TIDMARB
RNS Number : 9297H
Argo Blockchain PLC
09 August 2021
Press release
09 August 2021
Argo Blockchain PLC
("Argo" or "the Company")
Interim Half Year Results 2021
Update on Mining Infrastructure
Argo Blockchain, a global leader in cryptocurrency mining (LSE:
ARB), is pleased to announce its results for the six months to 30
June 2021.
Financial highlights
-- Revenues increase by 180% to GBP31.1m reflecting increase in
production coupled with an increase in Bitcoin prices (H1 2020:
GBP11.1m)
-- EBITDA* increased by 332% to GBP16.0m (H1 2020: GBP3.7m)
despite a GBP6.2m downward revaluation of digital assets and a
GBP1.6m share based payment charge
-- M ining margin of 81% (H1 2020: 39%)
-- Pre-tax profit of GBP10.7m (H1 2020: GBP0.5m)
-- To tal number of Bitcoin and Bitcoin Equivalent mined during
H1 2020 was 883 BTC (2020: 1,669). The change from the previous
period was mainly due to the halving of May 2020
-- To tal number of Bitcoin and Bitcoin Equivalent held as at 30
June 2021 were 1,268 BTC, an increase from 127 Bitcoin and Bitcoin
Equivalent as at 30 June 2020
*Earnings before interest, tax, depreciation and
amortisation
Operating highlights
-- Mining capacity increased from 685 petahash as at 31 December
2020 to 1,075 petahash as at 30 June 2021
Post period end
-- Broken ground at the Texas facility
-- In late June and July, significant changes in mining
difficulty led to a substantial decrease in the global hashrate,
resulting in an increase in the number of Bitcoin Argo mines with
the same hashpower
-- New board appointments
Commenting on the results, Peter Wall, chief executive and
interim chairman, said: " We have capitalised on a change in market
conditions in the first half of 2021 to deliver strong growth in
both revenues and profits, demonstrating that our smart growth
strategy is delivering value to shareholders."
Update on Mining Infrastructure
The Company announces an update to its 22 February 2021
announcement relating to the expansion of the Company's mining
capacity in Q4 2021 and 2022. As previously announced, Argo
committed to an initial purchase of US$8 million of mining rigs
from ePIC Blockchain Technologies ("ePIC"), with delivery expected
to begin in Q4 2021. However, based on limitations of technology,
Argo and ePIC have agreed to amend the agreement. Under the amended
agreement, the initial purchase order was cancelled and, at Argo's
option, $5 million deposited with ePIC, in whole or in part, can be
applied to the purchase of ePIC mining machines or ePIC common
stock or repaid in full.
This announcement contains inside information.
For further information please contact:
Argo Blockchain
Peter Wall via Tancredi +44 203 434 2334
Chief Executive
------------------------------
finnCap Ltd
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Corporate Finance
Jonny Franklin-Adams
Tim Harper
Joint Corporate Broker
Sunila de Silva +44 207 220 0500
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Tennyson Securities
------------------------------
Joint Corporate Broker
Peter Krens +44 207 186 9030
------------------------------
OTC Markets
------------------------------
Jonathan Dickson +44 204 526 4581
jonathan@otcmarkets.com +44 7731 815 896
------------------------------
Tancredi Intelligent Communication
UK & Europe Media Relations
------------------------------
Emma Valgimigli
Emma Hodges +44 7727 180 873
Salamander Davoudi +44 7861 995 628
argoblock@tancredigroup.com +44 7957 549 906
------------------------------
About Argo:
Argo Blockchain plc is a global leader in cryptocurrency mining
with one of the largest and most efficient operations powered by
clean energy. The Company is headquartered in London, UK and its
shares are listed on the Main Market of the London Stock Exchange
under the ticker: ARB and on the OTCQX Best Market in the United
States under the ticker: ARBKF.
Interim Management Report
Argo entered 2021 with a clear business strategy of "smart
growth" and its mining operations continue to gain momentum as new
production capacity was brought onstream. The Group's mining margin
has remained strong during the first half of 2021, averaging 81 per
cent over the period.
In the first quarter, the Group conducted two fundraisings which
together generated GBP49.2m in new equity. These fundraisings
enabled the Group to invest in new machines and fund working
capital requirements as well as a strategic investment in Pluto
Digital PLC ("Pluto") and an acquisition of DPN LLC to acquire the
Helios project and land in West Texas, as described below. The
Group has been able to grow its crypto holding to 1,268 Bitcoin and
equivalents at the end of June 2021 as a result of the cash
generated from these placements and the monies collected from
options and warrants exercises, which helped to fund working
capital.
In March, the Group acquired the Helios project - 160 acres of
land in West Texas primed for the development of a cryptocurrency
data centre - through the acquisition of DPN LLC. The land has
access to up to 800 megawatts (MW) of power, primarily from
renewable sources. Post period end, the Group has broken ground at
this facility and expects the first stage of this development, a
200MW Facility, to be completed in the first half of 2022.
The Group is mindful of its carbon footprint and has previously
committed to announce its climate action plan to achieve the
Group's goal of becoming a net zero greenhouse gas (GHG) company.
Alongside this plan, in March the Group announced "Terra Pool", a
Bitcoin mining pool powered by clean energy, with the aim of
expediting the shift from conventional power to clean energy and
reducing the impact of Bitcoin mining on the environment. The
mining pool will provide a platform for cryptocurrency miners to
produce Bitcoin and other cryptocurrencies in a sustainable
way.
In two separate investment rounds completed in early 2021 Argo
invested a total of GBP8.4m in Pluto. Pluto is a crypto technology
company that is exploring solutions to connect Web 3.0 technologies
to the global economy. Pluto is investing in, incubating and
advising digital asset projects based on decentralised technologies
(DeTech), decentralised finance (DeFi) and networks such as
Ethereum and Polkadot. Pluto also plans to support the operation of
proof-of-stake networks by staking and operating validator
nodes.
Having successfully completed a major expansion, the Group's
strategic focus is to optimise operations by further increasing
efficiency and reducing operating costs and executing the build out
of Argo's Texas facility in line with the timeline the Group set
out in the first quarter of 2021.
Outlook
I am delighted to report that the shift to profitability we
reported in 2020 has continued into 2021 with the Group recording a
record profit.
The Group increased EBITDA from GBP3.7m in H1 2020 to GBP16.0m
in H1 2021. Profit before tax amounted to GBP10.7m against GBP0.5m
in the comparable period while earnings attributable to
shareholders amounted to GBP7.21m, up from GBP523,000 in 2020.
The results also reflect Argo's strategy to pursue "smart
growth", which entailed considered investment in its mining
infrastructure when hardware prices were competitive, while
enhancing mining efficiency through optimisation of machine
performance and energy costs. These factors enabled the Group to
manage its cash resources through a highly volatile pricing
environment for Bitcoin, which impacted mining margins and
difficulty rates across the sector for much of the period. As we
move to an owned and operated model, we expect hosting costs to
reduce and provide the potential to enhance margins further.
We believe the gains that began late last year mark an important
milestone in the cryptocurrency and blockchain industry due to a
series of positive developments that point to increasing acceptance
of cryptocurrencies, in particular Bitcoin, as a new asset class, a
means of exchange and store of value by corporate and institutional
investors as well as consumers.
During the period, the cryptocurrency mining sector has also
experienced a significant shock due to a change in the regulation
of mining in China, leading to an unprecedented drop in global
hashrate and mining difficulty. We believe Argo is well positioned
to capitalise on the emerging trends in the market through its
large and highly efficient mining infrastructure and experience.
The Group will also continue to manage growth through the expansion
of the size and quality of its mining infrastructure, as well as
strategic opportunities that leverage its leading market
position.
In March 2021, we acquired 160 acres of land in west Texas,
where we are building a new hosting facility with up to 200MW of
clean energy at low prices, which will give us the capacity to
establish our flagship mining centre in the United States by the
first quarter of 2022 and access to up to a further 600MW of power
for future development.
Our strategic priority in 2021 remains to focus on continued
"smart growth", to further expand our mining capacity and our
facilities whilst investigating new and innovative opportunities in
emerging cryptocurrencies and addressing our environmental
responsibilities. We will focus on increasing returns from our
installed base by optimising hardware performance to reduce power
consumption from clean power, improve machine uptime and maintain
among the best mining margins in the sector.
On behalf of the Board, I would like to thank all shareholders
for their support and take this opportunity to welcome those from
North America who have become Argo investors following our hugely
successful commencement of trading on the OTC market in early
2021.
Post the period end, we announced the board appointments of
Colleen Sullivan, Maria Parella and Sarah Gow as independent
non-executive directors, and of Alex Appleton as an executive
director. We also announced the resignation of executive chairman,
Ian Macleod, and non-executive directors, James Savage and Marco
D'Attanasio. I would like to thank them for their contribution
during the period and look forward to welcoming Argo's new board
members for the period ahead. Their experience within the
cryptocurrency, technology and finance sectors will be invaluable
as Argo continues to progress as a global leader in cryptocurrency
mining.
Peter Wall
CEO & Interim Executive Chairman
Responsibility Statement
We confirm that to the best of our knowledge:
-- the Interim Report has been prepared in accordance with
International Accounting Standards 34, Interim Financial Reporting,
as adopted by the EU; and
-- gives a true and fair view of the assets, liabilities,
financial position and profit/loss of the Group; and
-- the Interim Report includes a fair review of the information
required by DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
set of interim financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year.
-- the Interim Report includes a fair review of the information
required by DTR 4.2.8R of the Disclosure and Transparency Rules,
being the information required on related party transactions.
The Interim Report was approved by the Board of Directors and
the above responsibility statement was signed on its behalf by:
Peter Wall
CEO & Interim Executive Chairman
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period ended Period ended
30 June 30 June
2021 2020
(unaudited) (unaudited)
Note GBP GBP
------------------------------------------ ----- ------------- -------------
Revenues 5 31,085,716 11,124,455
Direct costs 11 (10,364,842) (9,697,116)
Crypto asset fair value movement 14 (6,188,438) (244,827)
Gross profit 14,532,436 1,182,512
------------------------------------------ ----- ------------- -------------
Operating costs and expenses
Consulting fees (304,379) (177,328)
Professional fees (415,066) (171,514)
General and administrative (1,136,755) (183,708)
Share based payment (1,567,608) -
Operating profit 11,108,628 649,962
------------------------------------------ ----- ------------- -------------
Interest expense (410,804) (126,914)
Interest income - 26
Profit before taxation 10,697,824 523,074
------------------------------------------ ----- ------------- -------------
Income tax expense 7 (3,483,827) -
Profit after taxation 7,213,997 523,074
------------------------------------------ ----- ------------- -------------
Other comprehensive income
Items which may be subsequently
reclassified to profit or loss:
* Currency translation reserve (361,029) (431,746)
Total other comprehensive income,
net of tax (361,029) (431,746)
------------------------------------------ ----- ------------- -------------
Total comprehensive income attributable
to the equity holders of the
Company 6,852,968 91,328
------------------------------------------ ----- ------------- -------------
Earnings per share attributable
to equity owners (pence)
Basic earnings per share 6 1.9p 0.2p
Diluted earnings per share 6 1.8p 0.2p
The income statement has been prepared on the basis that all
operations are continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 31 December
2021 2020
(unaudited) (audited)
Note GBP GBP
-------------------------------------- ----------- ------------- ------------
ASSETS
Non-current assets
Investments at fair value through
profit or loss 0 219,360 1,393,303
Investments accounted for using the
equity method 9 8,444,820 -
Intangible fixed assets 291,270 367,768
Property, plant and equipment 11 35,795,266 10,524,232
Right of use assets 11 6,355,192 7,379,387
Other receivables 12 - 4,114,726
Total non-current assets 51,105,908 23,779,416
-------------------------------------- ----------- ------------- ------------
Current assets
Investments at fair value through
profit or loss 0 1,411,376 -
Trade and other receivables 13 39,246,333 2,175,319
Digital assets 14 31,896,437 4,637,438
Cash and cash equivalents 16,047,609 2,050,761
Total current assets 88,601,755 8,863,518
-------------------------------------- ----------- ------------- ------------
Total assets 139,707,663 32,642,934
-------------------------------------- ----------- ------------- ------------
LIABILITIES STOCKHOLDERS EQUITY
Equity
Error!
Reference
source
not
Share capital found. 381,832 303,436
Error!
Reference
source
not
Share premium found. 55,317,447 1,540,497
Share based payment reserve 16 992,324 75,233
Foreign currency translation reserve 16 81,823 442,852
Accumulated surplus 16 29,178,867 21,964,870
-------------------------------------- ----------- ------------- ------------
Total equity 85,952,293 24,326,888
-------------------------------------- ----------- ------------- ------------
Current liabilities
Trade and other payables 17 25,210,780 936,659
Loans and borrowings 18 15,383,111 -
Income tax 3,483,827 -
Lease liability 3,990,370 3,469,672
-------------------------------------- ----------- ------------- ------------
Total current liabilities 48,068,088 4,406,331
-------------------------------------- ----------- ------------- ------------
Non-current liabilities
Lease liability 1,654,918 3,909,715
Loans and borrowings 18 4,032,364 -
Total liabilities 53,755,370 8,316,046
-------------------------------------- ----------- ------------- ------------
Total equity and liabilities 139,707,663 32,642,934
-------------------------------------- ----------- ------------- ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share premium Foreign currency Accumulated Total
capital translation surplus/
reserve (deficit)
GBP GBP GBP GBP GBP
--------------------- --------- -------------- ----------------- ------------ -----------
Balance at
1 January
2020 293,750 25,252,288 178,240 (4,986,336) 20,737,942
Total comprehensive
profit for
the period:
Profit for
the period - - - 523,074 523,074
Other comprehensive
income - - (431,746) - (431,746)
--------------------- --------- -------------- ----------------- ------------ -----------
Total comprehensive
income for
the period - - (431,746) 523,074 91,328
--------------------- --------- -------------- ----------------- ------------ -----------
Transactions
with equity
owners:
Issue of share - - - - -
capital net
of issue costs
--------------------- --------- -------------- ----------------- ------------ -----------
Balance at
30 June 2020 293,750 25,252,288 (253,506) (4,463,262) 20,829,270
--------------------- --------- -------------- ----------------- ------------ -----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share premium Foreign currency Share based Accumulated Total
capital translation payment surplus/
reserve reserve (deficit)
GBP GBP GBP GBP GBP GBP
--------------------- --------- -------------- ----------------- ------------ ------------ -----------
Balance at
1 January 2021 303,436 1,540,497 442,852 75,233 21,964,870 24,326,888
Total comprehensive
income for
the period:
Profit for
the period - - - - 7,213,997 7,213,997
Other comprehensive
income - - (361,029) - - (361,029)
--------------------- --------- -------------- ----------------- ------------ ------------ -----------
Total comprehensive
income for
the period - - (361,029) - 7,213,997 6,852,968
--------------------- --------- -------------- ----------------- ------------ ------------ -----------
Transactions
with equity
owners:
Common stock
to be issued* 71 11,296 - - - 11,367
Issue of common
stock net of
issue costs 78,235 53,765,654 - - - 53,843,889
Stock based
compensation
charge - - - 1,567,608 - 1,567,608
Common stock
options/warrants
exercised - - - (567,523) 567,523 -
Common stock
options/warrants
lapsed/expired - - - (82,994) 82,994 -
--------------------- --------- -------------- ----------------- ------------ ------------ -----------
Total transactions
with equity
owners 78,306 53,776,950 - 917,091 650,517 55,422,864
--------------------- --------- -------------- ----------------- ------------ ------------ -----------
Balance at
30 June 2021 381,832 55,317,447 81,823 992,324 29,178,867 85,952,293
--------------------- --------- -------------- ----------------- ------------ ------------ -----------
*Shares to be issued relate to share options exercised and paid
up pre period end, however the shares were formally issued post
period end.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Period ended Period ended
30 June 30 June
2021 2020
(unaudited) (unaudited)
Note GBP GBP
-------------------------------------------- ----- ------------- -------------
Cash flows from operating activities
Operating profit 11,108,628 649,962
Adjustments for:
Depreciation/Amortisation 4,869,638 3,012,462
Foreign exchange movements 25,087 (431,746)
Share based payment expense 1,567,608 -
Working capital changes:
(Increase)/decrease in trade and other
receivables 13 (2,092,532) 534,947
Increase/(decrease) in trade and other
payables 17 15,245,263 (167,503)
(Increase)/decrease in digital assets 14 (34,758,295) 203,045
Fair value change in digital assets 14 6,407,446 (104,781)
-------------------------------------------- ----- ------------- -------------
Net cash flow from operating activities 2,372,843 3,696,386
-------------------------------------------- ----- ------------- -------------
Investing activities
Acquisition of subsidiaries, net of cash (271,732) -
acquired
Investment in associate 9 (7,352,970) -
Other investments 8 (219,361) -
Purchase of tangible fixed assets 11 (6,883,195) (1,617,024)
Mining equipment prepayments 13 (35,471,499) -
Interest received - 27
-------------------------------------------- ----- ------------- -------------
Net cash used in investing activities (50,198,757) (1,619,997)
-------------------------------------------- ----- ------------- -------------
Financing activities
Increase/(decrease) in loans 8 14,375,021 (797,455)
Lease payments (1,734,098) -
Interest paid (410,803) (126,914)
Proceeds from shares issued 49,592,641 -
-------------------------------------------- ----- ------------- -------------
Net cash generated from/used in) financing
activities 61,822,761 (924,369)
-------------------------------------------- ----- ------------- -------------
Net increase in cash and cash equivalents 13,996,847 1,155,020
-------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at beginning
of period 2,050,761 161,342
Cash and cash equivalents at end of period 16,047,608 1,316,362
-------------------------------------------- ----- ------------- -------------
Material non-cash movements:
-- During the period, the Company assumed the mortgages on two
properties from GPUone with a value of GBP5,040,454. Consideration
of the acquisition was made from a forgiveness of prepayments made
totalling GBP4,664,113. Additionally, the Company used common stock
as payment to acquire DPN LLC, part of which was issued during the
period amounting to GBP3,261,990, and a further GBP9,025,857 which
is due to be paid in common stock and included within
liabilities.
-- During the period, the Company paid a total of 75,000
Polkadot, which had a value of GBP1,091,850, in respect of the
acquisition of shares in Pluto Digital PLC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY INFORMATION
Argo Blockchain PLC ("the Company") is a public company, limited
by shares, and incorporated in England and Wales. The registered
office is Room 4, 1st Floor 50 Jermyn Street, London, United
Kingdom, SW1Y 6LX.
On 4 March 2021 the Group acquired 100% of the share capital of
DPN LLC Inc.
On 11 May 2021 the Group acquired 100% of the share capital of
9377-2556 Quebec Inc and 9366-5230 Quebec Inc.
The principal activity of the group is that of crypto asset
mining.
2. BASIS OF PREPARATION
The condensed consolidated interim financial statements for the
six months ended 30 June 2021 have been prepared in accordance with
IAS 34 'Interim Financial Reporting' and presented in sterling.
They do not include all of the information required in annual
financial statements in accordance with IFRS, and should be read in
conjunction with the consolidated financial statements for the year
ended 31 December 2020, which have been prepared in accordance with
International Financial Reporting Standards endorsed by the
European Union as issued by the IASB. The report of the auditors on
those financial statements was unqualified.
The financial statements have been prepared under the historical
cost convention, except for the measurement to fair value certain
financial and digital assets and financial instruments.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing these
condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the financial statements for
the year ended 31 December 2020.
The Group has reclassified the 2020 comparative for the fair
value movement in digital assets. This is now included in the
calculation of gross profit, whereas previously in 2020 this was
included in operating profit/(loss). The reclassification into
gross profit in 2021 more accurately reflects the nature and
management of these assets as inventory for commodity
broker-traders.
3. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these condensed consolidated interim financial statements are
consistent with those of the previous financial year except as set
out below.
Associates
Associates are entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost, and
the carrying amount is increased or decreased to recognise the
investor's share of the profit or loss of the investee after the
date of acquisition. The Group's investment in associates includes
goodwill identified on acquisition.
The Group's share of post-acquisition profit or loss is
recognised in the income statement, and its share of
post-acquisition movements in other comprehensive income is
recognised in other comprehensive income with a corresponding
adjustment to the carrying amount of the investment. Dilution gains
and losses arising in investments in associates are recognised in
the income statement.
Business Combinations
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. Identifiable assets acquired
and liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds and the
redemption value is recognised in the income statement over the
period of the borrowings, using the effective interest method.
Borrowings are removed from the statement of financial position
when the obligation specified in the contract is discharged,
cancelled or expired. Borrowings are classified as current
liabilities unless the Group has an unconditional right to defer
settlement of a liability for at least 12 months after the end of
the reporting period.
Revenue recognition - Management fees
The Group recognised management fees on the services provided to
third parties to management mining machines on their behalf,
ensuring the machines are optimised and mining as efficiently as
possible. The performance obligation is identified to be the as the
services are performed, and thus revenue is recorded over time.
Segmental reporting
The directors consider that the Group has only one significant
reporting segment being crypto mining which is fully earned by a
Canadian subsidiary.
Tangible fixed assets
Depreciation on the land and buildings is recognised so as to
write off the cost or valuation of assets less their residual
values over their estimated useful lives of 25 years on a straight
line basis. Depreciation is recorded in the Income Statement within
general administrative expenses once the asset is brought into
use.
Management assesses the useful lives based on historical
experience with similar assets as well as anticipation of future
events which may impact their useful life.
4. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
The Group has adopted all recognition, measurement and
disclosure requirements of IFRS, including any new and revised
standards and Interpretations of IFRS, in effect for annual periods
commencing on or after 1 January 2021. The adoption of these
standards and amendments did not have any material impact on the
financial result of position of the Group.
Standards which are in issue but not yet effective:
At the date of authorisation of these financial statements, the
following Standards and Interpretation, which have not yet been
applied in these financial statements, were in issue but not yet
effective.
Standard Description Effective date for annual
or Interpretation accounting period beginning
on or after
------------------ -------------------------------------------- ----------------------------
IAS 1 Amendments - Presentation and Classification 1 January 2023
of Liabilities as Current or Non-current
IAS 16 Amendments - Property, Plant and Equipment 1 January 2022
IAS 37 Provisions, Contingent Liabilities 1 January 2022
and Contingent Assets
IAS 8 Amendments - Definition of Accounting 1 January 2023
Estimates
IAS 1 Amendments - Disclosure of Accounting 1 January 2013
Policies
IFRS 3 Amendments - Business Combinations 1 January 2022
- Conceptual Framework
IFRS Annual Improvements to IFRS Standards 1 January 2022
2018-2020
------------------ -------------------------------------------- ----------------------------
The Group has not early adopted any of the above standards and
intends to adopt them when they become effective.
5. REVENUES
Period ended Period ended
30 June 30 June
2021 (unaudited) 2020 (unaudited)
GBP GBP
------------------------------------------ ------------------ ------------------
Crypto currency mining - worldwide 29,937,270 11,124,455
Crypto currency management fees - United 1,148,446 -
States
Total revenue 31,085,716 11,124,455
------------------------------------------- ------------------ ------------------
Due to the nature of Crypto currency mining, it is not possible
to provide a geographical split of the revenue stream.
Crypto currency mining revenues are recognised at a point in
time.
Crypto currency management fees are services recognised over
time.
6. EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the
profit attributable to equity shareholders by the weighted average
number of shares in issue.
Period ended Period ended
30 June 30 June
2021 (unaudited) 2020
(unaudited)
Net profit for the period attributable to
ordinary equity holders from continuing operations
(GBP) 7,213,997 523,074
Weighted average number of ordinary shares
in issue 381,832,335 293,750,000
Basic earnings per share for continuing operations
(pence) 1.9 0.2
----------------------------------------------------- ------------------- -------------
Net profit for the period attributable to
ordinary equity holders for continuing operations
(GBP) 7,213,997 523,074
Diluted number of ordinary shares in issue 393,091,232 350,098,603
----------------------------------------------------- ------------------- -------------
Diluted earnings per share for continuing
operations (pence) 1.8 0.2
----------------------------------------------------- ------------------- -------------
The Group has in issue 11,258,897 warrants and options at 30 June
2021 (2020: 51,462,453).
7. TAXATION
Period ended Period ended
30 June 2021 30 June
(unaudited) 2020
(unaudited)
GBP GBP
-------------------------------------------- -------------- -------------
Income tax expense - foreign tax 3,483,827 -
Deferred tax expense - -
-------------------------------------------- -------------- -------------
Taxation charge in the financial statements 3,483,827 -
-------------------------------------------- -------------- -------------
No deferred tax asset has been recognised in respect of UK tax
losses carried forward on the basis that there is insufficient
certainty over the level of future profits to utilise against this
amount.
8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Non-current As at 30 June As at 31 December
2021 2020
(unaudited) (audited)
------------------------------------------ -------------- ------------------
At 1 January 2021 and 1 January 2020 1,393,303 58,140
Additions 219,360 1,335,676
Foreign exchange movement 18,073 (513)
Transferred to current investments (1,411,376) -
------------------------------------------ -------------- ------------------
At 30 June 2021 and 31 December 2020 219,360 1,393,303
------------------------------------------ -------------- ------------------
Current
------------------------------------------ -------------- ------------------
At 1 January 2021 and 1 January 2020 - -
Transferred from non-current investments 1,411,376 -
------------------------------------------ -------------- ------------------
At 30 June 2021 and 31 December 2020 1,411,376 -
------------------------------------------ -------------- ------------------
Non-current investments include:
Luxor Technology Corporation
On 7 December 2020 the Group entered into an agreement to
acquire GBP73,427 (USD$100,000) of shares in Luxor Technology
Corporation. On 7 May 2021, following a second round of funding
which the Group did not participate in, this prepayment became an
investment representing less than 1% of the Series A-1 Preferred
Stock and voting rights.
WonderFi Technologies Inc.
On 3 June 2021 the Group invested GBP145,933 (CDN$250,000) of
WonderFi Technologies Inc. (formerly DeFi Ventures Inc.) an
investment representing less than 1% of the Ordinary shares and
voting rights.
Current investments include:
GPUone Holding Inc investment in Class A shares. This investment
represents an interest of approximately 10% of GPUone Holding Inc.
as at 30 June 2021.
9. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
As at 30 As at 31
June 2021 December
(unaudited) 2020 (audited)
GBP GBP
--------------------------- ------------- ----------------
Opening balance - -
Acquired during the period 8,444,820 -
Total Associates 8,444,820 -
--------------------------- ------------- ----------------
Set out below are the associates of the Group as at 30 June
2021, which, in the opinion of the Directors, significant influence
is held. The associate as listed below has share capital consisting
solely of ordinary shares, which are held directly by the Group.
The country of incorporation or registration is also their
principal place of business.
Nature of investment in associates 2021 and 2020:
Name of entity Address of the % of ownership Nature of relationship Measurement
registered office interest method
Pluto Digital Hill Dickinson 24.65% Refer below Equity
PLC LLP, 8th Floor
The Broadgate
Tower, 20 Primrose
Street, London,
United Kingdom,
EC2A 2EW
On 3 February 2021 Argo invested in Pluto Digital PLC ("Pluto"),
a crypto venture capital and technology company. The investment was
satisfied with 75,000 Polkadot with a fair value at that date of
GBP1,091,850. Further to this in a second round of funding the
Group invested an additional GBP7,352,970 on 8 March 2021.
Argo owns 24.65% of the total share capital and voting rights of
the business and is entitled to nominate one director to the Pluto
Board of Directors..
Pluto is a crypto technology company that is exploring solutions
to connect Web 3.0 technologies to the global economy. Pluto plans
to invest in, incubate and advise digital asset projects based on
decentralised technologies (DeTech), decentralised finance (DeFi)
and networks such as Ethereum and Polkadot. Pluto also plans to
support the operation of proof-of-stake networks by staking and
operating validator nodes. Pluto represents a strategic partnership
for the Group as it diversifies its activities in the crypto
space.
Pluto Digital PLC is a private company and there is no quoted
market price available for its shares.
There are no contingent liabilities relating to the Group's
interest in the associates.
No summarised financial information for the period ended 30 June
2021 has been made available by Pluto to the Group and therefore no
share of the profit or loss of the associate has been recognised.
The directors do not believe their share of profit or loss for the
period would be material to the Group.
10. BUSINESS COMBINATION
GPUone subsidiaries acquired from GPUone Holding Inc.
On 11 May 2021, the Group acquired 100% of the share capital of
GPUone 9377-2556 and GPUone 9366-5230 from its shareholder GPUone
Holding Inc. for a fair value of GBP4,955,980 consisting of
GBP291,867 being satisfied in cash and the balance satisfied by the
cancellation of certain prepayments and deposits previously paid by
Argo to the vendor. Each of these acquired entities owned and
operated a data centre within which Argo was the lead tenant.
The acquisition was performed to enable the Group to obtain
control of its hosting facility and power costs across its
facilities in Canada. From acquisition on 11 May 2021 to 30 June
2021 the GPUone subsidiaries loss amounted to GBP494,508 which is
fully consolidated . No revenue has been generated from these
entities since acquisition. Both GPUone entities were dormant up
until the date of acquisition, when the relevant assets and
liabilities acquired were transferred by GPUone Holding Inc. to
these entities immediately prior to acquisition. There is no
difference between the amount consolidated within profit and loss
and the amount which would have been consolidated if the
acquisition happened on 1 January 2021.
The consideration was negotiated on an arm's length basis and
primarily on the basis of the valuation of the land and buildings
being acquired. The directors attribute the consideration as fair
value of the land and buildings with no goodwill being recognised
as currently Argo does not anticipate hosting any third parties at
these sites in the medium term.
The fair values of the acquisition date assets and liabilities,
together with any separately identifiable intangible assets, have
been provisionally determined at 30 June 2021 because the
acquisition was completed late in the period. The Group is
currently obtaining the information necessary to finalise its
valuation.
On a GBP1 for GBP1 basis certain deposits and other receivables
totalling GBP666,845 were acquired. The directors consider these
amounts fully recoverable and as such these receivables have not
been impaired.
The following table summarises the consideration paid for the
GPUone subsidiaries and the fair value of assets acquired and
liabilities assumed at the acquisition date:
Consideration at 11 May 2021
GBP
Cash 291,867
Payment for deposits 666,845
Cancellation of prepayment and deposits 4,664,113
----------
Total consideration 5,622,825
----------
Recognised amounts of identifiable assets acquired, and
liabilities assumed
GBP
Cash and cash equivalents 20,135
Property, plant and equipment (Note 11) 10,159,851
Trade and other receivables 483,294
Property mortgages (5,040,455)
------------
Total 5,622,825
------------
If new information obtained within one year from the acquisition
date about the facts and circumstances that existed at the
acquisition date identifies adjustment to the above amounts, or any
additional provisions identified that existed at the acquisition
date, then the acquisition accounting will be revised.
Acquisition of DPN LLC
The acquisition of DPN LLC, effectively comprising the land
acquisition in west Texas, has been treated as an asset acquisition
in these condensed consolidated financial statements.
11. TANGIBLE FIXED ASSETS
Group Right Mining Land & buildings Improvement Total
of use and Computer to Datacentre
Assets Equipment
GBP GBP GBP GBP GBP
----------------------- ----------- -------------- ----------------- --------------- ------------
Cost
At 1 January 2021 7,379,387 17,864,347 - 84,927 25,328,661
Foreign exchange
movement - (132,458) - - (132,457)
Acquisition through
business combination - 163,416 9,996,435 10,159,851
Additions - - 19,012,587 - 19,012,587
At 30 June 2021 7,379,387 17,895,305 29,009,022 84,927 54,368,642
----------------------- ----------- -------------- ----------------- --------------- ------------
Depreciation and
impairment
At 1 January 2021 - 7,377,050 - 47,992 7,425,042
Depreciation charged
during the period 1,024,915 3,723,527 35,155 9,544 4,793,141
At 30 June 2021 1,024,195 11,101,297 35,155 57,536 12,218,183
----------------------- ----------- -------------- ----------------- --------------- ------------
Carrying amount
----------------------- ----------- -------------- ----------------- --------------- ------------
At 1 January 2021 7,379,387 10,487,297 - 36,935 17,903,619
----------------------- ----------- -------------- ----------------- --------------- ------------
At 30 June 2021 6,355,192 6,794,008 28,973,867 27,391 42,150,459
----------------------- ----------- -------------- ----------------- --------------- ------------
No depreciation has been charged on the Texas land and buildings
additions as they are yet to come into use.
12. OTHER RECEIVABLES (NON-CURRENT)
As at 30 As at 31 December
June 2021 2020 (audited)
(unaudited)
GBP GBP
-------------------------------- ------------- ------------------
Deposits
Brought forward 4,114,726 4,151,400
Exchange movement - (36,674)
Cancelled on acquisition of (4,114,726) -
GPUone subsidiaries
-------------------------------- ------------- ------------------
Total carrying amount of other
receivables - 4,114,726
---------------------------------- ------------- ------------------
This deposit was used as part of the acquisition of the GPUone
Holding Inc subsidiaries detailed in note 10.
13. TRADE AND OTHER RECEIVABLES
As at 30 As at 31
June 2021 December
(unaudited) 2020 (audited)
GBP GBP
----------------------------------- ------------- ----------------
Mining equipment prepayments 35,471,499 -
Prepayments and other receivables 1,957,977 811,684
Other taxation and social
security 1,816,857 1,363,635
Total trade and other receivables 39,246,333 23,227,957
------------------------------------- ------------- ----------------
Mining equipment prepayments consist of payments made and due on
mining equipment due to arrive in Q3 and Q4 2021. Payments to ePIC
ASIC Asia Limited comprise GBP3,429,826 and the balance of
GBP32,041,673 was paid to Core Scientific Inc in advance of machine
purchases to be received after the period end.
In February 2021, the Group entered into an agreement with ePIC
(a designer and manufacturer of mining machines), which gives us
priority access to next generation mining machines on a
non-exclusive basis. As part of the agreement, the Group will
assist in the development and testing of future products and will
provide space and capacity at our Mirabel facility for ePIC's
research and innovation engineering teams to assist in the
development of future mining machines. In August 2021, based on
limitations of technology, the Group and ePIC agreed to amend their
agreement. Under the amended agreement, the initial purchase order
was cancelled and, at the Group's option, $5million deposited with
ePIC, in whole or part, can be applied to the purchase of ePIC
mining machines or ePIC common stock or repaid in full.
Other taxation and social security consist of purchase tax
recoverable in the UK and Canada. GST and QST debtors are greater
than 90 days as at 30 June 2021.
The directors consider that the carrying amount of trade and
other receivables is equal to their fair value.
14. DIGITAL ASSETS
Group Period ended Year ended
30 June 2021 31 December
2020
(unaudited) (audited)
GBP
GBP
------------------------------------- ---- ---- -------------- -------------
At 1 January 2021 and 2020 4,637,438 1,040,964
Additions
Crypto assets mined 29,937,270 18,947,908
Crypto asset purchased and received 4,383,010 9,896,641
------------------------------------------------- -------------- -------------
Total additions 34,320,280 28,844,549
Disposals
Crypto assets sold (1,091,850) (27,318,471)
------------------------------------------------- -------------- -------------
Total disposals (1,091,850) (27,318,471)
Fair value movements
Loss on futures - (258,326)
Movements on crypto asset sales 219,008 (13,816)
Movements on crypto assets held
at the period end (6,407,446) 2,342,538
------------------------------------------------- -------------- -------------
Total fair value movements (6,188,439) 2,070,396
At 30 June 2021 & 31 December
2020 31,896,437 4,637,438
------------------------------------------------- -------------- -------------
The Group mined crypto assets during the period, which are
recorded at fair value on the day of acquisition. Movements in fair
value between acquisition (date mined) and disposal (date sold),
and the movement in fair value in crypto assets held at the year
end, are recorded in profit or loss. The Group has used 795 Bitcoin
as collateral for a loan see note 18. Post period end a further 86
Bitcoin were used as collateral for this loan.
At the period end, the Group held crypto assets representing a
fair value of GBP31,896,437. The breakdown of which can be seen
below:
As at 30 June 2021 (unaudited)
Crypto asset name Coins/tokens Fair value
GBP
-------------------------------- ------------- -----------
Bitcoin - Bitcoin 471 11,700,276
Bitcoin - held as collateral 795 19,748,876
Ethereum - ETH 254 394,963
Alternative coins 52,322
At 30 June 2021 31,896,437
--------------------------------- ------------- -----------
As at 31 December 2020 (audited)
Crypto asset name Coins/tokens Fair value
GBP
----------------------------------------- ------------- -----------
Bitcoin - Bitcoin 183 3,937,344
Polkadot - DOT 75,000 515,176
Ethereum - ETH 254 138,257
Binance Coin - BNB 1,243 34,260
USDT,USDC & Tether (stable coin - fixed
to USD) 26,509 19,553
Alternative coins - 496
At 31 December 2020 4,637,438
------------------------------------------ ------------- -----------
15. ORDINARY SHARES
As at 30 As at 31
June 2021 December
(unaudited) 2020 (audited)
GBP GBP
-------------------------------------------- -------------- ----------------
Ordinary share capital
Issued and fully paid
303,435,997 Ordinary Shares of GBP0.001
each 303,436 293,750
Issued in the period
78,325,292 Ordinary Shares of GBP0.001 78,325 -
each
Fully paid not yet issued
71,046 Ordinary Shares of GBP0.001 each 71 9,686
381,832,335 Ordinary Shares of GBP0.001
each 381,832 303,436
--------------------------------------------- -------------- ----------------
Share premium
-------------------------------------------- -------------- ----------------
At beginning of the period 1,540,497 25,252,288
Cancelled during the period - (25,252,288)
Issued in the period 53,765,654 -
Fully paid not yet issued 11,296 1,540,497
--------------------------------------------- -------------- ----------------
At the end of period 55,317,447 1,540,597
--------------------------------------------- -------------- ----------------
On 23 November 2020 the High Court of England and Wales confirmed
the reduction to the Company's equity through cancellation of the
share premium account. This was transferred into retained earnings.
16. RESERVES
The following describes the nature and purpose of each
reserve:
Reserve Description
--------------------- -------------------------------------------------------
Ordinary shares Represents the nominal value of equity shares
Share premium Amount subscribed for share capital in excess
of nominal value
Share based payment Represents the fair value of options and warrants
reserve granted less amounts transferred on exercise,
lapse or expiry
Foreign currency Cumulative effects of translation of opening
translation reserve balances on non-monetary assets between subsidiary
functional currency (Canadian dollars) and Group
functional and presentational currency (Sterling).
Accumulated surplus Cumulative net gains and losses and other transactions
with equity holders not recognised elsewhere.
17. TRADE AND OTHER PAYABLES
As at 30 As at 31
June 2021 December
(unaudited) 2020 (audited)
GBP GBP
----------------------------------- ------------- ----------------
Trade payables 15,233,372 548,293
Accruals and other payables 949,976 271,471
Short term loans - 115,924
Deferred contingent consideration 9,025,857 -
Other taxation and social
security 1,575 972
Total trade and other payables 25,210,780 936,660
------------------------------------- ------------- ----------------
Within trade payables is GBP10,844,312 (2020: GBPnil) for
amounts due for mining equipment not yet received.
The directors consider that the carrying value of trade and
other payables is equal to their fair value.
Deferred contingent consideration relates to the acquisition of
DPN LLC of which up to a further US$12.5m in shares at a
predetermined price being payable if certain contractual milestones
related to the facility are fulfilled.
18. LOANS AND BORROWINGS
Non-current liabilities AS at 30 June 31 December
2021 (unaudited) 2020 (audited)
-------------------------------- -------------------- ------------------
Assumed mortgage on acquisition 4,032,364 -
Total 4,032,364 -
-------------------------------- -------------------- ------------------
Current liabilities
-------------------------------- -------------------- ------------------
Short term loan 14,375,021 -
Assumed mortgage on acquisition 1,008,090 -
-------------------------------- -------------------- ------------------
Total 15,383,111 -
-------------------------------- -------------------- ------------------
The mortgage is secured against the two buildings at Mirabal and
Baie-Comeau is repayable over 60 months at an interest rate of 5%
per annum.
On 29 June 2021 the Group entered into a loan agreement with
Galaxy Digital LP for a facility of US$20 million. The proceeds of
the loan will be used, in conjunction with funds raised previously,
to continue the build-out the West Texas data centre. The
short-term loan is a Bitcoin collateralised loan against 795
Bitcoin initially with a further 86 Bitcoin transferred after the
period end. It has a 6-month term and attracts an interest rate of
12.5% per annum.
19. FINANCIAL INSTRUMENTS
As at 30 As at 31
June 2021 December
(unaudited) 2020 (audited)
GBP GBP
----------------------------------------- ------------- ----------------
Carrying amount of financial
assets
Measured at amortised cost
* Trade and other receivables 209,498 144,607
* Cash and cash equivalents 16,047,608 2,050,761
Measured at fair value through
profit or loss 1,630,736 1,393,303
Total carrying amount of financial
assets 17,887,842 3,588,671
------------------------------------------- ------------- ----------------
Carrying amount of financial
liabilities
Measured at amortised cost
* Trade and other payables 16,105,765 548,293
* Short term loans 15,383,111 115,924
4,032,364 -
* Long term loans
* Lease liabilities 5,645,239 7,409,387
Measured at fair value through 9,025,857 -
profit or loss
Total carrying amount of financial
liabilities 50,192,336 8,073,604
------------------------------------------- ------------- ----------------
Fair Value Estimation
Fair value measurements are disclosed according to the following
fair value measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)
- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices), or indirectly (that is, derived from prices) (Level
2)
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3).
This is the case for unlisted equity securities.
The following table presents the Group's assets and liabilities
that are measured at fair value at 30 June 2021 and 31 December
2020.
Level Level 2 Level 3 Total
1
Assets GBP GBP GBP GBP
----------------------------------------------- ------- ----------- ---------- -----------
Financial assets
at fair value through
profit or loss
* Equity holdings - - 1,630,736 1,630,736
* Digital assets - 31,896,437 - 31,896,437
Total at 30 June
2021 - 31,896,437 1,630,736 33,527,173
------------------------------------------------ ------ ----------- ---------- -----------
Liabilities
----------------------------------------------- ------- ----------- ---------- -----------
Financial liabilities
at fair value through
profit or loss
* Deferred contingent consideration - - 9,025,857 9,025,857
Total at 30 June
2021 - - 9,025,857 9,025,857
------------------------------------------------ ------ ----------- ---------- -----------
Level Level 2 Level 3 Total
1
Assets GBP GBP GBP GBP
------------------------ ------- ---------- ---------- -----------
Financial assets
at fair value through
profit or loss
Equity holdings - - 1,393,303 1,393,303
Digital assets - 4,637,438 - 4,637,438
Total at 30 December
2020 - 4,637,438 1,393,303 6,030,741-
------------------------- ------ ---------- ---------- -----------
All financial assets are in unlisted securities and digital
assets.
There were no transfers between levels during the period.
The Group recognises the fair value of financial assets at fair
value through profit or loss relating to unlisted investments at
the cost of investment unless:
- There has been a specific change in the circumstances which,
in the Group's opinion, has permanently impaired the value of the
financial asset. The asset will be written down to the impaired
value;
- There has been a significant change in the performance of the
investee compared with budgets, plans or milestones;
- There has been a change in expectation that the investee's
technical product milestones will be achieved or a change in the
economic environment in which the investee operates;
- There has been an equity transaction, subsequent to the
Group's investment, which crystallises a valuation for the
financial asset which is different to the valuation at which the
Group invested. The asset's value will be adjusted to reflect this
revised valuation; or
- An independently prepared valuation report exists for the
investee within close proximity to the reporting date.
20. COMMITMENTS
The Group's material contractual commitments relate to the
master services agreement with Core Scientific, which provides
hosting, power and support services. Whilst management do not
envisage terminating agreements in the immediate future, it is
impracticable to determine monthly commitments due to large
fluctuations in power usage and variations on foreign exchange
rates, and as such a commitment over the contract life has not been
determined.
21. RELATED PARTY TRANSACTIONS
Key management compensation
Key management includes Directors (executive and non-executive)
and senior management. The compensation paid to related parties in
respect of key management for employee services during the period
was made only from Argo Innovation Labs Inc, amounting to:
GBP18,250 paid to POMA Enterprises Limited in respect of fees of
Matthew Shaw (Non-executive director); GBP105,600 paid to Vernon
Blockchain Inc in respect of fees of Peter Wall (CEO); GBP67,649
paid to Tenuous Holdings Ltd in respect of fees of Ian MacLeod
(Executive chairman). During the period, James Savage (NED) was
remunerated a gross salary of GBP15,000, Marco D'Attanasio was
remunerated gross fees of GBP15,000 and Alex Appleton through
Appleton Business Advisors Limited was paid GBP60,000 during the
period.
Total director fees and remuneration, paid directly and
indirectly, totalled GBP221,499 (2020: GBP250,148).
Pluto Digital PLC
On 3 February 2021 Argo invested in Pluto Digital PLC, a crypto
venture capital and technology company. The investment was
satisfied with 75,000 Polkadot with a fair value at the time of
GBP1,091,850. Further to this in a second round of funding Argo
invested a further GBP7,352,970 on 8 March 2021. There have been no
transactions with this associate during the period.
Argo owns 24.65% of the total share capital and voting rights of
the business and is entitled to nominate one director to the Pluto
Board of Directors. In accordance with IAS28 the Group considers
the Pluto Digital PLC investment as an associate.
22. CONTROLLING PARTY
There is no controlling party of the Group.
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END
IR UPUUARUPGPGR
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