REG - Arbuthnot BankingSecure Trust Bank - Final Results <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 6
19/03/2015 07:01
- Part 6: For the preceding part double click ID:nRSS8401He
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assess key pieces of information on a firm's capital, risk exposures and risk assessment processes. Our Pillar 3
disclosures for the year ended 31 December 2014 are published as a separate document on the Group website under Investor
Relations (Announcements & Shareholder Info).
8. Net interest income
Year ended 31 December Year ended 31 December
2014 2013
£000 £000
Cash and balances at central banks 1,026 733
Loans and advances to banks 52 70
Debt securities held-to-maturity 530 296
Loans and advances to customers 116,016 92,230
Interest income 117,624 93,329
9. Fee and commission income
2014 2013
£000 £000
Banking commissions 5,014 4,714
Trust and other fiduciary fee income 5,210 4,320
Financial Planning fees and commissions 1,557 1,351
Structured product commissions 1,218 1,810
Other fee income * 16,964 19,621
29,963 31,816
* This mainly includes fee and commission income received on OneBill, PPI insurance and commission earned on debt recovery activities at Secure Trust Bank.
10. Net impairment loss on financial assets
2014 2013
£000 £000
Net Impairment losses on loans and advances to customers 18,244 17,734
Impairment losses on financial investments 347 1,073
18,591 18,807
11. Gain from a bargain purchase
On 15 January 2013 Debt Managers (Services) Limited (DMS), a wholly owned subsidiary of Secure Trust Bank, acquired certain
trade and assets from Debt Managers Holdings Ltd, Debt Managers (AB) Limited and Debt Managers Limited (together "Debt
Managers"). Debt Managers collects debt on behalf of a range of clients including banks and utility companies.
Key benefits of this acquisition to Secure Trust Bank include:
• Broadening the income base of Secure Trust Bank without the requirement for large amounts of capital;
• The acquisition of a scalable collections platform through which Secure Trust Bank intends to channel its delinquent
debt; and
• The acquisition of the latest call centre and collections technology, including market leading dialler capability,
interactive voice response technology and payment websites.
DMS acquired the Debt Managers business for an initial cash payment of £0.4m paid on completion of the transaction.
Deferred consideration of up to £0.3m was payable by DMS one year after completion subject to the business achieving
certain performance criteria. Of this, £0.1m was paid by DMS in final settlement.
The acquired assets included a software platform jointly developed with a third party. Upon completion the rights to this
software were sold to that third party for consideration of £2m. DMS then proceeded to lease back the internal rights to
use this software. On completion Secure Trust Bank provided DMS with £2.2m of funding to clear an outstanding overdraft of
£1.8m and to fund the working capital requirements of DMS.
The Consolidated Statement of Comprehensive Income includes revenue of £3.8m and a loss before tax of £0.9m attributable to
DMS. Had the acquisition occurred at the start of the financial year, the Consolidated Statement of Comprehensive Income
would have included revenue of £4.0m and a loss before tax of £0.9m attributable to DMS.
Acquired Recognised
assets / Fair value values on
liabilities adjustments acquisition
£000 £000 £000
Clients cash at bank 1,362 - 1,362
Other assets 1,117 263 1,380
Intangible assets 2,010 - 2,010
Property, plant and equipment 57 - 57
Total assets 4,546 263 4,809
Bank overdraft 1,846 - 1,846
Client account 1,301 - 1,301
Other liabilities 730 - 730
Total liabilities 3,877 - 3,877
Net identifiable (liabilities)/assets 669 263 932
Consideration 519
Goodwill (413)
12. Gain on Sale of Building
On 17 October 2013 Arbuthnot Latham & Co., Limited completed the sale and leaseback of 7 Wilson Street. The net book value
of the property at the date of sale was £16.5m. Under the terms of the sale and leaseback agreement, the cash
consideration received by Arbuthnot Latham was £26.2m paid on completion. The Buyer also provided £5.4m to be drawn by
Arbuthnot Latham to fund a renovation and fit out programme. After providing £3.0m for the rent payable during the period
of refurbishment prior to occupation and £0.2m of transaction costs, the net gain was £6.5m.
13. Other income
Arbuthnot Latham received £1.2m of rental income in 2013 from the letting of the 7 Wilson Street property. The property
was vacated by the tenants at the end of September 2013 and refurbishment works started soon afterwards in anticipation of
the Group occupation which took place in November 2014.
14. Operating expenses
2014 2013
Operating expenses comprise: £000 £000
Staff costs, including Directors:
Wages and salaries 41,082 33,262
Social security costs 4,180 3,553
Pension costs 1,741 1,509
Share based payment transactions (note 37) 1,583 2,249
Amortisation of intangibles (note 28) 3,000 2,803
Depreciation (note 29) 808 1,015
Operating lease rentals 5,120 4,617
Costs arising from acquisitions 198 535
Other administrative expenses 27,468 24,088
Total operating expenses 85,180 73,631
2014 2013
Remuneration of the auditor and its associates, excluding VAT, was as follows: £000 £000
Fees payable to the Company's auditor for the audit of the Company's annual accounts 95 82
Fees payable to the Company's auditor and its associates for other services:
Audit of the accounts of subsidiaries 329 356
Audit related assurance services 65 104
Taxation compliance services 82 73
Taxation advisory services 61 62
Other assurance services 321 56
Corporate finance services 115 -
Other non-audit services 13 28
Total fees payable 1,081 761
Other assurance services include regulatory assessments. Corporate finance services include due diligence work on a
potential corporate transaction.
15. Average number of employees
2014 2013
Retail banking 608 530
Private banking 175 145
Group 17 16
800 691
16. Income tax expense
2014 2013
United Kingdom corporation tax at 21.5% (2013: 23.25%) £000 £000
Current taxation
Corporation tax charge - current year 5,349 3,146
Corporation tax charge - adjustments in respect of prior years (18) 548
5,331 3,694
Deferred taxation
Origination and reversal of temporary differences 274 1,006
Adjustments in respect of prior years (106) (502)
168 504
Income tax expense 5,499 4,198
Tax reconciliation
Profit before tax 22,515 15,713
Tax at 21.5% (2013: 23.25%) 4,841 3,653
Permanent differences 657 208
Tax rate change 126 291
Prior period adjustments (125) 46
Corporation tax charge for the year 5,499 4,198
The UK corporation tax rate reduced from 24% to 23% with effect from 1 April 2013 and to 21% from 1 April 2014. On 2 July
2013 the Government substantively enacted a further reduction to the UK corporation tax rate to 20% from 1 April 2015. This
will reduce the Company's future current tax charge accordingly.
17. 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 of £8,634,000 (2013: £7,930,000 ) by the weighted average number of ordinary shares 15,279,322 (2013: 15,279,322)
in issue during the year.
Diluted
Diluted earnings per ordinary share are calculated by dividing the profit after tax attributable to equity holders of the
Company of £8,634,000 (2013: £7,930,000 ) by the weighted average number of ordinary shares in issue during the year, as
noted above, as well as the number of dilutive share options in issue during the year. The number of dilutive share options
in issue at the year end was 187,500 (2013: 106,250).
18. Cash and balances at central banks
2014 2013
Group £000 £000
Cash and balances at central banks 115,938 193,046
In 2010 a reserve account was opened at the Bank of England (BoE) to comply with the new liquidity regime that came into
force on 1 October 2010. Surplus funds are now mainly held in the BoE reserve account, with the remainder held in
certificates of deposit, fixed rate notes and money market deposits in highly rated banks (the majority held in UK clearing
banks).
19. Loans and advances to banks
2014 2013
Group £000 £000
Placements with banks included in cash and cash equivalents (note 39) 31,844 105,061
The table below presents an analysis of loans and advances to banks by rating agency designation as at 31 December, based on Moody's long term ratings:
2014 2013
Group £000 £000
Aaa - 57,101
A1 3,216 -
A2 26,242 44,327
A3 - 3,633
Baa1 2,386 -
31,844 105,061
None of the loans and advances to banks are either past due or impaired.
20. Debt securities held-to-maturity
Debt securities represent certificates of deposit. The Group's intention is to hold them to maturity and, therefore, they
are stated in the Statement of Financial Position at amortised cost.
The movement in debt securities held to maturity may be summarised as follows:
2014 2013
Group £000 £000
At 1 January 19,466 13,526
Exchange difference on monetary assets 188 -
Additions 85,244 9,844
Redemptions (13,215) (3,904)
At 31 December 91,683 19,466
The table below presents an analysis of debt securities by rating agency designation at 31 December, based on Moody's long term ratings:
2014 2013
Group £000 £000
Aaa 48,714 14,120
Aa1 22,284 3,044
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