Last checked at 18 Jul 2017 07:00
18 July 2017
For immediate release
ARBUTHNOT BANKING GROUP ("Arbuthnot", "the Group" or "ABG")
Results for the six months to 30 June 2017
"Diversification continues"
Arbuthnot Banking Group announces a half yearly profit before tax of £2.5m, compared with a loss in the prior year of £2.4m.
Included in the profit figure for the six months ended 30 June is an estimated* income of £2.1m for Secure Trust Bank PLC ("STB") being an associated undertaking.
Arbuthnot Banking Group PLC is the holding company for Arbuthnot Latham & Co., Limited and Secure Trust Bank PLC is an associated company.
FINANCIAL HIGHLIGHTS
· Profit before tax £2.5m (H1 2016: loss £2.4m)
· Underlying profit before tax £2.7m (H1 2016: £2.0m)
· Earnings per share £0.17 (H1 2016: £11.11)*
· Interim dividend per share 14p (H1 2016: 13p)
· Net assets £234m (H1 2016: £282m)**
· Net assets per share £15.33 (H1 2016: £18.52)
OPERATIONAL HIGHLIGHTS
· Customer loans £879m (H1 2016: £657m), increased by 34%
· Customer deposits £1,229m (H1 2016: £940m), growth of 31%
· Assets Under Management £1,001m (H1 2016: £797m), up by 26%
· Completion of acquisition of Renaissance Asset Finance
Commenting on the results, Sir Henry Angest, Chairman and Chief Executive of Arbuthnot, said: "The Group has made good progress in its plans to diversify, the Renaissance Asset Finance acquisition has been completed and the Commercial Banking business is gaining momentum. It is also pleasing to see customer deposits and assets under management pass the significant milestone of £1 billion for the first time. However, with uncertain economic and political times ahead we remain cautious in our decision making."
The interim results are available at http://www.arbuthnotgroup.com.
\* The estimate for associate income is based on our 18.6% share of the after tax earnings of Secure Trust calculated using the full year market consensus of the equity research performed on STB, with an assumed straight-line growth in profits over the first half of the year. STB is scheduled to announce its interim results on 22 August 2017. For the avoidance of doubt, ABG's estimate for the income from STB is not an estimate being made on its behalf. The Group's profit before tax, profit after tax and earnings per share therefore include this estimated income from STB.
*\* The prior year includes the impact of the gains arising on the sale of Everyday Loans and the deconsolidation of STB.
*\* The fall in net assets is as a result of the payment of a £44m special dividend and the final dividend for 2016.
ENQUIRIES:
Arbuthnot Banking Group 0207 012 2400
Sir Henry Angest, Chairman and Chief Executive
Andrew Salmon, Group Chief Operating Officer
James Cobb, Group Finance Director
Stifel Nicolaus Europe Ltd trading as KBW (Nomad and Joint Broker) 0207 710 7600
Robin Mann
Gareth Hunt
Stewart Wallace
Numis Securities Ltd (Joint Broker) 0207 260 1000Chris Wilkinson
Andrew Holloway
Bell Pottinger (Financial PR) 0203 772 2566
Ben Woodford
Dan de Belder
Sam Cartwright
Chairman's Statement
Arbuthnot Banking Group PLC
I am pleased to report that Arbuthnot Banking Group ("ABG") has delivered a profit before tax of £2.5m for the first six months of 2017, which includes an estimated profit from our associate, Secure Trust Bank PLC ("STB"), who will publish its interim results on 22 August. This compares to a loss of £2.4m for the same period of 2016.
On 28 April, the Group successfully completed the acquisition of Renaissance Asset Finance, a lender of specialist assets including vintage and high value cars and business assets. The impact of its earnings has only been included in the last two months of the first half. This acquisition is a clear demonstration of the Group's long held strategy of diversification of income streams that should provide some protection from either an economic slow-down or short term turbulence, and also from increased competition. It has been clear from the number of new start-up banks and non bank lenders that the market place is becoming more competitive. However, we believe that the Group has two significant advantages that should ensure its long term prosperity. Firstly, it has a long standing heritage and market knowledge. This experience is required to run a bank properly and has to be earned over time, it cannot always simply be bought by hiring a few individuals, but it has to be embedded in the DNA of the organisation. Secondly, our ability to attract long term low cost deposits provides a competitive advantage.
Given this long term confident view, the Board has decided to increase the interim dividend by 1p to 14p, which will be paid on 29 September 2017 to shareholders on the register on 1 September.
Arbuthnot Latham & Co., Limited
Arbuthnot Latham ("AL") has reported a profit before tax for the first half of the year of £4.9m (H1 2016: £4.5m). When the impact of the gain of £1.7m that was realised on the sale of Visa shares in 2016 is removed, it shows an increase of 75%.
The forward looking indicators of the bank suggest that AL is continuing to grow at a respectable rate. Customer deposits at £1.2bn (H1 2016: £0.94bn) and Assets under Management of £1bn (H1 2016: £0.8bn), have passed the significant milestones of one billion each during the first six months. With loans rapidly approaching £0.9bn at £0.88bn (H1 2016: £0.66bn), the business is growing at over 25% in all measures of these lead indicators. The business hopes to end the year with all three measures having grown through the billion mark.
The Private Bank has led the way mainly in attracting new customers to the deposit and investment products of the bank. It has also been able to write record volumes of new loans in the period, with new originations reaching £76m in the first half, an increase of 27% on the prior year. However, the Private Bank has experienced a significant level of loan repayments, which resulted in the Private Banking loan book remaining at the same level as the prior year.
The Commercial Bank has continued to invest in new staff and now has 44 employees. At a direct contribution level, the Commercial Bank has broken even during the first half of the year. Its customer balances have continued to grow at healthy rates and at the end of June its loan book was £147m (H1 2016: £16m) and deposit book was £160m (H1 2016: £23m). The business is now showing signs of good momentum and has a strong pipeline of business for the remaining months of the year.
Renaissance Asset Finance has shown that its distribution networks remain strong and more importantly loyal. Prior to AL acquiring the business its certainty of funding was not clear and as a consequence, its balance sheet reduced in size as it was not able to meet all broker enquiries. At the time of the completion of the acquisition, the loan book had fallen to £57m. During its first two months as part of the Group it has rebounded well and returned to growth and closed the period at £60m, an increase of 5% in its first two months.
Overall impairments remain low and consistent with the prior year. This is in line with the expectations of the business, especially given the secured nature of the lending and the fact that the Bank refuses to chase volumes at the expense of relaxing loan to value lending covenants.
The business continues to work through its IFRS 9 work plan and is currently not expecting it to have a material impact on the capital resources of either the bank or ABG. The only real change will be the need to recognise the future twelve months' expected losses from the current performing loans.
Secure Trust Bank PLC
We have recorded £2.1m of income related to STB. This represents an estimate of our 18.6% share of the after tax earnings of the investment in our associate undertaking. In calculating this estimate, the Company has used the full year market consensus of the equity research performed on STB with an assumed straight-line growth in profits over the first half, noting the trading statement made by STB on 3 May 2017 in relation to STB's first quarter trading being in-line with STB's management's expectations.
Outlook
The short term geopolitical and macro economic environment seems more uncertain than it has for a number of years. However, the Group remains focused on developing new areas of growth to diversify its income streams and thus deploying profitably its sizeable capital surplus. As a result of this, the Group remains confident that it is well placed to take advantage of any opportunities that may arise as a result of it being well capitalised and funded.
Consolidated Statement of Comprehensive Income
Six months ended 30 June | Six months ended 30 June | |||
2017 | 2016 | |||
Note | £000 | £000 | ||
Interest income | 22,106 | 15,988 | ||
Interest expense | (2,839) | (4,105) | ||
Net interest income | 19,267 | 11,883 | ||
Fee and commission income | 6,183 | 7,708 | ||
Fee and commission expense | (322) | (376) | ||
Net fee and commission income | 5,861 | 7,332 | ||
Operating income | 25,128 | 19,215 | ||
Net impairment loss on financial assets | (343) | (388) | ||
Other income | 2 | 1,104 | 1,665 | |
Profit from associates | 1 | 2,145 | 265 | |
Operating expenses | 3 | (25,499) | (23,121) | |
Profit / (loss) before income tax | 2,535 | (2,364) | ||
Income tax expense | (90) | (539) | ||
Profit / (loss) after income tax from continuing operations | 2,445 | (2,903) | ||
Profit from discontinued operations after tax | 6 | - | 228,110 | |
Profit for the period | 2,445 | 225,207 | ||
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 | 389 | (209) | ||
Tax on other comprehensive income | (78) | 262 | ||
Other comprehensive income for the period, net of tax | 311 | (2,268) | ||
Total comprehensive income for the period | 2,756 | 222,939 | ||
Profit attributable to: | ||||
Equity holders of the Company | 2,445 | 163,781 | ||
Non-controlling interests | - | 61,426 | ||
2,445 | 225,207 | |||
Total comprehensive income attributable to: | ||||
Equity holders of the Company | 2,756 | 161,513 | ||
Non-controlling interests | - | 61,426 | ||
2,756 | 222,939 | |||
Earnings per share for profit attributable to the equity holders of the Company during the period | ||||
(expressed in pence per share): | ||||
- basic | 5 | 16.5 | 1,111.2 | |
- diluted | 5 | 16.5 | 1,107.5 |
Consolidated Statement of Financial Position
At 30 June | ||||
2017 | 2016 | |||
£000 | £000 | |||
ASSETS | ||||
Cash and balances at central banks | 253,309 | 293,348 | ||
Loans and advances to banks | 35,898 | 33,499 | ||
Debt securities held-to-maturity | 158,515 | 103,131 | ||
Derivative financial instruments | 1,816 | 1,228 | ||
Loans and advances to customers | 879,348 | 657,122 | ||
Other assets | 20,101 | 14,403 | ||
Financial investments | 2,173 | 2,469 | ||
Deferred tax asset | 1,689 | 1,714 | ||
Investment in associate | 82,132 | 87,114 | ||
Intangible assets | 16,954 | 7,004 | ||
Property, plant and equipment | 4,490 | 5,216 | ||
Investment property | 53,339 | 50,200 | ||
Total assets | 1,509,764 | 1,256,448 | ||
EQUITY AND LIABILITIES | ||||
Equity attributable to owners of the parent | ||||
Share capital | 153 | 153 | ||
Retained earnings | 235,178 | 283,079 | ||
Other reserves | (1,051) | (1,320) | ||
Total equity | 234,280 | 281,912 | ||
LIABILITIES | ||||
Deposits from banks | 6,579 | 1,986 | ||
Deposits from customers | 1,234,445 | 939,539 | ||
Current tax liability | 450 | 488 | ||
Other liabilities | 21,042 | 20,335 | ||
Debt securities in issue | 12,968 | 12,188 | ||
Total liabilities | 1,275,484 | 974,536 | ||
Total equity and liabilities | 1,509,764 | 1,256,448 | ||
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 2017 | 153 | - | 20 | (251) | (1,131) | 235,567 | - | 234,358 |
Total comprehensive income for the period | ||||||||
Profit for the six months ended 30 June 2017 | - | - | - | - | - | 2,445 | - | 2,445 |
Other comprehensive income, net of income tax | ||||||||
Available-for-sale reserve | - | - | - | 389 | - | - | - | 389 |
Available-for-sale reserve - Associate | - | - | - | (78) | - | - | - | (78) |
Total other comprehensive income | - | - | - | 311 | - | - | - | 311 |
Total comprehensive income for the period | - | - | - | 311 | - | 2,445 | - | 2,756 |
Transactions with owners, recorded directly in equity | ||||||||
Contributions by and distributions to owners | ||||||||
Equity settled share based payment transactions | - | - | - | - | - | (154) | - | (154) |
Final dividend relating to 2016 | - | - | - | - | - | (2,680) | - | (2,680) |
Total contributions by and distributions to owners | - | - | - | - | - | (2,834) | - | (2,834) |
Balance at 30 June 2017 | 153 | - | 20 | 60 | (1,131) | 235,178 | - | 234,280 |
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 |
Total comprehensive income for the period | ||||||||
Profit for the six months ended 30 June 2016 | - | - | - | - | - | 163,781 | 61,426 | 225,207 |
Other comprehensive income, net of income tax | ||||||||
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 |
Transactions with owners, recorded directly in equity | ||||||||
Contributions by and distributions to owners | ||||||||
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 |
Consolidated Statement of Cash Flows
Six months ended 30 June | Six months ended 30 June | |||
2017 | 2016 | |||
£000 | £000 | |||
Cash flows from operating activities | ||||
Interest received | 20,004 | 87,027 | ||
Interest paid | (3,347) | (16,490) | ||
Fees and commissions received | 4,966 | 12,987 | ||
Net trading and other income | 1,104 | - | ||
Cash payments to employees and suppliers | (16,392) | (63,503) | ||
Taxation paid | - | (6,053) | ||
Cash flows from operating profits before changes in operating assets and liabilities | 6,335 | 13,968 | ||
Changes in operating assets and liabilities: | ||||
- net decrease in derivative financial instruments | (527) | 127 | ||
- net (increase)/decrease in loans and advances to customers | (121,290) | 956,385 | ||
- net (increase)/decrease in other assets | (7,720) | 22,212 | ||
- net increase/(decrease) in deposits from banks | 3,379 | (53,319) | ||
- net increase/(decrease) in amounts due to customers | 236,796 | (990,299) | ||
- net increase/(decrease) in other liabilities | 3,960 | (20,342) | ||
Net cash inflow/(outflow) from operating activities | 120,933 | (71,268) | ||
Cash flows from investing activities | ||||
Purchase of financial investments | - | (462) | ||
Disposal of financial investments | - | 837 | ||
Purchase of computer software | (8,797) | (5,071) | ||
Proceeds from sale of software | - | 8,062 | ||
Purchase of investment property | - | (50,200) | ||
Purchase of property, plant and equipment | (361) | (939) | ||
Proceeds from sale of property, plant and equipment | - | 8,815 | ||
Disposal of subsidiaries, net of cash and cash equivalents disposed | - | 65,695 | ||
Purchases of debt securities | (108,363) | (59,893) | ||
Proceeds from redemption of debt securities | 55,772 | 41,424 | ||
Net cash (outflow)/inflow from investing activities | (61,749) | 8,268 | ||
Cash flows from financing activities | ||||
Dividends paid | (2,680) | (7,342) | ||
Net cash used in financing activities | (2,680) | (7,342) | ||
Net increase/(decrease) in cash and cash equivalents | 56,504 | (70,342) | ||
Cash and cash equivalents at 1 January | 232,703 | 397,189 | ||
Cash and cash equivalents at 30 June | 289,207 | 326,847 |
1. Operating segments
The Group is organised into three main operating segments as disclosed below:
1) Retail banking (associate) - 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.
In calculating the Income from associates, the Company has used an estimate based on the full year market consensus of the equity research performed on STB with an assumed straight-line growth in profits over the first half, noting the trading statement made by STB on 3 May 2017 in relation to STB's first quarter trading being in-line with STB's management's expectations. The Group's profit before tax, profit after tax and earnings per share therefore include this estimated income from STB..
Continuing operations | ||||
Retail Bank Associate Income | UK Private banking | Group Centre | Total | |
Six months ended 30 June 2017 | £000 | £000 | £000 | £000 |
Interest revenue | - | 22,184 | 117 | 22,301 |
Inter-segment revenue | - | (78) | (117) | (195) |
Interest revenue from external customers | - | 22,106 | - | 22,106 |
Fee and commission income | - | 6,183 | - | 6,183 |
Revenue from external customers | - | 28,289 | - | 28,289 |
Interest expense | - | (2,782) | 117 | (2,665) |
Add back inter-segment revenue | - | 78 | (78) | - |
Subordinated loan note interest | - | - | (174) | (174) |
Fee and commission expense | - | (322) | - | (322) |
Segment operating income | - | 25,263 | (135) | 25,128 |
Impairment losses | - | (343) | - | (343) |
Other income | - | 1,588 | (484) | 1,104 |
Income from associates | 2,145 | - | - | 2,145 |
Operating expenses | - | (21,632) | (3,867) | (25,499) |
Segment profit / (loss) before tax | 2,145 | 4,876 | (4,486) | 2,535 |
Income tax (expense) / income | - | (90) | - | (90) |
Segment profit / (loss) after tax | 2,145 | 4,786 | (4,486) | 2,445 |
Segment profit / (loss) after tax | 2,145 | 4,786 | (4,486) | 2,445 |
Loans and advances to customers | - | 879,348 | - | 879,348 |
Other assets | - | 551,239 | 79,177 | 630,416 |
Segment total assets | - | 1,430,587 | 79,177 | 1,509,764 |
Customer deposits | - | 1,234,445 | - | 1,234,445 |
Other liabilities | - | 111,199 | (70,160) | 41,039 |
Segment total liabilities | - | 1,345,644 | (70,160) | 1,275,484 |
Other segment items: | ||||
Capital expenditure | - | (2,658) | - | (2,658) |
Depreciation and amortisation | - | (1,046) | (1) | (1,047) |
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 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 | - | - | - | - | 2,209 | (544) | 1,665 | |
Income from associates | - | - | - | 265 | - | - | 265 | |
Operating expenses | (6,016) | (29,073) | (35,089) | - | (16,762) | (6,359) | (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 | - | - | - | - | - |
Segment profit / (loss) after tax | 118,781 | 109,329 | 228,110 | 265 | 4,459 | (7,627) | (2,903) | 225,207 |
Loans and advances to customers | - | 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: | ||||||||
Capital expenditure | - | (53,721) | - | (53,721) | (53,721) | |||
Depreciation and amortisation | - | (753) | (1) | (754) | (754) | |||
2. Other income
Other income of £1.1m in 2017 mainly consist out of rental income received from the investment property, while 2016 included a £1.6m gain realised as a result of the completion of the Visa Europe transaction.
3. Operating expenses
In 2016 operating expenses included 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 2017 | £000 | £000 |
Profit before tax from continuing operations | 4,876 | 2,535 |
Investment in operating systems | 97 | 97 |
Acquisition costs | 67 | 67 |
Underlying profit | 5,040 | 2,699 |
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. | ||
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 14,815,045 (2016: 14,738,548) in issue during the period. On 30 March 2017, Sir Henry Angest bought 150,500 shares previously held in an ESOP trust.
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. There were no dilutive share options in issue at the end of June (2016: 50,000).
Six months ended 30 June | Six months ended 30 June | |
2017 | 2016 | |
Profit attributable | £000 | £000 |
Total profit after tax attributable to equity holders of the Company | 2,445 | 163,781 |
Profit / (loss) after tax from continuing operations attributable to equity holders of the Company | 2,445 | (2,903) |
Profit after tax from discontinuing operations (ELL) attributable to equity holders of the Company | - | 61,667 |
Profit after tax from discontinuing operations (STB) attributable to equity holders of the Company | - | 105,017 |
Six months ended 30 June | Six months ended 30 June | |
2017 | 2016 | |
Dilutive profit attributable | £000 | £000 |
Total profit after tax attributable to equity holders of the Company | 2,445 | 163,781 |
Profit after tax from continuing operations attributable to equity holders of the Company | 2,445 | (2,903) |
Profit after tax from discontinuing operations (ELL) attributable to equity holders of the Company | - | 61,667 |
Profit after tax from discontinuing operations (STB) attributable to equity holders of the Company | - | 105,017 |
Six months ended 30 June | Six months ended 30 June | |
2017 | 2016 | |
Basic Earnings per share | p | p |
Total Basic Earnings per share | 16.5 | 1,111.2 |
Basic Earnings per share from continuing operations | 16.5 | (19.7) |
Basic Earnings per share from discontinuing operations - ELL | - | 418.4 |
Basic Earnings per share from discontinuing operations - STB | - | 712.5 |
Six months ended 30 June | Six months ended 30 June | |
2017 | 2016 | |
Diluted Earnings per share | p | p |
Total Diluted Earnings per share | 16.5 | 1,107.5 |
Diluted Earnings per share from continuing operations | 16.5 | (19.6) |
Diluted Earnings per share from discontinuing operations - ELL | - | 417.0 |
Diluted Earnings per share from discontinuing operations - STB | - | 710.1 |
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 | |||
2017 | 2016 | |||
Discontinued operations | £000 | £000 | ||
Profit after tax from discontinued operations - ELL (up to 13 April 2016) | - | 2,027 | ||
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 | ||
Profit after tax on sale of discontinued operations - STB | - | 100,180 | ||
Profit after tax from discontinued operations | - | 228,110 |
On 4 December 2015, the Bank agreed to the conditional sale of its non-standard consumer lending business, ELL, which comprised 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 £2.8m, this resulted in a gain recognised on disposal of £116.8m.
Details of the profits of discontinued operations, net assets disposed of and consequential gain recognised on disposal and cash flow from discontinued operations are set out below.
Six months ended 30 June | From 1 January to 13 April | |||
2017 | 2016 | |||
Note | £000 | £000 | ||
Interest income | - | 11,137 | ||
Net interest income | - | 11,137 | ||
Fee and commission income | - | 147 | ||
Fee and commission expense | - | (124) | ||
Net fee and commission income | - | 23 | ||
Operating income | - | 11,160 | ||
Net impairment loss on financial assets | - | (2,610) | ||
Operating expenses | - | (6,016) | ||
Profit before tax | - | 2,534 | ||
Tax expense | - | (507) | ||
Profit after tax | - | 2,027 | ||
Profit on sale of business | - | 116,754 | ||
Total profit from discontinued operation | - | 118,781 | ||
Profit attributable to: | ||||
Equity holders of the Company | - | 61,667 | ||
Non-controlling interests | - | 57,114 | ||
Profit after tax | - | 118,781 | ||
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 | |
- diluted | 5 | - | 417.0 | |
6. Discontinued operations - continued | |
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 | 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. | |
6. Discontinued operations - continued | ||||
Cash flow from discontinued operations - ELL | Six months ended 30 June | From 1 January to 13 April | ||
2017 | 2016 | |||
£000 | £000 | |||
Cash flows from operating activities | ||||
Interest received | - | 11,137 | ||
Fees and commissions received | - | 23 | ||
Cash payments to employees and suppliers | - | (8,626) | ||
Taxation paid | - | (507) | ||
Cash flows from operating profits before changes in operating assets and liabilities | - | 2,027 | ||
Changes in operating assets and liabilities: | ||||
- net increase in loans and advances to customers | - | (3,618) | ||
- net increase in other assets | - | (249) | ||
- net increase in other liabilities | - | 2,621 | ||
Net cash inflow from operating activities | - | 781 | ||
Cash flows from investing activities | ||||
Purchase of property, plant and equipment | - | (9) | ||
Net cash outflow from investing activities | - | (9) | ||
Cash flows from financing activities | ||||
Increase in borrowings | ||||
Dividends paid | ||||
Net increase in cash and cash equivalents | - | 772 | ||
Cash and cash equivalents at 1 January | - | 1,661 | ||
Cash and cash equivalents at 13 April | - | 2,433 |
6. Discontinued operations - continued
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).
Six months ended 30 June | From 1 January to 15 June | |||
2017 | 2016 | |||
Note | £000 | £000 | ||
Interest income | - | 57,498 | ||
Interest expense | - | (12,107) | ||
Net interest income | - | 45,391 | ||
Fee and commission income | - | 7,981 | ||
Fee and commission expense | - | (779) | ||
Net fee and commission income | - | 7,202 | ||
Operating income | - | 52,593 | ||
Net impairment loss on financial assets | - | (12,172) | ||
Operating expenses | - | (29,074) | ||
Profit before tax | - | 11,347 | ||
Tax expense | - | (2,198) | ||
Profit after tax | - | 9,149 | ||
Profit on sale of shares | - | 100,180 | ||
Total profit from discontinued operation | - | 109,329 | ||
Profit attributable to: | ||||
Equity holders of the Company | - | 105,017 | ||
Non-controlling interests | - | 4,312 | ||
Profit after tax | - | 109,329 | ||
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 | |
- diluted | 5 | - | 710.1 | |
6. Discontinued operations - continued | |
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 |
6. Discontinued operations - continued | ||||
Cash flow from discontinued operations - STB excluding ELL | Six months ended 30 June | From 1 January to 15 June | ||
2017 | 2016 | |||
£000 | £000 | |||
Cash flows from operating activities | ||||
Interest received | - | 68,635 | ||
Interest paid | - | (12,107) | ||
Fees and commissions received | - | 7,226 | ||
Cash payments to employees and suppliers | - | (51,552) | ||
Taxation paid | - | (6,034) | ||
Cash flows from operating profits before changes in operating assets and liabilities | - | 6,168 | ||
Changes in operating assets and liabilities: | ||||
- net increase in loans and advances to customers | - | (165,976) | ||
- net decrease in other assets | - | 117,395 | ||
- net decrease in deposits from banks | - | (10,000) | ||
- net increase in amounts due to customers | - | 12,936 | ||
- net decrease in other liabilities | - | (5,031) | ||
Net cash outflow from operating activities | - | (44,508) | ||
Cash flows from investing activities | ||||
Purchase of computer software | - | (1,754) | ||
Purchase of property, plant and equipment | - | (531) | ||
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 from investing activities | - | 107,262 | ||
Cash flows from financing activities | ||||
Increase in borrowings | ||||
Dividends paid | - | (10,005) | ||
Net cash used in financing activities | - | (10,005) | ||
Net increase in cash and cash equivalents | - | 52,749 | ||
Cash and cash equivalents at 1 January | - | 141,595 | ||
Cash and cash equivalents at 15 June | - | 194,344 |
7. Basis of reporting
The interim financial statements have been prepared on the basis of accounting policies set out in the Group's 2016 statutory accounts as amended by standards and interpretations effective during 2017 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 17 July 2017 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.