Final Results

RNS Number : 9142L

Manx Financial Group PLC

14 May 2010

 



FOR IMMEDIATE RELEASE                                                                                           14 May 2010

Manx Financial Group PLC (the 'Company')

Report and accounts for the year ended 31 December 2009

Manx Financial Group PLC (LSE: MFX), the financial services Group which includes Conister Bank Limited and Conister Card Services Limited, presents its final results for the year ended 31 December 2009.

The 2009 Audited Annual Report and Accounts are being posted to shareholders today and are available from the Company's website www.mfg.im.

Financial Highlights

MFG - the Holding Company:

·      The Group's financial performance improved as its loss was reduced to £2.6 million (2008: £18.3 million) an improvement of £15.7 million. Excluding the ESS transaction the underlying result has improved by £6.1 million compared to last year.

·      The trend towards consolidated profitability continues with the loss reducing in the second half of 2009 to £0.8 million (2008: £15.3 million) from £1.8 million in the first half of 2009 (2008: £3.0 million).

·      The Group's cost base reduced by £6.7 million year on year, the equivalent of a 42% decrease.

·      The cost of the holding company, excluding impairments, reduced to £1.2 million (2008: £3.4 million), a 65% reduction year on year.

·      The Group successfully secured £1.22 million of supplementary capital in February 2010 to facilitate new lending opportunities.

Conister Bank Limited:

·      Despite the deteriorating economic climate the Bank's financial performance from continuing operations was a reduced loss of £1.2 million (2008: £1.3 million) a 7.7% improvement.

·      The trend back towards profitability continued with the second half loss reducing to £0.5 million (2008: £1.2 million) from £0.7 million in the first half of 2009 (2008: £0.1 million).

·      The Bank's cost base reduced by £1.5 million year on year, 18%.

·      The Bank's capital position has improved year on year with the Risk Asset Ratio remaining stable at 18% and with Tier 1 capital, having adopted BASEL II reporting criteria, increasing to 20.9% (2008: 15.6% under BASEL I).

·      Substantial liquidity surplus to regulatory requirements, £10.7 million (2008: £10.1 million).

·      The year end litigation funding net asset, a business segment in run off, has reduced by 87% to £0.2 million (2008: £1.5 million).

·      The Bank has no exposure to the sub-prime sector or to mortgages.

·      The Bank has no wholesale funding and has a loan book which matches the duration of the depositors' terms.

Conister Card Services Limited:

·      Financial performance greatly improved as the loss was significantly reduced to £0.4 million (2008: £3.5 million) as the change in strategy started to impact positively on the income statement.

·      In the second half of 2009 the business recorded a profit of £0.1 million (2008: loss of £1.9 million).

·      Conister Card Services cost base reduced by £3.0 million, 72%, year on year. The number of active cards issued has increased to 73,150 (2008: 34,729) an increase of 111%.

Operational Highlights

·      The Bank has successfully installed a new banking system on time and under budget.

·      The Risk & Compliance team has been strengthened to facilitate increased risk monitoring and reporting, and to support the new business lines established in 2009.

·      The Bank's recent rebranding to more fully represent the services now provided has been an acclaimed success.

·      The Bank has successfully commenced its Wealth and General Insurance businesses in 2009.

·      Conister Card Services has completed its repositioning within the prepaid card market becoming a BIN sponsor.

Contacts

Manx Financial Group PLC

Denham Eke, Chief Executive

Tel:  [phone]

Beaumont Cornish Limited

Roland Cornish

Tel:  [phone]

The financial information set out below comprises non-statutory accounts.  The financial information for the year ended 31 December 2009 has been extracted from accounts for the year ended 31 December 2009 on which the report of the auditors was unqualified.

Chairman's Statement

Introduction

The final quarter of 2009 has shown signs that the global macroeconomic environment is stabilising; however, we remain in a period of high economic uncertainty. The US economy has emerged from recession in the third quarter and the UK has shown signs of improvement and recently exited recession. Inflation remains modest and the consensus amongst UK, US and Continental Europe commentators is that interest rates will not rise in the near term.

Quantitative easing programmes by central banks are likely to continue, or at least not be withdrawn, in an effort to support the recovery during its initial stages, furthermore there remains a need to support the main banks. Whilst this unprecedented and massive liquidity injection has stimulated demand for financial assets and saved some banks from collapse, it appears not to have stimulated consumer demand to any great extent.

Much of the recovery in industrial production has not been a result of stronger consumer demand, as consumers worry about rising unemployment and taxes, and continue to reduce their indebtedness rather than increase spending. In other words, in the UK and in the Isle of Man the savings rate has risen markedly.

The Group continues to be well insulated against the pressures of the economic environment due to its core focus on the Isle of Man, a market which has avoided the severe recessions experienced by its near neighbours and also, by avoiding any exposure to wholesale money markets, the property market and sub-prime loans.

The macro environment has had two key effects on the Group however, which are worth noting: 1. Default rates remain extremely low, and we remain more than adequately provisioned for loan impairments. 2. As the savings rates rise, people are less keen to take on debt which makes it harder to grow our loan book, which is our key objective. The last point is being addressed and with increased capital we are taking advantage of lending opportunities of the highest quality.

We have experienced none of the severe systemic issues suffered by the major banks and today our capital ratios remain exceptionally high.

Manx Financial Group PLC

During 2009 the Group changed its name to better reflect its heritage and roots, to the Manx Financial Group PLC, an important part in the evolution to a financial services company. The Group's financial performance continues to improve with the loss reduced to £2.6 million (2008: £18.3 million), an improvement of £15.7 million (£6.1 million excluding the ESS transaction) with a positive trend towards profitability as the second half's financial performance was £1.0 million ahead of the first half of 2009 and £12.3 million ahead of the corresponding period in 2008.

Also in 2009 the Group undertook a balance sheet efficiency review resulting in the bank commencing a strategy to reconnect the historical disconnection between its lending and how it was funded.

As a result our deposit balance has reduced to £49.5 million (2008: £66.1 million) which more closely matches our advanced balances. This reconnection will improve the financial performance of the Group through reducing its cost of funds and it will more efficiently use its surplus liquidity which stood at £10.7 million (2008: £10.1 million) at the year end.

The trend in improving profitability is projected to increase steadily and I am very confident of the outturn in the next few years.

The Board and Executives have now established one of the strongest banks, with about as clean a balance sheet as any bank could hope for. There are no hidden liabilities lurking in any part of our business and confidence is very high.

In January 2010, following a successful EGM where all of your Board's resolutions were approved by the Shareholders in accordance with the Company's Memorandum and Articles of Association, a convertible bond was issued to support new lending opportunities. It is the Board's current intention to raise further capital this year through a general offer for subscription to all Shareholders to fund further new lending opportunities and I hope you will take up this opportunity to support the continued development of the Group.   A further announcement will be made in this regard, if and when the details of the offer are finalised by the Board.

The Group continues to review opportunities to grow through the acquisition of businesses that complement the Bank or businesses that would benefit from being part of a Group that owns a Bank. However, whilst the current economic environment presents opportunities we are determined to ensure that we make decisions based on sound financial assessment and robust business due diligence. We shall not acquire just for the sake of growth if the business does not fit with our strategic vision.

Conister Bank Limited

The Bank's capital has remained steady with a Risk Asset Ratio of 17.9% (2008: 17.6%) and a Tier 1 capital ratio of 20.9%. The Bank has maintained a liquidity position in excess of its regulatory requirements, driven by a higher number of customers reinvesting maturing deposits than anticipated. This provides evidence of the support the Bank enjoys from its core retail customers and has resulted in the Bank not being required to compete for expensive retail deposits during 2009 resulting in an improved margin position.

The Bank's financial performance also improved in 2009 with the loss reducing to £1.2 million (2008: £1.3 million).

I continue to oversee the work of the executive team resulting in improved processes and controls and this remains a focus of the Board.

The Risk & Compliance team has been strengthened accordingly to facilitate increased risk monitoring and reporting and further develop operational processes and controls.

Two years ago, with the onset of the global downturn, the Bank tightened its underwriting criteria and this has manifested itself in near static provisioning levels for asset financing in 2009.

There has also been significant progress in resolving the outstanding issues associated with the discontinued litigation funding business stream with net assets at the year end reduced by 87% to £0.2 million (2008: £1.5 million) and we can now foresee a successful conclusion to this book.

Conister Card Services Limited

The repositioning of this business in 2009 from a Programme Manager to that of a BIN sponsor is now complete and the financial improvement forecast from this strategic change has become evident in the year end results. The loss for the year was reduced to £0.4 million (2008: £3.5 million) and indeed the cards business made a small profit in the second half of 2009. The business continues to look for new programme managers with profitable contracts and ways to leverage the Bank's MasterCard^® licence.

Our People

I continue to be impressed by the commitment and dedication of our staff to the Group and to its customers and I thank them for all their continued effort during 2009. I am pleased to welcome Nick Sheard (Head of Risk and Compliance) and Douglas Grant (Group Finance Director) to the Board in September 2009 and January 2010 respectively, both of whom bring valuable experience and skills.

Outlook

Market conditions appear to be improving, and if the global economy can avoid any unforeseen shocks, the outlook for your Company is very good over the next cycle.

The withdrawal of major banking groups from our core lending market and the increased criteria and demands made by others that have suffered from, sometimes, unconnected losses presents a significant opportunity. We will continue to work to seek out new business opportunities and partners to distribute our products to a wider audience and take advantage of the opportunities this presents.

Conister Bank will continue as the Isle of Man's only independent bank and will continue to leverage its unique position, in what is its 75th anniversary year, through the provision of straightforward products to strengthen and lengthen the customer relationship.

Conister Card Services will continue to exploit the Bank's MasterCard^® membership and seek out new opportunities and take advantage of strategic opportunities as the market consolidates and grows.

The Bank's balance sheet remains strong with no debt or toxic assets. This together with the Board and Executives will drive forward the business based on a stable and sound platform ably assisted by an enthusiastic, motivated and customer focused team.

I would like to take this opportunity to again thank our staff and our Shareholders for their support throughout the year.

AGM

As always the Board would recommend the shareholders consider and support the resolutions laid before them at the AGM.

Jim Mellon

Executive Chairman

30 April 2010

Chief Executive's Business and Financial Review

Manx Financial Group - the Holding Company

In my 2008 report I stated that our goal was to build upon the strong foundations that had been laid and make a steady return to profitability. I am pleased to report that significant progress has been made with the Group meeting all of our internal business and financial objectives. The Group's financial performance for the year was much improved with the loss reducing to £2.6 million (2008: £18.3 million), an improvement of £15.7 million, and the operational result, excluding the ESS share transaction, was an improvement of £6.1 million. I am pleased to report a steadily improving financial performance with the loss in the second half of the year cut to £0.8 million (2008: £15.3 million) which was £1.0 million and £2.2 million ahead of the first half of 2009 and the first half of 2008 respectively.

As part of our balance sheet review the Board started to correct the mismatch between lending returns and cost of funds which has historically had a negative impact on the income statement through the expense of carrying surplus deposits. With the uncertain economic environment the Board planned for a decrease in lending during 2009 and therefore took the necessary steps to more closely align deposit balances with lending expectations. Also throughout 2009, the Bank carried historically high liquidity which enabled it to comfortably absorb the shocks suffered by the rest of the global banking system and meet the possibility of increased customer withdrawal requests, although this was subsequently found to have been unnecessary.

This action has resulted in a step change to the Group's asset base and, looking forward, the forecasted increase in lending will be initially absorbed by utilising some of the Bank's surplus liquidity and then through increasing deposit balances. These actions have and will improve the income statement. Capitalising on the Bank's Isle of Man heritage and independence is a cornerstone of our strategy and in the third quarter of 2009 we rebranded and launched Conister Bank with a focus on clearly communicating the Bank's primary product propositions and repositioning the Bank as the Island's only independent Bank. This has been a great success. We also rebranded the Manx Financial Group and re-launched the new corporate website early in 2010.

In the current uncertain and changeable economic environment the Bank will continue to focus on our core competencies and has made significant appointments in Marketing, Wealth Management and Customer Services to ensure that we build a strong and stable platform with an experienced management team to deliver future growth. The successful implementation of a new Banking Platform was delivered on time and under budget giving the Bank a market leading platform to further enhance customer service.

The Risk and Compliance team was restructured during 2009 to enable support for business lines such as Wealth Management as well as providing greater support for the core businesses of Asset Finance and Deposits. A new Executive Risk Committee was established to coordinate a coherent risk management framework which has resulted in a greater focus at Board level on key risk issues. Treasury management has improved significantly with surplus cash being invested in capital efficient instruments to effectively manage excess liquidity and the Bank's risk asset ratio.

I have continued our focus on cost reduction and I am pleased to report that significant savings, in the order of £6.7 million, have been made without significant job losses.

Conister Bank Limited - Banking

Despite the poor trading conditions, financial performance for the year improved by £0.1 million leading to a loss of £1.2 million (2008: -£1.3 million). The Bank's trend back to profitability continued with the results for the second half of 2009, a reduced loss of £0.5 million (2008: -£1.2 million), from £0.7m in the first half of 2009, (2008: -£0.1 million).

The Bank has introduced new income streams to reduce its reliance on net interest income but also to grow the products that it can offer customers in order to provide an alternative to the offerings of the major banking groups. The Bank commenced the sale of Guaranteed Asset Protection and Payment Protection products during 2009 to provide added security for customers, and also launched "Solo", a packaged finance/GAP product initially through the Isle of Man Car dealer network.

One of our most important strengths is our staff, who work and live in the same communities as the majority of our customers. This gives us an intimacy that centralised international banking groups cannot offer. The launch of the Bank's Wealth Management proposition, Conister Wealth, towards the end of 2009, has been well received by both old and new customers alike and after only a few weeks of trading, assets under influence exceeded £2.5 million.

The Bank's deposit customers have continued to show confidence in the bank with reinvestment rates from maturing customers regularly exceeding 70% which has meant the Bank has carried surplus liquidity throughout 2009. Cash balances stood at £18.0 million (2008: £20.6 million). Consequently, the Bank has not had to compete for expensive retail deposits in 2009 and has reduced deposit rates accordingly.

The Bank has no exposure to wholesale funding and has utilised its surplus liquidity to improve capital management by using UK Government Treasury Bills as an alternative to bank deposits to reduce further risk weighted assets. Unfortunately one consequence of the UK government's quantitative easing programme has been to depress the return the Bank can achieve on such liquid assets.

The loan book has performed well with arrears remaining flat year on year, providing evidence to support the Bank's decision to tighten lending criteria as the "credit crunch" hit in the latter half of 2008. However, we continue to work closely with our customers during this difficult economic environment. Margins, have improved throughout 2009 in line with the falling cost of deposits.

As part of my continuing review of operations, we reduced our Premium Finance lending through 2009 and also withdrew from Military Lending. The reduction in Premium Finance lending has reduced the Bank's exposure to this business line. This was, effectively, an outsourced operation and our enhanced risk management process had identified a number of operational deficiencies that needed to be addressed. Military Lending is a specialist niche and this line of business, being broker driven, was of variable quality and questionable profitability. With regard to Litigation Funding, a business segment in run off since 2007, the mediation process has been completed and the book's net debtor is expected to run off to a successful conclusion by 2011.

Conister Card Services Limited - BIN Sponsorship

TransSend has been renamed as Conister Card Services and now acts as a BIN sponsor to prepaid card issuers in the Isle of Man and to appropriate opportunities that may arise elsewhere that comply with our regulatory requirements. This change in strategy is starting to filter into the Group's income statements and it is pleasing to report that Conister Card Services reported a profit for the second half of 2009, £0.1 million (2008: second half loss of £1.9 million). The full year result was a greatly reduced loss of £0.4 million (2008: £3.5 million) but encouragingly our position within the prepaid market allowed card volumes to increase to 73,150 (2008: 34,729), an increase of 111%.

The Future

It is clear that all business in financial services will continue to face significant challenges for years to come with increased consumer scrutiny and regulatory focus. However, the Isle of Man and UK markets present significant opportunities for sustainable managed growth.

I firmly believe that the Group has now put its legacy issues behind it and is uniquely positioned to exploit the opportunities presented by the fall out from the past two years.

In conclusion, I would like to thank all of our staff and all of our business partners without whom I would not have been able to make the changes that are necessary to build a strong, profitable and compliant business for the future.

Denham Eke

Chief Executive Officer

30 April 2010

Consolidated Comprehensive Statement of Income

For the year ended 31 December 2009	Notes		2009 £000		2008 £000
Interest income			5,341		7,140
Interest expense			(3,222)		(3,552)
Net interest income			2,119 9 (459)		3,588        18 (727)
Fee and commission income Fee and commission expense
Net fee and commission expense Net trading income			(450)   1,669		(709) 2,879
Other operating income			871		805
Programme costs			(591)		(505)
Foreign exchange (loss)/gain			(26)		31
Operating Income			1,923		3,210
Personnel expenses			(2,425)		(4,421)
Depreciation			(102)		(77)
Other expenses			(1,395)		(3,366)
Provision of impairment of loan assets			(643)		(1,363)
Depositors' Compensation Scheme			(89)		-
Realised loss on sale of available-for-sale financial instruments			-		(454)
Dividend income from financial assets carried at fair value			-		6
Realised gains on available-for-sale investments			30		-
Unrealised gain/(loss) on financial assets carried at fair value			238		(162)
Loss before specific items			(2,463)		(6,627)
Net impairment loss on available-for-sale instruments			-		(9,638)
Re-structure costs	9		(158)		(1,425)
Project costs	10		-		(494)
Legal costs related to net impairment of available-for-sale financial instruments			-		(76)
Scheme of arrangement costs			-		(45)
Loss before income tax expense			(2,621)		(18,305)
Income tax expense			-		-
Loss for the year			(2,621)		(18,305)
Other comprehensive income
Available-for-sale gains taken to equity			6		-
Actuarial losses on defined benefit pension scheme taken to equity			(111)		(43)
Total comprehensive loss for the year attributable to owners			(2,726)		(18,348)
Basic and diluted loss per share (pence)	15		(4.13)		(32.8)

Consolidated and Company Statement of Financial Position

		Group				Company
As at 31 December 2009	Notes	2009 £000		2008 £000		2009 £000		2008 £000
Assets
Cash and cash equivalents		7,976		20,589		-		-
Financial assets at a fair value through profit or loss		374		136		-		-
Available-for-sale financial instruments	19	9,989		-		-		-
Loans and advances to customers		37,554		55,916		-		-
Property, plant and equipment		601		192		6		-
Investment in group undertakings		-		-		6,191		9,610
Trade and other receivables		450		1,389		24		472
Total assets		56,944		78,222		6,221		10,082
Liabilities
Customer accounts		49,544		66,058		-		-
Creditor and accrued charges		1,282		3,094		192		1,059
Pension liability		66		314		-		-
Total liabilities		50,892		69,466		192		1,059
Equity
Called up share capital		15,854		15,854		15,854		15,854
Share premium account		6,142		6,142		6,142		6,142
Profit and loss account		(15,944)		(13,240)		(15,967)		(12,973)
Total equity		6,052		8,756		6,029		9,023
Total liabilities and equity		56,944		78,222		6,221		10,082

Consolidated Statement of Cash Flows

For the year ended 31 December 2009	Notes		2009 £000		2008 £000
RECONCILIATION OF LOSS BEFORE TAXATION TO OPERATING CASH FLOWS
Loss before tax on continuing activities			(2,621)		(18,305)
Realised loss on financial assets held at fair value through profit and loss			-		454
Unrealised (gain)/loss on financial asset carried at fair value			(238)		162
Net impairment loss on financial assets			-		9,638
Dividend income from financial assets carried at fair value through profit and loss			-		(6)
Loss on disposal of property, plant and equipment			2		104
Depreciation charge			102		77
Available-for-sale gains taken to equity			6		-
Actuarial losses on defined benefit pension scheme taken to equity			(111)		(43)
(Decrease)/increase in pension liability			(248)		9
Share-based payment expense			22		315
Decrease/(increase) in trade debtors			939		(651)
(Decrease)/increase in trade creditors			(1,812)		1,057
Net cash outflow from trading activities			(3,959)		(7,189)
Decrease in loans and advances to customers			18,362		821
(Decrease)/increase in deposit accounts			(16,514)		4,085
Cash Outflow from operating activities			(2,111)		(2,283)
CASH FLOW STATEMENT
Cash flows from operating activities
Cash outflow from operating activities			(2,111) -		(2,283) (1)
Taxation paid
Net cash outflow from operating activities			(2,111)		(2,284)
Cash flows from investing activities
Purchase of tangible fixed assets			(526)		(96)
Purchase of available-for-sale financial instruments			(9,989)		(909)
Sale of financial assets at fair value through profit and loss			-		127
Sale of  tangible fixed assets			13		-
Dividend income from financial assets carried at fair value			-		346
Net cash outflow from investing activities			(10,502)		(532)
Cash flows from financing activities
Issue of subordinated liabilities			-		500
Net cash inflow from financing activities			-		500
Decrease in cash and cash equivalents			(12,613)		(2,316)

Statement of Changes in Equity

For the year ended 31 December 2009	Share Capital		Share Premium		Retained earnings		2009		2008
Group	£000		£000		£000		£000		£000
Balance as at 1 January	15,854		6,142		(13,240)		8,756		17,473
Loss for the year	-		-		(2,621)		(2,621)		(18,305)
Other comprehensive income	-		-		(105)		(105)		(43)
Transactions with owners:
Arising on shares issued in the year	-		-		-		-		9,316
Share-based payment expense	-		-		22		22		315
Balance as at 31 December 2009	15,854		6,142		(15,944)		6,052		8,756

For the year ended 31 December 2009	Share Capital		Share Premium		Retained earnings		2009		2008
Company	£000		£000		£000		£000		£000
Balance as at 1 January	15,854		6,142		(12,973)		9,023		-
Loss for the year	-		-		(3,016)		(3,016)		(13,288)
Transactions with owners:
Scheme of arrangement	-		-		-		-		12,680
Arising on shares issued in the year	-		-		-		-		9,316
Share-based payment expense	-		-		22		22		315
Balance as at 31 December 2009	15,854		6,142		(15,967)		6,029		9,023

Notes

Segmental analysis (Note 5)

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, finance leases, personal loans and premium finance); Litigation Finance; and a Prepaid Card division, Conister Card Services.  The Group ceased to provide new Litigation Finance in June 2007.

Included within personnel expenses in the Consolidated Income Statement is £362,064 (2008: £1,579,000) relating to direct salary costs for Conister Card Services.

	Asset and Personal Finance	Litigation Finance	Conister Card Services	Investing Activities	Total 2009
For the year ended 31 December 2009	£000	£000	£000	£000	£000
Net interest income	1,866	253	-	-	2,119
Operating income	1,447	253	223	-	1,923
Provision for impairment	28	(671)	-	-	(643)
Loss before unallocated items	(922)	(468)	(225)	268	(1,347)
Group central costs	-	-	-	-	(1,116)
Loss before specific items					(2,463)
Capital expenditure	526	-	-	-	526
Total assets	56,183	188	199	374	56,944
Total liabilities and equity	56,598	188	158	-	56,944

	Asset and Personal Finance	Litigation Finance	Conister Card Services	Investing Activities	Total 2008
For the year ended 31 December 2008	£000	£000	£000	£000	£000
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	76,425	1,503	158	136	78,222
Total liabilities and equity	76,719	1,503	-	-	78,222

Segment capital expenditure is the total cost incurred during the year to acquire equipment and fund leasehold improvements.

Restructure costs (Note 9)

Restructure costs comprise: the cost of closure of the UK Conister Card Services operation, the costs of closure of two branch offices in the UK, and the reorganisation of Isle of Man operational processes.

	2009		2008
	£000		£000
Closure of UK Conister Card Services operation
Administration expenses	-		320
Programme costs	-		127
Redundancy costs	101		117
	101		564
Closure of UK branch offices
Redundancy costs	-		61
Reorganisation of Isle of Man operations process
Redundancy costs	57		429
Director's ex gratia cost	-		264
Director's share option cost	-		107
	57		800
	158		1,425

The ex gratia and share option costs in prior year relates to Mr J F Linehan.

Project costs (Note 10)

	2009		2008
	£000		£000
Costs of Conister Card Services sale	-		133
Costs of potential acquisition	-		361
	-		494

Loss per share (Note 15)

	2009		2008
	£000		£000
Loss for the year	(2,621)		(18,305)
	Number		Number
Weighted average number of ordinary shares in issue	63,416,450		55,866,457
Basic and diluted loss per share	(4.13)p		(32.8)p

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

The diluted loss per share calculation is based upon loss for the year after taxation and the weighted average of the number of shares in issue after adjustment to assume conversion of all dilutive potential shares.  Other than the employee share option scheme, there are no other potentially dilutive instruments.

Available-for-sale financial instruments (Note 19)

	Group				Company
	2009		2008		2009		2008
	£000		£000		£000		£000
UK Government Treasury Bills	9,989		-		-		-
	9,989		-		-		-

UK Government Treasury Bills are stated at fair value and changes in fair value are reflected in equity. 

Related party transactions (Note 30)

New Law

"Loans and advances to customers" include a loan due to Conister Bank Limited from NewLaw, a UK firm of solicitors. The loan carries interest at 7.3% per annum and is repayable over 36 months.  As at 31 December 2009 the balance on the loan was £139,084 (31 December 2008: £305,986).  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 Bank 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 2009 the Group provided financing of £19 million (31 December 2008: £30.8 million), earning interest income of £1,024,000 (31 December 2008: £1,280,000). Group Direct Limited and Southern Rock Insurance Company Limited are related parties of Mr Banks.

Cash Deposits

During the year the Bank held cash on deposit on behalf of the following related individuals:

J Mellon and a Company related to him (Executive Chairman and Non-Executive Director)

A Company related to D Eke (Chief Executive Officer)

J Hemuss (Conister Trust Limited, Executive Director)

D Grant (Executive Director)

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 J Mellon.  The loan was unsecured, bore interest on commercial terms and no repayment of the loan was necessary in the first 5 years.  The loan represented a Related Party Transaction in accordance with AIM Rule 13. Accordingly, the Independent Directors consulted with the Group's Nominated Adviser, considered the terms of the transaction to be fair and reasonable in so far as the shareholders of the Company were concerned.

On 3 March 2010 this loan was repaid by the Bank and the capital formed part of the convertible loan arrangement (see note 34).

Key management personnel (including Executive Directors') compensation

	2009		2008
	£000		£000
Short-term employee benefits	729		1,640
Share-based payments	9		211
Total	738		1,851

Short-term employee benefits include £nil (2008: £665,000) in respect of redundancy and settlement costs as a result of the reorganisation of Isle of Man operational processes (note 9).

The 2008 share-based payment charge includes £107,000 in respect of the modifications to the share options held by J F Linehan.

Post-balance sheet events (Note 34)

On 15 January 2010 the Company converted to a 2006 company as defined by Isle of Man company law.

On 3 March 2010 MFG entered into a convertible loan agreement with J Mellon for £1.25 million. The loan is convertible into shares from the first anniversary of the loan drawdown at £0.09 per share and bears interest until conversion at a rate of 9%. MFG also entered into an identical agreement with Rock Holdings Limited (a company linked to A Banks) for £0.46 million on 26 March 2010. These loans represent a Related Party Transaction in accordance with AIM Rule 13. Accordingly, the Independent Directors, having consulted with the Group's Nominated Adviser, consider the terms of the transaction to be fair and reasonable in so far as the shareholders of the Company are concerned.

 

END

 

 

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