TIDMALD
RNS Number : 9160U
Aldermore Group PLC
12 April 2016
12 April 2016
Aldermore Group PLC (the "Company")
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2015
AND NOTICE OF AGM
The Company announces that, in accordance with Listing Rule
9.6.1, the documents listed below have been submitted to the
National Storage Mechanism and will shortly be available for
inspection at www.hemscott.com/nsm.do.
- Annual Report and Accounts 2015
- Notice of 2016 Annual General Meeting
- Annual General Meeting 2016 Form of Proxy
- Shareholder communications letter
The mailing to shareholders of the documents mentioned above has
commenced and the Annual Report and Accounts 2015 and the Notice of
2016 Annual General Meeting will shortly be available to view on
the Company's website at www.investors.aldermore.co.uk.
The Company's 2016 Annual General Meeting will be held at
10.30am on Tuesday 17 May 2016 at the offices of Linklaters LLP, 1
Silk Street, London EC2Y 8HQ.
This announcement should be read in conjunction with the
Company's full year results announcement issued on 10 March 2016.
Together these constitute the material required by DTR 6.3 to be
communicated to the media in full unedited text through a
Regulatory Information Service. This material is not a substitute
for reading the Company's Annual Report and Accounts 2015. Page
references in the text below refer to page numbers in the Annual
Report and Accounts 2015.
For further information:
Rachel Spencer
Company Secretary
+44 (0)20 3553 4202
Claire Cordell
Director of Investor Relations
+44 (0)20 3553 4274
Principal risks
Principal Mitigation Key risk measures Commentary
risks
----------------- ----------------------------------------------------------- ----------------- -------------------
Strategic GRAPH RoE has improved
and business * Remain focused on a sustainable business model which Underlying as we continue
risk is aligned to the Group's strategy return to increase
The risks on equity(1) lending while
that can affect improving
our ability 2014: 15.1% the net interest
to achieve 2015: 20.6% margin, driving
our corporate cost/income
and strategic ratio lower
objectives. and delivering
a low and
consistent
cost of risk.
----------------- ----------------------------------------------------------- ----------------- -------------------
Credit risk GRAPH Improved cost
The risk of * Focus on business sectors where we have specific Cost of risk of risk reflects
financial expertise continued
loss arising 2014: 23bps focus on
from a borrower 2015:19bps underwriting
failing to * Limit concentration of exposures by size, geography and credit
meet their and sector risk management
financial as well as
obligations the relatively
to the Group. * Obtain appropriate level of security cover along with benign external
affordability testing credit environment.
* Detailed lending policies embedded in all business
areas
* Portfolio performance against risk appetite regularly
reviewed
* Stress testing
See page 110
for further
information
----------------- ----------------------------------------------------------- ----------------- -------------------
Liquidity GRAPH Liquidity
risk * Maintain a liquidity buffer, which is based on Liquidity coverage ratio
The risk that requirements under stressed conditions coverage ratio is well in
we are not excess of
able to meet 2014: 270% current and
our financial * Monitor liquidity buffer on a daily basis to ensure 2015: 235% expected future
obligations there are sufficient liquid assets at all times regulatory
as they fall requirements.
due, or can
do so only See page 123
at excessive for further
cost. information
----------------- ----------------------------------------------------------- ----------------- -------------------
Market risk ICON No material
The financial * We do not seek to take or expose the Group to market tick risk.
impact from risk and we do not carry out proprietary trading
movements
in market
prices on See page 125
the value for further
of assets information
and liabilities.
----------------- ----------------------------------------------------------- ----------------- -------------------
1 Excludes IPO-related expenses at GBP4.1 million pre-tax and
GBP3.4 million post tax in 2015 (2014: GBP6.0 million and GBP4.6
million respectively).
Principal Mitigation Key risk measures Commentary
risks
------------------ ----------------------------------------------------------- ----------------- ------------------
Interest rate GRAPH Percentage
risk * Match interest rate structure of assets with Hedged fixed un-hedged
The risk of liabilities or deposits creating a natural hedge rate assets remains well
financial v liabilities within our
loss through tolerance
un-hedged * Alternatively, we will enter into swap agreements to 2014: 99.5% of 5%.
or mismatched convert fixed interest rate liabilities into variable 2015: 100%
asset and rate liabilities, which are then matched with
liability variable interest rate assets
positions
sensitive
to changes See page 125
in interest for further
rates. information
------------------ ----------------------------------------------------------- ----------------- ------------------
Capital risk GRAPH Increase in
The risk that * Regulate the volume of loan origination Fully loaded CET1 ratio
we have CRD IV CET1 driven by
insufficient ratio 2015 retained
capital to * Monthly forecasting of 12 - 18 month capital outlook earnings of
cover regulatory 2014: 10.4% GBP78m plus
requirements 2015: 11.8% GBP75m of
or growth * Stress testing and sensitivity analysis gross primary
plans. equity raised
at IPO partially
See page 126 offset by
for further growth in
information risk weighted
assets as
(MORE TO FOLLOW) Dow Jones Newswires
April 12, 2016 05:01 ET (09:01 GMT)
lending has
increased.
------------------ ----------------------------------------------------------- ----------------- ------------------
Operational ICON We agree a
risk * Embed and ensure all staff understand and follow the tick tolerated
The risk of Operational Risk Management Framework level of losses
financial arising from
loss and/or operational
reputational * Oversight and challenge from Group Risk risk events.
damage resulting During 2015,
from inadequate we have operated
or failed * Monitoring of the operational risk profile within risk
internal appetite.
processes,
people and * Strengthened cyber security
systems or
from external
events including See page 129
financial for further
crime. information
------------------ ----------------------------------------------------------- ----------------- ------------------
Conduct risk ICON We utilise
The risk of * Conduct Risk Framework tick a composite
causing unfair metric which
outcomes and takes into
detriment * Product Governance Framework account a
to our customers, number of
regulatory factors including
censure and/or * Conduct Risk built into Risk & Control customer
undermining Self-Assessment process complaints
market integrity and customer
as a result detriment
of our behaviour, * Monitor first line conduct risk metrics covering the suffered as
decision-making, product life cycle a result of
activities product design,
or processes. product sales
* Oversight and challenge from Group Risk and post-sale
processes.
This includes
See page 130 actual detriment
for further or emerging
information issues which
may lead to
detriment.
During the
year, we remained
within our
overall risk
appetite.
------------------ ----------------------------------------------------------- ----------------- ------------------
Current strategic risks
The Group's current strategic risks are detailed as follows.
These may have a potential future impact on the strategic plans for
the business and its future financial performance.
Compliance and competition regulation
The banking sector is currently subject to a large volume of
actual and potential regulatory change arising from European
regulation and from the PRA and FCA. We actively manage a number of
regulatory review and change activities.
Buy-to-Let
There have been a number of actual and proposed regulatory and
legislative changes related to the buy-to-let sector.
Firstly, the Summer Budget introduced plans to restrict relief
on mortgage interest for individual landlords to the basic rate of
income tax from April 2017. This was followed by the introduction,
from April 2016, of an additional 3 per cent stamp duty tax on
buy-to-let properties over GBP40,000. It should be noted, that
around half of all buy-to-let mortgages across the market relate to
remortgage rather than purchase transactions and attract no stamp
duty. We represent a small part of the overall market and, as such,
believe that this lending segment remains attractive from a growth
and return perspective.
In addition to the powers of recommendation already granted, the
UK Government is currently consulting on whether to grant the
Financial Policy Committee (FPC) powers of direction to the PRA/FCA
in relation to restrictions to the buy-to-let market. We consider
our current underwriting criteria to be prudent. We stress all
loans at origination to ensure that the mortgage is still
affordable in a rising interest rate environment.
Additionally, in December 2015, the Basel Committee issued a
consultation paper on risk weights which, if implemented as
currently drafted, would, probably from 2019, increase the
standardised capital risk weight for a buy-to-let mortgage on a
residential property.
Although we believe the PRA will continue to press for the
right, which it currently exercises, to determine the appropriate
standardised risk weight for UK buy-to-let, given it is a mature
and efficient market, we intend to pursue an IRB approach.
Interest rates
We are cognisant of the very low interest rate environment at
present, with inflation and unemployment remaining low, despite
global economic uncertainty and financial market turmoil.
Predictions for an interest rate rise are highly uncertain but are
currently indicating a rise sometime in 2018. However, the risk of
an interest rate rise and the associated potential impact on our
customers' ability to repay is recognised and is mitigated through
a range of measures, including stress testing and the use of
affordability criteria which measure the ability of customers to
service loan payments at higher interest rates.
Political risks
There are ongoing political risks, including the UK's membership
of the EU. The impact of leaving the EU is uncertain but could
affect exports and the position of London as a major financial
centre. There could also be changes in taxation or regulation which
may prove to be disadvantageous to our customers. We are solely a
UK-focused business and seek to mitigate these by working closely
with banking regulators and Government authorities.
Economic risks
The UK economic outlook remains relatively benign, with growth
expected to continue, a stable property market and very gradually
rising interest rates. Although there are some sub-sectors which
have some risks (oil and gas and steel sectors), we have only
limited exposure to these areas.
The international economic and political environment also
contains risks. These include structural and deflationary concerns
in the EU, worsening geopolitical risks in Russia and the Middle
East, and a continued slowing of the economy in China, putting
pressure on global financial and commodity markets. To date, the UK
economy has remained robust in the face of these global headwinds
and as a UK- focused business we have not felt any adverse
consequences. The medium-term impact is unclear and there remains a
possibility that material international events could adversely
affect the UK and act as a drag on the UK economy and sectors in
which we lend. We aim to manage these risks by maintaining a
well-diversified product base, and remaining focused on the UK.
Cyber-crime
Financial cyber-crime has become a major issue in our
increasingly interconnected world and exposes our business to both
financial and reputational damage. During 2015, we continued to
strengthen our defences against cyber-crime. Notwithstanding this,
we plan to make further security improvements during 2016 and to
ensure that the measures in place are in line with best practice
standards. Additionally, we have plans in place to identify and
respond to a cyber risk event on a timely basis, ensuring that
there is a practical approach to actions and escalation to help
minimise any potential impact.
Impact of accounting standards
(MORE TO FOLLOW) Dow Jones Newswires
April 12, 2016 05:01 ET (09:01 GMT)
New reporting requirements under IFRS 9 introduce forward
looking credit models which will lead to changes in the timing of
impairment recognition. We continue to assess the impact of IFRS 9
and have implemented a project plan to ensure compliance with this
new standard well ahead of its proposed implementation date of 1
January 2018.
Competition
The competitive landscape contains risks from new entrants,
increased competition from incumbent lenders and disruptive
products/software solutions potentially affecting both lending and
deposit taking activities. The effect of this could result in lower
volume, higher customer attrition and/or lower net interest
margins. The risk of competition has been recognised in our future
planning process but is constantly monitored.
Risk management, internal control and viability reporting
Assessment of principal risks
As described further in the Risk Report, the Board is
responsible for determining the nature and extent of the principal
risks it is willing to take in order to achieve its strategic
objectives. The Board is also ultimately responsible for
maintaining sound risk management and internal control systems. In
line with the Code requirements, the Directors have performed a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity.
The principal risks are further described on pages 40 to 41 and
the current strategic risks are described on page 42.
Statement of Directors' responsibilities in respect of the
Annual Report and Accounts and the financial statements
The Directors are responsible for preparing the Annual Report
and Accounts and the Group and parent company financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with IFRSs as adopted by the EU and applicable law and
have elected to prepare the parent company financial statements on
the same basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company and of
their profit or loss for that period. In preparing each of the
Group and parent company financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the parent
company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors' Report,
Remuneration Report and Corporate governance statement that
complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the Strategic report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the group's position and
performance, business model and strategy.
Phillip Monks
Chief Executive Officer
9 March 2016
Notes to the consolidated financial statements
40. Related parties
a) Controlling parties
The Group was previously controlled by AnaCap Financial
Partners, II L.P. (52.3 per cent. of voting rights) and AnaCap
Financial Partners, L.P. (47.7 per cent. of voting rights) who were
the sole voting shareholders of Aldermore Group PLC.
On 13 March 2015, the Company was admitted to the LSE, offering
117,934,783 ordinary shares, of which 78,872,283 shares were sold
by the Selling shareholders. Upon admission, AnaCap Financial
Partners L.P., AnaCap Financial Partners II L.P., AnaCap Derby
Co-Investment (No.1.) L.P. and AnaCap Derby Co-Investment (No.2.)
(collectively "the Principal Shareholders") and the Company entered
into the "Relationship agreement". Details of the Relationship
agreement were provided within the Prospectus issued prior to the
admission to the LSE.
On 15 September 2015 the Principal Shareholders sold 40,885,613
Ordinary GBP0.10 shares on the open market.
At 31 December 2015, AnaCap Financial Partners L.P., AnaCap
Financial Partners II L.P., AnaCap Derby Co-Investment (No.1.) L.P.
and AnaCap Derby Co-Investment (No.2.) L.P held 11.26 per cent,
11.01 per cent, 9.54 per cent and 8.33 per cent of the Company's
ordinary share capital respectively. Although Anacap is no longer a
controlling party for the Group it continues to have significant
influence and is therefore considered to be a related party.
The Group had agreements in place with Syscap Limited ("Syscap")
at the start of the year. Syscap were previously under the control
of Anacap Financial Partners II L.P. and AnaCap Financial Partners,
L.P. Syscap ceased to be a related party when Anacap sold their
interest on 20 February 2015. During the year the following
agreements were in place between the Group and Syscap:
-- The Group provides GBP5 million of block discounting
facilities to Syscap Limited, a provider of business finance
solutions. The facilities are secured by underlying receivables of
short-term loans, primarily to solicitors' practices which are
funded at a discount to the face value of the loans. The facilities
contain appropriate conditions relating to performance,
non-performing deal substitution rights and default provisions in
line with the Group's standard commercial policies. Pricing on the
facilities is subject to normal commercial terms
-- Until 20 February 2015 Syscap introduced business of GBP9.6
million (year ended 31 December 2014: GBP21.9 million) and received
commission of GBP0.1 million (year ended 31 December 2014: GBP0.4
million) of which GBPnil was outstanding as at 20 February 2015 (31
December 2014: GBPnil)
In addition, Anacap charged the Group investment monitoring fees
of GBP29,000 for the year ended 31 December 2015 (year ended 31
December 2014: GBP0.2 million). The balance outstanding at 31
December 2015 is GBPnil (31 December 2014: GBP0.1 million).
During 2015, the Group also incurred fees of GBP0.1 million in
relation to the Shareholder-representative Directors (year ended 31
December 2014: GBPnil).
b) Key management personnel
Key Management Personnel ("KMP") comprise Directors of the Group
and members of the Executive Committee. Details of the compensation
paid (in accordance with IAS 24) to KMP are:
2015 2014
GBP'000 GBP'000
-------------------------------- -------- --------
Emoluments 5,035.8 3,366.0
-------------------------------- -------- --------
Payments in respect of personal
pension plans 45.9 24.0
-------------------------------- -------- --------
Compensation for loss of office - 20.0
-------------------------------- -------- --------
Contributions to money purchase
scheme 71.3 72.0
-------------------------------- -------- --------
Loan forgiveness 162.3 -
-------------------------------- -------- --------
Share-based payments 1,196.5 555.0
-------------------------------- -------- --------
6,511.8 4,037.0
-------------------------------- -------- --------
Compensation for loss of office for the year ended 31 December
2014 of GBP20,000 relates to two key persons.
The Group made payments of GBP45,900 in aggregate in respect of
four key persons' personal pension plans during the year ended 31
December 2015 (31 December 2014: GBP24,000, two key persons).
Key persons' emoluments includes GBP0.8 million of deferred
bonus (31 December 2014: GBPnil).
Share-Based Payments ("SBP")
As at 31 December 2014, certain KMP held a number of shares in
the B, C and E classes. In preparation for the IPO, the rights to
these shares were varied and the holdings re-designated.
(MORE TO FOLLOW) Dow Jones Newswires
April 12, 2016 05:01 ET (09:01 GMT)
A number of KMP were awarded shares in the Company under new
share incentive plans created upon IPO. In total, KMP were granted
awards over 5,938,906 shares. Further details of the share schemes,
including performance conditions are provided in Note 36. In
addition, a number of KMP participated in the Sharesave Plan,
holding options over a total of 17,855 shares at 31 December
2015.
The aggregate value of transactions and outstanding balances
related to KMP (as defined by IAS 24 "Related Party Disclosure")
were as follows:
2015 2014
GBP'000 GBP'000
--------------- -------- --------
Deposits
--------------- -------- --------
At 1 January 1,565.0 1,067.0
--------------- -------- --------
Net movement 454.2 498.0
--------------- -------- --------
At 31 December 2,019.2 1,565.0
--------------- -------- --------
The table above includes transactions and balances relating to
KMP in post at the end of the year.
At 31 December 2015 there are two loans with KMP for the value
of GBP0.1 million (31 December 2014: four loans, GBP0.2 million).
From 1 January 2015 until admission to the LSE a number of KMP had
loans with the Company. Upon admission the Company forgave loans
totalling GBP0.2 million. A number of KMP continue to have loans
and deposits in the ordinary course of business with the Group.
During 2014 and up to Admission, interest rates charged on loan
balances outstanding from related parties were lower than the rates
that would be charged in arm's length transactions. Interest was
charged on these loans at an annual rate of 0.8 per cent above 1
month LIBOR.
All deposit arrangements have been operated by the Group on
commercial terms and conditions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSITMPTMBABMLF
(END) Dow Jones Newswires
April 12, 2016 05:01 ET (09:01 GMT)
Aldermore (LSE:ALD)
Historical Stock Chart
From Mar 2024 to Apr 2024
Aldermore (LSE:ALD)
Historical Stock Chart
From Apr 2023 to Apr 2024
