TIDMMFX
RNS Number : 3895N
Manx Financial Group PLC
28 September 2012
FOR IMMEDIATE RELEASE 28(th) September 2012
Manx Financial Group PLC
Unaudited Interim Results for the 6 months ended 30 June
2012
Manx Financial Group PLC (LSE: MFX), the financial services
Group which includes Conister Bank Limited, Conister Card Services
Limited, Edgewater Associates Limited and ECF Asset Finance PLC
presents its interim results for the six months ended 30 June 2012.
Copies of the Interim Report can be obtained from our website
www.mfg.im.
Contacts:
Manx Financial Group PLC
Denham Eke, Chief Executive
Tel: 01624 694694
Britton Financial PR
Tim Blackstone
Tel: 07957 140416
Beaumont Cornish Limited
Roland Cornish/James Biddle
Tel: +44 (0) 20 7628 3396
The financial information set out below comprises non-statutory accounts. The financial information
has been extracted from published accounts for the six months ended 30 June 2012.
Chairman's Statement
Review of performance
Manx Financial Group PLC
The Group has continued to both maintain existing and attract
new deposits in the first six months which have been utilised to
fund increased lending. The lack of liquidity in the UK market has
allowed us to lend to high quality counterparties at good rates.
Interest income has increased to GBP3.6 million (2011: GBP3.2
million) and this growth indicates that this income is on course to
surpass last year's total for the full year. The same is also true
for fee and commission income. Personnel expenses are significantly
down due to the recent restructuring exercise within the Group,
principally as a result of rationalising recent acquisitions. The
full effect of these cost savings will only be evident in the
second half.
In the circumstances, it is encouraging that we have made a
small profit of GBP92,000 (2011: loss of GBP120,000) before
specific items (which includes non-recurring and non-cash items).
Specific items, however, turn this profit into a loss for the
period of GBP572,000 (2011: loss of GBP357,000). It is expected
that there will be a significant reduction in non-recurring
specific items in the remainder of this year and I expect the
second half will again show an improved performance as we continue
to grow the loan book and reap the benefits of our reduced cost
base.
Conister Bank Limited
Interest income has increased by 14.4% to GBP3.6 million having
incurred a similar level of interest expense of GBP1.1 million
(2011: GBP1.0 million). This generated a net interest income of
GBP2.5 million (2011: GBP2.2 million).
Good loan book growth of 6% has been achieved since last year
end, mainly driven by our new distribution channels which also
incur an increase in commission expense. Provisioning levels have
continued to remain at a low level due to the quality of our loan
book following our strong underwriting criteria. Provisions made
for the period were GBP0.1 million (2011: GBP0.1 million) and the
indications are that they will continue to remain low for the rest
of this year.
The one-off VAT recovery booked at the 2011 year end is still
being vigorously pursued by the Board. We recently submitted, after
discussion with Customs & Excise, a retrospective VAT Claim for
GBP171,000 which will reduce the VAT debtor to GBP513,000. The
balance will follow the decision of the Volkswagen Financial
Services Limited case against HM Revenue & Customs which is now
scheduled to be heard at the Court of Appeal on 26 October
2012.
Edgewater Associates Limited
Our IFA business continues to operate in difficult trading
conditions, particularly with regard to writing new business.
Notwithstanding, the business continues to be profitable with a
GBP0.1 million profit for the period (2011: GBP0.1 million).
Edgewater remains insulated against the difficult economic
environment within which it operates having had the foresight to
move away from a fee based income model to a renewal income basis,
a requirement under draft Manx legislation.
Conister Card Services Limited
The extension to our major contract in August 2011 will come to
an end in November 2012. The UK prepaid card market has struggled
to gain any traction and will be replaced in the near future by
mobile connectivity. For this half year, the business recorded a
very small loss and with the completion of this contract the
business will be wound down. However, we will continue to retain
the MasterCard(R) licence to utilise when opportunities are
presented to the Group.
Our People
We recently welcomed Juan Kelly both to the Board and as
Managing Director of Conister Bank Limited and its subsidiaries.
Juan has already made a significant contribution to operations,
particularly with regard to restructuring the sales, customer
service and underwriting functions. The full benefit of these
changes will be felt in the coming months.
Additionally, the Group undertook a restructuring exercise
within the half year in light of recent acquisitions. Overall,
headcount has been reduced by 45% to 53. I would like to thank the
Board and particularly our staff for their understanding throughout
this process and their continued loyalty and contribution.
Outlook
The outlook of the Group looks increasingly positive with net
interest income being on target to exceed 2011's full year result.
Our cost base is also falling with personnel expenses seeing a
significant reduction. The most significant non-recurring costs
have already been borne.
The Board is still determined to pursue growth through increased
lending. Organic growth will come through our new distribution
channels where we will continue to utilise our excess liquidity. To
support organic growth, we will introduce further incremental
regulatory capital, of which GBP1.2 million was received by 31 July
2012. We will also continue to review potential loan book purchases
and businesses that operate in profitable niche sectors for
acquisition.
I remain confident, in judging current performance, that the
Group will return much improved results for the second half of the
year, with Conister Bank increasing its profitability. On this
basis, the Group is scheduled to become self-sufficient in its
capital requirements during 2013.
I would like to thank you for your support as shareholders as we
continue to improve the performance of the Group.
Jim Mellon
Executive Chairman
Condensed Consolidated Statement of Comprehensive Income
Notes For the For the For the
period period year ended
ended 30 ended.30 31 Dec
June 2012 June 2011 2011
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Interest income 2 3,621 3,164 6,650
Interest expense (1,076) (970) (2,065)
---------------------- --------------------- ---------------------
Net interest income 3 2,545 2,194 4,585
Fee and commission income 658 646 1,191
Fee and commission expense (563) (351) (739)
---------------------- --------------------- ---------------------
Net trading income 2,640 2,489 5,037
Other operating income 347 510 903
Programme costs (249) (227) (485)
Foreign exchange loss (5) (4) (10)
---------------------- --------------------- ---------------------
Operating income 3 2,733 2,768 5,445
Personnel expenses (1,456) (1,631) (3,314)
Other expenses (1,032) (1,083) (2,309)
Provision for impairment on
loan
assets (153) (100) (463)
Depositors' Compensation
Scheme
expense - (74) -
---------------------- --------------------- ---------------------
Profit/(loss) before
specific
items 92 (120) (641)
Acquisition and
restructuring
costs 4 (412) (308) (537)
VAT recoverable - - 684
Litigation funding provision
release 6 - 343 -
Realised gains on
available-for-sale
financial assets 14 14 41
Unrealised (loss)/gain on
financial
assets carried at fair
value (146) (60) 15
Depreciation (120) (115) (234)
Impairment of goodwill - (111) (111)
--------------------- ---------------------
Loss before income tax
expense (572) (357) (783)
Income tax expense - - -
---------------------- --------------------- ---------------------
Loss for the period/year (572) (357) (783)
Other comprehensive income:
Available-for-sale gains
taken
to equity 5 4 3
Actuarial loss on pension
scheme - - (19)
---------------------- --------------------- ---------------------
Total comprehensive loss
for the
period/year attributable
to owners (567) (353) (799)
---------------------- --------------------- ---------------------
Basic and diluted loss per
share
(pence) 5 (0.64) (0.40) (0.88)
Condensed Consolidated Statement of Financial Position
Notes 30 June 30 June 31 Dec
2012 2011 2011
GBP000 (unaudited) GBP000 GBP000
(unaudited) (audited)
Assets
Cash and cash equivalents 2,598 4,357 2,335
Financial assets at a fair
value through profit or loss 7 43 115 189
Available for sale financial
instruments 8 8,993 10,289 10,495
Loans and advances to customers 9 52,654 49,934 49,525
Commissions receivable 286 348 234
Property, plant and equipment 820 696 814
Trade and other receivables 10 1,151 410 1,260
Goodwill 13 2,344 2,344 2,344
--------------------- --------------- -----------
Total assets 68,889 68,493 67,196
Liabilities
Customer accounts 57,728 56,601 55,910
Creditors and accrued charges 11 607 1,015 855
Pension liability 69 60 79
Loan notes 12 2,910 2,210 2,210
Deferred consideration 492 337 492
--------------------- --------------- -----------
Total liabilities 61,806 60,223 59,546
Equity
Called up share capital 14 18,433 18,433 18,433
Profit and loss account and
other reserves (11,350) (10,163) (10,783)
--------------------- --------------- -----------
Total equity 7,083 8,270 7,650
Total liabilities and equity 68,889 68,493 67,196
Condensed Consolidated Statement of Cash Flows
Notes For the For the For the
period ended period year ended
ended 30
June 2011
GBP000
(unaudited)
30 June 31 Dec
2012 2011
GBP000 GBP000
(unaudited)
(audited)
Reconciliation of loss before
taxation to operating cash
flows
Loss before income tax expense (572) (357) (783)
Unrealised loss/(gain) on
financial assets carried
at fair value through profit
or loss 146 60 (15)
Realised gains on available-for-sale
investments (14) (14) (41)
Available-for-sale gains
taken to equity 5 4 3
Impairment of goodwill - 111 111
Loss on disposal of property,
plant and equipment - - 6
Depreciation charge 120 115 234
Share-based payment expense - 3 4
Actuarial gain on defined
benefit pension scheme taken
to equity - - (19)
(Decrease)/increase in pension
liability (10) - 19
Decrease/(increase) in trade
debtors 109 39 (820)
(Decrease)/increase in trade
creditors (248) 28 (123)
(Increase)/decrease in commission
debtors (52) (111) 3
---------------- ---------------- -------------
Net cash outflow from trading
activities (516) (122) (1,421)
Increase in loans and advances
to customers (3,129) (1,467) (1,058)
Increase in deposit accounts 1,818 3,855 3,165
Cash (outflow)/inflow from
operating activities (1,827) 2,266 686
CASH FLOW STATEMENT
Cash flows from operating
activities
Cash (outflow)/inflow from
operating activities (1,827) 2,266 686
Taxation paid - - -
---------------- ---------------- -------------
Net cash (outflow)/inflow
from operating activities (1,827) 2,266 686
Cash flows from investing
activities
Purchase of tangible fixed
assets (122) (70) (323)
Sale of fixed assets 9 20 29
Sale/(purchase) of available-for-sale
financial instruments 8 1,503 (2,983) (3,162)
Payment of deferred consideration
on acquisition of subsidiaries - (158) (158)
Acquisition of subsidiaries
net of cash required - (12) (32)
---------------- ---------------- -------------
Net cash inflow/(outflow)
from investing activities 1,390 (3,203) (3,646)
Cash flows from financing
activities
Issue of loan notes 700 500 500
---------------- ---------------- -------------
Net cash inflow from financing
activities 700 500 500
increase/(decrease) in cash
and cash equivalents 263 (437) (2,460)
Condensed Consolidated Statement of Changes in Equity
Retained
earnings Total Total Total
Share and other 30 June 30 June 31 Dec
Capital reserves 2012 2011 2011
GBP000 GBP000 GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Balance brought forward 18,433 (10,783) 7,650 8,620 8,620
Loss for the period/year - (572) (572) (357) (783)
Other comprehensive
income - 5 5 4 (16)
Transactions with owners:
Shares to be issued - - - - (175)
Share-based payment
expense - - - 3 4
--------- ----------- ------------- ------------- -----------
Balance carried forward 18,433 (11,350) 7,083 8,270 7,650
Notes to the Consolidated Financial Statements
1. Preparation of the interim statements
The financial information included in this interim financial
report for the six months ended 30 June 2012 is unaudited.
The interim financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting". The
accounting policies (unless stated otherwise) have been applied
consistently with those presented in the Annual Report for the
twelve months to 31 December 2011 and comply with IFRSs and IFRIC
interpretations applicable to companies reporting under IFRS.
2. Interest income
For the For the For the
period period year ended
ended ended
30 June 30 June 31 Dec
2012GBP000 2011GBP000 2011
(unaudited) (unaudited)
GBP000
Interest income comprises: (audited)
Interest income - asset financing 3,425 3,160 6,643
Interest income - deposits 1 4 7
---------------- ---------------- ------------
Total 3,426 3,164 6,650
3. Segmental analysis
Segment information is presented in respect of the Group's
business segments. The Directors consider that the Group currently
operates in one geographic segment, the Isle of Man and UK. The
primary format, business segments, is based on the Group's
management and internal reporting structure. The Directors consider
that the Group operates in four product orientated segments in
addition to its investing activities: Asset and Personal Finance
(including provision of hire purchase contracts, finance leases,
personal loans, commercial loans, block discounting and other
specialised secured credit facilities); Litigation Finance; a
Prepaid Card division, Conister Card Services Limited; and a Wealth
Management division, Edgewater Associates Limited. The Group ceased
to provide new Litigation Finance lending in June 2007.
Asset
and Prepaid Wealth Total
Personal Litigation Card Management Investing 30 June
Finance Finance Division Division Activities 2012
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
For the six months (unaudited)
to 30 June 2012
Net interest
income 2,633 - - - (88) 2,545
Operating income 2,174 - 49 598 (88) 2,733
Provision for
impairment (143) (10) - - - (153)
Profit/(loss)
before unallocated
items 702 (10) (23) 15 (88) 596
Group central
costs (504) (504)
Profit/(loss)
before specific
items 702 (10) (23) 15 (592) 92
--------- ------------- ---------------- ---------------------- -------------- -------------
Capital expenditure 118 - - 4 - 122
Total assets 67,152 1,106 157 474 - 68,889
Total liabilities
and equity 67,104 1,106 - 610 69 68,889
4. Acquisition and restructuring costs
For the For the For the
period period period ended
ended 30 ended 30
June 2012 June 2011
GBP000 GBP000 31 Dec 2011
(unaudited) (unaudited) GBP000
(audited)
Acquisition costs
Legal and professional fees 117 - -
Restructuring costs
Redundancy costs 295 308 537
------------- --------------------- ------------------------
412 308 537
Acquisition and restructuring costs in the current period relate
to restructuring in the Group and professional fees incurred for
prospective acquisitions that were not proceeded with. In the prior
periods restructuring costs related to the purchase of Edgewater
Associates Limited and ECF Asset Finance PLC and to the
restructuring of the UK operation.
5. Loss per share
For the For the For the
period ended period ended year ended
30 June 2012
GBP000 30 June 31 Dec 2011
2011GBP000
(unaudited) (unaudited) GBP000
(audited)
Loss for the period/year (572) (357) (783)
Number Number Number
---------------- ------------------- --------------
Weighted average number of
ordinary shares in issue 89,570,252 88,824,754 89,213,979
Basic and diluted loss per
share (0.64)p (0.40)p (0.88)p
---------------- ------------------- --------------
The basic loss per share calculation is based upon loss for the
period/year after taxation and the weighted average of the number
of shares in issue throughout the period/year.
There is no difference between basic and diluted loss per
share.
6. Litigation funding provision release
For the period ended 30 June 2011, due to a change in estimates
with respect to the litigation funding provisions, GBP343,000 of
interest was released.
In keeping with analysing specific items in the statement of
comprehensive income within the period, the GBP343,000 has been
re-classified from interest income to a separate line item of
litigation funding provision release.
7. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss represents
shares in a UK quoted company, designated at fair value through
profit or loss on initial recognition. The investment is stated at
market value with the difference between cost and market value
included within the Condensed Consolidated Statement of
Comprehensive Income.
8. Available-for-sale financial assets
30 June 30 June2011 31 Dec2011
2012 GBP000 GBP000(audited)
GBP000 (unaudited)
(unaudited)
UK Government Treasury Bills 8,993 10,289 10,495
-------------- ------------- ------------------
8,993 10,289 10,495
UK Government Treasury Bills are stated at fair value and
unrealised changes in fair value are reflected in equity.
9. Loans and advances to customers
30 June 30 June 31 Dec
2012 2011 2011
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Hire purchase balances 35,020 28,563 33,186
Finance lease balances 3,964 7,011 5,012
Litigation funding 1,106 1,543 1,137
Unsecured personal loans 4,401 4,243 2,965
Vehicle stocking plans 1,461 1,503 1,397
Block discounting 3,890 3,184 3,715
Secured commercial loans 2,812 3,887 2,113
-------------- --------------- ------------
52,654 49,934 49,525
10. Trade and other receivables
30 June 30 June 31 Dec
2012 2011 000(unaudited) 2011
GBP000 GBP000
(unaudited) (audited)
Trade debtors 121 185 114
Prepayments and other debtors 346 225 462
VAT recoverable 684 - 684
-------------- ----------------------- ------------
1,151 410 1,260
Included in trade and other receivables is an amount of
GBP684,000 relating to a reclaim of value added tax (VAT).
Conister Bank Limited (the Bank), as the Group VAT registered
entity, has for some time considered the VAT recovery rate being
obtained by the business was neither fair nor reasonable,
specifically regarding the attribution of part of the residual
input tax relating to the hire purchase business not being
considered as a taxable supply. Queries have been raised with the
Isle of Man Government Customs & Excise Division (C&E), and
several reviews of the mechanics of the recovery process were
undertaken by the Bank's professional advisors.
The decision of the first-tier Tax Tribunal released 18 August
2011 in respect of Volkswagen Financial Services Limited (UK)
Limited v HM Revenue & Customs (TC01401) ("VWFS Decision")
added significant weight to the case put by the Bank and a request
for a revised Partial Exemption Special Method was submitted in
December 2011. HM Revenue & Customs have appealed the decision.
The proposal put forward by the Bank is that the revised method
would allocate 50% of costs in respect of hire purchase
transactions to a taxable supply and 50% to an exempt supply. In
addition at this time a Voluntary Disclosure was made as a
retrospective claim for input VAT under-claimed in the last 4
years.
Discussions regarding the retrospective claim are ongoing.
However, there has been an acknowledgment that the old Partial
Exemption Special Method was neither fair nor reasonable, and the
revised Partial Exemption Special Method has been agreed to be not
unreasonable but is unlikely to be agreed prior to the appeal being
heard. C&E have also confirmed that they are happy for this
method to have been applied in Quarter 4 2011, and to apply to
future returns pending approval. Should the Bank's revised method
not be accepted by C&E once the reclaim has been concluded on,
then the additional VAT reclaimed under this method will be
repayable.
On the basis of the discussions and correspondence with C&E
in addition to the VWFS Decision, the Directors believe that the
VAT claimed retrospectively will be secured.
11. Creditors and accrued charges
Notes 30 June 30 June 31 Dec
2012 2011GBP000 2011
(unaudited)
GBP000 GBP000
(unaudited)
(audited)
Creditors and accruals 650 741 698
Short-term employee benefits 69 90 76
VAT (recoverable)/payable 10 (112) 184 81
--------------- --------------- ------------
607 1,015 855
--------------- --------------- ------------
12. Loan Notes
On 2 May 2012 and 27 June 2012, GBP300,000 and GBP400,000 was
advanced by Burnbrae Limited respectively. GBP500,000 of loans
previously had been advanced on 21 December 2011, bringing the
total advanced by Burnbrae to GBP1.2m. The terms of these advances
are 7%p.a. interest payable in arrears every quarter, to be repaid
in 5 years after the drawdown date and no later than 31 July 2017.
The loans can also be converted to equity at the rate of 4 pence
from the first day after the settlement date until the sixth day
prior to the maturity date.
On 3 March 2010 MFG entered into a convertible loan agreement
with J Mellon for GBP1.25 million. The loan is convertible into
shares from the first anniversary of the loan drawdown at 9 pence
per share and bears interest until conversion at a rate of 9% p.a.
MFG also entered into an identical agreement with Rock Holdings
Limited for GBP0.46 million on 26 March 2010. Both loans are to be
repaid on 26 February 2015. No amounts have been exercised as at
the date of these Interim Financial Statements.
13. Goodwill
30 June 30June 31 Dec
2012 2011 2011
GBP000 GBP000(unaudited) GBP000
(unaudited)
(audited)
Edgewater Associates Limited 1,849 1,849 1,849
ECF Asset Finance PLC 454 454 454
Three Spires Insurance Services
Limited 41 41 41
--------------- -------------------- ------------
2,344 2,344 2,344
14. Called up share capital and share premium
Authorised: Ordinary shares
of no par value Number
------------
At 31 December 2011 150,000,000
At 30 June 2012 150,000,000
Issued and fully paid: Ordinary
shares of no par value Number GBP000
At 30 June 2012 89,570,252 18,433
15. Regulatory
The Company's wholly owned subsidiary Conister Bank Limited is
licensed to undertake banking activity by the Isle of Man
Government Financial Supervision Commission. The Financial
Supervision Commission reviews the appointment of all Directors of
Conister Bank Limited.
16. Contingent liabilities
Conister Bank Limited is required to be a member of the Isle of
Man Government Depositors' Compensation Scheme which was introduced
by the Isle of Man Government under the Banking Business
(Compensation of Depositors) Regulations 1991. The Scheme creates a
liability on the Company to participate in the compensation of
depositors should it be activated.
17. Litigation
The Bank is vigorously pursuing the repayment of litigation
funding loans made to clients of other solicitor firms and further
litigation may be required in this regard. Counter claims have been
received and there is the possibility of litigation being
necessary. There is a risk of an adverse outcome in all litigation
and the costs and timescale to resolve these matters are
uncertain.
18. Post balance sheet disclosures
On 31 July 2012, Burnbrae Limited advanced an additional GBP0.5m
of loan notes to the Group under the same terms as disclosed in
note 12. This increased Burnbrae Limited's loan advance total to
GBP1.7m.
19. Approval of interim statements
The interim statements were approved by the Board on 26
September 2012. The interim report will be available from that date
at the Group's Registered Office: Clarendon House, Victoria Street,
Douglas, Isle of Man, IM1 2LN and at the Group's website -
www.mfg.im.
The Group's nominated advisor and broker is Beaumont Cornish
Limited, 2(nd) Floor, Bowman House, 29 Wilson Street, London, EC2R
7DE.
The Interim and Annual reports along with other supplementary
information of interest to Shareholders are included on our
website. The address of the website is www.mfg.im which includes
investor relations information and contact details.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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