REG - Secure Trust BankArbuthnot Banking - Final Results <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 3

Arbuthnot BankingAnnouncement

19/03/2015 07:01

- Part 3: For the preceding part double click  ID:nRSS8407Hb 

activities                                                                                                          
 Net inflow on issue of share capital                                                          52.1                    -                       
 Dividends paid                                                                                (10.2)                  (9.1)                   
 Net cash flows from financing activities                                                      41.9                    (9.1)                   
 Net increase/(decrease) in cash and cash equivalents                                          16.0                    (4.0)                   
 Cash and cash equivalents at 1 January                                                        90.0                    94.0                    
 Cash and cash equivalents at 31 December                                              28      106.0                   90.0                    
 
 
Company statement of cash flows 
 
                                                                                               Year ended 31 December  Year ended 31 December  
                                                                                               2014                    2013                    
                                                                                       Note    £million                £million                
 Cash flows from operating activities                                                                                                          
 Profit for the year                                                                           23.0                    9.8                     
                                                                                                                                               
 Adjustments for:                                                                                                                              
 Income tax expense                                                                            4.8                     3.0                     
 Depreciation of property, plant and equipment                                         18      0.2                     0.3                     
 Amortisation of intangible assets                                                     16      0.3                     0.3                     
 Impairment losses on loans and advances to customers                                          8.7                     9.6                     
 Share based compensation                                                                      0.5                     2.5                     
 Cash flows from operating profits before changes in operating assets and liabilities          37.5                    25.5                    
 Changes in operating assets and liabilities:                                                                                                  
 - net (increase)/decrease in loans and advances to banks                                      (11.3)                  41.3                    
 - net increase in loans and advances to customers                                             (224.9)                 (96.0)                  
 - net (increase)/decrease in other assets                                                     (15.2)                  34.0                    
 - net increase in amounts due to banks                                                        15.8                    0.1                     
 - net increase in deposits from customers                                                     171.8                   37.7                    
 - net increase in other liabilities                                                           7.0                     6.0                     
 Income tax paid                                                                               (2.9)                   (2.5)                   
 Net cash (outflow)/inflow from operating activities                                           (22.2)                  46.1                    
 Cash flows from investing activities                                                                                                          
 Borrowings repaid on acquisition of subsidiary undertaking                                    -                       (36.9)                  
 Purchase of subsidiary undertakings                                                   17      -                       (3.7)                   
 Purchase of property, plant and equipment                                             18      (3.4)                   (0.2)                   
 Purchase of computer software                                                         16      (0.7)                   (0.4)                   
 Proceeds from sale of property, plant and equipment                                           -                       0.4                     
 Net cash flows from investing activities                                                      (4.1)                   (40.8)                  
 Cash flows from financing activities                                                                                                          
 Net inflow on issue of share capital                                                          52.1                    -                       
 Dividends paid                                                                                (10.2)                  (9.1)                   
 Net cash flows from financing activities                                                      41.9                    (9.1)                   
 Net increase/(decrease) in cash and cash equivalents                                          15.6                    (3.8)                   
 Cash and cash equivalents at 1 January                                                        88.5                    92.3                    
 Cash and cash equivalents at 31 December                                              28      104.1                   88.5                    
 
 
Notes to the consolidated financial statements 
 
1.  Accounting policies 
 
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated. 
 
1.1  Reporting entity 
 
Secure Trust Bank PLC is a company incorporated in the United Kingdom (referred to as "the Company"). The registered
address of the Company is One Arleston Way, Solihull, West Midlands, B90 4LH. The consolidated financial statements of the
Company as at and for the year ended 31 December 2014 comprise Secure Trust Bank PLC and its subsidiaries (together
referred to as "the Group" and individually as "subsidiaries"). The Group is primarily involved in banking and financial
services. 
 
1.2  Basis of presentation 
 
The Group's consolidated financial statements and the Company's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs as adopted or early adopted by the Group and endorsed by the EU) and the
Companies Act 2006 applicable to companies reporting under IFRS. They have been prepared under the historical cost
convention, as modified by the revaluation of land and buildings and financial instruments at fair value through profit or
loss. The consolidated financial statements are presented in pounds sterling, which is the Group's functional and
presentational currency. 
 
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 2. 
 
The directors have assessed, in the light of current and anticipated economic conditions, the Group's ability to continue
as a going concern. The directors confirm they are satisfied that the Company and the Group have adequate resources to
continue in business for the foreseeable future. For this reason, they continue to adopt the 'going concern' basis for
preparing accounts. 
 
The consolidated financial statements were authorised for issue by the Board of Directors on 18 March 2015. 
 
a) Interpretations and amendments to existing standards applicable to the Group which are effective for annual periods
beginning on 1 January 2014 or which have been early adopted: 
 
·      IFRS 10 'Consolidated Financial Statements' and IAS 27 (Revised) 'Separate Financial Statements'.  IFRS 10
supersedes IAS 27 and SIC-12, and provides a single model to be applied in the control analysis for all investees. There
are some minor clarifications in IAS27, and the requirements of IAS 28 and IAS 31 have been incorporated into IAS 27. Due
to the adoption of IFRS 10 the Group had to change its accounting policy for determining whether it has control over and
consequently whether it consolidates other investees. According to this standard, control is now defined as when the
investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. However, this standard did not have any material impact on the
financial statements as there was no change in the investees consolidated. 
 
·      IFRS 11, 'Joint Arrangements' (effective 1 January 2013). This standard replaces the existing accounting for
subsidiaries and joint ventures (now joint arrangements) and removes the choice of equity or proportionate accounting for
jointly controlled entities, as was the case under IAS 31. 
 
·      IFRS 12, 'Disclosure of Interests in Other Entities' (effective 1 January 2013). This standard replaces the existing
accounting for subsidiaries and joint ventures (now joint arrangements) and contains the disclosure requirements for
entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. 
 
·      IAS 32 (Revised) 'Offsetting Financial Assets and Financial Liabilities'. This standard was amended to clarify the
offsetting criteria, specifically when an entity currently has a legal right of set off and when gross settlement is
equivalent to net settlement. 
 
·      IAS 36 (Revised) 'Impairment of Assets'. The amendment reverses the unintended requirement in IFRS 13 'Fair Value
Measurement' to disclose the recoverable amount of every cash-generating unit to which significant goodwill or intangible
assets with indefinite lives have been allocated.  Under the amendments, recoverable amount is required to be disclosed
only when an impairment loss has been recognised or reversed. 
 
·      IFRIC 21 'Levies'.  The interpretation defines a levy as an outflow from an entity imposed by a government in
accordance with legislation. A levy is recognised as a liability when, and only when, the triggering event specified in the
legislation occurs. 
 
The above changes did not have any material impact on the financial statements. 
 
b) Published standards and amendments to existing standards applicable to the Group which are not yet effective and which
have not been early adopted: 
 
·      Annual improvements to IFRSs (2010-2012 and 2011-2013 cycles) (effective for annual periods beginning on 1 February
2015). Sets out minor improvements to IFRS standards as part of the annual improvement process. 
 
·      IFRS 15 'Revenue from contracts with customers' (effective for annual periods beginning on 1 January 2017). The
standard replaces a number of existing standards and interpretations and applies to contracts with customers, but does not
apply to insurance contracts, financial instruments or lease contracts, which are in the scope of other IFRSs. It also does
not apply if two companies in the same line of business exchange non-monetary assets to facilitate sales to other parties.
The standard specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide
users of financial statements with more informative relevant disclosures. It introduces a new revenue recognition model
that recognises revenue either at a point in time or over time. The model features a principles-based five-step model to be
applied to all contracts with customers. 1 
 
The above standard and amendments to existing standards are unlikely to have a material impact on the Group. 
 
·      IFRS 9 'Financial instruments' (effective for annual periods beginning after 1 January 2018). This is the IASB's
replacement of IAS 39 'Financial Instruments: Recognition and Measurement'. Phase one of this standard deals with the
classification and measurement of financial assets and represents a significant change from the existing requirements in
IAS 39. The standard contains three primary measurement categories for financial assets: 'amortised cost', 'fair value
through other comprehensive income' and 'fair value through profit or loss' and eliminates the existing categories of 'held
to maturity', 'available for sale' and 'loans and receivables'. The potential effect of phase one of this standard is not
expected to have a pervasive impact on the Group's financial statements, due to the nature of the Group's operations. 
Phase two of the standard covers impairment, with a new expected loss impairment model that will require expected credit
losses to be accounted for from when financial instruments are first recognised and lowers the threshold for the
recognition of full lifetime expected losses. The impact of this development is currently being evaluated but is likely to
be material to the Group once it becomes effective. Phase three covers general hedge accounting and introduces a
substantially reformed model for hedge accounting with enhanced disclosure about risk management activity. The new model
aligns the accounting treatment with risk management activities. The potential effect of phase three of this standard is
not expected to have a pervasive impact on the Group's financial statements. 1 
 
1 These standards and amendments to existing standards have not yet been endorsed by the EU. 
 
1.3  Consolidation 
 
Subsidiaries 
 
Subsidiaries are all investees controlled by the Group. The Group controls an investee when it is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its power
over the investee. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases. 
 
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange plus costs directly attributable to the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of
acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly
in the Statement of Comprehensive Income. 
 
The parent company's investments in subsidiaries are recorded at cost less, where appropriate, provision for impairment in
value. 
 
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group. 
 
1.4  Interest income and expense 
 
Interest income and expense are recognised in the Statement of Comprehensive Income for all instruments measured at
amortised cost and held to maturity using the effective interest method. 
 
The effective interest method calculates the amortised cost of a financial asset or a financial liability and allocates the
interest income or interest expense over the relevant period. The effective interest rate is the rate that discounts
estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a
shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective
interest rate, the Group takes into account all contractual terms of the financial instrument but does not consider future
credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part
of the effective interest rate, transaction costs and all other premiums or discounts. 
 
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss,
interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss. 
 
1.5  Net fee and commission income 
 
Fees and commissions which are not considered integral to the effective interest rate are generally recognised on an
accruals basis when the service has been provided.  Fees and commissions income consists principally of weekly and monthly
fees from the One Bill and Current Account products, arrears fees in the Everyday Loans business along with associated
insurance commissions and commissions earned on debt collection activities in the Debt Managers business.  Fee and
commission expenses consist primarily of fees and commission relating to the Current Account product. 
 
1.6  Financial assets and financial liabilities 
 
The Group classifies its financial assets at fair value through profit or loss, loans and receivables or held-to-maturity
and classifies its financial liabilities as other financial liabilities. Management determines the classification of its
investments at initial recognition. A financial asset or financial liability is measured initially at fair value.  A
financial asset or financial liability is measured initially at fair value plus, for