RNS Number : 4003N
Manx Financial Group PLC
29 September 2021
FOR IMMEDIATE RELEASE 29 September 2021
Manx Financial Group PLC (the 'Company')
Unaudited Interim Results for the 6 months to 30 June 2021
Manx Financial Group PLC (LSE: MFX), the financial services group which includes Conister Bank Limited, Conister Finance & Leasing Ltd, Blue Star Business Solutions Limited, Edgewater Associates Limited and Manx FX Limited, presents the Interim results for the six months ended 30 June 2021.
Jim Mellon, Executive Chairman, commented: "Each of our business units is making steady progress. I have great confidence that the 2021 full year will see the Group well on the way to recording the levels of growth and profitability we experienced prior to the onset of this awful pandemic."
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 Denham Eke, Chief Executive Tel +44 (0)1624 694694
Beaumont Cornish Limited Roland Cornish/James Biddle Tel +44 (0) 20 7628 3396
Greentarget Limited Dafina Grapci-Penney Tel +44 (0) 203 963 1887
Dear Shareholders
I am pleased to present my half-year report for the period ended 30 June 2021.
The effects of COVID-19 on our various businesses continued to be an issue during the first half of 2021. Against this complex backdrop, it is encouraging to report that the Group's pre-tax profit for the first six months of the year was just over £1.1 million (2020: £1.0 million) - an increase of 13% on the same period last year. Each of our business units is making steady progress and, unless there is a resumption of lock-downs and associated measures - events which I believe to be extremely unlikely, I have great confidence that the 2021 full year will see the Group well on the way to recording the levels of growth and profitability we experienced prior to the onset of this awful pandemic.
Financial Review
Our operating income showed an increase of 6.2% to £9.0 million (2020: £8.5 million), including gains in both net interest income of 9.5% to £8.6 million (2020: £7.8 million), and in net trading income of 12.2% to £8.9 million (2020: £7.9 million). Our interest yield on loans fell slightly to 10.9% (2020: 11.6%), due mainly to our success in promoting the Government-backed loan schemes and our move away from sub-prime lending to prime and near prime propositions. Our interest expense on deposits showed a marginal decrease to 2.2% (2020: 2.4%). Operating expenses grew by 5.3% to £7.8 million (2020: £7.5 million), principally as a result of our prudent policy of recognising further impairments of £2.1 million (2020: £1.9 million) to protect the integrity of our balance sheet. As a result, and as already stated, our profit before tax increased to £1.1 million.
Turning to our balance sheet, despite the challenges of the trading environment, our net loan book has increased by 16.4% to £211.4 million (2020: £181.6 million), with impairments falling to 2.9% (2020: 3.3%) of the gross total. We continue to ensure that liquidity is maintained to provide a prudent buffer until the economic situation fully normalises and, as a result, our cash and debt securities stand at £57.2 million (2020: £64.0 million) - a decrease of 10.7%, keeping us in a more advantageous competitive position with our capacity for increased lending. Our customer deposits have grown by 6.2% to £231.2 million (2020: £217.8 million) and are carefully managed by our Treasury function, especially important at this time.
All of which leads to an 8.8% growth in our total asset base to £283.8 million (2020: £260.7 million). Shareholder equity has increased by 6.0% to £23.1 million (2020: £21.8 million), providing net assets per share, adjusted for the post-period script dividend, of 20.2 pence (2020: 19.1 pence).
Business Review
Conister Bank Limited ("Bank")
In my last Chairman's Statement, I promised to provide an update on the Bank's second VAT claim of £0.6 million. I am pleased to report that the Bank resolved its claim against the Isle of Man's Customs and Excise and has been paid in full. A subsequent claim of statutory interest due on this claim has been lodged with the first-tier tribunal in the UK, alongside other High Street Banks, but no value has been recognised in these financial statements for the claim.
The Bank continues to attract deposits at historically low market rates which will position it well against any inflationary pressure. With UK Gilts attracting negative interest rates, our treasury management strategy increased our cash balance to £25.6 million (2020: £6.0 million) and reduced our debt securities to £27.6 million (2020: £57.0 million).
The Bank continues to be supportive of both the Isle of Man and UK Governments' business support schemes and has now been accredited for the UK Government's Recovery Loan Scheme. Along with this, the Bank has repositioned its distribution to support more COVID-19 and recession-proof markets. This repositioning, including moving to a more prime customer base, drove loan book growth to 16.4% (2020: 6.8%), which is encouraging during a period of short-notice economic lockdowns.
This loan book growth resulted in the net interest income margin net of commissions increasing by 5.4% (2020: 2.2%) but we expect a normalised position over the life of these loans due to their prime nature and the Government guarantees.
Personnel expenses increased by £0.1 million as the Bank's headcount increased by nine as part of launching a new debt collection company, Manx Collections Limited, which generated £0.1 million of profitability in the first six months of trading. Overheads increased by £0.2 million, which is primarily due to the recovery costs on delinquent debts. During these uncertain times we continue to operate a prudent provisioning policy, with an allowance of £2.1 million (2020: £1.9 million). Finally, in relation to our cost base, depreciation and amortisation increased by £0.1 million to £0.4 million (2020: £0.3 million), driven by continued investment in our IT strategy.
Edgewater Associates Limited
Our independent financial advisory business remains the largest on the Isle of Man and had a difficult half-year with the trading conditions negatively impacted by COVID-19. Meeting clients became problematic and many sought to delay investment decisions due to market turbulence. Despite a UK economic recovery being underway, the sustained threat of inflation has dampened client confidence and stifled investment. As a result, profitability has remained broadly similar year-on-year despite assets under management increasing by 11.6% to £375.0 million (2020: £336.0 million) and renewal income increasing to £0.6 million (2020: £0.5 million).
Manx FX Limited ("MFX")
Our foreign exchange advisory business has had a remarkable half-year. Whereas our IFA business suffered from market volatility, MFX benefitted, demonstrating the importance in having a diversified financial services group. Turnover remained constant at £0.9 million, particularly trading in Euros and South African Rand following the wide-ranging impact of BREXIT. The business continues to have a very liquid balance sheet and declared an interim dividend to the Group of £0.6 million during the half-year (2020: £nil).
Beer Swaps Limited ("BSL")
On 14 June 2021, the Bank acquired further shares in BSL to increase its ordinary shareholding to 90% for a cash consideration of £0.3 million. For the period under ownership, BSL reported turnover of £0.6 million and a profit before tax of £0.2 million with net assets of £0.3 million. BSL is now the largest tank lessor in the UK brewing market.
Blue Star Business Solutions Limited ("BBSL")
BBSL has traded well through difficult economic conditions in which the economic impact of UK Government support schemes distorted the credit broker sector. However, and notwithstanding, BBSL has reported a £0.1 million profit (2020: £0.0 million). BBSL brokered £6.4 million (2020: £3.8 million) of which £3.8 million (2020: £2.1 million) was referred to the Bank. BBSL receives no loan interest income for lending placed with the Bank, but if it did, the imputed profitability for the first half would have been £0.5 million.
Strategic Objectives for 2021
Our strategic priorities for 2021 remain unchanged, and I will report on these in detail in my next Chairman's Statement. As ever, we strive to increase shareholder value, both in a prudent yet progressive manner. I repeat our 2021 key objectives:
§ Treating customers in both as fair and appropriate manner as possible. Our Treating Customers Fairly ("TCF") regime continues to be enhanced throughout our businesses and I am pleased to report that we have a negligible level of complaints, all of which have been settled to the customers' satisfaction. TCF is the cornerstone of all our operations as we make every effort to ensure that our customer service offering is second to none.
§ Adopting a pro-active strategy of managing risk. We have taken active steps to rebase our loan book away from sub-prime lending into prime and near-prime advances. In doing so, we recognise that the gross interest rates may diminish somewhat, but we anticipate that this erosion will be more than compensated by a lower incidence of arrears and write-offs. Our new segregated debt collection subsidiary - Manx Collections Limited - received its FCA licence in June 2021 and has already made significant progress not only in recoveries, but also in the early identification of problems, working with our customers to ensure a better outcome for the Bank. We continue to make prudential impairments as part of our policy of strengthening our balance sheet to minimise the risk of any unforeseen event adversely affecting our profitability.
§ Developing our core businesses by considered acquisitions. The current economic environment has produced a number of interesting potential acquisition opportunities. Each of these is evaluated carefully before commitment. We also recognise that our recent acquisitions have become significant contributors to our profitability.
§ Developing and implementing a coherent digital infrastructure. We recognise the importance of IT to service the operational requirements of a growing Group and to remain competitive. We continue with our investment in core systems which is already minimising the time taken to consider advances, allowing us to redeploy staff into more productive areas.
§ Managing the liabilities side of our balance sheet. Our new Treasury management function is working well, ensuring that our liquidity matches the anticipated growth of our lending. Our recently launched Isle of Man notice accounts continue to gain traction and we will continue to develop attractive deposit products with competitive interest rates for our depositors.
§ Managing our balance sheet to exceed the regulatory requirements for capital adequacy. We are well capitalised with our Total Capital Ratio standing at 17.8% (2020: 16.0%). We will maintain our strategy of converting Group retained earnings into Tier 1 capital for the Bank to support its lending growth. Meanwhile, we will continue to maintain a heightened level of cash liquidity.
§ Increase shareholder value. The discount between Net Asset Value and market capitalisation is an issue that we are working to rectify. The strategic aim of returning to being a dividend paying company has now been achieved and I see no reason to prevent us returning 10% of profit attributable to shareholders as a dividend for the foreseeable future. This, together with enhanced investor relations, should help the market in rerating our shares.
Current trading and outlook
The Isle of Man economy continues to be resilient under the strain of COVID-19 and our local new business growth shows no signs of slowing down. The UK also shows signs of a real return to growth with Gross Domestic Product for Quarter 2 this year increasing by 22.2% over the same quarter last year, and our UK lending growth reflects this. Taken together, I have every confidence that our full year will show a significant improvement in profitability providing the requirement for impairments remain at their current level.
The Bank's appointments as accredited lenders to the various Government-backed schemes will help second-half lending growth and we will continue to strengthen our balance sheet by maintaining adequate liquidity.
It remains for me, as always, to thank on behalf of the Board, our staff for their splendid efforts coping with the additional demands of dealing with the COVID pandemic whilst continuing to develop the Group in such a successful manner and, finally, to thank our shareholders for their enduring loyalty.
Jim Mellon
Executive Chairman
27 September 2021
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
Notes
For the six months ended 30 June 2021 £'000 (unaudited)
For the six months ended 30 June 2020 £'000 (unaudited)
For the year ended 31 December 2020 £'000 (audited)
Interest income
6
10,979
10,428
20,692
Interest expense
(2,424)
(2,617)
(5,222)
Net interest income
8,555
7,811
15,470
Fee and commission income
2,356
2,157
3,865
Fee and commission expense
(1,878)
(1,870)
(3,481)
Depreciation on leasing assets
(173)
(203)
(406)
Net trading income
8,860
7,895
15,448
Other operating income
129
111
200
Gain on financial instruments
-
6
259
Realised (loss) / gain on debt securities
(1)
212
261
Revaluation on acquisition of subsidiary
-
237
237
Operating income
8,988
8,461
16,405
Personnel expenses
(3,241)
(3,337)
(6,823)
Other expenses
(2,099)
(1,772)
(3,707)
Impairment on loans and advances to customers
(2,142)
(1,895)
(3,950)
Depreciation
(323)
(222)
(490)
Amortisation and impairment of intangibles
(216)
(172)
(374)
Share of profit / (loss) of equity accounted investees, net of tax
59
(91)
54
VAT recovery
113
36
906
Profit before tax payable
1,139
1,008
2,021
Income tax expense
(122)
(16)
(53)
Profit for the period / year
1,017
992
1,968
Notes
For the six months ended 30 June 2021 £'000 (unaudited)
For the six months ended 30 June 2020 £'000 (unaudited)
For the year ended 31 December 2020 £'000 (audited)
Profit for the period / year
1,017
992
1,968
Other comprehensive income:
Items that will be reclassified to profit or loss
Unrealised (loss) / gain on debt securities
(9)
102
(51)
Items that will never be reclassified to profit or loss
Actuarial loss on defined benefit pension scheme taken to equity
-
-
(241)
Total comprehensive income for the period / year
1,008
1,094
1,676
Profit attributable to:
Owners of the Company
1,029
997
1,935
Non-controlling interest
(12)
(5)
33
1,017
992
1,968
Total comprehensive income attributable to:
Owners of the Company
1,020
1,099
1,643
Non-controlling interest
(12)
(5)
33
1,008
1,094
1,676
Earnings per share - profit for the period / year
Basic earnings per share (pence)
8
0.89
0.87
1.65
Diluted earnings per share (pence)
8
0.73
0.71
1.37
Earnings per share - total comprehensive income for the period / year
Basic earnings per share (pence)
8
0.88
0.96
1.41
Diluted earnings per share (pence)
8
0.72
0.78
1.19
Condensed Consolidated Statement of Financial Position
As at
Notes
30 June 2021 £'000 (unaudited)
30 June 2020 £'000 (unaudited)
31 December 2020 £'000 (audited)
Assets
Cash and cash equivalents
29,577
6,991
34,053
Debt securities
9
27,610
57,036
25,532
Trading assets
-
4
4
Loans and advances to customers
5,10
211,445
181,581
193,143
Trade and other receivables
11
1,458
2,521
2,170
Property, plant and equipment
6,472
5,793
6,045
Intangible assets
2,329
2,290
2,286
Investment in associate
375
171
316
Other investments
17
68
-
-
Goodwill
12
4,412
4,361
4,412
Total assets
283,746
260,748
267,961
Liabilities
Deposits from customers
231,179
217,758
218,285
Creditors and accrued charges
13
4,058
3,148
3,206
Contingent consideration
613
921
672
Loan notes
14
23,722
16,222
22,222
Pension liability
846
688
944
Deferred tax liability
195
141
197
Total liabilities
260,613
238,878
245,526
Equity
Called up share capital
15
19,121
19,121
19,121
Retained earnings
3,984
2,686
3,230
Equity attributable to owners of the Company
23,105
21,807
22,351
Non-controlling interest
28
63
84
Total equity
23,133
21,870
22,435
Total liabilities and equity
283,746
260,748
267,961
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the Company
For the six months ended 30 June 2021
Share capital £'000
Retained earnings £'000
Total £'000
Non-controlling interest £'000
Total equity £'000
Balance at 1 January 2020
20,732
1,587
22,319
-
22,319
Total comprehensive income for the period:
Profit for the period
-
997
997
(5)
992
Other comprehensive income
-
102
102
-
102
Total comprehensive income for the period
-
1,099
1,099
(5)
1,094
Transactions with owners:
Purchase of ordinary shares
(1,611)
-
(1,611)
-
(1,611)
Total transactions with owners of the Company
(1,611)
-
(1,611)
-
(1,611)
Changes in ownership interests:
Change in ownership interest of a subsidiary
-
-
-
68
68
Total changes in ownership interests
-
-
-
68
68
Balance at 30 June 2020
19,121
2,686
21,807
63
21,870
Balance at 1 July 2020
19,121
2,686
21,807
63
21,870
Total comprehensive income for the period:
Profit for the period
-
938
938
38
976
Other comprehensive income
-
(394)
(394)
-
(394)
Total comprehensive income for the period
-
544
544
38
582
Changes in ownership interests:
Change in ownership interest of a subsidiary
-
-
-
(17)
(17)
Total changes in ownership interests
-
-
-
(17)
(17)
Balance at 31 December 2020
19,121
3,230
22,351
84
22,435
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
Condensed Consolidated Statement of Cash Flows
Notes
For the six months ended 30 June 2021 £'000 (unaudited)
For the six months ended 30 June 2020 £'000 (unaudited)
For the year ended 31 December 2020 £'000 (audited)
RECONCILIATION OF PROFIT BEFORE TAXATION TO OPERATING CASH FLOWS
Profit before tax
1,139
1,008
2,021
Adjustments for:
Depreciation
496
425
896
Amortisation and impairment of intangibles
216
172
374
Realised gain on debt securities
-
(212)
(237)
Share of (profit) / loss of equity accounted investees
(59)
91
(54)
Contingent consideration interest expense
61
58
122
Pension charge included in personnel costs
-
-
15
Gain on acquisition of subsidiary
-
(237)
(253)
1,853
1,305
2,884
Changes in:
Trading asset
4
15
15
Trade and other receivables
11
712
73
415
Creditors and accrued charges
13
767
(15)
315
Net cash flow from trading activities
3,336
1,378
3,629
Changes in:
Loans and advances to customers
10
(18,302)
(4,461)
(16,023)
Deposits from customers
12,894
7,825
8,352
Pension contribution
(98)
-
-
Cash (outflow) / inflow from operating activities
(2,170)
4,742
(4,042)
Notes
For the six months ended 30 June 2021 £'000 (unaudited)
For the six months ended 30 June 2020 £'000 (unaudited)
For the year ended 31 December 2020 £'000 (audited)
CASH FLOW STATEMENT
Cash from operating activities
Cash (outflow) / inflow from operating activities
(2,170)
4,742
(4,042)
Income taxes paid
-
-
(172)
Net cash (outflow) / inflow from operating activities
(2,170)
4,742
(4,214)
Cash flows from investing activities
Purchase of property, plant and equipment
(1,172)
(322)
(1,187)
Purchase of intangible assets
(259)
(35)
(231)
Sale of property, plant and equipment
249
-
127
Acquisition of subsidiary or associate, net of cash acquired
16
(310)
(622)
(648)
(Purchase) / sale of debt securities at fair value through other comprehensive income
9
(3,188)
(3,608)
1,101
Sale / (purchase) of debt securities at amortised cost
9
1,101
(6,322)
20,108
Contingent consideration
(120)
-
(59)
Net cash (outflow) / inflow from investing activities
(3,699)
(10,909)
19,211
Cash flows from financing activities
Receipt / (repayment) of loan notes
14
1,500
(1,360)
4,640
Lease payments
(107)
(102)
(204)
Net cash inflow / (outflow) from financing activities
1,393
(1,462)
4,436
Net (decrease) / increase in cash and cash equivalents
(4,476)
(7,629)
19,433
Cash and cash equivalents - opening
34,053
14,620
14,620
Cash and cash equivalents - closing
29,577
6,991
34,053
Included in cash flows are:
Interest received - cash amounts
10,757
10,741
20,274
Interest paid - cash amounts
(2,345)
(2,669)
(5,053)
Notes
For the six months ended 30 June 2021
1. Reporting entity
Manx Financial Group PLC ("Company" or "MFG") is a company incorporated in the Isle of Man. These condensed consolidated interim financial statements ("interim financial statements") as at and for the six months ended 30 June 2021 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 2020 ("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 were the same as those described in the last annual financial statements other than those described in Note 17 - Acquisition of financial instrument.
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 37 - Financial risk management on pages 46 and 71 respectively of the Annual Financial Statements 2020.
An explanation of the terms Stage 1, Stage 2 and Stage 3 is included in Note 39 (G)(vii) on page 80 of the Annual Financial Statements 2020.
A. Summary of credit risk on loans and advances to customers
2021
2020
30 June (unaudited)
Stage 1 £'000
Stage 2 £'000
Stage 3 £'000
Total £'000
Stage 1 £'000
Stage 2 £'000
Stage 3 £'000
Total £'000
Grade A
195,141
-
-
195,141
164,648
-
-
164,648
Grade B
-
4,437
7,255
11,692
-
2,252
-
2,252
Grade C
589
50
10,248
10,887
5,558
2,211
13,074
20,843
Gross value
195,730
4,487
17,503
217,720
170,206
4,463
13,074
187,743
Allowance for ECL
(698)
(14)
(5,563)
(6,275)
(220)
(38)
(5,904)
(6,162)
Carrying value
195,032
4,473
11,940
211,445
169,986
4,425
7,170
181,581
2020
2019
31 December (audited)
Stage 1 £'000
Stage 2 £'000
Stage 3 £'000
Total £'000
Stage 1 £'000
Stage 2 £'000
Stage 3 £'000
Total £'000
Grade A
173,673
-
-
173,673
168,796
-
-
168,796
Grade B
-
5,728
7,751
13,479
1,143
1,675
-
2,818
Grade C
335
9
12,771
13,115
-
1,985
10,544
12,529
Gross value
174,008
5,737
20,522
200,267
169,939
3,660
10,544
184,143
Allowance for ECL
(423)
(18)
(6,683)
(7,124)
(116)
(467)
(4,190)
(4,773)
Carrying value
173,585
5,719
13,839
193,143
169,823
3,193
6,354
179,370
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
2021
2020
30 June 2020 (unaudited)
Stage 1 £000
Stage 2 £000
Stage 3 £000
Total £000
Stage 1 £000
Stage 2 £000
Stage 3 £000
Total £000
Current
193,435
-
-
193,435
159,467
-
-
159,467
Overdue < 30 days
2,293
-
-
2,293
5,181
-
-
5,181
Overdue > 30 days
-
4,488
17,504
21,992
5,558
4,463
13,074
23,095
195,728
4,488
17,504
217,720
170,206
4,463
13,074
187,743
2020
2019
31 December (audited)
Stage 1 £000
Stage 2 £000
Stage 3 £000
Total £000
Stage 1 £000
Stage 2 £000
Stage 3 £000
Total £000
Current
170,436
-
-
170,436
145,373
-
-
145,373
Overdue < 30 days
3,572
-
-
3,572
24,259
-
-
24,259
Overdue > 30 days
-
5,737
20,522
26,259
307
3,660
10,544
14,511
174,008
5,737
20,522
200,267
169,939
3,660
10,544
184,143
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, excluding the Terminal funding portfolio.
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, business segments, is based on the Group's management and internal reporting structure. The Directors consider that the Group operates in three (2020: three) product orientated segments in addition to its investing activities: Asset and Personal Finance (including provision of HP contracts, finance leases, personal loans, commercial loans, block discounting, vehicle stocking plans and wholesale funding agreements); EAL and MFX.
For the 6 months ended 30 June 2021 (unaudited)
Asset and Personal Finance £'000
EAL £'000
MFX £'000
Investing Activities £'000
Total £'000
Net interest income / (expense)
9,201
-
-
(646)
8,555
Fee and commission income
469
1,031
856
-
2,356
Operating income / (expense)
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
6,259
283,856
Total liabilities
243,136
545
8
17,034
260,723
For the 6 months ended 30 June 2020 (unaudited)
Asset and Personal Finance £'000
EAL £'000
MFX £'000
Investing Activities £'000
Total £'000
Net interest income / (expense)
8,287
-
-
(476)
7,811
Fee and commission income
207
1,075
875
-
2,157
Operating income / (expense)
6,932
1,075
872
(215)
8,664
Profit / (loss) before tax payable
843
6
785
(626)
1,008
Capital expenditure
357
-
-
-
357
Total assets
257,310
2,292
321
825
260,748
Total liabilities
228,416
633
7
9,822
238,878
For the year ended 31 December 2020 (audited)
Asset and Personal Finance £000
EAL £000
MFX £000
Investing Activities £000
Total £000
Net interest income
15,470
-
-
-
15,470
Fee and commission income
430
2,103
1,332
-
3,865
Operating income
13,206
2,103
1,096
-
16,405
Profit / (loss) before tax payable
1,316
(94)
1,096
(297)
2,021
Capital expenditure
1,138
46
2
1
1,187
Total assets
260,155
2,638
536
4,632
267,961
Total liabilities
230,001
660
12
14,853
245,526
8. Earnings per share
For the 6 months ended 30 June 2021 (unaudited)
For the 6 months ended 30 June 2020 (unaudited)
For the year ended 31 Dec 2020 (audited)
Profit for the period / year
£1,017,000
£992,000
£1,968,000
Weighted average number of ordinary shares in issue (basic)
114,130,077
114,130,077
118,964,270
Basic earnings per share (pence)
0.89
0.87
1.65
Diluted earnings per share (pence)
0.73
0.71
1.37
Total comprehensive income for the period / year
£1,008,000
£1,094,000
£1,676,000
Weighted average number of ordinary shares in issue (basic)
114,130,077
114,130,077
118,964,270
Basic earnings per share (pence)
0.88
0.96
1.41
Diluted earnings per share (pence)
0.72
0.78
1.19
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.
As at
30 June 2021 (unaudited)
30 June 2020 (unaudited)
31 Dec 2020 (audited)
Reconciliation of weighted average number of ordinary shares in issue between basic and diluted
Weighted average number of ordinary shares (basic)
114,130,077
114,130,077
118,964,270
Number of shares issued if all convertible loan notes were exchanged for equity
36,555,556
36,555,556
36,555,556
Dilutive element of share options if exercised
-
-
-
Weighted average number of ordinary shares (diluted)
150,685,633
150,685,633
155,519,826
Reconciliation of profit for the period / year between basic and diluted
Profit for the period / year (basic)
£1,017,000
£992,000
£1,968,000
Interest expense saved if all convertible loan notes were exchanged for equity
£83,125
£83,125
£166,250
Profit for the period / year (diluted)
£1,100,125
£1,075,125
£2,134,250
The diluted earnings per share calculation assumes that all convertible loan notes and share options have been converted / exercised at the beginning of the period where they are dilutive.
As at
30 June 2021 (unaudited)
30 June 2020 (unaudited)
31 Dec 2020 (audited)
Reconciliation of total comprehensive income for the period / year between basic and diluted
Total comprehensive income for the period / year (basic)
£1,008,000
£1,094,000
£1,676,000
Interest expense saved if all convertible loan notes were exchanged for equity
£83,125
£83,125
£166,250
Total comprehensive income for the period / year (diluted)
£1,091,125
£1,177,125
£1,842,250
9. Debt securities
As at
30 June 2021 £'000 (unaudited)
30 June 2020 £'000 (unaudited)
31 Dec 2020 £'000 (audited)
Financial assets at fair value through other comprehensive income:
UK Government treasury bills
27,610
48,612
24,431
Financial assets at amortised cost:
UK Certificates of Deposit
-
8,424
1,101
27,610
57,036
25,532
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 losses of £1,000 (30 June 2020: realised gains of £212,000 and 31 December 2020: realised gains of £261,000) and unrealised losses of £9,000 (30 June 2020: unrealised gains of £102,000 and 31 December 2020: unrealised losses of £51,000) for the period.
10. Loans and advances to customers
As at
Gross Amount £'000
Impairment Allowance £'000
30 June 2021 Carrying Value £'000 (unaudited)
30 June 2020 Carrying Value £'000 (unaudited)
31 Dec 2020 Carrying Value £'000 (audited)
HP
69,747
(2,115)
67,632
70,168
71,151
Finance lease
32,775
(3,237)
29,538
35,841
31,132
Wholesale funding arrangements
16,890
16,890
18,832
17,272
Block discounting
13,488
-
13,488
14,911
13,430
Unsecured personal loans
32,040
(432)
31,608
24,788
27,398
Secured commercial loans
10,170
(469)
9,701
12,237
9,091
Secured personal loans
1,746
-
1,746
3,182
2,152
Vehicle stocking plans
1,520
-
1,520
1,622
1,807
Government backed loans
39,344
(22)
39,322
-
19,710
217,720
(6,275)
211,445
181,581
193,143
11. Trade and other receivables
As at
30 June 2021 £'000 (unaudited)
30 June 2020 £'000 (unaudited)
31 Dec 2020 £'000 (audited)
VAT claim
-
871
586
Prepayments
360
309
482
Other debtors
1,098
1,341
1,102
1,458
2,521
2,170
The VAT claim was settled in full and the Bank received £699,000 during the period. An additional recovery of £113,000 over and above the carrying amount recognised at year end has been recognised in profit and loss.
12. Goodwill
As at
30 June 2021 £'000 (unaudited)
30 June 2020 £'000 (unaudited)
31 Dec 2020 £'000 (audited)
EAL
1,849
1,849
1,849
BBSL
1,390
1,390
1,390
BSL
678
627
678
ECF Asset Finance PLC ("ECF")
454
454
454
Three Spires Insurance Services Limited ("Three Spires")
41
41
41
4,412
4,361
4,412
13. Creditors and accrued charges
As at
30 June 2021 £'000 (unaudited)
30 June 2020 £'000 (unaudited)
31 Dec 2020 £'000 (audited)
Commission creditors
2,345
1,110
1,748
Other creditors and accruals
999
1,089
822
Lease liability
396
605
503
Taxation creditors
254
344
133
Deferred interest (Note 17)
64
-
-
4,058
3,148
3,206
14. Loan notes
As at
Notes
30 June 2021 £'000 (unaudited)
30 June 2020 £'000 (unaudited)
31 Dec 2020 £'000 (audited)
Related parties
J Mellon
JM
1,750
1,750
1,750
Burnbrae Limited
BL
3,200
2,200
3,200
4,950
3,950
4,950
Unrelated parties
UP
18,772
12,272
17,272
23,722
16,222
22,222
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 and 9 pence respectively.
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.
UP - Thirty-six loans consisting of an average £521,447 with an average interest payable of 5.7% per annum. The earliest maturity date is 4 May 2022 and the latest maturity is 30 March 2026.
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 2021, 31 December 2020 and 30 June 2020
200,200,000
Issued and fully paid ordinary Shares of no par value
Number
£'000
At 31 December 2020 and 30 June 2020
114,130,077
19,121
At 30 June 2021
114,130,077
19,121
There are three convertible loans totalling £2,950,000 (30 June and 31 December 2020: 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 2020:1,050,000) remain outstanding.
16. Acquisition of non-controlling interest
On 14 June 2021, the Group increased its shareholding in Beer Swaps Limited ("BSL"), trading as Ninkasi Rentals and Finance, to 90% (30 June and 31 December 2020: 75%) for a cash consideration of £310,000.
The carrying value of non-controlling interest acquired at the date of acquisition was £44,000. The consideration in excess of the carrying amount of £266,000 has been charged directly to the profit and loss account.
17. Acquisition of financial instrument
On 9 June 2021 the Group acquired 10% of the issued share capital of RFG for nil consideration. The receipt of the issued share capital is considered to be a commitment fee receivable by the Group in order to originate loan facilities in aggregate not exceeding £6,250,000 to RFG. The commitment fee is an integral part of the effective interest rate of the associated loan facilities issued to RFG.
The Group is not considered to have a significant influence over RFG as it holds less than a 20% shareholding and is not considered to participate in the policy making decisions of the entity. The 10% shareholding has thus been classified as a financial instrument.
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 £68,000 at initial recognition based on the proportionate share of the net asset value of RFG.
As part of the transaction, the Group has been granted two warrants to acquire further shares. The first warrant is for 5% of the share capital and the second warrant is for a further 5% of the share capital.
The two warrants are exercisable dependent upon the Group's banking subsidiary, the Bank, contracting with RFG, for a larger facility. The fair value of the two warrants has been determined to be nil due to the significant uncertainty that exists at acquisition date and the period end in issuing a further debt facility.
18. Regulators
Certain Group subsidiaries are regulated by the FSA and the FCA as detailed below.
The Bank and EAL are regulated by the FSA under a Class 1(1) - Deposit Taking licence and Class 2 - Investment Business licence respectively. The Bank and CFL are regulated by the FCA to provide regulated products and services.
19. 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 and creates a liability on the Bank to participate in the compensation of depositors should it be activated.
20. Subsequent events
On 7 July 2021, the Company announced a dividend of 0.1724 pence per Ordinary Share for the period from 1 January 2020 to 31 December 2020, calculated as being 10% of the profit after tax available to Shareholders. The dividend was paid on 10th August 2021 to holders of Ordinary Shares recorded on the register on 16 July 2021. MFG also offered a Script Dividend Scheme under which Shareholders could elect to receive New Ordinary Shares in lieu of the cash dividend.
There were no other significant subsequent events identified after 30 June 2021.
21. Approval of interim financial statements
The interim financial statements were approved by the Board on 27 September 2021. 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
MFG's subsidiaries being EAL, MFX, BBSL, BSL, Bank, CFL, ECF, Three Spires
UK
United Kingdom
UP
Unrelated parties
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