REG - Close Bros Grp PLC - Half Yearly Report <Origin Href="QuoteRef">CBRO.L</Origin> - Part 3
08/03/2016 07:11
- Part 3: For the preceding part double click ID:nRSH3207Rb
million following
finalisation of completion accounts. The profit on disposal was £10.3 million.
Based in Frankfurt, Seydler provided equity and debt capital markets services, securities trading and research primarily in
German small and mid-sized companies and was part of the Securities division.
The transaction fulfilled the requirements of IFRS 5 to be classified as "Discontinued operations" in the consolidated
income statement, the results of which are set out below:
Results of discontinued operations
Six months ended31 January Year ended31 July
2016 20151 2015
£ million £ million £ million
Operating income - 11.3 11.7
Operating expenses - (9.4) (10.4)
Operating profit before tax - 1.9 1.3
Tax - (0.6) (0.4)
Profit after tax - 1.3 0.9
Profit on disposal of discontinued operations, net of tax - 9.9 10.3
Profit for the period from discontinued operations - 11.2 11.2
1 Profit after tax is up until the point of disposal.
Cash flow from discontinued operations
Six months ended31 January Year ended31 July
2016 20151 2015
£ million £ million £ million
Net cash flow from operating activities - 6.6 6.6
Net cash flow from investing activities - (0.1) (0.1)
Net cash flow from financing activities - - -
1 Up until the point of disposal.
5. Earnings per share
The calculation of basic earnings per share is based on the profit attributable to shareholders and the number of basic
weighted average shares. When calculating the diluted earnings per share, the weighted average number of shares in issue
is adjusted for the effects of all dilutive share options and awards.
Six months ended Year ended
31 January 31 July
2016 2015 2015
Continuing operations
Basic 59.7p 56.9p 117.8p
Diluted 58.9p 56.2p 116.5p
Adjusted basic1 61.1p 58.2p 120.5p
Adjusted diluted1 60.3p 57.5p 119.2p
Continuing and discontinued operations
Basic 59.7p 64.5p 125.4p
Diluted 58.9p 63.7p 124.0p
Discontinued operations
Basic - 7.6p 7.6p
Diluted - 7.5p 7.5p
1 Excludes amortisation of intangible assets on acquisition, discontinued operations and their tax effects.
Six months ended Year ended
31 January 31 July
2016 2015 2015
£ million £ million £ million
Profit attributable to shareholders 88.6 95.3 185.7
Less profit for the period from discontinued operations, net of tax - 11.2 11.2
Profit attributable to shareholders on continuing operations 88.6 84.1 174.5
Adjustment:
Amortisation of intangible assets on acquisition 2.5 2.4 5.0
Tax effect of adjustment (0.5) (0.5) (1.0)
Adjusted profit attributable to shareholders on continuing operations 90.6 86.0 178.5
Six months ended Year ended
31 January 31 July
2016 2015 2015
million million million
Average number of shares
Basic weighted 148.4 147.7 148.1
Effect of dilutive share options and awards 1.9 1.9 1.7
Diluted weighted 150.3 149.6 149.8
6. Dividends
Six months ended Year ended
31 January 31 July
2016 2015 2015
£ million £ million £ million
For each ordinary share
Interim dividend for previous financial year paid in April 2015: 18.0p - - 26.7
Final dividend for previous financial year paid in November 2015: 35.5p (2014: 32.5p) 52.3 47.6 47.6
52.3 47.6 74.3
An interim dividend relating to the six months ended 31 January 2016 of 19.0p, amounting to an estimated £28.0 million, is
declared. This interim dividend, which is due to be paid on 20 April 2016 to shareholders on the register at 18 March
2016, is not reflected in these financial statements.
7. Loans and advances to customers
The contractual maturity of loans and advances to customers is set out below:
On demand Within three months Between three months and one year Between one and two years Between two and five years After more than five years Impairment provisions Total
£ million £ million £ million £ million £ million £ million £ million £ million
At 31 January 2016 87.0 1,614.5 1,801.2 1,160.3 1,304.6 55.0 (53.8) 5,968.8
At 31 January 2015 64.5 1,595.2 1,669.9 1,054.6 1,094.6 34.2 (52.0) 5,461.0
At 31 July 2015 45.4 1,543.5 1,797.8 1,108.2 1,254.1 44.9 (56.1) 5,737.8
31 January 31 July
2016 2015 2015
£ million £ million £ million
Impairment provisions on loans and advances to customers
Opening balance 56.1 48.3 48.3
Charge for the period 16.7 19.3 41.9
Amounts written off net of recoveries (19.0) (15.6) (34.1)
Impairment provisions 53.8 52.0 56.1
At 31 January 2016, gross impaired loans were £160.0 million (31 January 2015: £171.2 million; 31 July 2015: £162.3
million) and equate to 3% (31 January 2015: 3%; 31 July 2015: 3%) of the gross loan book before impairment provisions. The
majority of the group's lending is secured and therefore the gross impaired loans quoted do not reflect the expected loss.
8. Debt securities
Held for trading Available for sale Loans and receivables Total
£ million £ million £ million £ million
Long trading positions in debt securities 12.2 - - 12.2
Certificates of deposit - - 200.9 200.9
Gilts - - - -
At 31 January 2016 12.2 - 200.9 213.1
Held for trading Available for sale Loans and receivables Total
£ million £ million £ million £ million
Long trading positions in debt securities 26.2 - - 26.2
Certificates of deposit - - - -
Gilts - 20.3 - 20.3
At 31 January 2015 26.2 20.3 - 46.5
Held for trading Available for sale Loans and receivables Total
£ million £ million £ million £ million
Long trading positions in debt securities 14.1 - - 14.1
Certificates of deposit - - 115.3 115.3
Gilts - 20.1 - 20.1
At 31 July 2015 14.1 20.1 115.3 149.5
Movements in the book value of gilts held as available for sale during the period comprise:
Gilts
£ million
At 1 August 2014 45.6
Disposals -
Redemptions at maturity (25.0)
Currency translation differences -
Movement in value (0.3)
At 31 January 2015 20.3
Disposals -
Redemptions at maturity -
Currency translation differences -
Movement in value (0.2)
At 31 July 2015 20.1
Disposals -
Redemptions at maturity (20.0)
Currency translation differences -
Movement in value (0.1)
At 31 January 2016 -
9. Equity shares
31 January 31 July
2016 2015 2015
£ million £ million £ million
Long trading positions 35.5 33.2 31.1
Other equity shares 2.2 11.8 10.1
37.7 45.0 41.2
Movements in the book value of other equity shares held during the period comprise:
Available for sale Fair valuethroughprofit or loss Total
£ million £ million £ million
At 1 August 2014 19.5 0.1 19.6
Additions - - -
Disposals (7.1) - (7.1)
Currency translation differences - - -
Movement in value of:
Equity shares classified as available for sale (0.7) - (0.7)
At 31 January 2015 11.7 0.1 11.8
Additions - - -
Disposals (1.0) - (1.0)
Currency translation differences (0.4) - (0.4)
Movement in value of:
Equity shares classified as available for sale (0.3) - (0.3)
At 31 July 2015 10.0 0.1 10.1
Additions - - -
Disposals (7.5) - (7.5)
Currency translation differences 0.2 - 0.2
Movement in value of:
Equity shares classified as available for sale (0.6) - (0.6)
At 31 January 2016 2.1 0.1 2.2
10. Settlement balances and short positions
31 January 31 July
2016 2015 2015
£ million £ million £ million
Settlement balances 325.2 433.4 376.5
Short positions held for trading:
Debt securities 10.6 12.8 13.7
Equity shares 14.4 11.4 14.1
25.0 24.2 27.8
350.2 457.6 404.3
11. Financial liabilities
The contractual maturity of financial liabilities is set out below:
On Within Between Between Between After more than five years Total
demand three three months one and two and
months and one year two years five years
£ million £ million £ million £ million £ million £ million £ million
Deposits by banks 18.7 3.5 15.1 11.5 - - 48.8
Deposits by customers 496.0 896.3 2,005.0 859.2 358.7 - 4,615.2
Loans and overdrafts from banks 12.3 153.3 - 60.3 90.0 - 315.9
Debt securities in issue 20.5 6.6 201.0 602.2 246.2 317.8 1,394.3
At 31 January 2016 547.5 1,059.7 2,221.1 1,533.2 694.9 317.8 6,374.2
On Within Between Between Between Aftermore thanfive years Total
demand three three months one and two and
months and one year two years five years
£ million £ million £ million £ million £ million £ million £ million
Deposits by banks 37.2 6.6 18.0 3.5 - - 65.3
Deposits by customers 122.4 810.5 2,057.4 1,074.2 192.9 - 4,257.4
Loans and overdrafts from banks 7.2 228.1 - - - - 235.3
Debt securities in issue 21.1 0.5 107.2 205.4 741.8 298.8 1,374.8
At 31 January 2015 187.9 1,045.7 2,182.6 1,283.1 934.7 298.8 5,932.8
On Within Between Between Between After more than five years Total
demand three three months one and two and
months and one year two years five years
£ million £ million £ million £ million £ million £ million £ million
Deposits by banks 11.5 0.3 22.8 0.5 - - 35.1
Deposits by customers 154.8 828.4 2,347.7 851.2 299.3 - 4,481.4
Loans and overdrafts from banks 8.6 99.1 123.7 59.9 89.9 - 381.2
Debt securities in issue 11.2 6.7 1.1 747.8 299.3 298.9 1,365.0
At 31 July 2015 186.1 934.5 2,495.3 1,659.4 688.5 298.9 6,262.7
At 31 January 2016, asset finance loan receivables of £745.2 million (31 January 2015: £679.5 million; 31 July 2015: £705.6
million) were positioned with the Bank of England. These loan receivables were used as collateral within the Funding for
Lending Scheme, against which £375.0 million of UK Treasury Bills had been drawn as at the reporting date (31 January 2015:
£225.0 million; 31 July 2015: £375.0 million). The term of these transactions is four years from the date of each drawdown
of the Treasury Bills.
The group also had repurchase agreements whereby £300.0 million (31 January 2015: £225.0 million; 31 July 2015: £375.0
million) from a total of £375.0 million (31 January 2015: £225.0 million; 31 July 2015: £375.0 million) Treasury Bills
drawn, have been lent in exchange for cash included within loans and overdrafts from banks.
The Treasury Bills are not recorded on the group's consolidated balance sheet as ownership remains with the Bank of
England. The risk and rewards of the loans and advances to customers remains with the group and continue to be recognised
in the consolidated balance sheet.
The group has securitised without recourse and restrictions £1,200.8 million (31 January 2015: £1,175.4 million; 31 July
2015: £1,164.8 million) of its insurance premium and motor loan receivables in return for debt securities in issue of
£848.4 million (31 January 2015: £847.7 million; 31 July 2015: £847.7 million). As the group has retained exposure to
substantially all the credit risk and rewards of the residual benefit of the underlying assets it continues to recognise
these assets in loans and advances to customers in its consolidated balance sheet.
12. Capital
The group's individual regulated entities and the group as a whole complied with all of the externally imposed capital
requirements to which they were subject for the periods to 31 January 2016 and 31 January 2015, and the year ended 31 July
2015. The table below summarises the composition of regulatory capital and Pillar 1 risk weighted assets at those
financial period ends.
31 January 31 July
2016 2015 2015
£ million £ million £ million
Common equity tier 1 capital
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 recognised for common equity tier 1 capital 20.6 17.4 18.3
Deductions from common equity tier 1 capital
Intangible assets, net of associated deferred tax liabilities (140.8) (137.9) (140.6)
Foreseeable dividend1 (43.8) (46.3) (52.4)
Investment in own shares (39.6) (30.4) (25.6)
Pension asset, net of associated deferred tax liabilities (1.1) (0.2) (2.5)
Additional valuation adjustments (0.1) (0.2) (0.1)
Common equity tier 1 capital 845.8 756.2 813.2
Tier 2 capital
Subordinated debt2 23.9 52.5 31.5
Unrealised gains on available for sale equity shares - 3.3 3.3
Tier 2 capital 23.9 55.8 34.8
Total regulatory capital 869.7 812.0 848.0
Risk weighted assets (notional) - unaudited
Credit and counterparty risk 5,385.8 4,779.7 5,103.2
Operational risk3 753.5 695.5 753.5
Market risk3 78.8 92.6 75.4
6,218.1 5,567.8 5,932.1
Common equity tier 1 capital ratio (fully loaded) 13.6% 13.6% 13.7%
Total capital ratio (transitional) 14.0% 14.6% 14.3%
1 Under the Regulatory Technical Standard on own funds, a deduction has been recognised for a foreseeable dividend. In
accordance with this standard, for 31 January 2016 and 31 January 2015 a foreseeable dividend has been determined based
on the average payout ratio over the previous three years applied to the retained earnings for the period. For 31 July
2015 a
foreseeable dividend was determined as the proposed final dividend (subsequently paid).
2 Shown after applying the Capital Requirements Regulation's transitional and qualifying own funds arrangements.
3 Operational and market risk include a notional adjustment at 8% in order to determine notional risk weighted assets.
The following table shows a reconciliation between equity and common equity tier 1 capital after deductions:
31 January 31 July
2016 2015 2015
£ million £ million £ million
Equity 1,026.5 940.4 1,009.9
Regulatory deductions from equity:
Intangible assets, net of associated deferred tax liabilities (140.8) (137.9) (140.6)
Foreseeable dividend1 (43.8) (46.3) (52.4)
Pension asset, net of associated deferred tax liabilities (1.1) (0.2) (2.5)
Additional valuation adjustments (0.1) (0.2) (0.1)
Other reserves not recognised for common equity tier 1 capital:
Available for sale movements reserve - (3.3) (3.3)
Cash flow hedging reserve 5.1 4.0 2.3
Non-controlling interests - (0.3) (0.1)
Common equity tier 1 capital 845.8 756.2 813.2
1 Under the Regulatory Technical Standard on own funds, a deduction has been recognised for a foreseeable dividend. In
accordance with this standard, for 31 January 2016 and 31 January 2015 a foreseeable dividend has been determined based
on the average payout ratio over the previous three years applied to the retained earnings for the period. For 31 July
2015 a
foreseeable dividend was determined as the proposed final dividend (subsequently paid).
13. Contingent liabilities
Financial Services Compensation Scheme ("FSCS")
As disclosed in note 24 of the Annual Report 2015, the group is exposed to the FSCS which provides compensation to
customers of financial institutions in the event that an institution is unable, or is likely to be unable, to pay claims
against it. The FSCS raises levies on UK licensed deposit-taking institutions to meet such claims based on their share of
UK deposits on 31 December of the year preceding the scheme year (which runs from 1 April to 31 March).
Following the default of a number of deposit takers in 2008, the FSCS borrowed funds from HM Treasury to meet the
compensation costs for customers of those firms. While it is expected that the substantial majority of the principal will
be repaid from funds the FSCS receives from asset sales, surplus cash flow or other recoveries in relation to the assets of
the institutions that defaulted, to the extent that there remains a shortfall, the FSCS will raise compensation levies on
all deposit-taking participants.
The amount of any future compensation levies payable by the group also depends on a number of factors including
participation in the market at 31 December, the level of protected deposits and the population of deposit-taking
participants. The group continues to accrue for its share of levies that have been raised by the FSCS.
14. Related party transactions
Related party transactions, including salary and benefits provided to directors and key management, did not have a material
effect on the financial position or performance of the group during the period. There were no changes to the type and
nature of the related party transactions disclosed in the Annual Report 2015 that could have a material effect on the
financial position and performance of the group in the six months to 31 January 2016.
15. Consolidated cash flow statement reconciliation
31 January 31 July
2016 2015 2015
£ million £ million £ million
(a) Reconciliation of operating profit before tax to net cash inflow from operating activities
Operating profit before tax from continuing operations 108.7 106.2 219.9
Operating profit before tax on discontinued operations - 11.8 11.6
Tax paid (21.4) (28.2) (53.4)
Depreciation and amortisation 23.2 19.9 41.4
(Increase)/decrease in:
Interest receivable and prepaid expenses (5.5) 1.2 (4.2)
Net settlement balances and trading positions 9.5 22.3 22.8
Net loans to/from money broker against stock advanced 0.7 7.6 (2.9)
Interest payable and accrued expenses (35.8) (29.7) 8.2
Net cash inflow from trading activities 79.4 111.1 243.4
(Increase)/decrease in:
Loans and advances to banks not repayable on demand (6.3) 1.8 1.6
Loans and advances to customers (231.0) (172.0) (448.1)
Assets held under operating leases (22.4) (14.8) (39.8)
Certificates of deposit (85.6) - (115.3)
Gilts held for liquidity 20.0 25.0 25.0
Other assets less other liabilities 2.4 (18.8) (19.1)
Increase/(decrease) in:
Deposits by banks 13.7 15.7 (14.5)
Deposits by customers 133.8 (247.2) (23.0)
Loans and overdrafts from banks (65.3) 225.9 371.8
Debt securities in issue, net of transaction costs 19.0 - -
Net cash outflow from operating activities (142.3) (73.3) (18.0)
(b) Analysis of net cash outflow in respect of the purchase of non-controlling interests
Cash consideration paid - (0.2) (1.0)
(c) Analysis of net cash inflow in respect of the sale of asubsidiary
Cash consideration received 2.4 36.9 36.9
Cash and cash equivalents disposed of (0.1) (13.7) (13.7)
2.3 23.2 23.2
(d) Analysis of changes in financing activities
Share capital (including premium), group bond and subordinated loan capital1:
Opening balance 566.6 596.5 596.5
Prepayment of subordinated loan capital - - (30.0)
Shares issued for cash - 0.1 0.1
Closing balance 566.6 596.6 566.6
(e) Analysis of cash and cash equivalents2
Cash and balances at central banks 802.5 1,034.0 1,031.2
Loans and advances to banks repayable on demand 70.3 72.5 72.5
872.8 1,106.5 1,103.7
1 Excludes accrued interest.
2 Excludes Bank of England cash reserve account and amounts held as collateral.
16. Fair value of financial assets and liabilities
The fair values of the group's financial assets and liabilities are not materially different from their carrying values,
with the exception of subordinated loan capital, and the Close Brothers Group plc ("CBG") and Close Brothers Limited
("CBL") bonds.
31 January 2016 31 January 2015 31 July 2015
Fair value Carrying value Fair value Carrying value Fair value Carrying value
Subordinated loan capital 54.1 46.4 90.9 77.3 56.9 46.4
CBG bond 216.1 205.8 225.2 205.5 219.7 205.6
CBL bond 315.8 319.5 329.9 321.0 315.4 311.2
The group holds financial instruments that are measured at fair value subsequent to initial recognition. Each instrument
has been categorised within one of three levels using a fair value hierarchy that reflects the significance of the inputs
used in making the measurements. These levels are based on the degree to which the fair value is observable and are defined
in note 29 "Financial risk management" of the Annual Report 2015.
The table below shows the classification of financial instruments held at fair value into the valuation hierarchy:
Level 1 Level 2 Level 3 Total
£ million £ million £ million £ million
At 31 January 2016
Assets
Debt securities:
Long trading positions in debt securities held for trading 9.8 2.4 - 12.2
Gilts classified as available for sale - - - -
Equity shares:
Held for trading 35.5 - - 35.5
Fair value through profit or loss - 0.1 - 0.1
Available for sale - - 2.1 2.1
Derivative financial instruments - 30.0 - 30.0
45.3 32.5 2.1 79.9
Liabilities
Short positions:
Debt securities 8.5 2.1 - 10.6
Equity shares 14.4 - - 14.4
Derivative financial instruments - 9.6 - 9.6
22.9 11.7 - 34.6
Level 1 Level 2 Level 3 Total
£ million £ million £ million £ million
At 31 January 2015
Assets
Debt securities:
Long trading positions in debt securities held for trading 22.0 4.2 - 26.2
Gilts classified as available for sale 20.3 - - 20.3
Equity shares:
Held for trading 33.2 - - 33.2
Fair value through profit or loss 0.1 - - 0.1
Available for sale - - 11.7 11.7
Derivative financial instruments - 49.5 - 49.5
75.6 53.7 11.7 141.0
Liabilities
Short positions:
Debt securities 9.9 2.9 - 12.8
Equity shares 11.4 - - 11.4
Derivative financial instruments - 13.2 - 13.2
21.3 16.1 - 37.4
Level 1 Level 2 Level 3 Total
£ million £ million £ million £ million
At 31 July 2015
Assets
Debt securities:
Long trading positions in debt securities held for trading 12.6 1.5 - 14.1
Gilts classified as available for sale 20.1 - - 20.1
Equity shares:
Held for trading 31.1 - - 31.1
Fair value through profit or loss - 0.1 - 0.1
Available for sale - - 10.0 10.0
Derivative financial instruments - 19.7 - 19.7
63.8 21.3 10.0 95.1
Liabilities
Short positions:
Debt securities 11.3 2.4 - 13.7
Equity shares 14.1 - - 14.1
Derivative financial instruments - 7.1 - 7.1
25.4 9.5 - 34.9
There were no significant transfers between Level 1 and 2 during the periods.
Movements in financial assets categorised as Level 3 during the periods were:
Equity shares
Available for sale Fair value through profit/(loss)
£ million £ million
At 1 August 2014 19.5 0.1
Total losses recognised in the consolidated income statement - -
Total losses recognised in other comprehensive income (0.7) -
Purchases and issues - -
Sales and settlements (7.1) -
Transfers out - (0.1)
At 31 January 2015 11.7 -
Total losses recognised in the consolidated income statement (0.9) -
Total gains recognised in other comprehensive income 0.2 -
Purchases and issues - -
Sales and settlements (1.0) -
At 31 July 2015 10.0 -
Total losses recognised in the consolidated income statement (0.4) -
Total gains recognised in other comprehensive income - -
Purchases and issues - -
Sales and settlements (7.5) -
At 31 January 2016 2.1 -
There were £0.4 million unrealised losses recognised in the consolidated income statement relating to instruments held at
31 January 2016 (31 January 2015: £nil; 31 July 2015: £0.9 million losses).
Cautionary Statement
Certain statements included or incorporated by reference within this announcement may constitute "forward-looking
statements" in respect of the group's operations, performance, prospects and/or financial condition. Forward-looking
statements are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates",
"aims", "due", "could", "may", "will", "should", "expects", "believes", "intends", "plans", "potential", "targets", "goal"
or "estimates". By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and
actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no
assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking
statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a
representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to
update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast. This announcement does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the company, nor shall
it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or
commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares or other
securities of the company. Past performance cannot be relied upon as a guide to future performance and persons needing
advice should consult an independent financial adviser. Statements in this announcement reflect the knowledge and
information available at the time of its preparation. Liability arising from anything in this announcement shall be
governed by English law. Nothing in this announcement shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.
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