,098
Loan and advances receivable 12 96 122
Trade and other receivables 11 413 1,453
Cash and cash equivalents 1,642 1,709
Total current assets 6,538 9,382
======================================================= ===== ==================== ====================
Total assets 3 20,465 23,313
======================================================= ===== ==================== ====================
Equity and liabilities
Equity
Issued share capital 13 390 390
Share premium 25,353 25,353
Revenue reserve (2,977) 420
Foreign currency translation reserve 2(d) (3,209) (3,086)
======================================================= ===== ==================== ====================
Total equity 19,557 23,077
======================================================= ===== ==================== ====================
Current liabilities
Trade and other payables 14 497 236
Taxation payable 7 - -
======================================================= ===== ==================== ====================
Total current liabilities 3 497 236
======================================================= ===== ==================== ====================
Non-current Liabilities
Trade and other payables 14 411 -
======================================================= ===== ==================== ====================
Total non-current liabilities 411 -
======================================================= ===== ==================== ====================
Total equity and liabilities 20,465 23,313
======================================================= ===== ==================== ====================
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEARED 31 DECEMBER 2022
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2021 2021 2021 2021 2021
US$'000 US$'000 US$'000 US$'000 US$'000
Restated at 1 January
2021 390 25,353 122 (3,055) 22,810
Total comprehensive
income
Profit for the year after
taxation - - 298 - 298
Other comprehensive income - - - (31) (31)
At 31 December 2021 390 25,353 420 (3,086) 23,077
============================ ========== ========== ========== ============== ========
Foreign
Issued currency
share Share Revenue translation
capital premium reserve reserve Total
2022 2022 2022 2022 2022
US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2022 390 25,353 420 (3,086) 23,077
Total comprehensive
income
Loss for the year after
taxation - - (3,397) - (3,397)
Other comprehensive income - - - (123) (123)
As at 31 December 2022 390 25,353 (2,977) (3,209) 19,557
============================ ========== ========== ========== ============== ========
The notes on pages 21 to 43 form part of these consolidated
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 DECEMBER 2022
Year ended Year ended
31 December 31 December
2022 2021
Note US$'000 US$'000
Net cash (outflow)/inflow
from operating activities 15 (800) 213
Cash flows from investing
activities
Interest received on cash and
cash equivalents 1 1
Disposal of financial assets
at fair value through profit
or loss 10 924 1,105
Loan repayment received 12 26 -
Purchase of fixtures, fittings
and equipment 9 (7) (1)
=================================== ===== ============ ============
Net cash generated from investing
activities 944 1,105
=================================== ===== ============ ============
Cash flows from financing
activities
Payment of lease liabilities 2(n) (124) (251)
=================================== ===== ============ ============
Net cash used in financing
activities (124) (251)
=================================== ===== ============ ============
Net increase in cash and cash
equivalents 20 1,067
Cash and cash equivalents at
1 January 2022 and
1 January 2021 1,709 675
Foreign exchange loss on cash
and cash
Equivalents (87) (33)
Cash and cash equivalents
as at 31 December 2022 and
31 December 2021 1,642 1,709
=================================== ===== ============ ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 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 and the principal place of business is at
24-25 New Bond Street, London, W1S 2RR. 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 currencies of the Group undertakings are US dollars,
Sterling, Euros and Romanian Lei. The presentational currency is US
dollars. The Group has 22 (2021: 18) employees.
Wholly owned subsidiaries Country of incorporation
Argo Capital Management Limited United Kingdom
Argo Property Management Srl Romania
2. ACCOUNTING POLICIES
(a) Accounting convention
These consolidated financial statements have been prepared on a
historical cost basis, except for the revaluation of certain
financial instruments, and in accordance with International
Financial Reporting Standards, as adopted by the EU.
Going concern
The financial statements have been prepared on a going concern
basis which assumes that the Group will be able to meet its
liabilities as they fall due for the foreseeable future.
The Directors have carried out a rigorous assessment of all the
factors affecting the business in deciding to adopt the going
concern basis for the preparation of the accounts. They have
reviewed and examined the Group's financial and other processes
including the annual budgeting process and expect the Group to have
sufficient cash resources available in the foreseeable future. This
has included the preparation of forecast financial information
focussed on cash flow requirements through to at least March 2022.
These forecasts reflect current cost patterns of the Group and take
into consideration current liquidity constraints of funds under
management and therefore their ability to settle management fees
and other receivables (refer to notes 11 and 12).
On the basis of review of this forecast financial information,
the liquid assets currently held and forecast inflows during the
period, the Directors are confident that the Group has adequate
financial resources available to continue in operational existence
for the foreseeable future and therefore continue to adopt the
going concern basis for preparing the consolidated financial
statements.
The Directors have therefore concluded that it is appropriate to
prepare the consolidated financial statements on a going concern
basis.
(b) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries. Subsidiaries are
consolidated from the date upon which control is transferred to the
Company and cease to be consolidated from the date upon which
control is transferred from the Company.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Company. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
(c) Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed and equity instruments
issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair value at the acquisition date.
Goodwill
Goodwill arising on the consolidation represents the excess of
the cost of the acquisition over the Company's interest in the fair
value of the identifiable assets and liabilities of a subsidiary at
the date of acquisition. Any excess of the Company's interest in
the fair value of the identifiable assets and liabilities over the
cost of the acquisition (negative goodwill) is immediately
recognised in the Consolidated statement of profit or loss.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses. Goodwill which is recognised as an asset is reviewed at
least annually for impairment. Any impairment is recognised
immediately in the Consolidated statement of profit or loss.
Impairment of intangible assets
At each reporting date the Group reviews the carrying amounts of
its intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss, if
any.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as
a revaluation decrease.
(d) Foreign currency translation
The consolidated financial statements are expressed in US
dollars. Transactions denominated in currencies other than US
dollars have been translated at the rate of exchange prevailing at
the date of the transaction. Assets and liabilities in other
currencies are translated to US dollars at the rates of exchange
prevailing at the reporting date. The resulting profits or losses
are reflected in the Consolidated statement of profit or loss.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the reporting date.
Income and expense items are translated at the average exchange
rates for the year. Exchange differences arising, if any, are
classified as equity and transferred to the Group's foreign
currency translation reserve.
(e) Revenue
Revenue is recognised to the extent that it is probable that
economic benefit will flow to the Group and the revenue can be
reliably measured.
Management and incentive fees receivable
The Group recognises revenue for providing management services
to funds. Revenue is accrued on a monthly basis on completion of
management services. In the Argo funds revenue is based on the
assets under management of each mutual fund.
Incentive fees arise monthly, quarterly or on realisation of an
investment. Incentive fees are recognised in the month they
arise.
(f) Depreciation
Plant and equipment is initially recorded at cost and
depreciated on a straight-line basis over the expected useful lives
of the assets, after taking into account the assets' residual
values, as follows:
Leasehold 20% per annum
Fixtures and fittings 33 1/3% per annum
Office equipment 33 1/3% per annum
Computer equipment and software 33 1/3% per annum
(g) IFRS 9 "Financial instruments"
The standard requires debt financial assets to be classified
into two measurement categories: those to be measured subsequently
at fair value (either through other comprehensive income (FVOCI) or
through profit or loss (either FVTPL or FVPL) and those to be
measured at amortized cost. The determination is made at initial
recognition. For debt financial assets the classification depends
on the entity's business model for managing its financial
instruments and the contractual cash flows characteristics of the
instruments. For equity financial assets it depends on the entity's
intentions and designation.
In particular, assets that are held for collection of
contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost.
Assets that are held for collection of contractual cash flows and
for selling the financial assets, where the assets' cash flows
represent solely payments of principal and interest, are measured
at fair value through other comprehensive income. Lastly, assets
that do not meet the criteria for amortised cost or fair value
through other comprehensive income are measured at fair value
through profit or loss.
For investments in equity instruments that are not held for
trading, the classification depends on whether the entity has made
an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through other
comprehensive income. If no such election has been made or the
investments in equity instruments are held for trading they are
required to be classified at fair value through profit or loss.
IFRS 9 also introduces a single impairment model applicable for
debt instruments at amortised cost and fair value through other
comprehensive income and removes the need for a triggering event to
be necessary for recognition of impairment losses. The new
impairment model under IFRS 9 requires the recognition of
allowances for doubtful debts based on expected credit losses
(ECL), rather than incurred credit losses as under IAS 39. The
standard further introduces a simplified approach for calculating
impairment on trade receivables as well as for calculating
impairment on contract assets and lease receivables; which also
fall within the scope of the impairment requirements of IFRS 9.
Financial liabilities are initially recognised at fair value and
classified as subsequently measured at amortised cost, except for
(i) financial liabilities at FVTPL: this classification is applied
to derivatives, financial liabilities held for trading (e.g. short
positions in securities), contingent consideration recognised by an
acquirer in a business combination and other financial liabilities
designated as such at initial recognition and (ii) financial
guarantee contracts and loan commitments. A financial liability is
derecognised when the obligation under the liability is discharged
or cancelled or expires.
(h) Trade date accounting
All 'regular way' purchases and sales of financial assets are
recognised on the 'trade date', i.e. the date that the entity
commits to purchase or sell the asset. Regular way purchases or
sales are purchases or sales of financial assets that require
delivery of the asset within the time frame generally established
by regulation or convention in the market place.
(i) Financial instruments
Financial assets - Classification
The Group classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through OCI or through profit or loss), and
-- those to be measured at amortised cost
The classification and subsequent measurement of debt financial
assets depends on: (i) the Group's business model for managing the
related assets portfolio and (ii) the cash flow characteristics of
the asset. On initial recognition, the Group may irrevocably
designate a debt financial asset that otherwise meets the
requirements to be measured at amortized cost or at FVOCI at FVTPL
if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
All other financial assets are classified as measured at
FVTPL.
For assets measured at fair value, gains and losses will either
be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on
whether the Group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI).
Currently the Group holds only investments which have been
classified as financial assets at fair value through profit or
loss. Investments held at fair value in managed mutual funds are
valued at fair value of the net assets as provided by the
administrators of those funds. Where funds contain level 3 assets
the Directors will consider the carrying value based on information
regarding future expected cash flows using appropriate valuation
techniques such as discounted cash flow analysis. Investment in the
management shares of The Argo Fund Limited is stated at fair value,
being the recoverable amount.
Financial assets - Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVTPL), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVTPL are expensed
in profit or loss. Fair value at initial recognition is best
evidenced by the transaction price. A gain or loss on initial
recognition is only recorded if there is a difference between fair
value and transaction price which can be evidenced by other
observable current market transactions in the same instrument or by
a valuation technique whose inputs include only data from
observable markets.
Financial assets -- impairment -- credit loss allowance for
ECL
The Group assesses on a forward--looking basis the ECL for debt
instruments (including loans) measured at Amortized Cost and FVOCI
and with the exposure arising from loan commitments and financial
guarantee contracts. The Group measures ECL and recognises credit
loss allowance at each reporting date. The measurement of ECL
reflects: (i) an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes, (ii) time
value of money and (iii) all reasonable and supportable information
that is available without undue cost and effort at the end of each
reporting period about past events, current conditions and
forecasts of future conditions.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash
equivalents comprise cash at bank. Cash and cash equivalents are
carried at Amortized Cost because: (i) they are held for collection
of contractual cash flows and those cash flows represent SPPI, and
(ii) they are not designated at FVTPL.
Financial Liabilities
Financial liabilities are initially recognised at fair value and
classified as subsequently measured at amortised cost, except for
(i) financial liabilities at FVTPL: this classification is applied
to derivatives, financial liabilities held for trading (e.g. short
positions in securities), contingent consideration recognised by an
acquirer in a business combination and other financial liabilities
designated as such at initial recognition and (ii) financial
guarantee contracts and loan commitments.
(j) Loans and borrowings
Loans and borrowings are recognised initially at fair value, net
of transaction costs incurred. Loans and borrowings are
subsequently carried at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption value is
recognised in profit or loss over the period of the borrowings,
using the effective interest method, unless they are directly
attributable to the acquisition, construction or production of a
qualifying asset, in which case they are capitalised as part of the
cost of that asset. Loans and borrowings are classified as current
liabilities, unless the Group has an unconditional right to defer
settlement of the liability for at least twelve months after the
statement of financial position date.
(k) Current taxation
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amounts are those
enacted or substantively enacted by the reporting date.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
Consolidated statement of profit or loss because it excludes items
of income or expense that are taxable or deductible in other
periods or because it excludes items that are never taxable or
deductible.
(l) Deferred taxation
Deferred income tax is provided for using the liability method
on temporary timing differences at the reporting date between the
tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax liabilities are
recognised in full for all temporary differences. Deferred tax
assets are recognised for all deductible temporary differences,
carried forward unused tax credits and unused tax losses to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences and
carry-forward of unused tax credits and unused losses can be
utilised.
The carrying amount of deferred income tax assets is revalued at
each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each
reporting date and are recognised to the extent that is probable
that future taxable profits will allow the deferred tax asset to be
recovered. Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply in the year when the
asset is realised or the liability settled, based on tax rates that
have been enacted or substantively enacted at the reporting
date.
(m) Accounting estimates, assumptions and judgements
The preparation of the consolidated financial statements
necessitates the use of estimates, assumptions and judgements.
These estimates, assumptions and judgements affect the reported
amounts of assets, liabilities and contingent liabilities at the
reporting date as well as affecting the reported income and
expenses for the year. Although the estimates are based on
management's knowledge and best judgment of information and
financial data, the actual outcome may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that and prior periods, or in the period of the revision and
future periods if the revision affects both current and future
periods.
In the process of applying the Group's accounting policies,
which are described above, management has made best judgements of
information and financial data that have the most significant
effect on the amounts recognised in the consolidated financial
statements:
- Investments fair value
- Management fees
- Trade receivables
- Going concern
- Loans and advances
It has been assumed that, when available, the audited financial
statements of the funds under the Group's management will confirm
the net asset values used in the calculation of management and
performance fees receivable.
(n) Leases
At inception of a contract, the Group assesses whether a contract
is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an
identified asset, the Group assesses whether:
the contract involves the use of an identified asset this may
be specified explicitly or implicitly and should be physically
distinct or represent substantially all of the capacity of a physically
distinct asset. If the supplier has a substantive substitution
right, then the asset is not identified;
* the Group has the right to obtain substantially all
of the economic benefits from use of the asset
throughout the period of use; and
* the Group has the right to direct the use of the
asset. The Group has this right when it has the
decision--making rights that are most relevant to
changing how and for what purpose the asset is used.
In rare cases where the decision about how and for
what purpose the asset is used is predetermined, the
Group has the right to direct the use of the asset if
either:
* the Group has the right to operate the asset; or
* the Group designed the asset in a way that
predetermines how and for what purpose it will be
used.
At inception or on reassessment of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease component on the basis of their relative
stand--alone prices. However, for the leases of land and buildings
in which it is a lessee, the Group has elected not to separate
non--lease components and account for the lease and non--lease
components as a single lease component.
The Group as lessee
The Group recognises a right--of--use asset and a lease liability
at the lease commencement date. The right--of--use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset
or to restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right--of--use asset is subsequently depreciated using the
straight--line method from the commencement date to the earlier
of the end of the useful life of the right--of--use asset or the
end of the lease term. The estimated useful lives of right--of--use
assets are determined on the same basis as those of property and
equipment. In addition, the right--of--use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the lease liability
comprise the following:
-fixed payments, including in--substance fixed payments;
-variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date;
-amounts expected to be payable under a residual value guarantee;
and
-the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise
an extension option, and penalties for early termination of a
lease unless the Group is reasonably certain not to terminate
early.
The lease liability is measured at amortised cost using the effective
interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there
is a change in the Group 's estimate of the amount expected to
be payable under a residual value guarantee, or if the Group changes
its assessment of whether it will exercise a purchase, extension
or termination option.
(o) Financial instruments and fair value hierarchy
The following represents the fair value hierarchy of financial
instruments measured at fair value in the 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.
(p) Future changes in accounting policies
IASB (International Accounting Standards Board) and IFRIC
(International Financial Reporting Interpretations Committee) have
issued the following standards and interpretations with an
effective date after the date of these financial statements:
Below are the standards that have been endorsed and not
endorsed, effective after 31 December 2022:
Effective date
Amendments to IAS 1 Presentation of Financial Statements: 01/01/2024
-- Classification of Liabilities as Current or (not endorsed)
Non-current Date (issued on 23 January 2020);
-- Classification of Liabilities as Current or
Non-current - Deferral of Effective Date (issued
on 15 July 2020); and
-- Non-current Liabilities with Covenants (issued
on 31 October 2022)
Amendments to IFRS 16 Leases: Lease Liability in 01/01/2024
a Sale and Leaseback (issued on 22 September 2022)
(not endorsed)
Amendments to IFRS 17 Insurance contracts: Initial
Application of IFRS 17 and IFRS 9 - Comparative
Information (issued on 9 December 2021)
Amendments to IFRS 17 Insurance contracts: Initial 01/01/2023
Application of IFRS 17 and IFRS 9 - Comparative
Information (issued on 9 December 2021)
Amendments to IAS 12 Income Taxes: Deferred Tax 01/01/2023
related to Assets and Liabilities arising from
a Single Transaction (issued on 7 May 2021)
Amendments to IAS 1 Presentation of Financial Statements 01/01/2023
and IFRS Practice Statement 2: Disclosure of Accounting
policies (issued on 12 February 2021)
Amendments to IAS 8 Accounting policies, Changes 01/01/2023
in Accounting Estimates and Errors: Definition
of Accounting Estimates (issued on 12 February
2021)
IFRS 17 Insurance Contracts (issued on 18 May 2017); 01/01/2023
including Amendments to IFRS 17 (issued on 25 June
2020)
The Directors do not expect the adoption of these standards and
interpretations to have a material impact on the Group's financial
statements in the period of initial application.
(q) Dividends payable
Interim and final dividends are recognised when declared.
2. 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 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 Capital
Argo Argo Capital Management
Group Management Property Year ended
Ltd Limited Limited 31 December
2022 2022 2022 2022
US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments - 2,201 345 2,546
Intersegment revenues - - - -
Total loss for
reportable segments (1,357) (1,717) (323) (3.397)
Intersegment profit/(loss) - - - -
Total assets for
reportable segments 18,390 1,553 522 20,465
Total liabilities
for reportable
segments 24 528 356 908
============================ ======== =============== ================= =============
Revenues, profit or loss, assets and liabilities Year ended
may be reconciled as follows:
31 December
2022
US$'000
Revenues
Total revenues for reportable segments 2,546
Elimination of intersegment revenues -
================================================== =============
Group revenues 2,546
================================================== =============
Profit or loss
Total loss for reportable segments (3,397)
Other unallocated amounts (-)
================================================== =============
Loss on ordinary activities (3,397)
================================================== =============
Assets
Total assets for reportable segments 24,008
Elimination of intersegment receivables (3,543)
Group assets 20,465
================================================== =============
Liabilities
Total liabilities for reportable segments 4,448
Elimination of intersegment payables (3,543)
================================================== =============
Group liabilities 908
================================================== =============
Argo Capital Argo Capital
Argo Management Argo Capital Management
Group (Cyprus) Management Property Year ended
Ltd Limited Limited Limited 31 December
2021 2021 2021 2021 2021
US$'000 US$'000 US$'000 US$'000 US$'000
Total revenues
for reportable
segments - - 4,130 252 4,382
Intersegment - - - - -
revenues
Total profit/(loss)
for reportable
segments 180 - 544 (426) 298
Intersegment - - - - -
profit/(loss)
Total assets
for reportable
segments 20,661 - 2,426 226 23,313
Total liabilities
for reportable
segments 28 - 185 23 236
===================== ======== ============= =============== ================= =============
Revenues, profit or loss, assets and liabilities Year ended
may be reconciled as follows:
31 December
2021
US$'000
Revenues
Total revenues for reportable segments 4,382
Elimination of intersegment revenues -
================================================== =============
Group revenues 4,382
================================================== =============
Profit or loss
Total profit for reportable segments 298
Other unallocated amounts (-)
================================================== =============
Profit on ordinary activities 298
================================================== =============
Assets
Total assets for reportable segments 26,748
Elimination of intersegment receivables (3,435)
Group assets 23,313
================================================== =============
Liabilities
Total liabilities for reportable segments 3,671
Elimination of intersegment payables (3,435)
================================================== =============
Group liabilities 236
================================================== =============
4. EMPLOYEE COSTS
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
Wages and salaries -under employment
contract 1,682 1,682
Wages and salaries - under service
contract 250 250
Social security costs 187 187
Other 101 101
====================================== ============== ==============
2,220 2,220
====================================== ============== ==============
5. KEY MANAGEMENT PERSONNEL REMUNERATION
Included in employee costs are payments to the following:
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
Directors and key management personnel 1,326 1,051
======================================== ============== ==============
The remuneration of the Directors of the Company for the year
was as follows:
Year ended Year ended
Cash 31 December 31 December
Salaries Fees Benefits bonus 2022 2021
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Executive
Directors
Kyriakos
Rialas 201 - - 40 241 225
Andreas
Rialas 196 - 13 350 559 233
Non-Executive
Directors
Michael
Kloter - 53 - - 53 56
David Fisher - 31 - - 31 34
Ken Watterson - 31 - - 31 34
--------------- ------------- ---------- ------------- ---------- -------------- --------------
6. OPERATING LOSS
Operating profit is stated after charging:
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
Auditors' remuneration 51 56
Depreciation -owned assets 5 7
Depreciation - right of use assets 119 189
Directors' fees and key management
personnel 1,326 1,051
Rent expense 58 33
======================================= ============== ==============
7. TAXATION
Taxation rates applicable to the parent company and the UK, and
Romanian subsidiaries range from 0% to 19% (2021: 0% to 19%).
Consolidated statement of profit or loss
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
Taxation charge for the year on Group - -
companies
Tax on profit on ordinary activities - -
======================================= ============== ==============
The tax charge for the year can be reconciled to the profit on
ordinary activities before taxation shown in the consolidated
statement of profit or loss as follows:
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
(Loss)/profit before tax (3,397) 298
======================================= ============== ==============
Applicable Isle of Man tax rate for
Argo Group Limited of 0% - -
Timing differences (2) (3)
Non-deductible expenses 2 2
Other adjustments (79) (108)
Tax effect of different tax rates
of subsidiaries operating in
other jurisdictions 79 109
======================================= ============== ==============
Tax charge - -
======================================= ============== ==============
Consolidated statement of financial position
At 31 December At 31 December
2022 2021
US$'000 US$'000
Corporation tax payable/receivable - -
==================================== =============== ===============
8. EARNINGS PER SHARE
The Company presents basic and diluted earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary shares
outstanding, adjusted for the effects of all dilutive potential
ordinary shares (see note 20).
Year ended Year ended
31 December 31 December
2022 2021
US$'000 US$'000
(Loss)/profit for the year after
taxation attributable to members (3,397) 298
===================================== ============== ==============
No. of No. of
Shares Shares
Weighted average number of ordinary
shares for basic earnings
per share 38.959,986 38,959,986
Effect of dilution (note 20) 3,895,998 3,895,998
===================================== ============== ==============
Weighted average number of ordinary
shares for diluted earnings per
share 42,855,984 42,855,984
===================================== ============== ==============
Year ended Year ended
31 December 31 December
2022 2021
US$ US$
Earnings per share (basic) (0.09) 0.01
Earnings per share (diluted) (0.08) 0.01
============================== ============== ==============
9. LAND, FIXTURES, FITTINGS AND EQUIPMENT
Right of Fixtures,
use asset fittings Land
& Total
equipment
US$'000 US$'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 455 7 - 462
Disposals (732) (3) - (735)
Foreign exchange movement - (17) (10) (27)
================================ ============ ============ ========== ========
At 31 December 2022 455 188 172 815
================================ ============ ============ ========== ========
Accumulated Depreciation
At 1 January 2021 555 256 - 811
Depreciation charge for period 179 7 - 186
Disposals (92) (62) - (154)
Foreign exchange movement (8) (10) - (18)
================================ ============ ============ ========== ========
At 31 December 2021 634 191 - 825
Depreciation charge for period 120 5 - 125
Disposals (732) (3) - (735)
Foreign exchange movement 8 (16) - (8)
================================ ============ ============ ========== ========
At 31 December 2022 30 177 - 207
================================ ============ ============ ========== ========
Net book value
At 31 December 2022 425 11 172 608
================================ ============ ============ ========== ========
At 31 December 2021 98 10 182 290
================================ ============ ============ ========== ========
10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
31 December 31 December
2022 2022
Holding Investment in management Total cost Fair value
shares
US$'000 US$'000
10 The Argo Fund Ltd - -
- -
==================================== ============== ==============
Holding Investment in ordinary Total cost Fair value
shares
US$'000 US$'000
13,920 The Argo Fund Ltd* 3,824 4,387
3,824 4,387
======== ======================= ============= =============
31 December 31 December
2021 2021
Holding Investment in management Total cost Fair value
shares
US$'000 US$'000
10 The Argo Fund Ltd - -
- -
==================================== ============== ==============
Holding Investment in ordinary Total cost Fair value
shares
US$'000 US$'000
16,920 The Argo Fund Ltd* 4,648 6,098
4,648 6,098
======== ======================= ============= =============
*Classified as current in the consolidated statement of
financial position
11. TRADE AND OTHER RECEIVABLES
At 31 December At 31 December
2022 2021
US$ '000 US$ '000
Trade receivables - Gross 2,255 2,814
Less: provision for impairment
of trade receivables (1,980) (1,499)
-------------------------------- ----------------- -----------------
Trade receivables - Net 275 1,315
Other receivables 41 34
Prepayments and accrued income 97 99
================================ ================= =================
413 1,448
================================ ================= =================
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value. All trade
receivable balances are either recoverable within one year from the
reporting date or are fully provided for. Since the year end the
Group received US$0.2 million in full settlement of these trade
receivables.
The movement in the Group's provision for impairment of trade
and loan receivables is as follows:
At 31 December At 31 December
2022 2021
US$ '000 US$ '000
As at 1 January 14,252 14,101
Bad debt written off (125) -
Provision charged during the year 636 740
Foreign exchange movement (744) (589)
As at 31 December 14,019 14,252
=================================== ================= =================
At year end, the provision for impairment of loan receivables
related to balances previously owed by Argo Real Estate
Opportunities Fund Limited for US$12 million (EUR11.2 million)
(2021: US$12.8 million (EUR11.2 million).
12. LOANS AND ADVANCES RECEIVABLE
At 31 December At 31 December
2022 2021
US$'000 US$'000
Deposits on leased premises - current - 122
-
Deposits on leased premises - non-current 96 9
Other loans and advances receivable - -
- current
Other loans and advances receivable
- non-current 13,320 13,641
============================================= =================== ====================================
13,416 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 $11
million (EUR10.2 million) made in February 2020 by Argo Group
Limited to ARE LP, an entity that is 100% owned by Andreas Rialas.
The loan carries an interest rate of 9%..As this loan is exposed to
the performance of an investment property in Ukraine, the Group has
made an IFRS 9 valuation adjustment of US$0.5 million for expected
losses at the reporting date.
The Group also has a balance receivable for $12 million (EUR11.2
million) from ARE LP (note 11) that was assigned from Argo Real
Estate Opportunities Fund Limited during 2021. The carrying value
of this balance is $nil.
13. SHARE CAPITAL
The Company's authorised share capital is unlimited ordinary
shares with a nominal value of US$0.01.
31 December 31 December 31 December 31 December
2022 2022 2021 2021
No. US$'000 No. US$'000
Issued and fully paid
Ordinary shares of
US$0.01 each 38,959,986 390 38,959,986 390
======================= ============= ============ =============== ===============
38,959,986 390 38,959,986 390
======================= ============= ============ =============== ===============
The Directors do not recommend the payment of a final dividend
for the year ended 31 December 2022 (31 December 2021: US$nil).
14. TRADE AND OTHER PAYABLES
At 31 December At 31 December
2022 2021
US$ '000 US$ '000
Trade creditors 26 37
Other creditors and accruals 471 199
=============================== =============== ===============
Total current trade and other
payables 497 236
=============================== =============== ===============
Trade creditors are normally settled on 30-day terms.
At 31 December At 31 December
2022 2021
US$ '000 US$ '000
Other creditors and accruals 411 -
=================================== =============== ===============
Total non-current trade and other 411 -
payables
=================================== =============== ===============
15. RECONCILIATION OF NET CASH OUTLOW FROM OPERATING ACTIVITIES TO
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
Year ended Year ended
31 December 31 December
2022 2021
US$ '000 US$ '000
(Loss)/profit on ordinary activities
before taxation (3,397) 298
Interest income (971) (1,091)
Depreciation 125 186
Provision for bad debts 636 740
(Decrease)/increase in payables 343 (8)
Decrease/(increase) in receivables 405 (519)
Decrease in fair value of current
asset investments 2,079 599
Net foreign exchange (gain)/loss (20) 8
Income taxes paid - -
====================================== ============== ==============
Net cash (outflow)/inflow from
operating activities (800) 213
====================================== ============== ==============
16. 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
services.
At the reporting date the Company holds an investment in The
Argo Fund Limited. This investment is reflected in the consolidated
financial statements at a fair value of US$4.4 million (31 December
2021: US$6.1 million).
At the year end, the Group was owed $13.8 million (note 12) 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$13.3 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.
During the year, a balance owed by Argo Real Estate
Opportunities Fund Limited for US$12 million (EUR11.2 million) (31
December 2021: US$12.8 million (EUR11.2 million)) was assigned to
Argo Real Estate Limited Partnership. These balances are carried at
US$ nil (31 December 2021: US$ nil) in the financial
statements.
17. FINANCIAL INSTRUMENTS RISK MANAGEMENT
(a) Use of financial instruments
The wider Group has maintained sufficient cash reserves not to
use alternative financial instruments to finance the Group's
operations. The Group has various financial assets and liabilities
such as trade and other receivables, loans and advances, cash,
short-term deposits, and trade and other payables which arise
directly from its operations.
The Group's non-subsidiary investments in funds were entered
into with the purpose of providing seed capital, supporting
liquidity and demonstrating the commitment of the Group towards its
fund investors.
(b) Market risk
Market risk is the risk that a decline in the value of assets
adversely impacts on the profitability of the Group, either as a
result of an asset not meeting its expected value or through the
decline of assets under management generating lower fees. The
principal exposures of the Group are in respect of its seed
investments in its own funds (refer to note 10). Lower management
fee and incentive fee revenues could result from a reduction in
asset values.
(c) Capital risk management
The primary objective of the Group's capital management is to
ensure that the Company has sufficient cash and cash equivalents on
hand to finance its ongoing operations. This is achieved by
ensuring that trade receivables are collected on a timely basis and
that excess liquidity is invested in an optimum manner by placing
fixed short-term deposits or using interest bearing bank
accounts.
At the year-end cash balances were held at Royal Bank of
Scotland and Banca Transilvana.
(d) Credit/counterparty risk
The Group will be exposed to counterparty risk on parties with
whom it trades and will bear the risk of settlement default. Credit
risk is concentrated in the funds under management and in which the
Group holds significant investments as detailed in notes 10, 11 and
12. As explained within these notes the Group is experiencing
collection delays with regard to management fees receivable and
monies advanced. Some of the investments in funds under management
(note 10) are illiquid and may be subject to events materially
impacting recoverable value.
The Group's principal financial assets are bank and cash
balances, trade and other receivables and investments held at fair
value through profit or loss. These represent the Company's maximum
exposure to credit risk in relation to financial assets and are
represented by the carrying amount of each financial asset in the
statement of financial position.At the reporting date, the
financial net assets past due but not impaired amounted to US$nil
(2021: US$nil).
e) Liquidity risk
Liquidity risk is the risk that the Group may be unable to meet
its payment obligations. This would be the risk of insufficient
cash resources and liquid assets, including bank facilities, being
available to meet liabilities as they fall due.
The main liquidity risks of the Group are associated with the
need to satisfy payments to creditors. Trade payables are normally
on 30-day terms (note 14).
As disclosed in note 2(a), Accounting Convention: Going Concern,
the Group has performed an assessment of available liquidity to
meet liabilities as they fall due during the forecast period. The
Group has concluded that it has sufficient resources available to
manage its liquidity risk during the forecast period.
(f) Foreign exchange risk
Foreign exchange risk is the risk that the Group will sustain
losses through adverse movements in currency exchange rates.
The Group is subject to short-term foreign exchange movements
between the calculation date of fees in currencies other than US
dollars and the date of settlement. The Group holds cash balances
in US Dollars, Sterling, Romanian Lei and Euros with carrying
amounts as follows: US dollar - US$1.15 million, Sterling - US$0.18
million and Euros - US$0.31 million.
If there was a 5% increase or decrease in the exchange rate
between the US dollar and the other operating currencies used by
the Group at 31 December 2022 the exposure would be a profit or
loss to the Consolidated statement of comprehensive income of
approximately US$0.025 million (2021: US$0.008 million).
(g) Interest rate risk
The interest rate profile of the Group at 31 December 2022 is as
follows:
Instruments
Total Variable Fixed on which
as per interest interest no interest
balance rate instruments* rate instruments is receivable
sheet
US$ '000 US$ '000 US$ '000 US$ '000
Financial Assets
Financial assets at
fair value
through profit or
loss 4,387 - - 4,387
Loans and receivables 13,829 96 13,320 413
Cash and cash equivalents 1,642 - - 1,642
=========================== ========== ==================== =================== =================
19,858 96 13,320 6,442
=========================== ========== ==================== =================== =================
Financial liabilities
Trade and other payables 908 - 470 438
=========================== ========== ==================== =================== =================
* Changes in the interest rate may cause movements.
Any movement in interest rates would have an immaterial effect
on the profit/(loss) for the year.
19. FINANCIAL INSTRUMENTS RISK MANAGEMENT (continued)
The interest rate profile of the Group at 31 December 2021 is as
follows:
Instruments
Total Variable Fixed on which
as per interest interest no interest
balance rate instruments* rate instruments is receivable
sheet
US$ '000 US$ '000 US$ '000 US$ '000
Financial Assets
Financial assets at
fair value
through profit or
loss 6,098 - - 6,098
Loans and receivables 15,216 111 13,641 1,464
Cash and cash equivalents 1,709 - - 1,709
=========================== ========== ==================== =================== =================
23,023 111 13,641 9,271
=========================== ========== ==================== =================== =================
Financial liabilities
Trade and other payables 236 - 124 112
=========================== ========== ==================== =================== =================
* Changes in the interest rate may cause movements.
Any movement in interest rates would have an immaterial effect
on the profit/(loss) for the year.
(h) Fair value
The carrying values of the financial assets and liabilities
approximate the fair value of the financial assets and liabilities
and can be summarised as follows:
At 31 December At 31 December
2022 2021
US$ '000 US$ '000
Financial Assets
Financial assets at fair value
through profit or loss 4,387 6,098
Loans and receivables 13,829 15,216
Cash and cash equivalents 1,642 1,709
================================= ================= =================
19.858 23,023
================================ ================= =================
Financial Liabilities
Trade and other payables 908 236
================================= ================= =================
Financial assets and liabilities, other than investments, are
either repayable on demand or have short repayment dates. The fair
value of investments is stated at the redemption prices quoted by
fund administrators and are based on the fair value of the
underlying net assets of the funds because, although the funds are
quoted, there is no active market for any of the investments
held.
Fair value hierarchy
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 2o).
At 31 December 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 - 4,387 - 4,387
==================== ========== ========= ========= =========
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
======================== ========== ========= ========= =========
20. SHARE-BASED INCENTIVE PLANS
To incentivise personnel and to align their interests with those
of the shareholders of Argo Group Limited, Argo Group Limited has
granted share options to directors and employees under The Argo
Group Limited Employee Stock Option Plan. The options are
exercisable within 10 years of the grant date.
The fair value of the options granted during the period was
measured at the grant date using a Black-Scholes model that takes
into account the effect of certain financial assumptions, including
the option exercise price, current share price and volatility,
dividend yield and the risk-free interest rate. The fair value of
the options granted is spread over the vesting period of the scheme
and the value is adjusted to reflect the actual number of shares
that are expected to vest.
The principal assumptions for valuing the options are:
Exercise price (pence) 21.0
Weighted average share price
at grant date (pence) 19.0
Average option life at date
of grant (years) 10.0
Expected volatility (% p.a.) 15.0
Dividend yield (% p.a.) 10.0
Risk-free interest rate (%
p.a.) 2
The fair value of options granted is recognised as an employee
expense with a corresponding increase in equity. The total charge
to employee costs in respect of this incentive plan is GBPnil
(2021: GBPnil).
The number and weighted average exercise price of the share
options during the period is as follows:
Weighted average No. of share
exercise price options
Outstanding at beginning of
period 21.2p 3,895,998
Granted during the period - -
Forfeited during the period - -
============================== ================= =============
Outstanding at end of period 21.2p 3,895,998
============================== ================= =============
Exercisable at end of period 21.2p 3,895,998
============================== ================= =============
Outstanding share options are contingent upon the option holder
remaining an employee of the Group.
The weighted average fair value of the options issued during the
period was GBPNil (2021: GBPNil).
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END
FR GZGFFRGFGFZM
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