Argo Blockchain plc — FY2022 Form 20-F
Reporting period: Year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; quarterly financial statements are not provided in the supplied text. Financial statements use IFRS and are presented primarily in pounds sterling (£).
Business context and reporting period
Argo mines Bitcoin and, to a lesser extent, other cryptocurrencies, earning revenue from block rewards and transaction fees. At year-end it reported a fleet of more than 31,000 machines and capacity of approximately 2.5 EH/s. Its strategy shifted toward a mix of owned facilities and third-party hosting.
In December 2022, Argo sold its Helios facility and Texas real property to Galaxy for approximately $65 million (£53 million) and entered into a new asset-backed loan. Its approximately 23,619 Helios-based machines remained in operation under a two-year hosting agreement. Argo held 141 Bitcoin and Bitcoin Equivalent at year-end, valued at about £2.1 million.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | £47.4 million | £74.2 million |
| Gross profit/(loss) | £(34.5) million | £53.6 million |
| Gross margin | (73)% | 72% |
| Operating profit/(loss) | £(65.2) million | £42.8 million |
| Net income/(loss) | £(194.2) million | £30.8 million |
| Total comprehensive income/(loss) | £(199.5) million | £37.3 million |
| Operating cash flow | £(70.7) million | £(27.8) million |
| Investing cash flow | £5.5 million | £(137.6) million |
| Financing cash flow | £68.1 million | £175.1 million |
| Cash and cash equivalents at year-end | £16.7 million | £11.8 million |
| Total assets | £91.4 million | £287.7 million |
| Total equity | £11.4 million | £201.8 million |
- Bitcoin and Bitcoin Equivalent mined increased to 2,156 from 2,045. The reported mining margin, a non-IFRS measure excluding certain costs, fell to 54% from 84%.
- Average direct cost per Bitcoin or Bitcoin Equivalent mined rose to £10,034 from £5,407; average total cost was £17,710, up from £10,849.
- Reported net debt was £46.3 million, compared with £42.3 million in 2021. Year-end borrowings included £31.4 million of bonds and £31.1 million of loans, plus lease liabilities.
- There is a material inconsistency in the filing’s Adjusted EBITDA disclosures: one narrative passage reports FY2022 Adjusted EBITDA of £(3.7) million, while the performance-metrics table and reconciliation report positive £0.979 million. Verify against the audited financial statements.
Material changes versus FY2021
- Revenue declined 36%, mainly reflecting lower cryptocurrency prices; the filing cites average Bitcoin prices of $54,804 in Q4 2021 and $18,066 in Q4 2022. Higher Texas power costs also weighed on results.
- Gross margin swung from 72% to (73)%. The filing attributes the deterioration to depressed Bitcoin prices, increased energy costs and losses associated with selling previously held Bitcoin.
- Operating costs increased substantially, including professional fees of £12.8 million versus £1.5 million and general and administrative expenses of approximately £31.2 million versus £6.1 million. The filing cites U.S. public-company costs, restructuring and transaction-related expenses, higher insurance and staff costs.
- Cash used in operations increased to £70.7 million. Argo shifted from holding mined cryptocurrency to generally selling production weekly to fund operations and working capital; its Bitcoin and Bitcoin Equivalent balance fell from 2,595 to 141.
- Capital expenditure, net of disposals, was reported as £5.4 million for 2022, compared with £160.3 million in 2021. The company also reported a separate gross tangible-asset purchase figure of £87.4 million in its cash-flow statement.
- Equity fell sharply, largely reflecting the annual loss. The Helios sale and debt refinancing reduced total indebtedness by approximately £33–£34 million according to different passages in the filing.
Outlook, risks and unusual items
- Going concern: Management adopted the going-concern basis, but the auditor highlighted a material uncertainty that may cast significant doubt on Argo’s ability to continue as a going concern. The auditor’s opinion was not modified. Management’s cash-flow assessment runs through June 30, 2024 and depends on volatile Bitcoin prices, hashprice and power costs, as well as debt service and access to funding.
- Liquidity and debt: Management stated that available resources should meet existing business needs for at least 12 months, while also stating that additional funding may be required. The Galaxy loan is described in the notes as $35 million, bearing interest at SOFR plus 11%, secured by mining equipment and amortized over 32 months; other sections characterize it as a three-year loan. Confirm the executed agreement and maturity terms.
- Restructuring and significant charges: FY2022 included £45.1 million of tangible-asset impairment, £4.2 million of intangible-asset impairment, £44.8 million loss on sale of a subsidiary and investment, £18.8 million loss on disposal of fixed assets, £43.5 million loss on digital-asset sales/fair-value movements as presented in the statements, and £18.3 million of finance costs. These items materially contributed to the net loss.
- Operating outlook: Argo expects lower 2023 capital expenditure following the Helios sale and plans to optimize its Quebec facilities. It expected delivery in Q3 2023 of 2,870 BlockMiner machines, adding approximately 300 PH/s; this is a stated expectation, not a guarantee.
- Key business risks: Results remain highly sensitive to Bitcoin prices, network hashrate/hashprice, electricity costs and availability, machine reliability, financing access, regulation, and digital-asset custody and counterparty risks. The filing reports a 17.78% failure rate for its Antminer 17-series fleet.
- Legal matter: A class action, Murphy vs. Argo Blockchain plc et al, was filed in New York on January 26, 2023. Argo disputes the allegations and is defending the case; no liability accrual was recorded because the company stated it could not estimate an amount.
- Leadership changes: The CEO and CFO departed in early 2023; an interim CEO and new CFO were appointed. The filing also describes payments related to former executives’ departures.
Important facts for investors to verify
- Reconcile the conflicting FY2022 Adjusted EBITDA figures and confirm the correct measure and definition.
- Review the going-concern cash-flow forecasts, downside assumptions for hashprice and power costs, and the timing and amount of debt-service obligations.
- Confirm the Galaxy loan’s actual term, amortization, interest provisions, collateral and covenant requirements, and the hosting agreement’s full cost structure.
- Examine the basis and assumptions for the major asset impairments and the accounting for the Helios disposal and related losses.
- Track cash burn, weekly cryptocurrency sales, operating efficiency at the Quebec sites, and delivery and deployment of the expected BlockMiner machines.
- Assess the status and potential financial exposure of the class action, along with any material developments in financing, regulatory requirements or access to banking and power.