REG - Manx Financial Group - Unaudited Interim Results to 30 June 2023
21/09/2023 07:00
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RNS Number : 1255N Manx Financial Group PLC 21 September 2023
FOR IMMEDIATE
RELEASE
21 September 2023
Manx Financial Group PLC
Unaudited Interim Results for the 6 months to 30 June 2023
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 2023.
Jim Mellon, Executive Chairman, commented:
"I am pleased to announce another record half year showing an increase in our
Profit Before Tax Payable to £3.0 million, a 30% improvement on the previous
Interim results of 30 June 2022 of £2.3
million."
Copies of the Interim Report will shortly be available on our website
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 Jamie Brownlee
Executive Vice Chairman Tel +44 (0) 20 7628 3396 Tel: +44 (0) 20 3307 5726
Tel +44 (0)1624 694694
Dear Shareholders
Introduction
The unsettled economic environment in the aftermath of the mini budget in
September 2022, together with the impact of the continuing war in Ukraine, has
created a very challenging marketplace for the Group. But I am now confident
that the UK is approaching the bottom of its credit cycle, despite the economy
having never entered a recession.
With this backdrop it is pleasing to announce another record half year with a
30% increase in our Profit Before Tax Payable to £3.0 million (30 June 2022:
£2.3 million) - a good result which I will discuss in greater detail in the
financial review section of this report.
Strategy update
We are progressing our UK Branch banking licence which will allow Conister
Bank Limited to access up to £500 million of additional liquidity in the form
of non-transactional Deposit Accounts to complement its Isle of Man full
Deposit taking licence. Obtaining the Branch banking licence is progressing as
planned and I would expect a response from both the Isle of Man and UK
regulators before the end of this year. This licence forms part of our funding
and liquidity strategy which, in turn, underpins our ability to deliver stable
earnings growth. To achieve stable earnings, we have maintained our objectives
of growth through gaining market share in recession-proof markets in a
customer focused, regulatory compliant, and credit conscious manner.
Our acquisition strategy remains unabated for companies operating in sectors
that we either already operate within, and where we are seeking a greater
market share, or for companies that operate profitably in sectors in which we
would like to enter.
The Group has embarked on a multi-year, multi-million-pound IT investment
programme which will be both customer focused and scalable to allow the
business to achieve its growth ambitions in a regulatory compliant and
controlled manner.
As I stated in the Group's 2022 Annual Report, climate change is bringing
commercial and reputational risks to the finance industry. Whilst this is
viewed externally as a longer-term issue, the financial risks are becoming
apparent now, and the Board currently considers climate change as part of its
governance framework. We have trialed our ESG strategy on Conister Bank
Limited and I still expect to extend it to cover all our wholly owned
operating subsidiaries by the end of this year.
Financial Review
The full impact of the Bank of England's 14 consecutive interest rate
increases to curb the UK's stubbornly high inflation rate negatively impacted
our net interest margin by 6% as we continued to acquire deposits to fund our
growing loan book. This margin erosion is clear evidence of Conister Bank
Limited passing on interest rate increases to the Island's long-suffering
savers and indeed it has proved very successful in attracting a significant
number of new depositors. It is worth noting that this margin erosion has been
partially offset by our increasing yields, which once the interest rates start
decreasing, will help to restore our net interest margin to a more normalised
position. We lent a record £182.6 million in the first six months of this
year, some £71.7 million, or 65%, ahead of the same period last year (30 June
2022: £110.9 million). In turn, this increased our Net Interest Income by 56%
to £16.4 million (30 June 2022: £10.5 million) despite the margin erosion.
It is worth noting that to minimise the impact of the margin erosion we have
optimised our Loan-to-Deposit ratio by a 6% improvement to 103% (31 December
2022: 97%).
Turning to our balance sheet, during this turbulent period we have focused on
balancing net loan book growth, by ensuring we continue to lend in markets
that have a positive credit history. Since 30 June 2022, the net loan book has
increased by £98.3 million, or 40%, to £343.3 million (30 June 2022: £244.9
million), and by a healthy £51.8 million since the year-end (31 December
2022: £291.5 million). Deferred income, being income already secured but not
released to the Income Statement now stands at £45.9 million (30 June 2022:
£32.5 million).
Deposits have increased by £78.9 million to £332.5 million (30 June 2022:
£253.6 million), and £28.3 million since the year-end (31 December 2022:
£304.2 million).
Business Review
Conister Bank Limited remains the driver of the Group's profitability and
performed admirably in these difficult market conditions. Through its prudent
lending, Interest Income increased by £2.8 million to £14.7 million (30 June
2022: £11.9 million) which after Interest Expense of £4.9 million (30 June
2022: £2.3 million) derived Net Interest Income of £9.8 million (30 June
2022: £9.7 million). This increase in Interest Expense is driven by both the
increase in the deposit base to fund our record lending of £182.6 million,
and the impact of increases in the Bank of England interest rate. Our cost of
funds increased from 1.59% as of 30 June 2022 to 3.38% as at 30 June 2023.
Over the same period our cost of risk remained stable at 0.1%.
Our focus on containing third party fees continued with Fee and Commission
Expense representing less than 1.4% of advances in the period (30 June 2022:
1.2%), which in turn led to a decrease in Net Trading Income of £1.0 million
to £7.3 million (30 June 2022: £8.3 million).
Our Treasury management was able to obtain improved returns with income of
£0.7 million (30 June 2022: £nil million) and we remain committed to our
conservative approach and do not have any unrealised losses on our book due to
it being mainly short-term in nature.
Overheads increased by £0.6 million to £4.5 million (30 June 2022: £3.9
million) as underlying inflationary pressure on our cost base was supplemented
by costs relating to recruiting the establishment required to operate the UK
Branch, together with the commencement of our long-term IT strategy.
Moving to the balance sheet, record lending helped both to improve our
liquidity efficiency and to grow our net loan book to £343.3 million (30 June
2022: £244.9 million). Our conservative approach to provisioning remains a
tenet of our business with provisioning of £10.1 million (30 June 2022: £8.5
million). Although we are seeking a UK Branch deposit taking licence, our
loyal Isle of Man deposit customers remain fundamental to our growth strategy,
and it is pleasing to note our retention rate of 82% reflects their continuing
trust in us (30 June 2022: 77%).
All our other major operating subsidiaries performed admirably during the
period under review and their continued drive for compliant, profitable
business will stand us in good stead for the future.
Notably, our foreign exchange advisory business, which thrives on these
turbulent market conditions, and our recently acquired short-term lender,
Payment Assist Limited ("PAL"). PAL provides a market leading product offering
to the auto vehicle maintenance and retail market.
Outlook
We expect market conditions to remain challenging through to Quarter 2 next
year at which point we should see the market improving as interest rates start
to abate. This will improve disposable income levels for corporates and
individuals alike. Some of the current inflation is not transitory and I
expect inflation to remain higher for longer than some economists are
currently forecasting. This will be positive for savers, and it should provide
a period for lenders to bring their net interest margin back into its more
traditional range. We expect advances for the year to be circa £0.4 billion
(2022: circa £0.3 billion), split approximately 20:80 between the Isle of Man
and the UK respectively.
The Group currently has the right products to lend under such a scenario and I
would expect our current short-term lending products along with our structured
finance products to remain popular. Other complementary products and funding
solutions are being developed which will be introduced into the market as this
year progresses.
Our diversified lending portfolio of Conister, Payment Assist Limited, Blue
Star Business Solutions Limited, Ninkasi Rentals & Finance Limited and The
Business Lending Exchange are all market specialists in their specific market
segments which provides us with some insulation from any single market
decline.
Our FX business should also perform well under these circumstances.
We will continue to seek strategic acquisitions, including within the general
insurance market, to support our existing customer base and to broaden our
reach into new jurisdictions.
All of this, along with diversifying our sources of liquidity, should position
the Group well for a strong finish to this year and to the start of 2024.
In summary, we remain well positioned to continue to grow organically in this
difficult market but also to seek acquisitions to gain market share in markets
that have historically demonstrated to be commercially resilient.
Presentation and webcast for analysts and investors
A conference call with management including an opportunity to ask questions
will commence at 11:00 am (BST) on 25 September 2023. A copy of the
presentation will be available on the investor relations section of www.mfg.im
(http://www.mfg.im) from 3:00 pm that day. To access the webcast, please
register your interest by writing to investor@mfg.im along with any advanced
questions you may have by 9:00am (BST) on 25 September 2023.
Thank you
These results could not be achieved without the continued support of our
staff, our customers, and the Board - I thank them all.
Jim Mellon
Executive Chairman
20 September 2023
Condensed Consolidated Statement of Profit of 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 2022
2023 2022 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Interest revenue calculated using the effective interest method 6 21,458 12,336 28,978
Other Interest income 6 713 908 1,765
Interest expense (5,787) (2,712) (6,391)
Net interest income 16,384 10,532 24,352
Fee and commission income 2,248 2,503 4,719
Fee and commission expense (3,046) (1,517) (3,569)
Depreciation on leasing assets - (16) (16)
Net trading income 15,586 11,502 25,486
Other operating income 62 275 314
Loss on financial instruments - (139) (19)
Realised gain on debt securities 9 664 26 292
Operating income 16,312 11,664 26,073
Personnel expenses (6,236) (4,091) (9,764)
Other expenses (3,031) (2,355) (5,806)
Provision for impairment on loans and advances to customers (3,294) (2,268) (3,990)
Depreciation (407) (357) (738)
Amortisation and impairment of intangibles (312) (256) (582)
Share of profit of equity accounted investees, net of tax - - 18
Profit before tax payable 3,032 2,337 5,211
Income tax expense (493) (160) (537)
Profit for the period / year 2,539 2,177 4,674
Notes For the six months ended For the six months ended For the year ended
30 June 30 June 31 December 2022
2023 2022 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Profit for the period / year 2,539 2,177 4,674
Other comprehensive income:
Items that will be reclassified to profit or loss
Unrealised gain on debt securities 62 43 131
Items that will never be reclassified to profit or loss
Actuarial gain on defined benefit pension scheme taken to equity - - 407
Total comprehensive income for the period / year 2,601 2,220 5,212
Profit attributable to:
Owners of the Company 1,927 2,161 4,331
Non-controlling interest 612 16 343
2,539 2,177 4,674
Total comprehensive income attributable to:
Owners of the Company 1,989 2,204 4,869
Non-controlling interest 612 16 343
2,601 2,220 5,212
Earnings per share - profit for the period / year
Basic earnings per share (pence) 8 1.67 1.89 3.77
Diluted earnings per share (pence) 8 1.30 1.48 2.93
Earnings per share - total comprehensive income
for the period / year
Basic earnings per share (pence) 8 1.73 1.93 4.24
Diluted earnings per share (pence) 8 1.34 1.51 3.28
Condensed Consolidated Statement of Financial Position
30 June 30 June 31 December 2022
2023 2022 £'000
As at £'000 £'000 (audited)
Notes (unaudited) (unaudited)
Assets
Cash and cash equivalents 17,267 14,369 22,630
Debt securities 9 31,371 40,151 40,675
Equity held at Fair Value Through Profit or Loss 122 68 122
Loans and advances to customers 5,10 343,244 244,923 291,475
Trade and other receivables 11 7,227 2,822 4,211
Property, plant and equipment 6,665 6,468 6,714
Intangible assets 3,028 2,431 2,703
Investment in associates 19 197 137 155
Goodwill 12 10,576 6,320 10,576
Total assets 419,697 317,689 379,261
Liabilities
Deposits from customers 332,509 253,617 304,199
Creditors and accrued charges 13 14,857 4,605 13,108
Deferred consideration 16 216 335 262
Loan notes 14 39,492 31,332 31,332
Pension liability 240 631 237
Deferred tax liability 353 182 353
Total liabilities 387,667 290,702 349,491
Equity
Called up share capital 15 19,287 19,195 19,195
Profit and loss account 11,927 7,705 10,371
Revaluation reserve 15 15 15
Non-controlling interest 801 72 189
Total equity 32,030 26,987 29,770
Total liabilities and equity 419,697 317,689 379,261
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 2023 £'000 £'000
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
Balance at 1 July 2022 19,195 7,705 15 26,915 72 26,987
Total comprehensive income for the period:
Profit for the period - 2,170 - 2,170 327 2,497
Other comprehensive income - 496 - 496 - 496
Total comprehensive income for the period - 2,666 - 2,666 327 2,993
Changes in ownership interests:
Dividend declared - - - - - -
Acquisition of subsidiary with non-controlling interest - - - - (210) (210)
Total changes in ownership interests - - - - (210) (210)
Balance at 31 December 2022 19,195 10,371 15 29,581 189 29,770
Balance at 1 January 2023 19,195 10,371 15 29,581 189 29,770
Total comprehensive income for the period:
Profit for the period - 1,927 - 1,927 612 2,539
Other comprehensive income - 62 - 62 - 62
Total comprehensive income for the period - 1,989 - 1,989 612 2,601
Changes in ownership interests:
Dividend declared (see note 15) 92 (433) - (341) - (341)
Total changes in ownership interests 92 (433) - (341) - (341)
Balance at 30 June 2023 19,287 11,927 15 31,229 801 32,030
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 2022
2023 2022 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Notes
RECONCILIATION OF PROFIT BEFORE TAXATION TO OPERATING CASH FLOWS
Profit before tax 3,032 2,337 5,211
Adjustments for:
Depreciation 407 373 754
Amortisation of intangibles 312 256 582
Share of profit of equity accounted investees - - (18)
Contingent consideration interest expense 4 35 102
Pension charge included in personnel expenses 3 - 14
Gain on financial instruments - 139 19
3,758 3,140 6,664
Changes in:
Trade and other receivables 11 (3,016) (875) (2,228)
Creditors and accrued charges 1,283 18 1,436
Net cash flow from trading activities 2,025 2,283 5,872
Changes in:
Loans and advances to customers (78,256) (28,648) (83,066)
Deposits from customers 28,310 2,782 50,740
Pension contribution - (56) (57)
Cash outflow from operating activities (47,921) (23,639) (26,511)
For the six months ended For the six months ended For the year ended
30 June 30 June 31 December 2022
2023 2022 £'000
£'000 £'000 (audited)
(unaudited) (unaudited)
Notes
CASH FLOW STATEMENT
Cash from operating activities
Cash outflow from operating activities (47,921) (23,639) (26,511)
Interest received 20,888 12,976 30,136
Interest paid 5,599 (2,624) (6,184)
Income taxes paid (331) (256) (157)
Net cash outflow from operating activities (21,765) (13,543) (2,716)
Cash flows from investing activities
Purchase of property, plant and equipment (356) (655) (1,473)
Purchase of intangible assets (638) (179) (504)
Sale of property, plant and equipment - 1,071 2,083
Acquisition of subsidiary or associate, net of cash acquired - - (1,785)
Net sale of debt securities 9 9,366 878 442
Contingent consideration 16 (50) (862) (937)
Net cash inflow / (outflow) from investing activities 8,322 253 (2,174)
Cash flows from financing activities
Receipt of loan notes 14 8,159 7,660 7,660
Payment of lease liabilities (capital) (79) (90) (202)
Dividend paid - (190) (217)
Net cash inflow from financing activities 8,080 7,380 7,241
Net (decrease) / increase in cash and cash equivalents (5,363) (5,910) 2,351
Cash and cash equivalents - opening 22,630 20,279 20,279
Cash and cash equivalents - closing 17,267 14,369 22,630
Non-cash investing activities disclosed in Note 19 is the £42,000 acquisition
of 10% shareholding in Lesley Stephen & Co Limited (LSC).
Notes
For the six months ended 30 June 2023
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 2023, 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 2022 ("Annual Financial Statements 2022"). 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 42 -
Financial risk management on pages 48 and 74 respectively of the Annual
Financial Statements 2022.
An explanation of the terms Stage 1, Stage 2 and Stage 3 is included in Note
44 (G)(vii) on page 83 of the Annual Financial Statements 2022.
A. Summary of credit risk on loans and advances to customers
2023 2022
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 324,303 - - 324,303 226,577 - - 226,577
Grade B - 2,557 8,483 11,040 - 5,579 8,591 14,170
Grade C 5,280 306 20,179 25,765 516 - 12,197 12,713
Gross value 329,583 2,863 28,662 361,108 227,093 5,579 20,788 253,460
Allowance for impairment (3,529) (119) (14,216) (17,864) (341) (10) (8,186) (8,537)
Carrying value 326,054 2,744 14,446 343,244 226,752 5,569 12,602 244,923
2022 2021
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 273,332 - - 273,332 213,103 - - 213,103
Grade B - 5,006 9,347 14,353 - 5,735 5,594 11,329
Grade C 391 - 17,622 18,013 342 541 12,656 13,539
Gross value 273,723 5,006 26,969 305,698 213,445 6,276 18,250 237,971
Allowance for impairment (303) (3) (13,917) (14,223) (503) (124) (8,093) (8,720)
Carrying value 273,420 5,003 13,052 291,475 212,942 6,152 10,157 229,251
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
2023 2022
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 323,949 - - 323,949 221,901 - - 221,901
Overdue < 30 days 5,634 - - 5,634 5,192 - - 5,192
Overdue > 30 days - 2,863 28,662 31,525 - 5,579 20,788 26,367
329,583 2,863 28,662 361,108 227,093 5,579 20,788 253,460
2022 2021
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 269,131 - - 269,131 210,492 - - 210,492
Overdue < 30 days 4,593 604 - 5,197 2,953 - - 2,953
Overdue > 30 days - 4,402 26,968 31,370 - 6,276 18,250 24,526
273,724 5,006 26,968 305,698 213,445 6,276 18,250 237,971
6. Interest revenue and other interest income
Interest revenue and other 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 (2022: three) product orientated segments in addition to its
financial activities to allocate the Group's capital (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 Edgewater Associates MFX Limited Investing
Finance £000 £000 Activities Total
For the 6 months ended 30 June 2023 (unaudited) £000 £000 £000
Interest revenue calculated using the effective interest rate method 21,458 - - - 21,458
Other interest income 713 - - - 713
Interest expense (4,660) - - (1,127) (5,787)
Net interest income 17,511 - - (1,127) 16,384
Components of Net Trading Income (2,603) 1,200 605 - (798)
Net trading income 14,908 1,200 605 (1,127) 15,586
Components of Operating Income 726 - - - 726
Operating Income 15,634 1,200 605 (1,127) 16,312
Depreciation (364) (10) (1) (32) (407)
Amortisation and impairment of intangibles (271) (37) (2) (2) (312)
All other expenses (10,995) (1,009) (168) (389) (12,561)
Profit / (loss) before tax payable 4,004 144 434 (1,550) 3,032
Capital expenditure 994 - - - 994
Total assets 365,236 1,499 271 52,691 419,697
Total liabilities 347,391 21 8 40,247 387,667
Asset and
Personal Edgewater Associates MFX Limited Investing
Finance £000 £000 Activities Total
For the 6 months ended 30 June 2022 (unaudited) £000 £000 £000
Interest revenue calculated using the effective interest rate method 12,336 - - - 12,336
Other interest income 908 - - - 908
Interest expense (2,001) - - (711) (2,712)
Net interest income 11,243 - - (711) 10,532
Components of Net Trading Income (1,015) 1,076 909 - 970
Net trading income 10,228 1,076 909 (711) 11,502
Components of Operating Income 162 - - - 162
Operating Income 10,390 1,076 909 (711) 11,664
Depreciation (310) (14) (1) (32) (357)
Amortisation and impairment of intangibles (213) (40) (2) (1) (256)
All other expenses (6,921) (1,000) (153) (640) (8,714)
Profit / (loss) before tax payable 2,946 22 753 (1,384) 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 Edgewater Associates MFX Limited Investing
Finance £000 £000 Activities Total
For the year ended 31 December 2022 (audited) £000 £000 £000
Interest revenue calculated using the effective interest rate method 28,978 - - - 28,978
Other interest income 1,765 - - - 1,765
Interest expense (6,391) - - - (6,391)
Net interest income 24,352 - - - 24,352
Components of Net Trading Income (2,696) 2,096 1,734 - 1,134
Net trading income 21,656 2,096 1,734 - 25,486
Components of Operating Income 587 - - - 587
Operating Income 22,243 2,096 1,734 - 26,073
Depreciation (640) (31) (2) (65) (738)
Amortisation and impairment of intangibles (494) (81) (5) (2) (582)
Share of profit of equity accounted investees, net of tax - - - 18 18
All other expenses (17,226) (1,943) (314) (77) (19,560)
Profit / (loss) before tax payable 3,883 41 1,413 (126) 5,211
Capital expenditure 1,794 55 3 1 1,853
Total assets 332,689 2,248 543 43,781 379,261
Total liabilities 316,921 513 163 31,894 349,491
8. Earnings per share
For the 6 months ended For the 6 months ended For the
30 June 2023 30 June 2022 year ended
(unaudited) (unaudited) 31 Dec 2022
(audited)
Profit for the period / year £1,927,000 £2,161,000 £4,331,000
Weighted average number of ordinary shares in issue (basic) 115,072,988 114,447,909 114,763,883
Basic earnings per share (pence) 1.67 1.89 3.77
Diluted earnings per share (pence) 1.30 1.48 2.93
Total comprehensive income for the period / year £1,989,000 £2,204,000 £4,869,000
Weighted average number of ordinary shares in issue (basic) 115,072,988 114,447,909 114,763,883
Basic earnings per share (pence) 1.73 1.93 4.24
Diluted earnings per share (pence) 1.34 1.51 3.28
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 2023 30 June 2022 31 Dec 2022
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) 115,072,988 114,447,909 114,763,883
Number of shares issued if all convertible loan notes were exchanged for 37,916,667 36,555,556 38,225,772
equity
Dilutive element of share options if exercised 2,409,005 - 830,035
Weighted average number of ordinary shares (diluted) 155,398,660 151,003,465 153,819,690
Reconciliation of profit for the period / year between basic and diluted
Profit for the period / year (basic) £1,927,000 £2,161,000 £4,331,000
Interest expense saved if all convertible loan notes were exchanged for equity £97,500 £76,250 £171,415
Profit for the period / year (diluted) £2,024,500 £2,237,250 £4,502,415
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 2023 30 June 2022 31 Dec 2022
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) £1,989,000 £2,204,000 £4,869,000
Interest expense saved if all convertible loan notes were exchanged for equity £97,500 £76,250 £171,415
Total comprehensive income for the period / year (diluted) £2,086,500 £2,280,250 £5,040,415
9. Debt securities
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Financial assets at fair value through other comprehensive income:
UK Government treasury bills 31,371 40,151 40,675
31,371 40,151 40,675
UK Government Treasury Bills are stated at fair value and unrealised changes
in the fair value are reflected in other comprehensive income. There were
realised gains of £664,000 (30 June 2022: £26,000 and 31 December 2022:
£292,000) and unrealised gains of £62,000 (30 June 2022: £43,000 and 31
December 2022: £131,000) for the period.
10. Loans and advances to customers
30 June 2023 30 June 2022 31 Dec 2022
Carrying Carrying Carrying
Gross Impairment Allowance Value Value Value
Amount £'000 £'000 £'000 £'000
As at £'000 (unaudited) (unaudited) (audited)
HP balances 102,485 (4,427) 98,058 61,322 83,049
Finance lease balances 20,997 (3,494) 17,503 20,152 17,731
Unsecured personal loans 75,218 (8,503) 66,715 35,935 42,453
Vehicle stocking plans 1,904 - 1,904 1,825 1,918
Wholesale funding arrangements 25,225 (11) 25,214 17,803 30,904
Block discounting 54,873 - 54,873 28,877 46,294
Secured commercial loans 12,663 (577) 12,086 12,542 12,158
Secured personal loans 964 - 964 1,422 1,777
Government backed loans 47,598 (762) 46,836 65,045 55,191
Property secured 19,181 (90) 19,091 - -
361,108 (17,864) 343,244 244,923 291,475
11. Trade and other receivables
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Prepayments 4,495 1,068 2,334
Other debtors 2,276 1,754 1,877
VAT Claim 456 - -
7,227 2,822 4,211
Included in trade and other receivables is an amount of £0.456m relating to
historic interest due on bad debt relief claims. This amount has been agreed
with the Isle of Man Collector of Customs and Excise and has been received in
July 2023.
12. Goodwill
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
PAL 4,456 - 4,456
EAL 1,649 1,849 1,649
BLX 1,908 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
10,576 6,320 10,576
13. Creditors and accrued charges
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
Commission creditors 726 1,401 1,398
Other creditors and accruals 11,273 1,472 9,368
Lease liability 1,535 1,205 1,614
Taxation creditors 854 454 692
Dividend payable 469 73 36
14,857 4,605 13,108
14. Loan notes
30 June 2023 30 June 2022 31 Dec 2022
£'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 33,542 25,382 25,382
39,492 31,332 31,332
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 2027,
paying interest of 7.5% per annum. Both loans are convertible to ordinary
shares of the Company at the rate of 7.5 pence.
On 22 July 2022, JM and BL agreed to extend outstanding unsecured convertible
loans of £1,750,000, expiring on 31 July 2022, for a further five years to 31
July 2027. A loan of £1,250,000 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.
BL - Three loans, one of £1,200,000 maturing on 31 July 2027, paying interest
of 7.5% per annum, one of £1,000,000 maturing 25 February 2025, paying
interest of 5.4% per annum, and one of £1,000,000 maturing 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 at a
rate of 7.5 pence.
CR - One loan consisting of £1,000,000 maturing on 12 October 2025, paying
interest of 6.0% per annum. Greg Bailey, a director, is the beneficial owner
of CR.
UP - Forty one loans (2022: Forty), the earliest maturity date is 2 October
2023 and the latest maturity is 25 May 2028.
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 2023, 30 June 2022, 31 December 2022 200,200,000
Issued and fully paid ordinary Shares of no par value Number £'000
Balance at 30 June 2023 115,072,988 19,287
Balance at 30 June 2022, 31 December 2022 115,072,988 19,195
Dividends
On 30 May 2023, MFG declared a dividend of £433,135 (2022: £279,200) which
could either be taken up in cash or new ordinary shares. On 12 July 2023,
418,948 new shares (2021: 781,349 new shares) were admitted to the Alternative
Investment Market ("AIM") at 21.8974 pence per share (2022: 8.02050 pence per
share), at a total cost of £91,739 (2022: £62,000).
Convertible loans
There are three convertible loans totalling £2,950,000 (30 June and 31
December 2022: three convertible loans totalling £2,950,000).
Share options and Restricted Stock Units
i. Issued during the financial year ended 31 December 2022
On 5 July 2022 and 27 October 2022, MFG granted Restricted Stock Units
("RSUs") under its 2022 RSU Plan. The Group has issued, in total, RSUs over
2,435,000 ordinary shares representing 2.1% of the issued share capital of the
Group, including 1,250,000 to certain directors and 1,185,000 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. 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 exercised 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 0.45% was issued
1,075,000 RSUs. Including 700,000 Share Options issued 24 June 2014, he would
hold a total of 2,308,951 ordinary shares, being 1.98% 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.
The terms and conditions of the grants are as follows: and will be settled by
the physical delivery of shares.
Contractual life of options
Number of Units
Grant date / employees entitled
Option grant to key employees at 5 July 2022 1,020,000 2 years
Option grant to directors at 5 July 2022 1,100,000 2 years
Option grant to key employees at 27 October 2022 165,000 2 years
Option grant to directors at 27 October 2022 150,000 2 years
Total share options 2,435,000
The fair value of employee services received in return for restricted stock
units granted is based on the fair value of them measured using the
Black-Scholes formula. Service related and non-market performance conditions
were not taken into account in measuring fair value. The inputs used in
measuring the fair values at the grant of the equity-settled restricted stock
unit payment plans were as follows.
Grant at Grant at
Fair value of restricted stock units and assumptions 5 July 2022 27 October 2022
Share price at grant date 8.5 pence 14.0 pence
Exercise price nil nil
Expected volatility * ^ 55.14% 107.71%
Expected life (weighted average) 2 years 2 years
Risk-free interest rate (based on government bonds) * ^ 1.65% 3.15%
Fair value at grant date 8.5 pence 14.0 pence
^ Based on past 3 years
* Annual rates
The expected volatility is based on both historical average share price
volatility and implied volatility derived from traded options over the group's
ordinary shares of maturity similar to those of the employee options.
The fair value of the liability is remeasured at each reporting date and at
settlement date.
The charge for the year for share options granted was £56,000 (30 June: £nil
and 31 December 2022: £18,000).
ii. Issued during the financial year ended 31 December 2014
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 with the condition of three-years continuous
employment being met.
Of the 1,750,000 share options issued, 1,050,000 (30 June and 31 December
2022:1,050,000) remain outstanding.
The fair value of services received in return for share options granted is
based on the fair value of share options granted, measured using a binomial
probability model with the following inputs for each award:
23 June
2014
Fair value at date of grant £0.08
Share price at date of grant £0.14
Exercise price £0.14
Expected volatility 55.0%
Option life 3
Risk-free interest rate (based on government bonds) 0.5%
Forfeiture rate 33.3%
16. Deferred consideration
Deferred consideration relates to contingent payments due to the sellers on
the acquisition BLX.
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 £50,000 to the sellers during the
period.
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
As at (unaudited) (unaudited) (audited)
BLX 216 335 262
216 335 262
17. 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.
18. 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.
19. Investment in associate
As part of the Bank providing loan finance to LSC, on 29 June 2023 the Group
acquired 10% of its issued share capital for nil consideration. The receipt of
the issued share capital is considered to be linked to the loan facilities
financed and therefore its term and interest rate implicit in the finance
agreement have been used as the basis to discount the fair value of the gratis
shares issued.
The Group possesses the capacity to engage in policy-making processes within
LSC through its right to designate an individual to attend all board
meetings as an observer. Via its representative, the Group also holds the
ability to introduce topics for discussion on the agenda, although it doesn't
have voting rights in this regard. Moreover, the Group has introduced
constraints on LSC's board, effectively preventing specified significant
actions from being taken without the Group's consent.
The Group continues to obtain information necessary to measure the fair value
of the shares obtained. The fair value of the financial instrument received
has been provisionally determined as £42,000 at initial recognition based on
the proportionate share of the net asset value of LSC. As part of the
transaction, the Group has been granted two warrants to acquire further
shares. The first warrant is for 10% of the share capital and the second
warrant is for a further 10% of the share capital.
The two warrants are exercisable dependent upon the profit before tax achieved
by LSC relative to target profit before tax for the relevant financial period.
The fair value of the two warrants has been determined to be nil due to the
significant uncertainty that exists at acquisition date of achieving such
targets.
For these reasons the financial instrument is accounted for as an Associate in
accordance with IAS 28.
20. Subsequent events
There were no other significant subsequent events identified after 30 June
2023.
21. Approval of interim financial statements
The interim financial statements were approved by the Board on 20 September
2023. 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
LSC Lesley Stephen & Co Limited
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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