Half-year Report

RNS Number : 7044M

ARGO Group Limited

01 August 2017

 

Argo Group Limited

("Argo" or the "Company")

Interim Results for the six months ended 30 June 2017

Argo today announces its interim results for the six months ended 30 June 2017.

The Company will today make available its interim report for the six month period ended 30 June 2017 on the Company's website www.argogrouplimited.com.

Key highlights for the six months period ended 30 June 2017

This report sets out the results of Argo Group Limited (the "Company") and its subsidiaries (collectively "the Group" or "Argo") covering the six months ended 30 June 2017.

-     Revenues US$6.3 million (six months to 30 June 2016: US$4.0 million)

-     Operating profit US$3.3 million (six months to 30 June 2016: profit US$3.8 million)

-     Profit before tax US$5.1 million (six months to 30 June 2016: profit US$4.9 million)

-     Net assets US$24.8 million (31 December 2016: US$20.1 million)

Commenting on the results and outlook, Kyriakos Rialas, Chief Executive Officer of Argo said:

"The results of AGL's first six months are a reflection of strong subscriptions and performance in the emerging markets. Investors continue to seek yield in a consistently low global interest rate regime despite recent tapering noise from ECB and interest rate increases by the FED. AGL's results include a significant element of performance fees from the workout of one of the distressed assets. Continuous investor interest in the Argo Fund is expected to materialize into more sizeable subscriptions in the second half of the year. "

Enquiries

Argo Group Limited

Andreas Rialas

020 7016 7660

Panmure Gordon

Dominic Morley

020 7886 2500

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

CHAIRMAN'S STATEMENT

The Group and its investment objective

Argo's investment objective is to provide investors with absolute returns in the funds that it manages by investing in, inter alia, fixed income, special situations, local currencies and interest rate strategies, private equity, real estate, quoted equities, high yield corporate debt and distressed debt, although not every fund invests in each of these asset classes.

Argo was listed on the AIM market in November 2008 and has a performance track record dating back to 2000.

Business and operational review

For the six months ended 30 June 2017 the Group generated revenues of US$6.3 million (six months to 30 June 2016: US$4.0 million) with management fees accounting for US$2.1 million (six months to 30 June 2016: US$2.0 million). The Group generated performance fees of US$4.0 million (six months to 30 June 2016: US$1.7 million).

Total operating costs for the period, ignoring bad debt provisions, are US$1.9 million compared to US$2.0 million for the six months to 30 June 2016. The Group has provided against management fees of US$0.8 million (€0.8 million) (six months to 30 June 2016: US$1.2 million (€1.0 million)) due from AREOF. In the Directors' view these amounts are fully recoverable however they have concluded that it would not be appropriate to continue to recognise income without provision from these investment management services as the timing of such receipts may be outside the control of the Company and AREOF.

Overall, the financial statements show an operating profit for the period of US$3.3 million (six months to 30 June 2016: profit US$3.8 million) and a profit before tax of US$5.1 million (six months to 30 June 2016: profit US$4.9 million) reflecting the net gain on investments of US$1.7 million (six months to 30 June 2016: net gain US$1.1 million). Performance fees will be realisable at the year-end if losses do not occur in the last six months of the year.

At the period end, the Group had net assets of US$24.8 million (31 December 2016: US$20.1 million) and net current assets of US$24.5 million (31 December 2016: US$19.6 million) including cash reserves of US$5.7 million (31 December 2016: US$6.1 million).

Net assets include investments in TAF, AREOF, Argo Special Situations Fund LP and ADCF (together referred to as "the Argo funds") at fair values of US$10.2 million (31 December 2016: US$9.7 million), US$0.1 million (31 December 2016: US$0.1 million), US$0.03 million (31 December 2016: US$0.01 million) and US$3.8 million (31 December 2016: US$2.5 million) respectively.

At the period end the Argo funds (excluding AREOF) owed the Group total management and performance fees of US$5.1 million (31 December 2016: US$2.4 million).

The Argo funds (excluding AREOF) ended the period with Assets under Management ("AUM") at US$136.2 million, 23.1% higher than at the beginning of the period. The increase is mostly due to performance but it includes a small net inflow of new cash. The current level of AUM remains below that required to ensure sustainable profits on a recurring management fee basis in the absence of performance fees. This has necessitated an ongoing review of the Group's cost basis. Nevertheless, the Group has ensured that the operational framework remains intact and that it retains the capacity to manage additional fund inflows as and when they arise.

The average number of permanent employees of the Group for the six months to 30 June 2017 was 23 (30 June 2016: 20).

The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2017 total US$ Nil (31 December 2016: Nil) after a bad debt provision of US$7.8 million (€6.8 million) (31 December 2016: US$6.4 million, €6.1 million). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. The AREOF management contract has a fixed term expiring on 31 July 2018.

Fund performance

Argo Funds

Fund	Launch date	30 June 2017 6 months	30 June 2016 6 months	2016 year total	Since inception	Annualised  performance	Sharpe ratio	Down months	AUM
		%	%	%	%	CAGR %			US$m
The Argo Fund	Oct-00	4.67	41.90	52.30	218.14	8.00	0.50	59 of 101	64.0
Argo Distressed Credit Fund	Oct-08	51.00	33.36	32.69	200.27	15.65	0.62	50 of 105	47.9
Argo Special Situations Fund LP	Feb-12	-12.03	-31.15	-12.03	-87.07	-7.87	-0.12	53 of 65	24.3
Total									136.2

* NAV only officially measured once a year in September.

AREOF's Adjusted NAV at 30 September 2016* were minus US$36.4 million (minus €31.9 million), compared with minus US$23.4 million (minus €20.9 million) a year earlier.  The Adjusted NAV per share at 30 September 2016 of minus US$0.06 (minus €0.05) (2015: minus US$0.03 (minus €0.03).

Although AREOF's consolidated statement of financial position indicates the AREOF group is insolvent on a

consolidated basis, the structural ring-fencing of the underlying SPV's limits the impact on the Group of negative equity at subsidiary level.

Upon completion of the AREOF group restructuring in March 2017, Argo Capital Management Property Limited reduced its annual management fees receivable from AREOF from €2 million to €1 million.

Emerging markets had a mixed start to the year primarily due to uncertainty in the US following the inauguration of President Trump. A number of election campaign promises would, if enacted, have had a detrimental impact on emerging market economies, most notably Mexico and Asian exporters. In addition, tighter US monetary policy - the Federal Reserve increased interest rates twice during the period - weaker oil prices and local political upheavals added to the volatility in certain countries such as Brazil, Qatar and Venezuela. However, some of these pressures began to abate towards the end of the period and it has become evident that policy change and/or implementation in the US has become quite difficult.

The long/short strategy pursued by TAF allows it to adjust quickly to a fluid emerging market credit environment and it recorded a respectable return of 4.67% in the first half. The performance of ADCF, which concentrates on less liquid distressed positions, was helped significantly by the revaluation prompted by a reassessment of recovery prospects from an industrial asset in Asia.

TAF is the Group's flagship fund and has a 17 year track record. Going forward, TAF continues to focus on liquid bond securities, both sovereign and corporate, and will be the centre of the Group's marketing efforts. Following the declines experienced by emerging markets over the past two years, the Board believes they offer attractive investment opportunities. Furthermore, the economic fundamentals in emerging markets are robust. They are expected to deliver significantly stronger economic growth than developed markets in 2017 while enjoying attractive risk profiles thanks to low levels of government indebtedness and high foreign exchange reserves.

The two markets in which AREOF operates were mixed. Conditions in Romania were largely favourable as the local economy continued to expand thereby boosting the local property market. In Ukraine, the political situation has been stable and the economy is now on a modest recovery path.

The majority of AREOF's debt facilities have been in default at some point during the period. This situation has been addressed through renegotiation with lending banks with a view to restructuring debt commitments to better align these to the current level of the AREOF group's cash flow. While discussions with the relevant banks are ongoing to find an agreeable solution for all parties AREOF continues to enjoy the forbearance of its banks and support of its shareholders. In view of this, the directors of AREOF have concluded that AREOF is a going concern.

The prevailing equity price of the AREOF shares at the time of their suspension in 2013 (see note 8 to the financial statements) was 2.0 euro cents. The valuation of Argo Group Limited's investment in AREOF and that of the Argo funds was 1.0 euro cent per share as at 30 June 2017.

Dividends and share purchase programme

The Group did not pay a dividend during the current or prior period. The Directors intend to restart dividend payments as soon as the Group's performance provides a consistent track record of profitability.

During the period the Directors authorised the repurchase of 1,065,616 shares at a total cost of U$0.2 million (£0.2million).

Under the current Share Buyback Programme II, the Company intends to use up to £2 million to acquire Ordinary Shares in the market over a twelve month period commencing on 28 September 2016 and expiring no later than 19 September 2017 (one year from the date of the 2016 AGM which authorised the 2016 Share Buyback Programme II). The minimum price that Argo will pay is 8p per Ordinary Share. The aggregate number of Ordinary Shares which may be acquired on behalf of the Company in connection with the 2016 Share Buyback Programme II will not exceed 23,676,987 Ordinary Shares, which broadly represents the number of shares in public hands. 

The Company has spent US$0.3million (£0.2 million) to buy back 1,440,616 Ordinary Shares on this programme so far.

The Directors firmly believe that a return of excess cash to shareholders through buy-backs will send a positive message to investors.

Outlook

The Board remains optimistic about the Group's prospects based on the transactions in the pipeline and the Group's initiatives to increase AUM. A significant increase in AUM is still required to ensure sustainable profits on a recurring management fee basis and the Group is well placed with capacity to absorb such an increase in AUM with negligible impact on operational costs.

Boosting AUM will be Argo's top priority in the next six months. The Group's marketing efforts will continue to focus on TAF which has a 17 year track record as well as identifying acquisitions that are earnings enhancing. TAF's prospectus was amended as of 1 March 2016 to eliminate trading in level 3 illiquid assets and concentrate trading and investments in emerging market bonds and other liquid assets.

Both TAF and ADCF are now registered with HM Revenue & Customs as UK Reporting Funds. This status allows our UK investors to be tax efficient with income or capital gains earned from our Cayman funds.

Over the longer term, the Board believes there is significant opportunity for growth in assets and profits and remains committed to ensuring the Group's investment management capabilities and resources are appropriate to meet its key objective of achieving a consistent positive investment performance in the emerging markets sector.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2017

			Six months					Six months
			ended					ended
			30 June					30 June
			2017					2016
	Note		US$'000					US$'000
Management fees			2,138					2,042
Performance fees			4,045					1,669
Other income			122					327
Revenue			6,305					4,038
Legal and professional expenses			(126)					(375)
Management and incentive fees payable			(33)					(34)
Operational expenses			(532)					(481)
Employee costs			(1,228)					(1,114)
Bad debt provision	9, 10		(1,032)					1,712
Foreign exchange gain			(7)					39
Depreciation	7		(15)					(21)
Operating profit			3,332					3,764
Interest income			88					44
Realised and unrealised gains/(losses) on investments	8		1,728					1,094
Profit/(loss) on ordinary activities before taxation			5,148					4,902
Taxation	5		(382)					(97)
Profit/(loss) for the period after taxation attributable to members of the Company	6		4,766					4,805
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations			202					(215)
Total comprehensive income for the period			4,968					4,590
				Six months			Six months
				Ended			Ended
				30 June			30 June
				2017			2016
				US$			US$
Earnings per share (basic)		6		0.10			0.08
Earnings per share (diluted)		6		0.09			0.07

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2017

		30 June		At 31 December
		2017		2016
	Note	US$'000		US$'000
Assets
Non-current assets
Fixtures, fittings and equipment	7	39		50
Financial assets at fair value through profit or loss	8	148		134
Loans and advances receivable	10	114		264
Total non-current assets		301		448
Current assets
Financial assets at fair value through profit or loss	8	13,982		12,267
Trade and other receivables	9	5,272		2,870
Loans and advances receivable	10	69		66
Cash and cash equivalents		5,742		6,126
Total current assets		25,065		21,329
Total assets		25,366		21,777
Equity and liabilities
Equity
Issued share capital	11	470		481
Share premium		28,022		28,211
Revenue reserve		(902)		(5,668)
Foreign currency translation reserve		(2,753)		(2,955)
Total equity		24,837		20,069
Current liabilities
Trade and other payables		146		1,683
Taxation payable	5	383		25
Total current liabilities		529		1,708
Total equity and liabilities		25,366		21,777

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2017

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2016	2016	2016	2016	2016
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2016	674	30,878	(6,239)	(2,876)	22,437
Total comprehensive income
Profit for the period after taxation	-	-	4,805	-	4,805
Other comprehensive income	-	-	-	(215)	(215)
Transaction with owners recorded directly in equity
Purchase of own shares (note 14)	(189)	(2,601)	-	-	(2,790)
As at 30 June 2016	485	28,277	(1,434)	(3,091)	24,237

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2017	2017	2017	2017	2017
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2017	481	28,211	(5,668)	(2,955)	20,069
Total comprehensive income
Profit for the period after taxation	-	-	4,766	-	4,766
Other comprehensive income	-	-	-	202	202
Transactions with owners recorded directly in equity
Purchase of own shares (note 11)	(11)	(189)	-	-	(200)
As at 30 June 2017	470	28,022	(902)	(2,753)	24,837

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2017

		Six months ended		Six months ended
		30 June		30 June
		2017		2016
	Note	US$'000		US$'000
Net cash (outflow)/inflow from operating activities	12	(366)		3,311
Cash flows used in investing activities
Interest received on cash and cash equivalents		14		23
Purchase of fixtures, fittings and equipment	7	(2)		(2)
Purchase of current asset investments	8	-		(2,000)
Proceeds from disposal of investments	8	-		7,467
Net cash generated from/(used in) investing activities		12		5,488
Cash flows from financing activities
Repurchase of own shares		(200)		(2,795)
Net cash used in financing activities		(200)		(2,795)
Net increase/(decrease) in cash and cash equivalents		(554)		6,004
Cash and cash equivalents at 1 January 2017 and     1 January 2016		6,126		3,126
Foreign exchange loss on cash and cash equivalents		170		(147)
Cash and cash equivalents as at 30 June 2017 and 30 June 2016		5,742		8,983

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2017

1.       CORPORATE INFORMATION

         The Company is domiciled in the Isle of Man under the Companies Act 2006.  Its registered office is at 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB. The condensed consolidated interim financial statements of the Group as at and for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the "Group").

         The consolidated financial statements of the Group as at and for the year ended 31 December 2016 are available upon request from the Company's registered office or at www.argogrouplimited.com.

         The principal activity of the Company is that of a holding company and the principal activity of the wider Group is that of an investment management business. The functional and presentational currency of the Group undertakings is US dollars.  

         Wholly owned subsidiaries                                                              Country of incorporation

Argo Capital Management (Cyprus) Limited	Cyprus
Argo Capital Management Limited	United Kingdom
Argo Capital Management Property Limited	Cayman Islands
Argo Property Management Srl	Romania
North Asset Management Sarl	Luxembourg

A firm of solicitors was appointed on 30 June 2017 for the dissolution of North Asset Management Sarl as this company has been dormant since June 2016 and does no longer have a purpose.

2.       ACCOUNTING POLICIES

(a)     Basis of preparation

         These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2016.

         The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016.

         These condensed consolidated interim financial statements were approved by the Board of Directors on 31 July 2017.       

b)      Financial instruments and fair value hierarchy

The following represents the fair value hierarchy of financial instruments measured at fair value in the Condensed Consolidated Statement of Financial Position. The hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement

3.      SEGMENTAL ANALYSIS

The Group operates as a single asset management business.

The operating results of the companies set out in note 1 above are regularly reviewed by the Directors of the Group for the purposes of making decisions about resources to be allocated to each company and to assess performance. The following summary analyses revenues, profit or loss, assets and liabilities:

	Argo Group Ltd	Argo Capital Management (Cyprus) Ltd	Argo Capital Management Ltd	Argo Capital Management Property Ltd	Six months ended  30 June
	2017	2017	2017	2017	2017
	US$'000	US$'000	US$'000	US$'000	US$'000
Total revenues for reportable segments customers	-	1,348	5,392	913	7,653
Intersegment revenues	-	1,348	-	-	1,348
Total profit/(loss) for reportable segments	1,592	1,137	2,899	(480)	5,148
Intersegment profit/(loss)	-	1,348	(1,348)	-	-
Total assets for reportable segments assets	17,071	2,135	5,683	2,448	27,337
Total liabilities for reportable segments	9	136	1,366	989	2,500

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Six months
	Ended
	30 June 2017
	US$'000
Revenues
Total revenues for reportable segments	7,653
Elimination of intersegment revenues	(1,348)
Group revenues	6,305
Profit or loss
Total profit for reportable segments	5,148
Elimination of intersegment loss	-
Other unallocated amounts	-
Profit on ordinary activities before taxation	5,148
Assets
Total assets for reportable segments	27,337
Elimination of intersegment receivables	(1,971)
Group assets	25,366
Liabilities
Total liabilities for reportable segments	2,500
Elimination of intersegment payables	(1,971)
Group liabilities	529

	Argo Group Ltd	Argo Capital Management (Cyprus) Ltd	Argo Capital Management Ltd	Argo Capital Management Property Ltd	Six months ended 30 June
	2016	2016	2016	2016	2016
	US$'000	US$'000	US$'000	US$'000	US$'000
Total revenues for reportable segments	600	786	2,497	1,425	5,308
Intersegment revenues	600	570	100	-	1,270
Total profit/(loss) for reportable segments	1,470	(136)	1,063	2,622	5,019
Intersegment profit/(loss)	600	(128)	(499)	-	(27)
Total assets for reportable segments	14,899	1,213	3,934	5,090	25,136
Total liabilities for reportable segments	40	29	691	1,069	1,829

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Six months
	ended
	30 June 2016
	US$'000
Revenues
Total revenues for reportable segments	5,308
Elimination of intersegment revenues	(1,270)
Group revenues	4,038
Profit or loss
Total profit for reportable segments	5,019
Elimination of intersegment loss	27
Other unallocated amounts	(144)
Profit on ordinary activities before taxation	4,902
Assets
Total assets for reportable segments	25,136
Elimination of intersegment receivables	(572)
Group assets	24,564
Liabilities
Total liabilities for reportable segments	1,829
Elimination of intersegment payables	(1,502)
Group liabilities	327

4.   SHARE-BASED INCENTIVE PLANS

         On 14 March 2011 the Group granted options over 5,900,000 shares to directors and employees under The Argo Group Limited Employee Stock Option Plan. All options are exercisable in four equal tranches over a period of four years at an exercise price of 24p per share.

         The fair value of the options granted was measured at the grant date using a Black-Scholes model that takes into account the effect of certain financial assumptions, including the option exercise price, current share price and volatility, dividend yield and the risk-free interest rate. The fair value of the options granted is spread over the vesting period of the scheme and the value is adjusted to reflect the actual number of shares that are expected to vest.

The principal assumptions for valuing the options are:

Exercise price (pence)	24.0
Weighted average share price at grant date (pence)	12.0
Weighted average option life (years)	10.0
Expected volatility (% p.a.)	2.11
Dividend yield (% p.a.)	10.0
Risk-free interest rate (% p.a.)	5.0

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The total charge to employee costs in respect of this incentive plan is nil due to the differential in exercise price and share price.

The number and weighted average exercise price of the share options during the period is as follows:

	Weighted average exercise price	No. of share options
Outstanding at beginning of period	24.0p	4,840,000
Granted during the period	-	450,000
Forfeited during the period	24.0p	(750,000)
Outstanding at end of period	24.0p	4,540,000
Exercisable at end of period	24.0p	4,540,000

The options outstanding at 30 June 2017 have an exercise price of 24p and a weighted average contractual life of 10 years, with all tranches of shares now being exercisable. Outstanding share options are contingent upon the option holder remaining an employee of the Group. They expire after 10 years.

No share options were issued during the period.

5.      TAXATION

         Taxation rates applicable to the parent company and the Cypriot, UK, Luxembourg, Cayman and Romanian subsidiaries range from 0% to 19.25% (2016: 0% to 20%).

Consolidated statement of profit or loss	Six months		Six months
	ended		Ended
	30 June		30 June
	2017		2016
	US$'000		US$'000
Taxation charge for the period on Group companies	382		97

The charge for the period can be reconciled to the profit/(loss) shown on the Condensed Consolidated Statement of profit or loss as follows:

	Six months		Six months
	ended		Ended
	30 June		30 June
	2017		2016
	US$'000		US$'000
Profit/(loss) before tax	5,148		4,902
Applicable Isle of Man tax rate for Argo Group Limited of 0%	-		-
Timing differences	-		2
Non-deductible expenses	5		6
Other adjustments	(308)		(171)
Tax effect of different tax rates of subsidiaries operating in other jurisdictions	685		260
Tax charge	382		97

Consolidated statement of financial position
	30 June		31 December
	2017		2016
	US$'000		US$'000
Corporation tax payable	383		25

6.      EARNINGS PER SHARE

         Earnings per share is calculated by dividing the net profit/(loss) for the period by the weighted average number of shares outstanding during the period.

	Six months		Six months
	ended		ended
	30 June		30 June
	2017		2016
	US$'000		US$'000
Net profit/(loss) for the period after taxation attributable to members	4,766		4,805
	No. of shares		No. of shares
Weighted average number of ordinary shares for basic earnings per share	47,582,353		62,509,327
Effect of dilution (Note 4)	4,540,000		4,840,000
Weighted average number of ordinary shares for diluted earnings per share	52,122,353		67,349,327

	Six months		Six months
	ended		ended
	30 June		30 June
	2017		2016
	US$		US$
Earnings per share (basic)	0.10		0.08
Earnings per share (diluted)	0.09		0.07

7.      FIXTURES, FITTINGS AND EQUIPMENT

	Fixtures, fittings & equipment
	US$'000
Cost
At 1 January 2016	245
Additions	31
Disposals	(2)
Foreign exchange movement	(24)
At 31 December 2016	250
Additions	2
Foreign exchange movement	11
At 30 June 2017	263
Accumulated Depreciation
At 1 January 2016	181
Depreciation charge for period	41
Disposals	(2)
Foreign exchange movement	(20)
At 31 December 2016	200
Depreciation charge for period	15
Foreign exchange movement	9
At 30 June 2017	224
Net book value
At 31 December 2016	50
At 30 June 2017	39

8.       FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

		30 June 2017		30 June 2017
Holding	Investment in management shares	Total cost		Fair value
		US$'000		US$'000
10	The Argo Fund Ltd	-		-
100	Argo Distressed Credit Fund Ltd	-		-
1	Argo Special Situations Fund LP	-		-
		-		-

Holding	Investment in ordinary shares	Total cost		Fair value
		US$'000		US$'000
32,104	The Argo Fund Ltd*	7,159		10,192
10,899,021	Argo Real Estate Opportunities Fund Ltd	988		119
115	Argo Special Situations Fund LP	115		29
1,262	Argo Distressed Credit Fund Limited*	2,000		3,790
		10,262		14,130

		31 December		31 December
		2016		2016
Holding	Investment in management shares	Total cost		Fair value
		US$'000		US$'000
10	The Argo Fund Ltd	-		-
100	Argo Distressed Credit Fund Ltd	-		-
1	Argo Special Situations Fund LP	-		-
		-		-

Holding	Investment in ordinary shares	Total cost		Fair value
		US$'000		US$'000
32,104	The Argo Fund Ltd*	7,159		9,758
10,899,021	Argo Real Estate Opportunities Fund Ltd	988		119
115	Argo Special Situations Fund LP	115		15
1,262	Argo Distressed Credit Fund Ltd*	2,000		2,509
		10,262		12,401

*Classified as current in the consolidated statement of Financial Position

9.       TRADE AND OTHER RECEIVABLES

	At 30 June 2017		At 31 December 2016
	US$ '000		US$ '000
Trade receivables - Gross	15,366		11,078
Less: provision for impairment of trade receivables	(10,264)		(8,626)
Trade receivables - Net	5,102		2,452
Other receivables	87		354
Prepayments and accrued income	83		64
	5,272		2,870

    The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All trade receivable balances are recoverable within one year from the reporting date except as disclosed below.

A provision for impairment have been raised for all balances owed by the AREOF Group under trade and other receivables. These balances include all management fees and other loans and advances made by the investment manager to the AREOF Group. These amounted to US$10.1 million (€8.9 million) (31 December 2016: US$8.5 million, €8.1 million).

At 30 June 2017, Argo Special Situations Fund LP owed the Group total management fees of US$0.9 million (31 December 2016: US$0.6 million). This fund is currently facing liquidity issues due to the debt financing arrangement put in place in 2014 however Management continues to work to remedy this and the Directors are confident that these fees may be recovered in the future.

         The movement in the Group's provision for impairment of trade receivables is as follow:

	At 30 June 2017		At 31 December 2016
	US$ '000		US$ '000
Opening balance	8,626		8,345
Bad debt recovered	-		(2,776)
Charged during the period	884		3,329
Foreign exchange movement	754		(272)
Closing balance	10,264		8,626

10.     LOANS AND ADVANCES RECEIVABLE

	At 30 June 2017		At 31 December 2016
	US$'000		US$'000
Deposits on leased premises - current	69		66
Deposits on leased premises - non-current (see below)	15		13 9
Other loans and advances receivable - non-current (see below)	99		251
	183		330

The deposits on leased premises are retained by the lessor until vacation of the premises at the end of the lease term as follows:

	At 30 June 2017		At 31 December 2016 t 31 December 2016
	US$'000		US$'000
Non-current:
Lease expiring in third year after reporting date	15		13
	15		13

The non-current other loans and advances receivable comprise:

	At 30 June 2017		At 31 December 2016
	US$'000		US$'000
Loan to AREOF	10		23
Loans to other AREOF Group entities	89		226
Other loans	-		2
	99		251

In the period to 30 June 2017, a provision for bad debt for US$0.2 million (31 December 2016: US$ Nil)      was made for balances with the AREOF Group for which settlement is considered uncertain.  The remaining exposure of US$0.1 million is considered recoverable as these are advances made on behalf of the AREOF Group to third parties and we expect settlement when the third parties repay.

11.     SHARE CAPITAL

   The Company's authorised share capital is unlimited with a nominal value of US$0.01.

	30 June	30 June	31 December	31 December
	2017	2017	2016	2016
	No.	US$'000	No.	US$'000
Issued and fully paid
Ordinary shares of US$0.01 each	47,032,878	470	48,098,494	481
	47,032,878	470	48,098,494	481

The Directors did not recommend the payment of a final dividend for the year ended 31 December 2016 and do not recommend an interim dividend in respect of the current period.

During the period the Directors authorised the repurchase of 1,065,616 shares at a total cost of US$0.2 million

12.     RECONCILIATION OF NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES TO PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

	Six months ended 30 June 2017		Six months ended 30 June 2016
	US$'000		US$'000
Profit on ordinary activities before taxation	5,148		4,902
Interest income	(88)		(44)
Depreciation	15		21
Realised and unrealised gains	(1,729)		(1,094)
Net foreign exchange loss/ (gain)	7		(39)
(Decrease)/increase in payables	(1,538)		29
Increase in receivables, loans and advances	(2,181)		(371)
Income taxes paid	-		(93)
Net cash (outflow)/ inflow from operating activities	(366)		3,311

13.     FAIR VALUE HIERARCY

The table below analyses financial instruments measured at fair value at the end of the reporting period by the level of the fair value hierarchy (note 2b).

                                                                                       At 30 June 2017

	Level 1	Level 2	Level 3	Total
	US$ '000	US$ '000	US$ '000	US$ '000
Financial assets at fair value through profit or loss	-	13,982	148	14,130

                                                               At 31 December 2016

	Level 1	Level 2	Level 3	Total
	US$ '000	US$ '000	US$ '000	US$ '000
Financial assets at fair value through profit or loss	-	12,267	134	12,401

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy:

	Unlisted closed ended investment fund		Listed open ended investment fund Emerging Markets
	Real Estate			Total
	US$ '000		US$ '000	US$ '000
Balance as at 1 January 2017	119		15	134
Total loss recognized in profit or loss	-		14	14
Balance as at 30 June 2017	119		29	148

14.   RELATED PARTY TRANSACTIONS

All Group revenues derive from funds or entities in which two of the Company's directors, Andreas Rialas and Kyriakos Rialas, have an influence through directorships and the provision of investment advisory services.

At the reporting date the Company holds investments in The Argo Fund Limited, Argo Real Estate Opportunities Fund Limited ("AREOF"), Argo Special Situations Fund LP and Argo Distressed Credit Fund Limited. These investments are reflected in the accounts at a fair value of US$10.2 million, US$0.1 million, US$0.03 million and US$3.8 million respectively.

The Group has provided AREOF with a notice of deferral in relation to the amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 30 June 2017 total US$Nil (31 December 2016:Nil) after a bad debt provision of US$7.8 million (€6.8 million) (31 December 2016: US$6.4 million, €6.1 million). In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies.  The AREOF management contract has a fixed term expiring on 31 July 2018.

At the period end the Argo Group is also owed loans repayable on demand of US$1.9 million (€1.7 million) (31 December 2016: US$1.7 million, €1.6 million) by AREOF accruing interest at 10%. A full provision has been made in the consolidated financial statements against this balance at the current and prior period.

At the period end the Argo Group was owed a total balance of US$0.3 million (€0.3 million) (31 December 2016: US$0.2 million, €0.2 million) by other AREOF Group entities. A provision for bad debt of US$0.3 million (€0.1 million) (31 December 2016: US$0.1 million, €0.1 million) has been made in the accounts in respect of these balances.

In addition to the above, the Argo Group is owed a further US$0.3 million (€0.3 million) (31 December 2016: US$0.3 million (€0.3 million) for expenses paid on behalf of AREOF, against which a bad debt provision for US0.3 million (€0.3 million) (31 December 2016: US$0.3 million, €0.3 million)

In the audited consolidated financial statements of AREOF at 30 September 2016 a material uncertainty surrounding the refinancing of bank debts was referred to in relation to the basis of preparation of the consolidated financial statements. In the view of the directors of AREOF, discussions with the banks are continuing satisfactorily and they have therefore concluded that it is appropriate to prepare those consolidated financial statements on a going concern basis.

          David Fisher, a non-executive director of the Company, is also a non-executive director of AREOF.

15.   COMMITMENTS

On 19th June 2017, the Board of Argo Property Management Limited approved the purchase of a piece of land in Romania for US$ 223.233 (RON891,613).  The 10% guarantee deposit in respect of the purchase was paid in June 2017. The purchase completed on 4 July 2017.

 

END

 

 

IR LIFFDTDILIID