Last checked at 21 Aug 2009 16:08
MANCHESTER BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
30 JUNE 2009
Business Review
The Group reported a solid start to 2009.
Key highlights for the period include:
Retail balances up by 10%
Total assets reduced by 2%
Profit before tax for the half year £0.6m
Retail savings and liquid funds
The first half of 2009 saw the completion of the programme, first commenced in the second half of 2007, to significantly reduce the Society's utilisation of wholesale funding by replacement with higher levels of retail deposits. As at 30 June 09 the Society's wholesale funding as a % of Shares Deposits & Loans was 10.3% having reduced from the level of 29.3% two years earlier. The Society was also able to maintain robust levels of liquidity throughout the first half of the year.
Mortgage lending and arrears
New mortgage lending during the first half of the year has been in line with the Society's plan, but was at lower levels than seen in previous years. A cautious approach has continued to be taken to the underwriting criteria applied to new products offered at suitably priced rates of interest.
The level of arrears seen on mortgage balances has remained stable during the period. The number of repossessed properties at the end of June 2009 was 18, which is one less than at the end of 2008. The Society continues to take a sympathetic and pragmatic approach to working with those borrowers that fall into arrears.
Board and staff changes
The Society has chosen not to pursue the high levels of growth achieved in earlier periods given such uncertain wider economic circumstances. Accordingly, it has been necessary to address the cost base, with the decision taken to make a number of posts redundant; this included the position of Group Development Director. The Board considers that the resulting staffing compliment will support current business levels and can accommodate adequately increased activity in the short term as and when the housing market recovers.
Tony Snape, the Society's longest serving non-executive director, retired from the Board in April 2009 after a period of 12 years of service with the Society. The Board would like to take this opportunity to recognise his commitment and diligence during his time with the Society.
Other non-trading matters
Within the 2008 Annual Report and Accounts, the Society had cautiously made provision for 75% of the £7m that had been deposited in total with Icelandic banks. Following communications with the administrators of these banks, the Society now believes that it will recover £3.15m. Accordingly, a favourable write back of £1.4m has been recorded within the half year accounts.
During 2008, the Society acquired an investment in Network Data Holdings plc. ("NDH"), in exchange for the disposal of its wholly owned mortgage broking subsidiary, Mortgage Broking Services Limited. Disappointingly, NDH went into administration in 2009 and accordingly it has been necessary to make full provision for the £2.5m investment in the half year results reported.
Risks and uncertainties
In common with all institutions funded primarily through retail deposits, the Group's interest margin has been squeezed by the low interest rate environment. Nevertheless the underlying business remains soundly profitable and margins should improve considerably when interest rates recover. The timing of this recovery remains highly uncertain and the Board will closely monitor the performance of the UK economy in order to ensure that suitable margin improvement is achieved at the appropriate time.
The Board maintains the view that the market outlook continues to be highly uncertain. The retail savings sector remains highly competitive and this is expected to continue throughout the remainder of 2009.
Further, the Society believes that the mortgage lending market will continue to perform in a similar manner to that seen over the past 12 months and it will maintain its prudent approach to credit underwriting.
Focus will be maintained on cautious, controlled, profitable growth with the reduction of the management expense ratio a key target.
Forward-looking statements
Within the half yearly information we make comments about anticipated future events, which we believe to be reasonable. As these statements are based on the Group's current view of the UK economy and banking market, we can give no assurances that the markets will develop in the way that we document and actual outcomes may differ to those that we anticipate.
The Group does not undertake to update any of the statements that it has made about future events prior to reporting of the full year results.
Responsibility statement of the directors in respect of the half yearly financial information
The directors confirm that, to the best of their knowledge:
The condensed set of consolidated accounts has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union.
The half yearly accounts include the information required by the Financial Services Authority Disclosure and Transparency Rules (DTR 4.2.7 and DTR 4.2.8)
The results for the half year ended 30 June 2009 and those comparable figures for the half year ended 30 June 2008 are unaudited. The figures for the year ended 2008 are extracted from the 2008 Annual Report and Accounts, on which the Independent Auditors' gave an unqualified opinion.
The Board of Directors responsible for the half yearly accounts are listed below:
J.D. Bee Chairman
D.E. Cowie Chief Executive
R.W. Dyson Non-executive director
A. Finch Non-executive director
C.W. Gee Finance Director
P.A. Lynch Operations Director
S.M. Molloy Non-executive director
M.J. Prior Vice Chairman
I.M. Richardson Executive Director & Secretary
J. Smith Non-executive director
Signed on behalf of the Board of Directors
J.D. Bee
Chairman
21 August 2009
NOTES
HALF-YEARLY FINANCIAL INFORMATION
30 JUNE 2009
Basis of preparation
The half yearly financial information for the 6 months ended 30 June 2009 has been prepared in accordance with both the Financial Services Authority' Disclosure and Transparency Rules and IAS 34 Interim Financial Reporting, as adopted by the European Union.
The half yearly financial information set out above does not constitute Accounts within the meaning of the Building Societies Act 1986.
The financial information for the 12 months to 31 December 2008 has been extracted from the 2008 Annual Report and Accounts on which the external auditors gave an unqualified opinion.
The half-yearly financial information for the 6 months ended 30 June 2009 and the 6 months ended 30 June 2008 is unaudited.
This financial information should be read in conjunction with the 2008 Annual Report and Accounts.
Accounting policies
The half yearly financial information has been prepared consistent with the accounting policies described on pages 18 to 21 of the 2008 Annual Report and Accounts. The Group expects that these accounting policies will be applied at the time of compiling the 2009 Annual Report and Accounts.
Under the terms of IAS 1 (revised 2007) Presentation of financial statements, the Group has elected to present two statements, being an Income Statement and a Statement of Comprehensive Income within this financial information. The Group expects to adopt this approach also at the time of compiling the 2009 Annual Report and Accounts.
The new IFRS 8 Operating segments, which replaces IAS 14 Segment reporting, had no impact on the way in which the Group information is reported.
Taxation
Corporation tax has been accrued at the rate of 28% (first half 2008 - 28%). The tax charge has been calculated as far as possible to approximate to the expected full year tax rate.
Related Party Transactions
The Group had no material or unusual related party transactions during the 6 months ended 30 June 2009.
Segmental information
The operations of the Group is not sufficiently diverse to require segmental analysis or reporting.
Financial commitments and contingencies
There is no material change from the Group's financial commitments or its contingent liabilities reported in the 2008 Annual Report and Accounts
Events after the end of the reporting period
Sums were received in partial settlement of the Society's claims against two of the Icelandic banks that were detailed within the 2008 Annual Report and Accounts. The quantum of the receipts supports the amended assumptions made within the half yearly financial results concerning the overall levels of anticipated recovery.
Approval of interim financial statements
The interim financial statements were approved by the Board of directors on 21 August 2009.
| MANCHESTER BUILDING SOCIETY GROUP | |||
| HALF-YEARLY FINANCIAL INFORMATION | |||
| Summary Consolidated Income Statement | |||
| Unaudited | Unaudited | Audited | |
| 6 months to | 6 months to | 12 months to | |
| 30-Jun-09 | 30-Jun-08 | 31-Dec-08 | |
| £000's | £000's | £000's | |
| Interest and similar income | 17,924 | 27,144 | 54,563 |
| Interest expense and similar charges | 12,822 | 21,488 | 42,599 |
| Net interest receivable | 5,102 | 5,656 | 11,964 |
| Other income and charges | -816 | 986 | 2,394 |
| Gains from derivatives and hedge accounting | 136 | -90 | 1,515 |
| Total operating income | 4,422 | 6,552 | 15,873 |
| Administrative expenses | 3,721 | 4,018 | 7,528 |
| Impairment losses | 148 | 227 | 5,976 |
| Profit before taxation | 553 | 2,307 | 2,369 |
| Taxation | 155 | 706 | 642 |
| Profit for the period | 398 | 1,601 | 1,727 |
| Summary Consolidated Statement of Comprehensive Income | |||
| Unaudited | Unaudited | Audited | |
| 6 months to | 6 months to | 12 months to | |
| 30-Jun-09 | 30-Jun-08 | 31-Dec-08 | |
| £000's | £000's | £000's | |
| Profit for the period | 398 | 1,601 | 1,727 |
| 398 | 1,601 | 1,727 | |
| MANCHESTER BUILDING SOCIETY GROUP | |||
| HALF-YEARLY FINANCIAL INFORMATION | |||
| Summary Consolidated Balance Sheet | |||
| Unaudited | Unaudited | Audited | |
| 30-Jun-09 | 30-Jun-08 | 31-Dec-08 | |
| Assets | £000's | £000's | £000's |
| Liquid assets | 224,093 | 198,331 | 220,012 |
| Derivative financial instruments | 2,651 | 6,301 | 5,979 |
| Loans & advances to customers | 688,058 | 658,056 | 708,551 |
| Property, plant and equipment | 9,262 | 9,551 | 9,383 |
| Investments | 250 | 520 | 2,771 |
| Other assets | 4,876 | 3,151 | 1,113 |
| 929,190 | 875,910 | 947,809 | |
| Unaudited | Unaudited | Audited | |
| Liabilities | 30-Jun-09 | 30-Jun-08 | 31-Dec-08 |
| £000's | £000's | £000's | |
| Shares | 735,242 | 576,481 | 668,304 |
| Deposits | 118,366 | 229,476 | 181,023 |
| Derivative financial instruments | 9,814 | 3,584 | 33,233 |
| Other liabilities | 2,850 | 4,039 | 2,793 |
| Subordinated liabilities | 15,700 | 15,700 | 15,700 |
| Subscribed capital | 14,788 | 14,788 | 14,788 |
| Reserves | 32,430 | 31,842 | 31,968 |
| 929,190 | 875,910 | 947,809 | |
| MANCHESTER BUILDING SOCIETY GROUP | |||
| HALF-YEARLY FINANCIAL INFORMATION | |||
| Summary Consolidated Cash Flow Statement | |||
| Unaudited | Unaudited | Audited | |
| 6 months to | 6 months to | 12 months to | |
| 30-Jun-09 | 30-Jun-08 | 31-Dec-08 | |
| £000's | £000's | £000's | |
| Net cash flows from operating activities | -62 | 28,188 | 50,282 |
| Taxation paid | -78 | -672 | -1,063 |
| Net cash flows from investing activities | -6,759 | -53,698 | -84,803 |
| Net cash flows from financing activities | 0 | 4,200 | 4,200 |
| Net decrease in cash and cash equivalents | -6,899 | -21,982 | -31,384 |
| Net decrease in cash and cash equivalents | -6,899 | -21,982 | -31,384 |
| Cash and cash equivalents at the start of the period | 63,333 | 94,717 | 94,717 |
| Cash and cash equivalents at the end of the period | 56,434 | 72,735 | 63,333 |
| Other percentages | |||
| Unaudited | Unaudited | Audited | |
| 6 months to | 6 months to | 12 months to | |
| 30-Jun-09 | 30-Jun-08 | 31-Dec-08 | |
| % | % | % | |
| Gross capital as a percentage of shares and borrowings | 7.42 | 8.09 | 7.17 |
| Liquid funds as a percentage of shares and borrowings | 27.32 | 25.75 | 25.90 |
| Wholesale deposits as a percentage of shares and borrowings | 10.35 | 25.15 | 18.44 |
| Profit after tax as a percentage of mean total assets* | 0.08 | 0.38 | 0.20 |
| Management expenses as a percentage of mean total assets* | 0.79 | 0.96 | 0.87 |
| * Expressed on an annualised basis |