REG - Skipton Bldg.Soc. - Annual Financial Report
26/02/2025 08:15
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RNS Number : 4519Y Skipton Building Society 26 February 2025
FINANCIAL RESULTS RELEASE - Skipton Group
26
February 2025
A SUCCESSFUL YEAR ENABLES SKIPTON TO GIVE EVEN MORE BACK TO MEMBERS,
DELIVERING REAL VALUE
Skipton Group ("Skipton"), which includes Skipton Building Society, Connells -
our property group (and the UK's largest estate agency); and other group
businesses, delivered Group profit before tax (PBT) of £318.6m - maintaining
our financial strength while continuing to invest in our members, Group
capabilities, and strengthening our executive team.
Stuart Haire, Group Chief Executive, said:
"2024 has been a very successful year commercially, building the capability
and collaboration across our Skipton Group, as we further embed our Group
structure to enable us to give more back to our members and society.
Collectively, we have one purpose - to help more people have a home, help
people save for life ahead and support long-term financial wellbeing. As we
navigate societal shifts, this is as relevant today as it has been since
Skipton Building Society was founded back in 1853.
Our core businesses are directly aligned to our members' needs; namely, to
finance their homes (Home Financing and Skipton International
("International")), to make their money work harder (Money and International)
and to help them buy and sell homes (Connells Group). These businesses
directly benefit our members through their product and service offerings.
In 2024 we have delivered against our purpose, with over 20,000 first-time
buyers given the keys to their first home, equating to 44% of our new lending.
As part of our commitment to providing free advice to all of our members, we
also saw our skilled colleagues have over 39,000 advice conversations with
members to help make their money work harder and support their long-term
financial wellbeing.
In Connells, our property group, we grew our profits by £47.5m, provided
almost 79,000 exchanges on properties for sale to enable more people to get
the keys to their home, and grew our lettings business to over 126,000
properties under management.
We grew our market share in the year and maintained our clear leadership
position, with over 10% of UK house listings being dealt with through our
estate agency arm.
Across our broader Group, we own Skipton Business Finance (invoice financing
and asset-based lending) and Jade (AI and software company). These businesses
both had a strong year of performance, with profits up 12% in Skipton Business
Finance and 8% in Jade. The profits of these businesses are reinvested into
the Society, creating a sustainable and resilient financial and service
platform for our members and customers, both now and in the future.
In combination, our Group businesses delivered another year of excellent
financial performance, with Group underlying PBT 1 of £302.3m.
Our Group mortgage and savings growth of 8.2% and 8.9% respectively,
materially beat the market and somewhat offset the reduction in margins caused
by our strong member pricing strategy and Bank of England base rate
reductions.
Through high quality products and propositions, we grew our member base by 3%
and now have over 1.26 million members benefiting from Skipton products and
services to support their financial wellbeing.
Our members enjoyed improved customer satisfaction across our Society, with an
overall increase of 1% from the end of 2023. Through our member panel,
Trustpilot reviews and colleague listening, we strive to ensure our members'
voices are always heard, so that we can continue to build on the excellent
service we provide and are recognised for.
By combining our collective efforts across the Group, and unlocking the power
of our data, I believe we can continue to provide more opportunities for
members to have a home, save for life ahead and support long-term financial
wellbeing. At a time when more people are struggling to buy their first homes
or change their homes, and one in three people have no savings, it is more
vital than ever that we play our role in building a more resilient society.
Alongside our products and services, raising awareness and lobbying for
societal change is also core to our purpose. Financial education is essential
to unlock better outcomes; whether it be tackling challenges for first-time
buyers, narrowing the advice gap, or how we all play our part in reaching net
zero by 2050. We understand that we cannot do this alone, but collectively we
can make a difference, and we will play a leading role."
Delivering on our strategic priorities
to Help More People Have a Home:
- Group mortgage balances growth of 8.2% to £30.9bn
- 44% of new lending to first-time buyers (FTBs) (2023: 40%), helping over
20,000 FTBs
- £31.7bn (2023: £30.9bn) of lending has been generated by Connells Group
for UK mortgage providers
- 126,590 properties under management (2023: 125,666)
- 91% Homes customer satisfaction 2 (2023: 93%)
to Make Money Work Harder:
- Society savings balances growth of 8.9% to £28.3bn
- 39,216 non-regulated advice conversations held (2023: N/A); and funds
under management of £4.7bn (2023: £4.3bn)
- 1,004k savers and investors (2023: 985k)
- we have paid 0.74%(3) (2023: 0.65%) above the market average to our savers
to Make Membership Matter:
- Society membership growth of 3.0% to over 1.27 million
- £197m value returned to members 3 (2023: £148m)
- 23.5k customer panel members, and over 24% of our savings customer
journeys digital-channel enabled
- Supported over 500 charities in the year, with donations in 2024 totalling
£3.3m
Group financial performance
Our Group financial performance is underpinned by our strong asset quality,
capitalisation, liquidity and funding profiles and these firm, sustainable
foundations have most notably enabled us to deliver:
- Group PBT of £318.6m (2023: £333.4m), with underlying Group PBT(1)
of £302.3m (2023: £308.6m); leveraging a stronger housing market to grow
Connells Group's total revenue by 12% to £1,069m (2023: £951m); offsetting
downward pressure on net interest income.
- Group net interest margin of 1.28% (2023: 1.53%), driven by £377m
more in interest payments year-on-year, with net interest income of £488.4m,
compared to £542.8m in 2023.
- Despite net interest margin pressures, the Society performed well
delivering PBT of £209.9m (2023: £283.7m). Skipton International performed
similarly, with PBT of £31.0m (2023: £47.3m).
- International had similar net interest margin pressures and recorded
underlying pre-tax profits in the year of £31.0m (2023: £47.3m).
- Pleasingly, Connells Group achieved profits of £61.3m (2023:
£13.8m), as activity continued to recover in the housing market; compared to
subdued trading last year.
- Skipton Business Finance and Jade both had a strong year of
performance, with profits up 12% and 8% respectively.
- Group UK residential mortgages in arrears by three months or more
are only 0.29% of mortgage accounts at the end of 2024 (2023: 0.23%), well
below the industry average of 0.91% 4 .
- A liquidity coverage ratio (LCR) of 193% 5 (2023: 173%).
- A strong capital position - Common Equity Tier 1 (CET1) and leverage
ratios(5) of 28.7% and 6.6% (2023: 26.0% and 6.7%) respectively 6 .
Helping More People Have a Home
In July we launched our Skipton Group Home Affordability Index, with our
second iteration launched in February 2025. The Index uses the collective
power of our Group data to help first-time buyers understand housing costs in
their area, and shed light on where the biggest challenges lie.
Our Index revealed that only one in eight first-time buyers can afford their
first home in their local area, and 80% lack sufficient savings for their
deposit. At Skipton it has always been our mission to change that; it is why
we launched our market leading Track Record mortgage product in 2023, and why
we innovated further across our entire product range throughout the year,
supporting more members to get onto the housing ladder without a deposit and
our broader member base in having a place they call home.
Our collective Group data is our strength as we strive to enhance our
products, driven by the needs of our members and society, so that we can
enable more people to achieve their aspirations of home ownership.
Our Group is well positioned to drive innovative change and finding solutions
for industry wide challenges in digitising the end-to-end home buying and
selling journey. Approximately one third of house sales continue to fall
through before completion, which can cause difficulties and challenges for all
parties - delays and disappointment for our members and customers, and for the
professionals involved throughout the journey.
Through Connells Group's partnership and part ownership of Legal Marketing
Services Ltd (LMS) (the UK's leading provider of conveyancing services), we
successfully piloted and deployed a market first solution for streamlining and
automating the proof of funds element of the transaction. Our Group structure
allows us to play our part in the broader ecosystem.
Making Money Work Harder
Home ownership is only one of the life events that requires sound advice to
achieve financial wellbeing.
We have stood by our commitment to provide free access to financial education
and advice for our members. We know the UK advice gap continues to widen and,
unlike our competitors, we provide regulated financial advice for those with a
minimum of £20,000 in assets to invest. In 2024 we have gone further; we also
recognise that support and advice below that amount is crucial for many of our
members. We launched our free My Money Review service at the start of the year
and have further expanded it by launching My Money Enquiry (a lighter version
of our My Money Review that can be completed over the counter in branch, over
the phone, or via Skipton video link), offering free accessible advice to all
of our members, regardless of how much they have to invest.
Our advice has already positively shaped the decisions that members have made.
During the pilot of our My Money Review service, over 40% of members
reassessed their financial planning, choosing options that are better suited
to their needs, helping their money work harder.
This activity has been enabled by investment in our colleagues, upskilling
them to hold advice conversations with confidence.
Making Membership Matter
Alongside helping our members align their savings, investments, and borrowings
with their personal circumstances, we want them to feel rewarded for the trust
they place in Skipton. This year we have developed more new member benefits:
exclusive rates, products, and services which cater for a diverse range of
needs. On average we paid 0.74% higher interest than the rest of the market
average for banks and building societies(3), giving more value back to our
members.
We are member owned, and our members are central to our Society, so we are
putting more focus on making membership truly matter. As part of our
commitments we continue to invest in an ongoing programme of branch
refurbishment and upgrading our colleague systems to help better serve our
members through our telephony channel.
We are also acutely aware of the impact we have on the planet. By working
across our Group companies and partnering with others, we have developed a
greater understanding of the role we can play in supporting members as they
seek to make their homes more sustainable and energy efficient. This
culminated in the complete retrofitting of a house in Skipton which will
become a show-home to de-mystify the retrofitting process.
To support our ambitions, we have strengthened our Group Executive team
throughout the year, increasing diversity across our Group and fostering
further collaboration and innovation.
Our passion and drive to deliver our purpose resonates throughout our Group,
with colleagues coming together across all of our business lines to share
knowledge and experience, solving challenges that our members, customers and
society face.
We are undertaking big technological changes across the Group that support our
members and customers to interact with us more digitally and more efficiently
- whether through our branches, our contact centres, or through self-service
functionality. We are committed to delivering products and services that are
accessible and inclusive to all, balancing digital needs with our expert
colleagues, and providing the excellent customer service that has long been
associated with Skipton.
We have implemented Microsoft Copilot, an Artificial Intelligence (AI)
solution to help our colleagues to deliver more value, more efficiently. We
are also investing in retooling our businesses with automation and data
capability, platform enhancements and digital assets to enhance the service we
can provide.
I am proud that our dedication to our members has been reflected in the
excellent customer satisfaction scores that we have seen across our
businesses, and the recognition we have received from the industry through a
multitude of awards.
Skipton Group
Results for the year ended 31 December 2024
Consolidated income statement
2024 2023
£m £m
Interest receivable and similar income:
Accounted for using the effective interest rate method 2,069.8 1,746.4
Other 32.5 33.6
Total interest receivable and similar income 2,102.3 1,780.0
Interest payable and similar charges (1,613.9) (1,237.2)
Net interest receivable 488.4 542.8
Fees and commissions receivable 1,115.5 993.7
Fees and commissions payable (5.9) (8.3)
Fair value gains on financial instruments mandatorily held at FVTPL 18.0 23.5
Other operating income 3.2 2.9
Total income 1,619.2 1,554.6
Administrative expenses (1,312.3) (1,224.8)
Operating profit before impairment and provisions 306.9 329.8
Impairment and provisions 11.7 3.6
Profit before tax 318.6 333.4
Tax expense (78.1) (78.8)
Profit for the year 240.5 254.6
Attributable to:
Members of Skipton Building Society 240.5 254.8
Non-controlling interests - (0.2)
240.5 254.6
Underlying Group PBT for 2024 was £302.3m (2023: £308.6m) as shown below:
2024 2023
£m £m
Total Group profit before tax 318.6 333.4
Less fair value gains in relation to equity release portfolio (note 1) (9.3) (11.0)
Less fair value gains on share warrants and equity share investments (note 2) (7.0) (13.8)
Underlying Group profit before tax 302.3 308.6
Notes
1. The £9.3m gain (2023: £11.0m gain) is comprised of fair value
loss on the portfolio of £12.6m (2023: £9.2m gains), and fair value gains of
£21.9m (2023: £1.8m gains) on the associated derivatives held to
economically hedge these fair value movements, as shown in the 'Fair value
gains on financial instruments mandatorily held at FVTPL' line in the Income
Statement.
2. As shown in the 'Fair value gains on financial instruments
mandatorily held at FVTPL' line in the Income Statement.
Skipton Group
Results for the year ended 31 December 2024
Consolidated statement of comprehensive income
2024 2023
£m £m
Profit for the year 240.5 254.6
Other comprehensive (expense) / income:
Items that will not be reclassified to Income Statement:
Remeasurement losses on net defined benefit obligations (3.7) (4.5)
Gains on equity share investments designated at FVOCI - 0.2
Income tax on items that will not be reclassified to Income Statement 1.0 1.1
(2.7) (3.2)
Items that may be reclassified subsequently to Income Statement:
Cash flow hedging reserve:
Losses taken to equity (29.6) (48.4)
Realised losses transferred to Income Statement 45.9 14.1
Fair value reserve:
(Losses) / gains taken to equity (1.7) 1.7
Impairment loss allowance on debt securities held at FVOCI - (0.1)
Cost of hedging reserve:
(Losses) / gains taken to equity (1.2) 0.8
Exchange differences on translation of foreign operations (1.4) (0.3)
Income tax on items that may be reclassified to Income Statement (3.7) 9.2
8.3 (23.0)
Other comprehensive income / (expense) for the year, net of tax 5.6 (26.2)
Total comprehensive income for the year 246.1 228.4
Attributable to:
Members of Skipton Building Society 246.1 228.6
Non-controlling interests - (0.2)
246.1 228.4
Skipton Group
Results for the year ended 31 December 2024
Consolidated statement of financial position
2024 2023
£m £m
Assets
Cash in hand and balances with the Bank of England 1,930.6 3,266.2
Loans and advances to credit institutions 414.6 488.8
Debt securities 4,349.6 3,337.7
Derivative financial instruments 752.1 1,000.8
Loans and advances to customers held at amortised cost 30,601.1 28,161.4
Loans and advances to customers held at FVTPL 0.9 0.9
Equity release portfolio held at FVTPL 277.2 293.3
Current tax asset 3.0 0.9
Investments in joint ventures 11.2 10.3
Property, plant and equipment 80.9 74.5
Right-of-use assets 90.4 100.9
Deferred tax asset 6.3 20.9
Other assets 181.2 152.1
Intangible assets 311.4 313.2
Retirement benefit surplus 4.8 -
Total assets 39,015.3 37,221.9
Liabilities
Shares 28,268.5 25,949.8
Amounts owed to credit institutions 1,599.6 2,093.4
Amounts owed to other customers 2,751.1 2,808.8
Debt securities in issue 2,435.3 2,414.7
Derivative financial instruments 225.1 452.2
Current tax liability 2.7 2.4
Lease liabilities 92.1 103.0
Other liabilities 86.6 85.9
Accruals and deferred income 114.7 107.9
Provisions for liabilities 31.8 29.4
Retirement benefit obligations 8.6 26.2
Subordinated liabilities 690.2 685.3
Subscribed capital 41.6 41.6
Total liabilities 36,347.9 34,800.6
Members' interests
General reserve 2,659.8 2,422.0
Fair value reserve (10.6) (9.5)
Cash flow hedging reserve 16.6 4.9
Cost of hedging reserve (1.4) (0.5)
Translation reserve 3.2 4.6
Attributable to members of Skipton Building Society 2,667.6 2,421.5
Non-controlling interests (0.2) (0.2)
Total members' interests 2,667.4 2,421.3
Total members' interests and liabilities 39,015.3 37,221.9
Skipton Group
Results for the year ended 31 December 2024
Consolidated statement of cash flows
2024 2023
Restated*
£m £m
Cash flows from operating activities
Profit before tax 318.6 333.4
Adjustments for:
Impairment credits on financial instruments (15.9) (2.0)
Depreciation and amortisation 70.0 74.2
Impairment of property, plant and equipment, right-of-use assets, investment 3.1 2.3
property and intangible assets
Profit on disposal of property, plant and equipment, investment property and (0.7) (0.2)
intangible assets
Fair value gains on financial instruments held at FVTPL (18.0) (23.5)
Interest on subordinated liabilities and subscribed capital 34.1 27.1
Interest on lease liabilities 3.1 2.3
Other non-cash movements (5.0) (34.1)
389.3 379.5
Changes in operating assets and liabilities:
Movement in prepayments and accrued income (3.4) (12.2)
Movement in accruals and deferred income 6.8 4.9
Movement in provisions for liabilities (10.1) (5.3)
Net movement in derivatives 43.6 (116.2)
Movement in loans and advances to customers (2,345.1) (3,085.1)
Movement in shares 2,317.2 3,470.8
Net movement in amounts owed to credit institutions and other customers (551.6) (400.2)
Net movement in debt securities in issue (5.9) (198.4)
Net movement in loans and advances to credit institutions 169.2 76.5
Net movement in other assets (44.7) 20.0
Net movement in other liabilities 32.8 5.8
Contributions to defined benefit scheme (26.0) (8.4)
Income taxes paid (68.3) (58.3)
Net cash flows from operating activities (96.2) 73.4
* During the year ended 31 December 2024, the Group reviewed its application
in prior periods of the requirements of IAS 7 Statement of Cash Flows. This
review identified material misstatements where the Group had previously
inappropriately classified non-cash movements in the operating section of the
Statements of Cash Flows. There was no impact on net cash flows for the
affected period and no impact on cash held at the end of that period. This
error was corrected by the re-classification of the affected amounts from the
'Changes in operating assets and liabilities' section to the 'Adjustments to
operating profits' section, and hence there was no net impact on cash flows
from operating activities. In accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors, comparative amounts are restated
accordingly.
Skipton Group
Results for the year ended 31 December 2024
Consolidated statement of cash flows (continued)
2024 2023
£m £m
Net cash flows from operating activities (96.2) 73.4
Cash flows from investing activities
Purchase of debt securities (4,402.0) (2,476.7)
Proceeds from maturities and disposals of debt securities 3,374.5 1,828.5
Purchase of non-controlling interests - (0.2)
Other investing activities (41.0) (26.5)
Net cash flows from investing activities (1,068.5) (674.9)
Cash flows from financing activities
Exercise of share options in subsidiary management incentive scheme - (2.5)
Exercise of put options held by non-controlling shareholders - (0.4)
Proceeds from issue of subordinated liabilities - 350.0
Interest paid on subordinated liabilities and subscribed capital (33.5) (23.0)
Interest paid on lease liabilities (3.1) (2.3)
Payment of lease liabilities (39.3) (41.2)
Net cash flows from financing activities 75.9 280.6
Net decrease in cash and cash equivalents (1,240.6) (320.9)
Cash and cash equivalents at 1 January 3,294.3 3,615.2
Cash and cash equivalents at end of year 2,053.7 3,294.3
Analysis of the cash balances as shown within the Statement of Financial
Position:
2024 2023
£m £m
Cash in hand and balances with the Bank of England 1,930.6 3,266.2
Mandatory reserve deposit with the Bank of England* - (106.6)
1,930.6 3,159.6
Loans and advances to credit institutions 123.1 134.7
Cash and cash equivalents at end of year 2,053.7 3,294.3
* From 1 March 2024 the mandatory reserve deposit with the Bank of England has
been replaced with a Bank of England levy; the levy recognised by the Group
for the year ended 31 December 2024 is charged to the Income Statement within
the line 'Administrative expenses'.
Skipton Group is led by Skipton Building Society, Principal Office: The Bailey
Skipton, BD23 1DN
Skipton Building Society is a member of the Building Societies Association.
Authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority, under
registration number 153706, for accepting deposits, advising on and arranging
mortgages and providing Restricted financial advice. Principal Office, The
Bailey, Skipton, North Yorkshire BD23 1DN.
1 The following items are excluded from statutory profit to arrive at
underlying profit: gains or losses on disposal of Group undertakings,
impairment of Group undertakings and goodwill, fair value movements in
relation to the equity release portfolio and fair value movements in equity
share investments and share warrants.
2 Member satisfaction is measured as the percentage of members and customers
surveyed that scored satisfaction as 5, 6 or 7 minus those scoring 1, 2 or 3
(on a scale of 1-7)
3 Source: CACI Current Account & Savings Database, Stock
4 Source: UK Finance industry arrears data (residential mortgages in arrears
by more than three) at 31 December 2024 - being the latest available data
5 The LCR, CET 1 ratio and leverage ratio are each presented in respect of
Skipton's prudential consolidation group; this comprises the entire Group
except Connells and a small number of other entities.
6 We have PRA permission to apply the internal ratings-based (IRB) approach
to certain credit risk exposures. From 1 January 2022, we apply a temporary
model adjustment (TMA) to the Society's regulator-approved IRB model output.
The Society submitted an update to the incumbent regulator-approved IRB model
to the PRA in 2021 and a revised version addressing the PRA feedback in 2024.
During 2024, the TMA has been updated to adjust IRB outputs to align with the
IRB models that were resubmitted to the PRA in January 2024. Until the updated
IRB models are approved by the PRA, the TMA remains subject to change and may
cause further movements in the capital metrics. There have not been, and we do
not expect there to be, any material changes to the risk profile or strategy
of the Society as a result of changes to the TMA.
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