For immediate release
Unaudited results for the six months to
FINANCIAL HIGHLIGHTS
· Profit before tax
· Underlying profit before tax
· Earnings per share 16.6p (H1 2018: 21.7p)*
· Interim dividend per share increased to 16p (H1 2018: 15p)
· Net assets per share
OPERATIONAL HIGHLIGHTS
· Customer loans
· Customer deposits
· Assets Under Management
· Capital raising activities have secured
· Agreed the purchase of
Commenting on the results, Sir
* The Group recognised a net loss of
The interim results are available at http://www.arbuthnotgroup.com.
ENQUIRIES: |
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020 7012 2400 |
Sir |
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020 7383 5100 |
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020 7260 1000 |
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020 7408 4090 |
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Maitland/AMO (Financial PR) |
020 7379 5151 |
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Jais Mehaji |
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Chairman's Statement
I am pleased to report that
While profit before tax has increased by 142%, this is not the main highlight of the first half. The capital raising activities that have been completed are more significant for the longer term prospects. Firstly, following a good set of financial results by Secure Trust Bank PLC, we were able to sell a further 1.05 million shares or 37% of our remaining holding in that company. This was completed at the market price of
Secondly, following the AGM the Group dual listed its Ordinary Shares on the NEX Exchange Growth Market ("NEX") and on admission issued 152,621 new Ordinary Non-Voting shares. This now provides an alternative potential means of raising capital.
Interestingly, the issuance of the new non-voting shares received 99.9% approval at the AGM after the shareholder service agency, ISS, recommended that shareholders should vote in favour of the resolution, pointing out that "…the Company has clearly explained the rationale behind the proposal and no significant concerns have been identified". In the current environment of heightened scrutiny on corporate governance, we welcomed such a resounding endorsement of our plans.
Finally, on 3 June we announced that we had issued
Given the increase in surplus capital, strong liquidity and also the newly established Arbuthnot Direct deposit platform, the Group was in a good position to participate in a residential mortgage portfolio transaction that was introduced to us in the second quarter of the year. Following on from the due diligence phases, we announced on 3 July that we had exchanged contracts to purchase approximately
Given the strong financial position of the Group, the Board has decided to increase the interim dividend by 1p to 16p, which will be paid on
The Bank originated new loans of
Customer deposits have increased to
Credit impairments have increased by
As the strategy has evolved to refocus the Private Bankers on developing relationships with new and existing criteria clients, the lending activities have migrated toward the
However, interaction and activity levels with criteria clients have increased as the new business development team became established. As a result, the level of new private clients joining the Bank has increased by 13% compared to the prior year, which has led to an increase in deposits balances to
The relationship banking model is proving to be popular with clients as demonstrated by the increase in the level of deposits to
We were disappointed that the
Renaissance
The lead indicators for the business have continued to show good performance during the first half. Customer balances have increased by 26% compared to the previous year to
However, despite the higher level of activity, profitability has declined due to yield compression with increased competition in asset finance markets. The business has also experienced materially lower levels of early termination of contracts. In particular, clients who have financed the purchase of high value cars are holding on to these vehicles for longer than before. This has resulted in the income being earned over a longer period of time rather than being brought forward at the termination event.
Other Divisions
The Asset Based Lending division had a good start to the year, increasing its customer balances by 559% to stand at
The business has developed a good network of introducers with a distribution team that covers the vast majority of
The management team have consistently delivered ahead of their forecast milestones and as a result, have managed to achieve monthly breakeven since
The Specialist Lending division have written its first loan in the second quarter of the year and despite holding back market interest while they remain in a soft launch phase, has a growing pipeline of deals on which to concentrate on as they move into full production in the second half of the year.
Secure Trust Bank PLC
As explained in the Annual Report and Accounts for 2018, our holding in Secure Trust Bank ("STB") is now classified as a financial investment, rather than an Associate company. This treatment results in the dividend income of
Outlook
The geopolitical and macroeconomic environment is unclear and the potential damaging effect of a hard left
Consolidated Statement of Comprehensive Income
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Six months ended 30 June |
Six months ended 30 June |
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2019 |
2018 |
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Note |
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Interest income |
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35,251 |
28,628 |
Interest expense |
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(6,483) |
(3,651) |
Net interest income |
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28,768 |
24,977 |
Fee and commission income |
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6,935 |
6,513 |
Fee and commission expense |
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(80) |
(112) |
Net fee and commission income |
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6,855 |
6,401 |
Operating income |
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35,623 |
31,378 |
Net impairment loss on financial assets |
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(1,317) |
(208) |
Other income |
6 |
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2,384 |
1,649 |
Operating expenses |
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(33,801) |
(31,636) |
Profit before income tax |
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2,889 |
1,183 |
Income tax expense |
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(413) |
(275) |
Profit after income tax from continuing operations |
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2,476 |
908 |
Profit from discontinued operations after tax |
9 |
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- |
2,329 |
Profit for the period |
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2,476 |
3,237 |
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Other comprehensive income |
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Items that will not be reclassified to profit or loss |
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Changes in fair value of equity investments at fair value through other comprehensive income |
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7,370 |
135 |
Tax on other comprehensive income |
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(53) |
(26) |
Other comprehensive income for the period, net of tax |
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7,317 |
109 |
Total comprehensive income for the period |
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9,793 |
3,346 |
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Profit attributable to: |
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Equity holders of the Company |
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2,476 |
3,237 |
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2,476 |
3,237 |
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Total comprehensive income attributable to: |
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Equity holders of the Company |
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9,793 |
3,346 |
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9,793 |
3,346 |
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Earnings per share for profit attributable to the equity holders of the Company during the period |
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(expressed in pence per share): |
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- basic |
8 |
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16.6 |
21.7 |
- diluted |
8 |
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16.6 |
21.7 |
Consolidated Statement of Financial Position
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At 30 June |
At 30 June |
At 31 December |
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2019 |
2018 |
2018 |
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ASSETS |
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Cash and balances at central banks |
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431,760 |
361,892 |
405,325 |
Loans and advances to banks |
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85,775 |
76,840 |
54,173 |
Debt securities at amortised cost |
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383,459 |
307,560 |
342,691 |
Assets classified as held for sale |
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8,020 |
8,017 |
8,002 |
Derivative financial instruments |
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1,354 |
1,906 |
1,846 |
Loans and advances to customers |
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1,275,372 |
1,096,739 |
1,224,656 |
Other assets |
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15,286 |
23,036 |
12,716 |
Financial investments |
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27,467 |
2,459 |
35,351 |
Deferred tax asset |
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1,438 |
2,032 |
1,490 |
Investment in associate |
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- |
84,032 |
- |
Intangible assets |
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17,349 |
15,941 |
16,538 |
Property, plant and equipment |
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5,453 |
5,311 |
5,304 |
Right-of-use assets |
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20,559 |
- |
- |
Investment properties |
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69,446 |
59,439 |
67,081 |
Total assets |
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2,342,738 |
2,045,204 |
2,175,173 |
EQUITY AND LIABILITIES |
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Equity attributable to owners of the parent |
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Share capital |
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154 |
153 |
153 |
Retained earnings |
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207,940 |
236,007 |
209,083 |
Other reserves |
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(4,273) |
(840) |
(13,280) |
Total equity |
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203,821 |
235,320 |
195,956 |
LIABILITIES |
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Deposits from banks |
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236,203 |
232,152 |
232,675 |
Derivative financial instruments |
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174 |
1,383 |
188 |
Deposits from customers |
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1,829,227 |
1,546,607 |
1,714,286 |
Current tax liability |
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649 |
550 |
236 |
Other liabilities |
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14,124 |
16,103 |
18,549 |
Lease liabilities |
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20,882 |
- |
- |
Debt securities in issue |
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37,658 |
13,089 |
13,283 |
Total liabilities |
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2,138,917 |
1,809,884 |
1,979,217 |
Total equity and liabilities |
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2,342,738 |
2,045,204 |
2,175,173 |
Consolidated Statement of Changes in Equity
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Attributable to equity holders of the Group |
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Share capital |
Revaluation reserve |
Capital redemption reserve |
Fair value reserve |
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Retained earnings |
Total |
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Balance at |
153 |
- |
20 |
(12,169) |
(1,131) |
209,083 |
195,956 |
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Total comprehensive income for the period |
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Profit for the six months ended |
- |
- |
- |
- |
- |
2,476 |
2,476 |
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Other comprehensive income, net of income tax |
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Changes in the fair value of financial assets at FVOCI |
- |
- |
- |
7,370 |
- |
- |
7,370 |
Tax on other comprehensive income |
- |
- |
- |
(53) |
- |
- |
(53) |
Total other comprehensive income |
- |
- |
- |
7,317 |
- |
- |
7,317 |
Total comprehensive income for the period |
- |
- |
- |
7,317 |
- |
2,476 |
9,793 |
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Transactions with owners, recorded directly in equity |
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Contributions by and distributions to owners |
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Issue of non-voting share capital |
1 |
- |
(2) |
- |
- |
(32) |
(33) |
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- |
- |
- |
- |
- |
1,083 |
1,083 |
Sale of Secure Trust Bank shares |
- |
- |
- |
1,692 |
- |
(1,692) |
- |
Final dividend relating to 2018 |
- |
- |
- |
- |
- |
(2,978) |
(2,978) |
Total contributions by and distributions to owners |
1 |
- |
(2) |
1,692 |
- |
(3,619) |
(1,928) |
Balance at |
154 |
- |
18 |
(3,160) |
(1,131) |
207,940 |
203,821 |
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Attributable to equity holders of the Group |
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Share capital |
Revaluation reserve |
Capital redemption reserve |
Fair value reserve |
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Retained earnings |
Total |
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Balance at |
153 |
- |
20 |
162 |
(1,131) |
237,171 |
236,375 |
IFRS 9 adjustment |
- |
- |
- |
- |
- |
(2,257) |
(2,257) |
Balance at |
153 |
- |
20 |
162 |
(1,131) |
234,914 |
234,118 |
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Total comprehensive income for the period |
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Profit for the six months ended |
- |
- |
- |
- |
- |
3,237 |
3,237 |
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Other comprehensive income, net of income tax |
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Changes in the fair value of financial assets at FVOCI |
- |
- |
- |
135 |
- |
- |
135 |
Tax on other comprehensive income |
- |
- |
- |
(26) |
- |
- |
(26) |
Total other comprehensive income |
- |
- |
- |
109 |
- |
- |
109 |
Total comprehensive income for the period |
- |
- |
- |
109 |
- |
3,237 |
3,346 |
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Transactions with owners, recorded directly in equity |
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Contributions by and distributions to owners |
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- |
- |
- |
- |
- |
685 |
685 |
Final dividend relating to 2017 |
- |
- |
- |
- |
- |
(2,829) |
(2,829) |
Total contributions by and distributions to owners |
- |
- |
- |
- |
- |
(2,144) |
(2,144) |
Balance at |
153 |
- |
20 |
271 |
(1,131) |
236,007 |
235,320 |
Consolidated Statement of Cash Flows
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Six months ended 30 June |
Six months ended 30 June |
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2019 |
2018 |
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Cash flows from operating activities |
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Interest received |
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46,707 |
39,584 |
Interest paid |
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(6,796) |
(3,889) |
Fees and commissions received |
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4,798 |
6,740 |
Net trading and other income |
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2,384 |
1,649 |
Cash payments to employees and suppliers |
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(16,938) |
(40,947) |
Cash flows from operating profits before changes in operating assets and liabilities |
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30,155 |
3,137 |
Changes in operating assets and liabilities: |
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- net decrease in derivative financial instruments |
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478 |
1,097 |
- net increase in loans and advances to customers |
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(51,806) |
(50,442) |
- net increase in other assets |
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(23,147) |
(7,742) |
- net increase in deposits from banks |
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3,528 |
37,055 |
- net increase in amounts due to customers |
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114,941 |
155,826 |
- net increase / (decrease) in other liabilities |
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16,457 |
(136) |
Net cash inflow from operating activities |
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90,606 |
138,795 |
Cash flows from investing activities |
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Purchase of financial investments |
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(128) |
(107) |
Disposal of financial investments |
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15,330 |
136 |
Purchase of computer software |
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(1,723) |
(748) |
Refurbishment cost investment property |
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(2,365) |
- |
Purchase of property, plant and equipment |
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(837) |
(1,799) |
Proceeds from sale of property, plant and equipment |
|
|
- |
39 |
Purchases of debt securities |
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(325,055) |
(153,823) |
Proceeds from redemption of debt securities |
|
|
285,187 |
75,288 |
Net cash outflow from investing activities |
|
|
(29,591) |
(81,014) |
Cash flows from financing activities |
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Dividends paid |
|
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(2,978) |
(2,829) |
Net cash used in financing activities |
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(2,978) |
(2,829) |
Net increase in cash and cash equivalents |
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|
58,037 |
54,952 |
Cash and cash equivalents at 1 January |
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459,498 |
383,780 |
Cash and cash equivalents at 30 June |
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517,535 |
438,732 |
Notes to the Consolidated Financial Statements
1. Basis of preparation
The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2018 statutory accounts as amended by standards and interpretations effective during 2019 as set out below and in accordance with IAS 34 "Interim Financial Reporting". The directors do not consider the fair value of the assets and liabilities presented in these financial statements to be materially different from their carrying value.
The statements were approved by the Board of Directors on
2. Risks and uncertainties
The Group regards the monitoring and controlling of risks and uncertainties as a fundamental part of the management process. Consequently, senior management are involved in the development of risk management policies and in monitoring their application.
The principal risks inherent in the Group's business are strategic, credit, market, liquidity, operational, cyber, conduct, regulatory and macroeconomic.
Strategic risk
Strategic risk is the risk that may affect the Group's ability to achieve its corporate and strategic objectives. This risk is important to the Group as it continues its growth strategy. However, the Group seeks to mitigate strategic risk by focusing on a sustainable business model which is aligned to the Group's business strategy. Also, the Board of Directors meets once a year to hold a two day board meeting to ensure that the Group's strategy is appropriate for the market and economy.
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. This risk exists in
Market risk
Market risk arises in relation to movements in interest rates, currencies and equity markets. The Group's treasury function operates mainly to provide a service to clients and does not take significant unmatched positions in any market for its own account. As a result, the Group's exposure to adverse movements in interest rates and currencies is limited to interest earnings on its free cash and interest rate re-pricing mismatches. The Group actively monitors its exposure to future interest rate rises.
The Group is exposed to changes in the market value of properties. The current carrying value of Investment Property is
The Group has a 9.85% interest in STB. This is currently recorded in the Group's balance sheet as a
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its obligations as they fall due. The Group takes a conservative approach to managing its liquidity profile. Retail client deposits and drawings from the
Operational risk
Operational risk is the risk that the Group may be exposed to financial losses from conducting its business. The Group is exposed to operational risks from its Information Technology and Operations platforms. There are additional internal controls in these processes that are designed to protect the Group from these risks. The Group's overall approach to managing internal control and financial reporting is described in the Corporate Governance section of the Annual Report.
Cyber risk
Cyber risk is an increasing risk that the Group is subject to within its operational processes. This is the risk that the Group is subject to some form of disruption arising from an interruption to its IT and data infrastructure. The Group regularly test the infrastructure to ensure that it remains robust to a range of threats, and has continuity of business plans in place including a disaster recovery plan.
Conduct risk
As a financial services provider we face conduct risk, including selling products to customers which do not meet their needs, failing to deal with customers' complaints effectively, not meeting customers' expectations, and exhibiting behaviours which do not meet market or regulatory standards.
The Group adopts a zero risk appetite for any unfair customer outcomes. It maintains clear compliance guidelines and provides ongoing training to all staff. Periodic spot checks and internal audits are performed to ensure these guidelines are being followed. The Group also has insurance policies in place to provide some cover for any claims that may arise.
Regulatory risk
Regulatory risk is the risk that the Group will have insufficient capital resources to support the business or does not comply with regulatory requirements. The Group adopts a conservative approach to managing its capital. The Board approves an ICAAP annually, which includes the performance of stringent stress tests to ensure that capital resources are adequate over a three year horizon. Capital and liquidity ratios are regularly monitored against the Board's approved risk appetite as part of the risk management framework.
Regulatory change also exists as a risk to the Group's business. Notwithstanding the assessments carried out by the Group to manage the regulatory risk, it is not possible to predict how regulatory and legislative changes may alter and impact the business. Significant and unforeseen regulatory changes may reduce the Group's competitive situation and lower its profitability.
Macroeconomic and competitive environment
The Group is also exposed to indirect risks that may arise from the macroeconomic and competitive environment. The economic environment is relatively stable in the
The Group monitors its exposure to future interest rate rises and currently has minimal lending to customers in products that would be directly sensitive to interest rate rises. However, at the current levels of interest rates, the affordability enjoyed by the Group's customers is beneficial.
Brexit
Given the uncertainty that exists over Brexit with the
The Group's only overseas operation is in
Analysis is ongoing with our card service providers to ensure that data transfers made from the
Finally, there are two significant business risks that may arise in an economic shock. Firstly, increased credit risk as borrowers are unable to continue to meet their interest obligations as they fall due. This would be alongside a significant fall in the collateral values of our security held against the loans. The average loan to value of our lending book is 53.7%, so to have any material impact this fall in collateral values would have to be severe and prolonged. In our ICAAP stress test scenarios, we are able to withstand a property value fall of 40% over an 18 month period alongside a doubling of our loss rates.
The second significant asset class that would be at risk in a down turn would be the Investment Properties, in particular
3. Changes in significant accounting policies
IFRS 16, 'Leases'
This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements.
The Group has adopted IFRS 16 under the modified retrospective transition approach from
a) Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of
The associated right-of-use assets were measured on the modified retrospective transition approach option two. The right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at
The recognised right-of-use assets relate to the following types of assets: |
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30 June 2019 |
1 January 2019 |
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Investment properties |
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7,992 |
8,029 |
Properties |
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12,131 |
13,385 |
Equipment |
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|
436 |
- |
Total Right-of-use assets |
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20,559 |
21,414 |
The change in accounting policy affected the following items on the balance sheet on
• Investment properties - increase by
• Property, plant and equipment - increase by
• Lease liabilities - increase by
There was no impact to retained earnings due to the retrospective modified approach option two being used.
b) Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
• reliance on previous assessments on whether leases are onerous
• the accounting for operating leases with a remaining lease term of less than 12 months as at
• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
c) The Group's leasing activities and how these are accounted for
The Group has leasehold investment property, offices and equipment all under operating leases. Rental contracts are typically made for fixed periods but may have extension or termination options. Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The extension and termination options held are exercisable only by the Group and not by the respective lessor.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Until the 2018 financial year, leases of investment property and property, plant and equipment were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.
From
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
• fixed payments less any lease incentives receivable
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the lessee's incremental borrowing rate, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of the lease liability
• any lease payments made at or before the commencement date less any lease incentives received
• any initial direct costs, and
• any restoration costs payable.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
4. Valuation of financial instruments
The Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions. If a market for a financial instrument is not active, the Group establishes fair value using a valuation technique. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis. The objective of valuation techniques is to determine the fair value of the financial instrument at the reporting date as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. In the event that fair values of assets and liabilities cannot be reliably measured, they are carried at cost.
The Group measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making measurements:
• Level 1: Quoted prices in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
• Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads assists in the judgement as to whether a market is active. If in the opinion of management, a significant proportion of the instrument's carrying amount is driven by unobservable inputs, the instrument in its entirety is classified as valued using significant unobservable inputs. 'Unobservable' in this context means that there is little or no current market data available from which to determine the level at which an arm's length transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value (consensus pricing data may, for example, be used).
The tables below analyse financial instruments measured at fair value by the level in the fair value hierarchy into which the measurement is categorised:
|
Level 1 |
Level 2 |
Level 3 |
Total |
At |
|
|
|
|
ASSETS |
|
|
|
|
Derivative financial instruments |
- |
1,354 |
- |
1,354 |
Financial assets at FVOCI |
25,932 |
- |
1,535 |
27,467 |
|
25,932 |
1,354 |
1,535 |
28,821 |
LIABILITIES |
|
|
|
|
Derivative financial instruments |
- |
174 |
- |
174 |
|
- |
174 |
- |
174 |
|
Level 1 |
Level 2 |
Level 3 |
Total |
At |
|
|
|
|
ASSETS |
|
|
|
|
Derivative financial instruments |
- |
1,906 |
- |
1,906 |
Financial investments |
17 |
- |
2,442 |
2,459 |
|
17 |
1,906 |
2,442 |
4,365 |
LIABILITIES |
|
|
|
|
Derivative financial instruments |
- |
1,383 |
- |
1,383 |
|
- |
1,383 |
- |
1,383 |
|
Level 1 |
Level 2 |
Level 3 |
Total |
At 31 December 2018 |
£000 |
£000 |
£000 |
£000 |
ASSETS |
|
|
|
|
Derivative financial instruments |
- |
1,846 |
- |
1,846 |
Financial investments |
34,223 |
- |
1,128 |
35,351 |
|
34,223 |
1,846 |
1,128 |
37,197 |
LIABILITIES |
|
|
|
|
Derivative financial instruments |
- |
188 |
- |
188 |
|
- |
188 |
- |
188 |
There were no transfers between level 1 and level 2 during the year. |
|
|
||
|
|
|
|
|
The following table reconciles the movement in level 3 financial instruments measured at fair value (financial investments) during the year: |
||||
|
|
At 30 June |
At 30 June |
At 31 December |
|
|
2019 |
2018 |
2018 |
Movement in level 3 |
|
£000 |
£000 |
£000 |
At 1 January |
|
1,128 |
2,203 |
2,203 |
Acquisitions |
|
128 |
- |
- |
Consideration received |
|
- |
104 |
163 |
Disposals |
|
- |
- |
(1,403) |
Movements recognised in Other Comprehensive Income |
|
279 |
135 |
135 |
Movements recognised in the Income Statement |
|
- |
- |
30 |
At 30 June / 31 December |
|
1,535 |
2,442 |
1,128 |
5. Operating segments
The Group is organised into five operating segments as disclosed below:
1) Private Banking - Provides traditional private banking services as well as offering financial planning and investment
management services. This segment includes
2) Commercial Banking - Provides bespoke commercial banking services and tailored secured lending against property investments and other assets.
3) RAF - Specialist asset finance lender mainly in high value cars but also business assets.
4) All Other Divisions - All other smaller divisions and central costs in
5) Group Centre - ABG Group Centre management.
Transactions between the operating segments are on normal commercial terms. Centrally incurred expenses are charged to operating segments on an appropriate pro-rata basis. Segment assets and liabilities comprise loans and advances to customers and customer deposits, being the majority of the balance sheet.
|
Continuing operations |
|||||
|
Private banking |
Commercial Banking |
RAF |
All Other Divisions |
Group Centre |
Group Total |
Six months ended 30 June 2019 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
Interest revenue |
17,582 |
12,210 |
4,562 |
1,002 |
33 |
35,389 |
Inter-segment revenue |
- |
- |
- |
- |
(138) |
(138) |
Interest revenue from external customers |
17,582 |
12,210 |
4,562 |
1,002 |
(105) |
35,251 |
Fee and commission income |
5,522 |
634 |
144 |
635 |
- |
6,935 |
Revenue from external customers |
23,104 |
12,844 |
4,706 |
1,637 |
(105) |
42,186 |
Interest expense |
(2,253) |
(1,539) |
(1,312) |
(1,072) |
(105) |
(6,281) |
Add back inter-segment revenue |
- |
- |
- |
- |
138 |
138 |
Subordinated loan note interest |
- |
|
|
|
(340) |
(340) |
Fee and commission expense |
(28) |
(34) |
(12) |
(6) |
- |
(80) |
Segment operating income |
20,823 |
11,271 |
3,382 |
559 |
(412) |
35,623 |
Impairment losses |
(824) |
(225) |
(202) |
(66) |
- |
(1,317) |
Other income |
- |
- |
- |
1,872 |
512 |
2,384 |
Operating expenses |
(17,931) |
(8,054) |
(2,319) |
(1,600) |
(3,897) |
(33,801) |
Segment profit / (loss) before tax |
2,068 |
2,992 |
861 |
765 |
(3,797) |
2,889 |
Income tax expense |
- |
- |
(188) |
- |
(225) |
(413) |
Segment profit / (loss) after tax |
2,068 |
2,992 |
673 |
765 |
(4,022) |
2,476 |
|
|
|
|
|
|
|
Loans and advances to customers |
645,524 |
474,302 |
97,663 |
69,384 |
(11,500) |
1,275,373 |
Other assets |
- |
- |
- |
1,046,678 |
20,687 |
1,067,365 |
Segment total assets |
645,524 |
474,302 |
97,663 |
1,116,062 |
9,187 |
2,342,738 |
Customer deposits |
1,042,634 |
668,792 |
- |
117,801 |
- |
1,829,227 |
Other liabilities |
- |
- |
- |
322,279 |
(12,589) |
309,690 |
Segment total liabilities |
1,042,634 |
668,792 |
- |
440,080 |
(12,589) |
2,138,917 |
Other segment items: |
|
|
|
|
|
|
Capital expenditure |
- |
- |
(5) |
(4,920) |
- |
(4,925) |
Depreciation and amortisation |
- |
- |
(6) |
(1,581) |
(13) |
(1,600) |
The "Group Centre" segment above includes the parent entity and all intercompany eliminations. |
Segment profit is shown prior to any intra-group eliminations.
The
|
Continuing operations |
Discontinued operations |
|
|||||
|
Private Banking |
Commercial Banking |
RAF |
All Other Divisions |
Group Centre |
Total |
Retail Bank Associate Income |
Group Total |
Six months ended 30 June 2018 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
Interest revenue |
17,166 |
7,580 |
3,948 |
26 |
54 |
28,774 |
- |
28,774 |
Inter-segment revenue |
- |
- |
- |
- |
(146) |
(146) |
- |
(146) |
Interest revenue from external customers |
17,166 |
7,580 |
3,948 |
26 |
(92) |
28,628 |
- |
28,628 |
Fee and commission income |
5,885 |
527 |
100 |
1 |
- |
6,513 |
- |
6,513 |
Revenue from external customers |
23,051 |
8,107 |
4,048 |
27 |
(92) |
35,141 |
- |
35,141 |
Interest expense |
(1,046) |
(1,132) |
(1,007) |
(340) |
(92) |
(3,617) |
- |
(3,617) |
Add back inter-segment revenue |
- |
- |
- |
- |
146 |
146 |
- |
146 |
Subordinated loan note interest |
- |
- |
- |
- |
(180) |
(180) |
- |
(180) |
Fee and commission expense |
(57) |
(47) |
(8) |
- |
- |
(112) |
- |
(112) |
Segment operating income |
21,948 |
6,928 |
3,033 |
(313) |
(218) |
31,378 |
- |
31,378 |
Impairment losses |
(122) |
(52) |
(34) |
- |
- |
(208) |
- |
(208) |
Other income |
- |
- |
31 |
1,949 |
(331) |
1,649 |
- |
1,649 |
Operating expenses |
(17,335) |
(7,724) |
(1,940) |
(987) |
(3,650) |
(31,636) |
- |
(31,636) |
Segment profit / (loss) before tax |
4,491 |
(848) |
1,090 |
649 |
(4,199) |
1,183 |
- |
1,183 |
Income tax expense |
- |
- |
(237) |
- |
- |
(237) |
- |
(237) |
Segment profit / (loss) after tax |
4,491 |
(848) |
853 |
649 |
(4,199) |
946 |
- |
946 |
Profit from discontinued operations |
- |
- |
- |
- |
- |
- |
2,329 |
2,329 |
Segment profit / (loss) after tax |
4,491 |
(848) |
853 |
649 |
(4,199) |
946 |
2,329 |
3,275 |
|
|
|
|
|
|
|
|
|
Loans and advances to customers |
664,127 |
346,160 |
77,602 |
20,350 |
(11,500) |
1,096,739 |
- |
1,096,739 |
Other assets |
- |
- |
- |
855,781 |
92,684 |
948,465 |
- |
948,465 |
Segment total assets |
664,127 |
346,160 |
77,602 |
876,131 |
81,184 |
2,045,204 |
- |
2,045,204 |
Customer deposits |
964,190 |
471,442 |
- |
110,975 |
- |
1,546,607 |
- |
1,546,607 |
Other liabilities |
- |
- |
- |
284,108 |
(20,831) |
263,277 |
- |
263,277 |
Segment total liabilities |
964,190 |
471,442 |
- |
395,083 |
(20,831) |
1,809,884 |
- |
1,809,884 |
Other segment items: |
|
|
|
|
|
|
|
|
Capital expenditure |
- |
- |
(40) |
(2,416) |
(95) |
(2,551) |
- |
(2,551) |
Depreciation and amortisation |
- |
- |
(7) |
(1,452) |
(13) |
(1,472) |
- |
(1,472) |
6. Other income
Other income mainly includes rental income received from the investment properties of £1.3m (2018: £1.2m) and £1m dividend income received from STB (2018: £nil). 2018 also included £0.3m rental income from STB for office space occupied.
7. Underlying profit reconciliation
The profit before tax from continuing operations as reported in the operating segments can be reconciled to the underlying profit from continuing operations for the year as disclosed in the tables below.
Underlying profit reconciliation |
|
|
Six months ended 30 June 2019 |
£000 |
£000 |
Profit before tax from continuing operations |
6,686 |
2,889 |
Investment in new ventures |
482 |
482 |
Underlying profit |
7,168 |
3,371 |
Underlying profit reconciliation |
|
|
Six months ended 30 June 2018 |
£000 |
£000 |
Profit before tax from continuing operations |
5,382 |
1,183 |
Investment in new ventures |
621 |
621 |
Dividend from STB as if deconsolidated from 1 January 2018 |
- |
1,110 |
IFRS 16 impact applied to 2018 |
(241) |
(241) |
Underlying profit |
5,762 |
2,673 |
8. Earnings per ordinary share
Basic
Basic earnings per ordinary share are calculated by dividing the profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares 14,926,992 (2018: 14,889,048) in issue during the period. On 17 May 2019, the Company issued 152,621 Ordinary Non-Voting shares.
Diluted
Diluted earnings per ordinary share are calculated by dividing the dilutive profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, as well as the number of dilutive share options in issue during the period. There were no dilutive share options in issue at the end of June (2018: nil).
|
Six months ended 30 June |
Six months ended 30 June |
|
2019 |
2018 |
Profit attributable |
£000 |
£000 |
Total profit after tax attributable to equity holders of the Company |
2,476 |
3,237 |
Profit after tax from continuing operations attributable to equity holders of the Company |
2,476 |
908 |
Profit after tax from discontinued operations attributable to equity holders of the Company |
- |
2,329 |
|
|
|
|
Six months ended 30 June |
Six months ended 30 June |
|
2019 |
2018 |
Basic Earnings per share |
p |
p |
Total Basic Earnings per share |
16.6 |
21.7 |
Basic Earnings per share from continuing operations |
16.6 |
6.1 |
Basic Earnings per share from discontinued operations |
- |
15.6 |
9. Discontinued operations
On 8 August 2018 Sir
Since the 8 August 2018, ABG sold 575,000 STB shares in November 2018 and a further 1,050,000 shares in April 2019. The current shareholding in STB is 9.85%.
10. Events after the balance sheet date
On 3 July 2019,
Portfolio A has been in run off since it was originated by Edeus Mortgages and Victoria Mortgage Funding between 2005 and 2008. Portfolio B was originated in 2018 and 2019 by
Based on loan balances as at 31 March 2019 Portfolio A consists of 1,457 loans with customer balances of £201m of which 20 per cent are buy-to-let and the remainder are owner occupied with an average loan to value of 67.4 per cent. Portfolio B consists of 462 loans with customer balances of £65m all of which are owner occupied with an average loan to value of 70 per cent.
The overall yield on the portfolios is 3.6 per cent before taking into account the effect of the negotiated purchase discount. The aggregate consideration of the purchase will be 97 per cent of Portfolio A and 98 per cent of Portfolio B at the time of the completion, which is expected to be 8 August 2019. The consideration will be satisfied by cash from the Group's own resources.
It is expected that in due course the Group will preposition these assets with the
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