REG - Arbuthnot Banking - Half-year Report <Origin Href="QuoteRef">ARBB.L</Origin> - Part 1

Arbuthnot BankingAnnouncement

18/07/2017 07:06

RNS Number : 3046L
Arbuthnot Banking Group PLC
18 July 2017

18 July 2017
For immediate release
ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")
Results for the six months to 30 June 2017
"Diversification continues"
Arbuthnot Banking Group announces a half yearly profit before tax of 2.5m, compared with a loss in the prior year of 2.4m.
Included in the profit figure for the six months ended 30 June is an estimated* income of 2.1m for Secure Trust Bank PLC ("STB") being an associated undertaking.
Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co., Limited and Secure Trust Bank PLC is an associated company.
FINANCIAL HIGHLIGHTS 
 Profit before tax 2.5m (H1 2016: loss 2.4m)
 Underlying profit before tax 2.7m (H1 2016: 2.0m)
 Earnings per share 0.17 (H1 2016: 11.11)*
 Interim dividend per share 14p (H1 2016: 13p)
 Net assets 234m (H1 2016: 282m)**
 Net assets per share 15.33 (H1 2016: 18.52)
OPERATIONAL HIGHLIGHTS
 Customer loans 879m (H1 2016: 657m), increased by 34%
 Customer deposits 1,229m (H1 2016: 940m), growth of 31%
 Assets Under Management 1,001m (H1 2016: 797m), up by 26%
 Completion of acquisition of Renaissance Asset Finance
Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of Arbuthnot, said: "The Group has made good progress in its plans to diversify, the Renaissance Asset Finance acquisition has been completed and the Commercial Banking business is gaining momentum. It is also pleasing to see customer deposits and assets under management pass the significant milestone of 1 billion for the first time. However, with uncertain economic and political times ahead we remain cautious in our decision making."
The interim results are available at http://www.arbuthnotgroup.com. 
*The estimate for associate income is based on our 18.6% share of the after tax earnings of Secure Trust calculated using the full year market consensus of the equity research performed on STB, with an assumed straight-line growth in profits over the first half of the year. STB is scheduled to announce its interim results on 22 August 2017. For the avoidance of doubt, ABG's estimate for the income from STB is not an estimate being made on its behalf. The Group's profit before tax, profit after tax and earnings per share therefore include this estimated income from STB.
**The prior year includes the impact of the gains arising on the sale of Everyday Loans and the deconsolidation of STB.
**The fall in net assets is as a result of the payment of a 44m special dividend and the final dividend for 2016.
ENQUIRIES:

Arbuthnot Banking Group  0207 012 2400
Sir Henry Angest, Chairman and Chief Executive 
Andrew Salmon, Group Chief Operating Officer
James Cobb, Group Finance Director
Stifel Nicolaus Europe Ltd trading as KBW (Nomad and Joint Broker) 0207 710 7600
Robin Mann
Gareth Hunt
Stewart Wallace 
Numis Securities Ltd (Joint Broker) 0207 260 1000
Chris Wilkinson 
Andrew Holloway
Bell Pottinger (Financial PR) 0203 772 2566
Ben Woodford
Dan de Belder
Sam Cartwright
Chairman's Statement
Arbuthnot Banking Group PLC
I am pleased to report that Arbuthnot Banking Group ("ABG") has delivered a profit before tax of 2.5m for the first six months of 2017, which includes an estimated profit from our associate, Secure Trust Bank PLC ("STB"), who will publish its interim results on 22 August. This compares to a loss of 2.4m for the same period of 2016.
On 28 April, the Group successfully completed the acquisition of Renaissance Asset Finance, a lender of specialist assets including vintage and high value cars and business assets. The impact of its earnings has only been included in the last two months of the first half. This acquisition is a clear demonstration of the Group's long held strategy of diversification of income streams that should provide some protection from either an economic slow-down or short term turbulence, and also from increased competition. It has been clear from the number of new start-up banks and non bank lenders that the market place is becoming more competitive. However, we believe that the Group has two significant advantages that should ensure its long term prosperity. Firstly, it has a long standing heritage and market knowledge. This experience is required to run a bank properly and has to be earned over time, it cannot always simply be bought by hiring a few individuals, but it has to be embedded in the DNA of the organisation. Secondly, our ability to attract long term low cost deposits provides a competitive advantage.
Given this long term confident view, the Board has decided to increase the interim dividend by 1p to 14p, which will be paid on 29 September 2017 to shareholders on the register on 1 September.
Arbuthnot Latham & Co., Limited
Arbuthnot Latham ("AL") has reported a profit before tax for the first half of the year of 4.9m (H1 2016: 4.5m). When the impact of the gain of 1.7m that was realised on the sale of Visa shares in 2016 is removed, it shows an increase of 75%.
The forward looking indicators of the bank suggest that AL is continuing to grow at a respectable rate. Customer deposits at 1.2bn (H1 2016: 0.94bn) and Assets under Management of 1bn (H1 2016: 0.8bn), have passed the significant milestones of one billion each during the first six months. With loans rapidly approaching 0.9bn at 0.88bn (H1 2016: 0.66bn), the business is growing at over 25% in all measures of these lead indicators. The business hopes to end the year with all three measures having grown through the billion mark.
The Private Bank has led the way mainly in attracting new customers to the deposit and investment products of the bank. It has also been able to write record volumes of new loans in the period, with new originations reaching 76m in the first half, an increase of 27% on the prior year. However, the Private Bank has experienced a significant level of loan repayments, which resulted in the Private Banking loan book remaining at the same level as the prior year.
The Commercial Bank has continued to invest in new staff and now has 44 employees. At a direct contribution level, the Commercial Bank has broken even during the first half of the year. Its customer balances have continued to grow at healthy rates and at the end of June its loan book was 147m (H1 2016: 16m) and deposit book was 160m (H1 2016: 23m). The business is now showing signs of good momentum and has a strong pipeline of business for the remaining months of the year.
Renaissance Asset Finance has shown that its distribution networks remain strong and more importantly loyal. Prior to AL acquiring the business its certainty of funding was not clear and as a consequence, its balance sheet reduced in size as it was not able to meet all broker enquiries. At the time of the completion of the acquisition, the loan book had fallen to 57m. During its first two months as part of the Group it has rebounded well and returned to growth and closed the period at 60m, an increase of 5% in its first two months.
Overall impairments remain low and consistent with the prior year. This is in line with the expectations of the business, especially given the secured nature of the lending and the fact that the Bank refuses to chase volumes at the expense of relaxing loan to value lending covenants.
The business continues to work through its IFRS 9 work plan and is currently not expecting it to have a material impact on the capital resources of either the bank or ABG. The only real change will be the need to recognise the future twelve months' expected losses from the current performing loans.
Secure Trust Bank PLC
We have recorded 2.1m of income related to STB. This represents an estimate of our 18.6% share of the after tax earnings of the investment in our associate undertaking. In calculating this estimate, the Company has used the full year market consensus of the equity research performed on STB with an assumed straight-line growth in profits over the first half, noting the trading statement made by STB on 3 May 2017 in relation to STB's first quarter trading being in-line with STB's management's expectations.
Outlook
The short term geopolitical and macro economic environment seems more uncertain than it has for a number of years. However, the Group remains focused on developing new areas of growth to diversify its income streams and thus deploying profitably its sizeable capital surplus. As a result of this, the Group remains confident that it is well placed to take advantage of any opportunities that may arise as a result of it being well capitalised and funded. 
Consolidated Statement of Comprehensive Income



Six months ended 30 June
Six months ended 30 June



2017
2016

Note

000
000
Interest income


22,106 
15,988 
Interest expense


(2,839)
(4,105)
Net interest income


19,267 
11,883 
Fee and commission income


6,183 
7,708 
Fee and commission expense


(322)
(376)
Net fee and commission income


5,861 
7,332 
Operating income


25,128 
19,215 
Net impairment loss on financial assets


(343)
(388)
Other income
2

1,104 
1,665 
Profit from associates
1

2,145 
265 
Operating expenses
3

(25,499)
(23,121)
Profit / (loss) before income tax


2,535 
(2,364)
Income tax expense


(90)
(539)
Profit / (loss) after income tax from continuing operations


2,445 
(2,903)
Profit from discontinued operations after tax
6

- 
228,110 
Profit for the period


2,445 
225,207 





Other comprehensive income




Items that are or may be reclassified to profit or loss




Available-for-sale reserve


- 
(2,321)
Available-for-sale reserve - Associate


389 
(209)
Tax on other comprehensive income


(78)
262 
Other comprehensive income for the period, net of tax


311 
(2,268)
Total comprehensive income for the period


2,756 
222,939 





Profit attributable to:




Equity holders of the Company


2,445 
163,781 
Non-controlling interests


- 
61,426 



2,445 
225,207 





Total comprehensive income attributable to:




Equity holders of the Company


2,756 
161,513 
Non-controlling interests


- 
61,426 



2,756 
222,939 





Earnings per share for profit attributable to the equity holders of the Company during the period




(expressed in pence per share):




- basic
5

16.5 
1,111.2 
- diluted
5

16.5 
1,107.5 

Consolidated Statement of Financial Position



At 30 June



2017
2016



000
000
ASSETS




Cash and balances at central banks


253,309
293,348
Loans and advances to banks


35,898
33,499
Debt securities held-to-maturity


158,515
103,131
Derivative financial instruments


1,816
1,228
Loans and advances to customers


879,348
657,122
Other assets


20,101
14,403
Financial investments


2,173
2,469
Deferred tax asset


1,689
1,714
Investment in associate


82,132
87,114
Intangible assets


16,954
7,004
Property, plant and equipment


4,490
5,216
Investment property


53,339
50,200
Total assets


1,509,764
1,256,448
EQUITY AND LIABILITIES




Equity attributable to owners of the parent




Share capital


153
153
Retained earnings


235,178
283,079
Other reserves


(1,051)
(1,320)
Total equity


234,280
281,912
LIABILITIES




Deposits from banks


6,579
1,986
Deposits from customers


1,234,445
939,539
Current tax liability


450
488
Other liabilities


21,042
20,335
Debt securities in issue


12,968
12,188
Total liabilities


1,275,484
974,536
Total equity and liabilities


1,509,764
1,256,448

Consolidated Statement of Changes in Equity

Attributable to equity holders of the Group



Share capital
Revaluation reserve
Capital redemption reserve
Available-for-sale reserve
Treasury shares
Retained earnings
Non-controlling interests
Total

000
000
000
000
000
000
000
000
Balance at 1 January 2017
153 
- 
20 
(251)
(1,131)
235,567 
- 
234,358 









Total comprehensive income for the period








Profit for the six months ended 30 June 2017
- 
- 
- 
- 
- 
2,445 
- 
2,445 









Other comprehensive income, net of income tax








Available-for-sale reserve
- 
- 
- 
389 
- 
- 
- 
389 
Available-for-sale reserve - Associate
- 
- 
- 
(78)
- 
- 
- 
(78)
Total other comprehensive income
- 
- 
- 
311 
- 
- 
- 
311 
Total comprehensive income for the period
- 
- 
- 
311 
- 
2,445 
- 
2,756 









Transactions with owners, recorded directly in equity








Contributions by and distributions to owners








Equity settled share based payment transactions
- 
- 
- 
- 
- 
(154)
- 
(154)
Final dividend relating to 2016
- 
- 
- 
- 
- 
(2,680)
- 
(2,680)
Total contributions by and distributions to owners
- 
- 
- 
- 
- 
(2,834)
- 
(2,834)
Balance at 30 June 2017
153 
- 
20 
60 
(1,131)
235,178 
- 
234,280 


Attributable to equity holders of the Group



Share capital
Revaluation reserve
Capital redemption reserve
Available-for-sale reserve
Treasury shares
Retained earnings
Non-controlling interests
Total

000
000
000
000
000
000
000
000
Balance at 1 January 2016
153 
98 
20 
1,047 
(1,131)
123,330 
67,887 
191,404 









Total comprehensive income for the period








Profit for the six months ended 30 June 2016
- 
- 
- 
- 
- 
163,781 
61,426 
225,207 









Other comprehensive income, net of income tax








Available-for-sale reserve
- 
- 
- 
(1,572)
- 
- 
(487)
(2,059)
Available-for-sale reserve - Associate
- 
- 
- 
(209)
- 
- 
- 
(209)
Total other comprehensive income
- 
- 
- 
(1,781)
- 
- 
(487)
(2,268)
Total comprehensive income for the period
- 
- 
- 
(1,781)
- 
163,781 
60,939 
222,939 









Transactions with owners, recorded directly in equity








Contributions by and distributions to owners








STB loss of control
- 
(98)
- 
525 
- 
(427)
(124,046)
(124,046)
Equity settled share based payment transactions
- 
- 
- 
- 
- 
(1,074)
31 
(1,043)
Final dividend relating to 2015
- 
- 
- 
- 
- 
(2,531)
(4,811)
(7,342)
Total contributions by and distributions to owners
- 
(98)
- 
525 
- 
(4,032)
(128,826)
(132,431)
Balance at 30 June 2016
153 
- 
20 
(209)
(1,131)
283,079 
- 
281,912 

Consolidated Statement of Cash Flows



Six months ended 30 June
Six months ended 30 June



2017
2016



000
000
Cash flows from operating activities




Interest received


20,004 
87,027 
Interest paid


(3,347)
(16,490)
Fees and commissions received


4,966 
12,987 
Net trading and other income


1,104 
- 
Cash payments to employees and suppliers


(16,392)
(63,503)
Taxation paid


- 
(6,053)
Cash flows from operating profits before changes in operating assets and liabilities


6,335 
13,968 
Changes in operating assets and liabilities:




- net decrease in derivative financial instruments


(527)
127 
- net (increase)/decrease in loans and advances to customers


(121,290)
956,385 
- net (increase)/decrease in other assets


(7,720)
22,212 
- net increase/(decrease) in deposits from banks


3,379 
(53,319)
- net increase/(decrease) in amounts due to customers


236,796 
(990,299)
- net increase/(decrease) in other liabilities


3,960 
(20,342)
Net cash inflow/(outflow) from operating activities


120,933 
(71,268)
Cash flows from investing activities




Purchase of financial investments


- 
(462)
Disposal of financial investments


- 
837 
Purchase of computer software


(8,797)
(5,071)
Proceeds from sale of software


- 
8,062 
Purchase of investment property


- 
(50,200)
Purchase of property, plant and equipment


(361)
(939)
Proceeds from sale of property, plant and equipment


- 
8,815 
Disposal of subsidiaries, net of cash and cash equivalents disposed


- 
65,695 
Purchases of debt securities


(108,363)
(59,893)
Proceeds from redemption of debt securities


55,772 
41,424 
Net cash (outflow)/inflow from investing activities


(61,749)
8,268 
Cash flows from financing activities




Dividends paid


(2,680)
(7,342)
Net cash used in financing activities


(2,680)
(7,342)
Net increase/(decrease) in cash and cash equivalents


56,504 
(70,342)
Cash and cash equivalents at 1 January


232,703 
397,189 
Cash and cash equivalents at 30 June


289,207 
326,847 

1. Operating segments
The Group is organised into three main operating segments as disclosed below:
1) Retail banking (associate) - incorporating household cash management, personal lending and banking and insurance services.
2) UK Private banking - incorporating private banking, wealth management and commercial banking.
3) Group Centre - ABG Group Centre management.
Transactions between the operating segments are on normal commercial terms. Centrally incurred expenses are charged to operating segments on an appropriate pro-rata basis. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet.
In calculating the Income from associates, the Company has used an estimate based on the full year market consensus of the equity research performed on STB with an assumed straight-line growth in profits over the first half, noting the trading statement made by STB on 3 May 2017 in relation to STB's first quarter trading being in-line with STB's management's expectations. The Group's profit before tax, profit after tax and earnings per share therefore include this estimated income from STB..

Continuing operations

Retail Bank Associate Income
UK Private banking
Group Centre
Total
Six months ended 30 June 2017
000
000
000
000
Interest revenue
- 
22,184
117
22,301
Inter-segment revenue
- 
(78)
(117)
(195)
Interest revenue from external customers
- 
22,106
- 
22,106
Fee and commission income
- 
6,183
- 
6,183
Revenue from external customers
- 
28,289
- 
28,289
Interest expense
- 
(2,782)
117
(2,665)
Add back inter-segment revenue
- 
78
(78)
- 
Subordinated loan note interest
- 
- 
(174)
(174)
Fee and commission expense
- 
(322)
- 
(322)
Segment operating income
- 
25,263
(135)
25,128
Impairment losses
- 
(343)
- 
(343)
Other income
- 
1,588
(484)
1,104
Income from associates
2,145
- 
- 
2,145
Operating expenses
- 
(21,632)
(3,867)
(25,499)
Segment profit / (loss) before tax
2,145
4,876
(4,486)
2,535
Income tax (expense) / income
- 
(90)
- 
(90)
Segment profit / (loss) after tax
2,145
4,786
(4,486)
2,445
Segment profit / (loss) after tax
2,145
4,786
(4,486)
2,445





Loans and advances to customers
- 
879,348
- 
879,348
Other assets
- 
551,239
79,177
630,416
Segment total assets
- 
1,430,587
79,177
1,509,764
Customer deposits
- 
1,234,445
- 
1,234,445
Other liabilities
- 
111,199
(70,160)
41,039
Segment total liabilities
- 
1,345,644
(70,160)
1,275,484
Other segment items:




Capital expenditure
- 
(2,658)
- 
(2,658)
Depreciation and amortisation
- 
(1,046)
(1)
(1,047)
The "Group Centre" segment above includes the parent entity and all intercompany eliminations. Segment profit is shown prior to any intra-group eliminations. The UK private bank opened a branch in Dubai in 2013. Other than the Dubai branch, all other operations of the Group are conducted wholly within the United Kingdom and therefore geographical information is not presented.

Discontinued operations (Retail Banking)
Continuing operations


ELL
STB
Total
Retail Bank Associate Income
UK Private banking
Group Centre
Total
Group Total
Six months ended 30 June 2016
000
000
000
000
000
000
000
000
Interest revenue
11,137 
57,498 
68,635 
- 
16,112 
68 
16,180 

Inter-segment revenue
- 
- 
- 
- 
(128)
(64)
(192)

Interest revenue from external customers
11,137 
57,498 
68,635 
- 
15,984 
4 
15,988 

Fee and commission income
147 
7,981 
8,128 
- 
7,708 
- 
7,708 

Revenue from external customers
11,284 
65,479 
76,763 
- 
23,692 
4 
23,696 

Interest expense
- 
(12,107)
(12,107)
- 
(3,996)
64 
(3,932)

Add back inter-segment revenue
- 
- 
- 
- 
128 
(128)
- 

Subordinated loan note interest
- 
- 
- 
- 
- 
(173)
(173)

Fee and commission expense
(124)
(779)
(903)
- 
(376)
- 
(376)

Segment operating income
11,160 
52,593 
63,753 
- 
19,448 
(233)
19,215 

Impairment losses
(2,610)
(12,172)
(14,782)
- 
(388)
- 
(388)

Other income
- 
- 
- 
- 
2,209 
(544)
1,665 

Income from associates
- 
- 
- 
265 
- 
- 
265 

Operating expenses
(6,016)
(29,073)
(35,089)
- 
(16,762)
(6,359)
(23,121)

Segment profit / (loss) before tax
2,534 
11,348 
13,882 
265 
4,507 
(7,136)
(2,364)
11,518 
Income tax (expense) / income
(507)
(2,199)
(2,706)
- 
(48)
(491)
(539)
(3,245)
Segment profit / (loss) after tax
2,027 
9,149 
11,176 
265 
4,459 
(7,627)
(2,903)
8,273
Profit on sale of discontinued operations
116,754 
100,180 
216,934 
- 
- 
- 
- 
- 
Segment profit / (loss) after tax
118,781 
109,329 
228,110 
265 
4,459 
(7,627)
(2,903)
225,207









Loans and advances to customers



- 
657,122 
- 
657,122 
657,122
Other assets



- 
515,489 
83,837 
599,326 
599,326
Segment total assets



- 
1,172,611 
83,837 
1,256,448 
1,256,448
Customer deposits



- 
939,539 
- 
939,539 
939,539
Other liabilities



- 
179,577 
(144,580)
34,997 
34,997
Segment total liabilities



- 
1,119,116 
(144,580)
974,536 
974,536
Other segment items:








Capital expenditure



- 
(53,721)
- 
(53,721)
(53,721)
Depreciation and amortisation



- 
(753)
(1)
(754)
(754)

2. Other income
Other income of 1.1m in 2017 mainly consist out of rental income received from the investment property, while 2016 included a 1.6m gain realised as a result of the completion of the Visa Europe transaction.
3. Operating expenses
In 2016 operating expenses included Group bonuses paid relating to the sale of the Everyday Loans Group amounting to 2.3m.

4. Underlying profit reconciliation
The profit before tax from continuing operations as reported in the operating segments can be reconciled to the underlying profit from continuing operations for the year as disclosed in the tables below.
Underlying profit reconciliation
Arbuthnot Latham & Co.
Arbuthnot Banking Group
Six months ended 30 June 2017
000
000
Profit before tax from continuing operations
4,876
2,535
Investment in operating systems
97
97
Acquisition costs
67
67
Underlying profit
5,040
2,699
Underlying profit reconciliation
Arbuthnot Latham & Co.
Arbuthnot Banking Group
Six months ended 30 June 2016
000
000
Profit / (loss) before tax from continuing operations
4,507
(2,364)
ABG Group bonuses relating to sale of ELL
- 
2,304
STB full year equivalent associate income*
- 
2,261
AL realised profit on AFS investment (Visa)
(1,665)
(1,665)
Investment in operating systems
260
260
AL commercial banking investment
567
567
AL incremental office space
650
650
Underlying profit
4,319
2,013



* - STB associate income adjustment (excl. ELL & bonuses relating to ELL sale) as if received from 1 January 2016.

5. Earnings per ordinary share
Basic
Basic earnings per ordinary share are calculated by dividing the profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares 14,815,045 (2016: 14,738,548) in issue during the period. On 30 March 2017, Sir Henry Angest bought 150,500 shares previously held in an ESOP trust. 
Diluted
Diluted earnings per ordinary share are calculated by dividing the dilutive profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, as well as the number of dilutive share options in issue during the period. There were no dilutive share options in issue at the end of June (2016: 50,000).

Six months ended 30 June
Six months ended 30 June

2017
2016
Profit attributable
000
000
Total profit after tax attributable to equity holders of the Company
2,445 
163,781 
Profit / (loss) after tax from continuing operations attributable to equity holders of the Company
2,445 
(2,903)
Profit after tax from discontinuing operations (ELL) attributable to equity holders of the Company
-
61,667 
Profit after tax from discontinuing operations (STB) attributable to equity holders of the Company
-
105,017 




Six months ended 30 June
Six months ended 30 June

2017
2016
Dilutive profit attributable
000
000
Total profit after tax attributable to equity holders of the Company
2,445 
163,781 
Profit after tax from continuing operations attributable to equity holders of the Company
2,445 
(2,903)
Profit after tax from discontinuing operations (ELL) attributable to equity holders of the Company
-
61,667 
Profit after tax from discontinuing operations (STB) attributable to equity holders of the Company
-
105,017 




Six months ended 30 June
Six months ended 30 June

2017
2016
Basic Earnings per share
p
p
Total Basic Earnings per share
16.5 
1,111.2 
Basic Earnings per share from continuing operations
16.5 
(19.7)
Basic Earnings per share from discontinuing operations - ELL
-
418.4 
Basic Earnings per share from discontinuing operations - STB
-
712.5 




Six months ended 30 June
Six months ended 30 June

2017
2016
Diluted Earnings per share
p
p
Total Diluted Earnings per share
16.5 
1,107.5 
Diluted Earnings per share from continuing operations
16.5 
(19.6)
Diluted Earnings per share from discontinuing operations - ELL
-
417.0 
Diluted Earnings per share from discontinuing operations - STB
-
710.1 

6. Discontinued operations
The profit after tax from discontinued operations is made up as follows:



Six months ended 30 June
Six months ended 30 June



2017
2016
Discontinued operations


000
000
Profit after tax from discontinued operations - ELL (up to 13 April 2016)


- 
2,027 
Profit after tax on sale of discontinued operations - ELL


- 
116,754 
Profit after tax from discontinued operations - STB (up to 15 June 2016)


- 
9,149 
Profit after tax on sale of discontinued operations - STB


- 
100,180 
Profit after tax from discontinued operations


- 
228,110 
On 4 December 2015, the Bank agreed to the conditional sale of its non-standard consumer lending business, ELL, which comprised Everyday Loans Holdings Limited and subsidiary companies Everyday Lending Limited and Everyday Loans Limited, to Non Standard Finance PLC (NSF) for 106.9 million in cash subject to a net asset adjustment and 16.3 million in NSF ordinary shares. The Disposal completed on 13 April 2016, and on completion, NSF repaid intercompany debt of 108.1 million to STB. After selling costs of 2.8m, this resulted in a gain recognised on disposal of 116.8m.
Details of the profits of discontinued operations, net assets disposed of and consequential gain recognised on disposal and cash flow from discontinued operations are set out below.



Six months ended 30 June
From 1 January to 13 April



2017
2016

Note

000
000
Interest income


- 
11,137 
Net interest income


- 
11,137 
Fee and commission income


- 
147 
Fee and commission expense


- 
(124)
Net fee and commission income


- 
23 
Operating income


- 
11,160 
Net impairment loss on financial assets


- 
(2,610)
Operating expenses


- 
(6,016)
Profit before tax


- 
2,534 
Tax expense


- 
(507)
Profit after tax


- 
2,027 
Profit on sale of business


- 
116,754 
Total profit from discontinued operation


- 
118,781 





Profit attributable to:




Equity holders of the Company


- 
61,667 
Non-controlling interests


- 
57,114 
Profit after tax


- 
118,781 





Earnings per share for profit attributable to the equity holders of the Company from discontinued operations during the year
(expressed in pence per share):




- basic
5

- 
418.4 
- diluted
5

- 
417.0 
6. Discontinued operations - continued

The following unaudited assets were sold as part of the sale of ELL:

Recognised values on sale

2016

000


Loans and advances to banks
457
Loans and advances to customers
116,744
Property, plant and equipment
452
Intangible assets
1,258
Deferred tax assets
371
Prepayments and accrued income
451
Other assets
11
Total assets
119,744


Intercompany funding
108,088
Current tax liability
3,212
Other liabilities
4,748
Total liabilities
116,048


Net identifiable assets
3,696


Consideration
123,206
Costs
(2,756)


Profit on sale of ELL
116,754


The intercompany funding was repaid by NSF at the time of completion.

6. Discontinued operations - continued









Cash flow from discontinued operations - ELL


Six months ended 30 June
From 1 January to 13 April



2017
2016



000
000
Cash flows from operating activities




Interest received


- 
11,137 
Fees and commissions received


- 
23 
Cash payments to employees and suppliers


- 
(8,626)
Taxation paid


- 
(507)
Cash flows from operating profits before changes in operating assets and liabilities


- 
2,027 
Changes in operating assets and liabilities:




- net increase in loans and advances to customers


- 
(3,618)
- net increase in other assets


- 
(249)
- net increase in other liabilities


- 
2,621 
Net cash inflow from operating activities


- 
781 
Cash flows from investing activities




Purchase of property, plant and equipment


- 
(9)
Net cash outflow from investing activities


- 
(9)
Cash flows from financing activities




Increase in borrowings




Dividends paid




Net increase in cash and cash equivalents


- 
772 
Cash and cash equivalents at 1 January


- 
1,661 
Cash and cash equivalents at 13 April


- 
2,433 
6. Discontinued operations - continued
On 15 June 2016 Arbuthnot Banking Group ('ABG') sold 6 million shares in Secure Trust Bank PLC ('STB'), which reduced its shareholding in STB from 51.92% to 18.93%. From this date the Group accounted for its remaining shareholding in STB as an associate. After the sale of the 6 million shares, the Group retained Board representation and as such is seen to have significant influence over STB. The profit and cash flow from discontinued operations relating to ELL have been shown in the tables above. The ELL entities were subsidiaries of STB and therefore formed part of the STB number reported in the operating segments of ABG. The tables below therefore reflect the profit and cash flow from the STB group excluding ELL. The combined impact can be seen in the operating segments (see note 1 - Retail banking).



Six months ended 30 June
From 1 January to 15 June



2017
2016

Note

000
000
Interest income


- 
57,498 
Interest expense


- 
(12,107)
Net interest income


- 
45,391 
Fee and commission income


- 
7,981 
Fee and commission expense


- 
(779)
Net fee and commission income


- 
7,202 
Operating income


- 
52,593 
Net impairment loss on financial assets


- 
(12,172)
Operating expenses


- 
(29,074)
Profit before tax


- 
11,347 
Tax expense


- 
(2,198)
Profit after tax


- 
9,149 
Profit on sale of shares


- 
100,180 
Total profit from discontinued operation


- 
109,329 





Profit attributable to:




Equity holders of the Company


- 
105,017 
Non-controlling interests


- 
4,312 
Profit after tax


- 
109,329 





Earnings per share for profit attributable to the equity holders of the Company from discontinued operations during the year
(expressed in pence per share):




- basic
5

- 
712.5 
- diluted
5

- 
710.1 
6. Discontinued operations - continued

The following unaudited assets were deconsolidated as part of the sale of 6 million shares in STB:

Recognised values on sale

2016

000


Cash and balances at central banks
176,647
Loans and advances to banks
27,618
Loans and advances to customers
1,117,700
Other assets
5,805
Financial investments
15,030
Deferred tax asset
606
Intangible assets
7,017
Property, plant and equipment
8,606
Total assets
1,359,029


Deposits from banks
25,000
Deposits from customers
1,046,009
Current tax liability
293
Other liabilities
29,748
Total liabilities
1,101,050


Net identifiable assets
257,979




Profit on sale of shares were calculated as follows:

2016

000
Consideration received
150,000
Less costs
(2,001)
Less net identifiable assets
(257,979)
Add back non-controlling interest 
124,046
Add back fair value of remaining investment in STB
86,114


Profit on sale of STB
100,180
6. Discontinued operations - continued









Cash flow from discontinued operations - STB excluding ELL


Six months ended 30 June
From 1 January to 15 June



2017
2016



000
000
Cash flows from operating activities




Interest received


- 
68,635 
Interest paid


- 
(12,107)
Fees and commissions received


- 
7,226 
Cash payments to employees and suppliers


- 
(51,552)
Taxation paid


- 
(6,034)
Cash flows from operating profits before changes in operating assets and liabilities


- 
6,168 
Changes in operating assets and liabilities:




- net increase in loans and advances to customers


- 
(165,976)
- net decrease in other assets


- 
117,395 
- net decrease in deposits from banks


- 
(10,000)
- net increase in amounts due to customers


- 
12,936 
- net decrease in other liabilities


- 
(5,031)
Net cash outflow from operating activities


- 
(44,508)
Cash flows from investing activities




Purchase of computer software


- 
(1,754)
Purchase of property, plant and equipment


- 
(531)
Disposal of property, plant and equipment


- 
2,179 
Proceeds from disposal of businesses


- 
106,912 
Proceeds from sale of property, plant and equipment


- 
456 
Net cash inflow from investing activities


- 
107,262 
Cash flows from financing activities




Increase in borrowings




Dividends paid


- 
(10,005)
Net cash used in financing activities


- 
(10,005)
Net increase in cash and cash equivalents


- 
52,749 
Cash and cash equivalents at 1 January


- 
141,595 
Cash and cash equivalents at 15 June


- 
194,344 

7. Basis of reporting
The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2016 statutory accounts as amended by standards and interpretations effective during 2017 and in accordance with IAS 34 "Interim Financial Reporting" (except for comparatives in the statement of financial position). The directors do not consider the fair value of the assets and liabilities presented in these financial statements to be materially different from their carrying value. 
The statements were approved by the Board of Directors on 17 July 2017 and are unaudited. The interim financial statements will be posted to shareholders and copies may be obtained from The Company Secretary, Arbuthnot Banking Group PLC, Arbuthnot House, 7 Wilson Street, London EC2M 2SN.

This information is provided by RNS
The company news service from the London Stock Exchange
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