TIDMARBB
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 GBP2.5m, compared with a loss in the prior year of
GBP2.4m.
Included in the profit figure for the six months ended 30 June
is an estimated* income of GBP2.1m 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 GBP2.5m (H1 2016: loss GBP2.4m)
-- Underlying profit before tax GBP2.7m (H1 2016: GBP2.0m)
-- Earnings per share GBP0.17 (H1 2016: GBP11.11)*
-- Interim dividend per share 14p (H1 2016: 13p)
-- Net assets GBP234m (H1 2016: GBP282m)**
-- Net assets per share GBP15.33 (H1 2016: GBP18.52)
OPERATIONAL HIGHLIGHTS
-- Customer loans GBP879m (H1 2016: GBP657m), increased by 34%
-- Customer deposits GBP1,229m (H1 2016: GBP940m), growth of 31%
-- Assets Under Management GBP1,001m (H1 2016: GBP797m), 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 GBP1 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
GBP44m 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 GBP2.5m 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 GBP2.4m 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 GBP4.9m (H1 2016: GBP4.5m). When the
impact of the gain of GBP1.7m 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
GBP1.2bn (H1 2016: GBP0.94bn) and Assets under Management of GBP1bn
(H1 2016: GBP0.8bn), have passed the significant milestones of one
billion each during the first six months. With loans rapidly
approaching GBP0.9bn at GBP0.88bn (H1 2016: GBP0.66bn), 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 GBP76m 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 GBP147m (H1 2016: GBP16m) and
deposit book was GBP160m (H1 2016: GBP23m). 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 GBP57m. During its
first two months as part of the Group it has rebounded well and
returned to growth and closed the period at GBP60m, 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 GBP2.1m 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 Six
months months
ended ended
30 June 30 June
2017 2016
Note GBP000 GBP000
-------------------------------------------- ----- --------- ---------
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 2,445 225,207
-------------------------------------------- ----- --------- ---------
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 2,756 222,939
-------------------------------------------- ----- --------- ---------
Profit attributable to:
Equity holders of the Company 2,445 163,781
Non-controlling interests - 61,426
-------------------------------------------- ----- --------- ---------
2,445 225,207
-------------------------------------------- ----- --------- ---------
Total comprehensive income attributable
to:
Equity holders of the Company 2,756 161,513
Non-controlling interests - 61,426
-------------------------------------------- ----- --------- ---------
2,756 222,939
-------------------------------------------- ----- --------- ---------
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
GBP000 GBP000
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
-------------------------------------------------------------------------------
Capital
Share Revaluation redemption Available-for-sale Treasury Retained Non-controlling
capital reserve reserve reserve shares earnings interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- -------- ------------ ----------- ------------------- --------- ---------- ---------------- --------
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
-------------------------------------------------------------------------------
Capital
Share Revaluation redemption Available-for-sale Treasury Retained Non-controlling
capital reserve reserve reserve shares earnings interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- -------- ------------ ----------- ------------------- --------- ---------- ---------------- ----------
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 Six
months months
ended ended
30 June 30 June
2017 2016
GBP000 GBP000
------------------------------------------------- ---------- ----------
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 UK Private Group
Income banking Centre Total
Six months ended 30 June 2017 GBP000 GBP000 GBP000 GBP000
------------------------------------------ ----------- ----------- --------- ----------
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
Retail
Bank
Associate UK Private Group Group
ELL STB Total Income banking Centre Total Total
Six months ended GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
30 June 2016
------------------------ -------- --------- --------- ----------- ----------- ---------- ---------- ----------
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 GBP1.1m in 2017 mainly consist out of rental
income received from the investment property, while 2016 included a
GBP1.6m 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 GBP2.3m.
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.
Arbuthnot Arbuthnot
Latham Banking
Underlying profit reconciliation & Co. Group
Six months ended 30 June 2017 GBP000 GBP000
---------------------------------------------- ---------- ----------
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
---------------------------------------------- ---------- ----------
Arbuthnot Arbuthnot
Latham Banking
Underlying profit reconciliation & Co. Group
Six months ended 30 June 2016 GBP000 GBP000
--------------------------------------------- ---------- ----------
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 Six
months months
ended ended
30 June 30 June
2017 2016
Profit attributable GBP000 GBP000
------------------------------------------------ --------- ---------
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 Six
months months
ended ended
30 June 30 June
2017 2016
Dilutive profit attributable GBP000 GBP000
------------------------------------------------ --------- ---------
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 Six
months months
ended ended
30 June 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 Six
months months
ended ended
30 June 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 Six
months months
ended ended
30 June 30 June
2017 2016
Discontinued operations GBP000 GBP000
----------------------------------------------- ---------- ---------
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 GBP106.9 million in cash subject to a net asset
adjustment and GBP16.3 million in NSF ordinary shares. The Disposal
completed on 13 April 2016, and on completion, NSF repaid
intercompany debt of GBP108.1 million to STB. After selling costs
of GBP2.8m, this resulted in a gain recognised on disposal of
GBP116.8m.
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 From
months 1 January
ended to 13
30 June April
2017 2016
Note GBP000 GBP000
------------------------------------------ ----- --------- -----------
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
GBP000
----------------------------------------------- -----------
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
Six From
months 1 January
Cash flow from discontinued operations ended to 13
- ELL 30 June April
2017 2016
GBP000 GBP000
---------------------------------------------- ---------- -----------
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 From
months 1 January
ended to 15
30 June June
2017 2016
Note GBP000 GBP000
------------------------------------------ ----- --------- -----------
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
GBP000
------------------------------------------------ -----------
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
GBP000
------------------------------------------------ -----------
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
Six From
months 1 January
Cash flow from discontinued operations ended to 15
- STB excluding ELL 30 June June
2017 2016
GBP000 GBP000
---------------------------------------------- ---------- -----------
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
END
IR SFFFMWFWSELW
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