Unaudited Interim Results to 30 June 2021

FOR IMMEDIATE RELEASE 29 September 2021

Manx Financial Group PLC (the 'Company')

Unaudited Interim Results for the 6 months to 30 June 2021

Manx Financial Group PLC (LSE: MFX), the financial services group which includes Conister Bank Limited, Conister Finance & Leasing Ltd, Blue Star Business Solutions Limited, Edgewater Associates Limited and Manx FX Limited, presents the Interim results for the six months ended 30 June 2021.

Jim Mellon, Executive Chairman, commented: "Each of our business units is making steady progress. I have great confidence that the 2021 full year will see the Group well on the way to recording the levels of growth and profitability we experienced prior to the onset of this awful pandemic."

Copies of the Interim Report will shortly be available on our website www.mfg.im

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Dear Shareholders

I am pleased to present my half-year report for the period ended 30 June 2021.

The effects of COVID-19 on our various businesses continued to be an issue during the first half of 2021. Against this complex backdrop, it is encouraging to report that the Group's pre-tax profit for the first six months of the year was just over £1.1 million (2020: £1.0 million) - an increase of 13% on the same period last year. Each of our business units is making steady progress and, unless there is a resumption of lock-downs and associated measures - events which I believe to be extremely unlikely, I have great confidence that the 2021 full year will see the Group well on the way to recording the levels of growth and profitability we experienced prior to the onset of this awful pandemic.

Financial Review

Our operating income showed an increase of 6.2% to £9.0 million (2020: £8.5 million), including gains in both net interest income of 9.5% to £8.6 million (2020: £7.8 million), and in net trading income of 12.2% to £8.9 million (2020: £7.9 million). Our interest yield on loans fell slightly to 10.9% (2020: 11.6%), due mainly to our success in promoting the Government-backed loan schemes and our move away from sub-prime lending to prime and near prime propositions. Our interest expense on deposits showed a marginal decrease to 2.2% (2020: 2.4%). Operating expenses grew by 5.3% to £7.8 million (2020: £7.5 million), principally as a result of our prudent policy of recognising further impairments of £2.1 million (2020: £1.9 million) to protect the integrity of our balance sheet. As a result, and as already stated, our profit before tax increased to £1.1 million.

Turning to our balance sheet, despite the challenges of the trading environment, our net loan book has increased by 16.4% to £211.4 million (2020: £181.6 million), with impairments falling to 2.9% (2020: 3.3%) of the gross total. We continue to ensure that liquidity is maintained to provide a prudent buffer until the economic situation fully normalises and, as a result, our cash and debt securities stand at £57.2 million (2020: £64.0 million) - a decrease of 10.7%, keeping us in a more advantageous competitive position with our capacity for increased lending. Our customer deposits have grown by 6.2% to £231.2 million (2020: £217.8 million) and are carefully managed by our Treasury function, especially important at this time.

All of which leads to an 8.8% growth in our total asset base to £283.8 million (2020: £260.7 million). Shareholder equity has increased by 6.0% to £23.1 million (2020: £21.8 million), providing net assets per share, adjusted for the post-period script dividend, of 20.2 pence (2020: 19.1 pence).

Business Review

Conister Bank Limited ("Bank")

In my last Chairman's Statement, I promised to provide an update on the Bank's second VAT claim of £0.6 million. I am pleased to report that the Bank resolved its claim against the Isle of Man's Customs and Excise and has been paid in full. A subsequent claim of statutory interest due on this claim has been lodged with the first-tier tribunal in the UK, alongside other High Street Banks, but no value has been recognised in these financial statements for the claim.

The Bank continues to attract deposits at historically low market rates which will position it well against any inflationary pressure. With UK Gilts attracting negative interest rates, our treasury management strategy increased our cash balance to £25.6 million (2020: £6.0 million) and reduced our debt securities to £27.6 million (2020: £57.0 million).

The Bank continues to be supportive of both the Isle of Man and UK Governments' business support schemes and has now been accredited for the UK Government's Recovery Loan Scheme. Along with this, the Bank has repositioned its distribution to support more COVID-19 and recession-proof markets. This repositioning, including moving to a more prime customer base, drove loan book growth to 16.4% (2020: 6.8%), which is encouraging during a period of short-notice economic lockdowns.

This loan book growth resulted in the net interest income margin net of commissions increasing by 5.4% (2020: 2.2%) but we expect a normalised position over the life of these loans due to their prime nature and the Government guarantees.

Personnel expenses increased by £0.1 million as the Bank's headcount increased by nine as part of launching a new debt collection company, Manx Collections Limited, which generated £0.1 million of profitability in the first six months of trading. Overheads increased by £0.2 million, which is primarily due to the recovery costs on delinquent debts. During these uncertain times we continue to operate a prudent provisioning policy, with an allowance of £2.1 million (2020: £1.9 million). Finally, in relation to our cost base, depreciation and amortisation increased by £0.1 million to £0.4 million (2020: £0.3 million), driven by continued investment in our IT strategy.

Edgewater Associates Limited

Our independent financial advisory business remains the largest on the Isle of Man and had a difficult half-year with the trading conditions negatively impacted by COVID-19. Meeting clients became problematic and many sought to delay investment decisions due to market turbulence. Despite a UK economic recovery being underway, the sustained threat of inflation has dampened client confidence and stifled investment. As a result, profitability has remained broadly similar year-on-year despite assets under management increasing by 11.6% to £375.0 million (2020: £336.0 million) and renewal income increasing to £0.6 million (2020: £0.5 million).

Manx FX Limited ("MFX")

Our foreign exchange advisory business has had a remarkable half-year. Whereas our IFA business suffered from market volatility, MFX benefitted, demonstrating the importance in having a diversified financial services group. Turnover remained constant at £0.9 million, particularly trading in Euros and South African Rand following the wide-ranging impact of BREXIT. The business continues to have a very liquid balance sheet and declared an interim dividend to the Group of £0.6 million during the half-year (2020: £nil).

Beer Swaps Limited ("BSL")

On 14 June 2021, the Bank acquired further shares in BSL to increase its ordinary shareholding to 90% for a cash consideration of £0.3 million. For the period under ownership, BSL reported turnover of £0.6 million and a profit before tax of £0.2 million with net assets of £0.3 million. BSL is now the largest tank lessor in the UK brewing market.

Blue Star Business Solutions Limited ("BBSL")

BBSL has traded well through difficult economic conditions in which the economic impact of UK Government support schemes distorted the credit broker sector. However, and notwithstanding, BBSL has reported a £0.1 million profit (2020: £0.0 million). BBSL brokered £6.4 million (2020: £3.8 million) of which £3.8 million (2020: £2.1 million) was referred to the Bank. BBSL receives no loan interest income for lending placed with the Bank, but if it did, the imputed profitability for the first half would have been £0.5 million.

Strategic Objectives for 2021

Our strategic priorities for 2021 remain unchanged, and I will report on these in detail in my next Chairman's Statement. As ever, we strive to increase shareholder value, both in a prudent yet progressive manner. I repeat our 2021 key objectives:

§ Treating customers in both as fair and appropriate manner as possible. Our Treating Customers Fairly ("TCF") regime continues to be enhanced throughout our businesses and I am pleased to report that we have a negligible level of complaints, all of which have been settled to the customers' satisfaction. TCF is the cornerstone of all our operations as we make every effort to ensure that our customer service offering is second to none.

§ Adopting a pro-active strategy of managing risk. We have taken active steps to rebase our loan book away from sub-prime lending into prime and near-prime advances. In doing so, we recognise that the gross interest rates may diminish somewhat, but we anticipate that this erosion will be more than compensated by a lower incidence of arrears and write-offs. Our new segregated debt collection subsidiary - Manx Collections Limited - received its FCA licence in June 2021 and has already made significant progress not only in recoveries, but also in the early identification of problems, working with our customers to ensure a better outcome for the Bank. We continue to make prudential impairments as part of our policy of strengthening our balance sheet to minimise the risk of any unforeseen event adversely affecting our profitability.

§ Developing our core businesses by considered acquisitions. The current economic environment has produced a number of interesting potential acquisition opportunities. Each of these is evaluated carefully before commitment. We also recognise that our recent acquisitions have become significant contributors to our profitability.

§ Developing and implementing a coherent digital infrastructure. We recognise the importance of IT to service the operational requirements of a growing Group and to remain competitive. We continue with our investment in core systems which is already minimising the time taken to consider advances, allowing us to redeploy staff into more productive areas.

§ Managing the liabilities side of our balance sheet. Our new Treasury management function is working well, ensuring that our liquidity matches the anticipated growth of our lending. Our recently launched Isle of Man notice accounts continue to gain traction and we will continue to develop attractive deposit products with competitive interest rates for our depositors.

§ Managing our balance sheet to exceed the regulatory requirements for capital adequacy. We are well capitalised with our Total Capital Ratio standing at 17.8% (2020: 16.0%). We will maintain our strategy of converting Group retained earnings into Tier 1 capital for the Bank to support its lending growth. Meanwhile, we will continue to maintain a heightened level of cash liquidity.

§ Increase shareholder value. The discount between Net Asset Value and market capitalisation is an issue that we are working to rectify. The strategic aim of returning to being a dividend paying company has now been achieved and I see no reason to prevent us returning 10% of profit attributable to shareholders as a dividend for the foreseeable future. This, together with enhanced investor relations, should help the market in rerating our shares.

Current trading and outlook

The Isle of Man economy continues to be resilient under the strain of COVID-19 and our local new business growth shows no signs of slowing down. The UK also shows signs of a real return to growth with Gross Domestic Product for Quarter 2 this year increasing by 22.2% over the same quarter last year, and our UK lending growth reflects this. Taken together, I have every confidence that our full year will show a significant improvement in profitability providing the requirement for impairments remain at their current level.

The Bank's appointments as accredited lenders to the various Government-backed schemes will help second-half lending growth and we will continue to strengthen our balance sheet by maintaining adequate liquidity.

It remains for me, as always, to thank on behalf of the Board, our staff for their splendid efforts coping with the additional demands of dealing with the COVID pandemic whilst continuing to develop the Group in such a successful manner and, finally, to thank our shareholders for their enduring loyalty.

Jim Mellon

Executive Chairman

27 September 2021

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

Notes

For the six months ended 30 June 2021

1. Reporting entity

Manx Financial Group PLC ("Company" or "MFG") is a company incorporated in the Isle of Man. These condensed consolidated interim financial statements ("interim financial statements") as at and for the six months ended 30 June 2021 comprise the Company and its subsidiaries ("Group").

2. Basis of accounting

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the last annual consolidated financial statements as at and for the year ended 31 December 2020 ("last annual financial statements"). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

3. Functional and presentation currency

These financial statements are presented in pounds sterling, which is the Group's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. All subsidiaries of the Group have pounds sterling as their functional currency.

4. Use of judgements and estimates

In preparing these interim financial statements, management make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those described in the last annual financial statements other than those described in Note 17 - Acquisition of financial instrument.

5. Credit risk

A summary of the Group's current policies and practices for the management of credit risk is set out in Note 7 - Financial risk review and Note 37 - Financial risk management on pages 46 and 71 respectively of the Annual Financial Statements 2020.

An explanation of the terms Stage 1, Stage 2 and Stage 3 is included in Note 39 (G)(vii) on page 80 of the Annual Financial Statements 2020.

A. Summary of credit risk on loans and advances to customers