Interim Results

IFG Group plc

Interim Results for the six months ended 30 June 2013

Today, 29 August 2013, IFG Group plc released its interim statement for the six months to 30 June 2013. Key highlights include:

Financial Highlights

· Revenue increase of 5% to £39.9 million (2012 HY: £38.0 million)

· Adjusted operating profit of £5.0 million (2012 HY restated: £4.7 million)

· Operating profit of £2.7 million (2012 HY: £3.3 million)

· Adjusted earnings per share up 54% to 3.55 pence (2012 HY restated: 2.31 pence)

· Strong balance sheet with net cash £18.9 million (31 December 2012: £20.6 million)

· Proposed interim dividend in cent per share maintained at 1.65

· Total assets under administration and advice up 6% from 31 December 2012 to circa £19.1 billion including £14.7 billion in James Hay Partnership, £3.1 billion in Saunderson House and circa €1.3 billion in Ireland

Business Highlights

· Strong new business momentum: James Hay Partnership H1 SIPP sales of 2,600 exceeded 2012 full year sales

· SIPP book now growing with 38,392 SIPPs under administration at the end of June 2013

· Strong performance in Saunderson House with increased revenue and profit: 76 new client wins in H1

· Saunderson House won the prestigious award for Best Advisory Firm at the Investment Week's Fund Manager of the Year Awards

· Improved performance in Ireland with 26 new client wins in Corporate Pensions

· Sound business fundamentals and strategic focus in core businesses

Commenting on the results, Mark Bourke, CEO of IFG Group plc, said:

"Operationally, the core businesses have delivered a good first half result and new business momentum continues. Strategically, we have clear direction. Financially, we have a strong and flexible balance sheet allowing further investment. The Group is in good shape and we are building a platform for substantial growth over the medium term."

For reference:

Mark Bourke Niamh Hore

Group CEO Investor Relations & Corporate Development

IFG Group plc IFG Group plc

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

Commentary on Interim Results

The Group has a strong balance sheet, sustained new sales momentum, sound business fundamentals and strategic focus. We continue to invest significantly in our people, technology and organisational infrastructure, and we are taking appropriate cost action where required.

In James Hay Partnership, the positive sales momentum, gathered in the second half of 2012, has been maintained. SIPP sales, in the first six months of the year, were 2,600 (H1 2012: 1,046). Both Saunderson House and IFG Corporate Pensions continue to perform well in their chosen markets and both are winning new clients.

For the first half of the year, revenue was £39.9 million which compares to £38.0 million in the prior period. Increases in revenue in Saunderson House and the Irish businesses more than offset a decline in revenue in James Hay Partnership, where the effects of attrition, new business lag and the once-off loss of income under RDR (Retail Distribution Review) had an adverse impact. The effects of attrition on the legacy James Hay book and the lag effect of new SIPP business are diminishing as the James Hay Partnership book has now achieved net book growth and continues to gain momentum.

Operating profit for the half year was £2.7 million (H1 2012: £3.3 million), profit attributable to the owners of the parent company was £1.6 million (H1 2012: £2.1 million) and basic earnings per share (EPS) was 1.56 pence (H1 2012: 1.68 pence). Strong operating profits from our core businesses were offset by an exceptional impairment provision of £1.1 million related to land held by Rayband Limited, a 35% associate of the Group.

DIVISIONAL PERFORMANCE

For the first half of 2013, adjusted operating profit was £5.0 million (H1 2012: £4.7 million). Adjusted EPS (see note 2) increased to 3.55 pence (H1 2012: 2.31 pence) reflective of the steady operational performance, investment in the business, a higher tax charge and lower interest charge along with a lower number of shares in issue following the £30.0 million return of capital to shareholders.

UNITED KINGDOM

Pensionadministration

Progress continues in James Hay Partnership. Alastair Conway, CEO, joined in March 2013. Mr. Conway brings valuable experience and success in the platform market. This will be particularly useful as the narrowly defined SIPP market and wider platform markets converge and grow over the coming years.

In the first half of 2013, revenue from new business in James Hay Partnership was offset by the effect of attrition and the loss of some rebate income following the introduction of RDR. This was a once-off loss of income, and not material, as the business model is not reliant on rebate income. Post-RDR, James Hay Partnership offers one of the most flexible advisor charging models, and transparent competitively priced platform charges.

The components of revenue are annual fees, transaction charges and asset-based platform charges. There is also an element of shared margin on cash held, which is a function of base rates and prevailing market pricing for deposits. Year to date average annual revenue per SIPP has remained stable. The profit decline to £3.4 million was primarily driven by the significant investment in the business which has already started to have a positive impact as we drive sales.

New business trends are strong, although there is a lag effect to establish and gather assets into new SIPP sales. For the first reporting period since the acquisition of James Hay on 10 March 2010, the number of new SIPPs exceeded attrition as 2,600 new SIPPs were added in the first half of the year (H1 2012: 1,046; FY 2012: 2,469). At the end of June 2013, James Hay Partnership business administered 38,392 SIPPs and currently services in excess of 45,000 individual clients. The rate of new business acquisitions are shown below:

The achievement of net book growth is a welcome development, and the sustained high level of new business sales has meant that we expect to reach the year five target we set on acquisition of 4,000 new SIPPs one year early (i.e. in the current year). Attrition levels of 8% annualised are also better than the original acquisition plan of 10%.

The popularity of the innovative modular iSIPP (MiSIPP) continues and we look forward to delivering an extended product range in the near future. Through a re-organised sales and servicing model, we will offer advisors a high quality service, technical expertise, and competitive products whilst ensuring they and their clients experience high standards of administration, online ease of access and functionality.

With new business momentum sustained and having conducted a comprehensive strategy review, we believe we have all the elements necessary to ensure James Hay Partnership is the leading provider in its market. Further investment will be focused on three key areas:

· investment in sales, marketing and distribution;

· investment in efficiency; and

· investment in platform development.

With this investment, and predominantly through organic means, there is significant opportunity for growth. Concurrently, we will continue to monitor the competitive landscape for acquisition opportunities which make operational, financial and regulatory sense. 

Independent financial advisory 

With more buoyant market conditions improving sentiment in the sector generally, the independent financial advisory business had a good half year performance. Revenue increased by 7%, which, combined with tight cost management, resulted in a 19% increase in adjusted operating profit compared to the first half of 2012.

Saunderson House Limited, our core IFA business, contributed strongly to this performance with 76 new client wins in the period (H1 2012: 59). Recovery rates of 87% were well in excess of the minimum targeted rate of 80%.

The competitive landscape, within which Saunderson House operates, continues to evolve following the introduction of the RDR earlier this year. The direct impact on Saunderson House has been minimal given its longstanding fee-based model and consistent adherence to its core values of client-service, transparency and independence. Looking forward, we envisage that opportunities will arise as a result of RDR as individual advisors and firms seek to join well-established firms, such as Saunderson House. 

Providing a full service of financial planning and investment advice, Saunderson House competes effectively on the basis of a best-in-class investment proposition with impressive performance track record, excellent client servicing and value for money. For the second year running, Saunderson House won the prestigious award for Best Advisory Firm at the Investment Week's Fund Manager of the Year Awards.

With seven client teams now in place, the business continues to grow steadily. We believe there is substantial growth potential in Saunderson House. This will be delivered through a combination of increasing client winning resources, targeting previously underexploited market segments and efficiency gains through streamlined administration.

Our other IFA business, trading as IFG Financial Services, has made a smooth transition to the new RDR regime and its proposition has been well received by clients. 

IRELAND

In the first half of the year, overall Ireland revenue increased by 25%. The core business continued to make progress and reported a result in line with expectations of a loss of £0.2 million (H1 2012: loss of £0.5 million). With the ongoing changes in the Irish pensions market, IFG Corporate Pensions is well placed to compete. Funds under management increased 14% from €725m to €825m and 26 new clients (H1 2012: 31) were secured in the period.

The non-core businesses reported a small profit as conditions in the general broking market improved somewhat.

GROUP FINANCING

The Group is in a strong financial position with net cash of £18.9 million. The decline in net cash from 31 December 2012 was marginal and will reverse in the second half of the year when cash accumulates.

The move to net cash from net debt over the past 12 months reflects the part use of proceeds from the sale of the International Segment to degear the Group. With a revised bank facility also put in place, the Group has the means and flexibility to invest in its core businesses.

Net finance cost

The net finance cost, for the six month period to 30 June 2013, is £0.2 million (H1 2012: £1.0 million). The decrease of £0.8 million in net finance cost is mainly attributable to the refinancing of the banking facility in November 2012 which reduced its debt from £42.3 million to £7.0 million.

SHAREHOLDER RETURNS

A final dividend for 2012 of 3.19 cent per share was approved by the shareholders on the 26 June 2013 and was paid on 12 July 2013. The Board expects to declare an interim dividend of 1.65 cent per share (current GBP equivalent: 1.41 pence per share), which is in line with the prior year period and reflects the investment in the business.

BOARD CHANGE

On 5 February 2013, Patrick Joseph Moran retired as Non-Executive Director and Chairman of the Board and, on the same day, John Gallagher and Cara Ryan were both co-opted to the Board. On 31 July 2013, Aidan Comerford resigned as Executive Director of Finance and Risk and stepped down from the Board as a Director with effect from 31 July 2013. We would like to thank Patrick Joseph Moran and Aidan Comerford sincerely for their contribution to the development of IFG over the past number of years.

OUTLOOK

As we look to the remainder of the year and beyond, the Group is well-positioned. We will continue to invest in the business and to build a platform for growth.

The fundamentals of our core businesses are sound. We have a strong balance sheet with clear strategic direction. New business trends support our core strategies. With further investment, we are confident of delivering substantial growth in the medium term.

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 2013 are unchanged from those for the year ended 31 December 2012. The principal risks and uncertainties facing the Group are set out in detail in the 2012 Annual Report and Accounts at http://www.ifggroup.com/gns/investor-relations/reports-presentations/2012.aspx.

The explanations, given in the 2012 Annual Report and Accounts, highlighted the following principal strategic and operational risks for IFG Group plc:

· environment and market conditions - risk that changes in macro economic 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 2012 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 2013

Consolidated Statement of Comprehensive Income

Six months ended 30 June 2013

Consolidated Balance Sheet

As at 30 June 2013

Consolidated Cash Flow Statement

 Six months ended 30 June 2013

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'), its subsidiaries and its interest in its joint venture and associate (together referred to as the 'Group') are engaged in the provision of financial services and commissions earned in the intermediation of financial services products. 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, County Dublin, Ireland. This condensed set of financial statements (financial information) was approved for issue by the board of directors (the 'Directors'), on 28 August 2013. 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 2012, 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 2013, 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 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) 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 2012.

Comparative information

As noted in the 2012 Annual Report and Accounts, final accounting for the acquisition of A.R.B Underwriting Limited and its subsidiary

A.R. Brassington & Co Limited (ARB) was completed. As a result, the June 2012 comparative information has been revised to include the effects of measurement period adjustments as if the accounting for the business combination had been completed on the acquisition date. The impact of the measurement period adjustment on 31 December 2011 Consolidated Balance Sheet was an increase in goodwill of £92,000, an increase in other intangible assets of £491,000 and an increase in deferred income tax liability of £62,000 with a net credit adjustment to non-controlling interest of £521,000.

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 and have taken into account the cash flow implications of the plans, which include a sensitivity analysis based on the key business risks identified by the Group. They 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 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, IFG Group plc 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.

New accounting standards

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2012, except for the adoption of new standards and interpretations effective as of 1 January 2013.

The Group applies, for the first time, an amendment to IAS 1 'Presentation of Financial Statements' and IFRS 13 'Fair Value Measurement'. As required by IAS 34, the nature and the effect of these changes are disclosed below:

IAS 1 'Presentation of Items of Other Comprehensive Income' - amendments to IAS 1

The amendments to IAS 1 introduce a grouping of items presented in Other Comprehensive Income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time (e.g. net gain or loss on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net gain or loss on available-for-sale financial assets) now have to be presented separately from items that will never be reclassified (e.g. actuarial gains or losses on defined benefit plans and revaluation of land and buildings). The amendment affected presentation only and had no impact on the Group's financial position or performance.

IFRS 13 'Fair Value Measurement'

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is

required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group.

IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7: 'Financial Instruments: Disclosures'. Some of these disclosures are specifically required for financial instruments by IAS 34.16A(j), thereby affecting the interim consolidated financial statement. The Group provides these disclosures in note 9.

Several other new standards and amendments apply for the first time in 2013. During the six months ended 30 June 2013, the Group reviewed the following standards and amendments to standards and concluded that they do not impact the annual consolidated financial statements or the interim condensed consolidated financial statements of the Group. They are as follows:

· IAS 16 (amendment) Property, Plant and Equipment;

· IAS 19 (revised) Employee Benefits;

· IAS 28 (revised) Investments in Associates and Joint Ventures;

· IAS 32 (revised) Financial Instruments: Presentation;

· Amendment to IFRS 7: Offsetting Financial Assets and Financial Liabilities;

· IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine; and

· Annual Improvements 2009-2011 (Annual Improvements).

Critical accounting estimates and judgements

In the six months ended 30 June 2013, 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 2012 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 excluding acquisition related amortisation expense, exceptional items and discontinued operations from the calculation of operating income, 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 the Divisional performance section.

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.

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.

In line with market best practice, we have amended our definition of adjusted earnings and adjusted EPS so that only amortisation of acquisition related intangible assets, exceptional items and discontinued operations, if applicable, are added back. The prior period comparatives have been adjusted to reflect this change in adjusted operating profit, adjusted earnings and adjusted earnings per share.

Included in the table below is:

· a comparison of the previous method of the calculation of adjusted earnings and adjusted earnings per share with the current method;

· a reconciliation between basic continuing 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 8).

3. Segmental information

In line with the requirements of IFRS 8 'Operating segments' the Group has identified its Chief Operating Decision Maker (CODM). The Group has identified the Chief Executive Officer (CEO) of the company as its CODM. 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.

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 2013, is as follows:

The segment results, for the period ended 30 June 2012, have been restated to reflect the change in adjusted operating profit as detailed in note 2. The results are as follows:

4. Exceptional items

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.

Provision against receivable from associate

During the period, 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 £1,142,000 was recorded to provide against the full balance. The impairment provision has been recorded within 'Other expenses'.

Redundancy and related costs

In H1 2012, the redundancy and related costs relate to charges that arose on the departure of staff in the UK segment.

5. Income tax expense

The charge for taxation for the six months ended 30 June 2013 is based on the estimated effective rate of taxation for the year.

Taxes on income, in the interim, period are accrued using the tax rate that would be applicable for expected total earnings for the financial year beginning 1 January 2013.

The increase in income tax expense, for the period ended 30 June 2013 compared to 30 June 2012, is largely explained by a non-cash reduction in the value of deferred tax assets in 2012 due to a reduction in UK tax rates. Further changes to the UK tax rate, reducing the tax rate from 23% to 20%, were not substantially enacted at the balance sheet date. In accordance with IFRS provisions, the rate of 23% is still used as a basis for the calculation of the deferred taxes stated. Should we apply the new corporate tax rate, deferred income tax liabilities as at 30 June 2013 would drop by £0.4 million and the current period income tax expense would have reduced by an equal amount to £0.5 million. However, as this change in rate was not substantively enacted at the balance sheet date the impact has not been reflected in the interim financial statements.

6. Dividends

A final dividend for 2012 of 3.19 cent per share was approved by the shareholders on 26 June 2013 and was paid on 12 July 2013. The Board expects to declare an interim dividend of 1.65 cent per share (current GBP equivalent: 1.41 pence per share). 

7. Cash generated from operations

8. 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. 

9. 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 2012. There have been no changes in any risk management policies adopted by the Group.

Liquidity and capital resources

Compared to the year end 31 December 2012, there was no material change in the contractual undiscounted cash outflows for financial liabilities. There have been no scheduled repayments of the new borrowings in the six month period to 30 June 2013. The next repayment of £7.0 million is due in November 2017.

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 2013, financial instruments at fair value were £nil (31 December 2012: £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 2013.

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.  

10. Share capital and share premium

Share options amounting to 62,500 were exercised under the terms of the IFG Share Option Plan UK 2010 scheme, during the period ended 30 June 2013.

During the period to 30 June 2013, there were no ordinary shares issued to the Employee Benefit Trust on behalf of the participants of the plan.

11. Commentary on other balance sheet items

Property, plant and equipment (PPE) and intangible assets

In the half year to 30 June 2013, the Group spent £1.9 million (H1 2012: £0.6 million) on PPE and intangible assets; mainly on computer hardware and software to continue to strive to improve efficiencies across the Group. The Group also charged amortisation and depreciation expense of £2.2 million (H1 2012: £3.3 million). Foreign exchange movement for these balances, in the period, was £0.6 million.

At 30 June 2013, amounts authorised by the Directors as capital commitments but not contracted for were £0.6 million to 31 December 2013 (H1 2012: £1.3 million).

Trade and other receivables

The increase in trade and other receivables from £22.4 million as at 31 December 2012 to £23.5 million as at 30 June 2013 is mainly due to a movement in work in progress in the six month period.

Trade and other payables

The increase in trade and other payables from £24.0 million as at 31 December 2012 to £24.3 million as at 30 June 2013 is due to the accrual of the 2012 final dividend and payment of performance related bonuses in the UK segment from the year end.

Other reserves

The other reserves balance reduced by £0.9m from £4.0 million as at 31 December 2012 to £3.1 million as at 30 June 2013. This movement is mainly attributable to the half year charge for share options £0.1m and a £0.8 million gain on the translation of the non-sterling foreign operations and intangible assets.

12. Seasonality of operations

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

13. Related party transactions

Key management personnel compensation

The Group considers the Directors of the Company as its key management personnel. Key management received compensation in the form of short-term benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of £0.6 million for the six months ended 30 June 2013 (H1 2012: £0.8 million).

Transactions and balances with joint ventures and associates

At 30 June 2013, Group companies were owed £1.1 million (31 December 2012: £1.1 million) by Rayband Limited, an Irish unlisted company and associate of the Group. During the period, the Group paid £1,000 in expenses on behalf of Rayband Limited. These advances are unsecured, interest free and have no fixed repayment date. Rayband Limited is controlled by Patrick Joseph Moran, the former Non-Executive Chairman of IFG Group plc. During the six month period, management have reviewed the recoverability of the balance and a provision for £1.1 million was recorded.

During 2010, IFG acquired an interest of 50% in IFG McGivern Flynn Teoranta (trading as 'Insure4less'), an Irish unlisted entity which the Group jointly controls. IFG McGivern Flynn Teoranta is engaged in the sale and marketing of insurance policies for general personal lines of insurance. At 30 June 2013, Group companies were owed £532,000 (31 December 2012: £501,000) from the joint venture for cash transfers, services rendered and expenses incurred on behalf of the joint venture. The Group also has a receivable from the joint venture relating to the sale of an insurance renewal book in 2010. The proceeds of the sale of £407,000 is payable in installments over 5 years commencing 2012. This balance is classified within 'Trade and other receivables' as payable to IFG within one year, as the terms of the repayment have been modified. These receivables are unsecured and interest free. During 2012, an impairment review was carried out on the recoverability of the balances and a provision for £800,000 was recorded.

Transactions involving entities in which key management have an interest

During the six month period to 30 June 2013, Group companies earned £nil (31 December 2012: £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 2013, Group companies were owed £50,000 (31 December 2012: £74,000) 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 2013, Group companies earned £3,000 (31 December 2012: £14,000) from Gargo Pension Trust, a pension trust held for Gary Owens, the Executive Director of the Irish segment. At the period ended 30 June 2013, Group companies were owed £25,000 (31 December 2012: £21,000) in relation to services provided for the pension trust.

During the six month period to 30 June 2013, Group companies earned £3,000 (31 December 2012: £11,000) from Leeson Pension Trust, a pension trust held for Mark Bourke, the Chief Executive Officer of the Group. At the period end, Group companies were owed £3,000 (31 December 2012: £10,000) in relation to services provided for the pension trust.

During the six month period to 30 June 2013, Group companies earned £nil (31 December 2012: £nil) from Kinvara Pension Trust, a pension trust held for Aidan Comerford, the Executive Director of Finance and Risk of the Group. At the period end, Group companies were owed £1,000 (31 December 2012: £1,000) in relation to services provided for the pension trust.

14. 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 £7,000,000 and guarantees of £1,618,000 totalling £8,618,000 (31 December 2012: £8,600,000). There are certain share pledges for some subsidiary companies under the bank facility agreement.

The Company has provided rent guarantees totalling £2,263,000 over the period to 2017 (31 December 2012: £2,547,000).

The agreement for the sale of the International Segment contains 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 £500,000. The Company will also have no liability for any warranty claim unless and until warranty claims exceed £1,350,000 in aggregate (in which case the Company will be liable for the full amount and not just the excess over £1,350,000). 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.

15. Post balance sheet events

On 31 July 2013, Aidan Comerford resigned as Executive Director of Finance and Risk and stepped down from the Board as a Director with effect from 31 July 2013.

16. 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, except for Aidan Comerford who resigned from the Board on 31 July 2013, 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 2013 are listed below:

Colm Barrington - Non Executive Director

Evelyn Bourke - Non-Executive Director

Mark Bourke - Executive Director - Chief Executive Officer

Aidan Comerford - Executive Director - Finance and Risk (resigned 31 July 2013)

John Gallagher - Non-Executive Chairman (co-opted 5 February 2013)

Gary Owens - Executive Director - Ireland

David Paige - Non-Executive Director

Robin Phipps - Non-Executive Director

Peter Priestley - Non-Executive Director

Cara Ryan - Non-Executive Director (co-opted 5 February 2013)

The Director that retired from the Board during the 6 month period to 30 June 2013 is:

Patrick Joseph Moran - Non-Executive Chairman (retired on 5 February 2013)

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

M Bourke D Paige

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

28 August 2013

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

Introduction

We have been engaged by the company to review the condensed set of financial statements in the Interim Report for the six months ended 30 June 2013, which consist of the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and related notes.

We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The Interim Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the first half results report in accordance with the Transparency (Directive 2004/109/EC) Regulations, 2007 and the Transparency Rules of the Central Bank of Ireland.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Interim Report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the Interim Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of 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 producing this report, 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and 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 and 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim Report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 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.

PricewaterhouseCoopers

Chartered Accountants

Dublin

28 August 2013

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.