Interim Results

RNS Number : 1200Z

Manx Financial Group PLC

16 September 2009

 





Manx Financial Group PLC (Formerly Conister Financial Group PLC)

Unaudited Interim Results for the 6 months ended 30 June 2009

Manx Financial Group PLC ('MFG' or 'the Group') is pleased to announce its financial results for the six months ended 30 June 2009. The Group comprises Conister Trust, the banking division that was formed in the Isle of Man in 1935 which specialises in providing finance for personal and business use, and TransSend, the prepaid card division formed in 2006.

Highlights 

MFG, the Holding Company:

• consolidated financial performance improved by £1.0 million as the half year loss attributable to the owners has reduced to £1.8 million (June 2008: loss of £2.8 million).

                    • 22% improvement in the consolidated cost to income ratio compared with the first half year of 2008.

                    • Group central costs have reduced by 49% to £0.7m compared with the first half year of 2008.

                    • Company headcount reduced by 14% since December 2008 following a reorganisation of the Isle of Man operational processes.

Conister Trust Limited, the Bank:

• strongly capitalised with a Risk Asset Ratio of 17.8% (December 2008: 17.6%) and a Tier 1 capital ratio of 17.1% (December 2008: 15.6%), higher than the UK's four leading retail banks.

• Risk Weighted Assets managed down by 21%.

•  Ratio of loans to deposits has improved by 8.9% as funding position strengthened.

•  Loss before tax of £0.7 million (June 2008: loss of £0.1 million) mainly due to the lower interest rate environment, a prudent impairment provision policy and a provision for the Depositors' Compensation Scheme.

•  Headcount reduced by 14% since December 2008 following the closure of UK branch offices and a reorganisation of the Isle of Man operational processes.

•  New banking system was successfully implemented in July as planned and within budget.

TransSend Holdings Limited, the prepaid cards business:

• incurred £0.2 million of further restructuring costs to facilitate profitability.

•  Investment necessary reduced to £0.3 million (June 2008: £1.5 million).

•  Repositioned as a prepaid card issuer and new strategic relationships with programme managers to widen spectrum of opportunities for prepaid cards.

•  Headcount reduced by 81% since December 2008 following the closure of the UK operation and the reorganisation of the Isle of Man operational processes

Contacts: 

Manx Financial Group PLC

Denham Eke, Chief Executive

Tel: [phone]

Britton Financial PR Tim Blackstone Tel: [phone] Beaumont Cornish Limited Roland Cornish Tel: [phone]

The financial information set out below comprises non-statutory accounts. The financial information for the six months ended 30 June 2009 has been extracted from published accounts for the six months ended 30 June 2009.

Chairman's Statement

Delivering in unprecedented circumstances

The global financial landscape continues to foster uncertainty and industry conditions have changed both fundamentally and permanently. During this period our strategy has been to continue to position the Group conservatively - we have no exposure to either the mortgage or interbank wholesale funding markets - whilst we focus on enhancing our core capabilities. This path will enable us to deliver a sustainable platform for long-term growth and a return to profitability. 

In achieving this goal, we remain committed to improving our systems, rationalising our costs and concentrating on what we do best. We are focused on lending on and from the Isle of Man, both to individuals and corporates, where the island's economy is performing well and, at this stage, we have confidence that 2009/10 will be another year of sustained growth. The Isle of Man has built diversity and strengthened its economy over the last quarter of a century which has provided considerable protection to the current economic downturn. We anticipate that this stable platform and the island's status as a well-regulated global finance centre will provide significant opportunities. At the same time we continue to minimise our exposure to legacy issues and maintain a conservative approach to provisioning.

Despite the adverse global economic environment, the careful positioning of the Group has led to an improved financial result year-on-year. The Bank continues to be strongly capitalised and with clear liquidity. Our independence has been of considerable benefit, together with our rigorous approach to risk management and we have maintained a strong control on costs. 

We intend to build on this momentum with a clear strategy of diversifying into complementary product lines to augment our current customer offering.

Financial review

I am pleased to report we improved our financial performance for the first six months of the year as losses reduced to £1.8 million (2008: £2.8 million), an improvement of £1.0 million, (36%). This improved result was achieved despite the continued deterioration in market conditions and a considerable reduction in our operating income.

The improvement relates to cost savings within the Group: in particular, the central overhead reduced by £0.6 million and the performance of our restructured prepaid card division improved by £1.2 million. These positive results were partially offset as net interest income in our banking division decreased by £0.9 million as yields dropped as a result of the lower Bank of England base rate and a fall in income from asset financing.

Costs have been tightly controlled, with a 22% improvement in the cost to income ratio. 

Conister Trust 

As planned, we have reduced the balance sheet total assets by £3.5 million since the end of 2008 and have managed our Risk Weighted Assets down by 21%. The ratio of loans to deposits has improved by 8.9% as we have strengthened our funding position. With a capital ratio of 17.8% we have capital resources in excess of our regulatory minima and continue to have a capital ratio higher than the UK's four leading retail banks. 

As part of the Group-wide rebranding exercise in October 2009, Conister Trust Limited will change its name to Conister Bank Limited which more accurately reflects the range of banking services we will be providing. 

Mediation regarding litigation funding has been concluded and it is now expected that run-off can continue to a conclusion. 

The new banking system was successfully implemented in July as planned and within budget. The system will enhance both the products and service we offer our customers and will lead to further income opportunities.

TransSend

The repositioning of TransSend to becoming a prepaid card issuer sponsor is now complete and we have entered into strategic relationships with a number of programme managers that will provide coverage over the spectrum of opportunities for prepaid cards. Card issuance under this model will commence in the second half of 2009. 

Board changes and people

We have further strengthened our Board by appointing Nick Sheard, who will retain his responsibilities as the Group's Head of Risk and Compliance, as a main Board Director . Compliance is embedded within our culture and Nick's appointment will strengthen our decision making process during these turbulent and challenging economic times. 

As always, I would like to thank our staff for their continuing commitment and dedication to the Group, our customers and our shareholders.

Outlook

We anticipate the positive trends in our trading performance in the first half of the year to continue provided the environment does not change significantly. Thus, year-on-year, we expect our second half's results to show a continued improvement.

Whilst we will continue to consolidate to provide further stability to the Group, we also intend to actively consider external opportunities where these complement our core competencies. It is clear that organic growth alone is inadequate to maximise shareholder value. These opportunities will inevitably include considering strategic acquisitions. I will, of course, keep shareholders informed as any initiative crystallises.

Jim Mellon

Executive Chairman

15 September 2009

Manx Financial Group PLC

Condensed Consolidated Statement of Comprehensive Income

	Notes			6 months to 30 June 2009 £000 (unaudited)			6 months to 30 June 2008 £000   (unaudited)					12 months to 31 December 2008 £000 (audited)
Interest income	2			2,931			3,725					7,140
Interest expense	3			(1,880)			(1,733)					(3,552)
Net interest income	3			1,051			1,992					3,588
Fee and commission expense				(226)			(322)					(709)
Net trading income				825			1,670					2,879
Other operating income				392			298					805
Programme costs				(338)			(147)					(505)
Foreign exchange gain				-			-					31
Operating income	3			879			1,821					3,210
Personnel expenses				(1,226)			(2,414)					(4,421)
Depreciation				(26)			(42)					(77)
Other expenses				(879)			(1,979)					(3,366)
Provision for impairment on loan assets				(396)			(292)					(1,363)
Realised loss on sale of available-for-sale financial assets			-					-						(454)
Dividend income from financial assets carried at fair value through profit or loss				-			-					6
Unrealised gain/(loss) on financial assets carried at fair value through profit or loss				94			(77)					(162)
Loss before specific items	3			(1,554)			(2,983)					(6,627)
Net impairment loss on available-for-sale financial instruments			-						-					(9,638)
Depositors' Compensation Scheme	4		(89)						-					-
Restructuring costs	5			(165)			-					(1,425)
Project costs	6			-			-					(494)
Legal costs related to net impairment of available-for-sale financial instruments			-					-					(76)
Scheme of Arrangement costs	7			-			(45)					(45)
Loss before income tax expenses				(1,808)			(3,028)					(18,305)
Income tax expenses				-			-					-
Loss for the year on continuing operations				(1,808)			(3,028)					(18,305)
Other comprehensive income:
Available-for-sale gains taken to equity				7			271					-
Gain/(loss) on pension scheme				40			(48)					(43)
Total comprehensive income/(loss) for the period attributable to owners				(1,761)			(2,805)					(18,348)
Basic and diluted loss per share (pence)	8			(2.85)			(5.92)					(32.80)

  Manx Financial Group PLC

Condensed Consolidated Statement of Financial Position

	Notes		30 June 2009 £000 (unaudited)		30 June 2008 £000   (unaudited)		31 December 2008 £000 (audited)
Assets
Cash and cash equivalents			12,428		15,303		20,589
Financial assets at a fair value through profit or loss	9		230		221		136
Available-for-sale financial instruments	10		10,493		5,305		-
Loans and advances to customers	11	1	48,549		56,333		55,916
Property, plant and equipment			164		338		192
Trade and other receivables	12		1,144		676		1,383
Total assets			73,008		78,176		78,216
Liabilities
Customer accounts			63,691		57,600		66,058
Creditor and accrued charges	13		2,077		1,075		3,094
Pension liability			221		335		314
Total liabilities			65,989		59,010		69,466
Equity
Called up share capital			15,854		14,079		15,849
Share premium account			6,142		2,732		6,141
Retained earnings			(14,977)		2,355		(13,240)
Total equity			7,019		19,166		8,750
Total liabilities and equity			73,008		78,176		78,216

  Manx Financial Group PLC

Condensed Consolidated Statement of Cash Flows

		Notes			30 June 2009 £000 (unaudited)				30 June 2008 £000   (unaudited)				31 December 2008 £000 (audited)
Reconciliation of loss before taxation to operating cash flows
Loss before income tax expense					(1,808)				(3,028)				(18,305)
Realised loss on financial assets held at fair value through profit or loss					-				-				454
Movement in financial assets held at fair value through profit or loss					(94)				77				162
Net impairment loss on financial assets					-				-				9,638
Dividend income from financial assets carried at fair value through profit or loss					-				-				(6)
Loss on disposal of property, plant and equipment					2				17				104
Depreciation charge					26				42				77
Share based payment expense					24				367				315
Pension scheme					(53)				(30)				(34)
(Increase)/decrease in trade debtors					239				394				(651)
(Decrease)/increase in trade creditors					(1,017)				(463)				1,057
Net cash outflow from trading activities					(2,681)				(2,624)				(7,189)
Decrease in loans and advances to customers					7,367				404				821
(Decrease)/increase in deposit accounts					(2,367				(4,373)				4,085
Cash inflow/(outflow) from operating activities					2,319				(6,593)				(2,283)
CASH FLOW STATEMENT
Cash flows from operating activities
Cash inflow/(outflow) from operating activities						2,319				(6,593)				(2,283)
Taxation paid						-				-				(1)
Net cash inflow/(outflow) from operating activities						2,319				(6,593)				(2,284)
Cash flows from investing activities
Purchase of tangible fixed assets						-				(106)				(96)
Purchase of available-for-sale financial instruments	10					(10,486)				(908)				(909)
Sale of financial assets carried at fair value through profit or loss						-				-				127
Dividend income from financial assets carried at fair value through profit or loss						-				-				346
Net cash outflow from investing activities						(10,486)				(1,014)				(532)
Cash flows from financing activities
Issue of ordinary share capital						6				5				-
Issue of subordinated liabilities						-				-				500
Net cash inflow from financing activities						-				5				500
Decrease in cash and cash equivalents						(8,161)				(7,602)				(2,316)
Cash and cash equivalents at beginning of period						20,589				22,905				22,905
Cash and cash equivalents at end of period						12,428				15,303				20,589

  Manx Financial Group PLC

Condensed Consolidated Statement of Changes in Equity

	Share Capital £000	Share Premium £000	Retained Earnings £000	Total 30 June 2009 £000	Total 30 June 2008 £000	Total 31 December 2008 £000
Balance brought forward	15,849	6,141	(13,240)	8,750	17,473	17,473
Loss for the year	-	-	(1,808)	(1,808)	(3,028)	(18,305)
Other comprehensive income	-	-	47	47	223	(43)
Transactions with owners:
Arising on shares issued in the  period/ year	5	1	-	6	4,131	9,310
Share based payment expense	-	-	24	24	367	315
Balance carried forward	15,854	6,142	(14,977)	7,019	19,166	8,750

Manx Financial Group PLC

Notes to the Consolidated Financial Statements

1. Preparation of the interim statements

The interim financial statements are unaudited. The financial information included in this interim financial report for the six months ended 30 June 2008 was also unaudited and subject to a review opinion by the Company's Independent Auditors.  

The interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The accounting policies (unless stated otherwise) have been applied consistently with those presented in the Annual Report for the twelve months to 31 December 2008 and comply with IFRSs and IFRIC interpretations applicable to companies reporting under IFRS.

 2. Interest income

Interest income comprises:			6 months to 30 June 2009 £000 (unaudited)		6 months to 30 June 2008 £000   (unaudited)		12 months to 31 December 2008 £000 (audited)
Interest income - asset financing			2,861		3,282		6,447
Interest income - deposits			70		443		693
Total			2,931		3,725		7,140

3. Segmental analysis 

Segment information is presented in respect of the Group's business segments. The Directors consider that the Group currently operates in one geographic segment, the Isle of Man and UK. The primary format, business segments, is based on the Group's management and internal reporting structure. The Directors consider that the Group operates in three product orientated segments in addition to its investing activities: Asset and Personal Finance (including provision of HP contracts, leases, personal loans and premium finance); Litigation Finance; and a prepaid card and BIN sponsorship division, TransSend. The Group ceased to provide new Litigation Finance lending in June 2007. 

							Asset and																			Total
							Personal			Litigation											Investing					30 June
For the six months to 30 June 2009						Finance						Finance					TransSend			Activities					2009
						£000						£000					£000			£000					£000
Interest income - asset financing							2,732			129					-						-					2,861
Interest income - deposits							70			-					-						-					70
Interest expense							(1,839)			(41)					-						-					(1,880)
Net interest income							963			88					-						-					1,051
Operating income							782			98					(1)						-					879
Provision for impairment							(145)			(251)					-						-					(396)
Loss before unallocated items							(394)			(272)					(321)						97					(890)
Group central costs							-			-					-						-					(664)
Loss before specific items																										(1,554)
Capital expenditure							-			-					-						-					-
Total assets					71,181						1,266					331							230					73,008
								Asset and																			Total
								Personal					Litigation									Investing					30 June
								Finance					Finance					TransSend				Activities					2008
For the six months to 30 June 2008								£000					£000					£000				£000					£000
Interest income - asset financing								3,128					79					75				-					3,282
Interest income - deposits								443					-					-				-					443
Interest expense								(1,691)					(42)					-				-					(1,733)
Net interest income								1,880					37					75				-					1,992
Operating income								1,647					33					141				-					1,821
Provision for impairment								(228)					(64)					-				-					(292)
Loss before unallocated items								26					(184)					(1,456)				(77)					(1,691)
Group central costs								-					-					-				-					(1,292)
Loss before specific items																											(2,983)
Capital expenditure								129					-					62				-					191
Total assets								73,992					1,956					2,007				221					78,176

			Asset and				Total
			Personal	Litigation		Investing	31 December
For the twelve months to 31 December 2008			Finance	Finance	TransSend	Activities	2008
			£000	£000	£000	£000	£000
Interest income			6,123	324	-	-	6,447
Deposit interest income			605	-	88	-	693
Interest expense			(3,391)	(161)	-	-	(3,552)
Net interest income			3,337	163	88	-	3,588
Operating income			2,842	187	181	-	3,210
Provision for impairment			(948)	(415)	-	-	(1,363)
Loss before unallocated items			(460)	(737)	(3,721)	(610)	(5,528)
Group central costs			-	-	-	-	(1,099)
Loss before specific items							(6,627)
Capital expenditure			96	-	-	-	96
Total assets			76,419	1,503	158	136	78,216

4.Depositors' Compensation Scheme 

	Notes		6 months to 30 June 2009 £000 (unaudited)		6 months to 30 June 2008 £000   (unaudited)		12 months to  31 December  2008    £000 (audited)
Provision in respect of Kaupthing Singer & Friedlander (Isle of Man) Limited	13		150		-		-
Recovery in respect of Bank of Credit & Commerce International SA	12		(61)		-		-
			89		-		-

On 27 May 2009, the Isle of Man Government Depositors' Compensation Scheme ('the Scheme') was activated in connection with the liquidation of Kaupthing Singer & Friedlander (Isle of Man) Limited. A provision of £150,000 has been made in respect of the estimated amount payable over the life of the Scheme.

On 3 August 2009, the Bank recovered £61,054 from the Scheme in respect of The Bank of Credit & Commerce International SA, a Luxembourg banking company, the Bank of Credit and Commerce Overseas Limited, a Cayman bank, and various other companies in the BCCI Group which closed in July 1991.

5.Restructuring costs

Restructuring costs comprise: the cost of closure of the UK TransSend operation, the costs of closure of two branch offices in the UK, and the reorganisation of the Isle of Man operations processes.  

	6 months to 30 June 2009 £000 (unaudited)		6 months to  30 June   2009   £000 (unaudited)		12 months to  31 December  2008    £000 (audited)
Closure of UK TransSend operation
Administration expenses	-		-		320
Onerous programme costs	-		-		127
Redundancy costs	165		-		117
	165		-		564
Closure of UK branch offices   Redundancy costs	-		-		61
Reorganisation of Isle of Man operational processes  Redundancy costs	-		-		429
Director's ex-gratia cost	-		- -		264 107
Director's share option cost	-
	-		-		800
	165		-		1,425

  6. Project costs

	6 months to 30 June 2009 £000 (unaudited)		6 months to  30 June   2009   £000 (unaudited)		12 months to  31 December  2008   £000 (audited)
Costs of TransSend sale	-		-		133
Costs of potential acquisition	-		-		361
	-		-		494

7. Scheme of Arrangement costs. 

Conister Trust Limited (formerly PLC), following an Isle of Man Court sanctioned Scheme of Arrangement, became a wholly owned subsidiary of Manx Financial Group PLC (formerly Conister Financial Group PLC) with effect from 31 January 2008. The legal and professional expenses attributable to this corporate restructure are presented on the face of the Income Statement. 

8. Loss per share

			6 months to 30 June 2009 £000 (unaudited)		6 months to  30 June   2009   £000 (unaudited)		12 months to  31 December  2008   £000 (audited)
Loss for the period/year			(1,808)		(3,028)		(18,305)
Weighted average number of ordinary shares in issue			63,416,450		51,150,345		55,866,457
Basic and diluted loss per share			(2.85)p		(5.92)p		(32.80)p

The basic loss per share calculation is based upon loss for the period/year after taxation and the weighted average of the number of shares in issue throughout the period/year. 

There is no difference between basic and fully diluted loss per share due to a loss being made in the period.

9. Financial assets at fair value through profit and loss 

Financial assets at fair value through profit or loss represents shares in a UK quoted company, designated at fair value through profit or loss on initial recognition. The investment is stated at market value with the difference between cost and market value included within the income statement. 

10. Available-for-sale financial assets 

Available-for-sale financial assets at 30 June 2009 comprise UK Government Treasury Bills which are stated at fair value and changes in fair value are reflected in equity.

11. Loans and advances to customers

			30 June 2009 £000 (unaudited)		30 June 2008 £000   (unaudited)		31 December 2008 £000 (audited)
Hire purchase			24,420		32,460		29,413
Finance lease			1,919		2,476		2,189
Premium financing			14,346		15,017		17,589
Litigation funding			1,266		1,956		1,503
Unsecured personal loans			5,776		3,941		4,676
Vehicle stocking plans			822		483		546
			48,549		56,333		55,916

  12. Trade and other receivables 

	Notes		30 June 2009 £000 (unaudited)		30 June 2008 £000   (unaudited)		31 December 2008 £000 (audited)
Trade debtors			415		326		511
Prepayments and other debtors			191		136		498
Depositors' Compensation Scheme recovery	4		61		-		-
Payments in advance for new banking system			477		-		342
VAT recoverable			-		214		32
			1,144		676		1,383

13. Creditor and accrued charges

	Notes		30 June 2009 £000 (unaudited)		30 June 2008 £000   (unaudited)		31 December 2008 £000 (audited)
Creditors and accruals			1,423		1,027		1,526
Redundancy costs			-		-		607
Closure of UK TransSend operation			-		-		447
Subordinated loan	16		500		-		500
Short-term employee benefits			4		48		14
Depositors' Compensation Scheme provision	4		150		-		-
			2,077		1,075		3,094

14. Regulatory

The Company's wholly owned subsidiary Conister Trust Limited is licensed to undertake banking activity by the Isle of Man Government Financial Supervision Commission. The Financial Supervision Commission reviews the appointment of all Directors of Conister Trust Limited.

15. Contingent liabilities

Conister Trust Limited is required to be a member of the Isle of Man Government Depositors' Compensation Scheme which was introduced by the Isle of Man Government under the Banking Business (Compensation of Depositors) Regulations 1991. The Scheme creates a liability on the Company to participate in the compensation of depositors should it be activated (note 4).

16. Related party transactions 

NewLaw

'Loans and advances to customers' include a loan due to Conister Trust Limited from NewLaw, a UK firm of solicitors. The loan carries interest at 7.3 per cent per annum and is repayable over 36 months. As at 30 June 2009 the balance on the loan was £222,534 (30 June 2008: £389,435). NewLaw is a related party of Mr Arron Banks who is a Non-Executive Director and significant Shareholder. The loan is secured by a personal guarantee from Mr Banks.

Premium finance

Conister Trust Limited has an agreement with Group Direct Limited, a UK insurance broker, to provide premium financing of insurance policies brokered by Group Direct. The majority of these policies are issued by Southern Rock Insurance Company Limited. In the period the Group provided financing of £12.9 million (30 June 2008: £13.6 million), earning interest income of £665,000 (30 June 2008: £686,000). Group Direct Limited and Southern Rock Insurance Company Limited are related parties of Mr Banks. 

Cash deposits

During the period Conister Trust Limited held cash on deposit on behalf of Mr Jim Mellon. Normal commercial interest rates are paid on these deposits.  

Subordinated loan

On 22 December 2008 the Bank entered into a subordinated loan agreement for £500,000 with Mr Mellon. The loan is unsecured, bears interest on commercial terms and no repayment of the loan is necessary in the first 5 years.  

Key management personnel (including Executive Directors') compensation 

			6 months to 30 June 2009 £000 (unaudited)		6 months to  30 June   2009   £000 (unaudited)		12 months to  31 December  2008   £000 (audited)
Short-term employee benefits			523		611		838
Share-based payments			5		244		79
Total			528		855		917

17. Litigation 

Manx Financial Group PLC's wholly owned subsidiary, Conister Trust Limited entered into litigation with a firm of solicitors involved in litigation finance, following their refusal to repay loans made to a number of their clients. Mediation occurred on 6 May 2009 and agreement was reached between the parties to settle this matter on 20 May 2009. As at 30 June 2009 the firm of solicitors had no outstanding loan balance (2008: £369,000).

The Bank is vigorously pursuing the repayment of litigation funding loans made to clients of other solicitor firms and further litigation may be required in this regard. Counter claims have been received and there is the possibility of litigation being necessary. There is a risk of an adverse outcome in all litigation and the costs and timescale to resolve these matters are uncertain.

18. Approval of interim statements

The interim statements were approved by the Board on 15 September 2009. The interim report will be available from that date at the Group's Registered Office: Conister House, Isle of Man Business Park, Cooil Road, Braddan, Isle of Man, IM2 2QZ.

The Group's nominated adviser is Beaumont Cornish Limited, 2nd Floor, Bowman House, 29 Wilson Street, London, EC2M 2SJ. The Group's broker is Fairfax I.S. PLC, 46 Berkeley Square, London, W1J 5AT. 

The Interim and Annual reports along with other supplementary information of interest to Shareholders, are included on our website. The address of the website is www.mfg.im which includes investor relations information and contact details.

 

END

 

 

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