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RNS
Arbuthnot Banking Group PLC  -  ARBB   

Half-year Report

Released 07:00 18-Jul-2017

RNS Number : 3046L
Arbuthnot Banking Group PLC
18 July 2017
 


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 1000
Chris 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



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



222,939






Profit attributable to:





Equity holders of the Company



2,445

163,781

Non-controlling interests



 -  

61,426




225,207






Total comprehensive income attributable to:





Equity holders of the Company



2,756

161,513

Non-controlling interests



 -  

61,426




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.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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