Last checked at 16 Aug 2010 10:19
MANCHESTER BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
30 JUNE 2010
Business Review
The Group reported a profitable start to 2010.
Highlights for the period include:
·; Profit before tax for the half year of £0.245m
·; The Society's management expense ratio fell further to 0.56%
·; Liquid funds increased by 7.5% over the past 12 months
Retail savings and liquid funds
There were no notable movements in either the number of retail depositing customers or the total balance of their funds during the period. However, over a three year period, the Society has grown its retail balances by 58%.
The Society maintained its low level of reliance on the wholesale funding markets during the period, operating such balances within the range of 10.5 - 12.3%, expressed as a percentage of Shares Deposits and Loans; the comparable level of wholesale funding from three years earlier had been 29.3%.
Robust levels of liquidity have been maintained throughout the period.
Mortgage lending and arrears
New mortgage lending during the first half of the year has been subdued. The small reduction in overall mortgage balances reported during the period was in line with the Society's business plans, with levels of redemptions and repayments received being in excess of new mortgage advances made. A cautious approach has continued to be taken to the underwriting criteria applied to all new products offered, with interest rates offered reflecting this underwriting caution.
The Society continues to take a sympathetic and pragmatic approach to working with those borrowers that fall into arrears.
The level of arrears seen on mortgage balances has remained stable during the first half of 2010 and the number of properties in possession at the end of June 2010 was marginally lower than the position a year earlier (June 2010: 16; June 2009: 18).
Board and staff changes
There have been no material changes to either the Group's organisational structure or its headcount. The Board considers that the current staffing compliment will support existing business levels and can accommodate increased activity in the short term as and when the housing market recovers.
John Bee, previously the Society's Chairman and a non-executive director for the past 10 years, retired from the Board in April 2010. The Board would like to thank him for his long standing commitment and for the contribution that he has made to the Group's development during his time on the Board.
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 model has been sufficiently robust to maintain profitability, albeit at reduced levels, and further steps have been taken to improve the net interest margin, with a consequential improvement anticipated to profitability in the second half of 2010.
Both the UK and global economic outlooks continue to be uncertain. Whilst average UK retail savings rates have reduced since the start of 2010, competition for retail deposits continues to be fierce and it is the Board's view that this will continue for the foreseeable future.
The future direction of the housing market also remains uncertain, with general sentiment fearing a further relapse in house prices following their unexpected recovery between H1 2009 and H2 2010. The Society's approach will remain cautious and its lending levels are likely to remain subdued during the remainder of the year. Focus into 2011 will be maintained on cautious, controlled, profitable growth with the reduction of the management expense ratio and a strengthening of capital ratios all being key targets.
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 2010 and those comparable figures for the half year ended 30 June 2009 are unaudited. The figures for the year ended 2009 are extracted from the 2009 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. Allen Non-executive director
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 Chairman
I.M. Richardson Executive Director
J. Smith Vice Chairman
Signed on behalf of the Board of Directors
M.J. Prior
Chairman
13 August 2010
NOTES
HALF-YEARLY FINANCIAL INFORMATION
30 JUNE 2010
Basis of preparation
The half yearly financial information for the 6 months ended 30 June 2010 has been prepared in accordance with both the Financial Services Authority's 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 2009 has been extracted from the 2009 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 2010 and the 6 months ended 30 June 2009 is unaudited.
This financial information should be read in conjunction with the 2009 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 2009 Annual Report and Accounts. The Group expects that these accounting policies will be applied at the time of compiling the 2010 Annual Report and Accounts.
There were no new reporting standards that affected the results reported for the half year ended 30 June 2010.
Taxation
Corporation tax has been accrued at the rate of 28% (first half 2009 - 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 2010.
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 2009 Annual Report and Accounts
Events after the end of the reporting period
There have been no events occurring after the end of the reporting period that would have impacted upon the results reported.
Approval of interim financial statements
The interim financial statements were approved by the Board of directors on 13 August 2010.
| MANCHESTER BUILDING SOCIETY GROUP |
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| HALF-YEARLY FINANCIAL INFORMATION |
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| Summary Consolidated Statements of Comprehensive Income | |||
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| Unaudited | Unaudited | Audited |
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| 6 months to | 6 months to | 12 months to |
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| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
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| £000s | £000s | £000s |
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| Interest and similar income | 13,803 | 17,924 | 36,030 |
| Interest expense and similar charges | 9,662 | 12,822 | 26,912 |
| Net interest receivable | 4,141 | 5,102 | 9,118 |
| Other income and charges | 526 | -816 | -2,021 |
| (Losses)/gains from derivatives and hedge accounting | -747 | 136 | -78 |
| Total operating income | 3,920 | 4,422 | 7,019 |
| Administrative expenses | 3,128 | 3,721 | 6,831 |
| Impairment losses | 547 | 148 | -537 |
| Profit before taxation | 245 | 553 | 725 |
| Taxation | 69 | 155 | 841 |
| Profit for the period | 176 | 398 | -116 |
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| Summary Consolidated Statement of Changes in Equity |
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| Unaudited | Unaudited | Audited |
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| 6 months to | 6 months to | 12 months to |
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| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
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| £000s | £000s | £000s |
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| Profit for the period | 176 | 398 | -116 |
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| 176 | 398 | -116 |
| MANCHESTER BUILDING SOCIETY GROUP |
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| Summary Consolidated Statements of Financial Position | |||
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| Unaudited | Unaudited | Audited |
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| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
| Assets | £000s | £000s | £000s |
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| Liquid assets | 241,118 | 224,093 | 236,257 |
| Derivative financial instruments | 1,420 | 2,651 | 2,082 |
| Loans and advances to customers | 677,783 | 688,058 | 688,568 |
| Property, plant and equipment | 8,979 | 9,262 | 9,122 |
| Investments | 250 | 250 | 250 |
| Other assets | 6,333 | 4,876 | 1,041 |
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| 935,883 | 929,190 | 937,320 |
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| Unaudited | Unaudited | Audited |
| Liabilities | 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
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| £000s | £000s | £000s |
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| Shares | 727,645 | 735,242 | 736,240 |
| Deposits | 122,368 | 118,366 | 122,960 |
| Derivative financial instruments | 20,561 | 9,814 | 11,331 |
| Other liabilities | 2,793 | 2,850 | 4,449 |
| Subordinated liabilities | 15,700 | 15,700 | 15,700 |
| Subscribed capital | 14,788 | 14,788 | 14,788 |
| Reserves | 32,028 | 32,430 | 31,852 |
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| 935,883 | 929,190 | 937,320 |
| MANCHESTER BUILDING SOCIETY GROUP |
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| HALF-YEARLY FINANCIAL INFORMATION |
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| Summary Consolidated Statements of Cash Flows | |||
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| Unaudited | Unaudited | Audited |
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| 6 months to | 6 months to | 12 months to |
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| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
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| £000s | £000s | £000s |
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| Net cash flows from operating activities | -592 | -62 | 17,078 |
| Taxation paid | -742 | -78 | -311 |
| Net cash flows from investing activities | -20,524 | -6,759 | 26,091 |
| Net cash flows from financing activities | 0 | 0 | 0 |
| Net decrease in cash and cash equivalents | -21,858 | -6,899 | 42,858 |
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| Net decrease in cash and cash equivalents | -21,858 | -6,899 | 42,858 |
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| Cash and cash equivalents at the start of the period | 106,191 | 63,333 | 63,333 |
| Cash and cash equivalents at the end of the period | 84,333 | 56,434 | 106,191 |
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| Other percentages |
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| Unaudited | Unaudited | Audited |
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| 6 months to | 6 months to | 12 months to |
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| 30 Jun 10 | 30 Jun 09 | 31 Dec 09 |
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| % | % | % |
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| Gross capital as a percentage of shares and borrowings | 7.48 | 7.42 | 7.08 |
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| Liquid funds as a percentage of shares and borrowings | 29.65 | 27.32 | 27.50 |
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| Wholesale deposits as a percentage of shares and borrowings | 10.54 | 10.35 | 11.10 |
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| Profit after tax as a percentage of mean total assets* | 0.04 | 0.08 | -0.01 |
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| Group management expenses as a percentage of mean total assets* | 0.67 | 0.79 | 0.72 |
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| * Expressed on an annualised basis |
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