12th Sep 2006 07:01
European Islamic Investment BankPLC12 September 2006 European Islamic Investment Bank plc Interim results for the six month period to 30 June 2006 We are pleased to report our interim results for the six month period to 30June, 2006. HIGHLIGHTS •Revenues have increased to £3,019,424 (2005 : £1,062,973) •Operating profits of £184,359 (2005 : £547,730) •Roll-out remains on track •Capital Markets business now fully staffed and making prices on Islamic Sukuks Chairman and Managing Director's statement Financial Results Revenues have increased from £1,062,973 to £3,019,424, as we commence thedeployment of our increased capital base in the bank's operating activities.Operating profit in the period was £184,359 compared with £547,730 reflectingour investment in our capabilities and infrastructure. Our expense base is bothwell managed and adequate to support our present and foreseen level of business. Business overview and outlook We received our FSA authorisation in March 2006, and our IPO on AIM in Mayraised approximately £73m of capital, net of costs, giving the Bank a capitalbase of £184m. Significant progress has been achieved in building ouroperational and IT infrastructure, finalising our operational business plan,setting up a risk management and compliance framework and recruiting key staffacross the business. Our Capital Markets business is now fully staffed and is actively trading andoffering two-way prices on assets. We believe the greater number of primaryissuances we are now seeing coming onto the market, will inevitably lead to amore active secondary market in Islamic Sukuks. We also anticipate that EIIB'sstrong Islamic structuring capability will allow us to very quickly move intothe primary market for structuring and placing such transactions. In our Asset Management business we have made significant progress onrecruitment and are currently developing a range of EIIB-branded products andevaluating a number of third party wealth management products which we will belooking to bring to market over the coming year. We continue to see robust growth in the Bank's target markets in GulfCooperation Council ("GCC") countries as well as in the Islamic Banking sectoras a whole. Significant liquidity in the GCC continues to generate strong demandfor Sharia'a compliant assets and we are confident that this supports theassumptions of our business plan. The Bank's objectives in the second half of the year will be to establish ourBahrain Representative Office so that we may more effectively leverage ourMiddle Eastern investor base and further improve our transaction origination anddistribution capabilities. In line with our business plan, we will also completethe build of our Investment Banking business. We are delighted with the quality of the team that is now in place in EIIB. OurIslamic transaction structuring capability is now being reflected in a change inthe profile of revenues from interbank placements to those generated by tradefinance, murabaha receivables, fees and income from securities. With the deal pipeline that we have now generated, we are very well placed toleverage our strong shareholder and investor bases to generate future top-linegrowth. It is encouraging that, less then four months since receiving our FSAauthorisation, we are on target to meet the objectives set out in our offerdocument and to meet market expectations for the year. Enquiries: Fishburn Hedges Tel: +44 (0)7839 4321Andy Berry / Michelle James About EIIB: EIIB was incorporated in January 2005 and received its authorisation by the FSAon 9 March 2006. On 3 April, it opened for business, and on 17 May completed itsIPO and was admitted to London's AIM market. Headquartered in London, EIIB's range of products and services will include thefollowing Sharia'a compliant investment banking activities: - Islamic Treasury and Capital Markets- Asset Management, including Private Banking- Trade Finance and Correspondent Banking- Advisory and Corporate Finance. EIIB seeks to service a market for Sharia'a compliant investment bankingservices in Europe, the Middle East and Asia that it believes has beenunder-exploited by conventional and Islamic banks, and by non-bankinginstitutions. EIIB intends to become a major participant in the market forIslamic securities, treasury and investment products, which is currentlyexperiencing rapid growth. The founding shareholders of EIIB include Gulf based individuals andinstitutions, including a number of Islamic banks, as well as individuals andcompanies based in Europe. Independent review report to European Islamic Investment Bank plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the Condensed IncomeStatement, Condensed Balance Sheet, Condensed Statement of Changes in Equity,Condensed Cash Flow Statement and the related notes 1 to 8. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company having regard to guidance contained inBulletin 1999/4 'Review of interim financial information' issued by the AuditingPractices Board. To the fullest extent permitted by the law, we do not accept orassume responsibility to anyone other than the company, for our work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report as required by the AIM Rulesissued by the London Stock Exchange. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. The comparatives for the period ended 30 June 2005 were not subject to review. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Ernst & Young LLP1 More London PlaceLondon SE1 2AF7 September 2006 Condensed income statement for the half year ended 30 June 2006(unaudited) Notes 6 months ended For the period 30 Jun 2006 11 Jan 2005 to 30 Jun 2005 £ £IncomeWakala and murabaha receivables 2,895,873 1,062,973Investments 60,346 -Mudaraba receivables 55,593 -Other income 7,612 - ---------- ----------Total operating income 3 3,019,424 1,062,973 ExpensesStaff costs (1,297,927) (249,915)Depreciation and amortisation (96,847) (349)Other general and administrativeexpenses (1,440,291) (264,979) ---------- ----------Total operating expenses (2,835,065) (515,243) ---------- ----------Operating profit before tax 184,359 547,730 Tax expense 4 (108,752) (164,319) ---------- ---------- Profit for the period 75,607 383,411 ---------- ---------- Attributable to equity holders ofthe bank 75,607 383,411 ---------- ---------- Earnings per share - basic and diluted - 0.06p ---------- ---------- The notes on pages 8 to 14 form an integral part of the condensed financialstatements. Condensed balance sheet at 30 June 2006(unaudited) Notes 30 Jun 2006 31 Dec 2005 restated £ £Assets Cash and balances with banks 616,826 435,706Due from financial institutions 170,250,881 111,214,717Receivables 5,418,795 -Available for sale investments 7,498,025 -Plant and equipment 7 (a) 231,815 96,493Intangibles - software 7 (b) 805,859 336,214Other assets 911,253 327,451 ---------- ----------Total assets 185,733,454 112,410,581 ---------- ---------- Liabilities Other liabilities 895,638 721,141Current tax payable 564,718 533,678Deferred tax 4 72,833 - ---------- ----------Total liabilities 1,533,189 1,254,819 Shareholders' equityShare capital 5 18,255,625 15,244,370Share premium account 5 164,084,300 94,325,276Net unrealised loss on available for saleinvestments (11,383) -Retained earnings 1,871,723 1,586,116 ---------- ----------Total equity attributable to the bank'sequity holders 184,200,265 111,155,762 ---------- ----------Total equity and liabilities 185,733,454 112,410,581 ---------- ---------- The notes on pages 8 to 14 form an integral part of the condensed financialstatements. Condensed statement of changes in equity for the half year ended 30 June 2006(unaudited) Share capital Share premium Fair value Retained Total account reserve earnings £ £ £ £ £ Balance at 11 January 2005 -Share issue 15,244,370 98,870,591 114,114,961Transactioncosts of shareissue (4,545,315) (4,545,315)Share award 127,000 127,000Profit for theperiod 383,411 383,411 --------- --------- ------- -------- ----------Balance at 30June 2005 15,244,370 94,325,276 - 510,411 110,080,057 Share award 153,000 153,000Profit for theperiod 922,705 922,705 --------- --------- ------- -------- ----------Balance at 31December 2005 15,244,370 94,325,276 - 1,586,116 111,155,762 --------- --------- ------- -------- ---------- Balance at 1January 2006 15,244,370 94,325,276 1,586,116 111,155,762Share issue 3,011,255 72,270,127 75,281,382Transactioncosts of shareissue (2,511,103) (2,511,103)Net unrealisedloss onavailable forsaleinvestments (11,383) (11,383)Share award 210,000 210,000Profit for theperiod 75,607 75,607 --------- --------- ------- -------- ----------Balance at 30June 2006 18,255,625 164,084,300 (11,383) 1,871,723 184,200,265 --------- --------- ------- -------- ---------- The notes on pages 8 to 14 form an integral part of the condensed financialstatements. Condensed cash flow statement for the half year ended 30 June 2006(unaudited) 6 months ended For the period 30 Jun 2006 11 Jan 2005 to 30 Jun 2005 £ £ Cash flows from operating activities Operating profit on ordinary activitiesbefore tax 184,359 547,730Adjusted for:Depreciation and amortisation 96,847 349Charges for share awards 210,000 127,000Net increase in operating assets:Due from financial institutions (59,036,164) (109,923,299)Receivables (5,418,795) -Available for sale investments (7,514,287) -Other assets (583,802) (172,082)Net increase in operating liabilities:Other liabilities 174,497 9,314 ---------- -----------Net cash outflow from operating activities (71,887,345) (109,410,988) Cash flow from investing activities Purchase of plant and equipment (154,363) (949)Purchase of software intangibles (547,451) (5,464) ---------- -----------Net cash outflow from investing activities (701,814) (6,413) Cash flows from financing activities Net proceeds from issue of share capital 72,770,279 109,449,646 ---------- -----------Net increase in cash and cash equivalents 181,120 32,245 ---------- ----------- Cash and cash equivalents at the beginningof the period 435,706 - ---------- -----------Cash and cash equivalents at the end of theperiod 616,826 32,245 ---------- ----------- The notes on pages 8 to 14 form an integral part of the condensed financialstatements. Notes to the condensed financial statements (unaudited) 1. Principal activities and definitions European Islamic Investment Bank plc (the 'Bank') was incorporated as the firstindependent, UK based Islamic investment bank managed on a wholly Sharia'acompliant basis. The activities of the Bank will be focused on servicing clientsin Europe, the Middle East and Asia through the provision of a range of servicesencompassing asset management and private banking, trading and investing inIslamic securities, treasury services and structured products, and providingcorporate finance and advisory services. The following terms are used in the financial statements: Wakala means agency and can be used in an arrangement whereby a party (theprincipal) places funds with another (the agent) for investment by the agent onthe principal's behalf in return for an agreed agency fee. Murabaha is a sale of goods at a cost plus an agreed profit mark up under whicha party (the seller) purchases goods at a cost price from a supplier and sellsthe goods to another (the buyer) at a cost plus an agreed mark up. Mudaraba is a partnership in profit wherein one party (the rab al-maal) providescapital and the other party (the mudarib) provides the labour or expertise toundertake a business or activity. Profits are shared on a pre-agreed ratio butlosses are borne by the rab al-maal only. 2. Accounting policies and basis of preparation The Bank is a company incorporated in the UK which was established on 11 January2005 and received authorisation from the FSA on 8 March 2006 to carry on itsproposed activities as an investment bank. The Bank prepared its first set of financial statements to 31 December 2005 inaccordance with UK Generally Accepted Accounting Principles ('UK GAAP'). From 1January 2006 the Bank has opted to prepare its financial statements inaccordance with International Financial Reporting Standards ('IFRS') as adoptedby the EU. These interim financial statements have been prepared in accordancewith International Accounting Standard ('IAS') 34 'Interim Financial Reporting'. The transition to IFRSs has had no material impact on the Bank's profit andequity as previously reported in the financial statements for the period ended31 December 2005. Consequently no material adjustments were required to theprofit and equity as previously reported under UK GAAP to comply with those nowreported under IFRS; and therefore reconciliations of the UK GAAP and IFRSfigures have not been provided. Where required, the comparative amounts havebeen restated to comply with IFRS presentation; the only balances affected bythis change were that the captions 'Plant and equipment' and 'Intangibles -software' were shown in the financial statements at 31 December 2005 under oneheading 'Tangible assets'. The Bank has changed the presentation of its Cashflow statement separating the movement in 'Cash and balances with banks' frombalances 'Due from financial institutions'. In the financial statements at 31December 2005 these two items were combined, in the interim statements and infuture financial statements the Bank believes the movement in balances 'Due fromfinancial institutions' should fall under the operating activities of the Bank. Under IAS 34 the Bank has to disclose accounting policies applicable to newitems appearing in the interim financial statements. There are two new balancesheet headings, 'Available for sale investments' and 'Deferred tax'. Available for sale investments Available for sale ('AFS') investments are recognised at cost at the point ofacquisition, cost being the fair value of the investment including anyacquisition charges. AFS investments are carried in the balance sheet at fairvalue. Income accruals on AFS investments are recognised in the incomestatement. Changes in the fair value are recognised directly in equity in the'Fair value reserve' in the accounting period in which they arise. Where thevalue of an investment is considered to be impaired, the losses are recognisedin the income statement; otherwise, the gains and losses previously recognisedin equity are recognised through the income statement when the investmentmatures or is sold. Fair value gains and losses are recognised in equity net ofany tax effect. Taxation Tax on the profit or loss for the year comprises current and deferred tax. Taxis recognised in the income statement except to the extent that it relates toitems recognised directly in shareholders' equity, in which case it isrecognised in shareholders equity. Current tax is provided on taxable profits at the current rate. Deferred tax is recognised on temporary differences between the carrying amountof assets and liabilities in the balance sheet and the amount attributed to suchassets and liabilities for tax purposes. Deferred tax liabilities are generallyrecognised for all taxable temporary differences and deferred tax assets arerecognised to the extent it is probable that future taxable profits will beavailable against which deductible temporary differences can be utilised.Deferred tax assets and liabilities are shown net in the balance sheet. 3. Segmental information The Bank has one class of business being investment banking and all otherservices are ancillary to this. 4. Tax expense 6 months ended For the period 30 Jun 2006 11 Jan 2005 to 30 Jun 2005 £ £ Current tax 35,919 164,319Deferred tax 72,833 - ---------- -----------Total tax expense 108,752 164,319 ---------- ----------- Reconciliation of effective tax rateProfit before tax 184,359 547,730 ---------- ----------- UK corporation tax at the standard rate(30%) 55,308 164,319Expenses not deductible for tax purposes 3,671 -Capital allowances in excess of depreciation (23,060) - ---------- -----------Current tax 35,919 164,319 ---------- ----------- Accelerated capital allowances 72,833 - ---------- -----------Deferred tax 72,833 - ---------- ----------- Current tax related to items charged to equityUnrealised losses on available for saleinvestments (4,879) - ---------- ----------- 5. Share capital and share premium Authorised £ 5,000,000,000 ordinaryshares of £0.01 each 50,000,000 ----------- Allotted, called up and fully paid Number Share Share of shares capital premium £ £ At 1 January 2006 1,524,437,000 15,244,370 94,325,276Share issue 301,125,531 3,011,255 72,270,127Less share issue costs (2,511,103) ------------- ----------- -----------At 30 June 2006 1,825,562,531 18,255,625 164,084,300 ------------- ----------- ----------- During the period the Bank issued 301,125,531 new ordinary shares with a nominalvalue of £0.01 and a price of £0.25 per share under an initial public offeringraising £72,770,279 net of share issue costs. 6. Assets and liabilities in foreign currency The Bank manages its exposure to foreign exchange rate fluctuations by matchingassets with liabilities in the same currency, with similar maturities and theuse of appropriate off-balance sheet instruments. 30 Jun 2006 31 Dec 2005 £ £ Denominated in sterling 172,632,312 112,410,581Denominated in currencies other than sterling 13,101,142 - ---------- ----------Total assets 185,733,454 112,410,581 ---------- ---------- Denominated in sterling 185,733,454 112,410,581 ---------- ----------Total liabilities 185,733,454 112,410,581 ---------- ---------- 7. (a) Plant and equipment Leasehold Furniture & Computer Total Improvements Fixtures Hardware £ £ £ £CostAt 1 January2006 36,715 40,538 21,115 98,368Additions 31,024 30,326 93,013 154,363 ----------- --------- --------- ---------At 30 June 2006 67,739 70,864 114,128 252,731 ----------- --------- --------- --------- DepreciationAt 1 January2006 612 676 587 1,875Charge for theperiod 3,623 6,695 8,723 19,041 ----------- --------- --------- ---------At 30 June 2006 4,235 7,371 9,310 20,916 ----------- --------- --------- --------- Net Book Value ----------- --------- --------- ---------At 30 June 2006 63,504 63,493 104,818 231,815 ----------- --------- --------- --------- ----------- --------- --------- ---------At 31 December2005 36,103 39,862 20,528 96,493 ----------- --------- --------- --------- 7. (b) Intangibles - software £CostAt 1 January 2006 346,294Additions 547,451 ---------At 30 June 2006 893,745 --------- DepreciationAt 1 January 2006 10,080Charge for the period 77,806 ---------At 30 June 2006 87,886 --------- Net Book Value ---------At 30 June 2006 805,859 --------- ---------At 31 December 2005 336,214 --------- Software consists of computer licences and software developments costs includingcapitalised staff costs. 8. Related party disclosures Compensation of key management personnel 6 months ended For the period 30 Jun 2006 11 Jan 2005 to 30 Jun 2005 £ £ Short term employee benefits 265,704 81,320Post employment pension benefits 12,757 -Share-based payments 140,000 164,667 ---------- -----------Total compensation paid to keymanagement personnel 418,461 245,987 ---------- ----------- Other directors' interests Two former directors, Mr Christophe Balet and Mr Michael Carter, are alsodirectors of, and hold beneficial interests in, Islamic Holdings Jersey Limited,the company was the registered holder of 6.65% of the issued shares of the Bankprior to the initial public offering during the period. Mr Christophe Balet andMr Michael Carter resigned on 25 January 2006 and 31 March 2006, respectively. The Bank retains Islamic Joint Venture Partners BSC (IJVP) to handle investorrelations in the Gulf region on a retainer of £5,000 per month, and paid IJVP£20,000 for services in connection with the initial public offering. IJVP was arelated company during the period by virtue of the fact that two directors ofIJVP, Mr Christophe Balet and Mr Michael Carter, hold beneficial interests inIJVP and also served on the board of the Bank. Company information Company registration no. Registrars5328847 Capita IRG plc The RegistryRegistered office 34 Beckenham Road131 Finsbury Pavement BeckenhamLondon EC2A 1NT Kent BR3 4TU Auditors Nominated broker and advisorErnst & Young LLP Evolution Securities Ltd1 More London Place 100 Wood StreetLondon SE1 2AF London EC2V 7AN BankersLloyds TSB Bank plc25 Gresham StreetLondon EC2V 7HN This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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