19th Jul 2016 07:00
19 July 2016
ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")
Results for the six months to 30 June 2016
"Period of Transition"
Arbuthnot Banking Group announces a half yearly profit of £225m.
Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co., Limited and its associated company Secure Trust Bank PLC.
FINANCIAL HIGHLIGHTS
· Profit for the period £225m (H1 2015: £12.7m)
· Underlying profit before tax £2.0m (H1 2015: £1.4m)
· Reported loss before tax on continuing ops £2.4m (H1 2015: £0.4m)
· Earnings per share £11.11 (H1 2015: £0.44)
· Interim dividend per share 13p (H1 2015: 12p)
· Special dividend 25p to be paid on 27 July 2016 *
· Net assets £282m (H1 2015: £179m)
· Net assets per share £18.52 (H1 2015: £11.74)
· Net assets increased almost six fold since December 2011 (£3.12 per share)
OPERATIONAL HIGHLIGHTS
· Completed sale of Everyday Loans - gain on sale £117m
· Placed 33% stake in Secure Trust Bank generating a gain of £100m
· Purchased a £50m investment property in the West End
· Customer loans £657m (H1 2015: £584m)
· Customer deposits £940m (H1 2015: £770m)
· Assets Under Management £797m (H1 2015: £701m)
Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of Arbuthnot, said:
"The Group has completed two significant transactions this year, which have substantially increased its financial resources. We are well positioned to accelerate the growth of Arbuthnot Latham and also to invest in other opportunities that may arise given the current volatile economic environment."
The interim results and presentation are available at http://www.arbuthnotgroup.com.
Secure Trust Bank PLC is today releasing its interim statement and it should be read in conjunction with these results.
\* The Special dividend was indicated in the 2015 Final results as announced on 17 March 2016 and was dependant on the completion of the sale of Everyday Loans. The dividend was declared on 17 June 2016. ABG shares are currently trading "ex-div" of this dividend.
ENQUIRIES |
|
Arbuthnot Banking Group Sir Henry Angest, Chairman and Chief Executive Andrew Salmon, Group Chief Operating Officer James Cobb, Group Finance Director David Marshall, Director of Communications
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020 7012 2400
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Canaccord Genuity Ltd (Nominated Advisor) Sunil Duggal |
020 7665 4500
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Numis Securities Ltd (Broker) Chris Wilkinson Mark Lander |
020 7260 1000 |
Bell Pottinger (Financial PR) Ben Woodford Sam Cartwright |
020 3772 2588 |
Chairman's Statement
Arbuthnot Banking Group PLC
I can report that Arbuthnot Banking Group has delivered a profit for the period of £225m (H1 2015: £12.7m). This performance is the result of the completion of two significant corporate transactions. In April, following the agreement we reached with Non-Standard Finance in December 2015, the sale of Everyday Loans was completed. This generated a gain of £117m. In May we took the opportunity to reduce our holding in Secure Trust Bank from 51.9% to 18.9%. This transaction resulted in the sale of 6 million shares by way of an institutional placing at the price of £25.
The reduction in ownership means that STB is no longer a fully consolidated subsidiary of the Group and is now an associated company. As a result of this transaction the Group was able to recognise a gain of £100m. This marks a significant milestone in the history and development of the Group, as Arbuthnot Banking Group has now converted its investment in two subsidiaries into cash and most importantly regulatory capital. Currently, this makes it one of the most highly capitalised banking groups in the UK, with net assets of £282m, the equivalent of £18.52 per share. Since the end of 2011 the net assets of the Group have risen nearly six-fold from a little over £3 per share.
The Group will continue to invest in its remaining wholly owned subsidiary to accelerate the growth in the Private and also Commercial Banking business. Given the current market conditions, the Group will also explore other opportunities to enhance and diversify its income streams.
Meanwhile, given our reduced ownership, STB will now explore the opportunity of achieving a listing on the main market and will be able to expand its horizon for growth opportunities that enhanced access to capital markets will allow. We look forward to watching its continued success while maintaining a significant ownership investment.
Once again the quirks of IFRS accounting rules have done us no favours, and indeed do not make understanding these results easy for the readers. Both of the significant transactions and the earnings of the business in the first half are required to be presented as discontinued operations. This results in a loss before tax from continuing operations of £2.4m. However, going forward the Group will recognise 18.9% of the after tax profits of STB in its continuing profits, which are not included in these results. The Group also incurred certain remuneration costs totalling £2.3m in its continuing business segments that were dependant on, and fully attributable to the successful completion of the Everyday Loans transaction. These will not be recurring. Therefore on a pro forma basis the underlying performance of the Group's continuing operations is £2.0m, which is 45% up on the prior year.
Given the confidence in the future the Board has decided to increase the dividend by 1p to 13p, which will be paid on 30 September 2016 to shareholders on the register on 2 September.
The interim dividend comes on top of the special dividend of 25p that is due to be paid on 27 July 2016.
Private banking subsidiary - Arbuthnot Latham & Co., Limited
Arbuthnot Latham has reported a profit before tax for the half year of £4.5m (H1 2015: £3.7m) which includes the impact of the investment programme that commenced during 2015, with the building out of the commercial banking business and the banking infrastructure upgrade project. This has offset a 13% increase in revenues.
Customer assets have continued on a healthy growth trajectory, increasing by 14% to £657m (H1 2015: £584m), while deposits increased by 23% as the bank continued to attract new clients. Assets under management increased to £797m (H1 2015: £701m).
The investment in the commercial banking activities totalled £0.6m in the first half of the year. The proposition focuses on servicing SMEs and owner managed businesses providing its clients with excellent service. Three sector teams have already been established in London while further teams are due to establish a presence in Manchester and Exeter to cover the North and South West regions respectively. Staff numbers will reach thirty by the end of the third quarter and this will include seventeen relationship managers, all with twenty years or more commercial banking experience. We are confident that the proposition resonates well with both prospective clients and potential employees.
The bank was also delighted to complete the purchase of the property at 20 King Street in the West End on 23 June 2016 for £50.2m plus associated purchase costs. This is expected initially to be held as an investment property receiving approximately £1.8m rental income per year. In due course the bank will explore plans to establish a West End client office within the building, using the entrance on St James's Street.
Retail banking subsidiary - Secure Trust Bank PLC
Following the reduction in our shareholding in Secure Trust Bank, the Group will report its ongoing investment in the bank as Income from Associated Undertakings. This will represent the after tax earnings, which for the period from 15 June to the end of the first half was £0.3m.
The earnings of the bank up until this date have been reported as discontinued operations as per the accounting requirements.
On a pro forma basis the continuing Income from Associated Undertakings for the first half of 2016 would have been £2.5m (H1 2015: £1.6m).
Outlook
Given the result of the EU Referendum on 23 June 2016 the UK economy faces short-term economic volatility. However, Arbuthnot Banking Group is well positioned to prosper. It has not only divested its high margin lending business, which is the more likely to experience an uptick in impairments in an economic downturn, but also realised for cash a significant proportion of its investment in Secure Trust Bank. It is therefore highly capitalised and well placed to take advantage of any opportunities that may arise while continuing to invest in the growth of Arbuthnot Latham.
Consolidated Statement of Comprehensive Income
|
|
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| *Re-presented |
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| Six months ended 30 June | Six months ended 30 June |
|
|
| 2016 | 2015 |
| Note |
| £000 | £000 |
Interest income |
|
| 15,988 | 13,371 |
Interest expense |
|
| (4,105) | (3,315) |
Net interest income |
|
| 11,883 | 10,056 |
Fee and commission income |
|
| 7,708 | 6,891 |
Fee and commission expense |
|
| (376) | (180) |
Net fee and commission income |
|
| 7,332 | 6,711 |
Operating income |
|
| 19,215 | 16,767 |
Net impairment loss on financial assets |
|
| (388) | (708) |
Other income | 2 |
| 1,665 | - |
Profit from associates |
|
| 265 | - |
Operating expenses | 3 |
| (23,121) | (16,472) |
Loss from continuing operations before income tax |
|
| (2,364) | (413) |
Income tax (expense) / credit |
|
| (539) | 94 |
Loss after income tax from continuing operations |
|
| (2,903) | (319) |
Profit from discontinued operations after tax | 6 |
| 228,110 | 13,017 |
Profit for the period |
|
| 225,207 | 12,698 |
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Items that are or may be reclassified to profit or loss |
|
|
|
|
Available-for-sale reserve |
|
| (2,321) | - |
Available-for-sale reserve - Associate |
|
| (209) | - |
Tax on other comprehensive income |
|
| 262 | - |
Other comprehensive income for the period, net of tax |
|
| (2,268) | - |
Total comprehensive income for the period |
|
| 222,939 | 12,698 |
|
|
|
|
|
Profit attributable to: |
|
|
|
|
Equity holders of the Company |
|
| 163,781 | 6,507 |
Non-controlling interests |
|
| 61,426 | 6,191 |
|
|
| 225,207 | 12,698 |
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
|
Equity holders of the Company |
|
| 161,513 | 6,507 |
Non-controlling interests |
|
| 61,426 | 6,191 |
|
|
| 222,939 | 12,698 |
* Prior year numbers have been re-presented for discontinuing operations (see note 6). |
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|
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Earnings per share for profit attributable to the equity holders of the Company during the period |
|
|
|
|
(expressed in pence per share): |
|
|
|
|
- basic | 5 |
| 1,111.2 | 44.1 |
- diluted | 5 |
| 1,107.5 | 43.6 |
Consolidated Statement of Financial Position
|
|
| At 30 June | |
|
|
| 2016 | 2015 |
|
|
| £000 | £000 |
ASSETS |
|
|
|
|
Cash and balances at central banks |
|
| 293,348 | 224,678 |
Loans and advances to banks |
|
| 33,499 | 35,865 |
Debt securities held-to-maturity |
|
| 103,131 | 98,143 |
Derivative financial instruments |
|
| 1,228 | 1,634 |
Loans and advances to customers |
|
| 657,122 | 1,436,381 |
Other assets |
|
| 14,403 | 17,269 |
Financial investments |
|
| 2,469 | 1,108 |
Deferred tax asset |
|
| 1,714 | 1,770 |
Investment in associate |
|
| 87,114 | 943 |
Intangible assets |
|
| 7,004 | 11,100 |
Property, plant and equipment |
|
| 5,216 | 13,475 |
Investment property |
|
| 50,200 | - |
Total assets |
|
| 1,256,448 | 1,842,366 |
EQUITY AND LIABILITIES |
|
|
|
|
Equity attributable to owners of the parent |
|
|
|
|
Share capital |
|
| 153 | 153 |
Retained earnings |
|
| 283,079 | 118,822 |
Other reserves |
|
| (1,320) | (1,263) |
Non-controlling interests |
|
| - | 61,716 |
Total equity |
|
| 281,912 | 179,428 |
LIABILITIES |
|
|
|
|
Deposits from banks |
|
| 1,986 | 10,871 |
Deposits from customers |
|
| 939,539 | 1,604,929 |
Current tax liability |
|
| 488 | 5,487 |
Other liabilities |
|
| 20,335 | 31,256 |
Debt securities in issue |
|
| 12,188 | 10,395 |
Total liabilities |
|
| 974,536 | 1,662,938 |
Total equity and liabilities |
|
| 1,256,448 | 1,842,366 |
Consolidated Statement of Changes in Equity
| Attributable to equity holders of the Group |
|
| |||||
| Share capital | Revaluation reserve | Capital redemption reserve | Available-for-sale reserve | Treasury shares | Retained earnings | Non-controlling interests | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Balance at 1 January 2016 | 153 | 98 | 20 | 1,047 | (1,131) | 123,330 | 67,887 | 191,404 |
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Total comprehensive income for the period |
|
|
|
|
|
|
|
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Profit for the six months ended 30 June 2016 | - | - | - | - | - | 163,781 | 61,426 | 225,207 |
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|
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Other comprehensive income, net of income tax |
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|
|
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Revaluation reserve |
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|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
Available-for-sale reserve | - | - | - | (1,572) | - | - | (487) | (2,059) |
Available-for-sale reserve - Associate | - | - | - | (209) | - | - | - | (209) |
Total other comprehensive income | - | - | - | (1,781) | - | - | (487) | (2,268) |
Total comprehensive income for the period | - | - | - | (1,781) | - | 163,781 | 60,939 | 222,939 |
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|
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Transactions with owners, recorded directly in equity |
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Contributions by and distributions to owners |
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|
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|
|
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STB loss of control | - | (98) | - | 525 | - | (427) | (124,046) | (124,046) |
Equity settled share based payment transactions | - | - | - | - | - | (1,074) | 31 | (1,043) |
Final dividend relating to 2015 | - | - | - | - | - | (2,531) | (4,811) | (7,342) |
Total contributions by and distributions to owners | - | (98) | - | 525 | - | (4,032) | (128,826) | (132,431) |
Balance at 30 June 2016 | 153 | - | 20 | (209) | (1,131) | 283,079 | - | 281,912 |
| Attributable to equity holders of the Group |
|
| |||||
| Share capital | Revaluation reserve | Capital redemption reserve | Available-for-sale reserve | Treasury shares | Retained earnings | Non-controlling interests | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Balance at 1 January 2015 | 153 | 98 | 20 | (250) | (1,131) | 114,641 | 60,038 | 173,569 |
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Total comprehensive income for the period |
|
|
|
|
|
|
|
|
Profit for the six months ended 30 June 2015 | - | - | - | - | - | 6,507 | 6,191 | 12,698 |
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Other comprehensive income, net of income tax |
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|
|
|
|
|
|
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Cash flow hedging reserve |
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|
|
|
|
|
|
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Total comprehensive income for the period | - | - | - | - | - | 6,507 | 6,191 | 12,698 |
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|
|
|
|
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Transactions with owners, recorded directly in equity |
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Contributions by and distributions to owners |
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|
|
|
|
|
Equity settled share based payment transactions | - | - | - | - | - | 56 | 36 | 92 |
Final dividend relating to 2014 | - | - | - | - | - | (2,382) | (4,549) | (6,931) |
Total contributions by and distributions to owners | - | - | - | - | - | (2,326) | (4,513) | (6,839) |
Balance at 30 June 2015 | 153 | 98 | 20 | (250) | (1,131) | 118,822 | 61,716 | 179,428 |
Consolidated Statement of Cash Flows
|
|
| Six months ended 30 June | Six months ended 30 June |
|
|
| 2016 | 2015 |
|
|
| £000 | £000 |
Cash flows from operating activities |
|
|
|
|
Interest received |
|
| 87,027 | 73,555 |
Interest paid |
|
| (16,490) | (12,512) |
Fees and commissions received |
|
| 12,987 | 11,482 |
Cash payments to employees and suppliers |
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| (63,503) | (49,020) |
Taxation paid |
|
| (6,053) | (1,163) |
Cash flows from operating profits before changes in operating assets and liabilities |
|
| 13,968 | 22,342 |
Changes in operating assets and liabilities: |
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|
|
|
- net decrease in derivative financial instruments |
|
| 127 | 6 |
- net decrease/(increase) in loans and advances to customers |
|
| 956,385 | (283,097) |
- net decrease/(increase) in other assets |
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| 22,212 | (403) |
- net decrease in deposits from banks |
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| (53,319) | (16,786) |
- net (decrease)/increase in amounts due to customers |
|
| (990,299) | 410,644 |
- net decrease in other liabilities |
|
| (20,342) | (3,728) |
Net cash (outflow)/inflow from operating activities |
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| (71,268) | 128,978 |
Cash flows from investing activities |
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|
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Purchase of financial investments |
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| (462) | (1,580) |
Disposal of financial investments |
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| 837 | 1,602 |
Purchase of computer software |
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| (5,071) | (1,200) |
Proceeds from sale of software |
|
| 8,062 | - |
Purchase of property, plant and equipment |
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| (51,139) | (1,648) |
Proceeds from sale of property, plant and equipment |
|
| 8,815 | - |
Disposal of subsidiaries, net of cash and cash equivalents disposed |
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| 65,695 | - |
Purchases of debt securities |
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| (59,893) | (152,243) |
Proceeds from redemption of debt securities |
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| 41,424 | 145,783 |
Net cash inflow/(outflow) from investing activities |
|
| 8,268 | (9,286) |
Cash flows from financing activities |
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|
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|
Dividends paid |
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| (7,342) | (6,931) |
Net cash used in financing activities |
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| (7,342) | (6,931) |
Net (decrease)/increase in cash and cash equivalents |
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| (70,342) | 112,761 |
Cash and cash equivalents at 1 January |
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| 397,189 | 147,782 |
Cash and cash equivalents at 30 June |
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| 326,847 | 260,543 |
1. Operating segments
The Group is organised into three main operating segments as disclosed below:
1) Retail banking - incorporating household cash management, personal lending and banking and insurance services.
2) UK Private banking - incorporating private banking, wealth management and commercial banking.
3) Group Centre - ABG Group Centre management.
Transactions between the operating segments are on normal commercial terms. Centrally incurred expenses are charged to operating segments on an appropriate pro-rata basis. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet.
| Discontinued operations (Retail Banking) | Continuing operations |
| |||||
| ELL | STB | Total | Retail Bank Associate Income | UK Private banking | Group Centre | Total | Group Total |
Six months ended 30 June 2016 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Interest revenue | 11,137 | 57,498 | 68,635 | - | 16,112 | 68 | 16,180 |
|
Inter-segment revenue | - | - | - | - | (128) | (64) | (192) |
|
Interest revenue from external customers | 11,137 | 57,498 | 68,635 | - | 15,984 | 4 | 15,988 |
|
Fee and commission income | 147 | 7,981 | 8,128 | - | 7,708 | - | 7,708 |
|
Revenue from external customers | 11,284 | 65,479 | 76,763 | - | 23,692 | 4 | 23,696 |
|
Interest expense | - | (12,107) | (12,107) | - | (3,996) | 64 | (3,932) |
|
Add back inter-segment revenue | - | - | - | - | 128 | (128) | - |
|
Subordinated loan note interest | - | - | - | - | - | (173) | (173) |
|
Fee and commission expense | (124) | (779) | (903) | - | (376) | - | (376) |
|
Segment operating income | 11,160 | 52,593 | 63,753 | - | 19,448 | (233) | 19,215 |
|
Impairment losses | (2,610) | (12,172) | (14,782) | - | (388) | - | (388) |
|
Other income | - | - | - | - | 1,665 | - | 1,665 |
|
Income from associates | - | - | - | 265 | - | - | 265 |
|
Operating expenses | (6,016) | (29,073) | (35,089) | - | (16,218) | (6,903) | (23,121) |
|
Segment profit / (loss) before tax | 2,534 | 11,348 | 13,882 | 265 | 4,507 | (7,136) | (2,364) | 11,518 |
Income tax (expense) / income | (507) | (2,199) | (2,706) | - | (48) | (491) | (539) | (3,245) |
Segment profit / (loss) after tax | 2,027 | 9,149 | 11,176 | 265 | 4,459 | (7,627) | (2,903) | 8,273 |
Profit on sale of discontinued operations | 116,754 | 100,180 | 216,934 |
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Segment profit / (loss) after tax | 118,781 | 109,329 | 228,110 | 265 | 4,459 | (7,627) | (2,903) | 225,207 |
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Loans and advances to customers |
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| - | - | 657,122 | - | 657,122 | 657,122 |
Other assets |
|
| - | - | 515,489 | 83,837 | 599,326 | 599,326 |
Segment total assets | - | - | - | - | 1,172,611 | 83,837 | 1,256,448 | 1,256,448 |
Customer deposits |
|
| - | - | 939,539 | - | 939,539 | 939,539 |
Other liabilities |
|
| - | - | 179,577 | (144,580) | 34,997 | 34,997 |
Segment total liabilities | - | - | - | - | 1,119,116 | (144,580) | 974,536 | 974,536 |
Other segment items: |
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Capital expenditure |
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| - | (53,721) | - | (53,721) | (53,721) |
Depreciation and amortisation |
|
|
| - | (753) | (1) | (754) | (754) |
The "Group Centre" segment above includes the parent entity and all intercompany eliminations. Segment profit is shown prior to any intra-group eliminations. The UK private bank opened a branch in Dubai in 2013. Other than the Dubai branch, all other operations of the Group are conducted wholly within the United Kingdom and therefore geographical information is not presented.
| Discontinued operations (Retail Banking) | Continuing operations |
| |||||
| ELL | STB | Total | Retail Bank Associate Income | UK Private banking | Group Centre | Total | Group Total |
Six months ended 30 June 2015 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Interest revenue | 19,574 | 44,588 | 64,162 | - | 13,460 | 60 | 13,520 |
|
Inter-segment revenue | - | (159) | (159) | - | (89) | (60) | (149) |
|
Interest revenue from external customers | 19,574 | 44,429 | 64,003 | - | 13,371 | - | 13,371 |
|
Fee and commission income | 1,086 | 8,396 | 9,482 | - | 6,891 | - | 6,891 |
|
Revenue from external customers | 20,660 | 52,825 | 73,485 | - | 20,262 | - | 20,262 |
|
Interest expense | - | (9,769) | (9,769) | - | (3,162) | 172 | (2,990) |
|
Add back inter-segment revenue | - | 159 | 159 | - | 89 | (248) | (159) |
|
Subordinated loan note interest | - | - | - | - | - | (166) | (166) |
|
Fee and commission expense | (1,249) | (386) | (1,635) | - | (180) | - | (180) |
|
Segment operating income | 19,411 | 42,829 | 62,240 | - | 17,009 | (242) | 16,767 |
|
Impairment losses | (3,223) | (7,995) | (11,218) | - | (708) | - | (708) |
|
Operating expenses | (10,608) | (24,265) | (34,873) | - | (12,640) | (3,832) | (16,472) |
|
Segment profit / (loss) before tax | 5,580 | 10,569 | 16,149 | - | 3,661 | (4,074) | (413) | 15,736 |
Income tax (expense) / income | (1,131) | (2,001) | (3,132) | - | - | 94 | 94 | (3,038) |
Segment profit / (loss) after tax | 4,449 | 8,568 | 13,017 | - | 3,661 | (3,980) | (319) | 12,698 |
|
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Loans and advances to customers |
|
| 852,291 | - | 584,090 | - | 584,090 | 1,436,381 |
Other assets |
|
| 149,701 | - | 281,135 | (24,851) | 256,284 | 405,985 |
Segment total assets | - | - | 1,001,992 | - | 865,225 | (24,851) | 840,374 | 1,842,366 |
Customer deposits |
|
| 835,083 | - | 769,846 | - | 769,846 | 1,604,929 |
Other liabilities |
|
| 38,555 | - | 52,495 | (33,041) | 19,454 | 58,009 |
Segment total liabilities | - | - | 873,638 | - | 822,341 | (33,041) | 789,300 | 1,662,938 |
Other segment items: |
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|
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|
|
|
|
Capital expenditure |
|
| (1,435) | - | (1,313) | - | (1,313) | (2,748) |
Depreciation and amortisation |
|
| (799) | - | (587) | (5) | (592) | (1,391) |
2. Other income
As a result of the completion of the Visa Europe transaction the group realised a gain of £1.6m.
3. Operating expenses
Operating expenses include Group bonuses paid relating to the sale of the Everyday Loans Group amounting to £2.3m.
4. Underlying profit reconciliation
The profit before tax from continuing operations as reported in the operating segments can be reconciled to the underlying profit from continuing operations for the year as disclosed in the tables below.
Underlying profit reconciliation | Arbuthnot Latham & Co. | Arbuthnot Banking Group |
Six months ended 30 June 2016 | £000 | £000 |
Profit / (loss) before tax from continuing operations | 4,507 | (2,364) |
ABG Group bonuses relating to sale of ELL | - | 2,304 |
STB full year equivalent associate income* | - | 2,261 |
AL realised profit on AFS investment (Visa) | (1,665) | (1,665) |
Investment in operating systems | 260 | 260 |
AL commercial banking investment | 567 | 567 |
AL incremental office space | 650 | 650 |
Underlying profit | 4,319 | 2,013 |
|
|
|
* - STB associate income adjustment (excl. ELL & bonuses relating to ELL sale) as if received from 1 January 2016. | ||
Underlying profit reconciliation | Arbuthnot Latham & Co. | Arbuthnot Banking Group |
Six months ended 30 June 2015 | £000 | £000 |
Profit / (loss) before tax from continuing operations | 3,661 | (413) |
STB full year equivalent associate income* | - | 1,622 |
Investment in operating systems | 170 | 170 |
AL commercial banking investment | 13 | 13 |
Underlying profit | 3,844 | 1,392 |
|
|
|
* - STB associate income adjustment (excl. ELL) as if received from 1 January 2015. |
|
|
5. Earnings per ordinary share
Basic
Basic earnings per ordinary share are calculated by dividing the profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares 14,738,548 (2015: 14,738,548) in issue during the period. The weighted average number of ordinary shares has been restated for 2015 from 15,279,322, after taking into account treasury shares (390,274) and shares held in an ESOP trust (150,500).
Diluted
Diluted earnings per ordinary share are calculated by dividing the dilutive profit after tax attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, as well as the number of dilutive share options in issue during the period. The number of dilutive share options in issue at the end of June was 50,000 (2015: 200,000).
| Six months ended 30 June | Six months ended 30 June |
| 2016 | 2015 |
Profit attributable | £000 | £000 |
Total profit after tax attributable to equity holders of the Company | 163,781 | 6,507 |
Loss after tax from continuing operations attributable to equity holders of the Company | (2,903) | (319) |
Profit after tax from discontinuing operations (ELL) attributable to equity holders of the Company | 61,667 | 2,310 |
Profit after tax from discontinuing operations (STB) attributable to equity holders of the Company | 105,017 | 4,516 |
|
|
|
| Six months ended 30 June | Six months ended 30 June |
| 2016 | 2015 |
Dilutive profit attributable | £000 | £000 |
Total profit after tax attributable to equity holders of the Company | 163,781 | 6,507 |
Profit after tax from continuing operations attributable to equity holders of the Company | (2,903) | (319) |
Profit after tax from discontinuing operations (ELL) attributable to equity holders of the Company | 61,667 | 2,310 |
Profit after tax from discontinuing operations (STB) attributable to equity holders of the Company | 105,017 | 4,516 |
|
|
|
| Six months ended 30 June | Six months ended 30 June |
| 2016 | 2015 |
Basic Earnings per share | p | p |
Total Basic Earnings per share | 1,111.2 | 44.1 |
Basic Earnings per share from continuing operations | (19.7) | (2.2) |
Basic Earnings per share from discontinuing operations - ELL | 418.4 | 15.7 |
Basic Earnings per share from discontinuing operations - STB | 712.5 | 30.6 |
|
|
|
| Six months ended 30 June | Six months ended 30 June |
| 2016 | 2015 |
Diluted Earnings per share | p | p |
Total Diluted Earnings per share | 1,107.5 | 43.6 |
Diluted Earnings per share from continuing operations | (19.6) | (2.1) |
Diluted Earnings per share from discontinuing operations - ELL | 417.0 | 15.5 |
Diluted Earnings per share from discontinuing operations - STB | 710.1 | 30.2 |
6. Discontinued operations
The profit after tax from discontinued operations is made up as follows:
|
|
| Six months ended 30 June | Six months ended 30 June |
|
|
| 2016 | 2015 |
Discontinued operations |
|
| £000 | £000 |
Profit after tax from discontinued operations - ELL (up to 13 April 2016) |
|
| 2,027 | 4,449 |
Profit after tax on sale of discontinued operations - ELL |
|
| 116,754 | - |
Profit after tax from discontinued operations - STB (up to 15 June 2016) |
|
| 9,149 | 8,568 |
Profit after tax on sale of discontinued operations - STB |
|
| 100,180 | - |
Profit after tax from discontinued operations |
|
| 228,110 | 13,017 |
On 4 December 2015, the Bank agreed to the conditional sale of its non-standard consumer lending business, ELL, which comprises Everyday Loans Holdings Limited and subsidiary companies Everyday Lending Limited and Everyday Loans Limited, to Non Standard Finance PLC (NSF) for £106.9 million in cash subject to a net asset adjustment and £16.3 million in NSF ordinary shares. The Disposal completed on 13 April 2016, and on completion, NSF repaid intercompany debt of £108.1 million to STB. After selling costs of £6.2m, this resulted in a gain recognised on disposal of £113.3m.
Details of the profits of discontinued operations, net assets disposed of and consequential gain recognised on disposal and cash flow from discontinued operations is set out below.
|
|
| From 1 January to 13 April | Six months ended 30 June |
|
|
| 2016 | 2015 |
| Note |
| £000 | £000 |
Interest income |
|
| 11,137 | 19,574 |
Net interest income |
|
| 11,137 | 19,574 |
Fee and commission income |
|
| 147 | 1,086 |
Fee and commission expense |
|
| (124) | (1,249) |
Net fee and commission income |
|
| 23 | (163) |
Operating income |
|
| 11,160 | 19,411 |
Net impairment loss on financial assets |
|
| (2,610) | (3,223) |
Operating expenses |
|
| (6,016) | (10,608) |
Profit before tax |
|
| 2,534 | 5,580 |
Tax expense |
|
| (507) | (1,131) |
Profit after tax |
|
| 2,027 | 4,449 |
Profit on sale of business |
|
| 116,754 | - |
Total profit from discontinued operation |
|
| 118,781 | 4,449 |
|
|
|
|
|
Profit attributable to: |
|
|
|
|
Equity holders of the Company |
|
| 61,667 | 2,310 |
Non-controlling interests |
|
| 57,114 | 2,139 |
Profit after tax |
|
| 118,781 | 4,449 |
|
|
|
|
|
Earnings per share for profit attributable to the equity holders of the Company from discontinued operations during the year | ||||
(expressed in pence per share): |
|
|
|
|
- basic | 5 |
| 418.4 | 15.7 |
- diluted | 5 |
| 417.0 | 15.5 |
The following unaudited assets were sold as part of the sale of ELL: | |
| Recognised values on sale |
| 2016 |
| £000 |
|
|
Loans and advances to banks | 457 |
Loans and advances to customers | 116,744 |
Property, plant and equipment | 452 |
Intangible assets | 1,258 |
Deferred tax assets | 371 |
Prepayments and accrued income | 451 |
Other assets | 11 |
Total assets | 119,744 |
|
|
Intercompany funding | 108,088 |
Current tax liability | 3,212 |
Other liabilities | 4,748 |
Total liabilities | 116,048 |
|
|
Net identifiable assets / (liabilities) | 3,696 |
|
|
Consideration | 123,206 |
Costs | (2,756) |
|
|
Profit on sale of ELL | 116,754 |
|
|
The intercompany funding was repaid by NSF at the time of completion. |
|
Cash flow from discontinued operations - ELL |
|
| From 1 January to 13 April | Six months ended 30 June |
|
|
| 2016 | 2015 |
|
|
| £000 | £000 |
Cash flows from operating activities |
|
|
|
|
Interest received |
|
| 11,137 | 19,574 |
Fees and commissions received |
|
| 23 | (163) |
Cash payments to employees and suppliers |
|
| (8,626) | (13,831) |
Taxation (paid)/received |
|
| (507) | (1,131) |
Cash flows from operating profits before changes in operating assets and liabilities |
|
| 2,027 | 4,449 |
Changes in operating assets and liabilities: |
|
|
|
|
- net increase in loans and advances to customers |
|
| (3,618) | (11,427) |
- net decrease in other assets |
|
| (249) | 407 |
- net increase in other liabilities |
|
| 2,621 | 5,146 |
Net cash inflow/(outflow) from operating activities |
|
| 781 | (1,425) |
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
| (9) | (179) |
Net cash from investing activities |
|
| (9) | (179) |
Cash flows from financing activities |
|
|
|
|
Increase in borrowings |
|
|
|
|
Dividends paid |
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
| 772 | (1,604) |
Cash and cash equivalents at 1 January |
|
| 1,661 | 1,623 |
Cash and cash equivalents at 13 April / 30 June |
|
| 2,433 | 19 |
On 15 June 2016 Arbuthnot Banking Group ('ABG') sold 6 million shares in Secure Trust Bank PLC ('STB'), which reduced its shareholding in STB from 51.92% to 18.93%. From this date the Group accounted for its remaining shareholding in STB as an associate. After the sale of the 6 million shares, the Group retained Board representation and as such is seen to have significant influence over STB. The profit and cash flow from discontinued operations relating to ELL have been shown in the tables above. The ELL entities were subsidiaries of STB and therefore formed part of the STB number reported in the operating segments of ABG. The tables below therefore reflect the profit and cash flow from the STB group excluding ELL. The combined impact can be seen in the operating segments (see note 1 - Retail banking).
|
|
| From 1 January to 15 June | Six months ended 30 June |
|
|
| 2016 | 2015 |
| Note |
| £000 | £000 |
Interest income |
|
| 57,498 | 44,588 |
Interest expense |
|
| (12,107) | (9,769) |
Net interest income |
|
| 45,391 | 34,819 |
Fee and commission income |
|
| 7,981 | 8,396 |
Fee and commission expense |
|
| (779) | (386) |
Net fee and commission income |
|
| 7,202 | 8,010 |
Operating income |
|
| 52,593 | 42,829 |
Net impairment loss on financial assets |
|
| (12,172) | (7,995) |
Operating expenses |
|
| (29,074) | (24,265) |
Profit before tax |
|
| 11,347 | 10,569 |
Tax expense |
|
| (2,198) | (2,001) |
Profit after tax |
|
| 9,149 | 8,568 |
Profit on sale of shares |
|
| 100,180 | - |
Total profit from discontinued operation |
|
| 109,329 | 8,568 |
|
|
|
|
|
Profit attributable to: |
|
|
|
|
Equity holders of the Company |
|
| 105,017 | 4,516 |
Non-controlling interests |
|
| 4,312 | 4,052 |
Profit after tax |
|
| 109,329 | 8,568 |
|
|
|
|
|
Earnings per share for profit attributable to the equity holders of the Company from discontinued operations during the year | ||||
(expressed in pence per share): |
|
|
|
|
- basic | 5 |
| 712.5 | 30.6 |
- diluted | 5 |
| 710.1 | 30.2 |
The following unaudited assets were deconsolidated as part of the sale of 6 million shares in STB: | |
| Recognised values on sale |
| 2016 |
| £000 |
|
|
Cash and balances at central banks | 176,647 |
Loans and advances to banks | 27,618 |
Loans and advances to customers | 1,117,700 |
Other assets | 5,805 |
Financial investments | 15,030 |
Deferred tax asset | 606 |
Intangible assets | 7,017 |
Property, plant and equipment | 8,606 |
Total assets | 1,359,029 |
|
|
Deposits from banks | 25,000 |
Deposits from customers | 1,046,009 |
Current tax liability | 293 |
Other liabilities | 29,748 |
Total liabilities | 1,101,050 |
|
|
Net identifiable assets | 257,979 |
|
|
|
|
Profit on sale of shares were calculated as follows: | |
| 2016 |
| £000 |
Consideration received | 150,000 |
Less costs | (2,001) |
Less net identifiable assets | (257,979) |
Add back non-controlling interest | 124,046 |
Add back fair value of remaining investment in STB | 86,114 |
|
|
Profit on sale of STB | 100,180 |
Cash flow from discontinued operations - STB excluding ELL |
|
| From 1 January to 15 June | Six months ended 30 June |
|
|
| 2016 | 2015 |
|
|
| £000 | £000 |
Cash flows from operating activities |
|
|
|
|
Interest received |
|
| 68,635 | 44,667 |
Interest paid |
|
| (12,107) | (9,841) |
Fees and commissions received |
|
| 7,226 | 7,995 |
Cash payments to employees and suppliers |
|
| (51,552) | (32,413) |
Taxation (paid)/received |
|
| (6,034) | (1,977) |
Cash flows from operating profits before changes in operating assets and liabilities |
|
| 6,168 | 8,431 |
Changes in operating assets and liabilities: |
|
|
|
|
- net increase in loans and advances to customers |
|
| (165,976) | (229,688) |
- net decrease in other assets |
|
| 117,395 | (661) |
- net / in deposits from banks |
|
| (10,000) | 24,285 |
- net / in amounts due to customers |
|
| 12,936 | 226,690 |
- net increase in other liabilities |
|
| (5,031) | (1,164) |
Net cash (outflow)/inflow from operating activities |
|
| (44,508) | 27,893 |
Cash flows from investing activities |
|
|
|
|
Purchase of computer software |
|
| (1,754) | (433) |
Purchase of property, plant and equipment |
|
| (531) | (884) |
Disposal of property, plant and equipment |
|
| 2,179 | - |
Proceeds from disposal of businesses |
|
| 106,912 | - |
Proceeds from sale of property, plant and equipment |
|
| 456 | - |
Net cash inflow/(outflow) from investing activities |
|
| 107,262 | (1,317) |
Cash flows from financing activities |
|
|
|
|
Increase in borrowings |
|
|
|
|
Dividends paid |
|
| (10,005) | (9,500) |
Net cash used in financing activities |
|
| (10,005) | (9,500) |
Net increase in cash and cash equivalents |
|
| 52,749 | 17,076 |
Cash and cash equivalents at 1 January |
|
| 141,595 | 104,530 |
Cash and cash equivalents at 15 June / 30 June |
|
| 194,344 | 121,606 |
7. Basis of reporting
The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2015 statutory accounts as amended by standards and interpretations effective during 2016 and in accordance with IAS 34 "Interim Financial Reporting" (except for comparatives in the statement of financial position). The directors do not consider the fair value of the assets and liabilities presented in these financial statements to be materially different from their carrying value.
The statements were approved by the Board of Directors on 18 July 2016 and are unaudited. The interim financial statements will be posted to shareholders and copies may be obtained from The Company Secretary, Arbuthnot Banking Group PLC, Arbuthnot House, 7 Wilson Street, London EC2M 2SN.
Related Shares:
Arbuthnot