REG - Manx Financial Group - Interim Results for the 6 months to 30 June 2022
27/09/2022 07:01
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RNS Number : 6511A Manx Financial Group PLC 27 September 2022
FOR IMMEDIATE
RELEASE
27(th) September 2022
Manx Financial Group PLC
Unaudited Interim Results for the 6 months to 30 June 2022
Manx Financial Group PLC (LSE: MFX), the financial services group which
includes Conister Bank Limited, Conister Finance & Leasing Ltd, Blue Star
Business Solutions Limited, MFX Limited and Edgewater Associates Limited,
presents the Interim results for the six months ended 30 June 2022.
Jim Mellon, Executive Chairman, commented: "I am pleased to report that at
£2.3 million, the Group had its strongest half-year pre-tax profit for over a
decade, being a 105% increase over the £1.1 million for the same period last
year."
Copies of the Interim Report will shortly be available on our website
www.mfg.im (http://www.mfg.im)
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION (EU No. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.
For further information, please contact:
Manx Financial Group PLC Beaumont Cornish Limited Greentarget Limited
Denham Eke, Roland Cornish/James Biddle Dafina Grapci-Penney
Executive Vice Chairman Tel +44 (0) 20 7628 3396 Tel +44 (0) 203 963 1887
Tel +44 (0)1624 694694
Dear Shareholders
Introduction
As I reported in my last Chairman's Statement, inflationary pressures and
central bank interventions still continue to be a negative influence on the
global economy, with the Isle of Man and the UK being no exceptions to these
burdens. But as a counter to this uncertainty, I believe that our diverse
portfolio of financial services companies provides a level of insulation
during these difficult times not afforded to many of our competitors. In
addition, the strength of our Balance Sheet provides the Group with the
opportunity for further selective acquisition, continuing our strategy of
vertical integration by taking significant positions in specialist lending
introducers.
Financial Review
Against this backdrop, I am pleased to report that at £2.3 million (2021:
£1.1 million), the Group had its strongest half-year pre-tax profit for over
a decade, being a 105% increase over the same period last year. There are
several positives to draw out from this result:
Firstly, our dependency on intermediaries has fallen considerably with a
record net trading income margin of 87% (2021: 81%) as our loans and advances
to customers increased by £33.5 million to £244.9 million (2021: £211.4
million). This generated growth of £2.3 million in interest income to £13.2
million (2021: £11.0 million). Fee and commission expense reduced by £0.4
million to £1.5 million (2021: £1.9 million). I am particularly pleased with
the latter decrease. This was a key objective about which I first wrote in my
2017 annual report when fee and commission expense stood at an unsustainable
£8.4 million for that year.
Secondly, we have improved the Loan-to-Deposit ratio, a key performance
measure. This ratio has increased by 6% to 97% (2021: 91%), which, in turn,
has improved our net interest income margin by 2% to 80% (2021: 78%).
Finally, our cost of risk has fallen by 0.2% to 1.9% (2021: 2.1%), now at the
lowest level since the onset of COVID at the beginning of 2020. This reduction
is a positive trend and confirms that the bulk of delinquency caused by Covid
has now passed, leaving a residual level of default with which to deal.
Turning to our Balance Sheet, our total assets increased by 12% to £317.7
million (2021: £283.7 million). Deposits increased by 10% to £253.6 million
(2021: £231.2 million) as the Group optimised the headroom available in its
Loan-to-Deposit ratio.
In short, the Group is well placed to enter into the anticipated recession
with liquid assets of £54.5 million (2021: £57.2 million). This includes a
HQLA (High-Quality Liquid Assets - those assets which can be immediately
converted into cash) cover of 21.5% (2021: 24.7%); and the Bank's Tier 1
capital ratio of 14.2% (2021: 13.7%); and a total capital ratio of 17.7%
(2021: 17.8%).
Shareholder Equity has also increased by 17% to £27.0 million (£23.1
million), with basic total comprehensive income earnings per share now at 1.94
pence (2021: 0.88 pence). Based on the last twelve months' profit, the
Price/Earnings ratio is now 2.32, and the earnings yield over the same period
(including share price movement plus the 2021 dividend) is 43.1%.
Business Review
The Bank's interest income increased by 9.4% to £11.9 million (2021: £10.9
million), which was partly offset by the additional interest expense of 13.3%
to £2.3 million (2021: £2.0 million). Market uncertainty and inflation have
impacted the Isle of Man deposit market, with depositors preferring to invest
their savings in shorter-term products. Consequently, with interest rates
rising, particularly in the fixed-term deposit market, the Bank's weighted
average cost of funds on Deposits from customers is slowly rising by 0.1% to
1.6% (2021: 1.5%) to both retain and attract new depositors.
Similarly, Treasury Bills and UK Gilts have also seen a strong recovery of
yields to over 2.0%. This has generated a positive return on the Treasury
book. As such, our Treasury Assets have moved from Cash and Cash Equivalents
to Debt Securities, generating a 45.4% increase to £40.2 million (2021:
£27.6 million).
Following the Bank's participation in both the Isle of Man and UK Governments'
business support schemes, the Bank has applied to continue in the UK
Government's extension of the Recovery Loan Scheme. Along with this, the Bank
has invested in its UK Structured Finance portfolio, as it protects the Bank
with additional credit enhancements by Finance Intermediaries. The division
grew by 53.7% to £46.7 million (2021: £30.34 million). This has been
identified as a safe market segment for the Bank to grow its loan book
sustainably whilst protecting the Bank against defaults. Pursuing a prime
customer base over the last 18-months has also positioned the Bank well for a
recession-proof loan book. Overall, the credit quality improved from a 78.5%
exposure to prime customers to 85.0%
Personnel expenses increased by £0.2 million, driven by the impact of wage
inflation. Overheads increased by only £0.2 million.
The Bank has an established IFRS 9 provision methodology and, together with
its specific provisioning, has reserved £8.5 million (2021: £6.3 million)
for delinquent debts. This, together with other credit enhancements offered by
Government Guarantees and Financial Intermediaries, again provides the Bank
with some insulation against the economic headwinds we face.
Turning towards our other operating subsidiaries. We continue to be fortunate
to have a highly motivated group of executive directors whom we can depend
upon to maximise their business's opportunities within our agreed risk profile
in this difficult market.
Of particular note is our foreign exchange advisory business. It continues to
go from strength-to-strength with an impressive first-half profit before tax
of £0.8 million (2021: £0.7 million). Whereas our IFA business suffered from
market volatility, our foreign exchange advisory business benefitted,
demonstrating the importance of having a diversified financial services group.
The cost-income ratio of 16.3% (2021: 15.8%) is noticeably low and allows the
company to expand and scale. The business continues to have a very liquid
balance sheet and declared an interim dividend to the Group of £1.0 million
during the half-year (2021: £0.6 million).
All our other operating subsidiaries traded profitably in the period under
review, which is also pleasing to report.
Strategic Objectives
Our stated 2022 strategic priorities remain unchanged. As I reported in my
last Chairman's Statement, one of the priorities is for the Group to develop
its core business by considered acquisitions that could help accelerate
shareholder value by addressing our discount between Net Asset Value and our
market capitalisation.
You would have noted by my market announcement in May that the Group entered
into a conditional agreement to acquire 50.1% of Payment Assist Limited's
("PAL") share capital. PAL is the UK's leading automotive repair
point-of-sale finance provider, working with premier national chains such as
National Tyres, Halfords and Formula One. PAL has now diversified lending into
insured products and retail and had a loan book of £21.3 million as at 31
December 2021, an increase of 72% since 2019. As disclosed in their last
published financial statements, PAL achieved revenue of £6.6 million in the
12 months to 31 December 2021, an increase of 69% since 2019 and EBITDA
of £2.5 million for the period to 31 December 2021, an increase of 108%
since 2019.
Our acquisition of PAL now has the regulatory approval to proceed, and we
announced the completion of the 50.1% acquisition on 21 September 2022. I
would personally like to thank the Executives for identifying a profitable
acquisition which I expect will be transformational to the Group.
Board changes
In May, I also announced the retirement of our long-standing Non-Executive
Director, David Gibson, who also served as Chairman of the Bank's Board. I
would like to take this opportunity to once again thank David for his years of
service to the Group, who undoubtedly assisted us in moving the Group forward
into the levels of profitability which I bring to you in this report. In his
stead of Bank Chairman, John Spellman, a fellow Group Non-Executive Director
of the Bank and the Group, has succeeded David. John brings considerable
experience of active engagement in the financial services sector, including
acting as the strategic advisor to the Isle of Man government, specialising in
finance and foreign direct investment.
Outlook
Despite the economic challenges that we face, I have every confidence that
your Group will successfully weather this period of uncertainty. Our banking
division continues to have a strong demand for its structured finance products
in sectors that have proved resilient in recent years. This will not only be
funded by our loyal Isle of Man deposit base but also through new sources of
liquidity to further diversify the funding of this substantial lending
pipeline.
Market volatility will continue to benefit our foreign exchange advisory
business, but it will be less beneficial to our IFA business which, in turn,
may have a negative impact on the carrying value of our goodwill at the
year-end. That said, I would still expect the net effect on these two
businesses to be positive.
Also, this economic environment has allowed the Group to develop its
acquisition strategy, and I fully expect we will continue to acquire strategic
shareholdings in other financial service businesses in the coming months. Our
acquisitions in Payment Assist Limited, Blue Star Business Solutions Limited,
Ninkasi Leasing & Rental Limited and The Business Lending Exchange Limited
have all proved very accretive and we will continue to focus our efforts in
identifying other acquisitions in niche, resilient markets.
In summary, we are well positioned to grow both organically and through
acquisition despite the challenging economic headwinds.
Thank you
On behalf of your Board, I would like to take this opportunity to thank our
staff for their splendid efforts in generating the results for this report and
also to thank our shareholders and other stakeholders for their enduring
loyalty.
Jim Mellon,
Executive Chairman.
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Notes For the six months ended For the six months ended For the year ended
30 June 30 June 31 December 2021
2022 2021 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Interest income 6 13,244 10,979 22,947
Interest expense (2,712) (2,424) (4,967)
Net interest income 10,532 8,555 17,980
Fee and commission income 2,503 2,356 4,621
Fee and commission expense (1,517) (1,878) (3,339)
Depreciation on leasing assets (16) (173) (269)
Net trading income 11,502 8,860 18,993
Other operating income 275 129 365
(Loss) / gain on financial instruments 17 (139) - 30
Realised gain / (loss) on debt securities 26 (1) (1)
Revaluation on acquisition of subsidiary - - 660
Operating income 11,664 8,988 20,047
Personnel expenses (4,091) (3,241) (7,156)
Other expenses (2,355) (2,099) (4,500)
Impairment on loans and advances to customers (2,268) (2,142) (4,360)
Depreciation (357) (323) (675)
Amortisation and impairment of intangibles (256) (216) (458)
Share of profit of equity accounted investees, net of tax - 59 32
VAT recovery - 113 113
Profit before tax payable 2,337 1,139 3,043
Income tax expense (160) (122) (234)
Profit for the period / year 2,177 1,017 2,809
Notes For the six months ended For the six months ended For the year ended
30 June 30 June 31 December 2021
2022 2021 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Profit for the period / year 2,177 1,017 2,809
Other comprehensive income:
Items that will be reclassified to profit or loss
Unrealised gain / (loss) on debt securities 43 (9) (18)
Revaluation gain on property, plant and equipment - - 15
Recognition of deferred tax credit on defined benefit pension - - 67
Items that will never be reclassified to profit or loss
Actuarial gain on defined benefit pension scheme taken to equity - - 172
Total comprehensive income for the period / year 2,220 1,008 3,045
Profit attributable to:
Owners of the Company 2,161 1,029 2,793
Non-controlling interest 16 (12) 16
2,177 1,017 2,809
Total comprehensive income attributable to:
Owners of the Company 2,204 1,020 3,029
Non-controlling interest 16 (12) 16
2,220 1,008 3,045
Earnings per share - profit for the period / year
Basic earnings per share (pence) 8 1.90 0.89 2.46
Diluted earnings per share (pence) 8 1.49 0.73 1.97
Earnings per share - total comprehensive income
for the period / year
Basic earnings per share (pence) 8 1.94 0.88 2.66
Diluted earnings per share (pence) 8 1.52 0.72 2.13
Condensed Consolidated Statement of Financial Position
30 June 30 June 31 December 2021
2022 2021 £'000
As at £'000 £'000 (audited)
Notes (unaudited) (unaudited)
Assets
Cash and cash equivalents 14,369 29,577 20,279
Debt securities 9 40,151 27,610 40,987
Equity held at FVTPL 68 68 68
Loans and advances to customers 5,10 244,923 211,445 229,251
Trade and other receivables 11 2,822 1,458 1,947
Property, plant and equipment 6,468 6,472 7,257
Intangible assets 2,431 2,329 2,508
Investment in associates 137 375 136
Goodwill 12 6,320 4,412 6,320
Total assets 317,689 283,746 308,753
Liabilities
Deposits from customers 253,617 231,179 253,459
Creditors and accrued charges 13 4,605 4,058 4,745
Contingent consideration 17 335 613 1,023
Loan notes 14 31,332 23,722 23,672
Pension liability 631 846 687
Deferred tax liability 182 195 182
Total liabilities 290,702 260,613 283,768
Equity
Called up share capital 15 19,195 19,121 19,133
Profit and loss account 7,705 3,984 5,781
Revaluation reserve 15 - 15
Non-controlling interest 72 28 56
Total equity 26,987 23,133 24,985
Total liabilities and equity 317,689 283,746 308,753
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the Company
Profit and loss account Revaluati-on reserve Non-controlling interest
Share capital £'000 £'000 £'000 Total
£'000 Total equity
For the six months ended 30 June 2022 £'000 £'000
Balance at 1 January 2021 19,121 3,230 - 22,351 84 22,435
Total comprehensive income for the period:
Profit for the period - 1,029 - 1,029 (12) 1,017
Other comprehensive income - (9) - (9) - (9)
Total comprehensive income for the period - 1,020 - 1,020 (12) 1,008
Changes in ownership interests:
Acquisition of subsidiary with non-controlling interest (Note 16) - (266) - (266) (44) (310)
Total changes in ownership interests - (266) - (266) (44) (310)
Balance at 30 June 2021 19,121 3,984 - 23,105 28 23,133
Balance at 1 July 2021 19,121 3,984 - 23,105 28 23,133
Total comprehensive income for the period:
Profit for the period - 1,764 - 1,764 28 1,792
Other comprehensive income - 230 15 245 - 245
Total comprehensive income for the period - 1,994 15 2,009 28 2,037
Changes in ownership interests:
Dividend declared (see note 15) 12 (197) - (185) - (185)
Total changes in ownership interests 12 (197) - (185) - (185)
Balance at 31 December 2021 19,133 5,781 15 24,929 56 24,985
Balance at 1 January 2022 19,133 5,781 15 24,929 56 24,985
Total comprehensive income for the period:
Profit for the period - 2,161 - 2,161 16 2,177
Other comprehensive income - 43 - 43 - 43
Total comprehensive income for the period - 2,204 - 2,204 16 2,220
Changes in ownership interests:
Dividend declared (see note 15) 62 (280) - (218) - (218)
Total changes in ownership interests 62 (280) - (218) - (218)
Balance at 30 June 2022 19,195 7,705 15 26,915 72 26,987
Condensed Consolidated Statement of Cash Flows
For the six months ended For the six months ended For the year ended
30 June 30 June 31 December 2021
2022 2021 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Notes
RECONCILIATION OF PROFIT BEFORE TAXATION TO OPERATING CASH FLOWS
Profit before tax 2,337 1,139 3,043
Adjustments for:
Depreciation 373 496 944
Amortisation of intangibles 256 216 458
Share of profit of equity accounted investees - (59) (32)
Contingent consideration interest expense 35 61 114
Pension charge included in personnel expenses - - 13
Gain on financial instruments 139 - (30)
Revaluation on acquisition of subsidiary - - (660)
3,140 1,853 3,850
Changes in:
Equity at FVTPL - 4 4
Trade and other receivables 11 (875) 712 223
Creditors and accrued charges 18 767 (109)
Net cash flow from trading activities 2,283 3,336 3,968
Changes in:
Loans and advances to customers 10 (15,672) (18,302) (36,128)
Deposits from customers 158 12,894 35,174
Pension contribution (56) (98) (98)
Cash (outflow) / inflow from operating activities (13,287) (2,170) 2,916
For the six months ended For the six months ended For the year ended
30 June 30 June 31 December 2021
2022 2021 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Notes
CASH FLOW STATEMENT
Cash from operating activities
Cash (outflow) / inflow from operating activities (13,287) (2,170) 2,916
Income taxes paid (256) - (10)
Net cash (outflow) / inflow from operating activities (13,543) (2,170) 2,906
Cash flows from investing activities
Purchase of property, plant and equipment (655) (1,172) (2,109)
Purchase of intangible assets (179) (259) (481)
Sale of property, plant and equipment 1,071 249 961
Acquisition of subsidiary or associate, net of cash acquired 16 - (310) (555)
Sale / (Purchase) of debt securities 9 878 (2,087) (15,473)
Contingent consideration 17 (862) (120) (120)
Net cash inflow / (outflow) from investing activities 253 (3,699) (17,777)
Cash flows from financing activities
Receipt of loan notes 14 7,660 1,500 1,450
Payment of lease liabilities (capital) (90) (107) (201)
Dividend paid (190) - (152)
Net cash inflow from financing activities 7,380 1,393 1,097
Net decrease in cash and cash equivalents (5,910) (4,476) (13,774)
Cash and cash equivalents - opening 20,279 34,053 34,053
Cash and cash equivalents - closing 14,369 29,577 20,279
Included in cash flows are:
Interest received - cash amounts 12,976 10,757 22,624
Interest paid - cash amounts (2,624) (2,345) 4,936
Notes
For the six months ended 30 June 2022
1. Reporting entity
Manx Financial Group PLC (the "Company" or "MFG") is a company incorporated in
the Isle of Man. These condensed consolidated interim financial statements
("interim financial statements") are as at and for the six months ended 30
June 2022, and comprise the Company and its subsidiaries ("Group").
2. Basis of accounting
These interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting and should be read in conjunction with the last
annual consolidated financial statements as at and for the year ended 31
December 2021 ("last annual financial statements"). They do not include all of
the information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual financial
statements.
3. Functional and presentation currency
These financial statements are presented in pounds sterling, which is the
Group's functional currency. All amounts have been rounded to the nearest
thousand, unless otherwise indicated. All subsidiaries of the Group have
pounds sterling as their functional currency.
4. Use of judgements and estimates
In preparing these interim financial statements, management make judgements,
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
The significant judgements made by management in applying the Group's
accounting policies and key sources of estimation uncertainty are the same as
those described in the last annual financial statements.
5. Credit risk
A summary of the Group's current policies and practices for the management of
credit risk is set out in Note 7 - Financial risk review and Note 41 -
Financial risk management on pages 47 and 72 respectively of the Annual
Financial Statements 2021.
An explanation of the terms Stage 1, Stage 2 and Stage 3 is included in Note
43 (G)(vii) on page 81 of the Annual Financial Statements 2021.
A. Summary of credit risk on loans and advances to customers
2022 2021
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
30 June (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Grade A 226,577 - - 226,577 195,141 - - 195,141
Grade B - 5,579 8,591 14,170 - 4,437 7,255 11,692
Grade C 516 - 12,197 12,713 589 50 10,248 10,887
Gross value 227,093 5,579 20,788 253,460 195,730 4,487 17,503 217,720
Allowance for impairment (341) (10) (8,186) (8,537) (698) (14) (5,563) (6,275)
Carrying value 226,752 5,569 12,602 244,923 195,032 4,473 11,940 211,445
2021 2020
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
31 December (audited) £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Grade A 213,103 - - 213,103 173,673 - - 173,673
Grade B - 5,735 5,594 11,329 - 5,728 7,751 13,479
Grade C 342 541 12,656 13,539 335 9 12,771 13,115
Gross value 213,445 6,276 18,250 237,971 174,008 5,737 20,522 200,267
Allowance for impairment (503) (124) (8,093) (8,720) (423) (18) (6,683) (7,124)
Carrying value 212,942 6,152 10,157 229,251 173,585 5,719 13,839 193,143
Loans are graded A to C depending on the level of risk. Grade C relates to
agreements with the highest of risk, Grade B with medium risk and Grade A
relates to agreements with the lowest risk.
B. Summary of overdue status of loans and advances to customers
2022 2021
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
30 June (unaudited) £000 £000 £000 £000 £000 £000 £000 £000
Current 221,901 - - 221,901 193,435 - - 193,435
Overdue < 30 days 5,192 - - 5,192 2,293 - - 2,293
Overdue > 30 days - 5,579 20,788 26,367 - 4,488 17,504 21,992
227,093 5,579 20,788 253,460 195,728 4,488 17,504 217,720
2021 2020
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
31 December (audited) £000 £000 £000 £000 £000 £000 £000 £000
Current 210,491 - - 210,491 170,436 - - 170,436
Overdue < 30 days 2,954 - - 2,954 3,572 - - 3,572
Overdue > 30 days - 6,276 18,250 24,526 - 5,737 20,522 26,259
213,445 6,276 18,250 237,971 174,008 5,737 20,522 200,267
6. Interest income
Interest income represents charges and interest on finance and leasing
agreements attributable to the period or year after adjusting for early
settlements and interest on bank balances.
7. Operating segments
Segmental information is presented in respect of the Group's business
segments. The Directors consider that the Group currently operates in one
geographic segment comprising of the Isle of Man, UK and Channel Islands. The
primary format for business segments is based on the Group's management and
internal reporting structure. The Directors consider that the Group operates
in three (2021: three) product orientated segments in addition to its
investing activities: (i) Asset and Personal Finance (including provision of
HP contracts, finance leases, personal loans, commercial loans, block
discounting, vehicle stocking plans and wholesale funding agreements); (ii)
Edgewater Associates Limited (provision of financial advice), and (iii) MFX
Limited (provision of foreign currency transaction services).
Asset and
Personal Investing
Finance Edgewater Associates MFX Activities Total
For the 6 months ended £'000 £'000 £'000 £'000 £'000
30 June 2022 (unaudited)
Net interest income 10,532 - - - 10,532
Fee and commission income 518 1,076 909 - 2,503
Operating income 9,688 1,076 900 - 11,664
Profit before tax payable 1,713 26 753 (155) 2,337
Capital expenditure 785 45 3 1 834
Total assets 303,163 2,298 620 11,608 317,689
Total liabilities 270,885 543 75 19,199 290,702
Asset and
Personal Investing
Finance Edgewater Associates MFX Activities Total
For the 6 months ended £'000 £'000 £'000 £'000 £'000
30 June 2021 (unaudited)
Net interest income / (expense) 9,201 - - (646) 8,555
Fee and commission income 469 1,031 856 - 2,356
Operating income 6,456 1,031 852 649 8,988
Profit / (loss) before tax payable 759 (12) 717 (325) 1,139
Capital expenditure 1,384 - 24 23 1,431
Total assets 274,832 2,150 615 6,149 283,746
Total liabilities 243,136 545 8 16,924 260,613
Asset and
Personal Investing
Finance Edgewater Associates MFX Activities Total
For the year ended £000 £000 £000 £000 £000
31 December 2021 (audited)
Net interest income 17,980 - - - 17,980
Fee and commission income 811 2,282 1,528 - 4,621
Operating income 16,251 2,282 1,514 - 20,047
Profit / (loss) before tax payable 2,528 114 1,277 (826) 3,043
Capital expenditure 3,083 13 1 5 3,102
Total assets 292,721 2,330 802 12,900 308,753
Total liabilities 265,751 638 61 17,318 283,768
8. Earnings per share
For the 6 months ended For the 6 months ended For the
30 June 2022 30 June 2021 year ended
(unaudited) (unaudited) 31 Dec 2021
(audited)
Profit for the period / year £2,177,000 £1,017,000 £2,809,000
Weighted average number of ordinary shares in issue (basic) 114,447,909 114,130,077 114,291,639
Basic earnings per share (pence) 1.90 0.89 2.46
Diluted earnings per share (pence) 1.49 0.73 1.97
Total comprehensive income for the period / year £2,220,000 £1,008,000 £3,045,000
Weighted average number of ordinary shares in issue (basic) 114,447,909 114,130,077 114,291,639
Basic earnings per share (pence) 1.94 0.88 2.66
Diluted earnings per share (pence) 1.52 0.72 2.13
The basic earnings per share calculation is based upon the profit for the
period / year after taxation and the weighted average of the number of shares
in issue throughout the period / year.
30 June 2022 30 June 2021 31 Dec 2021
As at (unaudited) (unaudited) (audited)
Reconciliation of weighted average number of ordinary shares in issue between
basic and diluted
Weighted average number of ordinary shares (basic) 114,447,909 114,130,077 114,291,639
Number of shares issued if all convertible loan notes were exchanged for 36,555,556 36,555,556 36,555,556
equity
Dilutive element of share options if exercised - - -
Weighted average number of ordinary shares (diluted) 151,003,465 150,685,633 150,847,195
Reconciliation of profit for the period / year between basic and diluted
Profit for the period / year (basic) £2,177,000 £1,017,000 £2,809,000
Interest expense saved if all convertible loan notes were exchanged for equity £76,250 £83,125 £166,250
Profit for the period / year (diluted) £2,253,250 £1,100,125 £2,975,250
The diluted earnings per share calculation assumes that all convertible loan
notes have been converted / exercised at the beginning of the period in which
they are dilutive.
30 June 2022 30 June 2021 31 Dec 2021
As at (unaudited) (unaudited) (audited)
Reconciliation of total comprehensive income for the period / year between
basic and diluted
Total comprehensive income for the period / year (basic) £2,220,000 £1,008,000 £3,045,000
Interest expense saved if all convertible loan notes were exchanged for equity £76,250 £83,125 £166,250
Total comprehensive income for the period / year (diluted) £2,296,250 £1,091,125 £3,211,250
9. Debt securities
30 June 2022 30 June 2021 31 Dec 2021
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Financial assets at fair value through other comprehensive income:
UK Government treasury bills 40,151 27,610 40,987
Financial assets at amortised cost:
UK Certificates of Deposit - - -
40,151 27,610 40,987
UK Government Treasury Bills are stated at fair value and unrealised changes
in the fair value are reflected in other comprehensive income. There were
£26,000 realised gains (30 June 2021: realised losses of £1,000 and 31
December 2021: realised losses of £1,000) and unrealised gains of £43,000
(30 June 2021: unrealised losses of £9,000 and 31 December 2021: unrealised
losses of £18,000) for the period.
10. Loans and advances to customers
30 June 2022 30 June 2021 31 Dec 2021
Carrying Carrying Carrying
Gross Impairment Allowance Value Value Value
Amount £'000 £'000 £'000 £'000
As at £'000 (unaudited) (unaudited) (audited)
HP balances 64,766 (3,444) 61,322 67,632 67,682
Finance lease balances 23,781 (3,629) 20,152 29,538 24,814
Unsecured personal loans 36,522 (587) 35,935 31,608 30,730
Vehicle stocking plans 1,825 - 1,825 1,520 1,675
Wholesale funding arrangements 17,803 - 17,803 16,890 15,447
Block discounting 28,877 - 28,877 13,488 16,465
Secured commercial loans 13,046 (504) 12,542 9,701 10,580
Secured personal loans 1,422 - 1,422 1,746 1,739
Government backed loans 65,418 (373) 65,045 39,322 60,119
253,460 (8,537) 244,923 211,445 229,251
11. Trade and other receivables
30 June 2022 30 June 2021 31 Dec 2021
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Prepayments 1,068 360 498
Other debtors 1,754 1,098 1,449
2,822 1,458 1,947
12. Goodwill
30 June 2022 30 June 2021 31 Dec 2021
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
EAL 1,849 1,849 1,849
BLX 1,908 - 1,908
BBSL 1,390 1,390 1,390
NRFL 678 678 678
Manx Collections Limited ("MCL") 454 454 454
Three Spires Insurance Services Limited ("Three Spires") 41 41 41
6,320 4,412 6,320
13. Creditors and accrued charges
30 June 2022 30 June 2021 31 Dec 2021
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Commission creditors 1,401 2,345 1,520
Other creditors and accruals 1,472 1,063 1,335
Lease liability 1,205 396 1,295
Taxation creditors 454 254 550
Dividend payable 73 - 45
4,605 4,058 4,745
14. Loan notes
30 June 2022 30 June 2021 31 Dec 2021
£'000 £'000 £'000
As at Notes (unaudited) (unaudited) (audited)
Related parties
J Mellon JM 1,750 1,750 1,750
Burnbrae Limited BL 3,200 3,200 3,200
Culminant Reinsurance Ltd CR 1,000 1,000 1,000
5,950 5,950 5,950
Unrelated parties UP 25,382 17,772 17,722
31,332 23,722 23,672
JM - Two loans, one of £1,250,000 maturing on 26 February 2025 with interest
payable of 5.4% per annum, and one of £500,000 maturing on 31 July 2022,
paying interest of 5.0% per annum. Both loans are convertible to ordinary
shares of the Company at the rate of 7.5 pence. Refer to Note 21 for post
period end subsequent loan note renewals.
BL - Three loans, one of £1,200,000 maturing on 31 July 2022, paying interest
of 5.0% per annum, one of £1,000,000 maturing on 25 February 2025, paying
interest of 5.4% per annum, and one of £1,000,000 maturing on 28 February
2025 paying interest of 6% per annum. Jim Mellon is the beneficial owner of BL
and Denham Eke is also a director. The £1,200,000 loan is convertible to
ordinary shares of the Company at a rate of 7.5 pence. Refer to Note 21 for
post period end subsequent loan note renewals.
CR - One loan consisting of £1,000,000 maturing on 12 October 2025, paying
interest of 6.0% interest per annum. Greg Bailey, a Director, is the
beneficial owner of CR.
UP - 39 loans with an average balance of £650,823 and an average interest
payable of 5.66% per annum. The earliest maturity date is 31 July 2022 and the
latest maturity is 4 January 2027.
With respect to the convertible loans, the interest rate applied was deemed by
the Directors to be equivalent to the market rate at the time with no
conversion option.
15. Called up share capital
Ordinary Shares of no-par value available for issue Number
At 30 June 2022, 31 December 2021 and 30 June 2021 200,200,000
Issued and fully paid ordinary Shares of no par value Number £'000
Balance at 30 June 2021 114,130,077 19,121
Scrip dividend at 7.0575 per share 161,562 12
Balance at 31 December 2021 114,291,639 19,133
Scrip dividend at 8.0250 per share 781,349 62
Balance at 30 June 2022 115,072,988 19,195
On 25 May 2022, MFG declared a dividend of £279,200 (2021: £196,800 which
could either be taken up in cash or new ordinary shares. 781,349 new shares
(2021: 161,562 new shares) were admitted to the Alternative Investment Market
("AIM") at 8.02050 pence per share (2021: 7.0575 pence per share), at a total
cost of £62,000 (2021: £11,402).
There are three convertible loans totalling £2,950,000 (30 June and 31
December 2021: three convertible loans totalling £2,950,000). On 23 June
2014, 1,750,000 share options were issued to Executive Directors and senior
management within the Group at an exercise price of 14 pence per share.
The options vest over three years with a charge based on the fair value of 8
pence per option at the date of grant. The period of grant is for 10 years
less 1 day ending 22 June 2024.
Of the 1,750,000 share options issued, 1,050,000 (30 June and 31 December
2021:1,050,000) remain outstanding.
16. Non-controlling interest
On 14 June 2021, the Group increased its shareholding in Ninkasi Rentals &
Finance Limited ("NRFL") to 90%. Non-controlling interest represents ordinary
share capital in NRFL held by the previous owners of NRFL who remain employed
by NRFL.
17. Deferred consideration
30 June 2022 30 June 2021 31 Dec 2021
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Opening balance 1,023 672 672
Assumed in a business combination - 387
Finance costs 35 61 114
Net change in fair value (unrealised) 139 - (30)
174 61 84
Payment (862) (120) (120)
Closing balance 335 613 1,023
Deferred consideration relates to contingent payments due to the sellers on
the acquisition of BBSL and BLX respectively.
On acquisition of BBSL on 16 April 2019, the Group agreed to pay the selling
shareholders:
§ 50% of net profits in BBSL for 3 years post completion; and
§ 50% of the incremental net profit that the Group benefits from as a
result of taking up BBSL loan proposals post completion up until the third
anniversary.
This was to be paid on each anniversary with a final payment in year 4 for the
unrealised lending profit. The Group made final instalment and settlement of
this contingent consideration when it made the final payment of £781,095
during the period.
On the acquisition of BLX on 11 October 2021, the Group agreed that a further
conditional consideration of up to £483,663 is payable to the sellers in
addition to the cash consideration paid. The total amount payable is
contingent on the recovery of certain loans and advances found to be in
default at acquisition. The fair value on acquisition date was determined to
be £387,000. The Group made a payment of £80,611 to the sellers during the
period.
18. Conditional Acquisition
On 16 May 2022, Manx Ventures Limited ("MVL"), a wholly owned subsidiary of
the Company, agreed to acquire a 50.1% interest (the "Acquisition") in UK
focused, point of sale lender Payment Assist Limited ("Payment Assist") for a
total initial consideration of £4 million payable in cash.
In addition to the Acquisition, Manx Ventures has agreed an option to acquire
the remaining 49.9% of Payment Assist for cash consideration of up to £5
million (the "Option"). The Option can be exercised by Manx Ventures at any
time for a period of two years after publication by Payment Assist of its
audited accounts for the period to 31 December 2024. MFG will fund the initial
£4 million consideration and deferred consideration of up to £5 million from
its cash resources.
The Acquisition, and hence the Option, is subject to the satisfaction of
certain conditions precedent including approval of the change of control by
the FCA. The Acquisition was completed and announced to the market on 21
September 2022.
19. Regulators
Certain Group subsidiaries are regulated by the Isle of Man Financial Services
Authority (FSA) and the United Kingdom Financial Conduct Authority (FCA) as
detailed below.
The Bank and EAL are regulated by the FSA under a Class 1(1) - Deposit Taking
licence, and a Class 2 - Investment Business licence respectively. The Bank
and CFL are regulated by the FCA to provide regulated products and services.
20. Contingent liabilities
The Bank is required to be a member of the Isle of Man Government Depositors'
Compensation Scheme which was introduced by the Isle of Man Government under
the Banking Business (Compensation of Depositors) Regulations 1991. This
creates a liability on the Bank to participate in the compensation of
depositors should it be activated.
21. Subsequent events
On 22 July 2022, JM and BL agreed to extend outstanding unsecured convertible
loans of £1.7 million, expiring on 31 July 2022, for a further five years to
31 July 2027. A loan of £1.2 million is from BL and the remaining loan of
£0.5 million is from JM himself. The new annual interest rate will be 7.5%
(previously 5.0%) and the new conversion price will be 8.0 pence per share
(previously 7.5 pence). All other terms are unchanged, including the ability
for the Company to repay the loans at any time during the period.
On 5 July 2022, MFG granted Restricted Stock Units ("RSUs") under its 2022 RSU
Plan. The Group has issued, in total, RSUs over 2,120,000 ordinary shares
representing 1.8% of the issued share capital of the Group, including
1,100,000 to certain directors and 1,020,000 to certain employees. The RSUs
will have a 2-year term and are subject to certain vesting conditions based
upon an overall growth in profitability, both at the Group and Company level
and the satisfaction of individual performance targets and other metrics,
including the achievement of additional sources of liquidity for increased
lending requirements. Any RSUs granted will fall away should the recipient
leave employment before the 2-year term expires. Should the individual vesting
conditions be satisfied at the end of the term, the stock will be granted at
nil cost.
The Group directors who received RSUs are as follows:
§ Douglas Grant, Group Chief Executive Officer, who currently owns 533,951
ordinary shares in the Company representing a holding of 0.46% was issued
925,000 RSUs. Including 700,000 Share Options issued 24 June 2014, he would
hold a total of 2,158,951 ordinary shares, being 1.8% of the issued share
capital of the Company on a fully diluted basis; and
§ James Smeed, Group Finance Director, was issued 175,000 RSUs. On the same
basis, he would hold 0.15% of the new issued share capital of the Company.
There were no other significant subsequent events identified after 30 June
2022.
22. Approval of interim financial statements
The interim financial statements were approved by the Board on 26(th)
September 2022. The interim report will be available from that date at the
Group's website - www.mfg.im and at the Registered Office: Clarendon House,
Victoria Street, Douglas, Isle of Man, IM1 2LN. The Group's nominated adviser
and broker is Beaumont Cornish Limited, Building 3, 566 Chiswick High Road,
London W4 5YA. The interim and annual financial statements along with other
supplementary information of interest to shareholders, are included on the
Group's website. The website includes investor relations information,
including corporate governance observance and contact details.
Appendix - Glossary of terms
BBSL Blue Star Business Solutions Limited
BL Burnbrae Limited
Bank Conister Bank Limited
CFL Conister Finance & Leasing Ltd
Company Manx Financial Group PLC
EAL Edgewater Associates Limited
FCA UK Financial Conduct Authority
FVTPL Fair value through profit and loss
FSA Isle of Man Financial Services Authority
Group Comprise the Company and its subsidiaries
HP Hire Purchase
IFA Independent Financial Advisors
Interim financial statements Condensed consolidated interim financial statements
JM Jim Mellon
LSE London Stock Exchange
MFG Manx Financial Group PLC
MFX MFX Limited
MFX.L Manx Financial Group PLC ticker symbol on the LSE
MVL Manx Ventures Limited
NRFL Ninkasi Rentals & Finance Limited
RFG Rivers Finance Group Plc
Subsidiaries MFG's subsidiaries being EAL, MFX, BBSL, NRFL, Bank, CFL, MVL, Three Spires
UK United Kingdom
UP Unrelated parties
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