Last checked at 24 Jul 2009 07:00
Strictly embargoed until 7am, Friday 24 July 2009
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Newcastle Building Society today announces its results for the 6 months ended 30 June 2009.
Key highlights:
Newcastle Building Society returns to profitability.
Society announces appointment of new Finance Director
Nearly 20,000 new customers attracted over the first six months.
Solvency ratio improved from 11.9% to 12.8% due to reduction in risk weighted assets.
Tier one capital improved from 9.2% to 9.8%.
Wholesale funding ratio has fallen from 27.9% to 17.4% reflecting reducing reliance on treasury markets.
Retail funding of mortgage balances has improved from 86% to 91%.
Residential lending portfolio continues to perform well with arrears at less than 1% which is below CML averages and a reduction for the last two consecutive months in May and June.
Three new savings contracts for the Newcastle Strategic Solutions division.
Plans announced for new flagship branch in Newcastle City Centre.
Chief Executive's Business Review:
Despite the difficult market conditions which existed throughout the period, the Society has returned to profitability. Lending activity has been subdued in line with the objective that all new lending is funded by retail deposits; moreover by 30 June, 91% of all lending was funded in this way compared to 86% at the end of 2008.
Competition for savings has been intense resulting in pressure on the net interest margin. However, recent inflows have been particularly strong, especially through a market leading Five Year Fixed Rate ISA. Overall, the Society attracted nearly 20,000 new customers over the first six months of 2009 with the strong performance continuing in to July.
As a result, the Society's use of wholesale funding has reduced from 27.9% at the end of 2008 to 17.4%.
The Society's capital ratios have also improved. Overall capital has risen to 12.8% from 11.9% and Tier 1 has increased to 9.8% from 9.2%. The liquidity ratio was 22.2% at the end of June, subsequently rising through the retail deposits mentioned earlier.
The Society's lending portfolio remains of high quality and is performing well. The last two months have also seen an improvement in residential arrears. At 30 June, less than 1% of residential owner occupied borrowers were in arrears of greater than three months, compared with the industry average of 2.39%. Only five owner occupied repossessions were instigated by the Society and there was a 7.5% decrease in the total number of properties in possession in the first half. Despite property price falls, the average loan to value across the Society's residential mortgage portfolio was just 53.6%.
The Society has no sub-prime or self-certification exposures and relatively low buy-to-let exposure. The vast majority of its lending is instead to traditional low risk residential borrowers and to housing associations, where there is a low risk of default compared to other types of lending. The commercial book performed well with no new problem cases emerging in the half year.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
In its 2008 results the Society made prudent provisions against its exposure to the Icelandic banks. With the benefit of recent information, especially from the administrators of the UK subsidiaries, those provisions have been reassessed leading to a write back of £2.7m. The net impairment loss of £0.2m includes this write back offset by a prudent supplement to existing provisions to reflect losses which may have been incurred but have not yet emerged.
The Society's Strategic Solutions division, which provides financial outsourcing services based on its core competencies, is recovering well following a reduction in income due to the loss of a major contract. Three new contracts are expected to go live by the end of 2009. This follows the success of the online banking and telephone administration facilities for Icesave customers provided by the Society as part of the Financial Services Compensation Scheme (FSCS) automated payment process which came to an end in January 2009. The importance and value of the Society's role in providing this service was publicly acknowledged by the FSCS.
The Card Solutions offering from the Strategic Solutions division continues to perform well, with over 150 live schemes, in excess of 500,000 cards in circulation and 1 million transactions each month. The Society is the number one provider of MasterCard® prepaid cards in Europe.
As part of ongoing development in the North East, the Society has also announced plans for a new flagship branch at a prime location within Newcastle's city centre. Opportunities to acquire such prime locations are rare and in doing so the Society realises a long term goal. Due to open early next year following major refurbishment, the site will serve as the Society's main city branch, improving the range and accessibility of services to members in its heartland.
The Society is also delighted to announce the appointment of a new Finance Director, Gary Wilkinson. He joins us from the Nationwide where he was Managing Director of Regional Brands - prior to that he had a long career within finance at the Alliance and Leicester.
Challenging trading conditions in 2009 are expected to continue but the Society is well-placed for the future and is committed to remaining an independent, mutual building society for the benefit of all members.
CJ Seccombe
Chief Executive
23 July 2009
Forward-looking statements
Certain statements in this half-yearly information are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
NEWCASTLE 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 |
|
| £m | £m | £m |
|
|
|
|
|
| Interest and similar income | 82.9 | 145.8 | 287.9 |
| Interest expense and similar charges | (67.7) | (123.9) | (249.3) |
| Net interest receivable | 15.2 | 21.9 | 38.6 |
| Other income and charges | 10.0 | 11.0 | 24.2 |
| Gains less losses from financial instruments | (0.7) | (0.9) | 0.5 |
| Administrative expenses | (23.6) | (23.2) | (47.5) |
| Operating profit before impairments and FSCS levy | 0.9 | 8.8 | 15.8 |
| Impairment losses | (0.2) | (0.3) | (44.7) |
| FSCS levy | - | - | (6.8) |
| Profit / (loss) before taxation | 0.7 | 8.5 | (35.7) |
| Taxation (expense) / credit | (0.2) | (2.6) | 9.9 |
| Profit / (loss) for the financial period | 0.5 | 5.9 | (25.8) |
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 |
|
| £m | £m | £m |
|
|
|
|
|
| Profit / (loss) for the period | 0.5 | 5.9 | (25.8) |
|
|
|
|
|
| Other comprehensive income |
|
|
|
| Movement on available for sale reserve | (7.2) | - | 6.6 |
| Movement on cash flow hedge reserve | 1.2 | (0.2) | (1.2) |
| Actuarial loss on retirement benefit obligations | - | - | (5.0) |
| Taxation | - | 1.9 | 3.4 |
| Total comprehensive income for the period | (5.5) | 7.6 | (22.0) |
The notes on pages 6 and 7 form an integral part of this condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Summary Consolidated Balance Sheet
|
| Unaudited | Unaudited | Audited |
| 30 Jun 09 | 30 Jun 08 | 31 Dec 08 | |
|
| £m | £m | £m |
| ASSETS |
|
|
|
| Liquid assets | 710.5 | 1,217.2 | 1,069.2 |
| Loans and advances to customers | 3,692.2 | 3,851.2 | 3,838.8 |
| Derivative financial instruments | 19.2 | 23.9 | 18.7 |
| Fair value adjustments for hedged risk | 41.9 | 31.5 | 68.6 |
| Property, plant and equipment | 30.8 | 30.6 | 32.1 |
| Investment properties | 14.3 | 13.0 | 13.9 |
| Other assets | 42.0 | 35.9 | 51.6 |
| TOTAL ASSETS | 4,550.9 | 5,203.3 | 5,092.9 |
|
|
| ||
|
| Unaudited | Unaudited | Audited |
| 30 Jun 09 | 30 Jun 08 | 31 Dec 08 | |
|
| £m | £m | £m |
| LIABILITIES |
|
|
|
| Shares | 3,361.1 | 3,146.9 | 3,302.3 |
| Deposits and debt securities | 818.6 | 1,657.6 | 1,389.3 |
| Derivative financial instruments | 40.7 | 35.3 | 70.2 |
| Fair value adjustments for hedged risk | 10.3 | 17.5 | 8.6 |
| Other liabilities | 46.4 | 47.1 | 43.1 |
| Subordinated liabilities | 60.7 | 60.7 | 60.8 |
| Subscribed capital | 29.9 | 19.9 | 29.9 |
| Reserves | 183.2 | 218.3 | 188.7 |
| TOTAL LIABILITIES | 4,550.9 | 5,203.3 | 5,092.9 |
The notes on pages 6 and 7 form an integral part of this condensed consolidated half-yearly financial information.
NEWCASTLE 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 | |
|
| £m | £m | £m |
|
|
|
|
|
| Net cash flows from operating activities | (362.8) | 290.8 | 170.1 |
| Taxation repaid / (paid) | 5.7 | 0.4 | (1.5) |
| Payment into defined benefit pension scheme | (0.4) | (0.4) | (0.4) |
| Net cash flows from investing activities | 109.1 | (153.5) | 205.3 |
| Net cash flows from financing activities | (3.0) | (3.6) | 2.3 |
| Net (decrease) / increase in cash and cash equivalents | (251.4) | 133.7 | 375.8 |
|
|
|
|
|
| Net (decrease) / increase in cash and cash equivalents | (251.4) | 133.7 | 375.8 |
| Cash and cash equivalents at the start of period | 606.1 | 230.3 | 230.3 |
| Cash and cash equivalents at the end of the period | 354.7 | 364.0 | 606.1 |
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 | 6.73 | 6.37 | 6.10 |
| Liquid assets as a percentage of shares and borrowings | 22.17 | 25.82 | 23.28 |
| Wholesale deposits as a percentage of shares and borrowings | 17.41 | 32.92 | 27.90 |
| Profit / (loss)after tax as a percentage of mean total assets* | 0.02 | 0.25 | (0.52) |
| Management expenses as a percentage of mean total assets* | 1.00 | 0.93 | 0.96 |
Expressed on an annualised basis
The notes on pages 6 and 7 form an integral part of this condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Notes
1.1 The half-yearly financial information set out above, which was approved by the Board of Directors on 23 July 2009, does not constitute accounts within the meaning of the Building Societies Act 1986.
1.2 The financial information for the 12 months to 31 December 2008 has been extracted from the accounts for that year which have been filed with the Financial Services Authority and on which the auditors gave an unqualified opinion.
1.3 The half-yearly financial information for the 6 months to 30 June 2009 and the 6 months to 30 June 2008 is unaudited.
1.4 The announcement will be sent to holders of the Society's permanent interest bearing shares. Copies are available from the Society's Principal Office at Portland House, Newcastle upon Tyne NE1 8AL.
This condensed consolidated half-yearly financial information for the half-year ended 30 June 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008, which have been prepared in accordance with IFRSs as adopted by the European Union.
3. Accounting policies
Except as described below, the half-yearly financial information has been prepared on the basis of the accounting policies adopted for the year ended 31 December 2008, as described in those financial statements.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2009.
IAS 1 (revised), 'Presentation of financial statements'. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has elected to present two statements; an income statement and a statement of comprehensive income. The half-yearly financial information has been prepared under the revised disclosure requirements.
IFRS 8, 'Operating segments'. IFRS 8 has replaced IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. Two reportable segments are presented; Member business and Solutions business.
The Group currently expects to adopt these accounting policies in its annual accounts for the year ended 31 December 2009.
4. Taxation
The effective tax charge is 28.6% (first half 2008 - 30.6%). The tax charge has been calculated as far as possible to approximate to the expected full year tax rate. This decrease is mainly due to the reduction in the rate of corporation tax.
5. Related Party Transactions
The Group had no material or unusual related party transactions during the half-year to 30 June 2009.
Key management compensation amounted to £0.4m for the period (first half 2008: £0.5m).
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
6. Segment information
The chief operating decision maker has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The 'Member business' provides mortgage, savings, investment and insurance products to members and customers. The 'Solutions business' provides business to business services through people, processes and technology. The Board assesses performance based on profit before tax after the allocation of all central costs.
| Period to 30 June 2009 | Member | Solutions |
|
|
| Business | Business | Total |
|
| £m | £m | £m |
| Net interest receivable | 15.2 | - | 15.2 |
| Other income and charges | 4.8 | 5.2 | 10.0 |
| Gains less losses from financial instruments | (0.7) | - | (0.7) |
| Administrative expenses | (17.9) | (5.7) | (23.6) |
| Operating profit before impairments and FSCS levy | 1.4 | (0.5) | 0.9 |
| Impairment losses | (0.2) | - | (0.2) |
| FSCS levy | - | - | - |
| Profit / (loss) before taxation | 1.2 | (0.5) | 0.7 |
| Taxation expense |
|
| (0.2) |
| Profit for the financial period |
|
| 0.5 |
|
|
|
|
|
| Total assets | 4,544.5 | 6.4 | 4,550.9 |
|
|
|
|
|
| Period to 30 June 2008 | Member | Solutions |
|
|
| Business | Business | Total |
|
| £m | £m | £m |
| Net interest receivable | 21.9 | - | 21.9 |
| Other income and charges | 5.2 | 5.8 | 11.0 |
| Gains less losses from financial instruments | (0.9) | - | (0.9) |
| Administrative expenses | (18.1) | (5.1) | (23.2) |
| Operating profit before impairments and FSCS levy | 8.1 | 0.7 | 8.8 |
| Impairment losses | (0.3) | - | (0.3) |
| FSCS levy | - | - | - |
| Profit before taxation | 7.8 | 0.7 | 8.5 |
| Taxation expense |
|
| (2.6) |
| Profit for the financial period |
|
| 5.9 |
|
|
|
|
|
|
|
|
|
|
|
| Member | Solutions |
|
| Period to 31 December 2008 | Business | Business | Total |
|
| £m | £m | £m |
| Net interest receivable | 38.6 | - | 38.6 |
| Other income and charges | 11.0 | 13.2 | 24.2 |
| Gains less losses from financial instruments | 0.5 | - | 0.5 |
| Administrative expenses | (35.9) | (11.6) | (47.5) |
| Operating profit before impairments and FSCS levy | 14.2 | 1.6 | 15.8 |
| Impairment losses | (44.7) | - | (44.7) |
| FSCS levy | (6.8) | - | (6.8) |
| (Loss) / profit before taxation | (37.3) | 1.6 | (35.7) |
| Taxation credit |
|
| 9.9 |
| (Loss) for the financial period |
|
| (25.8) |
|
|
|
|
|
| Total assets | 5,085.0 | 7.9 | 5,092.9 |
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Statement of directors' responsibilities
The directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the half-yearly management report herein includes a fair review of the information required by the Disclosure and Transparency Rules (DTR 4.2.7 and DTR 4.2.8).
The directors of Newcastle Building Society are listed in the Annual Report for 2008. The following changes have occurred in the period:
Jonathan Westhoff (resigned 30 April 2009)
On behalf of the Board
CJ Hilton
Chairman
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Independent review report to Newcastle Building Society
Introduction
We have been engaged by Newcastle Building Society to review the condensed set of financial statements in the half-yearly financial information for the six months ended 30 June 2009, which comprises the summary consolidated income statement, summary consolidated statement of comprehensive income, summary consolidated balance sheet, summary consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial information and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial information is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial information in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial information has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Society a conclusion on the condensed set of financial statements in the half-yearly financial information based on our review. This report, including the conclusion, has been prepared for and only for the Society for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial information for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants Newcastle upon Tyne 23 July 2009
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Notes:
(a) The maintenance and integrity of the Newcastle Building Society website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
ENDS
Contacts:
Colin SeccombeChief ExecutiveTel: 0191 244 2209email: colin.seccombe@newcastle.co.uk
Angela RussellDeputy Finance DirectorTel: 0191 244 1593email: angela.russell@newcastle.co.uk
Press Contact:
Richard HallCorporate Communications AssistantTel: 0191 244 1522Email: richard.hall@newcastle.co.uk