FOR IMMEDIATE
RELEASE
26 March 2024
Manx
Financial Group PLC (the 'Company' or the 'Group')
Report
and accounts for the year ended 31 December 2023
Manx Financial Group PLC (LSE:
MFX), the financial services group which includes Conister Bank
Limited, Conister Finance & Leasing Ltd, Payment Assist
Limited, Blue Star Business Solutions Limited, Edgewater Associates
Limited and MFX Limited presents its audited final results for the
year ended 31 December 2023.
Jim Mellon, Executive Chairman,
commented: "I am pleased to report another set of record results
with a 35% increase in Profit Before Tax to £7.0
million."
The 2023 Audited Annual Report and
Accounts will be posted to Shareholders and will be available from
the Company's website www.mfg.im shortly. Details concerning the 2023 Annual General
Meeting will be announced in due course.
This announcement contains inside information for the
purposes of Article 7 of EU Regulation No. 596/2014 on market
abuse. Upon the publication of this announcement via a Regulatory
Information Service, this inside information is now considered to
be in the public domain.
For further information, please
contact:
Manx Financial Group
PLC
Denham Eke,
Executive Vice Chairman
Tel +44
(0)1624 694694
|
Beaumont Cornish
Limited
Roland Cornish/James
Biddle
Tel +44
(0) 20 7628 3396
|
Greentarget Limited
Jamie Brownlee
Tel +44
(0) 20 3307 5726
|
Dear Shareholders
Introduction
With the continuing conflicts in Ukraine and
Palestine, together with rising energy costs and the disruption in
the Red Sea to world supply chains, the global economy remained
inflationary and fragile. Our home markets in the Isle of Man and
UK were not immune to these factors. Indeed, the Bank of England
continued to grapple with stubbornly high inflation throughout the
year and, as a consequence, approved five interest rate increases
as part of their strategy to bring inflation back into their target
range of less than 2%. The higher than targeted inflation rate was
not offset by a corresponding increase in wages which has put many
families and businesses under a real cost of living
crisis.
Despite this negative backdrop, thus far the
Group has not experienced a corresponding increase in arrears. This
reflects positively on the integrity of our underwriting, the
products we offer, and the markets we continue to serve.
Our financial performance for the year also
reflects this resilience and I am pleased to report another set of
record results with a 35% increase in Profit Before Tax to £7.0
million (2022: £5.2 million), with our basic Earnings Per Share
increasing to 4.59p (2022: 3.77p) - an improvement of 21.8%. At the
Profit After Tax payable level of £6.1 million (2022: £4.7
million), £5.3 million (2022: £4.3 million) was due to the Group's
shareholders, and £0.9 million (2022: £0.3 million) was due to
minority interests. This improvement was due to a number of factors
including operating income growth - augmented with a full year's
impact from Payment Assist Limited, a gain in debt securities and a
lower charge for provisioning and impairments.
Our financial performance also strengthened
our balance sheet with total assets increasing by £101.4 million to
£480.7 million (2022: £379.3 million), and our shareholder equity
increased by £6.2 million to £36.0 million (2022: £29.8 million).
This outcome allows the Board to recommend continuing our policy of
returning 10% of the Group's profit available to shareholders in
the form of cash and/or shares. This year the total dividend
available for payment is £0.53 million (2022: £0.43 million). Thus,
the amount recommended for shareholder approval at our Annual
General Meeting will be 0.4551 pence per share (2022: 0.3764 pence
per share) - a 20.9% uplift.
On a separate note, I appreciate there has
been a lot of media comment surrounding the FCA announcement that
they are reviewing whether customers have lost out as a result of
variable commission arrangements on lending to the motor finance
sector. The outcome and potential impact of the FCA's review will
not be known until they report their findings, expected to be
sometime later this year. Despite having some exposure in this
area, our initial review suggests that any liability will be
minimal with no present need for any provision. Notwithstanding,
the Board recognises the requirement to plan for a range of
possible outcomes but currently it does not expect the issue to
materially impact the Group's results, if at all.
Financial
Performance
This year's financial performance is again a
record despite the previously mentioned economic headwinds
impacting on both of our trading locations.
For the third year running, Conister Bank
Limited ("Conister") set a new lending record of £352.5 million
(2022: £231.4 million), an increase of 52.3%. With increases in the
cost of deposits reflecting the five increases in the UK interest
rate, our cost of funds was negatively impacted with yield
compression of 12.7% to 71.3% (2022: 84.0%) in the year.
Nevertheless, our net interest income increased substantially by
£8.0 million to £32.4 million (2022: £24.4 million).
With other operating subsidiaries again making
a positive contribution, notably Conister Finance & Leasing
Ltd, Payment Assist Limited and MFX Limited, this resulted in
operating income increasing by £5.4 million to £31.5 million (2022:
26.1 million). Operating income has now increased by 57.0% over the
last two years.
Operating expenses, excluding provisions,
increased by £3.4 million to £20.3 million (2022: £16.9 million),
reflecting the full cost of consolidating Payment Assist Limited
into the Group along with an incremental increase in overheads
relating to obtaining our UK Branch deposit taking licence.
Provisions increased by £0.1 million to £4.1 million (2022: £4.0
million).
Turning to the Group's balance sheet, total
assets increased by £101.1 million to £480.7 million (2022: £379.3
million). This was driven by a £71.2 million increase in the net
loan book and a £35.5 million increase in Treasury Bills to support
regulatory liquidity requirements. Isle of Man deposits grew by
£86.2 million to £390.4 million (2022: £304.2 million). Total
liabilities stood at £444.7 million (2022: 349.5 million), leading
to an increase in equity of £6.2 million to £36.0 million (2022:
£29.8 million). The debt to asset ratio, measured as being total
debt as a percentage of total tangible assets, remains robust at
95.5% (2022: 95.5%) meaning liabilities are covered by assets 1.1
times (2022: 1.1 times).
Key
Objectives
After a period of economic uncertainty, I am
cautiously optimistic that over the next 24 months we will move to
a more normalised interest and inflation rate environment. Until we
get to that position, our key objective will continue to be to
increase shareholder value as prudently as possible. Thus, our
strategic focus remains unchanged, namely to:
§ Provide the
highest quality of service throughout our operations to all
customers, ensuring that their treatment is both fair and
appropriate
§ Continue
adopting a pro-active strategy to managing risk, including climate
risk, within a structured and compliant manner
§ Concentrate
on developing our core business by considered acquisitions,
increasing prudential lending, and augmenting the range of
financial services we offer
§ Prudently
progress the implementation of an enhanced and scalable IT
infrastructure to better service the operational requirements of a
growing Group without the requirement for a disproportionate
increase in headcount and other associated operational
costs
§ Continue to
develop our Treasury management to improve the return on the
liability side of our balance sheet; and
§ Manage our
balance sheet to exceed the regulatory requirements for capital
adequacy
To continue to grow shareholder value, we will
need to grow the balance sheet as our scale is still sub-optimal.
With organic growth this year partially dependent upon an improved
economic environment, we need to re-focus our non-dilutive
acquisition strategy. Further details are included under "Business
Model and Strategy" on page 8 of the Annual Report.
Environmental, Social and Corporate
Governance
The Group takes social responsibility
seriously and remains committed to reducing its impact on the
environment, and to making a positive contribution to the
communities in which we live and work.
Our Environmental, Social, and Governance
("ESG") initiatives, are integral to our commitment to sustainable
development and corporate responsibility. This year, more than
ever, we have witnessed the importance of resilience and
adaptability, and our ESG policy has been at the heart of our
strategy to navigate these challenges. We have made significant
strides in embedding our ESG principles across all levels of
operations. Our commitment to a whole business approach, focusing
on what matters, applying best practices, using our influence
responsibly, and ensuring accountability, has driven meaningful
progress towards our sustainability goals.
In particular, our efforts towards better
understanding our carbon footprint, enhancing product development
for sustainability, and embedding diversity, equity, and inclusion
into our corporate culture have been noteworthy. We are also proud
of the progress made in upskilling our workforce on ESG matters and
integrating these principles. The financial results for this period
reflect not only our economic resilience but also our commitment to
social and environmental responsibility. Our financial performance,
while robust, is just one aspect of our success. The true measure
of our achievements lies in our positive impact on society and the
environment, as guided by our comprehensive ESG policy.
Looking ahead, we remain dedicated to
advancing our ESG commitments, aware that our journey towards
sustainability is continuous. We will keep pushing the boundaries
of what is possible and fostering a culture of responsibility and
inclusiveness.
Our ESG progress is available on page 11 of
the Annual Report and our Corporate Governance Report outlining our
adherence to the Quoted Companies Alliance Code is detailed on page
23 of the Annual Report.
Operating
Unit Review
Our principal operating subsidiaries continued
with their strategy of growth through gaining market share in
recession-proof markets as demand for our products remained buoyant
which resulted in record advances in the year.
Conister Bank
Limited and Conister Finance & Leasing Ltd
Conister, together with its wholly owned
subsidiary, Conister Finance & Leasing Ltd, remained the driver
of the Group's financial performance recording a Profit After Tax
of £2.2 million (2022: £1.8 million).
In its home market, Conister continues to grow
its loan book, lending £56.3 million (2022: £50.5 million) during
the year. The net loan book stands at £78.1 million (2022: £68.4
million). This book continues to have exceptionally low arrears,
1.89% (2022: 1.95%).
In the UK, growth has been driven by our
Structured Finance products with lending increasing by £93.1
million to £246.2 million (2022: £153.1 million). The structuring
of these facilities continues to minimise the risk of default and
is proving a successful mechanism for growth in this difficult
environment.
The Isle of Man deposit base has again proved
very loyal with an 77% retention rate (2022: 78%). This, along with
new deposits of £156.0 million (2022: £106.3 million), provided
ample liquidity to allow Conister to achieve its record growth and
to provide support for the future.
In October 2023, Conister obtained its UK
Branch Deposit Taking permissions which, as well as providing an
alternative source of liquidity, will allow the Bank to access new
lending and liquidity opportunities. We anticipate taking UK
deposits in the second half of 2024, principally via a
user-friendly online process.
Overheads, excluding provisions, increased by
£1.5 million to £11.9 million (2022: £10.4 million) as the business
geared up to become operationally ready to take deposits in the UK.
Prudently, it has bolstered its Credit and Collections teams to
continue to protect Conister during these challenging
times.
Provisions reduced by £0.3 million to £9.3
million (2022: £9.6 million) and now represent 2.6% of the net loan
book (2022: 3.3%). This reduction provides a positive reflection on
the quality of the loan book.
The Bank's total assets have increased by
£97.8 million to £451.8 million (2022: £354.0 million), driven by
loan book growth of £68.0 million. Liabilities have increased by
£90.8 million, with deposits increasing by £86.2 million to £390.4
million. As a result, Conister's equity has increased by £7.0
million to £41.5 million (2022: £34.5 million).
Following the award of the UK Banking Licence,
Conister Finance & Leasing Ltd will be restructured during
2024, with the regulated activities merged into Conister. The
Basingstoke office will continue as the Conister's UK branch for
deposit taking and regulated lending.
MFX
Limited
Our foreign exchange brokerage continued with
an impressive performance considering these turbulent times and
earned a profit of £0.7 million (2022: £1.4 million). Dividends
paid to the Group in the year were £0.8 million (2022: £1.8
million).
Payment
Assist Limited
This is the first full financial year that
this business's result has been consolidated into the Group's
annual accounts. The business operates mostly in the short-term
lending market and exceeded our financial expectations in the year
by delivering £4.0 million to the Group in terms of interest income
to Conister and recharges for Group services.
Turnover was £10.8 million (2022: £10.1
million), Operating Profit was £2.7 million (£2022: £1.8 million)
leading to a Profit After Tax of £2.1 million (2022: £0.8 million).
As previously reported, the Group owns 50.1% of Payment Assist
Limited, with the opportunity to acquire the remaining percentage
from the beginning of 2027.
Edgewater
Associates Limited
We restructured the company at the end of 2023
and, as a result, there are signs of a more sustained profitability
for the future. Edgewater Associates Limited contributed £0.4
million (2022: £nil) in dividends to the Group.
Other
operating subsidiaries
All other operating subsidiaries contributed
positively to the Group's results.
Outlook
I believe that the high interest rate
environment will persist during 2024 and this will continue to
dampen our net interest margin, but it should not reduce the demand
for our products. Shorter term lending in particular - loans less
than 12 months - will continue to be much in demand for small
businesses and consumers alike. Whilst I remain cautious about
overall organic growth this year, accretive acquisition
opportunities are available. We will remain prudent in our approach
to these opportunities, and we will only progress such acquisitions
if they can be delivered without any shareholder
dilution.
Looking further ahead, the unwinding of the
pressure on our net interest margin will naturally drive organic
growth. This, along with any accretive acquisitions we make in the
meantime, will create an even more robust, diversified financial
services Group which will support our ongoing objective of
continuously enhancing shareholder value.
Conclusion
I would like to take this opportunity to thank
our staff and Board of Directors for their support in making this
result possible and for setting the Group on the right footing for
the opportunities and challenges that lie ahead. I would also like
to thank the Executives for gaining the new UK Branch deposit
taking licence in less than 12 months - a magnificent achievement
and well done to all involved. Finally, I would like to thank my
fellow shareholders for their continued support.
Jim Mellon
Executive Chair
25 March 2024
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 31
December
|
Notes
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Interest revenue calculated using
the effective interest method
|
|
|
45,356
|
|
28,978
|
Other interest income
|
|
|
1,535
|
|
1,765
|
Interest expense
|
|
|
(14,530)
|
|
(6,391)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
9
|
|
32,361
|
|
24,352
|
|
|
|
|
|
|
Fee and commission income
|
10
|
|
3,997
|
|
4,719
|
Fee and commission
expense
|
10
|
|
(7,327)
|
|
(3,569)
|
Depreciation on leasing
assets
|
22
|
|
-
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
trading income
|
|
|
29,031
|
|
25,486
|
Other operating income
|
|
|
364
|
|
314
|
Gain / (loss) on financial
instruments
|
19
|
|
195
|
|
(19)
|
Realised gain on debt
securities
|
18
|
|
1,893
|
|
292
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
31,483
|
|
26,073
|
|
|
|
|
|
|
Personnel expenses
|
11
|
|
(12,170)
|
|
(9,764)
|
Other expenses
|
12
|
|
(6,627)
|
|
(5,806)
|
Provision for impairment on loans
and advances to customers
|
13
|
|
(4,135)
|
|
(3,990)
|
Depreciation
|
22
|
|
(825)
|
|
(738)
|
Amortisation and impairment of
intangibles
|
23
|
|
(683)
|
|
(582)
|
Share of profit of equity accounted
investees, net of tax
|
30
|
|
-
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax payable
|
14
|
|
7,043
|
|
5,211
|
|
|
|
|
|
|
Income tax expense
|
15
|
|
(903)
|
|
(537)
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
6,140
|
|
4,674
|
For the year ended 31
December
|
Notes
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
6,140
|
|
4,674
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will be reclassified to profit or
loss
|
|
|
|
|
|
|
Unrealised gain on debt
securities
|
18
|
|
324
|
|
131
|
|
Related tax
|
|
|
(32)
|
|
-
|
|
|
|
|
|
|
|
|
Items that will never be reclassified to profit or
loss
|
|
|
|
|
|
|
Actuarial gain on defined benefit
pension scheme taken to equity
|
28
|
|
29
|
|
407
|
|
Related tax
|
|
|
(3)
|
|
-
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax
|
|
|
318
|
|
538
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period attributable to
owners
|
|
|
6,458
|
|
5,212
|
|
|
|
|
|
|
|
|
Profit attributable to:
|
|
|
|
|
|
|
Owners of the Company
|
|
|
5,288
|
|
4,331
|
|
Non-controlling interests
|
32
|
|
852
|
|
343
|
|
|
|
|
6,140
|
|
4,674
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to:
|
|
|
|
|
|
|
Owners of the Company
|
|
|
5,606
|
|
4,869
|
|
Non-controlling interests
|
32
|
|
852
|
|
343
|
|
|
|
|
6,458
|
|
5,212
|
|
|
|
|
|
|
|
|
Earnings per share - Profit for the year
|
|
|
|
|
|
|
Basic earnings per share
(pence)
|
16
|
|
4.59
|
|
3.77
|
|
Diluted earnings per share
(pence)
|
16
|
|
3.51
|
|
2.93
|
|
|
|
|
|
|
|
|
Earnings per share - Total comprehensive income for the
year
|
|
|
|
|
|
|
Basic earnings per share
(pence)
|
16
|
|
4.86
|
|
4.24
|
|
Diluted earnings per share
(pence)
|
16
|
|
3.71
|
|
3.28
|
|
|
|
|
|
|
|
The Directors believe that all
results derive from continuing activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 31
December
|
Notes
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
Interest income calculated using the
effective interest method
|
|
|
862
|
|
522
|
|
Dividend income
|
|
|
1,200
|
|
1,575
|
|
Other income
|
|
|
584
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
2,646
|
|
2,166
|
|
|
|
|
|
|
|
|
Personnel expenses
|
11
|
|
(62)
|
|
(127)
|
|
Administration expenses
|
|
|
(61)
|
|
-
|
|
Depreciation expense
|
22
|
|
(63)
|
|
(65)
|
|
Amortisation expense
|
23
|
|
(57)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax payable
|
|
|
2,403
|
|
1,972
|
|
|
|
|
|
|
|
|
Tax payable
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
2,403
|
|
1,972
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
2,403
|
|
1,972
|
|
|
|
|
|
|
|
|
The Directors believe that all
results derive from continuing activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 31 December
|
|
|
Notes
|
|
2023
£000
|
|
2022
£000
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
17
|
|
12,107
|
|
22,630
|
Debt securities
|
|
|
18
|
|
76,129
|
|
40,675
|
Equity held at Fair Value Through
Profit or Loss
|
|
|
33
|
|
138
|
|
122
|
Loans and advances to
customers
|
|
|
20
|
|
362,653
|
|
291,475
|
Trade and other
receivables
|
|
|
21
|
|
8,227
|
|
4,211
|
Property, plant and
equipment
|
|
|
22
|
|
6,410
|
|
6,714
|
Intangible assets
|
|
|
23
|
|
4,268
|
|
2,703
|
Investment in associates
|
|
|
30
|
|
197
|
|
155
|
Goodwill
|
|
|
34
|
|
10,576
|
|
10,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
480,705
|
|
379,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Deposits from customers
|
|
|
24
|
|
390,421
|
|
304,199
|
Creditors and accrued
charges
|
|
|
25
|
|
14,409
|
|
13,108
|
Deferred consideration
|
|
|
26
|
|
20
|
|
262
|
Loan notes
|
|
|
27
|
|
39,317
|
|
31,332
|
Pension liability
|
|
|
28
|
|
162
|
|
237
|
Deferred tax liability
|
|
|
15
|
|
392
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
444,721
|
|
349,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Called up share capital
|
|
|
29
|
|
19,384
|
|
19,195
|
Profit and loss account
|
|
|
|
|
15,544
|
|
10,371
|
Revaluation reserve
|
|
|
22
|
|
15
|
|
15
|
Non-controlling interest
|
|
|
32
|
|
1,041
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
35,984
|
|
29,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
|
|
480,705
|
|
379,261
|
|
|
|
|
|
|
|
|
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December
|
|
|
|
|
Notes
|
|
2023
£000
|
|
2022
£000
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
17
|
|
373
|
|
1,761
|
Trade and other
receivables
|
|
|
|
|
21
|
|
123
|
|
562
|
Amounts due from Group
undertakings
|
|
|
|
|
35
|
|
10,694
|
|
9,907
|
Property, plant and
equipment
|
|
|
|
|
22
|
|
139
|
|
201
|
Intangible assets
|
|
|
|
|
23
|
|
861
|
|
25
|
Investment in
subsidiaries
|
|
|
|
|
31
|
|
28,097
|
|
23,597
|
Subordinated loans
|
|
|
|
|
35
|
|
14,228
|
|
7,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
54,515
|
|
43,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Creditors and accrued
charges
|
|
|
|
|
25
|
|
544
|
|
440
|
Amounts due to Group
undertakings
|
|
|
|
|
35
|
|
608
|
|
122
|
Loan notes
|
|
|
|
|
27
|
|
39,317
|
|
31,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
40,469
|
|
31,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Called up share capital
|
|
|
|
|
29
|
|
19,384
|
|
19,195
|
Profit and loss account
|
|
|
|
|
|
|
(5,338)
|
|
(7,308)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
14,046
|
|
11,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
|
|
|
|
54,515
|
|
43,781
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES OF
EQUITY
|
|
|
|
Attributable to owners of
the Company
|
|
|
|
|
Group
|
|
Share
capital
£000
|
|
Profit and loss
account
£000
|
|
Revaluation
reserve
£000
|
|
Total
£000
|
|
Non-controlling
interests
£000
|
|
Total
equity
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1 January
2022
|
|
19,133
|
|
5,781
|
|
15
|
|
24,929
|
|
56
|
|
24,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
-
|
|
4,331
|
|
-
|
|
4,331
|
|
343
|
|
4,674
|
Other comprehensive
income
|
|
-
|
|
538
|
|
-
|
|
538
|
|
-
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
|
|
62
|
|
(279)
|
|
-
|
|
(217)
|
|
-
|
|
(217)
|
Acquisition of subsidiary with
non-controlling interest
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(210)
|
|
(210)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December
2022
|
|
19,195
|
|
10,371
|
|
15
|
|
29,581
|
|
189
|
|
29,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
-
|
|
5,288
|
|
-
|
|
5,288
|
|
852
|
|
6,140
|
Other comprehensive income
|
|
-
|
|
318
|
|
-
|
|
318
|
|
-
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend declared (see note 29)
|
|
91
|
|
(433)
|
|
-
|
|
(342)
|
|
-
|
|
(342)
|
Share issue (see note 29)
|
|
98
|
|
-
|
|
-
|
|
98
|
|
-
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December 2023
|
|
19,384
|
|
15,544
|
|
15
|
|
34,943
|
|
1,041
|
|
35,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Company
|
|
|
Share
capital
£000
|
|
Profit and loss
account
£000
|
|
Total
equity
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1 January
2022
|
|
|
19,133
|
|
(9,001)
|
|
10,132
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
-
|
|
1,972
|
|
1,972
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
Dividends declared (see note
29)
|
|
|
62
|
|
(279)
|
|
(217)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December
2022
|
|
|
19,195
|
|
(7,308)
|
|
11,887
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
-
|
|
2,403
|
|
2,403
|
|
|
|
|
|
|
|
|
Transactions with owners
|
|
|
|
|
|
|
|
Dividend declared (see note 29)
|
|
|
91
|
|
(433)
|
|
(342)
|
Share issue (see note 29)
|
|
|
98
|
|
-
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December 2023
|
|
|
19,384
|
|
(5,338)
|
|
14,046
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31
December
|
Notes
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
RECONCILIATION OF PROFIT BEFORE TAXATION TO OPERATING CASH
FLOWS
|
|
|
|
|
|
Profit before tax
|
|
|
7,043
|
|
5,211
|
Adjustments for:
|
|
|
|
|
|
Depreciation
|
22
|
|
825
|
|
754
|
Amortisation of
intangibles
|
23
|
|
683
|
|
582
|
Impairment of loans and advances to
customers
|
|
|
4,135
|
|
3,990
|
Net interest income
|
|
|
(34,726)
|
|
(26,064)
|
Realised gains on debt
securities
|
|
|
(1,893)
|
|
(292)
|
Share of profit of equity accounted
investees
|
30
|
|
-
|
|
(18)
|
Contingent consideration interest
expense
|
6(ii)
|
|
4
|
|
102
|
Pension charge included in personnel
expenses
|
28
|
|
11
|
|
14
|
(Loss) / gain on financial
instruments
|
19
|
|
(195)
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,113)
|
|
(15,702)
|
Changes in:
|
|
|
|
|
|
Trade and other
receivables
|
|
|
(4,016)
|
|
(2,228)
|
Creditors and accrued
charges
|
|
|
1,953
|
|
1,436
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash flow from trading activities
|
|
|
(26,176)
|
|
(16,494)
|
|
|
|
|
|
|
Changes in:
|
|
|
|
|
|
Loans and advances to
customers
|
|
|
(75,590)
|
|
(56,313)
|
Deposits from customers
|
|
|
88,116
|
|
46,061
|
Pension contribution
|
28
|
|
(57)
|
|
(57)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in
operating activities
|
|
|
(13,707)
|
|
(26,803)
|
|
|
|
|
|
|
CASH FLOW STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
Cash from
operating activities
|
|
|
|
|
|
Cash used in operating activities
|
|
|
(13,707)
|
|
(26,803)
|
Interest received
|
|
|
47,168
|
|
30,136
|
Interest paid
|
|
|
(14,059)
|
|
(6,184)
|
Income taxes paid
|
|
|
(1,337)
|
|
(157)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from /
(used in) operating activities
|
|
|
18,065
|
|
(3,008)
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Acquisition of property, plant and
equipment, excluding right-of-use assets
|
22
|
|
(1,280)
|
|
(1,473)
|
Acquisition of intangible
assets
|
23
|
|
(2,248)
|
|
(504)
|
Proceeds from sale of property,
plant and equipment
|
22
|
|
759
|
|
2,083
|
Acquisition of subsidiary or
associate, net of cash acquired
|
34
|
|
-
|
|
(1,785)
|
(Purchase) / Sale of debt
securities
|
|
|
(33,237)
|
|
734
|
Deferred consideration on
acquisition of subsidiary
|
6(ii),26
|
|
(67)
|
|
(937)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(36,073)
|
|
(1,882)
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
Receipt of loan notes
|
27
|
|
7,985
|
|
7,660
|
Payment of lease liabilities
(capital)
|
37
|
|
(256)
|
|
(202)
|
Dividend paid
|
29
|
|
(342)
|
|
(217)
|
Share issue
|
29
|
|
98
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from financing activities
|
|
|
7,485
|
|
7,241
|
|
|
|
|
|
|
Net
(decrease) / increase in cash and cash
equivalents
|
|
|
(10,523)
|
|
2,351
|
|
|
|
|
|
|
Cash and cash equivalents at 1
January
|
|
|
22,630
|
|
20,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at 31 December
|
|
|
12,107
|
|
22,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There are £42,000 of non-cash
investing activities with respect to the Group's acquisition of
10.0% shareholding in Lesley Stephen & Co Limited. (see note
30).
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31
December
|
Notes
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
RECONCILIATION OF PROFIT BEFORE TAXATION TO OPERATING CASH
FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
2,403
|
|
1,972
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
Depreciation
|
22
|
|
63
|
|
63
|
Amortisation
|
23
|
|
57
|
|
2
|
Interest income
|
|
|
(862)
|
|
(522)
|
Dividend income
|
|
|
(1,200)
|
|
(1,575)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
461
|
|
(60)
|
|
|
|
|
|
|
Changes in:
|
|
|
|
|
|
Amounts due from group
undertakings
|
|
|
(787)
|
|
(3,803)
|
Trade and other
receivables
|
|
|
439
|
|
(90)
|
Creditors and accrued
charges
|
|
|
312
|
|
100
|
Amounts due to Group
undertakings
|
|
|
486
|
|
(4,187)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from / (used in) operating activities
|
|
|
911
|
|
(8,040)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
Cash from operating activities
|
|
|
|
|
|
Cash from / (used) in operating
activities
|
|
|
911
|
|
(8,040)
|
Interest received
|
|
|
1,200
|
|
522
|
Dividends received
|
|
|
862
|
|
1,575
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from / (used in) operating activities
|
|
|
2,973
|
|
(5,943)
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Acquisition of property, plant and
equipment
|
|
|
(1)
|
|
-
|
Acquisition of intangible
assets
|
|
|
(893)
|
|
(8)
|
Issue of subordinated
loans
|
|
|
(6,500)
|
|
-
|
Increase in investment in group
undertakings
|
|
|
(4,500)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(11,894)
|
|
(8)
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
Proceeds from issue of loan
notes
|
27
|
|
7,985
|
|
7,660
|
Payment of finance lease
liabilities
|
|
|
(117)
|
|
(99)
|
Proceeds from issue of
shares
|
|
|
98
|
|
-
|
Dividend paid
|
|
|
(433)
|
|
(279)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from financing activities
|
|
|
7,533
|
|
7,282
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) / increase in cash and cash
equivalents
|
|
|
(1,388)
|
|
1,331
|
|
|
|
|
|
|
Cash and cash equivalents at 1
January
|
|
|
1,761
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at 31 December
|
|
|
373
|
|
1,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes form part of these financial
statements.
NOTES TO
THE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS
1. Reporting entity
Manx Financial Group PLC ("Company") is a
company incorporated in the Isle of Man. The Company's registered
office is at Clarendon House, Victoria Street, Douglas, Isle of
Man, IM1 2LN. The consolidated financial statements of the Company
for the year ended 31 December 2023 comprise the Company and its
subsidiaries ("Group") including Conister Bank Limited (the
"Bank"). The Group is primarily involved in the provision of
financial services.
The Company's financial statements are the
separate financial statements of the Company.
2. Basis of
accounting
The consolidated and the separate financial
statements of the Company have been prepared in accordance with
international accounting standards in accordance with UK-adopted
international accounting standards ("UK-adopted IFRS" or "IFRSs"),
on a going concern basis as disclosed in the Directors'
Report.
3. Functional and presentation
currency
These financial statements are presented in
pounds sterling, which is the Company'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
The preparation of financial statements requires
management to 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.
Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in
any future periods affected.
Assumptions and
estimation uncertainties
Information about assumptions and estimation
uncertainties at year-end that have a significant risk of resulting
in a material adjustment to the carrying amounts of assets and
liabilities in the next financial year is included in the following
notes:
§ Note 23 and
34 - impairment test of intangible assets and goodwill: key
assumptions underlying recoverable amounts; and
§ Note
44(G)(vi) and Note 7(A) - key assumptions of Expected Credit Loss
("ECL") allowance for loans and advances to customers and
assessment of impairment allowances where loans are in default or
arrears.
5. Financial instruments -
Classification
For description of how the Group classifies
financial assets and liabilities, see note 44(G)(ii).
The following table provides reconciliation
between line items in the statement of financial position and
categories of financial instruments.
Group
|
|
Mandatorily at
FVTPL
|
Designated as at
FVTPL
|
FVOCI - debt
instruments
|
FVOCI - equity
instruments
|
Amortised
cost
|
Total carrying
amount
|
31
December 2023
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
-
|
-
|
-
|
-
|
12,107
|
12,107
|
Debt securities
|
|
-
|
-
|
76,129
|
-
|
-
|
76,129
|
Equity held at Fair Value Through
Profit or Loss
|
|
-
|
138
|
-
|
-
|
-
|
138
|
Loans and advances to
customers
|
|
-
|
-
|
-
|
-
|
362,653
|
362,653
|
Trade and other
receivables
|
|
-
|
-
|
-
|
-
|
8,227
|
8,227
|
Total financial assets
|
|
-
|
138
|
76,129
|
-
|
382,987
|
459,254
|
|
|
|
|
|
|
|
|
Deposits from customers
|
|
-
|
-
|
-
|
-
|
390,421
|
390,421
|
Creditor and accrued
charges
|
|
-
|
-
|
-
|
-
|
14,409
|
14,409
|
Deferred consideration
|
|
-
|
20
|
-
|
-
|
-
|
20
|
Loan notes
|
|
-
|
-
|
-
|
-
|
39,317
|
39,317
|
Total financial liabilities
|
|
-
|
20
|
-
|
-
|
444,147
|
444,167
|
Group
|
|
Mandatorily at FVTPL
|
Designated as at FVTPL
|
FVOCI -
debt instruments
|
FVOCI -
equity instruments
|
Amortised cost
|
Total
carrying amount
|
31 December 2022
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
-
|
-
|
-
|
-
|
22,630
|
22,630
|
Debt securities
|
|
-
|
-
|
40,675
|
-
|
-
|
40,675
|
Equity held at Fair Value Through
Profit or Loss
|
|
-
|
122
|
-
|
-
|
-
|
122
|
Loans and advances to
customers
|
|
-
|
-
|
-
|
-
|
291,475
|
291,475
|
Trade and other
receivables
|
|
-
|
-
|
-
|
-
|
4,211
|
4,211
|
Total financial assets
|
|
-
|
122
|
40,675
|
-
|
318,316
|
359,113
|
|
|
|
|
|
|
|
|
Deposits from customers
|
|
-
|
-
|
-
|
-
|
304,199
|
304,199
|
Creditor and accrued
charges
|
|
-
|
-
|
-
|
-
|
13,108
|
13,108
|
Deferred consideration
|
|
-
|
262
|
-
|
-
|
-
|
262
|
Loan notes
|
|
-
|
-
|
-
|
-
|
31,332
|
31,332
|
Total financial
liabilities
|
|
-
|
262
|
-
|
-
|
348,639
|
348,901
|
Company
|
|
Mandatorily at
FVTPL
|
Designated as at
FVTPL
|
FVOCI - debt
instruments
|
FVOCI - equity
instruments
|
Amortised
cost
|
Total carrying
amount
|
31
December 2023
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
-
|
-
|
-
|
-
|
373
|
373
|
Trade and other
receivables
|
|
-
|
-
|
-
|
-
|
123
|
123
|
Amounts due from Group
undertakings
|
|
-
|
-
|
-
|
-
|
9,613
|
9,613
|
Subordinated loans
|
|
-
|
-
|
-
|
-
|
14,228
|
14,228
|
Total financial assets
|
|
-
|
-
|
-
|
-
|
24,337
|
24,337
|
|
|
|
|
|
|
|
|
Creditor and accrued
charges
|
|
-
|
-
|
-
|
-
|
453
|
453
|
Amounts due to Group
undertakings
|
|
-
|
-
|
-
|
-
|
608
|
608
|
Loan notes
|
|
-
|
-
|
-
|
-
|
39,317
|
39,317
|
Total financial liabilities
|
|
-
|
-
|
-
|
-
|
40,378
|
40,378
|
|
|
|
|
|
|
|
|
Company
|
|
Mandatorily at FVTPL
|
Designated as at FVTPL
|
FVOCI -
debt instruments
|
FVOCI -
equity instruments
|
Amortised cost
|
Total
carrying amount
|
31 December 2022
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
-
|
-
|
-
|
-
|
1,761
|
1,761
|
Trade and other
receivables
|
|
-
|
-
|
-
|
-
|
562
|
562
|
Amounts due from Group
undertakings
|
|
-
|
-
|
-
|
-
|
9,907
|
9,907
|
Subordinated loans
|
|
-
|
-
|
-
|
-
|
7,728
|
7,728
|
Total financial assets
|
|
-
|
-
|
-
|
-
|
19,958
|
19,958
|
|
|
|
|
|
|
|
|
Creditor and accrued
charges
|
|
-
|
-
|
-
|
-
|
440
|
440
|
Amounts due to Group
undertakings
|
|
-
|
-
|
-
|
-
|
122
|
122
|
Loan notes
|
|
-
|
-
|
-
|
-
|
31,332
|
31,332
|
Total financial
liabilities
|
|
-
|
-
|
-
|
-
|
31,894
|
31,894
|
|
|
|
|
|
|
|
|
6. Financial instruments - Fair
values
For description of the Group's fair value
measurement accounting policy, see note 44(G)(vi).
The following table shows the carrying amounts
and fair values of Group financial assets and financial
liabilities, including their levels in the fair value hierarchy. It
does not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.
|
Carrying
amount
|
|
Fair value
|
31
December 2023
|
Total
£000
|
|
Level 1
£000
|
|
Level 2
£000
|
|
Level 3
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
Financial assets measured at fair value
|
|
|
|
|
|
|
|
|
|
Debt securities
|
76,129
|
|
-
|
|
76,129
|
|
-
|
|
76,129
|
Equity held at Fair Value Through
Profit or Loss
|
138
|
|
-
|
|
-
|
|
138
|
|
138
|
|
76,267
|
|
-
|
|
76,129
|
|
138
|
|
76,267
|
|
|
|
|
|
|
|
|
|
|
Financial assets not measured at fair value
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
12,107
|
|
-
|
|
-
|
|
-
|
|
-
|
Loans and advances to
customers
|
362,653
|
|
-
|
|
-
|
|
-
|
|
-
|
Trade and other
receivables
|
8,227
|
|
-
|
|
-
|
|
-
|
|
-
|
|
382,987
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at fair
value
|
|
|
|
|
|
|
|
|
|
Deferred consideration
|
20
|
|
-
|
|
-
|
|
20
|
|
20
|
|
20
|
|
-
|
|
-
|
|
20
|
|
20
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities not measured at fair
value
|
|
|
|
|
|
|
|
|
|
Deposits from customers
|
390,421
|
|
-
|
|
-
|
|
-
|
|
-
|
Creditors and accrued
charges
|
14,409
|
|
-
|
|
-
|
|
-
|
|
-
|
Loan notes
|
39,317
|
|
-
|
|
-
|
|
-
|
|
-
|
|
444,147
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Carrying
amount
|
|
Fair
value
|
31 December 2022
|
Total
£000
|
|
Level
1
£000
|
|
Level
2
£000
|
|
Level
3
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
Financial assets measured at fair
value
|
|
|
|
|
|
|
|
|
|
Debt securities
|
40,675
|
|
-
|
|
40,675
|
|
-
|
|
40,675
|
Equity held at Fair Value Through
Profit or Loss
|
122
|
|
-
|
|
-
|
|
122
|
|
122
|
|
40,797
|
|
-
|
|
40,675
|
|
122
|
|
40,797
|
|
|
|
|
|
|
|
|
|
|
Financial assets not measured at
fair value
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
22,630
|
|
-
|
|
-
|
|
-
|
|
-
|
Loans and advances to
customers
|
291,475
|
|
-
|
|
-
|
|
-
|
|
-
|
Trade and other
receivables
|
4,211
|
|
-
|
|
-
|
|
-
|
|
-
|
|
318,316
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at
fair value
|
|
|
|
|
|
|
|
|
|
Deferred consideration
|
262
|
|
-
|
|
-
|
|
262
|
|
262
|
|
262
|
|
-
|
|
-
|
|
262
|
|
262
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities not measured
at fair value
|
|
|
|
|
|
|
|
|
|
Deposits from customers
|
304,199
|
|
-
|
|
-
|
|
-
|
|
-
|
Creditors and accrued
charges
|
13,108
|
|
-
|
|
-
|
|
-
|
|
-
|
Loan notes
|
31,332
|
|
-
|
|
-
|
|
-
|
|
-
|
|
348,639
|
|
-
|
|
-
|
|
-
|
|
-
|
All
Company financial assets and liabilities carrying amounts are
deemed to be reasonable approximation of fair value.
Measurement of
fair values
i. Valuation techniques and significant unobservable
inputs
Type
|
Valuation
technique
|
Significant
unobservable inputs
|
Inter-relationship between significant
unobservable inputs and fair value measurement
|
Debt securities
|
Market comparison / discounted cash flow: The
fair value is estimated considering a net present value calculated
using discount rates derived from quoted yields of securities with
similar maturity and credit rating that are traded in active
markets.
|
Not applicable.
|
Not applicable.
|
Equities at Fair Value Through Profit or
Loss
|
Net asset value
|
Expected net cash flows derived from the
entity
|
The estimated fair value would increase
(decrease) if the expected cash flows were higher
(lower).
|
Deferred consideration
|
Discounted cash flows: The valuation model
considers the present value of the expected future payments,
discounted using a risk-adjusted discount rate.
|
Expected cash flows £20,000 (2022:
£291,340).
Risk-adjusted discount rate 14.0% (2022:
14.0%).
|
The estimated fair value would increase
(decrease) if:
-the expected cash flows were higher (lower);
or
-the risk-adjusted discount rate was lower
(higher).
|
ii. Level 3
recurring fair values
Reconciliation
of Level 3 fair values
The following table shows a reconciliation from
the opening balances to the closing balances for Level 3 fair
values.
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Balance at 1 January
|
|
|
262
|
|
1,023
|
|
|
|
|
|
|
Finance costs
|
|
|
4
|
|
102
|
Net change in fair value
(unrealised)
|
|
|
(179)
|
|
74
|
|
|
|
(175)
|
|
176
|
|
|
|
|
|
|
Payment (note 26)
|
|
|
(67)
|
|
(937)
|
|
|
|
|
|
|
Balance at 31 December
|
|
|
20
|
|
262
|
Sensitivity
analysis
For the fair value of contingent consideration,
reasonably possible changes at the reporting date to one of the
significant unobservable inputs, holding other inputs constant
would have the following effects.
|
|
|
Profit or
loss
|
31 December 2023
|
|
|
Increase
£000
|
|
Decrease
£000
|
|
|
|
|
|
|
Expected cash flows (10.0%
movement)
|
|
|
2
|
|
(2)
|
Risk-adjusted discount rate (1.0%
movement)
|
|
|
-
|
|
-
|
|
|
|
Profit
or loss
|
31 December 2022
|
|
|
Increase
£000
|
|
Decrease
£000
|
|
|
|
|
|
|
Expected cash flows (10.0%
movement)
|
|
|
29
|
|
(29)
|
Risk-adjusted discount rate (1.0%
movement)
|
|
|
5
|
|
(3)
|
7. Financial risk
review
Risk
management
This note presents information about the Group's
exposure to financial risks and the Group's management of capital.
For information on the Group and Company's financial risk
management framework, see note 42.
A. Group Credit risk
For definition of credit risk and information on
how credit risk is mitigated by the Group, see note 42.
i. Credit
quality analysis
Loans and
advances to customers
Explanation of the terms 'Stage 1', 'Stage 2'
and 'Stage 3' is included in note 44(G)(vii).
An analysis of the credit risk on loans and
advances to customers is as follows:
Group
|
2023
|
|
2022*
|
|
Stage 1
£000
|
Stage 2
£000
|
Stage 3
£000
|
Total
£000
|
|
Stage
1
£000
|
Stage
2
£000
|
Stage
3
£000
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
Grade A
|
341,953
|
-
|
-
|
341,953
|
|
273,332
|
-
|
-
|
273,332
|
Grade B
|
-
|
7,822
|
3,700
|
11,522
|
|
-
|
5,006
|
9,347
|
14,353
|
Grade C
|
-
|
2
|
28,791
|
28,793
|
|
391
|
-
|
19,576
|
19,967
|
Gross value
|
341,953
|
7,824
|
32,491
|
382,268
|
|
273,723
|
5,006
|
28,923
|
307,652
|
|
|
|
|
|
|
|
|
|
|
Allowance for impairment
|
(184)
|
(6)
|
(19,425)
|
(19,615)
|
|
(303)
|
(3)
|
(15,871)
|
(16,177)
|
Carrying value
|
341,769
|
7,818
|
13,066
|
362,653
|
|
273,420
|
5,003
|
13,052
|
291,475
|
Loans are graded A to C depending on the level
of risk. Grade A relates to agreements with the lowest risk, Grade
B with medium risk and Grade C relates to agreements with the
highest of risk.
The following table sets out information about
the overdue status of loans and advances to customers in Stage 1, 2
and 3:
Group
|
2023
|
|
2022*
|
|
31 December
|
Stage 1
£000
|
Stage 2
£000
|
Stage 3
£000
|
Total
£000
|
|
Stage
1
£000
|
Stage
2
£000
|
Stage
3
£000
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
Current
|
333,740
|
-
|
-
|
333,740
|
|
269,130
|
-
|
-
|
269,130
|
Overdue < 30 days
|
8,213
|
-
|
-
|
8,213
|
|
4,593
|
604
|
-
|
5,197
|
Overdue > 30 days
|
-
|
7,825
|
32,490
|
40,315
|
|
-
|
4,402
|
28,923
|
33,325
|
|
341,953
|
7,825
|
32,490
|
382,268
|
|
273,723
|
5,006
|
28,923
|
307,652
|
|
|
|
|
|
|
|
|
|
| |
For Stage 3 loans and advances, the Bank holds
collateral with a value of £13,410,000 (2022: £12,927,000)
representing security cover of 35.0% (2022: 48.0%).
* Please refer to Note 20.
Debt
securities, cash and cash equivalents
The following table sets out the credit quality
of liquid assets:
Group
|
|
2023
|
2022
|
|
|
£000
|
£000
|
|
|
|
|
Government bonds and treasury bills
|
|
|
|
Rated A to A+
|
|
76,129
|
40,675
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
Rated A to A+
|
|
12,107
|
22,630
|
|
|
|
|
Trade and other receivables
|
|
|
|
Unrated
|
|
8,227
|
4,211
|
|
|
96,463
|
67,516
|
The analysis has been based on Standard &
Poor's ratings. The above debt securities, cash and cash
equivalents are considered to be Stage 1 as there is no evidence of
significant deterioration in credit quality and hence no material
expected credit loss allowance is
observed.
ii. Collateral
and other credit enhancements
The Group holds collateral in the form of the
underlying assets (typically private and commercial vehicles, plant
and machinery) to loan arrangements as security for HP, finances
leases, vehicle stocking plans, block discounting, wholesale
funding arrangements, integrated wholesale funding arrangements and
secured commercial loan balances, which are sub-categories of loans
and advances to customers. In addition, the Group will take
debentures, mortgages, personal and corporate guarantees, fixed and
floating charges on specific assets such as cash and
shares.
The terms of enforcing such security can only
occur on default, and when realised can only be used to settle the
amount of debt and related collection fees. On occasion the
Bank may realise a surplus if the defaulting party loses title to
the underlying security as part of enforcement. In addition, the
commission share schemes have an element of capital
indemnified.
As at 31 December 2023, 13.0% of loans and
advances had an element of capital indemnification (2022:
4.0%). At the time of granting credit within the
sub-categories listed above, the loan balances due are secured over
the underlying assets held as collateral.
At the time of granting credit
within the sub-categories listed above, the loan balances due are
secured over the underlying assets held as collateral (see note 12
for further details). Collateral is valued at the time
of borrowing, and generally are not updated except when a loan is
individually assessed as impaired.
For portfolios where the Group has never had a
default in its history or has robust credit enhancements such as
credit insurance or default indemnities for the entire portfolio,
then no IFRS 9 provision is made. At 2023 year-end, 28.0% had
such credit enhancements (2022: 29.0%).
The following table sets out the principal types
of collateral held against different types of financial
assets.
Group
|
|
|
2023
%
|
|
2022
%
|
Principal
type of collateral held
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HP balances
|
|
|
100
|
|
100
|
Property
and equipment
|
Finance lease balances
|
|
|
100
|
|
100
|
Property
and equipment
|
Unsecured personal loans
|
|
|
-
|
|
-
|
None
|
Vehicle stocking plans
|
|
|
100
|
|
100
|
Motor
vehicles
|
Wholesale funding
arrangements
|
|
|
100
|
|
100
|
Floating
charges over corporate assets
|
Block discounting
|
|
|
100
|
|
100
|
Floating
charges over corporate assets
|
Secured commercial loans
|
|
|
100
|
|
100
|
Floating
charges over corporate assets
|
Secured personal loans
|
|
|
100
|
|
100
|
Property
|
Government backed loans
|
|
|
70 - 100
|
|
70 -
100
|
Government guarantee
|
Property secured
|
|
|
100
|
|
100
|
Property
|
|
|
|
|
|
|
|
There have been no significant changes in the
quality of collateral as a result of a deterioration or changes to
the Group's collateral policies during the reporting
period.
iii. Amounts
arising from ECL
Inputs,
assumptions and techniques used for estimating
impairment
See accounting policy in note
44(G)(vii).
Significant
increase in credit risk
When determining whether the risk of default
on a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Group's historical experience and expert
credit assessment and including forward looking
information.
§ A Significant
Increase in Credit Risk ("SICR") is always deemed to occur when the
borrower is 30 days past due on its contractual payments. If
the Group becomes aware ahead of this time of non-compliance or
financial difficulties of the borrower, such as loss of employment,
avoiding contact with the Group then a SICR has also deemed to
occur.
§ A receivable is
always deemed to be in default and credit-impaired when the
borrower is 90 days past due on its contractual payments or earlier
if the Group becomes aware of severe financial difficulties such as
bankruptcy, individual voluntary arrangements, abscond or
disappearance, fraudulent activity or other similar
events.
Credit risk
grades
The Group allocates each exposure to a credit
risk grade based on a variety of data that is determined to be
predictive of the risk of default and applying experienced credit
judgement. Credit risk grades are defined using qualitative and
quantitative factors that are indicative of risk of default. These
factors vary depending on the nature of the exposure and the type
of borrower.
Credit risk grades are defined and calibrated
such that the risk of default occurring increases exponentially as
the credit risk grade deteriorates. Loans are graded A to C
depending on the level of risk. Grade A relates to agreements with
the lowest risk, Grade B with medium risk and Grade C relates to
agreements with the highest of risk.
Each exposure is allocated to a credit risk
grade on initial recognition based on available information about
the borrower. Exposures are subject to ongoing monitoring, which
may result in an exposure being moved to a different credit risk
grade. The monitoring typically involves the use of the following
data:
Corporate
exposures
|
Retail
exposures
|
All
exposures
|
Information obtained during periodic review of
customer files - e.g. audited financial statements, management
accounts, budgets and projections. Examples of areas of particular
focus are: gross profit margins, financial leverage ratios, debt
service coverage, compliance with covenants
|
Internally collected data on customer
behaviour - e.g. repayment behaviour
|
Payment record - this includes overdue status
as well as a range of variables about payment ratios
|
Data from credit reference agencies
|
Affordability matrix
|
Requests for and granting of
forbearance
|
|
External data from credit reference agencies,
including industry-standard credit scores
|
Existing forecast changes in business,
financial and economic conditions
|
Definition
of default
The Group considers a financial asset to be in
default when:
§ the borrower
is unlikely to pay its credit obligations to the Group in full,
without recourse by the Group to actions such as realising security
(if any is held);
§ the borrower
is more than 90 days past due on any material credit obligation to
the Group; or
§ it is
becoming probable that the borrower will restructure the asset as a
result of bankruptcy due to the borrower's inability to pay its
credit obligations.
In assessing whether a borrower is in default,
the Group considers indicators that are:
§ qualitative:
e.g. breaches of covenant;
§ quantitative:
e.g. overdue status and non-payment on another obligation of the
same issuer to the Group; and
§ based on data
developed internally and obtained from external sources.
Inputs into the assessment of whether a
financial instrument is in default and their significant may vary
over time to reflect changes in circumstances. The definition of
default largely aligns with that applied by the Group for
regulatory capital purposes.
Incorporation of forward-looking
information
The Group incorporates forward looking
information into the measurement of ECL.
The Group has identified and documented key
drivers of credit risk and credit losses its financial instruments
and using an analysis of historical data, has estimated the
relationship between macroeconomic variables and credit risk and
credit losses. The key drivers for credit risk for corporate,
retail and wholesale portfolios include gross domestic product
(GDP) growth, unemployment rates and consumer price index (CPI)
inflation. The Group estimates each key driver for credit risk over
the active forecast period of three years. The table below lists
the UK macroeconomic assumption used in the base scenarios over the
five year forecast period:
31 December
2023
|
2024
|
2025
|
2026
|
2027
|
2028
|
GDP growth rate
|
0.5
|
1.0
|
1.3
|
1.5
|
1.7
|
CPI inflation
|
4.2
|
2.4
|
1.8
|
2.0
|
2.0
|
Unemployment rate
|
4.8
|
4.9
|
4.9
|
4.9
|
5.0
|
31 December 2022
|
2023
|
2024
|
2025
|
2026
|
2027
|
GDP growth rate
|
0.0
|
0.4
|
n/a
|
n/a
|
n/a
|
CPI inflation
|
1.8
|
0.8
|
n/a
|
n/a
|
n/a
|
Unemployment rate
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
Predicted relationships between the key
indicators and default and loss rates on various portfolios of
financial assets have been developed based on analysing historical
data over the past 8 years.
Changes to
ECL assumptions from the prior year
As of 31 December 2023, the Group has updated
its economic projections utilised in the expected credit loss
calculation, shifting from the 2022 figures. This adjustment is
prompted by a higher than anticipated inflation and GDP growth
rate. Additionally, the forecast duration has been prolonged from
two to five years, and an additional key indicator, unemployment
rate, has been incorporated.
iv.
Concentration of credit risk
Geographical
Lending is restricted to individuals and
entities with Isle of Man, UK or Channel Islands
addresses.
Segmental
The Bank is exposed to credit risk with regard
to customer loan accounts, comprising HP and finance lease
balances, unsecured personal loans, secured commercial loans, block
discounting, vehicle stocking plan loans and wholesale funding
agreements. In addition, the Bank lends via significant
introducers into the UK. There was one introducer that accounted
for more than 20.0% of the Bank's total lending portfolio at the
end of 31 December 2023 (2022: none).
B. Group Liquidity risk
For the definition of liquidity risk and
information on how liquidity risk is managed by the Group, see note
42.
i. Exposure to
liquidity risk
The key measure used by the Group for managing
liquidity risk is the ratio of net liquid assets to deposits from
customers and short-term funding. For this purpose, net liquid
assets includes cash and cash equivalents and investment-grade debt
securities for which there is an active and liquid
market.
Details of the reported Group ratio of net
liquid assets to deposits from customers at the reporting date and
during the reporting year were as follows:
|
2023
|
|
2022
|
At 31 December
|
23.0%
|
|
20.0%
|
Average for the year
|
19.0%
|
|
22.0%
|
Maximum for the year
|
23.0%
|
|
25.0%
|
Minimum for the year
|
15.0%
|
|
19.0%
|
ii. Maturity
analysis for financial liabilities and financial
assets
The table below shows the Group's financial
liabilities classified by their earliest possible contractual
maturity, on an undiscounted basis including interest due at the
end of the deposit term. Based on historical data, the Group's
expected actual cash flow from these items vary from this analysis
due to the expected re-investment of maturing customer
deposits.
Residual
contractual maturities of financial liabilities as at the reporting
date (undiscounted):
31
December 2023
|
Sight-
8 days
£000
|
|
>8 days
- 1 month
£000
|
|
>1
month
- 3 months
£000
|
|
>3
months
- 6 months
£000
|
|
>6
months
- 1 year
£000
|
|
>1 year
- 3 years
£000
|
|
>3
years
- 5 years
£000
|
|
>5
years
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
17,261
|
|
13,767
|
|
29,718
|
|
77,801
|
|
122,719
|
|
125,205
|
|
24,076
|
|
-
|
|
410,547
|
Other liabilities
|
55
|
|
257
|
|
1,407
|
|
6,395
|
|
18,997
|
|
18,188
|
|
13,108
|
|
554
|
|
58,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
17,316
|
|
14,024
|
|
31,125
|
|
84,196
|
|
141,716
|
|
143,393
|
|
37,184
|
|
554
|
|
469,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
31 December 2022
|
Sight-
8
days
£000
|
|
>8
days
- 1
month
£000
|
|
>1
month
- 3
months
£000
|
|
>3
months
- 6
months
£000
|
|
>6
months
- 1
year
£000
|
|
>1
year
- 3
years
£000
|
|
>3
years
- 5
years
£000
|
|
>5
years
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
10,878
|
|
6,838
|
|
27,346
|
|
65,153
|
|
104,662
|
|
81,670
|
|
14,557
|
|
-
|
|
311,104
|
Other liabilities
|
691
|
|
116
|
|
1,796
|
|
3,717
|
|
13,196
|
|
22,354
|
|
6,697
|
|
590
|
|
49,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
11,569
|
|
6,954
|
|
29,142
|
|
68,870
|
|
117,858
|
|
104,024
|
|
21,254
|
|
590
|
|
360,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
The table below shows the carrying amount of the
Group's assets and liabilities by their expected
maturities.
Expected
maturity of assets and liabilities at the reporting
date:
31
December 2023
|
Sight-
8 days
£000
|
|
>8 days
- 1 month
£000
|
|
>1
month
- 3 months
£000
|
|
>3 months - 6
months
£000
|
|
>6
months
- 1 year
£000
|
|
>1 year
- 3 years
£000
|
|
>3
years
- 5 years
£000
|
|
>5
years
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
12,107
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
12,107
|
Debt securities
|
3,499
|
|
7,976
|
|
28,275
|
|
36,379
|
|
-
|
|
-
|
|
-
|
|
-
|
|
76,129
|
Loans and advances
|
17,720
|
|
23,854
|
|
41,805
|
|
42,293
|
|
54,800
|
|
131,666
|
|
49,445
|
|
1,070
|
|
362,653
|
Other assets
|
180
|
|
-
|
|
-
|
|
-
|
|
9,580
|
|
-
|
|
5,057
|
|
14,999
|
|
29,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
33,506
|
|
31,830
|
|
70,080
|
|
78,672
|
|
64,380
|
|
131,666
|
|
54,502
|
|
16,069
|
|
480,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
16,884
|
|
12,750
|
|
27,084
|
|
74,397
|
|
118,029
|
|
118,434
|
|
22,843
|
|
-
|
|
390,421
|
Other liabilities
|
-
|
|
100
|
|
1,000
|
|
5,800
|
|
18,421
|
|
16,160
|
|
12,265
|
|
554
|
|
54,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
16,884
|
|
12,850
|
|
28,084
|
|
80,197
|
|
136,450
|
|
134,594
|
|
35,108
|
|
554
|
|
444,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
31 December 2022
|
Sight-
8
days
£000
|
|
>8
days
- 1
month
£000
|
|
>1
month
- 3
months
£000
|
|
>3
months - 6 months
£000
|
|
>6
months
- 1
year
£000
|
|
>1
year
- 3
years
£000
|
|
>3
years
- 5
years
£000
|
|
>5
years
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
22,630
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
22,630
|
Debt securities
|
3,986
|
|
7,987
|
|
20,785
|
|
7,917
|
|
-
|
|
-
|
|
-
|
|
-
|
|
40,675
|
Loans and advances
|
8,038
|
|
10,952
|
|
27,913
|
|
40,730
|
|
47,813
|
|
106,755
|
|
46,176
|
|
3,098
|
|
291,475
|
Other assets
|
122
|
|
-
|
|
-
|
|
-
|
|
5,786
|
|
-
|
|
5,140
|
|
13,433
|
|
24,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
34,776
|
|
18,939
|
|
48,698
|
|
48,647
|
|
53,599
|
|
106,755
|
|
51,316
|
|
16,531
|
|
379,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
10,878
|
|
6,380
|
|
26,552
|
|
64,251
|
|
103,561
|
|
78,984
|
|
13,593
|
|
-
|
|
304,199
|
Other liabilities
|
650
|
|
-
|
|
1,500
|
|
3,286
|
|
12,399
|
|
20,627
|
|
6,240
|
|
590
|
|
45,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
11,528
|
|
6,380
|
|
28,052
|
|
67,537
|
|
115,960
|
|
99,611
|
|
19,833
|
|
590
|
|
349,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Company
All the Company's assets (excluding Investment
in subsidiaries, Property, plant and equipment, Intangible assets,
Investment in subsidiaries and Subordinated loans) are due within
one year. The Subordinated loans are due in more than five
years.
All the Company's creditors (excluding Loan
notes) are due within one year. The maturity profile £12.3 million
of loan notes are due within one year, £14.8 million within 3 years
and £12.3 million within five years.
iii. Liquidity
reserves
The following table sets out the components of
the Group's liquidity reserves:
|
2023
Carrying
amount
|
|
2023
Fair
value
|
|
2022
Carrying
amount
|
|
2022
Fair
value
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
|
Balances with other banks
|
12,107
|
|
12,107
|
|
22,630
|
|
22,630
|
Unencumbered debt
securities
|
76,129
|
|
76,129
|
|
40,675
|
|
40,675
|
Total liquidity reserves
|
88,236
|
|
88,236
|
|
63,305
|
|
63,305
|
C. Group Market risk
For the definition of market risk and
information on how the Group manages the market risks of trading
and non-trading portfolios, see note 42.
The following table sets out the allocation of
assets and liabilities subject to market risk between trading and
non-trading portfolios:
|
|
|
Market risk
measure
|
|
Carrying
amount
|
|
Trading
portfolios
|
|
Non-trading
portfolios
|
31 December 2023
|
£000
|
|
£000
|
|
£000
|
|
|
|
|
|
|
Assets subject to market risk
|
|
|
|
|
|
Debt securities
|
76,129
|
|
-
|
|
76,129
|
Equity held at Fair Value Through
Profit or Loss
|
138
|
|
-
|
|
138
|
Total
|
76,267
|
|
-
|
|
76,267
|
|
|
|
Market
risk measure
|
|
Carrying
amount
|
|
Trading
portfolios
|
|
Non-trading portfolios
|
31 December 2022
|
£000
|
|
£000
|
|
£000
|
|
|
|
|
|
|
Assets subject to market
risk
|
|
|
|
|
|
Debt securities
|
40,675
|
|
-
|
|
40,675
|
Equity held at Fair Value Through
Profit or Loss
|
122
|
|
-
|
|
122
|
Total
|
40,797
|
|
-
|
|
40,797
|
i. Exposure to
interest rate risk
The following tables present the interest rate
mismatch position between assets and liabilities over the
respective maturity dates. The maturity dates are presented on a
worst-case basis, with assets being recorded at their latest
maturity and deposits from customers at their earliest.
31
December 2023
|
Sight-
1
month
£000
|
|
>1month
- 3months
£000
|
|
>3months
-
6months
£000
|
|
>6months- 1 year
£000
|
|
>1 year
- 3
years
£000
|
|
>3 years
- 5
years
£000
|
|
>5 years
£000
|
|
Non-Interest
Bearing
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash
equivalents
|
12,107
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
12,107
|
Debt securities
|
11,475
|
|
28,275
|
|
36,379
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
76,129
|
Loans and advances to
customers
|
41,574
|
|
41,805
|
|
42,293
|
|
54,800
|
|
131,666
|
|
49,445
|
|
1,070
|
|
-
|
|
362,653
|
Other assets
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
29,816
|
|
29,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
65,156
|
|
70,080
|
|
78,672
|
|
54,800
|
|
131,666
|
|
49,445
|
|
1,070
|
|
29,816
|
|
480,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from customers
|
29,634
|
|
27,084
|
|
74,397
|
|
118,029
|
|
118,434
|
|
22,843
|
|
-
|
|
-
|
|
390,421
|
Other liabilities
|
100
|
|
1,000
|
|
5,800
|
|
5,370
|
|
16,160
|
|
12,265
|
|
162
|
|
13,443
|
|
54,300
|
Total equity
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
35,984
|
|
35,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
29,734
|
|
28,084
|
|
80,197
|
|
123,399
|
|
134,594
|
|
35,108
|
|
162
|
|
49,427
|
|
480,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate sensitivity
gap
|
35,422
|
|
41,996
|
|
(1,525)
|
|
(68,599)
|
|
(2,928)
|
|
14,337
|
|
908
|
|
(19,611)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
35,422
|
|
77,418
|
|
75,893
|
|
7,294
|
|
4,366
|
|
18,703
|
|
19,611
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2022
|
Sight-
1 month
£000
|
|
>1month
-
3months
£000
|
|
>3months
- 6months
£000
|
|
>6months- 1 year
£000
|
|
>1 year
- 3 years
£000
|
|
>3 years
- 5 years
£000
|
|
>5 years
£000
|
|
Non-Interest
Bearing
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash
equivalents
|
22,630
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
22,630
|
Debt securities
|
11,973
|
|
20,785
|
|
7,917
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
40,675
|
Loans and advances to
customers
|
18,990
|
|
27,913
|
|
40,730
|
|
47,813
|
|
106,755
|
|
46,176
|
|
3,098
|
|
-
|
|
291,475
|
Other assets
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
24,481
|
|
24,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
53,593
|
|
48,698
|
|
48,647
|
|
47,813
|
|
106,755
|
|
46,176
|
|
3,098
|
|
24,481
|
|
379,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from customers
|
17,258
|
|
26,552
|
|
64,251
|
|
103,561
|
|
78,984
|
|
13,593
|
|
-
|
|
-
|
|
304,199
|
Other liabilities
|
650
|
|
1,500
|
|
3,286
|
|
905
|
|
20,627
|
|
6,240
|
|
237
|
|
11,847
|
|
45,292
|
Total equity
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
29,770
|
|
29,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity
|
17,908
|
|
28,052
|
|
67,537
|
|
104,466
|
|
99,611
|
|
19,833
|
|
237
|
|
41,617
|
|
379,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate sensitivity
gap
|
35,685
|
|
20,646
|
|
(18,890)
|
|
(56,653)
|
|
7,144
|
|
26,343
|
|
2,861
|
|
(17,136)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
35,685
|
|
56,331
|
|
37,441
|
|
(19,212)
|
|
(12,068)
|
|
14,275
|
|
17,136
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank monitors the impact of changes in
interest rates on interest rate mismatch positions using a method
consistent with the FSA required reporting standard. The
methodology applies weightings to the net interest rate sensitivity
gap in order to quantify the impact of an adverse change in
interest rates of 2.0% per annum (2022: 2.0%). The following tables
set out the estimated total impact of such a change based on the
mismatch at the reporting date:
31
December 2023
|
Sight-
1
month
|
|
>1month
-3months
|
|
>3months
- 6months
|
|
>6months
- 1 year
|
|
>1 year
- 3 years
|
|
>3
years
- 5 years
|
|
>5
years
|
|
Non-Interest
Bearing
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate sensitivity gap
£000
|
35,422
|
|
41,996
|
|
(1,525)
|
|
(68,599)
|
|
(2,928)
|
|
14,337
|
|
908
|
|
(19,611)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighting
|
0.000
|
|
0.003
|
|
0.007
|
|
0.014
|
|
0.027
|
|
0.054
|
|
0.115
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£000
|
-
|
|
126
|
|
(11)
|
|
(960)
|
|
(79)
|
|
774
|
|
104
|
|
-
|
|
(46)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
31 December 2022
|
Sight-
1
month
|
|
>1month
-3months
|
|
>3months
-
6months
|
|
>6months
- 1 year
|
|
>1
year
- 3
years
|
|
>3
years
- 5
years
|
|
>5
years
|
|
Non-Interest
Bearing
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate sensitivity gap
£000
|
35,685
|
|
20,646
|
|
(18,890)
|
|
(56,653)
|
|
7,144
|
|
26,343
|
|
2,861
|
|
(17,136)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighting
|
0.000
|
|
0.003
|
|
0.007
|
|
0.014
|
|
0.027
|
|
0.054
|
|
0.115
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£000
|
-
|
|
62
|
|
(132)
|
|
(793)
|
|
193
|
|
1,423
|
|
329
|
|
-
|
|
1,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
D. Group Capital Management
i. Regulatory
capital
MFG and its subsidiaries maintain sufficient
capital stock to cover risks inherent in their principal operating
activities. The lead regulator of the Group's wholly owned
subsidiary, the Bank, is the FSA. The FSA sets and monitors capital
requirements for the Bank. The Bank maintains a capital base to
meet the capital adequacy requirements of the FSA. There have
been no changes to its approach to capital management from the
prior year.
The Bank's regulatory capital consists of the
following elements.
§ Common Equity
Tier 1 ("CET1") capital, which includes ordinary share capital,
retained earnings and reserves after adjustment for deductions for
goodwill, intangible assets and intercompany receivable.
§ Tier 2
capital, which includes qualifying subordinated liabilities and any
excess of impairment over expected losses.
The Bank's Tier 1 and Total Capital regulatory
ratios stood at 11.52% (2022: 12.20%) and 16.50% (2022: 15.90%)
respectively as at 31 December 2023. The Bank complied with
all capital requirements externally imposed on it in the year with
minimum Tier 1 and Overall Capital ratio of 8.73% (2022: 8.50%) and
15.29% (2022: 14.00%) respectively.
The FSA's approach to the measurement of capital
adequacy is primarily based on monitoring the relationship of the
capital resources requirement to available capital resources. The
FSA sets individual capital guidance ("ICG") for the Bank in excess
of the minimum capital resources requirement. A key input to the
ICG setting process is the Bank's internal capital adequacy
assessment process ("ICAAP").
The Bank is also regulated by the FCA in the UK
for credit and brokerage related activities.
Further details of the Bank's management of
capital are described in the Risk Management Report on page 16 of
the Annual Report.
ii. Capital
allocation
Management uses regulatory capital ratios to
monitor its capital base. The allocation of capital between
specific operations and activities is, to a large extent, driven by
optimisation of the return achieved on the capital allocated. The
amount of capital allocated to each operation or activity is based
primarily on regulatory capital requirements.
E. Company Financial Risk Review
i. Credit
risk
The Company is exposed to credit risk primarily
from deposits with banks and from its financing activities of Group
entities. These balances include Trade and other receivables,
Amounts due from Group undertakings, Investment in subsidiaries and
Subordinated loans. Cash balances are held with institutions with a
credit rating of A to A+. The Group's primary credit exposure is to
the Bank. The Investment in subsidiary and subordinated loan
balance counterparties are disclosed in Notes 31 and 35
respectively. Amounts due from Group undertakings relate to
balances advanced to the Group's subsidiary (MVL) for the
acquisition of other subsidiaries including PAL, BBSL, BLX and NRF.
The Group manages its credit risk by ensuring that sufficient
resources are allocated to credit management and capital allocation
and using reputable financial institutions to hold its cash
balances.
ii. Liquidity
risk
The value and term of short term assets are
monitored against those of the Company's liabilities. The Company
maintains sufficient liquid assets to meet liabilities as they fall
due either by retaining Interest income from the Subordinated loan,
Dividend income from subsidiary companies or raising funds
through the issue of Loan notes. Amounts due to / from Group
undertakings are unsecured, interest-free and repayable on demand.
The capital on subordinated loan notes is repayable to the Company
in more than 5 years. £12.3m (2022: £6.1m) of loan notes are
repayable within one year.
iii. Market
risk
The Company does not have exposure to foreign
exchange risk as transactions are made in and balances held in
Sterling. The Company has both interest-bearing assets and
liabilities. In order to manage interest rate risk, the Companies
Subordinated loans and Loan notes are charged exclusively at fixed
rates.
8. 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,
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 investing activities: Asset and Personal Finance (including
provision of HP contracts, finance leases, personal loans,
commercial loans, block discounting, vehicle stocking plans and
wholesale funding agreements); Edgewater Associates
Limited (provision of financial advice); and MFX Limited (provision
of foreign currency transaction services).
For the year ended 31 December 2023
|
Asset and
Personal
Finance
£000
|
|
Edgewater
Associates
£000
|
|
MFX
Limited
£000
|
|
Investing
Activities
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
Interest revenue calculated using
the effective interest method
|
45,356
|
|
-
|
|
-
|
|
-
|
|
45,356
|
Other interest income
|
1,535
|
|
-
|
|
-
|
|
-
|
|
1,535
|
Interest expense
|
(14,538)
|
|
-
|
|
-
|
|
8
|
|
(14,530)
|
Net
interest income
|
32,353
|
|
-
|
|
-
|
|
8
|
|
32,361
|
Components of Net Trading
Income
|
(6,410)
|
|
2,032
|
|
1,048
|
|
-
|
|
(3,330)
|
Net
trading income
|
25,943
|
|
2,032
|
|
1,048
|
|
8
|
|
29,031
|
Components of Operating
Income
|
2,450
|
|
2
|
|
-
|
|
-
|
|
2,452
|
Operating Income
|
28,393
|
|
2,034
|
|
1,048
|
|
8
|
|
31,483
|
Depreciation
|
(739)
|
|
(22)
|
|
(1)
|
|
(63)
|
|
(825)
|
Amortisation and impairment of
intangibles
|
(545)
|
|
(76)
|
|
(5)
|
|
(57)
|
|
(683)
|
Share of profit of equity accounted
investees, net of tax
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
All other expenses
|
(20,294)
|
|
(1,972)
|
|
(364)
|
|
(302)
|
|
(22,932)
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before tax payable
|
6,815
|
|
(36)
|
|
678
|
|
(414)
|
|
7,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
2,627
|
|
6
|
|
-
|
|
895
|
|
3,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
438,916
|
|
1,578
|
|
267
|
|
39,944
|
|
480,705
|
Total liabilities
|
418,794
|
|
279
|
|
10
|
|
25,638
|
|
444,721
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
2022
|
Asset
and
Personal
Finance
£000
|
|
Edgewater Associates
£000
|
|
MFX
Limited
£000
|
|
Investing
Activities
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
Interest revenue calculated using
the effective interest 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
|
|
|
|
|
|
|
|
|
|
|
Included
in other expenses above is Goodwill impairment of £0.2 million
relating to the Edgewater Associates segment (see note 34). All
revenues are earned from the entity's one geographic segment. All
non-current assets are located in the entity's one geographic
segment.
9. Net interest
income
|
2023
|
|
2022
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
Loans and advances to
customers
|
45,356
|
|
28,978
|
Total interest income calculated using the effective interest
method
|
45,356
|
|
28,978
|
Operating lease income
|
1,535
|
|
1,765
|
Total interest income
|
46,891
|
|
30,743
|
|
|
|
|
Interest expense
|
|
|
|
Deposits from customers
|
(12,072)
|
|
(4,601)
|
Loan note interest
|
(2,361)
|
|
(1,610)
|
Lease liability
|
(93)
|
|
(78)
|
Contingent consideration: interest
expense
|
(4)
|
|
(102)
|
Total interest expense
|
(14,530)
|
|
(6,391)
|
|
|
|
|
Net
interest income
|
32,361
|
|
24,352
|
10. Net fee and commission
income
In the following table, fee and commission
income from contracts with customers in the scope of IFRS 15 -
Revenue from Contracts with Customers is disaggregated by major
type of services. The table includes a reconciliation of the
disaggregated fee and commission income with the Group's reportable
segments. See note 44D regarding revenue
recognition.
|
2023
|
|
2022
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
|
Major service lines
|
|
|
|
Independent financial advice
income
|
2,032
|
|
2,096
|
Foreign exchange trading
income
|
1,049
|
|
1,743
|
Asset and personal finance:
Brokerage services income
|
421
|
|
590
|
Debt collection
|
495
|
|
290
|
Fee
and commission income
|
3,997
|
|
4,719
|
Fee and commission
expense
|
(7,327)
|
|
(3,569)
|
Net
fee and commission income
|
(3,330)
|
|
1,150
|
Fee and commission expense relates to
commission paid to Brokerages which introduce new business to the
Bank.
11. Personnel expenses
|
Group
|
|
Company
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff gross salaries
|
(9,060)
|
|
(7,403)
|
|
-
|
-
|
Executive Directors'
remuneration
|
(569)
|
|
(507)
|
|
-
|
-
|
Non-executive Directors'
fees
|
(259)
|
|
(207)
|
|
(62)
|
(127)
|
Executive Directors'
pensions
|
(45)
|
|
(41)
|
|
-
|
-
|
Executive Directors' performance
related pay
|
(99)
|
|
(68)
|
|
-
|
-
|
Staff pension costs
|
(537)
|
|
(397)
|
|
-
|
-
|
National insurance and payroll
taxes
|
(1,134)
|
|
(818)
|
|
-
|
-
|
Staff training and recruitment
costs
|
(354)
|
|
(305)
|
|
-
|
-
|
Equity Settled Restricted Stock
Units - key management personnel
|
(67)
|
|
(9)
|
|
-
|
-
|
Equity Settled Restricted Stock
Units - employees
|
(46)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,170)
|
|
(9,764)
|
|
(62)
|
(127)
|
|
|
|
|
|
|
|
The Company's personnel expenses consist
exclusively of Directors remuneration and fees for services
rendered to the Company.
12. Other expenses
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
Professional and legal
fees
|
(1,586)
|
|
(1,427)
|
Marketing costs
|
(452)
|
|
(363)
|
IT costs
|
(1,534)
|
|
(1,210)
|
Establishment costs
|
(635)
|
|
(366)
|
Communication costs
|
(177)
|
|
(152)
|
Travel costs
|
(319)
|
|
(297)
|
Bank charges
|
(936)
|
|
(314)
|
Insurance
|
(338)
|
|
(333)
|
Irrecoverable VAT
|
(383)
|
|
(362)
|
Other costs
|
(267)
|
|
(782)
|
Impairment loss on goodwill (See
Note 34)
|
-
|
|
(200)
|
|
|
|
|
|
|
|
|
|
(6,627)
|
|
(5,806)
|
|
|
|
|
13. Impairment on loans and advances to
customers
The charge in respect of allowances for
impairment comprises, excluding loss allowances on financial assets
managed on a collective basis.
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
Impairment allowances
made
|
(6,998)
|
|
(7,642)
|
Release of allowances previously
made
|
2,837
|
|
3,612
|
|
|
|
|
|
|
|
|
|
(4,161)
|
|
(4,030)
|
|
|
|
|
The credit in respect of allowances for
impairment on financial assets managed on a collective basis
comprises:
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
Collective impairment allowances made
|
(656)
|
|
(244)
|
Release of allowances previously made
|
682
|
|
284
|
|
|
|
|
|
|
|
|
Total credit
for allowances for impairment on financial assets managed on a
collective basis
|
26
|
|
40
|
|
|
|
|
|
|
|
|
Total charge
for allowances for impairment
|
(4,135)
|
|
(3,990)
|
|
|
|
|
14. Profit before tax payable
The profit before tax payable for the year is
stated after charging:
|
Group
|
|
Company
|
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees payable to the Company's
auditor for the audit of the Group's financial
statements
|
(85)
|
|
(78)
|
|
(58)
|
|
(54)
|
|
Other fees payable to the Company's
auditor:
|
(4)
|
|
(11)
|
|
-
|
|
-
|
|
Audit of the Company's subsidiary
undertakings
|
(221)
|
|
(197)
|
|
-
|
|
-
|
|
Other assurance service
fees
|
(10)
|
|
(6)
|
|
-
|
|
-
|
|
Other services - tax
compliance
|
(4)
|
|
(4)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Pension cost defined benefit
scheme
|
(11)
|
|
(14)
|
|
-
|
|
-
|
|
Expenses relating to short-term
leases and low value assets
|
(81)
|
|
(92)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
15. Income tax expense
Group
|
2023
|
|
2022
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
|
Current tax expense
|
|
|
|
Current year
|
(899)
|
|
(366)
|
|
(899)
|
|
(366)
|
Deferred tax expense
|
|
|
|
Origination and reversal of
temporary differences
|
(4)
|
|
(171)
|
|
|
|
|
Tax expense
|
(903)
|
|
(537)
|
Group
|
|
|
2023
|
|
|
|
2022
|
|
%
|
|
£000
|
|
%
|
|
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of effective tax rate
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
7,043
|
|
|
|
5,211
|
Tax using the Bank's domestic tax
rate
|
(10.0)
|
|
(704)
|
|
(10.0)
|
|
(521)
|
Effect of tax rates in foreign
jurisdictions
|
(5.9)
|
|
(416)
|
|
2.1
|
|
111
|
Tax exempt income
|
3.1
|
|
217
|
|
-
|
|
-
|
Non deductible expenses
|
-
|
|
-
|
|
(2.4)
|
|
(127)
|
Tax expense
|
(12.8)
|
|
(903)
|
|
(10.3)
|
|
(537)
|
The main rate of corporation tax in the Isle of
Man is 0.0% (2022: 0.0%). However, the profits of the Group's Isle
of Man banking activities are taxed at 10.0% (2022: 10.0%). The
profits of the Group's subsidiaries that are subject to UK
corporation tax are taxed at a rate of 25.0% (2022: 19.0%). The
Company is subject to 0.0% tax.
The value of tax losses carried forward reduced
to nil and there is now a temporary difference related to
accelerated capital allowances resulting in a £392,000 liability
(2022: £353,000 liability). This resulted in an expense of £171,000
(2022: £171,000) to the Consolidated Income Statement.
16. Earnings per share
|
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year attributable to owners of the
Company
|
|
|
|
£5,288,000
|
|
£4,331,000
|
Weighted average number of Ordinary
Shares in issue (basic)
|
|
|
|
115,330,589
|
|
114,763,883
|
Basic earnings per share
(pence)
|
|
|
|
4.59
|
|
3.77
|
Diluted earnings per share
(pence)
|
|
|
|
3.51
|
|
2.93
|
|
|
|
|
|
|
|
Total comprehensive income for the year attributable to
owners of the Company
|
|
|
|
£5,606,000
|
|
£4,869,000
|
Weighted average number of Ordinary
Shares in issue (basic)
|
|
|
|
115,330,589
|
|
114,763,883
|
Basic earnings per share
(pence)
|
|
|
|
4.86
|
|
4.24
|
Diluted earnings per share
(pence)
|
|
|
|
3.71
|
|
3.28
|
|
|
|
|
|
|
|
The basic earnings per share calculation is
based upon the profit for the year after taxation and the weighted
average of the number of shares in issue throughout the
year.
As at:
|
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of weighted average number of Ordinary Shares
in issue between basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Ordinary
Shares (basic)
|
|
|
|
115,330,589
|
|
114,763,883
|
Number of shares issued if all
convertible loan notes were exchanged for equity
|
|
|
|
37,916,667
|
|
38,225,772
|
Dilutive element of share options if
exercised
|
|
|
|
2,460,929
|
|
830,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Ordinary
Shares (diluted)
|
|
|
|
155,708,185
|
|
153,819,690
|
|
|
|
|
|
|
|
Reconciliation of profit for the year between basic and
diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
(basic)
|
|
|
|
£5,288,000
|
|
£4,331,000
|
Interest expense saved if all
convertible loan notes were exchanged for equity
|
|
|
|
£171,415
|
|
£171,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
(diluted)
|
|
|
|
£5,459,415
|
|
£4,502,415
|
|
|
|
|
|
|
|
The diluted earnings per share calculation
assumes that all convertible loan notes and share options have been
converted / exercised at the beginning of the year where they are
dilutive.
As at:
|
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total comprehensive income for the year
between basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the
year (basic)
|
|
|
|
£5,606,000
|
|
£4,869,000
|
Interest expense saved if all
convertible loan notes were exchanged for equity
|
|
|
|
£171,415
|
|
£171,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the
year (diluted)
|
|
|
|
£5,777,415
|
|
£5,040,415
|
|
|
|
|
|
|
|
The weighted average number of ordinary shares
and earnings per share have been adjusted
retrospectively.
17. Cash and cash equivalents
|
Group
|
|
Company
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and in hand
|
12,107
|
|
20,651
|
|
373
|
|
1,761
|
Fixed deposit (less than 90
days)
|
-
|
|
1,979
|
|
-
|
|
-
|
|
12,107
|
|
22,630
|
|
373
|
|
1,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash at bank includes an amount of £1,653,000
(2022: £24,000) representing receipts which are in the course of
transmission.
18. Debt securities
|
Group
|
|
Company
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive
income:
|
|
|
|
|
|
|
|
UK Government treasury
bills
|
76,129
|
|
40,675
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,129
|
|
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 £1,893,000
(2022: £292,000) and unrealised gains of £324,000 (2022: £131,000)
during the year.
19. Financial assets
|
Group
|
|
Company
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at FVOCI:
|
|
|
|
|
|
|
|
(Loss) / gain on Deferred
consideration (See note 6(ii))
|
179
|
|
(74)
|
|
-
|
|
-
|
Gain on equity instrument
|
16
|
|
55
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
(19)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
The Bank acquired a new equity instrument in the
previous financial year (see note 33).
20. Loans and advances to
customers
Group
|
Gross
Amount
£000
|
|
2023
Impairment
Allowance
£000
|
|
Carrying
Value
£000
|
|
Gross
Amount
£000
|
|
2022*
Impairment
Allowance
£000
|
|
Carrying
Value
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HP balances
|
119,533
|
|
(4,143)
|
|
115,390
|
|
87,142
|
|
(4,093)
|
|
83,049
|
Finance lease balances
|
24,878
|
|
(3,050)
|
|
21,828
|
|
21,513
|
|
(3,782)
|
|
17,731
|
Unsecured personal loans
|
88,647
|
|
(10,833)
|
|
77,814
|
|
49,689
|
|
(7,236)
|
|
42,453
|
Vehicle stocking plans
|
1,973
|
|
-
|
|
1,973
|
|
1,918
|
|
-
|
|
1,918
|
Wholesale funding
arrangements
|
21,503
|
|
-
|
|
21,503
|
|
30,904
|
|
-
|
|
30,904
|
Block discounting
|
47,520
|
|
-
|
|
47,520
|
|
46,294
|
|
-
|
|
46,294
|
Secured commercial loans
|
25,788
|
|
(516)
|
|
25,272
|
|
12,753
|
|
(595)
|
|
12,158
|
Secured personal loans
|
1,075
|
|
-
|
|
1,075
|
|
1,867
|
|
(90)
|
|
1,777
|
Government backed loans
|
41,283
|
|
(1,073)
|
|
40,210
|
|
55,572
|
|
(381)
|
|
55,191
|
Property secured
|
10,068
|
|
-
|
|
10,068
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382,268
|
|
(19,615)
|
|
362,653
|
|
307,652
|
|
(16,177)
|
|
291,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral is held in the form of underlying
assets for HP, finance leases, vehicles stocking plans, block
discounting, secured commercial and personal loans and wholesale
funding arrangements.
Allowance for impairment
|
|
|
2023
£000
|
|
2022*
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January
|
|
|
15,962
|
|
8,464
|
Acquisition
|
|
|
-
|
|
5,030
|
Allowance for impairment
made
|
|
|
6,998
|
|
7,642
|
Release of allowances previously
made
|
|
|
(2,837)
|
|
(3,612)
|
Write-offs
|
|
|
(697)
|
|
(1,562)
|
Balance at 31 December
|
|
|
19,426
|
|
15,962
|
|
|
|
|
|
|
Collective allowance for impairment
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January
|
|
|
215
|
|
255
|
Collective allowance for impairment
made
|
|
|
656
|
|
244
|
Release of allowances previously
made
|
|
|
(682)
|
|
(284)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December
|
|
|
189
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowances for impairment
|
|
|
19,615
|
|
16,177
|
|
|
|
|
|
|
* The gross value and impairment allowance as at
31 December 2022 has each been adjusted from £305,698k and £14,223k
by £1,954,000 to appropriately reflect the gross value and
impairment allowances of the loans and advances to customers. The
adjustment did not have any impact on the carrying value of the
loans and advances to customers nor of the statement of profit or
loss or cash flows.
The following table provides an explanation of
how significant changes in the gross carrying amount of financial
instruments during the period contributed to changes in loss
allowance:
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers
|
|
|
|
|
|
Acquisition of
subsidiary
|
|
|
-
|
|
4,620
|
Unsecured personal loans
originated during the period
|
|
|
5,551
|
|
-
|
|
|
|
|
|
|
The contractual amount outstanding on financial
assets that were written off during the reporting period and are
still subject to enforcement activity are £nil (2022: £nil).
Advances on preferential terms are available to all Directors,
management and staff. As at 31 December 2023 £1,699,794 (2022:
£1,228,334) had been lent on this basis. In the Group's ordinary
course of business, advances may be made to Shareholders, but all
such advances are made on normal commercial terms (see note
36).
At the end of the current financial year 8 loan
exposures (2022: 13) exceeded 10.0% of the capital base of the
Bank:
Exposure
|
Outstanding
Balance
2023
£000
|
|
Outstanding Balance
2022
£000
|
|
Facility
Limit
2023
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Block discounting
facility
|
47,520
|
|
68,209
|
|
78,088
|
Wholesale funding
agreement
|
21,503
|
|
34,975
|
|
26,005
|
HP and finance
lease receivables
Loans and advances to customers include the
following HP and finance lease receivables:
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
|
72,372
|
|
51,368
|
Between one and five
years
|
|
|
72,039
|
|
57,287
|
|
|
|
|
|
|
Gross investment in HP and finance lease
receivables
|
|
|
144,411
|
|
108,655
|
|
|
|
|
|
|
The investment in HP and finance lease
receivables net of unearned income comprises:
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
|
68,767
|
|
47,646
|
Between one and five
years
|
|
|
68,451
|
|
53,134
|
|
|
|
|
|
|
Net investment in HP and finance lease
receivables
|
|
|
137,218
|
|
100,780
|
|
|
|
|
|
|
21. Trade and other receivables
|
Group
|
|
Company
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debtors
|
7,730
|
|
3,380
|
|
-
|
|
494
|
Prepayments
|
497
|
|
831
|
|
123
|
|
68
|
|
|
|
|
|
|
|
|
|
8,227
|
|
4,211
|
|
123
|
|
562
|
|
|
|
|
|
|
|
|
22. Property, plant and equipment and
right-of-use assets
Group
|
Buildings and
Leasehold
Improvements
£000
|
IT
Equipment
£000
|
Furniture
and
Equipment
£000
|
Motor
Vehicles1
£000
|
|
Right-of-use
assets
£000
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
|
745
|
|
603
|
|
5,739
|
|
196
|
|
1,960
|
|
9,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
93
|
|
127
|
|
941
|
|
119
|
|
-
|
|
1,280
|
Disposals
|
|
-
|
|
-
|
|
(787)
|
|
(98)
|
|
-
|
|
(885)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
838
|
|
730
|
|
5,893
|
|
217
|
|
1,960
|
|
9,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
|
443
|
|
456
|
|
1,160
|
|
85
|
|
385
|
|
2,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge for year
|
|
40
|
|
97
|
|
427
|
|
39
|
|
222
|
|
825
|
Disposals
|
|
-
|
|
-
|
|
(98)
|
|
(28)
|
|
-
|
|
(126)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
483
|
|
553
|
|
1,489
|
|
96
|
|
607
|
|
3,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December
2023
|
|
355
|
|
177
|
|
4,404
|
|
121
|
|
1,353
|
|
6,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December 2022
|
|
302
|
|
147
|
|
4,579
|
|
111
|
|
1,575
|
|
6,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Included in motor vehicles are operating leases with the
Group as lessor. Depreciation on leasing assets was £nil (2022:
£16,000).
Buildings with an original cost of
£160,000 were revalued by independent valuers Vospers Limited to
£175,000 on the basis of market value as at 15 September 2021. The
valuation conforms to International Valuation Standards and was
based on recent market transactions on arm's length terms for
similar properties. The Directors consider the valuation of the
buildings as at 31 December 2023 remains £175,000. The carrying
amount that would have been recognised had the building been
carried under the cost model would be £150,400 (2022:
153,600).
Company
|
Leasehold
Improvements
£000
|
IT
Equipment
£000
|
Furniture
and
Equipment
£000
|
|
Right-of
use-assets
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
|
234
|
|
20
|
|
18
|
|
424
|
|
696
|
Additions
|
|
-
|
|
1
|
|
-
|
|
-
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
234
|
|
21
|
|
18
|
|
424
|
|
697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
|
234
|
|
6
|
|
11
|
|
244
|
|
495
|
Charge for year
|
|
-
|
|
1
|
|
2
|
|
60
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
234
|
|
7
|
|
13
|
|
304
|
|
558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December 2023
|
|
-
|
|
14
|
|
5
|
|
120
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December
2022
|
|
-
|
|
14
|
|
7
|
|
180
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
23. Intangible assets
Group
|
|
Customer
Contracts
£000
|
Intellectual
Property
Rights
£000
|
IT Software and Website
Development
£000
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
|
|
2,930
|
|
1,245
|
|
2,549
|
|
6,724
|
Additions
|
|
|
7
|
|
757
|
|
1,484
|
|
2,248
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
|
2,937
|
|
2,002
|
|
4,033
|
|
8,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation
|
|
|
|
|
|
|
|
|
|
As at 1 January 2023
|
|
|
1,161
|
|
523
|
|
2,337
|
|
4,021
|
Charge for year
|
|
|
214
|
|
218
|
|
251
|
|
683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
|
1,375
|
|
741
|
|
2,588
|
|
4,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December 2023
|
|
|
1,562
|
|
1,261
|
|
1,445
|
|
4,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December
2022
|
|
|
1,769
|
|
722
|
|
212
|
|
2,703
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
IT Software and Website
Development
£000
|
|
Total
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
As at 1 January 2023
|
|
|
31
|
|
31
|
Additions
|
|
|
893
|
|
893
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
|
924
|
|
924
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation
|
|
|
|
|
|
As at 1 January 2023
|
|
|
6
|
|
6
|
Charge for year
|
|
|
57
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 December 2023
|
|
|
63
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December 2023
|
|
|
861
|
|
861
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at 31 December
2022
|
|
|
25
|
|
25
|
|
|
|
|
|
|
24. Deposits from customers
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Retail customers: term
deposits
|
|
|
377,899
|
|
291,238
|
Corporate customers: term
deposits
|
|
|
12,522
|
|
12,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
390,421
|
|
304,199
|
|
|
|
|
|
|
25. Creditors and accrued
charges
|
Group
|
|
Company
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other creditors and
accruals
|
12,623
|
|
10,096
|
|
453
|
|
232
|
Commission creditors
|
174
|
|
1,398
|
|
-
|
|
-
|
Lease liability
|
1,358
|
|
1,614
|
|
91
|
|
208
|
Taxation creditors
|
254
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,409
|
|
13,108
|
|
544
|
|
440
|
|
|
|
|
|
|
|
|
26. Deferred consideration
Deferred consideration relates to contingent
payments due to the sellers on the acquisition of BBSL and BLX
respectively.
On the acquisition of BLX on 11 October 2021,
the Group agreed that a further conditional consideration of up to
£483,663 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 £387,000. The Group made a payment of £67,000 (2022: £156,093)
to the sellers during the period.
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
BLX
|
|
|
20
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
262
|
|
|
|
|
|
|
27. Loan notes
|
|
Group
|
|
Company
|
|
Notes
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties
|
|
|
|
|
|
|
|
|
J Mellon
|
JM
|
1,750
|
|
1,750
|
|
1,750
|
|
1,750
|
Burnbrae Limited
|
BL
|
3,200
|
|
3,200
|
|
3,200
|
|
3,200
|
Culminant Reinsurance
Ltd
|
CR
|
1,000
|
|
1,000
|
|
1,000
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,950
|
|
5,950
|
|
5,950
|
|
5,950
|
|
|
|
|
|
|
|
|
|
Unrelated parties
|
UP
|
33,367
|
|
25,382
|
|
33,367
|
|
25,382
|
|
|
|
|
|
|
|
|
|
|
|
39,317
|
|
31,332
|
|
39,317
|
|
31,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
JM - Two loans, one
loan of £1,250,000 maturing on 26 February 2025 with interest
payable of 5.4% per annum, convertible to ordinary shares of the
Company at a rate of 9.0 pence, one of £500,000 maturing on 31 July
2027, paying interest of 7.5% per annum and convertible to ordinary
shares of the Company at a rate of 8.0 pence.
BL - Three loans, one of £1,200,000 maturing on 31
July 2027, paying interest of 7.5% per annum, convertible to
ordinary shares of the Company at a rate of 8.0 pence, one of
£1,000,000 maturing 25 February 2025, paying interest of 5.4% per
annum, and one of £1,000,000 maturing 28 September 2025 paying
interest of 6.0% per annum. Jim Mellon is the beneficial owner of
BL and Denham Eke is also a director.
CR - One loan consisting of £1,000,000 maturing on
12 October 2025, paying interest of 6.0% per annum. Greg Bailey, a
director, is the beneficial owner of CR.
UP - Forty loans (2022: Forty), the earliest
maturity date is 22 January 2024 and the latest maturity is 10
October 2028. The average interest payable is 5.87% (2022:
5.52%)
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.
28. Pension liability
The Conister Trust Pension and Life Assurance
Scheme ("Scheme") operated by the Bank is a funded defined benefit
arrangement which provides retirement benefits based on final
pensionable salary. The Scheme is closed to new entrants and the
last active member of the Scheme left pensionable service in
2011.
The Scheme is approved in the Isle of Man by
the Assessor of Income Tax under the Income Tax (Retirement Benefit
Schemes) Act 1978 and must comply with the relevant legislation. In
addition, it is registered as an authorised scheme with the FSA in
the Isle of Man under the Retirement Benefits Scheme Act 2000. The
Scheme is subject to regulation by the FSA but there is no minimum
funding regime in the Isle of Man.
The Scheme is governed by two corporate
trustees, Conister Bank Limited and Boal & Co (Pensions)
Limited. The trustees are responsible for the Scheme's investment
policy and for the exercise of discretionary powers in respect of
the Scheme's benefits.
Exposure to
risk
The Company is exposed to the risk that
additional contributions will be required in order to fund the
Scheme as a result of poor experience. Some of the key factors that
could lead to shortfalls are:
§ investment
performance - the return achieved on the Scheme's assets may be
lower than expected; and
§ mortality -
members could live longer than foreseen. This would mean that
benefits are paid for longer than expected, increasing the value of
the related liabilities.
In order to assess the sensitivity of the
Scheme's pension liability to these risks, sensitivity analysis
have been carried out. Each sensitivity analysis is based on
changing one of the assumptions used in the calculations, with no
change in the other assumptions. The same method has been applied
as was used to calculate the original pension liability and the
results are presented in comparison to that liability. It should be
noted that in practice it is unlikely that one assumption will
change without a movement in the other assumptions; there may also
be some correlation between some of these assumptions. It should
also be noted that the value placed on the liabilities does not
change on a straight line basis when one of the assumptions is
changed. For example, a 2.0% change in an assumption will not
necessarily produce twice the effect on the liabilities of a 1.0%
change.
Exposure to
risk
No changes have been made to the method or to
the assumptions stress-tested for these sensitivity analyses
compared to the previous period. The investment strategy of the
Scheme has been set with regard to the liability profile of the
Scheme. However, there are no explicit asset-liability matching
strategies in place.
Restriction of
assets
No adjustments have been made to the statement
of financial position items as a result of the requirements of
IFRIC 14 - IAS 19: The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction, issued by IASB's
International Financial Reporting Interpretations
Committee.
Scheme
amendments
There have not been any past service costs or
settlements in the financial year ending 31 December 2023 (2022:
none).
Funding
policy
The funding method employed to calculate the
value of previously accrued benefits is the Projected Unit Method.
Following the cessation of accrual of benefits when the last active
member left service in 2011, regular future service contributions
to the Scheme are no longer required. However, additional
contributions will still be required to cover any shortfalls that
might arise following each funding valuation.
The most recent triennial full actuarial
valuation was carried out at 31 March 2022, which showed that the
market value of the Scheme's assets was £1,432,000 representing
65.2% of the benefits that had accrued to members, after allowing
for expected future increases in earnings. As required by IAS 19:
Employee Benefits, this valuation has been updated by the actuary
as at 31 December 2023.
The amounts recognised in the Consolidated
Statement of Financial Position are as follows:
Total underfunding in funded plans recognised as a
liability
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
1,359
|
|
1,289
|
Present value of funded
obligations
|
|
|
(1,521)
|
|
(1,526)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(162)
|
|
(237)
|
|
|
|
|
|
|
Movement in the liability for defined benefit
obligations
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Opening defined benefit obligations
at 1 January
|
|
|
1,526
|
|
2,230
|
Benefits paid by the plan
|
|
|
(77)
|
|
(75)
|
Interest on obligations
|
|
|
74
|
|
44
|
Actuarial gain
|
|
|
(2)
|
|
(673)
|
|
|
|
|
|
|
Liability for defined benefit obligations at 31
December
|
|
|
1,521
|
|
1,526
|
|
|
|
|
|
|
Movement in plan assets
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Opening fair value of plan assets at
1 January
|
|
|
1,289
|
|
1,543
|
Interest on plan assets
|
|
|
63
|
|
30
|
Contribution by employer
|
|
|
57
|
|
57
|
Return on plan assets
|
|
|
27
|
|
(266)
|
Benefits paid
|
|
|
(77)
|
|
(75)
|
|
|
|
|
|
|
Closing fair value of plan assets at 31
December
|
|
|
1,359
|
|
1,289
|
|
|
|
|
|
|
Expense recognised in income statement
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Net interest cost recognised in the statement of profit and
loss
|
|
|
11
|
|
14
|
|
|
|
|
|
|
Actuarial gain / (loss) recognised in other comprehensive
income
|
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
Return on plan assets
|
|
|
27
|
|
(266)
|
Actuarial gain on defined benefit
obligations
|
|
|
2
|
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
407
|
|
|
|
|
|
|
|
2023
|
|
2022
|
Plan assets consist of the following
|
%
|
|
%
|
|
|
|
|
|
|
|
|
Equity securities
|
45
|
|
61
|
Corporate bonds
|
20
|
|
13
|
Government bonds
|
28
|
|
21
|
Cash
|
2
|
|
2
|
Other
|
5
|
|
3
|
|
100
|
|
100
|
The
actuarial assumptions used to calculate Scheme liabilities under
IAS19 are as follows:
|
2023
%
|
2022
%
|
|
|
|
|
|
|
Rate of increase in pension in
payment:
|
|
|
-
Service up to 5 April 1997
|
-
|
-
|
-
Service from 6 April 1997 to 13 September
2005
|
3.1
|
3.1
|
-
Service from 14 September 2005
|
2.1
|
2.1
|
Rate of increase in deferred
pensions
|
5.0
|
5.0
|
Discount rate applied to scheme
liabilities
|
5.0
|
5.0
|
Inflation
|
3.2
|
3.2
|
|
|
|
Life expectancy
|
2023
%
|
2022
%
|
|
|
|
|
|
|
Current pensioner aged 65
(male)
|
21.3
|
21.6
|
-
Current pensioner aged 65 (female)
|
23.8
|
23.9
|
-
Future pensioner aged 65 in 10 years
(male)
|
21.8
|
22.1
|
-
Future pensioner aged 65 in 10 years
(female)
|
24.5
|
24.7
|
|
|
|
The assumptions used by the actuary are best
estimates chosen from a range of possible assumptions, which due to
the timescale covered, may not necessarily be borne out in
practice.
Sensitivity
analysis
Reasonably possible changes at the reporting date to one of
the relevant actuarial assumptions, holding other assumptions
constant, would have affected the defined benefit obligation by the
amounts shown below.
|
2023
|
|
2022
|
Effect in £'000
|
Increase
|
Decrease
|
|
Increase
|
Decrease
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate (0.5%
movement)
|
(76)
|
84
|
|
(79)
|
87
|
-
Inflation rate (0.5% movement)
|
20
|
(18)
|
|
18
|
(20)
|
-
Life expectancy (1 year movement)
|
58
|
(58)
|
|
53
|
(55)
|
|
|
|
|
|
|
29. Called up share capital
Ordinary shares of no par value available for
issue
|
|
Number
|
At
31 December 2023
|
|
200,200,000
|
At 31 December 2022
|
|
200,200,000
|
Issued and fully paid: Ordinary shares of no par
value
|
Number
|
£000
|
At
31 December 2023
|
116,191,936
|
19,384
|
At 31 December 2022
|
115,072,988
|
19,195
|
A. Analysis of
changes in financing during the year
|
Group
|
|
Company
|
|
|
2023
£000
|
|
2022
£000
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January
|
52,141
|
|
44,100
|
|
50,735
|
|
43,113
|
|
Issue of loan notes
|
7,985
|
|
7,660
|
|
7,985
|
|
7,659
|
|
Issue of lease liability
|
-
|
|
521
|
|
-
|
|
-
|
|
Issue of shares via scrip dividend
|
91
|
|
62
|
|
91
|
|
62
|
|
Issue of shares
|
98
|
|
-
|
|
98
|
|
-
|
|
Payment of lease liabilities
|
(256)
|
|
(202)
|
|
(117)
|
|
(99)
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December
|
60,059
|
|
52,141
|
|
58,792
|
|
50,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
The 2023 Group closing balance is represented by
£19,384,000 share capital (2022: £19,195,000), £39,317,000 of loan
notes (2022: £31,332,000) and £1,358,000 lease liability (2022:
£1,614,000).
The 2023 Company closing balance is represented
by £19,384,000 share capital (2022: £19,195,000), £39,317,000 of
loan notes (2022: £31,332,000) and £91,000 lease liability (2022:
£208,000).
B. Dividends
On 30 May 2023, MFG declared a dividend of
£433,000 (2022: £279,000) which could either be taken up in cash or
new ordinary shares of 418,993 new shares (2022: 781,349 new
shares) were admitted to the Alternative Investment Market ("AIM")
at 21.8974 pence per share (2022: 8.0205 pence per share), at a
total cost of £91,000 (2022: £62,000).
C. Convertible loans
There are three convertible loans totalling
£2,950,000 (2022: £2,950,000) (refer to note 27).
D. Share options and Restricted Stock Units
i. Issued
during the financial year ended 31 December 2023
On 5 July 2022, 27 October 2022 and 29 November
2023 MFG granted Restricted Stock Units ("RSUs") under its 2022 RSU
Plan. The Group has issued, in total, RSUs over 4,687,500 ordinary
shares representing 4.1% of the issued share capital of the Group,
including 2,900,000 to certain directors and 1,787,500 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 was issued 1,925,000 RSUs.
Including the 1,243,129 Ordinary Shares in the Company he currently
owns, he would hold a total of 3,168,129 on a fully diluted basis,
being 2.0% of the new issued share capital of the Company;
and
§ James Smeed,
Group Finance Director, was issued 475,000 RSUs. On the same basis,
he would hold 0.3% 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.
Grant date / employees entitled
|
Number of
Units
|
|
|
|
Contractual life of
options
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
granted to key employees at 5 July 2022
|
1,020,000
|
|
|
|
2
years
|
RSUs
granted to directors at 5 July 2022
|
1,100,000
|
|
|
|
2
years
|
RSUs
granted to key employees at 27 October 2022
|
165,000
|
|
|
|
2
years
|
RSUs
granted to directors at 27 October 2022
|
150,000
|
|
|
|
2
years
|
RSUs
granted to directors and key employees at 29 November
2023
|
2,252,500
|
|
|
|
2
years
|
|
|
|
|
|
|
Total RSUs
|
4,687,500
|
|
|
|
|
Lapsed
RSUs
|
(135,000)
|
|
|
|
|
Remaining
RSUs
|
4,552,500
|
|
|
|
|
|
|
|
|
|
|
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.
Fair value of restricted stock units and
assumptions
|
Grant at
5 July 2022
|
|
Grant at
27 October 2022
|
|
Grant at
29 November
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
price at grant date
|
8.5
pence
|
|
14.0
pence
|
|
17.5
pence
|
Exercise
price
|
nil
|
|
nil
|
|
nil
|
Expected
volatility * ^
|
55.14%
|
|
107.71%
|
|
638.12%
|
Expected
life (weighted average)
|
2
years
|
|
2
years
|
|
2
years
|
Risk-free
interest rate (based on government bonds) * ^
|
1.65%
|
|
3.15%
|
|
4.43%
|
Forfeiture rate
|
0.00%
|
|
0.00%
|
|
0.00%
|
|
|
|
|
|
|
Fair value at grant
date
|
8.5
pence
|
|
14.0
pence
|
|
17.5
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 charge for the year for share options
granted was £113,000 (2022: £18,000).
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, 350,000
(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:
On 30 November 2023, Douglas Grant, Chief
Executive Officer, exercised options over 700,000 ordinary shares
of no par value ("New Ordinary Shares") in the Company (the
"Options"), at an exercise price of 14 pence per New Ordinary
Share, for an aggregate consideration of £98,000.
|
|
|
|
23
June
2014
|
|
|
|
|
|
|
|
|
|
|
Fair value at date of
grant
|
|
|
|
£0.08
|
Share price at date of
grant
|
|
|
|
£0.14
|
Exercise price
|
|
|
|
£0.14
|
Expected volatility
|
|
|
|
55.0%
|
Option life
|
|
|
|
3
|
Risk-free interest rate (based on
government bonds)
|
|
|
|
0.5%
|
Forfeiture rate
|
|
|
|
33.3%
|
|
|
|
|
|
|
|
|
|
|
|
| |
30. List of associates
Set out below is a list of associates of the
Group:
|
|
|
Group
2023
£000
|
|
Group
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
Payitmonthly Ltd ("PIML")
|
|
|
155
|
|
155
|
Lesley Stephen & Co Limited
("LSC")
|
|
|
42
|
|
-
|
|
|
|
197
|
|
155
|
In August 2018, 30% of the share capital of PIML
was acquired for £90,000 consideration. The Group's resulting share
of the associate's total comprehensive income during the year was
£nil (2022: £18,000).
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 fair value of the financial instrument received has
been determined as £42,000 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. The Group's resulting share of the
associate's total comprehensive income during the year was £nil
(2022: £nil).
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 £42,000 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.
31. List of subsidiaries
Set out below is a list of direct subsidiaries
of the Group:
Carrying value of investments
|
Nature
of
Business
|
31
December
2022
% Holding
|
Date
of
Incorporation
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conister Bank Limited
|
Asset
and Personal Finance
|
100
|
05/12/1935
|
|
26,092
|
|
21,592
|
|
Edgewater Associates
Limited
|
Wealth
Management
|
100
|
24/12/1996
|
|
2,005
|
|
2,005
|
|
TransSend Holdings
Limited
|
Holding
Company
|
100
|
05/11/2007
|
|
-
|
|
-
|
|
Manx Ventures Limited
|
Holding
Company
|
100
|
15/05/2009
|
|
-
|
|
-
|
|
|
|
|
|
|
28,097
|
|
23,597
|
|
|
|
|
|
|
|
|
|
|
All subsidiaries are incorporated in the Isle of
Man.
Set out below is a list of indirect significant
subsidiaries of the Group:
Carrying value of investments
|
Principal place of
business
|
Country of
incorporation
|
Ownership
interest
|
|
|
|
|
|
|
|
|
Conister Finance & Leasing
Limited
|
UK
|
IOM
|
100.0%
|
MFX Limited
|
IOM
|
IOM
|
100.0%
|
Payment Assist Limited
|
UK
|
UK
|
50.1%
|
Blue Star Leasing
Limited
|
UK
|
UK
|
100.0%
|
Ninkasi Rentals & Finance
Limited
|
UK
|
UK
|
90.0%
|
The Business Lending Exchange
Limited
|
UK
|
UK
|
100.0%
|
|
|
|
|
32. Non-controlling interests in
subsidiaries
The following table summarises the information
about the Group's subsidiaries that have material NCI, before any
intra-group eliminations.
31
December 2023
£'000
|
PAL
|
|
NRF
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
NCI percentage
|
49.9%
|
|
10%
|
|
|
Cash and cash
equivalents
|
1,249
|
|
369
|
|
|
Loans and advances to
customers
|
15,965
|
|
-
|
|
|
Trade and other
receivables
|
1,013
|
|
1,133
|
|
|
Property, plant and
equipment
|
-
|
|
4,275
|
|
|
Intangible assets
|
380
|
|
23
|
|
|
Loans and borrowings
|
(4,036)
|
|
(145)
|
|
|
Creditors and accrued
charges
|
(12,593)
|
|
(4,884)
|
|
|
Deferred tax
|
-
|
|
(232)
|
|
|
Net assets
|
1,978
|
|
539
|
|
|
Carrying amount of NCI
|
987
|
|
54
|
|
1,041
|
Revenue
|
10,822
|
|
1,478
|
|
|
Profit
|
1,700
|
|
42
|
|
|
OCI
|
-
|
|
-
|
|
|
Total comprehensive income
|
1,700
|
|
42
|
|
|
Profit allocated to NCI
|
848
|
|
4
|
|
852
|
OCI allocated to NCI
|
-
|
|
-
|
|
-
|
Operating activities
cashflows
|
973
|
|
339
|
|
|
Investing activities
cashflows
|
(185)
|
|
(151)
|
|
|
Financing activities
cashflows
|
(2,122)
|
|
-
|
|
|
Net (decrease) / increase in cashflows
|
(1,334)
|
|
188
|
|
|
|
|
|
|
|
|
31
December 2022
£'000
|
PAL
|
|
NRF
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
NCI percentage
|
49.9%
|
|
10%
|
|
|
Cash and cash
equivalents
|
2,584
|
|
219
|
|
|
Loans and advances to
customers
|
9,818
|
|
-
|
|
|
Trade and other
receivables
|
1,116
|
|
941
|
|
|
Property, plant and
equipment
|
15
|
|
4,507
|
|
|
Intangible assets
|
251
|
|
27
|
|
|
Loans and borrowings
|
(3,089)
|
|
(4,355)
|
|
|
Creditors and accrued
charges
|
(10,416)
|
|
(628)
|
|
|
Deferred tax
|
-
|
|
(217)
|
|
|
Net assets
|
279
|
|
494
|
|
|
Carrying amount of NCI
|
140
|
|
49
|
|
189
|
Revenue
|
3,407
|
|
1,660
|
|
|
Profit
|
645
|
|
207
|
|
|
OCI
|
-
|
|
-
|
|
|
Total comprehensive income
|
645
|
|
207
|
|
|
Profit allocated to NCI
|
322
|
|
21
|
|
343
|
OCI allocated to NCI
|
-
|
|
-
|
|
-
|
Operating activities
cashflows
|
585
|
|
87
|
|
|
Investing activities
cashflows
|
124
|
|
(158)
|
|
|
Financing activities
cashflows
|
-
|
|
(12)
|
|
|
Net increase / (decrease) in cashflows
|
709
|
|
(83)
|
|
|
|
|
|
|
|
|
33. Financial Instruments
Rivers Finance
Group PLC ("RFG")
On 9 June 2021 the Group acquired 10% of the
issued share capital of RFG for nil consideration. The receipt of
the issued share capital is considered to be a commitment fee
receivable by the Group in order to originate loan facilities in
aggregate not exceeding £6,250,000 to RFG. The commitment fee is an
integral part of the effective interest rate of the associated loan
facilities issued to RFG.
The Group is not considered to have a
significant influence over RFG as it holds less than a 20%
shareholding and is not considered to participate in the policy
making decisions of the entity. The 10% shareholding has thus been
classified as a financial instrument.
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 determined
as £138,000 (2022: £122,000) based on the proportionate share of
the net asset value of RFG. There has been no change to fair value
at year-end.
As part of the transaction, the Group has been
granted two warrants to acquire further shares. The first warrant
is for 5% of the share capital and the second warrant is for a
further 5% of the share capital.
The two warrants are exercisable dependent upon
the Group's banking subsidiary, the Bank, contracting with RFG, for
a larger facility. The fair value of the two warrants has been
determined to be nil due to the significant uncertainty that exists
at acquisition date and the period end in issuing a further debt
facility.
34. Goodwill
Cash generating unit
|
|
|
Group
2023
£000
|
|
Group
2022
£000
|
|
Company
2023
£000
|
|
Company
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAL (see below)
|
|
|
4,456
|
|
4,456
|
|
-
|
|
-
|
|
EAL
|
|
|
1,649
|
|
1,649
|
|
-
|
|
-
|
|
BLX
|
|
|
1,908
|
|
1,908
|
|
-
|
|
-
|
|
BBSL
|
|
|
1,390
|
|
1,390
|
|
-
|
|
-
|
|
NRFL
|
|
|
678
|
|
678
|
|
-
|
|
-
|
|
Manx Collections Limited
("MCL")
|
|
|
454
|
|
454
|
|
-
|
|
-
|
|
Three Spires Insurance Services
Limited ("Three Spires")
|
|
|
41
|
|
41
|
|
-
|
|
-
|
|
|
|
|
10,576
|
|
10,576
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Management has determined that a reasonably
possible change in the key assumptions would not result in the
carrying amount to exceed the recoverable amount of the following
CGU's and accordingly no impairment of goodwill.
Payment
Assist Limited ("PAL")
On 16 May 2022, the Group (through MVL)
announced that it entered into an agreement to acquire 50.1% of the
shares and voting interests in UK focused, point of sale lender PAL
for a total consideration of £4.244 million payable in cash. The
acquisition was completed in September 2022. In addition to the
acquisition, MVL has agreed an option to acquire the remaining
49.9% of Payment Assist for a variable cash consideration of 2
times the average net profit per share at the point of exercise,
subject to a maximum of £5 million (the "Option"). The Option can
be exercised by MVL at any time for the period until PAL has
declared a dividend for the financial year ended 31 December
2026.
General
The key assumptions used in the estimation of
the recoverable amount are set out in this note. The recoverable
amount of the CGUs discussed in this note were each based on value
in use. The values assigned to key assumptions represents
management's assessment of future trends in the relevant industries
and have been based on historical data from both external and
internal sources.
The estimated recoverable amount in relation to
the goodwill generated on the purchase of PAL is based on 10-year
forecasted cash flow projections and then discounted using a 14.2%
(2022: 14.0%) discount factor. The sensitivity of the analysis was
tested using additional discount factors of up to 20.0% on single
interest income growth rates.
The estimated recoverable amount in relation to
the EAL CGU (including also goodwill generated on acquisition of
EAL) is based on forecasted 10-year forecasted cash flow
projections, using a 2.0% annual increment, and then discounted
using a 13.9% (2022: 14.0%) discount factor. The sensitivity of the
analysis was tested using additional discount factors of 15.0% and
20.0% on stable profit levels. An impairment loss on EAL goodwill
of £200,000 has been recognised in the prior year.
The estimated recoverable amount in relation to
the goodwill generated on the purchase of BLX is based on10-year
interest income using a 0% annual increment, and then discounted
using a 14.2% (2022: 14.0%) discount
factor. The sensitivity of the analysis was tested using additional
discount factors of up to 20.0% on single interest income growth
rates.
The estimated recoverable amount in relation to
the goodwill generated on the purchase of BBSL is based on
forecasted 10-year forecasted cash flow projections using a 0%
annual increment, with a terminal value calculated using a 2.0%
growth rate of net income and then discounted using a
14.2% (2022: 14.0%) discount factor. The
sensitivity of the analysis was tested using additional discount
factors of up to 20.0% on single interest income growth
rates.
The estimated recoverable amount in relation to
the goodwill generated on the purchase of NRFL is based on 10-year
forecasted cash flow projection using a 2.0% annual increment, and
then discounted using a 14.2% (2022: 12.0%)
discount factor. The sensitivity of the analysis was tested
using additional discount factors of up to 20.0%. On the basis of
the above reviews no impairment to goodwill has been made in the
current year.
The estimated recoverable amount in relation to
the goodwill generated on the purchase of MCL is based on 4-year
sales interest income. This is extrapolated to 10 years using a
2.0% annual increment, and then discounted using a 14.2% (2022:
11.0%) discount factor. The sensitivity of the analysis was tested
using additional discount factors up to 20.0%.
The goodwill generated on the purchase of Three
Spires has been reviewed at the current year end and is considered
adequate given its income streams referred to EAL. Based on
the above no impairment to goodwill has been made in the current
year.
35. Loans and amounts due from Group
undertakings
Amounts due
from and to Group undertakings
Amounts due from and to Group undertakings
relate to intra-group transactions and are unsecured, interest-free
and repayable on demand. The amounts will be settled either through
cash or net settlement.
Subordinated
loans
MFG has issued several subordinated loans as
part of its equity funding into the Bank and EAL.
Creation
|
Maturity
|
Interest
rate
%
p.a.
|
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conister Bank Limited
|
|
|
|
|
|
|
11 February 2014
|
11 February 2034
|
7.0
|
|
500
|
|
500
|
27 May 2014
|
27 May 2034
|
7.0
|
|
500
|
|
500
|
9 July 2014
|
9 July 2034
|
7.0
|
|
500
|
|
500
|
17 September 2014
|
17 September 2026
|
7.0
|
|
400
|
|
400
|
22 July 2013
|
22 July 2033
|
7.0
|
|
1,000
|
|
1,000
|
25 October 2013
|
22 October 2033
|
7.0
|
|
1,000
|
|
1,000
|
23 September 2016
|
23 September 2036
|
7.0
|
|
1,100
|
|
1,100
|
14 June 2017
|
14 June 2037
|
7.0
|
|
450
|
|
450
|
12 June 2018
|
12 June 2038
|
7.0
|
|
2,000
|
|
2,000
|
23 March 2023
|
23 March 2043
|
7.0
|
|
6,500
|
|
-
|
|
|
|
|
|
|
|
Edgewater Associates Limited
|
|
|
|
|
|
|
21 February 2017
|
21 February 2027
|
7.0
|
|
150
|
|
150
|
14 May 2017
|
14 May 2027
|
7.0
|
|
128
|
|
128
|
|
|
|
|
14,228
|
|
7,728
|
36. Related party transactions
Cash
deposits
During the year, the Bank held cash on deposit
on behalf of Jim Mellon (Executive Chairman of MFG). At 31 December
total deposits amounted to £4,502 (2022: £94,475), at normal
commercial interest rates in accordance with the standard rates
offered by the Bank.
Key management
remuneration including Executive Directors
|
2023
£000
|
|
2022
£000
|
|
|
|
|
|
|
|
|
Remuneration - executive Directors
|
569
|
|
516
|
Remuneration - non-executive
Directors
|
259
|
|
172
|
Performance Related Pay
|
99
|
|
68
|
Pension
|
45
|
|
41
|
Equity Settled Restricted Stock
Units (see note 11)
|
67
|
|
9
|
|
1,039
|
|
806
|
Employment benefits include gross salaries,
performance related pay, employer defined contributions and
restricted stock units (See note 29D). At 31 December
2023, Douglas Grant had three amortising loans outstanding to
Conister Bank Limited with capital outstanding of £315,524 (2022:
£376,163). The maximum original term of the three loans is 61
months and the average interest is 2.57% (2022: 7.0%). James Smeed
had an amortising loan outstanding to Conister Bank with capital
outstanding of £10,847 (2022: £15,463). The original term of the
loan is 49 months and the average interest is 3.01% (2022: 3.01%).
No impairment is held in respect of these amounts.
Intercompany
recharges
Various intercompany recharges are made during
the course of the year as a result of the Bank settling debts in
other Group companies.
Loan advance to
PIML
On 24 May 2018, a £500,000 loan facility was
made available to PIML by the Bank in order to provide the finance
required to expand its operations. The facility is for 12 months.
Interest is charged at commercial rates. At 31 December 2023,
£2,677,000 (2022: £1,241,000) had been advanced to PIML. No
impairment is held in respect of these amounts. This loan facility
is repayable in cash.
Loan advance to
Lesley Stephen & Co Limited ("LSC")
A total £10 million loan facility is available
to LSC to provide the finance required to expand its operations.
Interest is charged at commercial rates. At 31 December 2023, £10
million had been advanced to LSC. As part of a finance arrangement
between the Bank and LSC, Manx Ventures Limited ("MVL") (a related
entity) acquired a 10% shareholding in RFG. This loan facility is
repayable in cash.
Subordinated
loans
The Company has advanced £13,950,000 (2022:
£7,450,000) of subordinated loans to the Bank and £278,000 (2022:
£278,000) to EAL as at 31 December 2023. See note 35 for more
details.
37. Leases
A. Leases as
lessee
The Group leases the head office building in the
Isle of Man. The lease's term is 10 years with an option to renew
the lease after that date. Lease payments are renegotiated every 10
years to reflect market rentals.
The Group leases an office unit in the United
Kingdom and IT equipment with contract terms of 2 to 3 years. These
leases are short-term and / or leases of low-value items. The Group
has elected not to recognise right-of-use assets and lease
liabilities for these leases.
Information about leases for which the Group is
a lessee is presented below.
i.
Right-of-use assets
Right-of-use assets related to leased properties
that do not meet the definition of investment property are
presented as property, plant and equipment.
|
|
Land and Buildings
|
|
Total
|
Group
|
|
£000
|
|
£000
|
Cost
|
|
|
|
|
As at 1 January 2023
|
|
1,960
|
|
1,960
|
Acquisition of subsidiary
|
|
-
|
|
-
|
Additions
|
|
-
|
|
-
|
As at 31
December 2023
|
|
1,960
|
|
1,960
|
Accumulated
depreciation
|
|
|
|
|
As at 1 January 2023
|
|
385
|
|
385
|
Charge for the year
|
|
222
|
|
222
|
Eliminated on disposals
|
|
-
|
|
-
|
As at 31
December 2023
|
|
607
|
|
607
|
Carrying
value at 31 December 2023
|
|
1,353
|
|
1,353
|
Carrying value at 31 December 2022
|
|
1,575
|
|
1,575
|
For company only right of use asset disclosure,
refer to note 22.
ii. Amounts
recognised in profit or loss
|
Group
|
|
Company
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
Interest on lease liabilities
|
93
|
|
78
|
|
-
|
|
-
|
Depreciation expense
|
222
|
|
180
|
|
60
|
|
63
|
Expenses relating to short-term leases and
low-value assets
|
81
|
|
92
|
|
-
|
|
-
|
iii. Amounts recognised in
statement of cash flows
|
Group
|
|
Company
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
|
Interest paid
|
93
|
|
78
|
|
-
|
|
-
|
Capital paid
|
256
|
|
202
|
|
117
|
|
99
|
Total cash outflow for leases
|
349
|
|
280
|
|
117
|
|
99
|
38. Regulators
Certain Group subsidiaries are regulated by the
FSA and the FCA as detailed below.
The Bank and EAL are regulated by the FSA under
a Class 1(1) - Deposit Taking licence and Class 2 - Investment
Business licence respectively. The Bank is also regulated by the
UK's Prudential Regulatory Authority ("PRA") and the UK's Financial
Conduct Authority ("FCA").
39. 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 and creates a
liability on the Bank to participate in the compensation of
depositors should it be activated.
The possibility of an outflow of resources
embodying economic benefits for all other contingent liabilities of
the Group are considered remote and thus do not require separate
disclosure.
40. Non-IFRS measures
Non-IFRS measures included in the financial
statements include the following:
Measure
|
Description
|
Net trading income
|
Net trading income represents net interest
income and contributions from non-interest income
activities.
|
Operating income
|
Operating income represents net trading income
other operating income and gains or losses on financial
instruments
|
41. Subsequent events
There were no subsequent events occurring after
31 December 2023.
42. Financial risk management
A. Introduction
and overview
The Group has exposure to the following risks
from financial instruments:
§ credit
risk;
§ liquidity
risk;
§ market risk;
and
§ operational
risk.
Risk management
framework
The Board has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Board has established the ARCC, which is responsible
for approving and monitoring Group risk management policies. The
ARCC is assisted in its oversight role by Internal Audit. Internal
Audit undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the
ARCC.
The Group's risk management policies are
established to identify and analyse the risks faced by the Group,
to set appropriate risk limits and controls, and to monitor risks
and adherence to limits. The risk management policies and systems
are reviewed regularly to reflect changes in market conditions and
the Group's activities. The Group, though its training and
management standards and procedures, aims to develop a disciplined
and constructive control environment in which all employees
understand their roles and obligations.
B. Credit
risk
Credit risk is the risk of financial loss to the
Group if a customer or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally from
the Group's loans and advances to customers and investment debt
securities. Credit risk includes counterparty, concentration,
underwriting and credit mitigation risks.
Management of credit
risk
The Bank's Board of Directors created the Credit
Committee which is responsible for managing credit risk, including
the following:
§ Formulating
credit policies in consultation with business units, covering
collateral requirements, credit assessments, risk grading and
reporting, documentary and legal procedures, and compliance with
regulatory and statutory requirements;
§ Establishing
the authorisation structure for the approval and renewal of credit
facilities. Authorisation limits are allocated in line with credit
policy;
§ Reviewing and
assessing credit risk: The Credit Committee assesses all credit
exposures in excess of designated limits, before facilities are
committed to customers. Renewals and reviews of facilities are
subject to the same review process.
§ Limiting
concentrations of exposures to counterparties, geographies and
industries, by issuer, credit rating band, market liquidity and
country (for debt securities);
§ Developing
and maintaining risk gradings to categorise exposures according to
the degree of risk of default. The current risk grading consists of
3 grades reflecting varying degrees of risk of default;
§ Developing
and maintaining the Group's process for measuring ECL: This
includes processes for:
o initial
approval, regular validation and back-testing of the models
used;
o determining
and monitoring significant increase in credit risk; and
o the
incorporation of forward-looking information; and
§ Reviewing
compliance with agreed exposure limits. Regular reports on the
credit quality of portfolios are provided to the Credit Committee
which may require corrective action to be taken.
C. Liquidity
risk
Liquidity risk is the risk that the Group will
encounter difficulty in meeting obligations associated with its
financial liabilities that are settled by delivering cash or
another financial asset. Liquidity risk arises from mismatches in
the timing and amounts of cash flows, which is inherent to the
Group's operations and investments.
Management of liquidity
risk
The Group's approach to managing liquidity is to
ensure, as far as possible, that it will always have enough
liquidity to meet its liabilities when they are due, under both
normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group's reputation. The key
elements of the Group's liquidity strategy are as
follows:
§ Funding base:
offering six-months to five-year fixed term deposit structure with
no early redemption option. This means the Bank is not subject to
optionality risk where customers redeem fixed rate products where
there may be a better rate available within the market;
§ Funding
profile: the Bank has a matched funding profile and does not engage
in maturity transformation which means that on a cumulative
mismatch position the Bank is forecast to be able to meet all
liabilities as they fall due;
§ Monitoring
maturity mismatches, behavioural characteristics of the Group's
financial assets and financial liabilities, and the extent to which
the Group's assets are encumbered and so not available as potential
collateral for obtaining funding;
§ Liquidity
buffer: the Bank maintains a liquidity buffer of 10.0% of its
deposit liabilities, with strict short-term mismatch limits of 0.0%
for sight to three months and -5.0% for sight to six months. This
ensures that the Bank is able to withstand any short-term liquidity
shock; and
§ Interbank
market: the Bank has no exposure to the interbank lending market.
The Bank has no reliance on liquidity via the wholesale markets. In
turn, if market conditions meant access to the wholesale funding
was constrained as per the 2008 credit crisis, this would have no
foreseeable effect on the Bank.
The Bank's liquidity position is monitored daily
against internal and external limits agreed with the FSA and
according to the Bank's Liquidity Policy. The Bank also has a
Liquidity Contingency Policy and Liquidity Contingency Committee in
the event of a liquidity crisis or potential liquidity disruption
event occurring.
The Treasury department receives information
from other business units regarding the liquidity profile of their
financial assets and financial liabilities and details of other
projected cash flows arising from projected future business.
Treasury then maintains a portfolio of short-term liquid assets,
largely made up of short-term liquid investment securities, loans
and advances to banks and other inter-bank facilities, to ensure
that sufficient liquidity is maintained within the Group as a
whole.
Regular liquidity stress testing is conducted
under a variety of scenarios covering both normal and more severe
market conditions. The scenarios are developed considering both
Group-specific events and market-related events (e.g. prolonged
market illiquidity).
D. Market
risk
Market risk is the risk that of changes in
market prices; e.g. interest rates, equity prices, foreign exchange
rates and credit spreads (not relating to changes in the obligor's
/ issuer's credit standing), will affect the Group's income or
value of its holdings of financial instruments. The objective of
the Group's market risk management is to manage and control market
risk exposures within acceptable parameters to ensure the Group's
solvency while optimising the return on risk.
Management of
market risks
Overall authority for market risk is vested in
the Assets and Liabilities Committee ("ALCO") which sets up limits
for each type of risk. Group finance is responsible for the
development of risk management policies (subject to review and
approval by the ALCO) and for the day-to-day review of their
implementation.
Foreign
exchange risk
The Bank is not subject to foreign exchange
risks and its business is conducted in pounds sterling.
Equity
risk
The Group has investment in associates which are
carried at cost adjusted for the Group's share of net asset value.
The Bank has access to these accounts. The Bank's exposure to
market risk is not considered significant given the low carrying
amount of the investment.
The Group's does not hold any investments in
listed equities.
Interest rate
risk
The principal potential interest rate risk that
the Bank is exposed to is the risk that the fixed interest rate and
term profile of its deposit base differs materially from the fixed
interest rate and term profile of its asset base, or basis and term
structure risk.
Additional interest rate risk may arise for
banks where (a) customers are able to react to market sensitivity
and redeem fixed rate products and (b) where a bank has taken out
interest rate derivate hedges especially against longer-term
interest rate risk, where the hedge moves against the bank.
However, neither of these risks apply to the Bank.
Interest rate risk for the Bank is not deemed to
be currently material due to the Bank's matched funding profile.
Any interest rate risk assumed by the Bank will arise from a
reduction in interest rates, in a rising environment due to the
nature of the Bank's products and its matched funded profile. The
Bank should be able to increase its lending rate to match any
corresponding rise in its cost of funds, notwithstanding its
inability to vary rates on its existing loan book. The Bank
attempts to efficiently match its deposit taking to its funding
requirements.
E. Operational
risk
Operational risk is the risk of direct or
indirect loss arising from a wide variety of causes associated with
the Group's processes, personnel, technology and infrastructure,
and from external factors other than credit, market and liquidity
risks - e.g. those arising from legal and regulatory requirements
and generally accepted standards of corporate behaviour.
Operational risks arise from all of the Group's
operations.
Management of operational
risk
The Group's objective is to manage operational
risk so as to balance the avoidance of financial losses and damage
to the Group's reputation with overall cost effectiveness and
innovation. In all cases, Group policy requires compliance with all
applicable legal and regulatory requirements.
The Group has developed standards for the
management of operational risk in the following areas:
§ Business
continuity planning;
§ Requirements
for appropriate segregation of duties, including the independent
authorisation of transactions;
§ Requirements
for the reconciliation and monitoring of transactions;
§ Compliance
with regulatory and other legal requirements;
§ Documentation
of controls and procedures;
§ Periodic
assessment of operational risks faced, and the adequacy of controls
and procedures to address the risks identified;
§ Requirements
for the reporting of operational losses and proposed remedial
action;
§ Development
of contingency plans;
§ Training and
professional development;
§ Ethical and
business standards;
§ Information
technology and cyber risks; and
§ Risk
mitigation, including insurance where this is
cost-effective.
Compliance with Group standards is supported by
a programme of periodic reviews undertaken by Internal Audit. The
results of Internal Audit reviews are reported to the
ARCC.
43. Basis of measurement
The financial statements are prepared on a
historical cost basis, except for the following material
items:
|
|
Items
|
Measurement basis
|
|
|
FVTPL - Trading asset
|
Fair value
|
FVOCI - Debt securities
|
Fair value
|
Land and buildings
|
Fair value
|
Deferred consideration
|
Fair value
|
Net defined benefit
liability
|
Fair value of plan assets less the
present value of the defined benefit obligation
|
|
|
44. Material accounting policies
There were no new standards, amendments or
interpretations issued and made effective during the current year
which have had a material impact on the Group. The Group has
adopted the following new standards and amendments to standards,
including any consequential amendments to other standards, with a
date of initial application of 1 January 2023:
§ Definition of
Accounting Estimates - Amendments to IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors
§ Disclosure
Initiative: Accounting Policies - Amendments to IAS 1 Presentation
of Financial Statements and IFRS Practice Statement 2 Making
Materiality Judgements
§ Deferred Tax
Related to Assets and Liabilities Arising from a Single Transaction
- Amendments to IAS 12 Income Taxes
No significant changes followed the
implementation of these standards and amendments.
The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective. New standards and amendments to standards, adopted but
not yet effective with an initial application of 1 January
2024:
§ Amendments to
IAS 12 - International Tax Reform - Pillar Two Model
Rules
§ Lease
Liability in a Sale and Leaseback - Amendments to IFRS 16
Leases
§
Classification of liabilities as Current or Non-Current and
Non-current Liabilities with Covenants - Amendments to IAS 1
Presentation of Financial Statements
§ Amendments to
IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
§ IFRS S1
General Requirements for Disclosure of Sustainability-related
Financial Information
§ IFRS S2
Climate-related Disclosures
The Group has assessed the impact of these
amendments and expects they will not have a material impact, when
adopted, on the Group Financial Statements.
The Group has consistently applied the following
accounting policies to all periods presented in these financial
statements.
Set out below is an index of the material
accounting policies, the details of which are available on the
pages that follow:
|
|
|
Ref.
|
Note
description
|
Page No. in Annual
Report
|
|
|
|
A.
|
Basis of consolidation of
subsidiaries and separate financial statements of the
Company
|
87
|
B.
|
Interest in equity accounted
investees
|
87
|
C.
|
Interest
|
87
|
D.
|
Fee and commission
income
|
88
|
E.
|
Leases
|
88
|
F.
|
Income tax
|
89
|
G.
|
Financial assets and financial
liabilities
|
89
|
H.
|
Cash and cash
equivalents
|
90
|
I.
|
Loans and advances
|
94
|
J.
|
Property, plant and
equipment
|
94
|
K.
|
Intangibles assets and
goodwill
|
94
|
L.
|
Impairment of non-financial
assets
|
95
|
M.
|
Deposits, debt securities issued
and subordinated liabilities
|
96
|
N.
|
Employee benefits
|
96
|
O.
|
Share capital and
reserves
|
96
|
P.
|
Earnings per share
("EPS")
|
96
|
Q.
|
Segmental reporting
|
97
|
A. Basis of consolidation of subsidiaries and
separate financial statements of the Company
i. Business
combinations
The Group accounts for business combinations
using the acquisition method when control is transferred to the
Group.
Any contingent consideration is measured at fair
value at the date of acquisition. Contingent consideration is
remeasured at fair value at each reporting date and subsequent
changes in the fair value of the contingent consideration are
recognised in profit or loss.
ii.
Subsidiaries
Subsidiaries are entities controlled by the
Group. The Group controls an entity if it is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its control
over the entity. The Group reassesses whether it has control if
there are changes to one or more of the elements of control. This
includes circumstances in which protective rights held (e.g. those
resulting from a lending relationship) become substantive and lead
to the Group having power over an investee. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until
the date on which control ceases.
iii.
Non-controlling interests ("NCI")
NCI are measured initially at their
proportionate share of the acquiree's identifiable net assets at
the date of acquisition.
Changes in the Group's interest in a subsidiary
that do not result in a loss of control are accounted for as equity
transactions.
iv.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any
unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated
financial statements. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no
evidence of impairment.
v. Separate
financial statements of the Company
In the separate financial statements of the
Company, interests in subsidiaries, associates and joint ventures
are accounted for at cost less impairment.
B. Interests in equity accounted investees
The Group's interests in equity accounted
investees may comprise interests in associates and joint
ventures.
Associates are those entities in which the Group
has significant influence, but not control or joint control, over
the financial and operating policies. A joint venture is an
arrangement in which the Group has joint control, whereby the Group
has rights to the net assets of the arrangement, rather than rights
to its assets and obligations for its liabilities.
Interests in associates and joint ventures are
accounted for using the equity method. They are initially
recognised at cost, which includes transaction costs. Subsequent to
initial recognition, the consolidated financial statements include
the Group's share of the profit or loss and OCI of equity accounted
investees, until the date on which significant influence or joint
control ceases.
C. Interest
Interest income and expense are recognised in
profit or loss using the effective interest method.
i. Effective
interest rate
The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts of the
financial instrument to the gross carrying amount of the financial
asset or amortised cost of the financial liability. When
calculating the effective interest rate for financial assets, the
Group estimates future cash flows considering all contractual terms
of the financial instruments, including origination fees, loan
incentives, broker fees payable, estimated early repayment charges,
balloon payments and all other premiums and discounts. It also
includes direct incremental transaction costs related to the
acquisition or issue of the financial instrument. The calculation
does not consider future credit losses.
ii. Amortised
cost and gross carrying amount
The amortised cost of a financial asset or
financial liability is the amount at which the financial asset or
financial liability is measured on initial recognition minus the
principal repayments, plus or minus the cumulative amortisation
using the effective interest method of any difference between that
initial amount and the maturity amount and, for financial assets,
adjusted for any expected credit loss allowance.
The gross carrying amount of a financial asset
is the amortised cost of a financial asset before adjusting for any
expected credit loss allowance.
iii.
Calculation of interest income and expense
In calculating interest income and expense, the
effective interest rate is applied to the gross carrying amount of
the asset (when the asset is not credit-impaired) or to the
amortised cost of the liability.
However, for financial assets that have become
credit-impaired subsequent to initial recognition, interest income
is calculated by applying the effective interest rate to the net
carrying amount of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to
the gross basis.
D. Fee and commission income
The Group generates fee and commission income
through provision of independent financial advice, insurance
brokerage agency, introducer of foreign exchange services and
commissions from brokering business finance for small and medium
sized enterprises.
Independent
financial advice and insurance brokerage agency
Income represents commission arising on services
and premiums relating to policies and other investment products
committed during the year, as well as renewal commissions having
arisen on services and premiums relating to policies and other
investment products committed during the year and previous years
and effective at the reporting date. Income is recognised on the
date that policies are submitted to product providers with an
appropriate discount being applied for policies not completed. As a
way to estimate what is due at the year-end, a "not proceeded with"
rate of 10.0% for pipeline life insurance products and 0.0% for
non-life insurance pipeline is assumed. Renewal commissions are
estimated by taking the historical amount written pro-rata to 3
months.
Other
Income other than that directly related to the
loans is recognised over the period for which service has been
provided or on completion of an act to which the fee
relates.
E. Leases
At inception of a contract, the Group assesses
whether a contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the
use of an identified asset for a period of time in exchange for
consideration.
i. As a
lessee
At commencement or on modification of a contract
that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis
of its relative stand-alone prices. However, for the leases of
property the Group has elected not to separate non-lease components
and as a result, accounts for the lease and non-lease components as
a single lease component.
The Group recognises a right-of-use asset and a
lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct costs
incurred, less any lease incentives received.
The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement
date to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Group by the end of the
lease term or the cost of the right-of-use asset reflects that the
Group will exercise a purchase option. In that case the
right-of-use asset will be depreciated over the useful life of the
underlying asset, which is determined on the same basis as those of
property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for
certain remeasurements of the lease liability.
The lease liability is initially measured at the
present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in
the lease or, if that rate cannot be readily determined, the
Group's incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing
rate by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms of the
lease and the type of the asset leased.
Lease payments included in the measurement of
the lease liability comprise the following:
§ Fixed
payments, including in-substance fixed payments;
§ Variable
lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement
date;
§ Amounts
expected to be payable under a residual value guarantee;
and
§ The exercise
price under a purchase option that the Group is reasonably certain
to exercise, lease payments in an optional renewal period if the
Group is reasonably certain to exercise an extension option, and
penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortised
cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in
an index or rate, if there is a change in the Group's estimate of
the amount expected to be payable under a residual value guarantee,
if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this
way, a corresponding adjustment is made to the carrying amount of
the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to
zero.
The Group presents right-of-use assets that do
not meet the definition of investment property in 'property, plant
and equipment' and lease liabilities in 'loans and borrowings' in
the statement of financial position.
Short-term
leases and leases of low-value assets
The Group has elected not to recognise
right-of-use assets and lease liabilities for leases of low-value
assets and short-term leases, including IT equipment. The Group
recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
ii. As a
lessor
At inception or on modification of a contract
that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis
of their relative stand-alone prices.
When the Group acts as a lessor, it determines
at lease inception whether each lease is a finance or an operating
lease.
To classify each lease, the Group makes an
overall assessment of whether the lease transfers substantially all
of the risks and rewards incidental to ownership of the underlying
asset. If this is the case, then the lease is a finance lease; if
not, then it is an operating lease. As part of this assessment, the
Group considers certain indicators such as whether the lease is for
the major part of the economic life of the asset.
Finance
leases and HP contracts
When assets are subject to a finance lease or HP
contract, the present value of the lease payments is recognised as
a receivable. The difference between the gross receivable and the
present value of the receivable is recognised as unearned finance
income. HP and lease income is recognised over the term of the
contract or lease reflecting a constant periodic rate of return on
the net investment in the contract or lease. Initial direct costs,
which may include commissions and legal fees directly attributable
to negotiating and arranging the contract or lease, are included in
the measurement of the net investment of the contract or lease at
inception.
Operating
leases
Leases in which a significant portion of the
risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are charged
to profit or loss and other comprehensive income on a straight-line basis over the period of the
lease.
F. Income tax
Current and
deferred taxation
Current taxation relates to the estimated
corporation tax payable in the current financial year. Deferred
taxation is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts. Deferred tax is not
recognised for taxable temporary differences arising on the initial
recognition of goodwill and temporary differences related to
investments in subsidiaries and associates to the extent that the
Group is able to control the timing of the reversal of the
temporary differences and it is probable that they will not reverse
in the foreseeable future.
Deferred taxation is determined using tax rates,
and laws that have been enacted or substantially enacted by the
reporting date and are expected to apply when the related deferred
tax is realised. Deferred taxation assets are recognised to the
extent that it is probable that future taxable profit will be
available against which the temporary differences can be
utilised.
G. Financial assets and financial liabilities
i. Recognition
and initial measurement
The Group initially recognises loans and
advances, deposits, debt securities issued and subordinated
liabilities on the date on which they are originated. All other
financial instruments including regular-way purchases and sales of
financial assets are recognised on the trade date, which is the
date on which the Group becomes party to the contractual provisions
of the instrument.
A financial asset or financial liability is
measured initially at fair value plus, for an item not at FVTPL,
transaction costs that are directly attributable to its acquisition
or issue.
ii.
Classification
Financial
assets
On initial recognition, a financial asset is
classified as measured at amortised cost, FVOCI or
FVTPL.
A financial asset is measured at amortised cost
if it meets both of the following conditions and is not designated
as at FVTPL:
§ The asset is
held within a business model whose objective is to hold assets to
collect contractual cash flows; and
§ The
contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of
principal and interest ("SPPI").
A debt instrument is measured at FVOCI only if
it meets both of the following conditions and is not designated as
FVTPL:
§ The asset is
held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets;
and
§ The
contractual terms of the financial asset give rise on specified
dates to cash flows that are SPPI.
On initial recognition of an equity investment
that is not held for trading, the Group may irrevocably elect to
present subsequent changes in fair value in OCI. This election is
made on an investment-by-investment basis.
All other financial assets are classified as
measured at FVTPL.
In addition, on initial recognition, the Group
may irrevocably designate a financial asset that otherwise meets
the requirements to be measured at amortised cost or at FVOCI as at
FVTPL if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
Business model
assessment
The Group makes an assessment of the objective
of a business model in which an asset is held at a portfolio level
because this best reflects the way the business is managed and
information provided to management.
Assessment of
whether contractual cash flows are solely payments of principal and
interest
For the purposes of this assessment, 'principal'
is defined as the fair value of the financial asset on initial
recognition. 'Interest' is defined as consideration for the time
value of money and for the credit risk associated with the
principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as profit margin.
In assessing whether the contractual cash flows
are SPPI, the Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset
contains a contractual term that could change the timing or amount
of contractual cash flows such that it would not meet this
condition.
Financial
liabilities
The Group classifies its financial liabilities,
other than financial guarantees and loan commitments, as measured
at amortised cost.
iii.
Derecognition
Financial
assets
The Group derecognises a financial asset when
the contractual rights to the cash flows from the financial asset
expire, or when it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of the risks
and rewards of ownership of the financial asset are transferred or
in which the Group neither transfers nor retains substantially all
of the risks and rewards of ownership and it does not retain
control of the financial asset.
On derecognition of a financial asset, the
difference between the carrying amount of the asset (or the
carrying amount allocated to the portion of the asset derecognised)
and the sum of (i) the consideration received (including any new
asset obtained less any new liability assumed) and (ii) any
cumulative gain or loss that had been recognised in OCI is
recognised in profit or loss.
Financial
liabilities
The Group derecognises a financial liability
when its contractual obligations are discharged or cancelled, or
expire.
iv.
Offsetting
Financial assets and financial liabilities are
offset and the net amount presented in the statement of financial
position when, and only when, the Group currently has a legally
enforceable right to set off the amounts and it intends either to
settle them on a net basis or to realise the asset and settle the
liability simultaneously.
Income and expenses are presented on a net basis
only when permitted under IFRS, or for gains and losses arising
from a group of similar transactions such as in the Group's trading
activity.
v. Fair value
measurement
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in
the principal or, in its absence, the most advantageous market to
which the Group has access at the date. The fair value of a
liability reflects its non-performance risk.
The Group recognises transfers between levels of
the fair value hierarchy as of the end of the reporting period
during which the change has occurred.
The Group measures fair values using the
following fair value hierarchy, which reflects the significance of
the inputs used in making the measurements:
§ Level 1: inputs
that are quoted market prices (unadjusted) in active markets for
identical instruments;
§ Level 2: inputs
other than quoted prices included within Level 1 that are
observable either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This category includes instruments valued
using: quoted market prices in active markets for similar
instruments; quoted prices for identical or similar instruments in
markets that are considered less than active; or other valuation
techniques in which all significant inputs are directly or
indirectly observable from market data; and
§ Level 3: inputs
that are unobservable. This category includes all instruments for
which the valuation technique includes inputs not based on
observable data and the unobservable inputs have a significant
effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar
instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the
instruments.
The fair values of financial assets and
financial liabilities that are traded in active markets are based
on quoted market prices or dealer price quotations. For all other
financial instruments, the Group determines fair values using other
valuation techniques.
For financial instruments that trade
infrequently and have little price transparency, fair value is less
objective, and requires varying degrees of judgement depending on
liquidity, concentration, uncertainty of market factors, pricing
assumptions and other risks affecting the specific
instrument.
vii.
Impairment
A financial instrument that is not
credit-impaired on initial recognition is classified in 'Stage 1'
and has its credit risk continuously monitored by the
Group.
If a SICR since initial recognition
is identified, the financial instrument is moved to 'Stage 2' but
is not yet deemed to be credit impaired.
§ An
SICR is always deemed to occur when the borrower is 30 days past
due on its contractual payments. If the Group becomes aware
ahead of this time of non-compliance or financial difficulties of
the borrower, such as loss of employment, avoiding contact with the
Group then an SICR has also deemed to occur; and
§ A
receivable is always deemed to be in default and credit-impaired
when the borrower is 90 days past due on its contractual payments
or earlier if the Group becomes aware of severe financial
difficulties such as bankruptcy, individual voluntary arrangement,
abscond or disappearance, fraudulent activity and other similar
events.
If the financial instrument is credit-impaired,
the financial instrument is then moved to 'Stage 3'. Financial
instruments in Stage 3 have their ECL measured based on expected
credit losses on a lifetime basis.
Loss allowances for lease receivables are always
measured at an amount equal to lifetime ECL.
12-month ECL are the portion of ECL that result
from default events on a financial instrument that are possible
within the 12 months after the reporting date. Financial
instruments for which a 12-month ECL is recognised are referred to
as 'Stage 1 financial instruments'.
Lifetime ECL are the ECL that result from all
possible default events over the expected life of a financial
instrument. Financial instruments for which a lifetime ECL is
recognised but which are not credit-impaired are referred to as
'Stage 2 financial instruments'.
Measurement of
ECL
After a detailed review, the Group devised and
implemented an impairment methodology in light of the IFRS 9
requirements outlined above noting the following:
§ The Group has
identified and documented key drivers of credit risk and credit
losses its financial instruments and using an analysis of
historical data, has estimated the relationship between
macroeconomic variables and credit risk and credit
losses;
§ The ECL is
derived by reviewing the Group's loss rate and loss given default
over the past 8 years by product and geographical segment;
and
§ If the Group
holds objective evidence through specifically assessing a
credit-impaired receivable and believes it will go on to completely
recover the debt due to the collateral held and cooperation with
the borrower, then no IFRS 9 provision is made.
ECL are probability-weighted
estimates of credit losses. They are measured as
follows:
§ Financial assets that are not credit-impaired at the reporting
date: as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the Group expects to
receive);
§ Financial assets that are credit-impaired at the reporting
date: as the difference between the gross carrying amount and the
present value of estimated future cash flows; and
§ Undrawn loan commitments: as the present value of the
difference between the contractual cash flows that are due to the
Group if the commitment is drawn down and the cash flows that the
Group expects to receive.
Credit-impaired
financial assets
At each reporting date, the Group assesses
whether financial assets carried at amortised cost and debt
financial assets carried at FVOCI, and finance lease receivables
are credit-impaired (referred to as 'Stage 3 financial assets'). A
financial asset is credit-impaired when one or more events that
have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Evidence that a financial asset is
credit-impaired includes the following observable date:
§ Significant
financial difficulty of the borrower or issuer;
§ A breach of
contract such as a default or past due event;
§ The
restructuring of a loan or advance by the Group on terms that the
Group would not consider otherwise;
§ It is
becoming probable that the borrower will enter bankruptcy or
another type of financial reorganisation; or
§ The
disappearance of an active market for a security because of
financial difficulties.
A loan that has been renegotiated due to a
deterioration in the borrower's condition is usually considered to
be credit-impaired unless there is evidence that the risk of not
receiving contractual cash flows has reduced significantly and
there are no other indicators of impairment. In addition, a retail
loan that is overdue for 90 days or more is considered
credit-impaired even when the regulatory definition of default is
different.
In assessing of whether an investment in
sovereign debt is credit impaired, the Group considers the
following factors:
§ The market's
assessment of creditworthiness as reflected in the bond
yields;
§ The rating
agencies' assessments of creditworthiness;
§ The country's
ability to access the capital markets for new debt
issuance;
§ The
probability of debt being restructured, resulting in holders
suffering losses through voluntary or mandatory debt forgiveness;
and
§ The
international support mechanisms in place to provide the necessary
support as 'lender of last resort' to that country, as well as the
intention, reflected in public statements, of governments and
agencies to use those mechanisms. This includes an assessment of
the depth of those mechanisms and, irrespective of the political
intent, whether there is the capacity to fulfil the required
criteria.
Presentation of
allowance for ECL in the statement of financial
position
Loss allowances for ECL are presented in the
statement of financial position as follows:
§ Financial
assets measured at amortised cost: as a deduction from the gross
carrying amount of the assets;
§ Loan
commitments: generally, as a provision; and
§ Debt
instruments measured at FVOCI: no loss allowance is recognised in
the statement of financial position because the carrying amount of
these assets is their fair value. However, the loss allowance is
disclosed and is recognised in the fair value reserve.
Write-off
Loans and debt securities are written off
(either partially or in full) when there is no reasonable
expectation of recovering a financial asset in its entirety or a
portion thereof. This is generally the case when the Group
determines that the borrower does not have assets or sources of
income that could generate sufficient cash flows to repay the
amounts subject to the write-off. This assessment is carried out at
the individual asset level.
Recoveries of amounts previously written off are
included in 'impairment losses on financial instruments' in the
statement of profit or loss and OCI.
Financial assets that are written off could
still be subject to enforcement activities in order to comply with
the Group's procedures for recovery of amounts due.
H. Cash and cash equivalents
For the purpose of the statement of cash flows,
cash and cash equivalents comprise cash and deposit balances with
an original maturity date of three months or less.
I. Loans and advances
Loans and advances' captions in the statement of
financial position include:
§ Loans and
advances measured at amortised cost (see note 44 (G)). They are
initially measured at fair value plus incremental direct
transaction costs, and subsequently at their amortised cost using
the effective interest method; and
§ Finance lease
receivables (see note 44 (E)).
J. Property, plant and equipment
Items of property, plant and equipment are
stated at historical cost less accumulated depreciation (see
below). Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Buildings are carried
at a revalued amount, being fair value at the date of revaluation
less subsequent depreciation and impairment and are revalued
annually.
If an asset's carrying
amount is increased as a result of a
revaluation, the increase shall be recognised in other
comprehensive income and accumulated in equity under the heading of
revaluation surplus. However, the increase shall be recognised in
profit or loss to the extent that it reverses a revaluation
decrease of the same asset previously recognised in profit or
loss.
If an asset's carrying
amount is decreased as a result of a
revaluation, the decrease shall be recognised in profit or
loss. However, the decrease shall be recognised in other
comprehensive income to the extent of any credit balance existing
in the revaluation surplus in respect of that asset. The decrease
recognised in other comprehensive income reduces the amount
accumulated in equity under the heading of revaluation
surplus.
The assets' residual values and useful economic
lives are reviewed, and adjusted if appropriate, at each reporting
date. An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
When parts of an item of property, plant and
equipment have different useful lives, those components are
accounted for as separate items of property, plant and
equipment.
Depreciation
and amortisation
Assets are depreciated or amortised on a
straight-line basis, so as to write off the book value over their
estimated useful lives. The estimated useful lives of
property, plant and equipment and intangibles are as
follows:
Property,
plant and equipment
Leasehold
improvements
to expiration of the lease
IT
equipment
4 - 5 years
Motor
vehicles
2 - 5 years
Furniture and
equipment
4 -10 years
Plant and
machinery
5 - 20
years
K. Intangible assets and goodwill
i.
Goodwill
Goodwill that arises on the acquisition of
subsidiaries is measured at cost less accumulated impairment
losses.
ii.
Software
Software acquired by the Group is measured at
cost less accumulated amortisation and any accumulated impairment
losses.
Expenditure on internally developed software is
recognised as an asset when the Group is able to demonstrate: that
the product is technically feasible, its intention and ability to
complete the development and use the software in a manner that will
generate future economic benefits, and that it can reliably measure
the costs to complete the development. The capitalised costs of
internally developed software include all costs directly
attributable to developing the software and capitalised borrowing
costs, and are amortised over its useful life. Internally developed
software is stated at capitalised cost less accumulated
amortisation and any accumulated impairment losses.
Software is amortised on a straight-line basis
in profit or loss over its estimated useful life, from the date on
which it is available for use. Amortisation methods, useful
lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
iii.
Other
Intangible assets that are acquired by an entity
and having finite useful lives are measured at cost less
accumulated amortisation and any accumulated impairment
losses.
Intangible assets with indefinite useful lives that are acquired or
built are carried at cost less accumulated impairment losses.
Intangible assets with indefinite useful lives are not amortised
but instead are subject to impairment testing at least
annually.
The useful lives of intangibles are as
follows:
Customer contracts and
lists
to expiration of the agreement
Intellectual property
rights
4 years - indefinite
Website development
costs
indefinite
IT Software and website development
costs
5 years
Included in intellectual property
rights is capitalised costs for acquiring a UK Banking licence. The
banking licence is assumed to have an indefinite life as there is
no foreseeable limit to the period over which the asset is expected
to generate benefits for the business. Costs related to obtaining
this asset are held at cost and are not being amortised.
L. Impairment of non-financial assets
At each reporting date, the Group reviews the
carrying amounts of its non-financial assets (other than deferred
tax assets) to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable
amount is estimated. Goodwill and indefinite useful life intangible
assets are tested annually for impairment.
For impairment testing, assets are grouped
together into the smallest group of assets that generates cash
inflows from continuing use that is largely independent of the cash
inflows of other assets or Cash Generating Units ("CGUs"). Goodwill
arising from a business combination is allocated to CGUs or groups
of CGUs that are expected to benefit from the synergies of the
combination.
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less cost to sell.
Value in use is based on the estimated future cash flows,
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its recoverable
amount.
The Group's corporate assets do not generate
separate cash inflows and are used by more than one CGU. Corporate
assets are allocated to CGUs on a reasonable and consistent basis
and tested for impairment as part of the testing of the CGUs to
which the corporate assets are located.
Impairment losses are recognised in profit or
loss. They are allocated first to reduce the carrying amount of any
goodwill allocated to the CGU, and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata
basis.
An impairment loss in respect of goodwill is not
reversed. For other assets, an impairment loss is reversed only to
the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
M. Employee benefits
i. Long-term
employee benefits
Pension
obligations
The Group has pension obligations arising from
both defined benefit and defined contribution pension
plans.
A defined contribution pension plan is one under
which the Group pays fixed contributions into a separate fund and
has no legal or constructive obligations to pay further
contributions. Defined benefit pension plans define an amount of
pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of
service and remuneration.
Remeasurements of the net defined benefit
liability, which comprise actuarial gains and losses, the return on
plan assets (excluding interest) and the effect of the asset
ceiling (if any, excluding interest), are recognised immediately in
OCI. The Group determines the net interest expense (income) on the
net defined benefit liability (asset) for the period by applying
the discount rate used to measure the defined benefit obligation at
the beginning of the annual period to the then-net defined benefit
liability (asset), taking into account any changes in the net
defined benefit liability (asset) during the period as a result of
contributions and benefit payments. Net interest expense and other
expenses related to defined benefit plans are recognised in profit
or loss.
The statement of financial position records as
an asset or liability as appropriate, the difference between the
market value of the plan assets and the present value of the
accrued plan liabilities. The defined benefit pension plan
obligation is calculated by independent actuaries using the
projected unit credit method and a discount rate based on the yield
on high quality rated corporate bonds.
The Group's defined contribution pension
obligations arise from contributions paid to a Group personal
pension plan, an ex gratia pension plan, employee personal pension
plans and employee co-operative insurance plans. For these pension
plans, the amounts charged to the income statement represent the
contributions payable during the year.
ii. Share-based
compensation
The Group maintains a share option programme
which allows certain Group employees to acquire shares of the
Group. The change in the fair value of options granted is
recognised as an employee expense with a corresponding change in
equity. The fair value of the options is measured at grant date and
spread over the period during which the employees become
unconditionally entitled to the options.
At each reporting date, the Group revises its
estimate of the number of options that are expected to vest and
recognises the impact of the revision to original estimates, if
any, in the income statement, with a corresponding adjustment to
equity.
The fair value is estimated using a proprietary
binomial probability model. The proceeds received, net of any
directly attributable transaction costs, are credited to share
capital (nominal value) and share premium when the options are
exercised.
N. Share capital and reserves
Share issue
costs
Incremental costs that are directly attributable
to the issue of an equity instrument are deducted from the initial
measurement of the equity instruments.
O. Earnings per share ("EPS")
The Group presents basic and diluted EPS data
for its Ordinary Shares. Basic EPS is calculated by dividing the
profit or loss that is attributable to ordinary Shareholders of MFG
by the weighted-average number of Ordinary Shares outstanding
during the period. Diluted EPS is determined by adjusting profit or
loss that is attributable to Ordinary Shareholders and the
weighted-average number of Ordinary Shares outstanding for the
effects of all dilutive potential Ordinary Shares, which comprise
share options granted to employees.
P. Segmental reporting
A segment is a distinguishable component of the
Group that is engaged either in providing products or services
(business segment), or in providing products or services within a
particular economic environment (geographical segment), which is
subject to risks and rewards that are different from those of other
segments. The Group's primary format for segmental reporting is
based on business segments.
An operating segment is a component of the Group
that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses relating to
transactions with any of the Group's other components, whose
operating results are regularly reviewed by the CEO who is the
chief operating decision maker ("CODM") to make decisions about
resources to be allocated to the segment and assess its
performance, and for which discrete financial information is
available.
Segment results reported to the CEO include
items that are directly attributable to a segment as well as those
that can be allocated on a reasonable basis.