Interim Results

IFG Group plc

Interim results for the six months ended 30 June 2014

IFG Group plc is pleased to announce its interim results for the six months to 30 June 2014.

Financial highlights

· Revenue from continuing businesses increased by 8% to £34.1 million (H1 2013 re-presented: £31.7 million)

· Adjusted operating profit from continuing businesses of £4.3 million (H1 2013 re-presented: £5.2 million)

· Short-term profitability impacted by continued investment in the business to support future growth

· Adjusted earnings per share on continuing businesses 2.80 pence (H1 2013 re-presented: 3.71 pence)

· Strong balance sheet will be enhanced further on completion of disposals

· Proposed interim dividend maintained at 1.65 cents per share

Business highlights

· Total assets under administration and advice in continuing businesses up 9% to £19.4 billion (H1 2013: £17.8 billion)

· Positive momentum in James Hay Partnership maintained with SIPP sales up 15% to 2,998 (H1 2013: 2,600) and net additions, after reduced attrition, up 70% to 1,784 (H1 2013: 1,050)

· Strategic arrangement signed with Capita to take over their SIPP book, which will accelerate growth in H2 2014 and 2015

· Strong performance from Saunderson House with revenue up 19%; new client wins of 133 (H1 2013: 76) and multiple awards won in the period 

· Sale of Irish pension administration and advisory businesses agreed with Willis Ireland for a maximum consideration of £10.8 million (€13.5 million), subject to regulatory approval

· Further progress made on streamlining the business portfolio including sale of IFG Financial Services, which will complete in early September 2014

Commenting on the results, Paul McNamara, CEO of IFG Group plc, said:

"IFG Group now has a sharper strategic focus on our strongly performing core businesses in James Hay Partnership and Saunderson House. Our solid financial position will be strengthened further following the disposal of non-core businesses and the agreed sale of the Irish businesses. With positive business momentum and a strong liquid balance sheet facilitating organic and inorganic growth, the Group is well positioned for the future."

For reference:

Paul McNamara John Cotter Niamh Hore

Group CEO Group Finance Director Investor Relations & Corporate Development

IFG Group plc IFG Group plc IFG Group plc

Tel: +353 (0)1 275 2800 Tel: +353 (0)1 275 2800 Tel: +353 (0)1 275 2866

Commentary on interim results

We outlined in the 2013 annual report our strategy to rationalise non-core activities and to focus on the continued growth and development of the James Hay Partnership and Saunderson House businesses. The steps we have taken in 2014 reflect that strategy. We continue to invest in people, technology and product capability in these businesses, which we believe will position them to become market leaders in scale, product offering and client service. IFG is now a strategically focused group, with well-positioned businesses and with strength and capital to pursue increased profitability and growth in our core markets.

For the first half of the year, revenue from continuing businesses was £34.1 million which compares to £31.7 million in the prior period, an increase of 8%. Total revenue, including discontinued businesses, was £42.3 million compared to £39.9 million in H1 2013, an increase of 6%.

James Hay Partnership is a leading platform provider in the retirement and wealth planning market. Saunderson House is an award-winning financial advisor to high net-worth clients, with a reputation for excellent client service and investment performance. The agreed sale, subject to regulatory approval, of our Irish pension administration and advisory businesses, the soon to be completed sale of our traditional UK Independent Financial Advisory (IFA) business (IFG Financial Services), together with other minor disposals of non-core businesses will, we believe, strengthen focus on our remaining businesses.

In James Hay Partnership, the sales momentum on the back of a significant and ongoing investment in the business has continued. SIPP sales, in the first six months of the year, were up 15% to 2,998 (H1 2013: 2,600). On a MiPlan equivalent basis, sales were 2,826 compared to 2,064 in H1 2013, an increase of 37%, with the success of the new modular MiPlan driving growth. We expect the first clients from our arrangement with Capita to begin transferring in Q3 2014 and transfers will continue into 2015.

The reduced rate of attrition on the legacy James Hay Partnership book, and the growth of new SIPP business are evidenced by the 70% increase in net SIPP additions. James Hay Partnership has now achieved both net revenue and book growth despite a challenging interest rate environment.

Saunderson House had a strong first half year and continues to benefit from the investment in client acquisition and business development with new client additions of 133 (H1 2013: 76), up 75% compared to the equivalent period in 2013.

Saunderson House was the major contributor to revenue growth, increasing 19% from £10.7 million to £12.8 million. James Hay Partnership revenue increased marginally from £18.2 million to £18.5 million, though the continued investment in the business has impacted the contribution to operating profit in the period.

Businesses sold or held-for-sale and treated as discontinued, contributed a loss of £0.1 million compared to a loss in H1 2013 of £0.4 million, although they contributed a £0.5 million profit at an operating level (H1 2013: £0.4 million loss).

Operating profit for the half year from continuing businesses was £2.3 million (H1 2013: £3.2 million), profit attributable to the owners of the parent company was £0.7 million (H1 2013: £1.6 million) and basic Earnings Per Share (EPS) from continuing businesses was 1.07 pence (H1 2013: 1.98 pence).

Adjusted operating profits were impacted by the continued investment in the business, with costs increasing year-on-year due to further investment in staff and technology to support growth, broaden the platform product and service capability and enhance operational efficiency. Operating profits from our core businesses were offset by exceptional costs of £1.2 million (H1 2013: £1.1 million), principally related to ongoing restructuring of the business and termination costs relating to senior staff departures, including the former Group CEO.

GROUP PERFORMANCE

For the first half of 2014, adjusted operating profit was £4.3 million (H1 2013: £5.2 million). Adjusted EPS (see note 2) decreased to 2.80 pence (H1 2013 re-presented: 3.71 pence). The reduced operating profit reflects the ongoing investment in the business, primarily in people and technology, with the benefits of revenue growth still to fall to the bottom line.

UNITED KINGDOM

United Kingdom - adjusted operating profit

Pension administration - James Hay Partnership

Progress continues in James Hay Partnership, as the business transitions from being a SIPP-only provider to being a platform for retirement wealth planning. Our new product, the MiPlan, was launched in March 2014. Its concept follows the guiding principles of our award-winning MiSIPP and offers a fair and flexible modular platform approach for both pension and non-pension specific tax wrappers. The MiPlan has been well received by clients and their advisors, and has contributed to the growth in new business. Impending changes announced in the UK budget have led to increased demand from clients with larger pension funds looking at investment options, as well as increased queries on drawdown options available.

In the first half of 2014, revenue from new business in James Hay Partnership was partially offset by the effect of attrition and a challenging interest rate environment as interest earned from banks on client deposits has been impacted by lower rates. In addition to this interest income, the components of revenue are annual fees, transaction charges and asset-based platform charges. Year to date average annual revenue per SIPP has reduced slightly due to the modular pricing of the MiPlan, lower interest income per SIPP and a marginal reduction in higher-fee components compared to 2013. The profit decline was primarily driven by the significant investment in the business, which has underpinned the positive impact on sales of new products. The strategic arrangement with Capita, who are seeking to exit their SIPP administration business, will contribute to the growth of new business in H2 2014.

At the end of June 2014, the James Hay Partnership business administered 41,289 SIPPs (H1 2013: 38,392) and served in excess of 49,000 individual clients. The rate of new business acquisitions and attrition is shown below:

The launch of the innovative modular MiPlan has broadened our product offering. Through a re-organised sales and servicing model, we offer advisors a high quality service, technical expertise, and competitive and innovative products whilst ensuring they and their clients experience high standards of administration, online access and expanded functionality. 

With new business momentum maintained, attrition at historically low levels and our enhanced product offering, we are reinforcing James Hay Partnership as a leading platform provider in its market. Further investment will continue in three key areas:

· investment in sales, marketing and distribution;

· investment in operational efficiency and capability; and

· investment in platform development.

With this investment, increasing organic sales and opportunities for strategic acquisitions, we see a strong basis for accelerated growth. We will continue to monitor the competitive landscape for acquisition opportunities and strategic partnerships, which make operational, financial and regulatory sense.

Independent financial advisory

Saunderson House delivered strong revenue growth in H1 2014, with the benefit of client additions during 2013 increasing revenue run rates. Revenue increased by 19%, and new client additions of 133 in H1 2014 were 75% ahead of the same period in 2013 (H1 2013: 76). Saunderson House now has over 1,500 clients with average annual fee income of circa £16,000 per client, broadly in line with 2013. Attrition rates remain de minimis, reflecting the quality of advisory relationships, the strong performance of the investment proposition and the award-winning client service.

The investment in people, and in particular in growing business development resources, has contributed to the positive trend in new client recruitment and is supported by a strong rate of referrals from existing clients. Simultaneously the investment in marketing has raised the profile of Saunderson House and increased brand recognition. The business won numerous awards during the period including:

· Winner - Adviser Firm of the Year at the Money Marketing Awards 2014

· Winner - Best Advisory Service, City of London Wealth Management Awards 2014

· Named - Top 25 UK financial planning company 2014

With seven client teams now fully functioning, the business continues to expand in its core market, whilst also focusing on adjacent markets. We believe there is substantial growth potential in Saunderson House. This will be delivered through a combination of increasing client development efforts, targeting previously underexploited market segments and efficiency gains through streamlined administration. We will also selectively look at acquisition opportunities, where the cultural, financial and client dynamic fit with our existing model.

The competitive landscape, within which Saunderson House operates, continues to evolve following the introduction of the Retail Distribution Review (RDR) and other market reforms. The impact of RDR on Saunderson House has been minimal given its longstanding fee-based model and consistent adherence to its core values of client-centricity, transparency and independence. We continue to invest in people and technology, enhancing operational processes in the business, which will drive efficiency and scalability as well as improved client service.

Other Independent Financial Advisor (IFA) comprises the businesses of IFG Financial Services and Siddalls France, which advises ex-patriots principally living in France. These businesses had resilient performances in H1 2014 and are treated as held-for-sale.

On 12 March 2014, we announced the sale of the IFG Financial Services businesses, our traditional non-core IFA business. We expect the closure of this transaction by early September 2014.

IRELAND

On 28 August 2014, the Group announced that it had signed an agreement for the sale of its Irish pension administration and advisory businesses to Willis Ireland for a maximum cash consideration of £10.8 million (€13.5 million), to be adjusted by a working capital adjustment on finalisation of the completion accounts.

The Group also announced that it is in advanced discussions in relation to the disposal of the general insurance businesses ARB and Insure4Less, the remaining businesses in the Irish Segment.

In the first six months, the Irish businesses recorded an operating profit of £0.5 million. The financial performance of the Irish Segment is dealt with through the discontinued line and explained in note 4 of the financial information.

Central overheads consist of costs related to the Company which are not allocated to the businesses, such as the costs of Non-Executive Directors and other specific costs to the Company, including stock exchange fees.

GROUP FINANCING

*excludes cash of £1.8 million held in disposal group

The decline in net cash from 31 December 2013 is principally a result of the payment of the 2013 final dividend of £2.7 million in H1 2014 (2012 final dividend paid in H2 2013) and increased working capital requirements due to the level of fees receivable, particularly in Saunderson House. The level of new client activity has increased debtors compared to December 2013. The completion of the sale of IFG Financial Services and the Irish pension administration and advisory businesses will materially increase cash balances in the second half of the year.

Net finance cost

The net finance cost, for the six-month period to 30 June 2014, is £0.2 million (H1 2013: £0.2 million).

SHAREHOLDER RETURNS

A final dividend for 2013 of 3.19 cents per share was approved by the shareholders on the 7 May 2014 and was paid on 30 May 2014. The Board expects to declare an interim dividend of 1.65 cents per share (current GBP equivalent: 1.32 pence per share), which is in line with 2013 and reflects the ongoing investment in the business.

BOARD CHANGES

On 28 July 2014, Paul McNamara joined as Group Chief Executive, taking over this role from Group Finance Director John Cotter, who had acted as Interim Group Chief Executive following the departure of former Group Chief Executive Mark Bourke in April 2014. There were no other changes to the Board.

OUTLOOK

The markets, in which we operate, continue to grow and benefit from recent tax and regulatory changes.

As we look to the remainder of the year and beyond, the Group is well positioned in these markets, with two successful and profitable businesses and a strong and liquid balance sheet, which provides the capability to accelerate the growth and development of both James Hay Partnership and Saunderson House. We have ambitions to further develop these businesses organically, and to pursue acquisitions which we believe will complement and enhance our existing businesses.

With strong management, profitable businesses and a clear strategic opportunity, we believe IFG Group is positioned for growth and improved financial performance in the second half of 2014 and into 2015. The investments in the business have driven growth in clients and assets and we expect this to translate into improved profitability in 2015.

Principal risks and uncertainties

The Transparency (Directive 2004/109/EC) Regulations 2007 require disclosure of the principal risks and uncertainties, which could have a material impact on the Group's performance over the remainder of the financial year. The risks and uncertainties affecting IFG Group plc in the six month period to 31 December 2014 are unchanged from those for the year ended 31 December 2013. The principal risks and uncertainties facing the Group are set out in detail in the 2013 Annual Report and Accounts at http://www.ifggroup.com/Libraries/2013_Reports/IFG_Annual_Report_FINAL_2013.sflb.ashx

The explanations, given in the 2013 Annual Report and Accounts, highlighted the following principal strategic and operational risks for IFG Group plc:

· environment and market conditions - risk that changes in macroeconomic factors may affect demand for the Group's services;

· competitor activity - exposure to increasing competition;

· acquisitions/disposals - risk that strategic acquisitions, disposals and other organic initiatives may not meet expectations;

· loss of key customers/intermediaries - risk of financial impact on the Group;

· loss of key management resources - ability to attract and retain highly skilled employees and executives is critical to the Group's continued success;

· customer claims experience - ability to contain level of loss arising from complaints from customers; and

· information technology systems - ability to avoid disruption to key information technology systems.

In addition, other risk areas such as regulatory, compliance and financial risks were highlighted in the 2013 Annual Report and Accounts and financial statements as follows:

· regulatory compliance - risk of regulatory actions and fines;

· fraud - risk of fraud and cybercrime fraud;

· capital markets, interest rates and treasury - exposure to the unpredictability of financial markets; and

· credit risk - exposure to financial loss as a result of a default by customers or counterparties with which the Group transacts business.

Consolidated Income Statement

Six months ended 30 June 2014

Consolidated Statement of Comprehensive Income

Six months ended 30 June 2014

Consolidated Balance Sheet

As at 30 June 2014

Consolidated Cash Flow Statement

Six months ended 30 June 2014

Cash and cash equivalents for the purpose of the statement of cash flows are comprised of cash and short-term deposits net of bank overdrafts. For the purpose of the cash flow statement, cash and cash equivalents include the following:

Consolidated Statement of Changes in Equity

Notes to the financial information

1. General information

IFG Group plc (the 'Company') and its subsidiaries (together 'the Group') provide a range of financial solutions including pension administration and independent financial advice. The Company is a public company, listed on the Irish and London Stock Exchanges and is incorporated and domiciled in the Republic of Ireland. The address of its registered office is IFG House, Booterstown Hall, Booterstown, Co. Dublin, Ireland. This condensed set of financial statements (financial information) was approved for issue by the board of directors (the 'Directors'), on 27 August 2014. This financial information has been reviewed, not audited.

The financial information presented herein does not amount to statutory financial statements that are required by Section 7 of the Companies (Amendment) Act, 1986 to be annexed to the annual return of the Company. The financial information does not include all the information and disclosures required in the annual financial statements.

The statutory financial statements, for the year ended 31 December 2013, will be annexed to the annual return and filed with the Companies Registration Office in Ireland. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis.

2. Basis of preparation

This financial information, for the six months ended 30 June 2014, has been prepared in accordance with the Transparency Regulations 2007, the Transparency Rules of the Central Bank of Ireland and International Accounting Standard 34 'Interim Financial Reporting' as adopted by the EU. This financial information should be read in conjunction with the financial statements for the year ended 31 December 2013, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

The accounting policies applied are consistent with those used to prepare the financial statements for the year ended 31 December 2013.

Going concern

The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future.

In forming this view, the Directors have reviewed the Group's solvency and liquidity position by reviewing the budget for a period not less than 12 months, the medium term plans as set out in the four-year plan which takes into account the cash flow implications and includes a sensitivity analysis based on the key business risks identified by the Group. The Directors have also considered surplus cash available to the Group, the availability of credit facilities, the review of the Group's committed borrowing facilities and the forecasted banking covenants.

Having assessed the Company's plans and relevant business risks, the Directors believe that the Group is well placed to manage these risks successfully and have a reasonable expectation that the Company and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future.

For these reasons, the Directors continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

Adoption of IFRS and IFRS Interpretations Committee ("IFRS IC") Interpretations

The following new standards, amendments to existing standards and interpretations have been adopted from 1 January 2014. There has been no impact to the reported results, statement of financial position or disclosures as a result of their application. These standards are:

· IFRS 10, 'Consolidated financial statements'

· IFRS 11, 'Joint arrangements'

· IFRS 12, 'Disclosure of interests in other entities'

· IAS 27 (revised 2011), 'Separate financial statements'

· IAS 28 (revised 2011), 'Associates and joint ventures'

· Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities

· Amendment to IFRS 10, 11 and 12 on transition guidance

· Amendment to IAS 32, 'Financial instruments: Presentation', on asset and liability offsetting

· Amendment to IAS 36 'Impairment of assets' on recoverable amounts disclosures

· Financial Instruments: Recognition and Measurement Amendment to IAS 39 'Novation of derivatives'

Comparative information

As disclosed in note 4, the Group announced that it had signed an agreement for the sale of its Irish pension administration and advisory businesses. The Group is also in advanced discussions with a counterparty for the sale of the business which includes ARB and Insure4less. Consequently, the Irish Segment is treated as a discontinued operation in the financial information, and the Consolidated Income Statement comparatives for 2013 have been re-presented accordingly.

Critical accounting estimates and judgements

In the six months ended 30 June 2014, there were no significant changes to the Group's approach to, and method of, making critical accounting estimates and judgments compared to those disclosed in note 4 of the 2013 Annual Report and Accounts.

Use of non-GAAP measures in the Group financial statements

The Group has identified certain measures that it believes will assist in the understanding of the performance of the business. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. These non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but management have included them as they consider them to be important comparables and key measures used within the business for assessing performance.

The following are key non-GAAP measures identified by the Group and used in the Group financial statements and in the financial information presented herein.

Adjusted operating profit

Adjusted operating profit is defined as operating profit, excluding acquisition related amortisation, exceptional items and discontinued operations. Management believes that excluding acquisition related amortisation expense, exceptional items and discontinued operations from the calculation of operating profit, on a non-GAAP basis, is useful because management excludes items that are not comparable when measuring operating profitability, evaluating performance trends, and setting performance objectives. It allows investors to evaluate the Group's performance for different periods on a more comparable basis by excluding items that impact comparability.

The reconciliation of adjusted operating profit to profit before income tax has been disclosed in note 3.

Adjusted earnings and adjusted earnings per share

Adjusted earnings is defined as profit attributable to owners of the parent company before amortisation of acquisition related intangible assets, exceptional items and discontinued operations, net of tax where applicable.

Adjusted earnings per share is defined as the continuing basic earnings per ordinary share adjusted for amortisation of acquisition related intangible assets, exceptional items and discontinued operations, net of tax where applicable.

Included in the table below are:

· a reconciliation between basic earnings per share to adjusted earnings per share; and

· a reconciliation between profit attributable to owners of the parent company to adjusted earnings.

The Group uses adjusted operating profit and adjusted earnings as measures of performance to eliminate the impact of items it does not consider indicative of ongoing operating performance due to their inherent unusual, extraordinary, or non-recurring nature or because they result from an event of a similar nature.

Net cash/(debt)

Net cash/(debt) is calculated as cash and cash equivalents less total debt. Total debt includes loans and borrowings, overdrafts and obligations under finance leases. The Group believes that the presentation of net cash/(debt) provides useful information to investors because management reviews net cash/(debt) as part of the management of overall liquidity, financial flexibility, capital structure and leverage (see note 9).

3. Segmental information

The Group has identified the Chief Executive Officer (CEO) of the Company as its Chief Operating Decision Maker (CODM), in line with the requirements of IFRS 8 'Operating segments'. The CEO reviews the Group's internal reporting in order to assess the allocation of resources and the performance of the Group. The operating segments have been identified based on these reports.

During the period, the Group was managed from a largely geographic perspective based on two reporting segments: United Kingdom (UK) and Ireland. However, as disclosed in note 4, the Group announced that it had signed an agreement for the sale of its Irish pension administration and advisory businesses. The Group is also in advanced discussions with a counterparty for the sale of the business which includes ARB and Insure4less. As a result, the Irish Segment is treated as discontinued. These sales are expected to complete before year-end and the Group's operating segments will be reviewed at that time.

The CEO assesses the performance of the segments based on a measure of adjusted earnings and reviews working capital and overall balance sheet performance on a Group wide basis.

The Group earned its revenues in these segments by way of fees from the provision of services and commissions earned in the intermediation of financial services products.

Goodwill is allocated by management to groups of cash-generating units on a reporting segment level and that is the level at which it is assessed for impairment. There has been no change to the allocation of goodwill relating to prior period business combinations.

The segment information provided to the CEO for reportable segments, for the period ended 30 June 2014, is as follows:

The segment results, for the period ended 30 June 2013, have been re-presented to reflect the change in adjusted operating profit as detailed in note 2 and to reflect the treatment of the Irish Segment as discontinued. The results are as follows:

4. Exceptional items and discontinued operations

The Group's accounting policy defines exceptional items as those items of income and expense that the Group considers to be material and/or of such a nature that their separate disclosure is relevant to a better understanding of the Group's financial performance.

Termination and restructuring costs

Termination and restructuring costs relate to the exit of the Group CEO in April 2014 and costs associated with other senior staff departures.

Transaction costs

Transaction costs relate to costs incurred in disposing of businesses in the UK Segment.

Provision against receivable from associate

During H1 2013, an impairment review was carried out on the recoverability of the balance due from Rayband Limited (associate of the Group). On review of the recoverable amount, an impairment provision of £1.1 million was recorded to provide against the full balance.

Discontinued operations

On 28 August 2014, the Board announced that it had signed an agreement for the sale of its Irish pension administration and advisory businesses to Willis Ireland for a maximum cash consideration of £10.8 million (€13.5 million) to be adjusted by a working capital adjustment on finalisation of the completion accounts.

For the purpose of the financial information, management has classified the Irish Segment as discontinued as it;

· represents a separate major line of business and geographical area of operations; and

· is part of a single co-ordinated plan to dispose of a separate major line of business and geographical area of operations.

The results of the Irish Segment are presented in the financial information as discontinued operations. The Consolidated Income Statement distinguishes the discontinued operations from continuing operations. The general insurance business, which formed part of the non-core activities in 2013, is the subject of a separate sale process and the Group is in advanced discussions for the sale of that business.

Financial information relating to this discontinued operation is set out below.

5. Income tax expense

The charge for taxation for the six months to 30 June 2014 is based on the estimated effective rate of taxation for the year.

The tax charge of £1.0 million (2013: £1.0 million) represents an effective tax rate of 48.3% (2013: 32.2%). The effective tax rate is higher than both the UK and Irish statutory tax rates of 21.5% (2013: 23.25%) and 12.5%, respectively, mainly due to non-deductible expenses.

6. Dividends

A final dividend for 2013 of 3.19 cents per share (GBP equivalent at rate of €1:£0.8337 was 2.66 pence by share) was approved by the shareholders on 7 May 2014 and was paid on 30 May 2014. The Board expects to declare an interim dividend of 1.65 cents per share (current GBP equivalent: 1.32 pence per share) in line with 2013.

7. Assets and liabilities classified as held-for-sale

As disclosed in note 4, the Irish Segment is classified as discontinued and its net assets of £14.4 million are classified as held-for-sale in the Consolidated Balance Sheet. The discontinued net assets of £14.4 million above relate to the Irish Segment, comprising the Irish pension administration and advisory businesses and ARB. The net assets of IFG Financial Services and Siddalls France are treated as continuing in the Consolidated Income statement but as held-for-sale in the Consolidated Balance Sheet.

8. Cash generated from operations

9. Analysis of net cash/(debt)

Other movements

Other movements include amortised facility costs and the impact of exchange rate movements arising on balances denominated in currencies other than GBP.

10. Financial risk management and financial instruments

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk and foreign currency risk), credit risk and liquidity risk.

The financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2013. There have been no changes in any risk management policies adopted by the Group.

Liquidity and capital resources

Compared to the year ended 31 December 2013, there was no material change in the contractual undiscounted cash outflows for financial liabilities. The Group has in place a £22.5 million facility with Barclays, with £7.0 million currently utilised. There have been no scheduled repayments of the new borrowings in the six month period to 30 June 2014. The next repayment of £7.0 million is due in November 2016.

Fair value estimation

All financial instruments, for which fair value is recognised or disclosed, are categorised within the fair value hierarchy (described as follows) based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities.

Level 2 - Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable).

Level 3 - Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable).

For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

At 30 June 2014, financial instruments at fair value were £44,000 (31 December 2013: £nil). There was no change in the valuation method of financial instrument assets or liabilities, carried at fair value, during the six month period to 30 June 2014.

The fair value of borrowings measured at amortised cost:

The fair value of the following financial assets and liabilities approximate their carrying amount: trade and other receivables, cash and cash equivalents, and trade and other payables.

11. Share capital and share premium

Share options amounting to 585,000 were exercised under the terms of the IFG Share Option Plan UK 2010 scheme, during the period ended 30 June 2014.

12. Commentary on other balance sheet items

Property, plant and equipment (PPE) and intangible assets

In the half year to 30 June 2014, the Group spent £1.8 million (H1 2013: £1.9 million) on PPE and intangible assets, including computer hardware and software to continue to enhance product capability and operational efficiency. The Group also charged amortisation and depreciation expense of £1.9 million (H1 2013: £1.7 million) in relation to continuing operations. Foreign exchange movement for these balances, in the period, was £0.4 million. There were also intangible assets of £9.0 million transferred to the disposal group.

At 30 June 2014, amounts authorised by the Directors as capital commitments but not contracted for were £2.0 million (December 2013: £4.0 million).

Trade and other receivables

The decrease in trade and other receivables from £22.4 million as at 31 December 2013 to £18.9 million as at 30 June 2014 is mainly due to the transfer of assets to the disposal group, offset by a movement in work in progress in the six month period.

Trade and other payables

The decrease in trade and other payables from £24.5 million as at 31 December 2013 to £18.4 million as at 30 June 2014 is due principally to the transfer of assets to the disposal group and payment of 2013 bonuses in Q1 2014.

Other reserves

The other reserves balance increased by £1.0 million from £10.8 million as at 31 December 2013 to £11.8 million as at 30 June 2014. This movement is mainly attributable to the half year charge for share options of £0.1 million and a £0.9 million loss on the translation of the non-sterling foreign operations and intangible assets.

13. Seasonality of operations

The Group's business operations are not significantly affected by any seasonal factors.

14. Related party transactions

Key management personnel compensation

The Group considers the Directors of the Company as its key management personnel. Key management in the business received compensation in the form of short-term benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of £1.3 million (this includes exit costs related to former CEO) for the six months ended 30 June 2014 (H1 2013: £0.6 million).

Transactions and balances with joint ventures and associates

At 30 June 2014, Group companies were owed £0.9 million (2013: £1.0 million) from IFG McGivern Flynn Teoranta (trading as 'Insure4less'). This receivable is unsecured and interest free. A provision of £0.9 million (2013: £0.9 million) has been recorded in the accounts against this balance.

Transactions involving entities in which key management have an interest

During the six month period to 30 June 2014, Group companies earned £nil (H1 2013: £nil) from Peajmor Limited, a legal entity which Patrick Joseph Moran, a former Director, controls. Cara Ryan, who was co-opted to the Board on 5 February 2013, is also a director of this entity and has a beneficial interest of 5%. At the period ended 30 June 2014, Group companies were owed £50,000 (H1 2013: £50,000) for services provided to Peajmor Limited. This amount, in line with the treatment of other investors who received similar services as Peajmor Limited, was provided for.

During the six month period to 30 June 2014, Group companies earned £19,000 (2013: £6,000) from key management for services provided. All fees were charged on an arm's length basis with our normal terms and conditions. At 30 June 2014, Group companies were owed £7,000 (2013: £29,000). A Group company acts as a pension trustee in the normal course of its business for certain Directors.

15. Contingencies

Given the nature of the business, the Group has a number of claims against it. The Group has procedures in place to assess the veracity of the claims and provision has been made to cover its best estimate of the exposure in respect of these matters. No provisions have been recorded for such contingencies as the Company's obligations under them are not probable and estimable, except for certain cases which already have been claimed.

The Company, along with some of its subsidiaries, has guaranteed Group borrowings of £7.0 million (December 2013: £7.0 million). There are certain share pledges for some subsidiary companies under the bank facility agreement.

The Company has provided rent guarantees totalling £1.5 million over the period to 2017 (H1 2013: £2.2 million).

The agreement for the 2012 sale of the International Segment contained certain limitations on the ability of the purchaser to claim against the Company for breach of warranty and under indemnities. In particular, the aggregate liability of the Company for all claims under the sale agreement (other than certain fundamental warranties) will not exceed the net consideration.

The Company will not be liable for any warranty or indemnity claim unless it exceeds £0.5 million. The Company will also have no liability for any warranty claim unless and until warranty claims exceed £1.3 million in aggregate (in which case the Company will be liable for the full amount and not just the excess over £1.3 million). In addition, claims in respect of non-tax warranties claims or indemnities must be brought within twenty-four months of the date of completion. Tax warranty and/or tax indemnity claims must be brought within seven years of the date on which completion occurs.

16. Post balance sheet events

On 2 May 2014, IFG Group plc announced that on 28 July 2014 Paul McNamara would join IFG as the new Group Chief Executive Officer and as an executive Director of the Group.

On 28 August 2014, the Board announced that it had signed an agreement for the sale of its Irish pension administration and advisory businesses to Willis Ireland for a maximum cash consideration of £10.8 million (€13.5 million), to be adjusted by a working capital adjustment on finalisation of the completion accounts. This transaction is expected to close in Q4 2014, subject to regulatory approval.

The Board also announced that it is in advanced discussions on the sale of ARB and Insure4less. If a transaction completes, it is likely to close in Q4 2014.

17. Statement of Directors' responsibilities

The Directors are responsible for preparing the financial information in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 'Interim Financial Reporting', as adopted by the EU.

The Directors are required to prepare the financial information on the going concern basis unless it is not appropriate. Since the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future, the financial information continues to be prepared on the going concern basis.

Each of the Directors, whose names and functions are outlined below, confirm that to the best of each persons' knowledge and belief:

· the condensed set of interim financial statements comprising the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cashflow Statement, the Consolidated Statement of Changes in Equity and the related notes have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the EU; and

· the financial information includes a fair review of the information required by:

(a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period and any changes in the related party transactions described in the last Annual Report that could do so.

The names and functions of the Directors as of 30 June 2014 are listed below:

Colm Barrington - Non Executive Director

Evelyn Bourke - Non-Executive Director

John Cotter - Executive Director - Group Finance Director and Interim CEO

John Gallagher - Non-Executive Chairman

Gary Owens - Executive Director - CEO Ireland

David Paige - Non-Executive Director

Robin Phipps - Non-Executive Director

Peter Priestley - Non-Executive Director

Cara Ryan - Non-Executive Director

Paul McNamara, Group Chief Executive, was co-opted to the Board on 28 July 2014.

During the six month period to 30 June 2014, Mark Bourke, who resigned on 27 April 2014, retired from the Board.

The directors of IFG Group plc accept responsibility for the information contained in this financial information. To the best of their knowledge and belief, having taken all reasonable care to ensure such is the case, the information contained in this financial information is in accordance with the facts and does not omit anything likely to affect the import of such information.

On behalf of the Board

P McNamara D Paige

(Executive Director - Chief Executive Officer) (Non-Executive Director)

27 August 2014

Forward-looking statements

Certain statements in this report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no guarantee that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no commitment to update any forward-looking statements whether as a result of new information, future events or otherwise.

Independent review report to IFG Group plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed the condensed consolidated interim financial statements, defined below, in the half yearly financial report of IFG Group plc for the six months ended 30 June 2014. Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations, 2007 and the Transparency Rules of the Central Bank of Ireland.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The condensed consolidated interim financial statements, which are prepared by IFG Group plc, comprise:

· the condensed consolidated income statement;

· the condensed consolidated statement of comprehensive income;

· the condensed consolidated balance sheet;

· the condensed consolidated cash flow statement;

· the condensed consolidated statement of changes in equity; and

· the explanatory notes to the condensed consolidated interim financial statements.

As disclosed in note 2, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The condensed consolidated interim financial statements included in the half-yearly financial report have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations, 2007 and the Transparency Rules of the Central Bank of Ireland.

What a review of condensed consolidated interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK & Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the United Kingdom and Ireland. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK & Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.

Responsibilities for the condensed consolidated interim financial statements and the review

The half-yearly financial report, including the condensed consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations, 2007 and the Transparency Rules of the Central Bank of Ireland.

Our responsibility is to express to the Company a conclusion on the condensed consolidated interim financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Transparency (Directive 2004/109/EC) Regulations, 2007 and the Transparency Rules of the Central Bank of Ireland and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers

Chartered Accountants

Dublin

27 August 2014

Notes:

(a) The maintenance and integrity of the IFG Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.

(b) Legislation in the Republic of Ireland governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.