TIDMMFX
RNS Number : 1671G
Manx Financial Group PLC
02 March 2015
FOR IMMEDIATE RELEASE Date 2 March 2014
Manx Financial Group PLC (the 'Company')
Report and accounts for the year ended 31 December 2014
Manx Financial Group PLC (LSE: MFX), the financial services
group which includes Conister Bank Limited, Conister Card Services
Limited and Edgewater Associates Limited, presents its final
results for the year ended 31 December 2014.
Jim Mellon, Executive Chairman, commented: "I am pleased to
report a record profit before tax for the Group of GBP1.73 million
which represents a growth of 61% for the year. 2014 also marked the
achievement of an important milestone whereby our total assets
exceeded GBP100 million for the first time, to reach nearly GBP120
million at year-end. Our outlook for 2015 remains very
promising."
The 2014 Audited Annual Report and Accounts will be available
from the Company's website shortly and will also be posted to
shareholders. www.mfg.im
Financial Highlights
Profit before tax: GBP1.7 million - up 61% (2013: profit of
GBP1.1 million)
Net interest income: GBP10.8 million - up 31% (2013: GBP8.3 million)
Loans: GBP89.3 million - up 18% (2013: GBP75.8
million)
Total assets: GBP119.5 million - up 28% (2013: GBP93.7
million)
Customer accounts: GBP100.3 million - up 28% (2013: GBP78.1
million)
Contacts:
Manx Financial Group PLC
Denham Eke, Chief Executive
Tel: +44 (0)1624 694694
Beaumont Cornish Limited
Roland Cornish/Felicity Geidt
Tel: +44 (0)20 7628 3396
Britton Financial PR
Tim Blackstone
Tel: +44 (0)7957 140416
Chairman's Statement
Review of performance
Dear Shareholders,
When I wrote to you last year, I commented that I believed that
the Group had turned a significant corner by moving into sustained
profitability. I am, therefore, pleased to report a record profit
before tax for the Group of GBP1.73 million (2013: GBP1.07
million). This represents a growth of 61%, and has led to net
profit for the year of GBP1.59 million (2013: GBP1.09 million), an
increase of 46%, continuing progress from the 2014 Interim net
profit of GBP0.72 million to a second half figure of GBP0.87
million. This outcome has further helped strengthen our balance
sheet with a 17% increase in total equity to GBP9.98 million (2013:
GBP8.53 million), providing a respectable Return on Equity of 15.9%
and confirming that our strategy of growing lending through
wholesale funding partnerships and retaining a disciplined approach
to expenditure is working well for us. 2014 was also a year when we
achieved an important milestone whereby our total assets exceeded
GBP100 million for the first time, to reach nearly GBP120 million
at year-end. Whilst increased liquidity is returning to the lending
market in both the Isle of Man and the UK, there is still an
imbalance between funding requirements and available loan finance.
We remain well placed to take advantage of this gap.
Having addressed the issue of profitability, we now intend to
further improve the Group's systems to provide enhanced
functionality to our offering. Technology is rapidly changing how
banks and financial services providers interact with their
customers. For banks, both borrowers and lenders alike benefit from
a more immediate delivery. The time of fully staffed branch
networks, ATMs and overseas call centres is running out. New
entrants to the lending market have taken advantage of the High
Street banks' lack of appetite or ability to embrace digital life.
These new lenders recognise that customers now, and even more so in
the future, want to engage with their bank in ways and at times
convenient to themselves, and not be driven by the constraints of
defined opening hours and menu-driven telephone systems. Equally,
as the understanding of risk becomes ever more sophisticated, the
use of data-driven algorithms allows credit decisions in real-time,
rather than tardy rulings by remote committees. Unlike the
traditional banks, we are not shackled with expensive branch
networks or legacy IT systems which hamper implementing the service
delivery now required by customers. The advances in technology
driven service provision also benefit financial advisors, who are
now able to offer more focussed and more competitive solutions to
their clients. As such, we are in an enviable position to benefit
from the enhancements provided by this financial technology
revolution and we intend to invest in this area in the coming
years.
Manx Financial Group PLC
In terms of the 2014 outcome, our net interest income increased
by 31% to GBP10.83 million (2013: GBP8.26 million) and net trading
income rose by 13% to GBP7.25 million (2013: GBP6.42 million),
which together led to a 12% growth in operating income. Personnel
and operations costs increased by only 2% which resulted in profit
before income tax growing by 61% to GBP1.73 million (2013: GBP1.07
million). After taxation, our profit for the year of GBP1.59
million (2013: GBP1.09 million), showed a growth of 46%. As a
result, our basic earnings per share ("EPS") increased by 39% to
1.56 pence (2013: 1.12 pence), providing an imputed earnings
multiple of 7.9 (based on 12.29 pence, being the Group's share
Volume Weighted Average Price for January 2015) and our diluted EPS
increased by 26% to 0.98 pence (2013: 0.78 pence).
Our total assets increased by 28% to GBP119.51 million (2013:
(GBP93.72 million), including loans and advances rising by 18% to
GBP89.34 million (2013: GBP75.82 million) and cash and near
equivalents growing by 89% to GBP24.90 million (2013: GBP13.18
million). This was supported by a 28% increase in our customer
accounts to GBP100.26 million (2013: GBP78.12 million). During the
period shareholder equity grew by 17% to GBP9.98 million (2013:
GBP8.53 million).
We announced the formation of Manx Financial Limited in the
second half of 2014 and commenced trading in both the Isle of Man
finance broking and the Isle of Man foreign exchange broking
markets. These businesses are tapping into an unsatisfied demand
and we already have a significant pipeline of opportunity,
demonstrating encouraging progress to date. We expect all three new
business streams to make a positive contribution to the Group
during the course of the new financial year.
Conister Bank Limited
Net interest income grew by 26% to GBP10.83 million (2013:
GBP8.61 million), leading to a 10% increase in net trading income
to GBP6.02 million (2013: GBP5.46 million). Operating income grew
by 11% to GBP6.15 million (2013: GBP5.54 million). Personnel and
other costs reduced by 10% to GBP4.79 million (2013: GBP5.31
million). As a result, profit before tax increased by almost 400%
to GBP1.02 million (2013: GBP0.21 million). This result was driven
by a combination of improved lending through our wholesale funding
partnerships, our interest rate strategy of locking in low cost of
funds over the longer term, and by the prudent control of
costs.
We continue to take a conservative approach to lending as
evidenced by the 30% reduction in impaired loans to GBP3.00 million
(2013: GBP4.31 million). The introduction of wholesale funding
arrangements which include a capital indemnity element provides an
additional level of security against losses.
We continue to match our loan and deposit books without the need
to make any behavioural adjustments. Whilst this is a very prudent
approach, we believe the reduced risk of any adverse liquidity
event provides a greater level of stability upon which to grow our
deposit base. Our matched funding also continues to provide a
partial hedge against any future rise in interest rates.
We continue to carry a VAT debtor of GBP589,000 in relation to
an on-going negotiation with the Isle of Man Government Customs
& Excise Division (C&E). We have believed for a number of
years that the VAT recovery rate for the business was neither fair
nor reasonable and we have raised a number of queries in this
regard with C&E. In parallel, there is a case being taken
against HM Revenue & Customs by Volkswagen Financial Services
(UK) which covers substantially the same issue and we have agreed
with C&E to await the outcome of this case before proceeding
with ours. Currently, the re-appeal for this case is scheduled for
April 2015.
Edgewater Associates Limited
After a slow start to the year, driven mainly by Retail
Distribution Review factors, the business returned a second half
growth in profit pre-exceptional items of 12% to GBP0.18 million
(2013: GBP0.16 million), a run rate of GBP0.36 million in a full
year. Our strategy is to focus on renewal income to reduce earnings
volatility. To achieve this, we continue to recruit and employ the
most experienced IFAs and also to invest further in our IT
platforms as part of the up-grading of our Group-wide systems.
We continue to look for additional IFA acquisitions to develop
and consolidate this division of the Group's business. We have
considered a number of potential targets and I hope to be able to
announce some progress in the near future.
Conister Card Services Limited
We continue to look for ways to monetise our MasterCard(R)
licence to issue pre-paid cards in the Isle of Man and the UK.
Despite a number of pre-paid card issuing companies struggling to
gain market share and attain profitability, we believe that we
found a viable strategy for success. As a consequence, I hope to be
able to announce further developments in this area shortly.
Outlook
It is clear that the banking and financial services landscape is
reaching a major watershed in which the twin forces of regulatory
reform and the development of financial technology will allow those
players capable of reacting quickly to gain a competitive
advantage.
In November 2014, the UK's Competition and Markets Authority
announced that it would launch a full investigation into retail
banking. This is a move that we welcome and that we hope will
produce positive outcomes for businesses such as our own by evening
out the competitive landscape.
The second strand is the benefit available to consumers
following the digitisation of financial services. As I have already
indicated, we see acquiring suitable technology as our key priority
to allow us access to new distribution channels and enabling the
provision of our services digitally to customers 24/7. Banking and
financial services are rapidly transforming from a people-intensive
business to a data management business. We intend fully to embrace
this change which will allow our staff to concentrate on
maintaining and developing business relationships with enhanced
customer services, both within our banking and our financial advice
divisions. Only by doing so will we ensure we continue to deliver
superior shareholder returns.
In 2014, the FCA initiated a review of every UK consumer credit
license holder as a consequence of the responsibility for
regulation moving from the Office of Fair Trading. The renewal
process for FCA-approved consumer lending will commence in
2015.
Thus the outlook for the Group remains very promising for 2015.
I anticipate that the trend of increasing profits will continue in
the year to come. In addition, and as I mention above, we continue
to seek suitable potential acquisitions for the banking and
financial services divisions that are both priced fairly and will
add additional profitability to our operations.
Finally, I would like to take this opportunity to thank both
you, our shareholders, and our staff alike for their continued
support of the Group and also remind you that 2015 will be the year
that our principal subsidiary, Conister Bank, will have served the
Isle of Man community continuously for 80 years - a notable
achievement.
Jim Mellon
Executive Chairman
26 February 2015
Consolidated Income Statement
2013
For the year ended 31 December Notes 2014 GBP000 GBP000
------------------------------------------------ -------- ------------------- -------------------
Interest income 13,634 10,750
Interest expense (2,809) (2,493)
Net interest income 10,825 8,257
Fee and commission income 1,276 1,399
Loss on joint venture 19 (2) -
Fee and commission expense (1,102) (990)
Commission share schemes (3,749) (2,249)
Net trading income 7,248 6,417
Other operating income 97 163
Operating income 7,345 6,580
Personnel expenses (2,931) (2,863)
Other expenses 7 (1,950) (1,657)
Provision for impairment on loan assets (550) (850)
Depositors' Compensation Scheme recovery 9 11 100
Depreciation (228) (252)
Realised gains on available for sale financial
assets 32 18
Unrealised loss on financial assets carried
at fair value (1) (3)
Profit before tax (payable) / recovery 1,728 1,073
Tax (payable) / recovery 11 (139) 14
Profit for the year 1,589 1,087
------------------- -------------------
Basic earnings per share (pence) 12 1.56 1.12
Diluted earnings per share (pence) 12 0.98 0.78
Consolidated Statement of Other Comprehensive Income
2013
For the year ended 31 December Notes 2014 GBP000 GBP000
------------------------------- ------ ------------ --------
Other comprehensive income:
Items that will be reclassified to profit
or loss
Available for sale gains taken to equity 6 10
Items that will never be reclassified to
profit or loss
Actuarial losses on defined benefit pension
scheme taken to equity (173) (53)
------ -----
Total comprehensive income for the period
attributable to owners 1,422 1,044
Basic earnings per share (pence) 12 1.39 1.08
Diluted earnings per share (pence) 12 0.89 0.76
Consolidated and Company Statement of Financial Position
Group Company
2014 2013 2014 2013
As at 31 December Notes GBP000 GBP000 GBP000 GBP000
----------------------- --------- -------- -------------------- --------- -------- --------------------
Assets
Cash and cash
equivalents 6,123 4,183 - -
Financial assets at a
fair
value through profit
or
loss 47 48 - -
Available for sale
financial
instruments 18,775 9,000 - -
Loans and advances to
customers 17 89,338 75,819 - -
Commissions receivable 326 289 - -
Property, plant and
equipment 605 629 - -
Investment in Group
undertakings 19 - - 12,072 12,072
Amounts due from Group
undertakings 19 - - 350 76
Trade and other
receivables 20 1,166 1,014 62 130
Investment in joint
venture 19 499 - - -
Subordinated loan 19 - - 3,900 2,000
Deferred tax asset 11 284 394 - -
Goodwill 19 2,344 2,344 - -
Total assets 119,507 93,720 16,384 14,278
Liabilities
Customer accounts 100,259 78,115 - -
Creditors and accrued
charges 1,715 754 20 9
Amounts owed to Group
undertakings 19 - - 2,421 1,848
Loan notes 23 7,165 6,065 7,165 6,065
Pension liability 388 252 - -
Total liabilities 109,527 85,186 9,606 7,922
Equity
Called up share
capital 18,933 18,933 18,933 18,933
Profit and loss
account (8,953) (10,399) (12,155) (12,577)
Total equity 9,980 8,534 6,778 6,356
Total liabilities and
equity 119,507 93,720 16,384 14,278
Consolidated Statement of Cash Flows
2014 2013
For the year ended 31 December Notes GBP000 GBP000
------------------------------------------------------ --------- --------- ---------
RECONCILIATION OF PROFIT BEFORE TAXATION TO
OPERATING CASH FLOWS
Profit before tax on continuing activities 1,728 1,073
Unrealised loss on financial assets carried
at fair value 1 3
(Gain) / loss on disposal of property, plant
and equipment (5) 17
Loss on joint venture 2 -
Depreciation charge 228 252
Realised gains on available for sale investments (32) (18)
Actuarial loss on defined benefit pension scheme
taken to equity (173) (53)
Pension liability 136 52
Share-based payment expense / (credit) 24 (50)
(Increase) / decrease in trade and other receivables (152) 238
Increase / (decrease) in trade and other payables 934 (1,408)
(Increase) / decrease in commission debtors (37) 23
Net cash inflow from trading activities 2,654 129
Increase in loans and advances to customers (13,519) (17,324)
Increase in deposit accounts 22,144 14,384
Cash inflow / (outflow) from operating activities 11,279 (2,811)
CASH FLOW STATEMENT
Cash flows from operating activities
Cash inflow / (outflow) from operating activities 11,279 (2,811)
Taxation paid - -
Net cash inflow / (outflow) from operating activities 11,279 (2,811)
Cash (outflow) / inflow from investing activities
Purchase of property, plant and equipment (208) (156)
(Purchase) / sale of available for sale financial
instruments (9,737) 3,512
Sale of property, plant and equipment 7 -
Investment in joint venture 19 (501) -
Payment of deferred consideration - (335)
Net cash (outflow) / inflow from investing activities (10,439) 3,021
Cash flows from financing activities
Issue of loan notes 23 1,100 2,055
Net cash inflow from financing activities 1,100 2,055
Increase in cash and cash equivalents 1,940 2,265
--------- --------
Included in cash flows are:
Interest received - cash amounts 13,360 9,072
Interest paid - cash amounts (2,802) (2,101)
Significant non-cash flows in the year
Conversion of loan notes to share capital - 500
Consolidated and Company Statement of Changes in Equity
Share Retained
For the year ended 31 December Capital Earnings 2014 2013
Group GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- ---------
Balance as at 1 January 18,933 (10,399) 8,534 7,215
Profit for the year - 1,589 1,589 1,087
Other comprehensive income - (167) (167) (43)
Transactions with owners:
Shares issued - - - 500
Shares to be issued - - - (175)
Share-based payment credit /
(expense) - 24 24 (50)
Balance as at 31 December 18,933 (8,953) 9,980 8,534
Share Retained
For the year ended 31 December Capital Earnings 2014 2013
Company GBP000 GBP000 GBP000 GBP000
---------------------------------------- --------- ---------- --------- ---------
Balance as at 1 January 18,933 (12,577) 6,356 5,649
Profit for the year - 398 398 432
Transactions with owners:
Shares issued - - - 500
Shares to be issued - - - (175)
Share-based payment credit / (expense) - 24 24 (50)
Balance as at 31 December 18,933 (12,155) 6,778 6,356
7. Other expenses
2014 2013
GBP000 GBP000
Professional and legal fees 496 281
Marketing costs 131 122
IT costs 348 298
Establishment costs 355 502
Communication costs 71 48
Travel costs 72 94
Bank charges 71 77
Insurance 111 97
Irrecoverable VAT 206 (41)
Other costs 89 179
1,950 1,657
9. Depositors' Compensation Scheme
2014 2013
GBP000 GBP000
---------------------------------------------------- ------- -------
Provision in respect of the Isle of Man Government
Depositors' Compensation Scheme 11 100
---------------------------------------------------- ------- -------
On 27 May 2009, Kaupthing Singer & Friedlander (Isle of Man)
Limited activated the Isle of Man Government Depositors'
Compensation Scheme (the Scheme) in connection with its
liquidation. Three payments of GBP73,880 were made in to the
Scheme. Repayments from the Financial Supervision Commission of
GBP133,506 and GBP34,424 have been received and a further GBP53,710
is expected from the Scheme.
11. Tax expense
2014 2013
GBP000 GBP000
--------------------------------------------------- ------- -------
Current tax expense
Current year 29 -
Deferred tax expense
Origination and reversal of temporary differences 12 (39)
Utilisation of previously recognised tax losses 123 50
Changes to estimates for prior years (25) (25)
110 (14)
Total tax expense / (recovery) 139 (14)
--------------------------------------------------- ------- -------
2014 2013
GBP000 GBP000
---------------------------------------------- ------- ------- -------- -------
Reconciliation of effective tax rate
Profit before tax on continuing operations 1,728 1,073
Tax using the Banking division's domestic
tax rate 10.0% 173 10.0% 107
Effect of tax rates in foreign jurisdictions 0.9% 12 - -
Non-deductible expenses 2.3% 40 40.1% 43
Tax exempt income (3.3)% (58) (79.4)% (85)
Timing differences in current year (0.9)% (15) (14.0)% (15)
Origination and reversal of temporary
differences in deferred tax 0.6% 12 (36.4)% (39)
Changes to estimates for prior years (1.5)% (25) (23.4)% (25)
------- ------- -------- -------
Total tax expense 8.1% 139 (13.1)% (14)
---------------------------------------------- ------- ------- -------- -------
The main rate of corporation tax in the Isle of Man is 0% (2013:
0%). However the profits of the Group's Manx banking activities are
taxed at 10% (2013: 10%). The profits of the Group's subsidiaries
that are subject to UK corporation tax are taxed at a rate of 21.5%
(2013: 20%).
The value of tax losses carried forward and timing differences
reduced to GBP284,000 (2013: GBP394,000) and resulted in an expense
of GBP110,000 (2013: GBP14,000 credit) to the income statement.
12. Earnings per share
2014 2013
Profit for the year GBP1,589,000 GBP1,087,000
--------------------------------------------- --- ------------- ----------------
Weighted average number of ordinary shares
in issue 102,070,252 96,899,019
Basic earnings per share 1.56p 1.12p
Diluted earnings per share 0.98p 0.78p
Total comprehensive income for the period GBP1,422,000 GBP1,044,000
--------------------------------------------- --- ------------- ----------------
Weighted average number of ordinary shares
in issue 102,070,252 96,899,019
Basic earnings per share 1.39p 1.08p
Diluted earnings per share 0.89p 0.76p
The basic earnings per share calculation is based upon the
profit for the year after taxation and the weighted average of the
number of shares in issue throughout the year.
The diluted earnings per share calculation assumes that all
convertible loan notes, warrants and share options have been
converted/exercised at the beginning of the year where they are
dilutive.
17. Loans and advances to customers
2014 2013
Gross Impairment Carrying Gross Impairment Carrying
Amount Allowance Value Amount Allowance Value
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Hire Purchase balances 52,059 (881) 51,178 46,222 (813) 45,409
Finance lease balances 11,422 (714) 10,708 8,882 (707) 8,175
Litigation funding - - - 2,164 (1,487) 677
Unsecured personal
loans 3,514 (148) 3,366 3,815 (306) 3,509
Vehicle stocking
plans 1,284 - 1,284 1,476 - 1,476
Block discounting 6,766 - 6,766 5,192 - 5,192
Secured commercial
loans 7,347 (62) 7,285 6,991 (435) 6,556
Secured personal
loans 8,751 - 8,751 4,834 (9) 4,825
91,143 (1,805) 89,338 79,576 (3,757) 75,819
Collateral is held, in the form of underlying assets, for Hire
Purchase, finance leases, vehicles stocking plans, block
discounting, secured commercial and personal loans. An estimate of
the fair value of collateral on past due or impaired loans and
advances is not disclosed as it would be impractical to do so.
2014 2013
Specific allowance for impairment GBP000 GBP000
Balance at 1 January 3,578 4,150
Specific allowance for impairment made 890 460
Release of allowances previously made (212) -
Write-offs (2,502) (1,032)
-------- --------
Balance at 31 December 1,754 3,578
2014 2013
Collective allowance for impairment GBP000 GBP000
Balance at 1 January 179 162
Collective allowance for impairment made 23 17
Release of allowances previously made (151) -
Balance at 31 December 51 179
Total allowances for impairment 1,805 3,757
Advances on preferential terms are available to all Directors,
management and staff. As at 31 December 2014 GBP125,983 (2013:
GBP93,187) had been lent on this basis. In the Group's ordinary
course of business, advances may be made to Shareholders but all
such advances are made on normal commercial terms.
As detailed below, at the end of the current financial year two
loan exposures exceeded 10% of the capital base of the Group (2013:
two loan exposures).
Outstanding Outstanding
Balance Balance Facility
2014 2013 limit
Exposure GBP000 GBP000 GBP000
Block discounting facility 3,501 2,229 5,500
Hire Purchase and finance lease receivables
Loans and advances to customers include the following Hire
Purchase and finance lease receivables:
2014 2013
GBP000 GBP000
Less than one year 30,615 25,495
Between one and five years 50,456 42,754
Gross investment in Hire Purchase and finance
lease receivables 81,071 68,249
The investment in Hire Purchase and finance lease receivables
net of unearned income comprises:
2014 2013
GBP000 GBP000
Less than one year 22,514 19,540
Between one and five years 40,967 35,564
Net investment in Hire Purchase and finance
lease receivables 63,481 55,104
19. Investment in Group undertakings
The Company has the following investments in subsidiaries
incorporated in the Isle of Man:
Carrying value Nature of 31 December Date of Total Total
of investments
Business 2014 Incorporation 2014 2013
% Holding GBP000 GBP000
Conister Bank Asset and Personal
Limited Finance 100 05.12.1935 10,067 10,067
TransSend Holding Company for 100 05.11.2007 - -
Holdings Prepaid Card Division
Limited
Bradburn Holding 100 15.05.2009 - -
Limited Company
Edgewater
Associates Wealth
Limited Management 100 24.12.1996 2,005 2,005
-------- --------
12,072 12,072
Amounts owed to and from group undertakings are unsecured,
interest-free and repayable on demand.
Subordinated loans
MFG has issued several subordinated loans as part of its equity
funding into the Bank. Interest charged is at the discretion of the
lender.
2014 2013
Creation Maturity Interest rate GBP000 GBP000
-------------------- ------------------- -------------- ------- -------
22 July 2013 22 July 2018 7.00% 1,000 1,000
25 October 2013 22 October 2020 7.00% 1,000 1,000
11 February 2014 11 February 2024 7.00% 500 -
27 May 2014 27 May 2024 7.00% 500 -
9 July 2014 9 July 2024 7.00% 500 -
17 September 2014 17 September 2026 7.00% 400 -
------- -------
Total subordinated
loans 3,900 2,000
----------------------------------------- -------------- ------- -------
Goodwill
Group Group
2014 2013
GBP000 GBP000
Edgewater Associates Limited ("EWA") 1,849 1,849
ECF Asset finance PLC ("ECF") 454 454
Three Spires Insurance Services Limited ("Three
Spires") 41 41
2,344 2,344
Goodwill impairment
The goodwill is considered to have an indefinite life and is
reviewed on an annual basis by comparing its estimated recoverable
amount with its carrying value.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of EWA is based on the forecasted 3 year
cash flow projections, extrapolated to 10 years using a 5% annual
increment, and then discounted using a 12% discount factor. The
sensitivity of the analysis was tested using additional discount
factors of 15% and 20% on stable profit levels.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of ECF is based on forecasted 3 year
sales interest income calculated at 5% margin, extrapolated to 10
years using a 5% annual increment, and then discounted using a 12%
discount factor. The sensitivity of the analysis was tested using
additional discount factors of 15% and 20% on varying sales
volumes.
There has been no change in the detailed method of measurement
for EWA and ECF when compared to 2013. The goodwill generated on
the purchase of Three Spires has been reviewed at the current year
end and is considered adequate given its income streams referred to
EWA. On the basis of the above reviews no impairment to goodwill
has been made in the current year.
Investment in joint venture
On 7 August 2014, a joint venture agreement was entered into
between Manx Financial Limited, previously a subsidiary of the
Group, and Andrew Flowers. Additional shares were issued such that
49.9% of the voting share capital was sold for GBP500,000, creating
GBP1,000 share premium in the company. Control was lost on this day
and consequently the assets and liabilities of the subsidiary were
derecognised. There was no profit or loss incurred upon ceding
control. Manx Financial Group PLC has invested GBP50,000 for 50.1%
of the voting share capital and has provided a corporate guarantee
to block funders in Manx Financial Limited.
20. Trade and other receivables
Group Company
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
Prepayments and other debtors 646 471 62 130
Depositors Compensation Scheme Receivable 54 77 - -
VAT recoverable 466 466 -
1,166 1,014 62 130
Included in trade and other receivables is an amount of
GBP466,000 (2013: GBP466,000) relating to a reclaim of value added
tax ("VAT").
Conister Bank Limited, 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 HP 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
Company's professional advisors.
The decision of the First-Tier Tax Tribunal released 18 August
2011 in respect of Volkswagen Financial Services (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.
The proposal put forward by the Bank was that the revised method
would allocate 50% of costs in respect of HP 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.
In November 2012, it was announced that the HMRC Upper Tribunal
had overturned the First-Tier Tribunal in relation to the VWFS
Decision. VWFS has subsequently been given leave to appeal and this
was scheduled to be heard in October 2013. However, this was
delayed by HMRC pending reference to a relevant European Court of
judgement in the case of Banco Mais (C183/13). The judgement in
this case was released on 10 July 2014 and ruled against the
taxpayer; however the impact of the judgement on the VWFS case is
unclear and the VWFS is still proceeding with the appeal to the
Court of Appeal. The re-appeal is now scheduled for April 2015.
The Bank's total exposure in relation to this matter is
GBP589,000, comprising the debtor balance referred to above plus an
additional GBP123,000 VAT reclaimed under the partial Exemption
Special Method, in the period from Q4 2011 to Q3 2012 (from Q4 2012
the Bank reverted back to the previous method). On the basis of the
discussions and correspondence which have taken place between the
Bank and C&E, in addition to the VWFS appeal, the Directors are
confident that the VAT claimed referred to above will be
secured.
23. Loan notes
Group Company
2014 2013 2014 2013
Notes GBP000 GBP000 GBP000 GBP000
Related parties
J Mellon JM 1,750 1,750 1,750 1,750
Burnbrae Limited BL 1,200 1,200 1,200 1,200
Southern Rock Insurance
Company Limited SR 460 460 460 460
Copper Development Corporation CDC 500 500 500 500
3,910 3,910 3,910 3,910
Unrelated parties UP 3,255 2,155 3,255 2,155
-------- -------- -------- --------
7,165 6,065 7,165 6,065
JM - Two loans, one of GBP500,000 maturing on 31 July 2017 with
interest payable of 7% per annum, and one of GBP1,250,000 maturing
on 26 February 2015, paying interest of 9% per annum. Both loans
are convertible at the rate of 4 pence and 9 pence respectively. JM
is also entitled to 8.3 million warrants at an exercise price of 6
pence which lapse on 31 July 2017. See note 30 for an extension of
this loan note subsequent to the year end.
BL - One loan consisting of GBP1,200,000 maturing on 31 July
2017 with interest payable of 7% per annum. Jim Mellon is the
beneficial owner of BL and Denham Eke is also a director. The loan
is convertible at a rate of 4 pence. BL is also entitled to 20
million warrants at an exercise price of 6 pence which lapse on 31
July 2017.
SR - One loan consisting of GBP460,000 maturing on 26 February
2015 with interest payable of 9% per annum. The loan is convertible
at a rate of 9 pence. SR is also entitled to 8.3 million warrants
at an exercise price of 6 pence which lapse on 24 October 2017.
Arron Banks, a significant Shareholder, holds a major stake in SR.
John Banks a non-executive Director is also a director of SR. See
note 30 for an extension of this loan subsequent to the year
end.
CDC - One loan of GBP350,000 maturing on 5 September 2017 with
interest payable of 5% per annum, and another loan of GBP150,000
maturing on 3 October 2017 paying interest of 5% per annum. Denham
Eke is a director of CDC.
UP - Fifteen loans consisting of an average GBP217,000, with an
average interest payable of 5.33% per annum. The earliest maturity
date is 28 April 2015 and the latest maturity is 14 July 2019.
With respect to the convertible loans, the interest rate applied
was deemed by the Directors to be equivalent to the market rate
with no conversion option hence no equity component has been
recognised with respect to any of these loans.
30. Subsequent events
The two outstanding Convertible Loan Notes ("Notes") that were
otherwise due for maturity on 26 February 2015 (see note 23) have
been extended by five years. The Notes together total GBP1.71
million, of which Jim Mellon, the Group's Executive Chairman, holds
GBP1.25 million and Rock Holdings Limited (subsequently assigned to
Southern Rock Insurance Limited), a company connected with John
Banks, a non-executive Director of the Group, holds GBP0.46
million.
As a result, and having considered other methods of raising
capital, the independent Directors have resolved, following
negotiations with the lenders, to extend the two Notes for a
further five years to 26 February 2020 at a reduced interest rate
of 6.5%, down from the previous 9.0%. All other terms remain as
those announced on 2 March 2010.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUQWPUPAGRM
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