TIDMMFX
RNS Number : 1255N
Manx Financial Group PLC
21 September 2023
FOR IMMEDIATE RELEASE 21 September 2023
Manx Financial Group PLC
Unaudited Interim Results for the 6 months to 30 June 2023
Manx Financial Group PLC (LSE: MFX), the financial services
group which includes Conister Bank Limited, Conister Finance &
Leasing Ltd, Blue Star Business Solutions Limited, MFX Limited and
Edgewater Associates Limited, presents the Interim results for the
six months ended 30 June 2023.
Jim Mellon, Executive Chairman, commented:
" I am pleased to announce another record half year showing an
increase in our Profit Before Tax Payable to GBP3.0 million, a 30%
improvement on the previous Interim results of 30 June 2022 of
GBP2.3 million ."
Copies of the Interim Report will shortly be available on our
website www.mfg.im
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU No. 596/2014) AS IT FORMS PART
OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT
2018.
For further information, please contact:
Manx Financial Group PLC Beaumont Cornish Limited Greentarget Limited
Denham Eke, Roland Cornish/James Biddle Jamie Brownlee
Executive Vice Chairman Tel +44 (0) 20 7628 3396 Tel: +44 (0) 20 3307 5726
Tel +44 (0)1624 694694
Dear Shareholders
Introduction
The unsettled economic environment in the aftermath of the mini
budget in September 2022, together with the impact of the
continuing war in Ukraine, has created a very challenging
marketplace for the Group. But I am now confident that the UK is
approaching the bottom of its credit cycle, despite the economy
having never entered a recession.
With this backdrop it is pleasing to announce another record
half year with a 30% increase in our Profit Before Tax Payable to
GBP3.0 million (30 June 2022: GBP2.3 million) - a good result which
I will discuss in greater detail in the financial review section of
this report.
Strategy update
We are progressing our UK Branch banking licence which will
allow Conister Bank Limited to access up to GBP500 million of
additional liquidity in the form of non-transactional Deposit
Accounts to complement its Isle of Man full Deposit taking licence.
Obtaining the Branch banking licence is progressing as planned and
I would expect a response from both the Isle of Man and UK
regulators before the end of this year. This licence forms part of
our funding and liquidity strategy which, in turn, underpins our
ability to deliver stable earnings growth. To achieve stable
earnings, we have maintained our objectives of growth through
gaining market share in recession-proof markets in a customer
focused, regulatory compliant, and credit conscious manner.
Our acquisition strategy remains unabated for companies
operating in sectors that we either already operate within, and
where we are seeking a greater market share, or for companies that
operate profitably in sectors in which we would like to enter.
The Group has embarked on a multi-year, multi-million-pound IT
investment programme which will be both customer focused and
scalable to allow the business to achieve its growth ambitions in a
regulatory compliant and controlled manner.
As I stated in the Group's 2022 Annual Report, climate change is
bringing commercial and reputational risks to the finance industry.
Whilst this is viewed externally as a longer-term issue, the
financial risks are becoming apparent now, and the Board currently
considers climate change as part of its governance framework. We
have trialed our ESG strategy on Conister Bank Limited and I still
expect to extend it to cover all our wholly owned operating
subsidiaries by the end of this year.
Financial Review
The full impact of the Bank of England's 14 consecutive interest
rate increases to curb the UK's stubbornly high inflation rate
negatively impacted our net interest margin by 6% as we continued
to acquire deposits to fund our growing loan book. This margin
erosion is clear evidence of Conister Bank Limited passing on
interest rate increases to the Island's long-suffering savers and
indeed it has proved very successful in attracting a significant
number of new depositors. It is worth noting that this margin
erosion has been partially offset by our increasing yields, which
once the interest rates start decreasing, will help to restore our
net interest margin to a more normalised position. We lent a record
GBP182.6 million in the first six months of this year, some GBP71.7
million, or 65%, ahead of the same period last year (30 June 2022:
GBP110.9 million). In turn, this increased our Net Interest Income
by 56% to GBP16.4 million (30 June 2022: GBP10.5 million) despite
the margin erosion. It is worth noting that to minimise the impact
of the margin erosion we have optimised our Loan-to-Deposit ratio
by a 6% improvement to 103% (31 December 2022: 97%).
Turning to our balance sheet, during this turbulent period we
have focused on balancing net loan book growth, by ensuring we
continue to lend in markets that have a positive credit history.
Since 30 June 2022, the net loan book has increased by GBP98.3
million, or 40%, to GBP343.3 million (30 June 2022: GBP244.9
million), and by a healthy GBP51.8 million since the year-end (31
December 2022: GBP291.5 million). Deferred income, being income
already secured but not released to the Income Statement now stands
at GBP45.9 million (30 June 2022: GBP32.5 million).
Deposits have increased by GBP78.9 million to GBP332.5 million
(30 June 2022: GBP253.6 million), and GBP28.3 million since the
year-end (31 December 2022: GBP304.2 million).
Business Review
Conister Bank Limited remains the driver of the Group's
profitability and performed admirably in these difficult market
conditions. Through its prudent lending, Interest Income increased
by GBP2.8 million to GBP14.7 million (30 June 2022: GBP11.9
million) which after Interest Expense of GBP4.9 million (30 June
2022: GBP2.3 million) derived Net Interest Income of GBP9.8 million
(30 June 2022: GBP9.7 million). This increase in Interest Expense
is driven by both the increase in the deposit base to fund our
record lending of GBP182.6 million, and the impact of increases in
the Bank of England interest rate. Our cost of funds increased from
1.59% as of 30 June 2022 to 3.38% as at 30 June 2023. Over the same
period our cost of risk remained stable at 0.1%.
Our focus on containing third party fees continued with Fee and
Commission Expense representing less than 1.4% of advances in the
period (30 June 2022: 1.2%), which in turn led to a decrease in Net
Trading Income of GBP1.0 million to GBP7.3 million (30 June 2022:
GBP8.3 million).
Our Treasury management was able to obtain improved returns with
income of GBP0.7 million (30 June 2022: GBPnil million) and we
remain committed to our conservative approach and do not have any
unrealised losses on our book due to it being mainly short-term in
nature.
Overheads increased by GBP0.6 million to GBP4.5 million (30 June
2022: GBP3.9 million) as underlying inflationary pressure on our
cost base was supplemented by costs relating to recruiting the
establishment required to operate the UK Branch, together with the
commencement of our long-term IT strategy.
Moving to the balance sheet, record lending helped both to
improve our liquidity efficiency and to grow our net loan book to
GBP343.3 million (30 June 2022: GBP244.9 million). Our conservative
approach to provisioning remains a tenet of our business with
provisioning of GBP10.1 million (30 June 2022: GBP8.5 million).
Although we are seeking a UK Branch deposit taking licence, our
loyal Isle of Man deposit customers remain fundamental to our
growth strategy, and it is pleasing to note our retention rate of
82% reflects their continuing trust in us (30 June 2022: 77%).
All our other major operating subsidiaries performed admirably
during the period under review and their continued drive for
compliant, profitable business will stand us in good stead for the
future.
Notably, our foreign exchange advisory business, which thrives
on these turbulent market conditions, and our recently acquired
short-term lender, Payment Assist Limited ("PAL"). PAL provides a
market leading product offering to the auto vehicle maintenance and
retail market.
Outlook
We expect market conditions to remain challenging through to
Quarter 2 next year at which point we should see the market
improving as interest rates start to abate. This will improve
disposable income levels for corporates and individuals alike. Some
of the current inflation is not transitory and I expect inflation
to remain higher for longer than some economists are currently
forecasting. This will be positive for savers, and it should
provide a period for lenders to bring their net interest margin
back into its more traditional range. We expect advances for the
year to be circa GBP0.4 billion (2022: circa GBP0.3 billion), split
approximately 20:80 between the Isle of Man and the UK
respectively.
The Group currently has the right products to lend under such a
scenario and I would expect our current short-term lending products
along with our structured finance products to remain popular. Other
complementary products and funding solutions are being developed
which will be introduced into the market as this year
progresses.
Our diversified lending portfolio of Conister, Payment Assist
Limited, Blue Star Business Solutions Limited, Ninkasi Rentals
& Finance Limited and The Business Lending Exchange are all
market specialists in their specific market segments which provides
us with some insulation from any single market decline.
Our FX business should also perform well under these
circumstances.
We will continue to seek strategic acquisitions, including
within the general insurance market, to support our existing
customer base and to broaden our reach into new jurisdictions.
All of this, along with diversifying our sources of liquidity,
should position the Group well for a strong finish to this year and
to the start of 2024.
In summary, we remain well positioned to continue to grow
organically in this difficult market but also to seek acquisitions
to gain market share in markets that have historically demonstrated
to be commercially resilient.
Presentation and webcast for analysts and investors
A conference call with management including an opportunity to
ask questions will commence at 11:00 am (BST) on 25 September 2023.
A copy of the presentation will be available on the investor
relations section of www.mfg.im from 3:00 pm that day. To access
the webcast, please register your interest by writing to
investor@mfg.im along with any advanced questions you may have by
9:00am (BST) on 25 September 2023.
Thank you
These results could not be achieved without the continued
support of our staff, our customers, and the Board - I thank them
all.
Jim Mellon
Executive Chairman
20 September 2023
Condensed Consolidated Statement of Profit of Loss and Other
Comprehensive Income
For the For the
six months six months For the
ended ended year ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Notes (unaudited) (unaudited) (audited)
------------------------------------- ------ ------------- ------------- -------------
Interest revenue calculated using
the effective interest method 6 21,458 12,336 28,978
Other Interest income 6 713 908 1,765
Interest expense (5,787) (2,712) (6,391)
Net interest income 16,384 10,532 24,352
Fee and commission income 2,248 2,503 4,719
Fee and commission expense (3,046) (1,517) (3,569)
Depreciation on leasing assets - (16) (16)
Net trading income 15,586 11,502 25,486
Other operating income 62 275 314
Loss on financial instruments - (139) (19)
Realised gain on debt securities 9 664 26 292
Operating income 16,312 11,664 26,073
Personnel expenses (6,236) (4,091) (9,764)
Other expenses (3,031) (2,355) (5,806)
Provision for impairment on loans
and advances to customers (3,294) (2,268) (3,990)
Depreciation (407) (357) (738)
Amortisation and impairment of
intangibles (312) (256) (582)
Share of profit of equity accounted
investees, net of tax - - 18
Profit before tax payable 3,032 2,337 5,211
Income tax expense (493) (160) (537)
Profit for the period / year 2,539 2,177 4,674
For the For the
six months six months For the
ended ended year ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Notes (unaudited) (unaudited) (audited)
------------------------------------------ ------ --------------- --------------- -----------------
Profit for the period / year 2,539 2,177 4,674
Other comprehensive income:
Items that will be reclassified
to profit or loss
Unrealised gain on debt securities 62 43 131
Items that will never be reclassified
to profit or loss
Actuarial gain on defined benefit
pension scheme taken to equity - - 407
Total comprehensive income for
the period / year 2,601 2,220 5,212
Profit attributable to:
Owners of the Company 1,927 2,161 4,331
Non-controlling interest 612 16 343
2,539 2,177 4,674
Total comprehensive income attributable
to:
Owners of the Company 1,989 2,204 4,869
Non-controlling interest 612 16 343
2,601 2,220 5,212
Earnings per share - profit for
the period / year
Basic earnings per share (pence) 8 1.67 1.89 3.77
Diluted earnings per share (pence) 8 1.30 1.48 2.93
Earnings per share - total comprehensive
income
for the period / year
Basic earnings per share (pence) 8 1.73 1.93 4.24
Diluted earnings per share (pence) 8 1.34 1.51 3.28
Condensed Consolidated Statement of Financial Position
30 June 30 June 31 December
2022
2023 2022 GBP'000
As at GBP'000 GBP'000 (audited)
Notes (unaudited) (unaudited)
----------------------------------- ------- -------------- ------------- ------------
Assets
Cash and cash equivalents 17,267 14,369 22,630
Debt securities 9 31,371 40,151 40,675
Equity held at Fair Value Through
Profit or Loss 122 68 122
Loans and advances to customers 5,10 343,244 244,923 291,475
Trade and other receivables 11 7,227 2,822 4,211
Property, plant and equipment 6,665 6,468 6,714
Intangible assets 3,028 2,431 2,703
Investment in associates 19 197 137 155
Goodwill 12 10,576 6,320 10,576
Total assets 419,697 317,689 379,261
Liabilities
Deposits from customers 332,509 253,617 304,199
Creditors and accrued charges 13 14,857 4,605 13,108
Deferred consideration 16 216 335 262
Loan notes 14 39,492 31,332 31,332
Pension liability 240 631 237
Deferred tax liability 353 182 353
Total liabilities 387,667 290,702 349,491
Equity
Called up share capital 15 19,287 19,195 19,195
Profit and loss account 11,927 7,705 10,371
Revaluation reserve 15 15 15
Non-controlling interest 801 72 189
Total equity 32,030 26,987 29,770
Total liabilities and equity 419,697 317,689 379,261
Condensed Consolidated Statement of Changes in Equity
Attributable to owners
of the Company
Non-controlling
Share Profit interest Total
capital and loss Revaluati-on Total GBP'000 equity
For the six months GBP'000 account reserve GBP'000 GBP'000
ended 30 June 2023 GBP'000 GBP'000
---------------------- ---------- ----------- ---------- ------------------ ----------
Balance at 1 January
2022 19,133 5,781 15 24,929 56 24,985
Total comprehensive
income for the
period:
Profit for the period - 2,161 - 2,161 16 2,177
Other comprehensive
income - 43 - 43 - 43
Total comprehensive
income for the
period - 2,204 - 2,204 16 2,220
Changes in ownership
interests:
Dividend declared
(see
note 15) 62 (280) - (218) - (218)
Total changes in
ownership
interests 62 (280) - (218) - (218)
Balance at 30 June
2022 19,195 7,705 15 26,915 72 26,987
Balance at 1 July
2022 19,195 7,705 15 26,915 72 26,987
Total comprehensive
income for the
period:
Profit for the period - 2,170 - 2,170 327 2,497
Other comprehensive
income - 496 - 496 - 496
Total comprehensive
income for the
period - 2,666 - 2,666 327 2,993
Changes in ownership
interests:
Dividend declared - - - - - -
Acquisition of
subsidiary
with non-controlling
interest - - - - (210) (210)
Total changes in
ownership
interests - - - - (210) (210)
Balance at 31
December
2022 19,195 10,371 15 29,581 189 29,770
Balance at 1 January
2023 19,195 10,371 15 29,581 189 29,770
Total comprehensive
income for the
period:
Profit for the period - 1,927 - 1,927 612 2,539
Other comprehensive
income - 62 - 62 - 62
Total comprehensive
income for the
period - 1,989 - 1,989 612 2,601
Changes in ownership
interests:
Dividend declared
(see
note 15) 92 (433) - (341) - (341)
Total changes in
ownership
interests 92 (433) - (341) - (341)
Balance at 30 June
2023 19,287 11,927 15 31,229 801 32,030
Condensed Consolidated Statement of Cash Flows
For the For the For the
six months six months year ended
ended ended 31 December
30 June 30 June 2022
2023 2022 GBP'000
Notes GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
-------------------------------------- -------- ------------- ------------- -------------
RECONCILIATION OF PROFIT BEFORE
TAXATION TO OPERATING CASH FLOWS
Profit before tax 3,032 2,337 5,211
Adjustments for:
Depreciation 407 373 754
Amortisation of intangibles 312 256 582
Share of profit of equity accounted
investees - - (18)
Contingent consideration interest
expense 4 35 102
Pension charge included in personnel
expenses 3 - 14
Gain on financial instruments - 139 19
3,758 3,140 6,664
Changes in:
Trade and other receivables 11 (3,016) (875) (2,228)
Creditors and accrued charges 1,283 18 1,436
Net cash flow from trading
activities 2,025 2,283 5,872
Changes in:
Loans and advances to customers (78,256) (28,648) (83,066)
Deposits from customers 28,310 2,782 50,740
Pension contribution - (56) (57)
Cash outflow from operating
activities (47,921) (23,639) (26,511)
For the For the For the
six months six months year ended
ended ended 31 December
30 June 30 June 2022
2023 2022 GBP'000
Notes GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
-------------------------------------- -------- ------------- ------------- -------------
CASH FLOW STATEMENT
Cash from operating activities
Cash outflow from operating
activities (47,921) (23,639) (26,511)
Interest received 20,888 12,976 30,136
Interest paid 5,599 (2,624) (6,184)
Income taxes paid (331) (256) (157)
Net cash outflow from operating
activities (21,765) (13,543) (2,716)
Cash flows from investing activities
Purchase of property, plant
and equipment (356) (655) (1,473)
Purchase of intangible assets (638) (179) (504)
Sale of property, plant and
equipment - 1,071 2,083
Acquisition of subsidiary or
associate, net of cash acquired - - (1,785)
Net sale of debt securities 9 9,366 878 442
Contingent consideration 16 (50) (862) (937)
Net cash inflow / (outflow)
from investing activities 8,322 253 (2,174)
Cash flows from financing activities
Receipt of loan notes 14 8,159 7,660 7,660
Payment of lease liabilities
(capital) (79) (90) (202)
Dividend paid - (190) (217)
Net cash inflow from financing
activities 8,080 7,380 7,241
Net (decrease) / increase in
cash and cash equivalents (5,363) (5,910) 2,351
Cash and cash equivalents -
opening 22,630 20,279 20,279
Cash and cash equivalents -
closing 17,267 14,369 22,630
Non-cash investing activities disclosed in Note 19 is the GBP42,000
acquisition of 10% shareholding in Lesley Stephen & Co Limited (LSC).
Notes
For the six months ended 30 June 2023
1. Reporting entity
Manx Financial Group PLC (the "Company" or "MFG") is a company
incorporated in the Isle of Man. These condensed consolidated
interim financial statements ("interim financial statements") are
as at and for the six months ended 30 June 2023, and comprise the
Company and its subsidiaries ("Group").
2. Basis of accounting
These interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting and should be
read in conjunction with the last annual consolidated financial
statements as at and for the year ended 31 December 2022 ("Annual
Financial Statements 2022"). They do not include all of the
information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual financial statements.
3. Functional and presentation currency
These financial statements are presented in pounds sterling,
which is the Group's functional currency. All amounts have been
rounded to the nearest thousand, unless otherwise indicated. All
subsidiaries of the Group have pounds sterling as their functional
currency.
4. Use of judgements and estimates
In preparing these interim financial statements, management make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates.
The significant judgements made by management in applying the
Group's accounting policies and key sources of estimation
uncertainty are the same as those described in the last annual
financial statements.
5. Credit risk
A summary of the Group's current policies and practices for the
management of credit risk is set out in Note 7 - Financial risk
review and Note 42 - Financial risk management on pages 48 and 74
respectively of the Annual Financial Statements 2022.
An explanation of the terms Stage 1, Stage 2 and Stage 3 is
included in Note 44 (G)(vii) on page 83 of the Annual Financial
Statements 2022.
A. Summary of credit risk on loans and advances to customers
2023 2022
Stage Stage Stage Total Stage Stage Stage Total
30 June (unaudited) 1 2 3 GBP'000 1 2 3 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Grade A 324,303 - - 324,303 226,577 - - 226,577
Grade B - 2,557 8,483 11,040 - 5,579 8,591 14,170
Grade C 5,280 306 20,179 25,765 516 - 12,197 12,713
Gross value 329,583 2,863 28,662 361,108 227,093 5,579 20,788 253,460
Allowance for
impairment (3,529) (119) (14,216) (17,864) (341) (10) (8,186) (8,537)
Carrying value 326,054 2,744 14,446 343,244 226,752 5,569 12,602 244,923
2022 2021
Stage Stage Stage Total Stage Stage Stage Total
31 December 1 2 3 GBP'000 1 2 3 GBP'000
(audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- --------- --------- --------- --------- --------- --------- ---------
Grade A 273,332 - - 273,332 213,103 - - 213,103
Grade B - 5,006 9,347 14,353 - 5,735 5,594 11,329
Grade C 391 - 17,622 18,013 342 541 12,656 13,539
Gross value 273,723 5,006 26,969 305,698 213,445 6,276 18,250 237,971
Allowance for
impairment (303) (3) (13,917) (14,223) (503) (124) (8,093) (8,720)
Carrying value 273,420 5,003 13,052 291,475 212,942 6,152 10,157 229,251
Loans are graded A to C depending on the level of risk. Grade C
relates to agreements with the highest of risk, Grade B with medium
risk and Grade A relates to agreements with the lowest risk.
B. Summary of overdue status of loans and advances to customers
2023 2022
Stage Stage Stage Total Stage Stage Stage Total
30 June (unaudited) 1 2 3 GBP000 1 2 3 GBP000
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- -------- -------- ---------- ---------- -------- -------- -------- --------
Current 323,949 - - 323,949 221,901 - - 221,901
Overdue < 30
days 5,634 - - 5,634 5,192 - - 5,192
Overdue > 30
days - 2,863 28,662 31,525 - 5,579 20,788 26,367
329,583 2,863 28,662 361,108 227,093 5,579 20,788 253,460
----------------------- -------- -------- ---------- ---------- -------- -------- -------- --------
2022 2021
Stage Stage Stage Total Stage Stage Stage Total
31 December 1 2 3 GBP000 1 2 3 GBP000
(audited) GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- -------- -------- -------- -------- -------- -------- --------
Current 269,131 - - 269,131 210,492 - - 210,492
Overdue < 30
days 4,593 604 - 5,197 2,953 - - 2,953
Overdue > 30
days - 4,402 26,968 31,370 - 6,276 18,250 24,526
273,724 5,006 26,968 305,698 213,445 6,276 18,250 237,971
--------------- -------- -------- -------- -------- -------- -------- -------- --------
6. Interest revenue and other interest income
Interest revenue and other interest income represents charges
and interest on finance and leasing agreements attributable to the
period or year after adjusting for early settlements and interest
on bank balances.
7. Operating segments
Segmental information is presented in respect of the Group's
business segments. The Directors consider that the Group currently
operates in one geographic segment comprising of the Isle of Man,
UK and Channel Islands. The primary format for business segments is
based on the Group's management and internal reporting structure.
The Directors consider that the Group operates in three (2022:
three) product orientated segments in addition to its financial
activities to allocate the Group's capital (investing activities):
(i) Asset and Personal Finance (including provision of HP
contracts, finance leases, personal loans, commercial loans, block
discounting, vehicle stocking plans and wholesale funding
agreements); (ii) Edgewater Associates Limited (provision of
financial advice), and (iii) MFX Limited (provision of foreign
currency transaction services).
Asset
and Edgewater MFX Investing
Personal Associates Limited Activities Total
For the 6 months ended 30 June Finance GBP000 GBP000 GBP000 GBP000
2023 (unaudited) GBP000
Interest revenue calculated using
the effective interest rate method 21,458 - - - 21,458
Other interest income 713 - - - 713
Interest expense (4,660) - - (1,127) (5,787)
---------- ------------- ---------- ------------- ---------
Net interest income 17,511 - - (1,127) 16,384
Components of Net Trading Income (2,603) 1,200 605 - (798)
---------- ------------- ---------- ------------- ---------
Net trading income 14,908 1,200 605 (1,127) 15,586
Components of Operating Income 726 - - - 726
---------- ------------- ---------- ------------- ---------
Operating Income 15,634 1,200 605 (1,127) 16,312
Depreciation (364) (10) (1) (32) (407)
Amortisation and impairment of
intangibles (271) (37) (2) (2) (312)
All other expenses (10,995) (1,009) (168) (389) (12,561)
Profit / (loss) before tax payable 4,004 144 434 (1,550) 3,032
Capital expenditure 994 - - - 994
Total assets 365,236 1,499 271 52,691 419,697
Total liabilities 347,391 21 8 40,247 387,667
Asset
and Edgewater MFX Investing
Personal Associates Limited Activities Total
For the 6 months ended 30 June Finance GBP000 GBP000 GBP000 GBP000
2022 (unaudited) GBP000
Interest revenue calculated using
the effective interest rate method 12,336 - - - 12,336
Other interest income 908 - - - 908
Interest expense (2,001) - - (711) (2,712)
---------- ------------- ---------- ------------- ---------
Net interest income 11,243 - - (711) 10,532
Components of Net Trading Income (1,015) 1,076 909 - 970
---------- ------------- ---------- ------------- ---------
Net trading income 10,228 1,076 909 (711) 11,502
Components of Operating Income 162 - - - 162
---------- ------------- ---------- ------------- ---------
Operating Income 10,390 1,076 909 (711) 11,664
Depreciation (310) (14) (1) (32) (357)
Amortisation and impairment of
intangibles (213) (40) (2) (1) (256)
All other expenses (6,921) (1,000) (153) (640) (8,714)
Profit / (loss) before tax payable 2,946 22 753 (1,384) 2,337
Capital expenditure 785 45 3 1 834
Total assets 303,163 2,298 620 11,608 317,689
Total liabilities 270,885 543 75 19,199 290,702
Asset
and Edgewater MFX Investing
Personal Associates Limited Activities Total
For the year ended 31 December Finance GBP000 GBP000 GBP000 GBP000
2022 (audited) GBP000
Interest revenue calculated using
the effective interest rate method 28,978 - - - 28,978
Other interest income 1,765 - - - 1,765
Interest expense (6,391) - - - (6,391)
---------- ------------- ---------- ------------- ---------
Net interest income 24,352 - - - 24,352
Components of Net Trading Income (2,696) 2,096 1,734 - 1,134
---------- ------------- ---------- ------------- ---------
Net trading income 21,656 2,096 1,734 - 25,486
Components of Operating Income 587 - - - 587
---------- ------------- ---------- ------------- ---------
Operating Income 22,243 2,096 1,734 - 26,073
Depreciation (640) (31) (2) (65) (738)
Amortisation and impairment of
intangibles (494) (81) (5) (2) (582)
Share of profit of equity accounted
investees, net of tax - - - 18 18
All other expenses (17,226) (1,943) (314) (77) (19,560)
Profit / (loss) before tax payable 3,883 41 1,413 (126) 5,211
Capital expenditure 1,794 55 3 1 1,853
Total assets 332,689 2,248 543 43,781 379,261
Total liabilities 316,921 513 163 31,894 349,491
8. Earnings per share
For the
For the For the
6 months 6 months
ended ended year ended
30 June 30 June 31 Dec
2023 2022 2022
(unaudited) (unaudited) (audited)
Profit for the period / year GBP1,927,000 GBP2,161,000 GBP4,331,000
Weighted average number of ordinary
shares in issue (basic) 115,072,988 114,447,909 114,763,883
Basic earnings per share (pence) 1.67 1.89 3.77
Diluted earnings per share (pence) 1.30 1.48 2.93
Total comprehensive income for the GBP1,989,000 GBP2,204,000 GBP4,869,000
period / year
Weighted average number of ordinary
shares in issue (basic) 115,072,988 114,447,909 114,763,883
Basic earnings per share (pence) 1.73 1.93 4.24
Diluted earnings per share (pence) 1.34 1.51 3.28
The basic earnings per share calculation is based upon the
profit for the period / year after taxation and the weighted
average of the number of shares in issue throughout the period /
year.
30 June 30 June 31 Dec
2023 2022 2022
As at (unaudited) (unaudited) (audited)
Reconciliation of weighted average
number of ordinary shares in issue between
basic and diluted
Weighted average number of ordinary
shares (basic) 115,072,988 114,447,909 114,763,883
Number of shares issued if all convertible
loan notes were exchanged for equity 37,916,667 36,555,556 38,225,772
Dilutive element of share options if
exercised 2,409,005 - 830,035
Weighted average number of ordinary
shares (diluted) 155,398,660 151,003,465 153,819,690
Reconciliation of profit for the period
/ year between basic and diluted
Profit for the period / year (basic) GBP1,927,000 GBP2,161,000 GBP4,331,000
Interest expense saved if all convertible GBP97,500 GBP76,250 GBP171,415
loan notes were exchanged for equity
Profit for the period / year (diluted) GBP2,024,500 GBP2,237,250 GBP4,502,415
The diluted earnings per share calculation assumes that all
convertible loan notes have been converted / exercised at the
beginning of the period in which they are dilutive.
30 June 30 June 31 Dec
2023 2022 2022
As at (unaudited) (unaudited) (audited)
Reconciliation of total comprehensive
income for the period / year between
basic and diluted
Total comprehensive income for the period GBP1,989,000 GBP2,204,000 GBP4,869,000
/ year (basic)
Interest expense saved if all convertible GBP97,500 GBP76,250 GBP171,415
loan notes were exchanged for equity
Total comprehensive income for the period GBP2,086,500 GBP2,280,250 GBP5,040,415
/ year (diluted)
9. Debt securities
30 June 30 June 31 Dec
2023 2022 2022
GBP'000 GBP'000 GBP'000
As at (unaudited) (unaudited) (audited)
Financial assets at fair value through
other comprehensive income:
UK Government treasury bills 31,371 40,151 40,675
31,371 40,151 40,675
UK Government Treasury Bills are stated at fair value and
unrealised changes in the fair value are reflected in other
comprehensive income. There were realised gains of GBP664,000 (30
June 2022: GBP26,000 and 31 December 2022: GBP292,000) and
unrealised gains of GBP62,000 (30 June 2022: GBP43,000 and 31
December 2022: GBP131,000) for the period.
10. Loans and advances to customers
30 June 30 June 31 Dec
2023 2022 2022
Carrying Carrying Carrying
Gross Impairment Value Value Value
Allowance
Amount GBP'000 GBP'000 GBP'000 GBP'000
As at GBP'000 (unaudited) (unaudited) (audited)
HP balances 102,485 (4,427) 98,058 61,322 83,049
Finance lease balances 20,997 (3,494) 17,503 20,152 17,731
Unsecured personal loans 75,218 (8,503) 66,715 35,935 42,453
Vehicle stocking plans 1,904 - 1,904 1,825 1,918
Wholesale funding
arrangements 25,225 (11) 25,214 17,803 30,904
Block discounting 54,873 - 54,873 28,877 46,294
Secured commercial loans 12,663 (577) 12,086 12,542 12,158
Secured personal loans 964 - 964 1,422 1,777
Government backed loans 47,598 (762) 46,836 65,045 55,191
Property secured 19,181 (90) 19,091 - -
361,108 (17,864) 343,244 244,923 291,475
11. Trade and other receivables
30 June 30 June 31 Dec
2023 2022 2022
GBP'000 GBP'000 GBP'000
As at (unaudited) (unaudited) (audited)
Prepayments 4,495 1,068 2,334
Other debtors 2,276 1,754 1,877
VAT Claim 456 - -
7,227 2,822 4,211
Included in trade and other receivables is an amount of
GBP0.456m relating to historic interest due on bad debt relief
claims. This amount has been agreed with the Isle of Man Collector
of Customs and Excise and has been received in July 2023.
12. Goodwill
30 June 30 June 31 Dec
2023 2022 2022
GBP'000 GBP'000 GBP'000
As at (unaudited) (unaudited) (audited)
PAL 4,456 - 4,456
EAL 1,649 1,849 1,649
BLX 1,908 1,908 1,908
BBSL 1,390 1,390 1,390
NRFL 678 678 678
Manx Collections Limited ("MCL") 454 454 454
Three Spires Insurance Services Limited
("Three Spires") 41 41 41
10,576 6,320 10,576
13. Creditors and accrued charges
30 June 30 June 31 Dec
2023 2022 2022
GBP'000 GBP'000 GBP'000
As at (unaudited) (unaudited) (audited)
Commission creditors 726 1,401 1,398
Other creditors and accruals 11,273 1,472 9,368
Lease liability 1,535 1,205 1,614
Taxation creditors 854 454 692
Dividend payable 469 73 36
14,857 4,605 13,108
14. Loan notes
30 June 30 June 31 Dec
2023 2022 2022
GBP'000 GBP'000 GBP'000
As at Notes (unaudited) (unaudited) (audited)
Related parties
J Mellon JM 1,750 1,750 1,750
Burnbrae Limited BL 3,200 3,200 3,200
Culminant Reinsurance Ltd CR 1,000 1,000 1,000
5,950 5,950 5,950
Unrelated parties UP 33,542 25,382 25,382
39,492 31,332 31,332
JM - Two loans, one of GBP1,250,000 maturing on 26 February 2025
with interest payable of 5.4% per annum, and one of GBP500,000
maturing on 31 July 2027, paying interest of 7.5% per annum. Both
loans are convertible to ordinary shares of the Company at the rate
of 7.5 pence.
On 22 July 2022, JM and BL agreed to extend outstanding
unsecured convertible loans of GBP1,750,000, expiring on 31 July
2022, for a further five years to 31 July 2027. A loan of
GBP1,250,000 million is from BL and the remaining loan of GBP0.5
million is from JM himself. The new annual interest rate will be
7.5% (previously 5.0%) and the new conversion price will be 8.0
pence per share (previously 7.5 pence). All other terms are
unchanged, including the ability for the Company to repay the loans
at any time during the period.
BL - Three loans, one of GBP1,200,000 maturing on 31 July 2027,
paying interest of 7.5% per annum, one of GBP1,000,000 maturing 25
February 2025, paying interest of 5.4% per annum, and one of
GBP1,000,000 maturing 28 February 2025 paying interest of 6% per
annum. Jim Mellon is the beneficial owner of BL and Denham Eke is
also a director. The GBP1,200,000 loan is convertible at a rate of
7.5 pence.
CR - One loan consisting of GBP1,000,000 maturing on 12 October
2025, paying interest of 6.0% per annum. Greg Bailey, a director,
is the beneficial owner of CR.
UP - Forty one loans (2022: Forty), the earliest maturity date
is 2 October 2023 and the latest maturity is 25 May 2028.
With respect to the convertible loans, the interest rate applied
was deemed by the Directors to be equivalent to the market rate at
the time with no conversion option.
15. Called up share capital
Ordinary Shares of no-par value available Number
for issue
-------------------------------------------- ------------
At 30 June 2023, 30 June 2022, 31 December
2022 200,200,000
-------------------------------------------- ------------
Issued and fully paid ordinary Shares of no par Number GBP'000
value
-------------------------------------------------
Balance at 30 June 2023 115,072,988 19,287
Balance at 30 June 2022, 31 December 2022 115,072,988 19,195
Dividends
On 30 May 2023, MFG declared a dividend of GBP433,135 (2022:
GBP279,200) which could either be taken up in cash or new ordinary
shares. On 12 July 2023, 418,948 new shares (2021: 781,349 new
shares) were admitted to the Alternative Investment Market ("AIM")
at 21.8974 pence per share (2022: 8.02050 pence per share), at a
total cost of GBP91,739 (2022: GBP62,000).
Convertible loans
There are three convertible loans totalling GBP2,950,000 (30
June and 31 December 2022: three convertible loans totalling
GBP2,950,000).
Share options and Restricted Stock Units
i. Issued during the financial year ended 31 December 2022
On 5 July 2022 and 27 October 2022, MFG granted Restricted Stock
Units ("RSUs") under its 2022 RSU Plan. The Group has issued, in
total, RSUs over 2,435,000 ordinary shares representing 2.1% of the
issued share capital of the Group, including 1,250,000 to certain
directors and 1,185,000 to certain employees. The RSUs will have a
2-year term and are subject to certain vesting conditions based
upon an overall growth in profitability. Any RSUs granted will fall
away should the recipient leave employment before the 2-year term
expires. Should the individual vesting conditions be satisfied at
the end of the term, the stock will be exercised at nil cost.
The Group directors who received RSUs are as follows:
-- Douglas Grant, Group Chief Executive Officer, who currently
owns 533,951 ordinary shares in the Company representing a holding
of 0.45% was issued 1,075,000 RSUs. Including 700,000 Share Options
issued 24 June 2014, he would hold a total of 2,308,951 ordinary
shares, being 1.98% of the issued share capital of the Company on a
fully diluted basis; and
-- James Smeed, Group Finance Director, was issued 175,000 RSUs.
On the same basis, he would hold 0.15% of the new issued share
capital of the Company.
The terms and conditions of the grants are as follows: and will
be settled by the physical delivery of shares.
Contractual
Number life of
Grant date / employees entitled of Units options
Option grant to key employees at 5 July 2022 1,020,000 2 years
Option grant to directors at 5 July 2022 1,100,000 2 years
Option grant to key employees at 27 October 2022 165,000 2 years
Option grant to directors at 27 October 2022 150,000 2 years
Total share options 2,435,000
The fair value of employee services received in return for
restricted stock units granted is based on the fair value of them
measured using the Black-Scholes formula. Service related and
non-market performance conditions were not taken into account in
measuring fair value. The inputs used in measuring the fair values
at the grant of the equity-settled restricted stock unit payment
plans were as follows.
Grant at Grant at
Fair value of restricted stock units and 5 July 27 October
assumptions 2022 2022
Share price at grant date 8.5 pence 14.0 pence
Exercise price nil nil
Expected volatility * ^ 55.14% 107.71%
Expected life (weighted average) 2 years 2 years
Risk-free interest rate (based on government
bonds) * ^ 1.65% 3.15%
Fair value at grant date 8.5 pence 14.0 pence
^ Based on past 3 years
* Annual rates
The expected volatility is based on both historical average
share price volatility and implied volatility derived from traded
options over the group's ordinary shares of maturity similar to
those of the employee options.
The fair value of the liability is remeasured at each reporting
date and at settlement date.
The charge for the year for share options granted was GBP56,000
(30 June: GBPnil and 31 December 2022: GBP18,000).
ii. Issued during the financial year ended 31 December 2014
On 23 June 2014, 1,750,000 share options were issued to
Executive Directors and senior management within the Group at an
exercise price of 14 pence per share.
The options vest over three years with a charge based on the
fair value of 8 pence per option at the date of grant. The period
of grant is for 10 years less 1 day ending 22 June 2024 with the
condition of three-years continuous employment being met.
Of the 1,750,000 share options issued, 1,050,000 (30 June and 31
December 2022:1,050,000) remain outstanding.
The fair value of services received in return for share options
granted is based on the fair value of share options granted,
measured using a binomial probability model with the following
inputs for each award:
23 June
2014
Fair value at date of grant GBP0.08
Share price at date of grant GBP0.14
Exercise price GBP0.14
Expected volatility 55.0%
Option life 3
Risk-free interest rate (based on
government bonds) 0.5%
Forfeiture rate 33.3%
16. Deferred consideration
Deferred consideration relates to contingent payments due to the
sellers on the acquisition BLX.
On the acquisition of BLX on 11 October 2021, the Group agreed
that a further conditional consideration of up to GBP483,663 is
payable to the sellers in addition to the cash consideration paid.
The total amount payable is contingent on the recovery of certain
loans and advances found to be in default at acquisition. The fair
value on acquisition date was determined to be GBP387,000. The
Group made a payment of GBP50,000 to the sellers during the
period.
30 June 30 June 31 Dec
2023 2022 2022
GBP'000 GBP'000 GBP'000
As at (unaudited) (unaudited) (audited)
BLX 216 335 262
216 335 262
17. Regulators
Certain Group subsidiaries are regulated by the Isle of Man
Financial Services Authority (FSA) and the United Kingdom Financial
Conduct Authority (FCA) as detailed below.
The Bank and EAL are regulated by the FSA under a Class 1(1) -
Deposit Taking licence, and a Class 2 - Investment Business licence
respectively. The Bank and CFL are regulated by the FCA to provide
regulated products and services.
18. Contingent liabilities
The Bank is required to be a member of the Isle of Man
Government Depositors' Compensation Scheme which was introduced by
the Isle of Man Government under the Banking Business (Compensation
of Depositors) Regulations 1991. This creates a liability on the
Bank to participate in the compensation of depositors should it be
activated.
19. Investment in associate
As part of the Bank providing loan finance to LSC, on 29 June
2023 the Group acquired 10% of its issued share capital for nil
consideration. The receipt of the issued share capital is
considered to be linked to the loan facilities financed and
therefore its term and interest rate implicit in the finance
agreement have been used as the basis to discount the fair value of
the gratis shares issued.
The Group possesses the capacity to engage in policy-making
processes within LSC through its right to designate an individual
to attend all board meetings as an observer. Via its
representative, the Group also holds the ability to introduce
topics for discussion on the agenda, although it doesn't have
voting rights in this regard. Moreover, the Group has introduced
constraints on LSC's board, effectively preventing specified
significant actions from being taken without the Group's
consent.
The Group continues to obtain information necessary to measure
the fair value of the shares obtained. The fair value of the
financial instrument received has been provisionally determined as
GBP42,000 at initial recognition based on the proportionate share
of the net asset value of LSC. As part of the transaction, the
Group has been granted two warrants to acquire further shares. The
first warrant is for 10% of the share capital and the second
warrant is for a further 10% of the share capital.
The two warrants are exercisable dependent upon the profit
before tax achieved by LSC relative to target profit before tax for
the relevant financial period. The fair value of the two warrants
has been determined to be nil due to the significant uncertainty
that exists at acquisition date of achieving such targets.
For these reasons the financial instrument is accounted for as
an Associate in accordance with IAS 28.
20. Subsequent events
There were no other significant subsequent events identified
after 30 June 2023.
21. Approval of interim financial statements
The interim financial statements were approved by the Board on
20 September 2023. The interim report will be available from that
date at the Group's website - www.mfg.im and at the Registered
Office: Clarendon House, Victoria Street, Douglas, Isle of Man, IM1
2LN. The Group's nominated adviser and broker is Beaumont Cornish
Limited, Building 3, 566 Chiswick High Road, London W4 5YA. The
interim and annual financial statements along with other
supplementary information of interest to shareholders, are included
on the Group's website. The website includes investor relations
information, including corporate governance observance and contact
details.
Appendix - Glossary of terms
BBSL Blue Star Business Solutions Limited
BL Burnbrae Limited
Bank Conister Bank Limited
CFL Conister Finance & Leasing Ltd
Company Manx Financial Group PLC
EAL Edgewater Associates Limited
FCA UK Financial Conduct Authority
FVTPL Fair value through profit and loss
FSA Isle of Man Financial Services Authority
Group Comprise the Company and its subsidiaries
HP Hire Purchase
IFA Independent Financial Advisors
Interim financial Condensed consolidated interim financial statements
statements
JM Jim Mellon
LSC Lesley Stephen & Co Limited
LSE London Stock Exchange
MFG Manx Financial Group PLC
MFX MFX Limited
MFX.L Manx Financial Group PLC ticker symbol on the LSE
MVL Manx Ventures Limited
NRFL Ninkasi Rentals & Finance Limited
RFG Rivers Finance Group Plc
Subsidiaries MFG's subsidiaries being EAL, MFX, BBSL, NRFL, Bank,
CFL, MVL, Three Spires
UK United Kingdom
UP Unrelated parties
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END
IR URSNRORUKUAR
(END) Dow Jones Newswires
September 21, 2023 02:00 ET (06:00 GMT)
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