REG - Close Bros Grp PLC - Half Yearly Report <Origin Href="QuoteRef">CBRO.L</Origin> - Part 2
08/03/2016 07:11
- Part 2: For the preceding part double click ID:nRSH3207Ra
2016 2015 2015
Unaudited Unaudited Audited
£ million £ million £ million
Profit after tax for the period 88.6 95.2 185.7
Other comprehensive income/(expense) that may be reclassified to income statement from continuing operations
Currency translation gains/(losses) 1.6 (1.7) (3.0)
Losses on cash flow hedging (4.0) (7.6) (5.5)
Losses on equity shares classified as available for sale - (0.5) (0.5)
Available for sale investment gains transferred to income statement on disposal (4.0) (6.7) (6.8)
Tax relating to items that may be reclassified 1.9 2.4 2.5
(4.5) (14.1) (13.3)
Other comprehensive (expense)/income that will not be reclassified to income statement from continuing operations
Defined benefit pension scheme losses (1.7) (4.7) (2.0)
Tax relating to items that will not be reclassified 0.3 1.0 0.4
(1.4) (3.7) (1.6)
Other comprehensive expense for the period, net of tax from continuing operations (5.9) (17.8) (14.9)
Other comprehensive expense for the period, net of tax from discontinued operations - (1.2) (1.2)
Total comprehensive income for the period 82.7 76.2 169.6
Attributable to
Non-controlling interests - (0.1) -
Shareholders 82.7 76.3 169.6
82.7 76.2 169.6
Consolidated Balance Sheet
at 31 January 2016
31 January 31 July
2016 2015 2015
Unaudited Unaudited Audited
Note £ million £ million £ million
Assets
Cash and balances at central banks 809.7 1,041.4 1,038.0
Settlement balances 332.2 436.9 398.3
Loans and advances to banks 88.3 83.8 84.6
Loans and advances to customers 7 5,968.8 5,461.0 5,737.8
Debt securities 8 213.1 46.5 149.5
Equity shares 9 37.7 45.0 41.2
Loans to money brokers against stock advanced 47.7 64.1 38.4
Derivative financial instruments 30.0 49.5 19.7
Intangible assets 143.7 141.6 144.2
Property, plant and equipment 164.9 125.1 148.4
Deferred tax assets 51.3 36.8 39.4
Prepayments, accrued income and other assets 133.4 108.0 117.8
Total assets 8,020.8 7,639.7 7,957.3
Liabilities
Settlement balances and short positions 10 350.2 457.6 404.3
Deposits by banks 11 48.8 65.3 35.1
Deposits by customers 11 4,615.2 4,257.4 4,481.4
Loans and overdrafts from banks 11 315.9 235.3 381.2
Debt securities in issue 11 1,394.3 1,374.8 1,365.0
Loans from money brokers against stock advanced 10.0 36.2 -
Derivative financial instruments 9.6 13.2 7.1
Current tax liabilities 25.1 17.9 17.9
Accruals, deferred income and other liabilities 178.8 164.3 209.0
Subordinated loan capital 46.4 77.3 46.4
Total liabilities 6,994.3 6,699.3 6,947.4
Equity
Called up share capital 37.7 37.7 37.7
Share premium account 284.0 283.9 284.0
Retained earnings 728.9 632.2 694.4
Other reserves (24.1) (13.7) (6.3)
Total shareholders' equity 1,026.5 940.1 1,009.8
Non-controlling interests - 0.3 0.1
Total equity 1,026.5 940.4 1,009.9
Total liabilities and equity 8,020.8 7,639.7 7,957.3
Consolidated Statement of CHANGES IN EQUITY
for the six months ended 31 January 2016
Other reserves
Called up share capital Share premium account Retained earnings Available for sale movements reserve Share-based payments reserve Exchange movements reserve Cash flow hedging reserve Total attributable to equity holders Non-controlling interests Total equity
£ million £ million £ million £ million £ million £ million £ million £ million £ million £ million
At 1 August 2014 (audited) 37.7 283.8 589.8 9.6 (7.5) 1.0 2.1 916.5 1.1 917.6
Profit/(loss) for the period - - 95.3 - - - - 95.3 (0.1) 95.2
Other comprehensive (expense)/income for the period - - (3.7) (6.3) - (2.9) (6.1) (19.0) - (19.0)
Total comprehensive income/(expense) for the period - - 91.6 (6.3) - (2.9) (6.1) 76.3 (0.1) 76.2
Exercise of options - - - - - - - - - -
Dividends paid - - (47.6) - - - - (47.6) (0.1) (47.7)
Shares purchased - - - - (18.0) - - (18.0) - (18.0)
Shares issued - 0.1 - - - - - 0.1 - 0.1
Shares released - - - - 15.5 - - 15.5 - 15.5
Other movements - - (4.3) - (1.1) - - (5.4) (0.6) (6.0)
Income tax - - 2.7 - - - - 2.7 - 2.7
At 31 January 2015 (unaudited) 37.7 283.9 632.2 3.3 (11.1) (1.9) (4.0) 940.1 0.3 940.4
Profit for the period - - 90.4 - - - - 90.4 0.1 90.5
Other comprehensive income/(expense) for the period - - 2.1 - - (0.9) 1.7 2.9 - 2.9
Total comprehensive income/(expense) for the period - - 92.5 - - (0.9) 1.7 93.3 0.1 93.4
Exercise of options - 0.1 - - - - - 0.1 - 0.1
Dividends paid - - (26.7) - - - - (26.7) - (26.7)
Shares purchased - - - - (0.2) - - (0.2) - (0.2)
Shares issued - - - - - - - - - -
Shares released - - - - 5.0 - - 5.0 - 5.0
Other movements - - (4.0) - 1.8 - - (2.2) (0.3) (2.5)
Income tax - - 0.4 - - - - 0.4 - 0.4
At 31 July 2015 (audited) 37.7 284.0 694.4 3.3 (4.5) (2.8) (2.3) 1,009.8 0.1 1,009.9
Profit for the period - - 88.6 - - - - 88.6 - 88.6
Other comprehensive (expense)/income for the period - - (1.4) (3.3) - 1.6 (2.8) (5.9) - (5.9)
Total comprehensive income/(expense) for the period - - 87.2 (3.3) - 1.6 (2.8) 82.7 - 82.7
Exercise of options - - - - - - - - - -
Dividends paid - - (52.3) - - - - (52.3) - (52.3)
Shares purchased - - - - (24.6) - - (24.6) - (24.6)
Shares issued - - - - - - - - - -
Shares released - - - - 10.6 - - 10.6 - 10.6
Other movements - - (1.1) - 0.7 - - (0.4) (0.1) (0.5)
Income tax - - 0.7 - - - - 0.7 - 0.7
At 31 January 2016 (unaudited) 37.7 284.0 728.9 - (17.8) (1.2) (5.1) 1,026.5 - 1,026.5
Consolidated Cash Flow Statement
for the six months ended 31 January 2016
Six months ended Year ended
31 January 31 July
2016 2015 2015
Unaudited Unaudited Audited
Note £ million £ million £ million
Net cash outflow from operating activities 15(a) (142.3) (73.3) (18.0)
Net cash (outflow)/inflow from investing activities
Purchase of:
Property, plant and equipment (4.6) (4.4) (14.8)
Intangible assets - software (7.4) (7.5) (19.1)
Non-controlling interest 15(b) - (0.2) (1.0)
Sale of:
Property, plant and equipment 0.1 0.1 0.1
Equity shares held for investment 6.1 4.9 5.6
Subsidiary 15(c) 2.3 23.2 23.2
(3.5) 16.1 (6.0)
Net cash outflow before financing activities (145.8) (57.2) (24.0)
Financing activities 15(d)
Issue of ordinary share capital, net of transaction costs - 0.1 0.1
Purchase of own shares for employee share award schemes (24.6) (18.0) (18.2)
Equity dividends paid (52.3) (47.6) (74.2)
Dividends paid to non-controlling interests - (0.1) (0.1)
Interest paid on subordinated loan capital and debt financing (8.2) (9.4) (18.6)
Net decrease in cash (230.9) (132.2) (135.0)
Cash and cash equivalents at beginning of period 1,103.7 1,238.7 1,238.7
Cash and cash equivalents at end of period 15(e) 872.8 1,106.5 1,103.7
THE NOTES
1. Basis of preparation and accounting policies
The interim financial information has been prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and in accordance with the International Financial Reporting Standards ("IFRS") endorsed by the
European Union. These include International Accounting Standard ("IAS") 34, Interim Financial Reporting, which
specifically addresses the contents of condensed interim financial statements. The consolidated financial statements
incorporate the individual financial statements of Close Brothers Group plc and the entities it controls, using the
acquisition method of accounting. The accounting policies applied are consistent with those set out on pages 89 to 93 of
the Annual Report 2015.
After making enquiries, the directors have a reasonable expectation that the company and the group as a whole have adequate
resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the
date of this report. For this reason, they continue to adopt the going concern basis in preparing the condensed
consolidated interim financial statements.
The preparation of the Interim Report requires management to make estimates and assumptions that affect the reported income
and expense, assets and liabilities and disclosure of contingencies at the date of the Interim Report. Although these
estimates and assumptions are based on the management's best judgement at that date, actual results may differ from these
estimates. There have been no significant changes in the basis upon which estimates have been determined compared to that
applied at 31 July 2015.
The Interim Report is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006. However, the information has been reviewed by the company's auditor, Deloitte LLP, and their report
appears on page 17.
The financial information for the year ended 31 July 2015 contained within this Interim Report does not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of those statutory accounts has been
reported on by Deloitte LLP and delivered to the Registrar of Companies. The report of the auditor on those statutory
accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section
498(2) or (3) of the Companies Act 2006.
2. Segmental analysis
The directors manage the group primarily by class of business and present the segmental analysis on that basis. The group's
activities are organised in three primary divisions: Banking, Securities and Asset Management.
Divisions charge market prices for services rendered to other parts of the group. Funding charges between segments take
into account commercial demands. More than 90% of all the group's activities, revenue and assets are located in the UK.
Summary Income Statement for the six months ended 31 January 2016
Banking Securities Asset Management Group Continuing operations Discontinuedoperations Total
£ million £ million £ million £ million £ million £ million £million
Net interest income/(expense) 207.0 (0.2) - 0.2 207.0 - 207.0
Non-interest income 51.1 35.4 47.0 0.5 134.0 - 134.0
Operating income 258.1 35.2 47.0 0.7 341.0 - 341.0
Administrative expenses (113.8) (27.7) (37.8) (13.1) (192.4) - (192.4)
Depreciation and amortisation (19.2) (0.7) (0.8) - (20.7) - (20.7)
Impairment losses on loans and advances (16.7) - - - (16.7) - (16.7)
Total operating expenses (149.7) (28.4) (38.6) (13.1) (229.8) - (229.8)
Adjusted operating profit/(loss)1 108.4 6.8 8.4 (12.4) 111.2 - 111.2
Amortisation of intangible assets on acquisition (0.2) - (2.3) - (2.5) - (2.5)
Profit on disposal of discontinued operations - - - - - - -
Operating profit/(loss) before tax 108.2 6.8 6.1 (12.4) 108.7 - 108.7
Tax (19.9) (1.6) (1.0) 2.4 (20.1) - (20.1)
Non-controlling interests - - - - - - -
Profit/(loss) after tax and non-controlling interests 88.3 5.2 5.1 (10.0) 88.6 - 88.6
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition, profit on disposal
of discontinued
operations and tax.
The following table provides further detail on operating income:
Six months ended Year ended
31 January 31 July
2016 2015 2015
£ million £ million £ million
Banking
Retail 96.4 89.9 181.1
Commercial 102.4 101.2 207.3
Property 48.9 46.7 96.8
Treasury and other non-lending income 10.4 7.0 13.4
Securities
Market-making and related activities 35.2 41.9 94.6
Asset Management
Advice and other services 16.7 17.2 36.1
Investment management 28.2 25.7 54.1
Other income 2.1 0.4 5.4
Group 0.7 0.4 0.7
Operating income from continuing operations 341.0 330.4 689.5
Operating income from discontinued operations - 11.3 11.7
Operating income 341.0 341.7 701.2
Summary Balance Sheet at 31 January 2016
Banking Securities Asset Management Group Total
£ million £ million £ million £ million £ million
Assets
Cash and loans and advances to banks 870.7 13.2 13.9 0.2 898.0
Settlement balances, long trading positions and loans to money brokers - 427.6 - - 427.6
Loans and advances to customers 5,968.8 - - - 5,968.8
Non-trading debt securities 200.9 - - - 200.9
Intangible assets 67.4 26.0 50.3 - 143.7
Other assets 322.2 10.7 41.5 7.4 381.8
Total assets 7,430.0 477.5 105.7 7.6 8,020.8
Liabilities
Settlement balances, short trading positions and loans from money brokers - 360.2 - - 360.2
Deposits by banks 48.8 - - - 48.8
Deposits by customers 4,615.2 - - - 4,615.2
Borrowings 1,544.0 6.8 - 205.8 1,756.6
Other liabilities 141.5 17.5 44.9 9.6 213.5
Intercompany balances 353.9 23.6 8.3 (385.8) -
Total liabilities 6,703.4 408.1 53.2 (170.4) 6,994.3
Equity 726.6 69.4 52.5 178.0 1,026.5
Total liabilities and equity 7,430.0 477.5 105.7 7.6 8,020.8
Summary Income Statement for the six months ended 31 January 2015
Banking Securities Asset Management Group Continuing operations Discontinuedoperations Total
£ million £ million £ million £ million £ million £ million £ million
Net interest income/(expense) 197.5 (0.4) (0.1) 0.4 197.4 - 197.4
Non-interest income 47.3 42.3 43.4 - 133.0 11.3 144.3
Operating income 244.8 41.9 43.3 0.4 330.4 11.3 341.7
Administrative expenses (103.1) (31.2) (37.5) (13.2) (185.0) (9.4) (194.4)
Depreciation and amortisation (16.0) (0.4) (0.7) (0.4) (17.5) - (17.5)
Impairment losses on loans and advances (19.3) - - - (19.3) - (19.3)
Total operating expenses (138.4) (31.6) (38.2) (13.6) (221.8) (9.4) (231.2)
Adjusted operating profit/(loss)1 106.4 10.3 5.1 (13.2) 108.6 1.9 110.5
Amortisation of intangible assets on acquisition (0.2) - (2.2) - (2.4) - (2.4)
Profit on disposal of discontinued operations - - - - - 9.9 9.9
Operating profit/(loss) before tax 106.2 10.3 2.9 (13.2) 106.2 11.8 118.0
Tax (21.9) (2.1) (0.6) 2.4 (22.2) (0.6) (22.8)
Non-controlling interests - - 0.1 - 0.1 - 0.1
Profit/(loss) after tax and non-controlling interests 84.3 8.2 2.4 (10.8) 84.1 11.2 95.3
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition, profit on disposal
of discontinued
operations and tax.
Summary Balance Sheet at 31 January 2015
Banking Securities Asset Management Group Total
£ million £ million £ million £ million £ million
Assets
Cash and loans and advances to banks 1,093.3 18.7 12.9 0.3 1,125.2
Settlement balances, long trading positions and loans to money brokers - 560.4 - - 560.4
Loans and advances to customers 5,461.0 - - - 5,461.0
Non-trading debt securities 20.3 - - - 20.3
Intangible assets 63.3 24.6 53.6 0.1 141.6
Other assets 279.1 12.0 27.1 13.0 331.2
Total assets 6,917.0 615.7 93.6 13.4 7,639.7
Liabilities
Settlement balances, short trading positions and loans from money brokers - 493.8 - - 493.8
Deposits by banks 65.3 - - - 65.3
Deposits by customers 4,257.4 - - - 4,257.4
Borrowings 1,475.4 6.5 - 205.5 1,687.4
Other liabilities 126.6 20.0 35.3 13.5 195.4
Intercompany balances 342.9 23.6 19.1 (385.6) -
Total liabilities 6,267.6 543.9 54.4 (166.6) 6,699.3
Equity 649.4 71.8 39.2 180.0 940.4
Total liabilities and equity 6,917.0 615.7 93.6 13.4 7,639.7
Summary Income Statement for the year ended 31 July 2015
Banking Securities Asset Management Group Continuing operations Discontinuedoperations Total
£ million £ million £ million £ million £ million £ million £ million
Net interest income/(expense) 396.5 (0.9) 0.2 0.7 396.5 - 396.5
Non-interest income 102.1 95.5 95.4 - 293.0 11.7 304.7
Operating income 498.6 94.6 95.6 0.7 689.5 11.7 701.2
Administrative expenses (214.6) (69.0) (76.4) (26.3) (386.3) (10.4) (396.7)
Depreciation and amortisation (33.4) (1.0) (1.4) (0.6) (36.4) - (36.4)
Impairment losses on loans and advances (41.9) - - - (41.9) - (41.9)
Total operating expenses (289.9) (70.0) (77.8) (26.9) (464.6) (10.4) (475.0)
Adjusted operating profit/(loss)1 208.7 24.6 17.8 (26.2) 224.9 1.3 226.2
Amortisation of intangible assets on acquisition (0.5) - (4.5) - (5.0) - (5.0)
Profit on disposal of discontinued operations - - - - - 10.3 10.3
Operating profit/(loss) before tax 208.2 24.6 13.3 (26.2) 219.9 11.6 231.5
Tax (43.3) (4.7) (2.6) 5.2 (45.4) (0.4) (45.8)
Non-controlling interests - - - - - - -
Profit/(loss) after tax and non-controlling interests 164.9 19.9 10.7 (21.0) 174.5 11.2 185.7
External operating income/expense 511.8 94.6 96.5 (13.4) 689.5 11.7 701.2
Inter segment operating (expense)/income (13.2) - (0.9) 14.1 - - -
Segment operating income 498.6 94.6 95.6 0.7 689.5 11.7 701.2
1 Adjusted operating profit/(loss) is stated before amortisation of intangible assets on acquisition, profit on disposal
of discontinued
operations and tax.
Summary Balance Sheet at 31 July 2015
Banking Securities Asset Management Group Total
£ million £ million £ million £ million £ million
Assets
Cash and loans and advances to banks 1,080.8 20.6 20.9 0.3 1,122.6
Settlement balances, long trading positions and loans to money brokers - 481.9 - - 481.9
Loans and advances to customers 5,737.8 - - - 5,737.8
Non-trading debt securities 135.4 - - - 135.4
Intangible assets 65.7 25.5 52.9 0.1 144.2
Other assets 283.4 10.7 27.3 14.0 335.4
Total assets 7,303.1 538.7 101.1 14.4 7,957.3
Liabilities
Settlement balances, short trading positions and loans from money brokers - 404.3 - - 404.3
Deposits by banks 35.1 - - - 35.1
Deposits by customers 4,481.4 - - - 4,481.4
Borrowings 1,583.7 3.3 - 205.6 1,792.6
Other liabilities 140.8 35.5 41.9 15.8 234.0
Intercompany balances 351.0 23.7 11.6 (386.3) -
Total liabilities 6,592.0 466.8 53.5 (164.9) 6,947.4
Equity 711.1 71.9 47.6 179.3 1,009.9
Total liabilities and equity 7,303.1 538.7 101.1 14.4 7,957.3
3. Taxation
Six months ended31 January Year ended31 July
2016 2015 2015
£ million £ million £ million
Tax charged/(credited) to the income statement
Current tax:
UK corporation tax 31.6 22.0 49.1
Foreign tax 1.5 2.0 2.6
Adjustments in respect of previous periods (2.1) - (0.2)
31.0 24.0 51.5
Deferred tax:
Deferred tax credit for the current period (13.0) (1.8) (6.5)
Adjustments in respect of previous periods 2.1 - 0.4
20.1 22.2 45.4
Tax on items not (credited)/charged to the income statement
Current tax relating to:
Share-based transactions tax allowance in excess of expense recognised (1.9) (2.8) (4.1)
Deferred tax relating to:
Cash flow hedging (1.2) (1.5) (1.1)
Defined benefit pension scheme (0.3) (1.0) (0.4)
Financial instruments classified as available for sale (0.7) (0.9) (1.0)
Share-based transactions tax allowance in excess of expense recognised 1.2 0.1 1.0
Currency translation losses - - (0.4)
(2.9) (6.1) (6.0)
Reconciliation to tax expense
UK corporation tax for the period at 23.1% (2015: 20.7%) on operating profit 25.1 22.0 45.5
Effect of different tax rates in other jurisdictions (0.3) (0.3) (0.8)
Disallowable items and other permanent differences 0.7 0.4 0.3
Deferred tax impact of (increased)/decreased UK corporation tax rate (5.4) 0.1 0.2
Prior period tax provision - - 0.2
20.1 22.2 45.4
The effective tax rate for the period is 18.5% (six months ended 31 January 2015: 20.9%; year ended 31 July 2015: 20.6%),
representing the best estimate of the annual effective tax rate expected for the full year.
The standard UK corporation tax rate for the financial year is 20.0% (six months ended 31 January 2015: 20.7%; year ended
31 July 2015: 20.7%). However from 1 January 2016 an additional 8% surcharge applies to banking company profits as defined
in legislation. As a result, the UK blended corporation tax rate applicable to Close Brothers for the full year is
expected to be 23.1% (six months ended 31 January 2015: 20.7%; year ended 31 July 2015: 20.7%).
The effective tax rate is below the UK corporation tax rate, largely reflecting a write up of deferred tax assets due to
the introduction of the bank corporation tax surcharge.
4. Discontinued operations
On 5 January 2015, the group completed the sale of Close Brothers Seydler Bank AG ("Seydler") to Oddo & Cie for a gross
cash consideration of E46.5 million (£36.4 million) which includes a post year end adjustment of £0.5
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