TIDMMFX
RNS Number : 9105H
Manx Financial Group PLC
16 March 2018
FOR IMMEDIATE RELEASE 16(th) March 2018
Manx Financial Group PLC (the 'Company')
Report and accounts for the year ended 31 December 2017
Manx Financial Group PLC (LSE: MFX), the financial services
group which includes Conister Bank Limited, Edgewater Associates
Limited, Manx FX Limited and Manx Incahoot Limited, presents its
final results for the year ended 31 December 2017.
Jim Mellon, Executive Chairman, commented: "I am pleased to
report that the Report & Accounts for 2017 showed a marked
improvement not only on 2016, but also on 2015. Our profit before
tax has grown by 78% to GBP2.7 million (2016: GBP1.5 million),
leading to a total comprehensive profit of GBP2.4 million (2016:
GBP1.0 million) an increase of 150%. This is a very satisfactory
outcome and reflects well on the performance of our newly
restructured management and operations throughout the Group."
The 2017 Audited Annual Report and Accounts will be available
from the Company's website www.mfg.im shortly.
Contacts:
Manx Financial Group PLC
Denham Eke, Chief Executive
Tel: +44 (0)1624 694694
Beaumont Cornish Limited
Roland Cornish/James Biddle
Tel: +44 (0)20 7628 3396
Britton Financial PR
Tim Blackstone
Tel: +44 (0)7957 140416
Chairman's Statement
Dear Shareholders,
When I wrote to you in the Interim Results for 2017, I was
confident that the full year would continue the return to previous
profitability. I am pleased to report that the Report &
Accounts for 2017 show marked improvement, not only on 2016, but
also on 2015 - our previous high watermark - and my earlier
confidence was not misplaced.
Thus, our profit before tax has grown by 78% to GBP2.7 million
(2016: GBP1.5 million), leading to a total comprehensive profit of
GBP2.4 million (2016: GBP1.0 million), an increase of 150%. This is
a very satisfactory outcome and reflects well on the performance of
our newly restructured management and operations throughout the
Group. I would also like to note that not only was the 2017 first
half pre-tax profit of GBP0.9 million an Interim record (2016:
GBP0.7 million), but also the second half 2017 pre-tax profit of
GBP1.8 million (2016: GBP0.8 million) is again a record,
demonstrating a sustained growth. The historic dependence on our
banking subsidiary, Conister Bank Limited (the "Bank"), is reducing
as Edgewater Associates Limited ("EWA"), our Independent Financial
Advisory ("IFA") operation, has successfully integrated its recent
acquisitions and is now making a significant contribution to the
Group's overall financial performance. Our aim of becoming a
diversified financial services group is coming to fruition and we
are well placed to take advantage of opportunities as they
arise.
Manx Financial Group PLC
As stated, profit before income tax for the year was GBP2.7
million (2016: GBP1.5 million) on a net interest income of GBP16.6
million (2016: GBP16.0 million). The positive impact of the
enlarged EWA is evident at the net trading income level as it grew
by GBP2.7 million to GBP11.3 million (2016: GBP8.6 million), a
growth of 33%, and the increases in both personnel and
administration expenses, in total GBP7.9 million (2016: GBP6.6
million), are mainly attributable to these acquisitions.
Turning to the Balance Sheet, our total assets increased by 13%
to GBP173.2 million (2016: GBP152.7 million) and our total
liabilities increased by 12% to GBP155.8 million (2016: GBP139.5
million). Within these figures, the Bank's loan book grew by GBP6.7
million to GBP122.7 million (2016: GBP116.1 million), the depositor
base increased by GBP16.3 million to GBP142.3 million (2016:
GBP126.0 million) - a growth of 6% and 13% respectively. Cash and
equivalents stand at GBP44.0 million (2016: GBP30.1 million). As a
result, the Group's equity increased by 32% to GBP17.4 million
(2016: GBP13.2 million).
Our key metrics remain positive: the basic earnings per share
have grown by 130% to 2.21 pence (2016: 0.96 pence) and our return
on equity is now 16% (2016: 12%).
During the course of 2017, we extinguished all outstanding
warrants over the Group and, as part of this exercise, Dr Gregory
Bailey acquired 17.8 million shares, representing 13.6% of the
current issued capital. I am pleased to welcome Dr Bailey to the
board where his capital markets experience will be invaluable. The
warrant exercise provided a further GBP1.8 million in aggregate to
support the regulatory capital base of the Bank and was achieved
without incurring onerous marketing costs. Dr Bailey is considered
a concert party with me, and together we hold 29.9% of equity;
Arron Banks and his associates hold 29.1%; leaving 41.0% of the
issued capital in free float.
As I have previously explained, almost all of the Group's equity
is utilised to underpin the Bank's regulatory capital. Maintaining
and increasing our equity is fundamental in ensuring future growth
to provide additional profitability. During the course of the year,
I and my interests agreed to extend certain loans, at terms
negotiated on an "arms-length" basis, that became due for
repayment. As a result, both the coupon and conversion price for
these loans have been changed in line with the market to 5% and 7.5
pence respectively (previously 7% and 4 pence). The Group will,
however, require further regulatory capital to support the Bank's
planned expansion and the executive is currently considering a
number of ways in which we can expand this capital, but with the
proviso that this will be only on a non-dilutive basis.
Conister Bank Limited
Our new loan advances totalled GBP73.7 million in 2017 which
compares favourably with the previous year (2016: GBP72.5 million),
with direct lending into the Isle of Man and the UK achieving
notable success. Whilst the loan book appears only to have
increased by 7% to GBP123.4 million (2016: GBP115.2 million), this
figure disguises our successful elimination of GBP11.1 million in
loan exposure to a single UK introducer where we suffered a
disproportionate commission-sharing cost in relation to our
perception of risk. Our underlying loan book growth was therefore
GBP19.3 million, an improvement of 17%. Our net interest income
increased by GBP0.8 million to GBP16.6 million (2016: GBP15.8
million), against a decrease in commission expense of GBP0.7
million to GBP8.4 million (2016: GBP9.1 million), leading to a
GBP1.6 million growth in our operating income to GBP8.5 million
(2016: GBP6.9 million) - an increase of 22%. Our new executive
management has done well to stem the burden of commissions paid to
introducers. Ensuring that we do not fall into the trap of "buying"
business is a principal facet of our revised strategy.
Establishment costs grew by 9% to GBP5.7 million (2016: GBP5.2
million), largely as a result of implementing our new IT systems,
including the replacement of the entire depositor software and the
development of a fully-automated lending platform which has been
introduced firstly in the Isle of Man in preparation for a UK
launch. As a prudent measure, we have made further impairment
provisions of GBP0.5 million (2016: GBP0.4 million), and have
reduced intangible assets by GBP0.1 million (2016: nil). As a
consequence, our profit after tax for the year increased by 223% to
GBP2.0 million (2016: GBP0.6 million).
Turning to the Balance Sheet, the Bank's total asset base grew
by 15% to GBP168.9 million (2016: GBP147.5 million) and total
equity increased by 31% to GBP17.0 million (2016: GBP13.0 million).
The loan book continues to perform well, with a total allowance for
impairment of GBP2.5 million (2016: GBP2.2 million), representing
2% of the book (2016: 2%). The continuing excellent performance of
the loans provides the confidence that our future income will
continue throughout 2018 and beyond. The Bank has GBP29.1 million
excess liquidity (2016: GBP17.0 million): the increase largely as a
result of a number of Isle of Man banks having left the market,
allowing us to accumulate deposits at historically low rates to
fund future lending. Managing this sum becomes increasingly
important and we will enhance our Treasury function in the coming
year to ensure that we generate the maximum return on any excess
balance remaining from our lending activities. As we do not access
Inter-Bank funding, we are reliant on an Isle of Man consumer
deposit base. Our belief is that we have secured approximately 20%
of the available market. During 2018, we will review the
opportunity of extending our coverage to include institutional
funds, to be accessed as and when required.
Our operational costs to net income ratio stands at 69% (2016:
77%). Even though this is a marked year-on-year improvement, we
believe that there is still considerable room to better this ratio
and this will be a focus throughout 2018. Although much of these
costs are of a fixed nature, they are scalable and thus our
development of a specialised broker network coupled with the
automated web-based loan processing platform will help achieve a
favourable outcome.
The Bank acquired a 40% holding in the Business Lending Exchange
Limited based in the UK, together with an option to acquire the
remaining shareholding, exercisable by 2021, based on 60% of four
times EBITA. I anticipate announcing further acquisitions in due
course.
Surrounding the Bank's entire operation is our strict adherence
to a robust credit and risk management framework. This enables us
to ensure we maintain our growth in a controlled and safe manner in
both the prime and near-prime markets. To this end, I am pleased to
state that we augmented the Bank's executive management of Douglas
Grant, Managing Director, and James Smeed, Finance Director with
the appointment of Steven Quayle as Head of Risk and Compliance,
Haseeb Qureshi as Chief Operating Officer and Andrew Bass as Isle
of Man Sales Director: all three with the status of Associate
Director and, pleasingly, the latter two being internal promotions.
We have strengthened our Internal Audit function to further ensure
that the Bank's culture continues to meet the highest professional
standards possible.
Edgewater Associates Limited
Following the successful integration of the recent acquisition
of the majority of the Isle of Man's IFA business held by Knox
Financial Services Limited, followed by the acquisition of Balla
Brokers (Insurance Services) Limited, I am pleased to report that
EWA, under Managing Director Sandra Cardwell, increased its gross
profit by 79% to GBP2.6 million (2016: GBP1.5 million), leading to
a post-tax profit of GBP0.7 million (2016: GBP0.4 million) - a
growth of 102%. Administrative expenses grew commensurately to
GBP1.8 million (2016: GBP1.1 million). This excellent performance
means that EWA's net assets now stand at GBP2.0 million (2016:
GBP1.3 million) and, as a result, equity has grown by 58%. EWA's
return on equity, based on its 2010 acquisition price of GBP2
million, was a very impressive 35%.
These consolidations have made EWA the largest IFA in the Isle
of Man, with over 10,000 clients and advising on assets in excess
of GBP273 million. Although principally dealing with private
individuals, considerable inroads have been made into the local
corporate market place and a team of experienced IFAs has been
assembled to grow this business line.
EWA also includes a general insurance division which increased
gross written premium in 2017 by 40% to GBP0.8 million (2016:
GBP0.5 million) and has the organisational structure to support
further acquisitions - an area in which I hope to make further
announcements in due course.
Manx FX Limited
Our foreign exchange advisory service, Manx FX Limited, under
Managing Director Garry Vernon, generated a post-tax profit in 2017
of GBP0.3 million (2016: GBP0.0 million) and has more than
recovered the initial investment expenditure.
Manx FX Limited continues to tender for new accounts and to seek
out new market sector opportunities by attending specialist
conferences, working with the Isle of Man government and through
customer referrals.
Manx Incahoot Limited
Not all of our incubator companies will immediately generate
profits and whilst Manx Incahoot Limited has incurred development
losses there is no doubt the employee benefit market remains a
growing sector. Unfortunately, the gestation period between
contract negotiation and completion is lengthy. There are
challenges ahead for this business and 2018 will be a defining year
for this subsidiary.
Corporate Governance
One of the Group Board's primary responsibilities is to ensure
the provision of effective corporate governance. To this end, the
Board undertook a full review of every aspect of governance in the
light of the Quoted Companies Alliance Code, 2013. I am pleased to
report that the Group is now fully compliant, well in advance of
the AIM requirement to adopt a recognised code of conduct by
September 2018.
Outlook
We have made a number of important changes during the year, the
results of which are extremely encouraging in almost all areas and
provide a strong platform to drive future profitability. Our
Balance Sheet is stronger than it has ever been. Not only are we
constantly seeking new lending opportunities, coupled with a
pipeline of potential incremental acquisitions, but we are also
considering prudential ways to maximise yield from our cash
balances. Wherever possible, we are implementing IT solutions and
systems development to free up our staff to take on more productive
roles.
The Bank, being our largest operation, continues to benefit from
an excellent loan book and the new lending opportunities available
in both the Isle of Man and the UK - our only constraint being
access to non-dilutive regulatory capital. For this, we have a
number of potential solutions which the Board is currently
evaluating.
EWA continues to increase its customer base and product
offering, also seeking further acquisition opportunities to
expand.
In doing all this, our underlying focus is always on an
appreciation of risk and credit management and this focus is now
embedded within the Group at all levels. We recognise that we have
operated within a fairly beneficial financial environment over the
last few years. I believe that this will continue within the short
term, but we recognise that there is a possibility of a future
economic downturn and we must be prepared for this. But we should
always remember that change provides its own opportunities.
Finally, it remains for me to thank you, our shareholders, our
excellent executive and staff who contribute so much to the
development of business, and finally our customers, be they
depositors or borrowers, for your continued loyalty.
Jim Mellon
Executive Chairman
15(th) March 2018
Consolidated Income Statement
2017 2016
For the year ended 31 December Notes GBP000 GBP000
-------------------------------------------- ------ -------- --------
Interest income 6 19,893 19,369
Interest expense 10 (3,256) (3,368)
Net interest income 16,637 16,001
Fee and commission income 3,115 1,660
Fee and commission expense (8,413) (9,106)
Net trading income 11,339 8,555
Other operating income 91 198
Terminal funding 3(u) 90 (154)
Operating income 11,520 8,599
Personnel expenses 7 (4,783) (3,935)
Other expenses 8 (3,152) (2,706)
Provision for impairment on loan
assets 9 (535) (447)
Loss on financial assets carried
at fair value 15 (21) (6)
Realised gains on available for
sale financial assets 16 36 71
Depreciation 19 (134) (246)
Amortisation and impairment of intangibles 20 (286) (80)
Change in share of net assets of
associate 21 38 -
VAT recovery 22 65 295
Profit before tax payable 10 2,748 1,545
Tax payable 11 (240) (244)
Profit for the year after taxation 2,508 1,301
-------- --------
Basic earnings per share (pence) 12 2.26 1.27
Diluted earnings per share (pence) 12 1.77 0.87
The Directors believe that all results
derive from continuing activities.
Consolidated Statement of Other Comprehensive Income
2017 2016
For the year ended 31 December Notes GBP000 GBP000
Profit for the year 2,508 1,301
Other comprehensive income: -
Items that will be reclassified
to profit or loss
Unrealised losses on available
for sale financial instruments
taken to equity 16 (93) (8)
Items that will never be reclassified
to profit or loss
Actuarial gains / (losses) on defined
benefit pension scheme taken to
equity 27 30 (316)
-------- ----------
Total comprehensive income for
the period attributable to owners 2,445 977
Basic earnings per share (pence) 12 2.21 0.96
Diluted earnings per share (pence) 12 1.73 0.68
Consolidated and Company Statement of Financial Position
Group Company
2017 2016 2017 2016
As at 31 December Notes GBP000 GBP000 GBP000 GBP000
------------------------------ -------- ----------- ----------- --------- ---------
Assets
Cash and cash equivalents 14 9,745 6,129 200 -
Financial assets at
a fair value through
profit or loss 15 24 70 - -
Available for sale financial
instruments 16 28,740 23,991 - -
Held to maturity financial
instruments 17 5,532 - - -
Loans and advances to
customers 18 122,720 116,053 - -
Commissions receivable 465 332 - -
Property, plant and
equipment 19 450 719 166 207
Intangible assets 20 1,719 1,316 - -
Investment in Group
undertakings 21 - - 13,772 12,072
Investment in associate 21 38 - - -
Amounts due from Group
undertakings 21 - - 16 296
Trade and other receivables 22 1,443 1,732 22 29
Subordinated loans 21 - - 5,778 5,178
Goodwill 21 2,344 2,344 - -
Total assets 173,220 152,686 19,954 17,782
Liabilities
Customer accounts 23 142,272 125,952 - -
Creditors and accrued
charges 24 3,164 2,975 139 82
Block creditors 25 751 1,390 - -
Amounts owed to Group
undertakings 21 - - 2,517 2,499
Loan notes 26 8,995 8,545 8,995 8,545
Pension liability 27 560 614 - -
Deferred tax liability 11 42 40 - -
Total liabilities 155,784 139,516 11,651 11,126
Equity
Called up share capital 28 20,732 18,933 20,732 18,933
Profit and loss account (3,296) (5,763) (12,429) (12,277)
Total equity 17,436 13,170 8,303 6,656
Total liabilities and
equity 173,220 152,686 19,954 17,782
Consolidated Statement of Cash Flows
2017 2016
For the year ended 31 December Notes GBP000 GBP000
-------------------------------------------- -------- --------- ---------
RECONCILIATION OF PROFIT BEFORE TAXATION
TO OPERATING CASH FLOWS
Profit before tax on continuing activities 2,748 1,545
Loss on financial assets carried
at fair value 15 21 6
Change in share in net assets of
associate 21 (38) -
Depreciation 19 134 246
Amortisation and impairment of intangibles 20 286 80
Actuarial gain / (loss) on defined
benefit pension scheme taken to equity 27 30 (316)
(Decrease) / increase in pension
liability 27 (54) 280
10,
Share-based payment expense 28 22 46
Decrease / (increase) in trade and
other receivables 290 (355)
(Decrease) / increase in trade and
other payables (49) 47
(Increase) / decrease in commission
debtors (133) 29
Net cash inflow from trading activities 3,257 1,608
Increase in loans and advances to
customers (6,667) (14,697)
Increase in deposit accounts 16,320 19,624
Cash inflow from operating activities 12,910 6,535
CASH FLOW STATEMENT
Cash flows from operating activities
Cash inflow from operating activities 12,910 6,535
Taxation paid - (36)
Net cash inflow from operating activities 12,910 6,499
Cash flows from investing activities
Purchase of property, plant and equipment 19 (122) (93)
Purchase of intangible assets 20 (213) (50)
Sale of tangible fixed assets 19 20 -
Acquisition of Manx Financial Limited 21 - (500)
Acquisition of MBL business 20 (239) (948)
Purchase of available for sale financial
instruments 16 (4,842) (8,017)
Purchase of held to maturity financial
instruments 17 (5,532) -
Sale of financial assets at fair
value through profit or loss 15 24 -
Net cash outflow from investing activities (10,904) (9,608)
Cash flows from financing activities
Receipt of loan notes 26 450 1,280
Increase in share capital 28 1,799 -
(Decrease) / increase in borrowings
from block creditors 25 (639) 802
Net cash inflow from financing activities 1,610 2,082
Increase / (decrease) in cash and
cash equivalents 3,616 (1,027)
--------- ---------
Included in cash flows are: -
Interest received - cash amounts 19,109 18,628
Interest paid - cash amounts (3,152) (3,260)
Consolidated and Company Statement of Changes in Equity
Share Retained
For the year ended 31 December Capital Earnings 2017 2016
Group GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- ---------
Balance as at 1 January 18,933 (5,763) 13,170 12,147
Profit for the year - 2,508 2,508 1,301
Other comprehensive income - (63) (63) (324)
Transactions with owners:
-
Share-based payment expense
(see notes 10 and 28) - 22 22 46
Shares issued (see note
28) 1,799 - 1,799 -
Balance as at 31 December 20,732 (3,296) 17,436 13,170
Share Retained
For the year ended 31 December Capital Earnings 2017 2016
Company GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- --------- ---------
Balance as at 1 January 18,933 (12,277) 6,656 6,729
Loss for the year - (174) (174) (119)
Transactions with owners:
-
Share-based payment expense
(see notes 10 and 28) - 22 22 46
Shares issued (see note 28) 1,799 - 1,799 -
Balance as at 31 December 20,732 (12,429) 8,303 6,656
Notes to the Consolidated Financial Statements
1. Reporting entity
Manx Financial Group PLC is a company incorporated in the Isle
of Man. The consolidated financial statements of Manx Financial
Group PLC (the "Company") for the year ended 31 December 2017
comprise the Company and its subsidiaries (the "Group").
A summary of the principal accounting policies, which have been
applied consistently, are set out below.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and International
Financial Reporting Interpretations Committee ("IFRIC")
interpretations applicable to companies reporting under IFRS,
including International Accounting Standards ("IAS").
The Group has continued to apply the accounting policies used
for the 2016 annual report, with the exception of those detailed
below.
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 2017:
-
n Disclosure initiative (Amendments to IAS 7);
n Recognition of Deferred Tax Assets for Unrealised Losses
(Amendments to IAS 12); and
n Annual Improvements to IFRSs 2014-2016 Cycle (Amendments to
IFRS 12 Disclosures of Interests in Other Entities).
There are no significant changes following the implementation of
these standards and amendments.
(b) Basis of measurement
The financial statements are prepared on a historical cost basis
except: -
n financial instruments at fair value through profit or loss and
available for sale financial instruments are measured at fair
value; and
n equity settled share-based payment arrangements are measured
at fair value.
(c) Functional and presentation currency
These financial statements are presented in pounds sterling,
which is the Group's functional currency. Except as indicated,
financial information presented in pounds sterling has been rounded
to the nearest thousand. All subsidiaries of the Group have pounds
sterling as their functional currency.
(d) Use of estimates and judgements
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.
In particular, information about significant areas of
estimation, uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the
amounts recognised in the financial statements are described in
note 3(p).
3. Significant accounting policies
(a) Basis of consolidation of subsidiaries
Subsidiaries are entities controlled by the Group. Control
exists when the Group has power over an investee, exposure or
rights to variable returns from its involvement with the investee
and the ability to use its power to affect those returns. In
assessing control, potential voting rights that presently are
exercisable are taken into account. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases.
Intra-Group balances, income and expenses and unrealised losses
or gains arising from intra-Group transactions, are eliminated in
preparing the consolidated financial statements.
(b) Accounting for business combinations
Business combinations are accounted for by using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. Control is the power to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the Group takes
into consideration potential voting rights that currently are
exercisable.
The Group measures goodwill at the acquisition date as: -
n the fair value of the consideration transferred; plus
n the recognised amount of any non-controlling interests in the
acquiree; plus
n if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree; less
n the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in the income statement.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
generally recognised in the income statement.
(c) Property, plant and equipment and intangible assets
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.
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.
An intangible asset is an identifiable non-monetary asset
without physical substance. An item is identifiable if it is
separable or arises from contractual or other legal rights. The
initial measurement of an intangible asset depends on whether it
has been acquired separately or has been acquired as part of a
business combination.
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 acquired as part of a business combination,
with an indefinite useful live are measured at fair value.
Intangible assets with indefinite useful lives are not amortised
but instead are subject to impairment testing at least
annually.
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 useful lives of property, plant and equipment and intangibles
are as follows: -
Property, plant and equipment
Leasehold improvements to expiration of the lease
Equipment 4-5 years
Vehicles 4 years
Furniture 10 years
Intangible assets
Customer contracts and lists to expiration of the agreement
Business intellectual property rights 4 years - indefinite
Website development costs indefinite
Software 5 years
(d) Financial assets
Management have determined the classification of the Group's
financial assets into one of the following categories: -
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money directly to a
customer with no intention of trading the receivable. This
classification includes advances made to customers under hire
purchase ("HP") and finance lease agreements, finance loans,
personal loans, block discounting, secured commercial loans,
stocking plans and wholesale funding agreements.
Loans are recognised when cash is advanced to the borrowers.
Loans and receivables are carried at amortised cost using the
effective interest rate method with all movements being recognised
in the income statement after taking into account provision for
impairment losses (see note 3(e)).
Financial assets at fair value through profit or loss
A financial asset is classified in this category if it is
acquired principally for the purpose of selling in the short term
or if so designated by management. The fair value of the financial
asset at fair value through profit or loss is based on the quoted
bid price at the reporting date.
Available for sale financial instruments
Available for sale investments are non-derivative investments
that are designated as available for sale or are not classified as
another category of financial assets. Available for sale
investments are carried at fair value.
Dividend income is recognised in the income statement when the
Group becomes entitled to the dividend. Other fair value changes
are recognised in other comprehensive income until the investment
is sold or impaired, whereupon the cumulative gains and losses
previously recognised in other comprehensive income are recognised
in the income statement.
Held to maturity financial instruments
Held to maturity investments are non-derivative investments that
are initially measured at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, they are
measured at amortised cost using the effective interest method.
Investments in subsidiary undertakings
Investments in subsidiary undertakings in the parent company
statement of financial position are measured at cost less any
provision for impairment.
Fair value
The fair value hierarchy is applied to all financial assets.
Refer to note 4(c) for further information.
(e) Impairment of financial assets
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or group of financial
assets is impaired. This arises if, and only if, there is objective
evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (a "loss
event") and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset, or group of
financial assets, that can be reliably estimated. Impairment losses
are recognised in the income statement for the year.
Objective evidence that financial assets are impaired can
include default or delinquency by a borrower, restructuring of a
loan or advance by the Group on terms that the Group would not
otherwise consider indications that a borrower or issuer will enter
bankruptcy or other observable data relating to a group of assets
such as adverse changes in the payment status of borrowers.
Loans and other receivables are reviewed for impairment where
there are repayment arrears and doubt exists regarding
recoverability. The impairment allowance is based on the level of
arrears together with an assessment of the expected future cash
flows, and the value of any underlying collateral after taking into
account any irrecoverable interest due. Amounts are written off
when it is considered that there is no further prospect of
recovery.
Where past experience has indicated that, over time, a
particular category of financial asset has suffered a trend of
impairment losses, a collective impairment allowance is made for
expected losses to reflect the continuing historical trend.
(f) 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.
(g) Financial liabilities
Financial liabilities consist of customer deposit accounts,
other creditors, loan notes, block creditors and accrued charges.
Customer accounts are recognised immediately upon receipt of cash
from the customer. Interest payable on customer deposits is
provided for using the interest rate prevailing for the type of
account.
(h) 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.
Under the defined benefit pension plan, in accordance with IAS
19 Employee benefits, the full service cost for the period,
adjusted for any changes to the plan, is charged to the income
statement. A charge equal to the expected increase in the present
value of the plan liabilities, as a result of the plan liabilities
being one year closer to settlement, and a credit reflecting the
long-term expected return on assets based on the market value of
the scheme assets at the beginning of the period, is included in
the income statement.
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 difference between the expected return on assets
and that actually achieved in the period, is recognised in the
income statement in the year in which they arise. 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.
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 share option programme was originally set up for Group
employees to subscribe for shares in Conister Trust Limited (now
Conister Bank Limited). Since the Scheme of Arrangement, the
shareholders of the Bank became shareholders of the Company. The
share option programme is now operated by the Company. 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.
(i) Leases
A Group company is the lessor
Finance leases and HP contracts
When assets are subject to a finance lease or HP contract, the
present fair 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.
A Group company is the lessee
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 the income statement on a
straight-line basis over the period of the lease.
(j) 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 timing differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. 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.
(k) Interest income and expense
Interest income and expense are recognised in the income
statement using the effective interest rate method.
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 net carrying amount of the financial asset or
financial liability. The discount period is the expected life or,
where appropriate, a shorter period. The calculation includes all
amounts receivable or payable by the Group that are an integral
part of the overall return, 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.
Once a financial asset or a group of similar financial assets
has been written down as a result of impairment, subsequent
interest income continues to be recognised using the original
effective interest rate applied to the reduced carrying value of
the financial instrument.
(l) Fees and commission income
Fees and commission 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 fees relate.
(m) Programme costs
Programme costs are direct expenditure incurred in relation to
prepaid card programmes. The costs are recognised over the period
in which income is derived from operating the programmes.
(n) 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.
(o) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and
interpretations are not effective for the year and have not been
applied in preparing these consolidated financial statements.
New/revised International Accounting Standards/International Effective
Financial Reporting Standards (IAS/IFRS) date
(accounting
periods
commencing
on or after)
------------------------------------------------------------- --------------
IFRS 15 Revenue from Contracts with Customers 1 January
2018
IFRS 9 Financial Instruments 1 January
2018
Classification and Measurement of Share-based 1 January
Payment Transactions (Amendments to IFRS 2018
2)
Applying IFRS 9 Financial Instruments with 1 January
IFRS 4 Insurance Contracts (Amendments to 2018
IFRS 4)
Transfers of Investment Property (Amendments 1 January
to IAS 40) 2018
Annual Improvements to IFRSs 2014-2016 Cycle 1 January
(Amendments to IFRS 1 First-time Adoption 2018
of IFRSs and IAS 28 Investments in Associates
and Joint Ventures)
IFRIC 22 Foreign Currency Transactions and 1 January
Advance Consideration 2018
IFRS 16 Leases 1 January
2019
IFRS 17 Insurance Contracts 1 January
2021
------------------------------------------------------------- --------------
The Directors do not expect the adoption of the standards and
interpretations to have a material impact on the Group's financial
statements in the period of initial application with the exception
of IFRS 9 Financial Instruments.
IFRS 9, published in July 2014, replaces the existing guidance
in IAS 39 Financial Instruments: Recognition and Measurement (IAS
39). IFRS 9 includes revised guidance on the classification and
measurement of financial instruments, including a new expected
credit loss model for calculating impairment on financial assets,
and the new general hedge accounting requirements. It also carries
forward the guidance on recognition and de-recognition of financial
instruments from IAS 39. IFRS 9 is effective for annual reporting
periods beginning on or after 1 January 2018, with early adoption
permitted.
The Group is finalising its assessment of the potential impact
on its consolidated financial statements resulting from the
application of IFRS 9. Based on assessments performed to date, it
is anticipated that impairment allowances could increase by 10 to
20%. Given the nature of the Group's operations, including its
establishment of loss pools for much of its lending, this standard
is not expected to have a pervasive impact on the Group's financial
statements. However, calculation of impairment of financial
instruments on an expected credit loss basis is expected to result
in the recognition of losses earlier and, as noted above, an
overall increase in the level of impairment allowances.
The impairment requirements apply to financial assets measured
at amortised cost and fair value through other comprehensive
income, loan receivables, certain loan commitments and financial
guarantee contracts. At initial recognition, an allowance (or
provision in the case of commitments and guarantees) is required
for expected credit losses ("ECL") resulting from default events
that are possible within the next 12 months ("12-month ECL"). In
the event of a significant increase in the credit risk, allowance
(or provision) is required for ECL resulting from all possible
default events over the expected life of the financial instrument
("lifetime ECL"). Financial assets where 12-month ECL is recognised
are considered to be Stage 1; financial assets, which are
considered to have experienced a significant increase in credit
risk are in Stage 2; and financial assets, for which there is
objective evidence of impairment, so are considered to be in
default or otherwise credit impaired, are in Stage 3.
The assessment of whether credit risk has increased
significantly since initial recognition is performed for each
reporting period by considering the change in the risk of default
occurring over the remaining life of the financial instrument,
rather than by considering the increase in ECL.
The assessment of credit risk and estimated ECL are required to
be unbiased and probability-weighted, and should incorporate all
available information which is relevant to the assessment including
information about past events, current conditions and reasonable
and supportable forecasts of economic conditions at the reporting
date. In addition, the estimation of ECL should take into account
the time value of money. As a result, the recognition and
measurement of the impairment is intended to be more
forward-looking than under IAS 39 and the resulting impairment
charge will tend to be more volatile. It will also tend to result
in an increase in the total level of impairment allowances, since
all financial assets will be assessed for at least 12-month ECL and
the population for financial assets to which lifetime ECL applies
is likely to be larger than the population for which there is
objective evidence of impairment in accordance with IAS 39.
(p) Key sources of estimation uncertainty
Management believe that a key area of estimation and uncertainty
is in respect of the impairment allowances on loans and advances to
customers, goodwill, intangible assets and the recoverability of
the value added tax ("VAT") receivable. Loans and advances to
customers are evaluated for impairment on a basis described in note
4a(i), credit risk. The Group has substantial historical data upon
which to base collective estimates for impairment on HP contracts,
finance leases and personal loans. The accuracy of the impairment
allowances and provisions for counter claims and legal costs depend
on how closely the estimated future cash flows mirror actual
experience. An impairment review is performed annually for goodwill
and intangible assets at different discount rates to allow for any
uncertainty. The assessment of the recoverability of the VAT
receivable balance is based on current discussions with the Isle of
Man Government Customs and Excise Division and the status of the
Volkswagen Financial Services (UK) Limited v HM Revenue &
Customs (TC01401) case (see note 22).
(q) Fiduciary deposits
Deposits received on behalf of clients by way of a fiduciary
agreement are placed with external parties and are not recognised
in the statement of financial position. Income in respect of
fiduciary deposit taking is included within interest income and
recognised on an accruals basis.
(r) Prepaid card funds
The Group could receive funds for its prepaid card activities.
These funds would be held in a fiduciary capacity for the sole
purpose of making payments as and when card-holders utilise the
credit on their cards and therefore would not be recognised in the
statement of financial position.
(s) Foreign exchange
Foreign currency assets and liabilities (applicable to the
Conister Card Services division only) are translated at the rates
of exchange ruling at the reporting date. Transactions during the
year are recorded at rates of exchange in effect when the
transaction occurs. The exchange movements are dealt with in the
income statement.
(t) 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.
(u) Terminal funding
In September 2014, the Bank discontinued funding handheld
payment devices (referred to as Terminal Funding) due to the volume
of write offs. Ever since, the book is being run off whilst the
Bank vigorously pursues historical write offs. A decision was made
by the Board in the prior year to cease funding and wind up the
book upon the final repayment date of August 2019.
2017 2016
GBP000 GBP000
Interest income 377 601
Fee and commission expense (92) (166)
Provision for impairment on loan assets (195) (589)
90 (154)
4. Risk and capital management
(a) Risk management
Introduction and overview
The Group has exposure to the following risks from its use of
financial instruments: -
n credit risk;
n liquidity risk;
n operational risk; and
n market risk.
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for managing risk and capital within the Bank. The Bank
is the main operating entity exposed to these risks.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management framework within
the Group. 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. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions. The
Group has a disciplined and constructive control environment, in
which all employees understand their roles and obligations.
The Board of Directors of the Bank (the "Board of the Bank")
delegate responsibility for risk management to the Executive Risk
Committee ("ERC") which reports to the Audit, Risk and Compliance
Committee ("ARCC"). It is responsible for the effective risk
management of the Bank. Operational responsibility for asset and
liability management is delegated to the Executive Directors of the
Bank, through the Bank's Assets and Liabilities Committee
("ALCO").
ARCC is responsible for monitoring compliance with the risk
management policies and procedures faced by the Group's regulated
entities, and for reviewing the adequacy of the risk management
framework. Internal Audit undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of
which are reported to the ARCC.
i) Credit risk
Credit risk is the risk of financial loss to the Bank if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. For risk management reporting
purposes, the Bank considers and consolidates all elements of
credit risk exposure, such as individual obligor default, country
and sector risk. The Bank is principally exposed to credit risk
with regard to loans and advances to customers, comprising HP and
finance lease receivables, unsecured personal loans, secured
commercial loans, block discounting, stocking plan loans and
wholesale funding agreements. It is also exposed to credit risk
with regard to cash balances and trade and other receivables.
Management of credit risk
The Board of the Bank delegates responsibility for the
management of credit risk to the Credit Committee ("CC") for loans
and ALCO for other assets. The following measures are taken in
order to manage the exposure to credit risk: -
n explicit credit policies, covering collateral requirements,
credit assessment, risk grading and reporting, documentary and
legal procedures, and compliance with regulatory and statutory
requirements;
n a rigorous authorisation structure for the approval and
renewal of credit facilities. Each opportunity is researched for
viability, legal/regulatory restriction and risk. If recommended,
the proposal is submitted to Board of the Bank or the CC. The CC
reviews lending assessments in excess of individual credit control
or executive discretionary limits;
n reviewing and assessing existing credit risk and collateral.
The CC assesses all credit exposures in excess of designated
limits, as set out in the underwriting manual for asset and
personal finance;
n limiting concentrations of exposure to counterparties,
geographies and industries defining sector limits, lending caps and
exposure to minimise interest rate risk;
n ensuring that appropriate records of all sanctioned facilities
are maintained;
n ensuring regular account reviews are carried out for all
accounts agreed by the CC; and
n ensuring Board of the Bank approval is obtained on all
decisions of the CC above the limits set out in the Bank's credit
risk policy.
Management of credit risk (continued)
An analysis of the credit risk on loans and advances to
customers is as follows: -
2017 2016
GBP000 GBP000
-------------------------------------- -------- --------
Carrying amount 122,720 116,053
Individually impaired(1)
Grade A - -
Grade B - -
Grade C 3,184 3,010
Gross value 3,184 3,010
Allowance for impairment (2,440) (2,099)
Carrying value 744 911
Collective allowance for impairment (73) (57)
Past due but not impaired
Less than 1 month 2,922 2,558
1 month but less than 2 months 1,941 1,314
2 months but less than 3 months 1,012 575
3 months and over 1,296 1,146
Carrying value 7,171 5,593
Neither past due nor impaired 114,878 109,606
(1) Loans are graded A to C depending on the level of risk.
Grade C relates to agreements with the highest of risk, Grade B
with medium risk and Grade A relates to agreements with the lowest
risk.
Impaired loans
Impaired loans are loans where the Group determines that it is
probable that it will be unable to collect all principal and
interest due according to the contractual terms of the loan
agreements.
Past due but not impaired loans
Past due but not impaired loans are loans where the contractual
interest or principal payments are past due but the Group believes
that impairment is not appropriate on the basis of the level of
security, collateral available and/or the stage of collection of
amounts owed to the Group.
Allowances for impairment
The Group establishes an allowance for impairment losses that
represents its estimate of incurred losses in its loan portfolio.
The main components of this allowance are a specific loss allowance
that relates to individually significant exposures, and a
collective loan loss allowance, which is established for the
Group's assets in respect of losses that have been incurred but
have not been identified on loans subject to individual assessment
for impairment. The collective loan loss allowance is based on
historical experience, the current economic environment and an
assessment of its impact on loan collectability. Guidelines
regarding specific impairment allowances are laid out in the Bank's
Debt Recovery Process Manual which is reviewed annually.
Write-off policy
The Group writes off a loan balance (and any related allowances
for impairment losses) when management determines that the loans
are uncollectable. This determination is reached after considering
information such as the occurrence of significant changes in the
borrower's financial position such that the borrower can no longer
pay the obligation, or that proceeds from collateral will not be
sufficient to pay back the entire exposure.
Collateral
The Group holds collateral in the form of the underlying assets
(typically private and commercial vehicles, plant and machinery) as
security for HP, finances leases, vehicle stocking plans, block
discounting and secured commercial loan balances, which are
sub-categories of loans and advances to customers. In addition, the
commission share schemes have an element of capital indemnified.
During 2017, 41.7% of loans and advances fell into this category
(2016: 54.4%).
Estimates of fair value are based on the value of collateral
assessed at the time of borrowing, and generally are not updated
except when a loan is individually assessed as impaired. 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 18 for further details).
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% of the
Bank's total lending portfolio at the end of 31 December 2017
(2016: one introducer).
(ii) Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting financial liability obligations as they fall
due.
Management of liquidity risk
The Group's approach to managing liquidity is to ensure, as far
as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
The Group uses various methods, including forecasting of cash
positions, to monitor and manage its liquidity risk to avoid undue
concentration of funding requirements at any point in time or from
any particular source. Maturity mismatches between lending and
funding are managed within internal risk policy limits.
Minimum liquidity
The Isle of Man Financial Services Authority ("FSA") requires
that the Bank should be able to meet its obligations for a period
of at least one month. In order to meet this requirement, the Bank
measures its cash flow commitments, and maintains its liquid
balances in a diversified portfolio of short-term bank balances,
short dated UK Government Treasury Bills and Certificates of
Deposit.
Bank balances are only held with financial institutions approved
by the Board of the Bank and which meet the requirements of the
FSA.
Measurement of liquidity risk
The key measure used by the Bank for managing liquidity risk is
the assets and liabilities maturity profile.
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)
>8 >1 >3 >3
days month months >6 >1 years
31 December Sight- - - - months year -
2017 8 1 3 6 - 1 - 3 5 >5
days month months months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Customer
accounts 2,579 3,136 12,710 24,241 30,207 60,820 12,567 - 146,260
Other
liabilities 3,094 89 318 1,540 1,754 3,326 3,322 560 14,003
Total
liabilities 5,673 3,225 13,028 25,781 31,961 64,146 15,889 560 160,263
Residual contractual maturities of financial liabilities as at
the reporting date (undiscounted) (continued)
>8 >3 >1 >3
days >1 months >6 year years
31 December - month - months - -
2016 Sight- 1 - 3 6 - 1 3 5 >5
8 days month months months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Customer
accounts 2,831 4,601 8,257 8,079 35,517 53,280 18,024 - 130,589
Other
liabilities 3,026 90 198 301 2,509 3,787 3,691 614 14,216
Total
liabilities 5,857 4,691 8,455 8,380 38,026 57,067 21,715 614 144,805
Maturity of assets and liabilities at the reporting date
>8 >1 >6 >1 >3
days month >3 months year years
31 December Sight- - - months- - - -
2017 8 1 3 6 1 3 5 >5
days month months months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Assets
Cash &
cash
equivalents 9,745 - - - - - - - 9,745
Available
for sale
financial
instruments - 1,998 16,983 2,992 - - 6,767 - 28,740
Held to
maturity
financial
instruments - - - 5,532 - - - - 5,532
Customer
accounts
receivable 3,713 3,654 7,956 10,823 25,886 54,950 15,717 21 122,720
Commission
debtors 79 194 192 - - - - - 465
Other assets 24 - - - - - - 5,994 6,018
Total assets 13,561 5,846 25,131 19,347 25,886 54,950 22,484 6,015 173,220
Liabilities
Customer
accounts 2,570 3,105 12,654 24,112 29,716 57,711 12,404 - 142,272
Other
liabilities 3,086 55 234 169 3,333 2,945 3,130 560 13,512
Total
liabilities 5,656 3,160 12,888 24,281 33,049 60,656 15,534 560 155,784
>8 >1 >6 >1 >3
days month >3 months year years
31 December Sight- - - months- - - -
2016 8 1 3 6 1 3 5 >5
days month months months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ------- ------- ------- -------- -------- -------- -------- -------- --------
Assets
Cash &
cash
equivalents 6,129 - - - - - - - 6,129
Available
for sale
financial
instruments - 6,499 6,499 10,993 - - - - 23,991
Customer
accounts
receivable 4,198 3,067 7,650 10,037 18,675 54,074 17,704 648 116,053
Commission
debtors 29 110 193 - - - - - 332
Other assets 70 - - - - - - 6,111 6,181
Total assets 10,426 9,676 14,342 21,030 18,675 54,074 17,704 6,759 152,686
Liabilities
Customer
accounts 2,840 4,597 8,235 8,028 34,988 50,931 16,333 - 125,952
Other
liabilities 3,028 39 104 159 2,276 3,754 3,590 614 13,564
Total
liabilities 5,868 4,636 8,339 8,187 37,264 54,685 19,923 614 139,516
(iii) Operational risk
Operational risk arises from the potential for inadequate
systems, including systems' breakdown, errors, poor management,
breaches in internal controls, fraud and external events, to result
in financial loss or reputational damage. Operational risk also
occurs when lending through an outsourced partner. The Group
manages the risk through appropriate risk controls and loss
mitigation actions. These actions include a balance of policies,
procedures, internal controls and business continuity arrangements.
Operational risk across the Group is analysed and discussed at all
Board meetings, with ongoing monitoring of actions arising to
address the risks identified.
(iv) Market risk
Market risk is the risk that changes in the level of interest
rates, changes in the rate of exchange between currencies or
changes in the price of securities and other financial contracts
including derivatives will have an adverse financial impact. The
primary market risk within the Group is interest rate risk exposure
in the Bank. As at 31 December 2017 and 2016, the fair value of the
financial instruments as presented in the interest risk table below
are considered to be equal to their carrying amounts.
During the year, the Group was exposed to market price risk
through holding available-for-sale financial instruments, and a
financial asset carried at fair value through profit and loss. The
only significant exposure relates to the financial asset carried at
fair value through profit and loss, which is an equity investment
stated at market value. Given the size of this holding, which was
GBP24,000 at 31 December 2017 (2016: GBP70,000) the potential
impact on the results of the Group is relatively small and no
sensitivity analysis has been provided for the market price
risk.
Interest rate risk
Interest rate risk exposure in the Bank arises from the
difference between the maturity of capital and interest payable on
customer deposit accounts, and the maturity of capital and interest
receivable on loans and financing. The differing maturities on
these products create interest rate risk exposures due to the
imperfect matching of different financial assets and liabilities.
The risk is managed on a continuous basis by management and
reviewed by the Board of the Bank. The Bank monitors interest rate
risk on a monthly basis via the ALCO. The matching of the maturity
interest rates of assets and liabilities is fundamental to the
management of the Bank. The maturities of assets and liabilities
and the ability to replace, at an acceptable cost, interest bearing
liabilities as they mature are important factors in assessing the
liquidity of the Bank and its exposure to changes in interest
rates.
Interest rate re-pricing table
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 customer accounts at
their earliest.
Sight- >1 >3
year years
31 December 1 >1month >3months >6months- - -
2017 month - - 1 3 5 >5 Non-Int.
3months 6months year years years years Bearing Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash & cash
equivalents 9,745 - - - - - - - 9,745
Available
for
sale
financial
instruments 1,998 16,983 2,992 - - 6,767 - - 28,740
Held to
maturity
financial
instruments - - 5,532 - - - - - 5,532
Customer
accounts
receivable 7,367 7,956 10,823 25,886 54,950 15,717 21 - 122,720
Commission
debtors 273 192 - - - - - - 465
Other assets 24 - - - - - - 5,994 6,018
Total assets 19,407 25,131 19,347 25,886 54,950 22,484 21 5,994 173,220
Liabilities
Customer
accounts 5,675 12,654 24,112 29,716 57,711 12,404 - - 142,272
Other
liabilities 3,141 234 169 3,333 2,945 3,130 560 - 13,512
Total
capital
and
reserves - - - - - - - 17,436 17,436
Total
liabilities
and equity 8,816 12,888 24,281 33,049 60,656 15,534 560 17,436 173,220
Interest
rate
sensitivity
gap 10,591 12,243 (4,934) (7,163) (5,706) 6,950 (539) (11,442) -
Cumulative 10,591 22,834 17,900 10,737 5,031 11,981 11,442 - -
>1 >3
>6months year years
31 December Sight- >3months - - -
2016 1 >1month - 1 3 5 >5 Non-Int.
month -3months 6months year years years years Bearing Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash & cash
equivalents 6,129 - - - - - - - 6,129
Available
for
sale
financial
instruments 6,499 6,499 10,993 - - - - - 23,991
Customer
accounts
receivable 7,265 7,650 10,037 18,675 54,074 17,704 648 - 116,053
Commission
debtors 139 193 - - - - - - 332
Other assets 70 - - - - - - 6,111 6,181
Total assets 20,102 14,342 21,030 18,675 54,074 17,704 648 6,111 152,686
Liabilities
Customer
accounts 7,437 8,235 8,028 34,988 50,931 16,333 - - 125,952
Other
liabilities 3,067 104 159 2,276 3,754 3,590 614 - 13,564
Total
capital
and
reserves - - - - - - - 13,170 13,170
Total
liabilities
and equity 10,504 8,339 8,187 37,264 54,685 19,923 614 13,170 152,686
Interest
rate
sensitivity
gap 9,598 6,003 12,843 (18,589) (611) (2,219) 34 (7,059) -
Cumulative 9,598 15,601 28,444 9,855 9,244 7,025 7,059 - -
Sensitivity analysis for interest rate risk
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
(2016: 2.0%). The following tables set out the estimated total
impact of such a change based on the mismatch at the reporting
date: -
>1 >3
>6months year years
31 December Sight- >3months - - -
2017 1 >1month - 1 3 5 >5 Non-Int.
month -3months 6months year years years years Bearing Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Interest
rate
sensitivity
gap 10,591 12,243 (4,934) (7,163) (5,706) 6,950 (539) (11,442) -
Weighting 0.000 0.003 0.007 0.014 0.027 0.054 0.115 0.000 -
GBP000 - 37 (35) (100) (154) 375 (62) - 61
>1 >3
>6months year years
31 December Sight- - - -
2016 1 >1month >3months 1 3 5 >5 Non-Int.
month -3months -6months year years years years Bearing Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Interest
rate
sensitivity
gap 9,598 6,003 12,843 (18,589) (611) (2,219) 34 (7,059) -
Weighting 0.000 0.003 0.007 0.014 0.027 0.054 0.115 0.000 -
GBP000 - 18 90 (260) (17) (120) 4 - (285)
(b) Capital Management
Regulatory capital
The Group considers capital to comprise share capital, share
premium, reserves and subordinated loans. Capital is deployed by
the Board to meet the commercial objectives of the Group, whilst
meeting regulatory requirements in the Bank. The Group's policy is
to maintain a strong capital base so as to maintain investor,
creditor, depositor and market confidence and to sustain future
development of the business.
In implementing current capital requirements, the capital
position in the Bank is also subject to prescribed minimum
requirements by the FSA in respect of the ratio of Common Equity
Tier 1, Tier 1 and Total Capital to total risk-weighted assets. The
requirement applies to the Bank (a wholly owned subsidiary of the
Company) as a component of the Group and has been adhered to
throughout the year.
(c) Fair value of financial 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.
Valuation models
The Group measures fair values using the following fair value
hierarchy, which reflects the significance of the inputs used in
making the measurements: -
n Level 1: inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
n 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
n 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.
Financial instruments measured at fair value - fair value
hierarchy
The following table analyses financial instruments measured at
fair value at the reporting date, by the level in the fair value
hierarchy into which the fair value measurement is categorised. The
amounts are based on the values recognised in the statement of
financial position.
Level Level Level Total
31 December 2017 1 2 3 GBP000
GBP000 GBP000 GBP000
Investment securities
Government bonds 28,740 - - 28,740
Equities 24 - - 24
-------- --------
28,764 - - 28,764
------------------------- -------- -------- -------- --------
Level Level Level Total
31 December 2016 1 2 3 GBP000
GBP000 GBP000 GBP000
Investment securities
Government bonds 23,991 - - 23,991
Equities 70 - - 70
-------- --------
24,061 - - 24,061
------------------------- -------- -------- -------- --------
Financial instruments not measured at fair value
The following table sets out the fair values of financial
instruments not measured at fair value and analyses them by the
level in the fair value hierarchy into which each fair value
measurement is categorised: -
Total Total
Level Level Level fair carrying
1 2 3 values amount
31 December 2017 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash and cash equivalents - 9,745 - 9,745 9,745
Held to maturity financial
assets - 5,532 - 5,532 5,532
Loans and advances to
customers - 122,720 - 122,720 122,720
Commissions receivable - 465 - 465 465
Investment in associate - 38 - 38 38
Trade and other receivables - 1,443 - 1,443 1,443
- 139,943 - 139,943 139,943
----------- --------- --------- -------- ----------
Liabilities
Customer accounts - 142,272 - 142,272 142,272
Creditors and accrued
charges - 3,164 - 3,164 3,164
Block creditors - 751 - 751 751
Loan notes - 8,995 - 8,995 8,995
----------- --------- --------- -------- ----------
- 155,182 - 155,182 155,182
----------- ---------------------------- --------- --------- -------- ----------
Total Total
Level Level Level fair carrying
1 2 3 values amount
31 December 2016 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash and cash equivalents - 6,129 - 6,129 6,129
Loans and advances to
customers - 116,053 - 116,053 116,053
Commissions receivable - 332 - 332 332
Trade and other receivables - 1,732 - 1,732 1,732
- 124,246 - 124,246 124,246
----------- --------- --------- -------- ----------
Liabilities
Customer accounts - 125,952 - 125,952 125,952
Creditors and accrued
charges - 2,975 - 2,975 2,975
Block creditors - 1,390 - 1,390 1,390
Loan notes - 8,545 - 8,545 8,545
----------- --------- --------- -------- ----------
- 138,862 - 138,862 138,862
----------- ---------------------------- --------- --------- -------- ----------
Where available, the fair value of loans and advances is based
on observable market transactions. Where observable market
transactions are not available, fair value is estimated using
valuation models, such as discounted cash flow techniques. Input
into the valuation techniques includes expected lifetime credit
losses, interest rates, prepayment rates and primary origination or
secondary market spreads. For collateral-dependent impaired loans,
the fair value is measured based on the value of the underlying
collateral. Input into the models may include data from third party
brokers based on over the counter trading activity, and information
obtained from other market participants, which includes observed
primary and secondary transactions.
5. Segmental analysis
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 five (2016: four)
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); Manx Incahoot; Conister Card Services; Edgewater
Associates; and Manx FX.
Asset Conister
and Manx Card Edgewater Investing
For the year Personal Incahoot Services Associates Manx Activities Total
ended 31 Finance GBP000 GBP000 GBP000 FX GBP000 GBP000
December GBP000 GBP000
2017
Net interest
income 16,637 - - - - - 16,637
Operating
income /(loss) 8,508 44 (104) 2,625 447 - 11,520
Profit / (loss)
before tax
payable 2,100 (293) (104) 742 249 (186) 2,508
Capital
expenditure 254 1 - 319 - - 574
Total assets 168,226 307 18 2,252 181 2,236 173,220
Asset Conister
and Manx Card Edgewater Investing
For the year Personal Incahoot Services Associates Manx Activities Total
ended 31 Finance GBP000 GBP000 GBP000 FX GBP000 GBP000
December GBP000 GBP000
2016
Net interest
income 16,001 - - - - - 16,001
Operating
income /(loss) 7,047 81 (106) 1,465 111 1 8,599
Profit / (loss)
before tax
payable 1,787 (205) (223) 371 (26)) (159) 1,545
Capital
expenditure 69 52 - 970 - - 1,091
Total assets 148,523 418 2 1,546 102 2,095 152,686
6. Interest income
Interest receivable and similar income represents charges and
interest on finance and leasing agreements attributable to the year
after adjusting for early settlements and interest on bank balances
and held to maturity financial instruments.
7. Personnel expenses
2017 2016
GBP000 GBP000
Salaries and Directors' remuneration / fees 3,914 3,248
Pension costs 247 199
National insurance and payroll taxes 432 353
Training and recruitment costs 190 135
4,783 3,935
8. Other expenses
2017 2016
GBP000 GBP000
Professional and legal fees 848 858
Marketing costs 211 167
IT costs 528 425
Establishment costs 376 362
Communication costs 137 61
Travel costs 149 79
Bank charges 142 136
Insurance 133 112
Irrecoverable VAT 180 238
Other costs 448 268
3,152 2,706
9. Allowance for impairment
The charge in respect of specific allowances for impairment
comprises: -
2017 2016
GBP000 GBP000
Specific impairment allowances made 1,295 915
Reversal of allowances previously made (776) (475)
Total charge for specific provision for
impairment 519 440
The charge in respect of collective allowances for impairment
comprises: -
2017 2016
GBP000 GBP000
Collective impairment allowances made 28 12
Release of allowances previously made (12) (5)
Total charge for collective allowances for
impairment 16 7
Total charge for allowances for impairment 535 447
10. Profit before tax payable
The profit before tax payable for the year is stated after
charging: -
2017 2016
GBP000 GBP000
Interest expense payable to depositors 2,690 2,795
Interest expense payable on loan notes 495 475
Interest expense payable to block funders 71 98
Share options expense 22 46
Directors' remuneration 214 304
Directors' fees 185 195
Directors' pensions 21 30
Directors' performance related pay 36 60
Auditor's remuneration: - as Auditor current
year 90 78
non-audit services 37 38
Pension cost defined benefit scheme 17 13
Operating lease rentals for property 220 231
11. Tax expense
2017 2016
GBP000 GBP000
--------------------------------------------------- ------- -------
Current tax expense
Current year 226 114
Changes to estimates for prior years 12 7
238 121
Deferred tax expense
Origination and reversal of temporary differences 2 24
Utilisation of previously recognised tax
losses - 78
Changes to estimates for prior years - 21
2 123
Total tax expense 240 244
--------------------------------------------------- ------- -------
2017 2016
GBP000 GBP000
--------------------------------------- ------- ------- ------- -------
Reconciliation of effective tax
rate
Profit before tax on continuing
operations 2,748 1,545
Tax using the Bank's domestic
tax rate 10.0% 275 10.0% 155
Effect of tax rates in foreign
jurisdictions 1.6% 44 1.5% 24
Non-deductible expenses 0.8% 23 1.8% 28
Tax exempt income (2.4)% (67) (0.4)% (6)
Timing differences in current
year (1.8)% (49) (0.6)% (9)
Origination and reversal of temporary
differences in deferred tax 0.1% 2 1.6% 24
Changes to estimates for prior
years 0.4% 12 1.8% 28
------- ------- ------- -------
Total tax expense 8.7% 240 15.8% 244
--------------------------------------- ------- ------- ------- -------
The main rate of corporation tax in the Isle of Man is 0.0%
(2016: 0.0%). However the profits of the Group's Isle of Man
banking activities are taxed at 10.0% (2016: 10.0%). The profits of
the Group's subsidiaries that are subject to UK corporation tax are
taxed at a rate of 19.0% (2016: 20.0%).
The value of tax losses carried forward reduced to nil and there
is now a timing difference related to accelerated capital
allowances resulting in a GBP42,000 liability (2016: GBP40,000
liability). This resulted in an expense of GBP2,000 (2016:
GBP123,000) to the consolidated income statement.
12. Earnings per share
2017 2016
Profit for the year after taxation GBP2,508,000 GBP1,301,000
------------------------------------- ------------- -------------
Weighted average number of ordinary
shares in issue 110,880,711 102,070,252
Basic earnings per share (pence) 2.26 1.27
Diluted earnings per share (pence) 1.77 0.87
--------------------------------------- ------------- -------------
Total comprehensive income for the GBP2,445,000 GBP977,000
year
------------------------------------- ------------- -------------
Weighted average number of ordinary
shares in issue 110,880,711 102,070,252
Basic earnings per share (pence) 2.21 0.96
Diluted earnings per share (pence) 1.73 0.68
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.
2017 2016
Reconciliation of weighted average
number of ordinary shares in issue
between basic and diluted earnings
per share
As per basic earnings per share 110,880,711 102,070,252
Number of shares issued if all convertible
loan notes were exchanged for equity
(note 26) 41,666,667 61,500,000
Dilutive element of warrants if taken
up (note 26) - 12,733,968
Dilutive element of share options - -
if exercised (note 28)
As per dilutive earnings per share 152,547,378 176,304,220
Reconciliation of earnings between
basic and diluted earnings per share
As per basic earnings per share - GBP2,508,000 GBP1,301,000
profit for the year after taxation
Interest expense saved if all convertible GBP196,150 GBP230,150
loan notes were exchanged for equity
(note 26)
As per dilutive earnings per share GBP2,704,150 GBP1,531,150
---------------------------------------------- ------------- -------------
Reconciliation of earnings between
basic and diluted earnings per share
As per basic earnings per share - GBP2,445,000 GBP977,000
total comprehensive income
Interest expense saved if all convertible GBP196,150 GBP230,150
loan notes were exchanged for equity
(note 26)
------------- -------------
As per dilutive earnings per share GBP2,641,150 GBP1,207,150
---------------------------------------------- ------------- -------------
The diluted earnings per share calculations assume that all
convertible loan notes, warrants and share options have been
converted/exercised at the beginning of the year where they are
dilutive.
13. Company loss
The loss on ordinary activities after taxation of the Company is
GBP174,000 (2016: GBP119,000).
14. Cash and cash equivalents
Group Company
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
Cash at bank and in hand 9,745 6,129 200 -
--------- -------- -------- --------
9,745 6,129 200 -
Cash at bank includes an amount of GBPnil (2016: GBP63,000)
representing receipts which are in the course of transmission.
15. Financial assets at fair value through profit or loss
The investment represents shares in a UK quoted company, elected
to be classified as a financial asset at fair value through profit
or loss. The investment is stated at market value and is classified
as a level 1 investment in the IFRS 13 fair value hierarchy. The
cost of the shares was GBP471,000. The unrealised difference
between cost and market value has been taken to the income
statement. Dividend income of GBP350,000 and GBP24,000 of sale
proceeds have been received from this investment since it was
made.
16. Available for sale financial instruments
Group Company
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
UK Government Treasury Bills 28,740 23,991 - -
28,740 23,991 - -
UK Government Treasury Bills are stated at fair value and
unrealised changes in the fair value are reflected in equity. There
were GBP93,000 of unrealised losses in the year ended 31 December
2017 (2016: GBP8,000).
17. Held to maturity financial instruments
Group Company
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
UK Certificates of Deposit 5,532 - - -
5,532 - - -
Held to maturity financial instruments represent certificates of
deposit held with a UK banking institution with a Fitch credit
rating of A (stable).
18. Loans and advances to customers
2017 2016
Gross Impairment Carrying Gross Impairment Carrying
Amount Allowance Value Amount Allowance Value
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
HP balances 59,909 (1,252) 58,657 61,952 (1,309) 60,643
Finance lease
balances 20,088 (1,046) 19,042 14,779 (673) 14,106
Unsecured personal
loans 10,521 (211) 10,310 6,638 (162) 6,476
Vehicle stocking
plans 1,613 - 1,613 1,366 - 1,366
Wholesale funding
arrangements 5,830 - 5,830 - - -
Block discounting 13,523 - 13,523 13,213 - 13,213
Secured commercial
loans 659 (4) 655 2,257 (12) 2,245
Secured personal
loans 13,090 - 13,090 18,004 - 18,004
125,233 (2,513) 122,720 118,209 (2,156) 116,053
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.
An estimate of the fair value of collateral on past due or impaired
loans and advances is not disclosed as it would be impractical to
do so.
2017 2016
Specific allowance for impairment GBP000 GBP000
Balance at 1 January 2,099 2,011
Specific allowance for impairment made 1,295 915
Release of allowances previously made (776) (475)
Write-offs (178) (352)
-------- --------
Balance at 31 December 2,440 2,099
2017 2016
Collective allowance for impairment GBP000 GBP000
Balance at 1 January 57 50
Collective allowance for impairment
made 28 12
Release of allowances previously made (12) (5)
Balance at 31 December 73 57
Total allowances for impairment 2,513 2,156
Advances on preferential terms are available to all Directors,
management and staff. As at 31 December 2017 GBP347,328 (2016:
GBP306,895) 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.
As detailed below, at the end of the current financial year
three loan exposures (2016: three), all in connection with block
discounting lending, exceeded 10.0% of the capital base of the
Bank: -
Outstanding Outstanding
Balance Balance Facility
2017 2016 limit
Exposure GBP000 GBP000 GBP000
Block discounting facility 9,487 9,302 11,000
HP and finance lease receivables
Loans and advances to customers include the following HP and
finance lease receivables: -
2017 2016
GBP000 GBP000
Less than one year 36,227 35,537
Between one and five years 60,576 60,542
Gross investment in HP and finance
lease receivables 96,803 96,079
The investment in HP and finance lease receivables net of
unearned income comprises: -
2017 2016
GBP000 GBP000
Less than one year 29,317 26,562
Between one and five years 50,680 50,169
Net investment in HP and finance lease
receivables 79,997 76,731
19. Property, plant and equipment
Leasehold IT Furniture & Motor
Improvements Equipment Equipment Vehicles Total
Group GBP000 GBP000 GBP000 GBP000 GBP000
Cost
As at 1 January 2017 417 1,555 629 57 2,658
Reclassification(1) - (1,330) - - (1,330)
Additions 26 69 17 10 122
Disposals - - - (57) (57)
As at 31 December 2017 443 294 646 10 1,393
Accumulated depreciation
As at 1 January 2017 129 1,189 588 33 1,939
Reclassification(1) - (1,093) - - (1,093)
Charge for year 60 56 11 7 134
Disposals - - - (37) (37)
As at 31 December 2017 189 152 599 3 943
Carrying value at 31 December 2017 254 142 47 7 450
Carrying value at 31 December 2016 288 366 41 24 719
(1) During the year IT software has been reclassified from
property, plant and equipment to intangible assets (see note 20) as
it is being reported similarly for regulatory purposes in the
Bank.
Leasehold IT Furniture &
Improvements Equipment Equipment Total
Company GBP000 GBP000 GBP000 GBP000
Cost
As at 1 January 2017 234 13 15 262
Additions - - - -
Disposals - - - -
As at 31 December 2017 234 13 15 262
Accumulated depreciation
As at 1 January 2017 53 1 1 55
Charge for year 39 1 1 41
Disposals - - - -
As at 31 December 2017 92 2 2 96
Carrying value at 31 December 2017 142 11 13 166
Carrying value at 31 December 2016 181 12 14 207
20. Intangible assets
IT Software and Website
Customer Contracts & Intellectual Development
Group Lists Property Rights GBP000 Total
GBP000 GBP000 GBP000
Cost
As at 1 January 2017 1,024 345 71 1,440
Reclassification(1) - - 1,330 1,330
Additions 21 43 149 213
Acquisition of MBL 239 - - 239
Disposals - - - -
As at 31 December 2017 1,284 388 1,550 3,222
Accumulated amortisation
As at 1 January 2017 76 48 - 124
Reclassification(1) - - 1,093 1,093
Charge for year /
impairment (note 21) 54 114 118 286
Disposals - - - -
As at 31 December 2017 130 162 1,211 1,503
Carrying value at 31
December 2017 1,154 226 339 1,719
Carrying value at 31
December 2016 948 297 71 1,316
(1) During the year IT software has been reclassified from
property, plant and equipment (see note 19) to intangible assets as
it is being reported similarly for regulatory purposes in the
Bank.
Acquisition of MBL
On 23 December 2016, EWA acquired the majority of the Isle of
Man IFA business held by Knox Financial Services Limited ("KFSL")
carrying a trading name of MBL. The initial acquisition included
approximately 4,000 clients together with 6 members of staff. The
basis of consideration is in part contingent, as it is determined
by 4 times renewal income received in the first 12 months of
ownership, reduced down by any clawbacks in the same period. The
final value cannot fall below GBP800,000. EWA entered into a loan
agreement with the Bank (see note 31 for terms) and paid the
non-refundable minimum of GBP800,000 and a further GBP200,000 into
an escrow account until the final valuation has been determined.
When the value has been finalised, any surplus or shortfall will be
settled.
At acquisition, by reference to the renewal income received by
KFSL in the 12 months prior to disposal, an estimate of GBP236,906
was assumed for income over the preceding 12 months, which would
have generated a consideration sum of GBP947,624. Therefore, EWA
accounted for this transaction by recognising an intangible asset
of GBP947,624 and a receivable of GBP52,376 (see note 22) of the
monies held in escrow. Subsequent to acquisition this estimate has
been updated to an estimated purchase price of GBP989,400 as at 31
December 2017. Consequently, the receivable from escrow has reduced
to GBP10,600. The fair value of the assets acquired is considered
to be of the same amount as the sum estimated to be paid and
principally relates to customer contracts.
In tandem, both parties entered into an option agreement,
exercisable within three months from the transaction date, for EWA
to acquire the remainder of the vendor's IFA business which
included approximately 150 clients. This option was exercised on 18
January 2017. The price of the acquisition is calculated by four
times the renewal income received over the 12 month period
subsequent to completion. The purchase price is estimated to be
GBP198,300, of which GBP75,000 was paid on exercise of the
option.
The period over which these contracts are to be amortised is
estimated to be 18.75 years given the average duration of the
existing EWA portfolio for renewal income.
21. Investment in Group undertakings
The Company has the following investments in subsidiaries
incorporated in the Isle of Man: -
Nature of 31 December Date of Total Total
Business 2017 Incorporation 2017 2016
Carrying value of investments % Holding GBP000 GBP000
Asset and Personal
Conister Bank Limited Finance 100 05/12/1935 11,767 10,067
Edgewater Associates Limited Wealth Management 100 24/12/1996 2,005 2,005
Holding Company for
Prepaid Card
TransSend Holdings Limited Division 100 05/11/2007 - -
Bradburn Limited Holding Company 100 15/05/2009 - -
13,772 12,072
Amounts owed to and from Group undertakings are unsecured,
interest-free and repayable on demand.
Subordinated loans
MFG has issued several subordinated loans as part of its equity
funding into the Bank and EWA. Interest charged is at the
discretion of the lender.
Company 2017 2016
Creation Maturity Interest rate GBP000 GBP000
------- -------
Conister Bank Limited
11 February 2014 11 February 2024 7.0% 500 500
27 May 2014 27 May 2024 7.0% 500 500
9 July 2014 9 July 2024 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 -
Edgewater Associates Limited
14 May 2012 14 May 2017 7.0% - 128
28 February 2013 28 February 2018 7.0% 50 50
21 February 2017 21 February 2027 7.0% 150 -
14 May 2017 14 May 2027 7.0% 128 -
5,778 5,178
Goodwill
Group Group
2017 2016
GBP000 GBP000
Edgewater Associates Limited ("EWA") 1,849 1,849
ECF Asset Finance PLC ("ECF") 454 454
Three Spires Insurance Services Limited ("Three Spires") 41 41
2,344 2,344
Goodwill impairment
The goodwill is considered to have an indefinite life and is
reviewed on an annual basis by comparing its estimated recoverable
amount with its carrying value.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of EWA is based on the forecasted 3 year
cash flow projections, extrapolated to 10 years using a 2.0% annual
increment, and then discounted using a 12.0% discount factor. The
sensitivity of the analysis was tested using additional discount
factors of 15.0% and 20.0% on stable profit levels.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of ECF is based on forecasted 3 year
sales interest income calculated at 5.0% margin, extrapolated to 10
years using a 2.0% annual increment, and then discounted using a
12.0% discount factor. The sensitivity of the analysis was tested
using additional discount factors of 15.0% and 20.0% on varying
sales volumes.
There has been no change in the detailed method of measurement
for EWA and ECF when compared to 2016. 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
EWA. On the basis of the above reviews no impairment to goodwill
has been made in the current year.
Acquisition of subsidiary
In December 2015, Bradburn Limited acquired 49.9% of the
remaining shares of Manx Financial Limited ("MFL") that it did not
already hold, for GBP500,000. At that point MFL became a subsidiary
of the Group.
Investment in associate
On 13 December 2017, 40.0% of the share capital of The Business
Lending Exchange Limited ("BLX") was acquired for nil
consideration. As at the date of acquisition the net assets of BLX
were GBP94,000. The Group's resulting share of net assets is equal
to GBP38,000 at that date.
Acquisition of Incahoot Limited
On 6 March 2015, the business of Incahoot Limited was acquired
by Manx Incahoot Limited, a subsidiary of the Group.
In exchange for the net assets acquired, Manx Incahoot Limited
paid GBP101,000 in cash and pledged a further 10.0% share of future
revenue streams on pipeline listed at the time of acquisition
generated within 2 years of purchase, up to a cap of GBP100,000. No
revenue was generated from this pipeline in the 2 year period.
On 9 December 2016, a valuation was conducted by an independent
firm of professional advisers on the intellectual property rights
acquired for the purpose of including within these financial
statements. The independent firm addressed the three levels of the
IFRS fair value hierarchy and concluded that level 3 was most
appropriate as the intellectual property rights acquired had no
active markets (Level 1), or comparable assets against which to
index prices (Level 2). Therefore, the report valued the
intellectual property rights acquired based on internally generated
data (Level 3) being: - costs incurred to date and cash flow
projections. The report averaged two valuation approaches, the
replacement cost approach and the income approach using a discount
factor of 42.5%, to arrive at a final valuation of GBP262,474. This
created an impairment of GBP48,026. On 2 February 2018, the
valuation was again updated which lead to a reduced valuation of
GBP154,427. This created an additional impairment of
GBP108,047.
There were no adverse trends arising from comparable market
disposals of domain names to warrant any impairment to this
intangible.
The Directors believe that the assets acquired will have an
enduring benefit to the company and therefore have adopted an
indefinite life as the appropriate basis for determining its useful
life for amortisation purposes.
22. Trade and other receivables
Group Company
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
Prepayments and other debtors 562 874 22 29
VAT recoverable 817 752 - -
Depositors Compensation Scheme Receivable 54 54 - -
Monies held in escrow from MBL acquisition (see note 20) 10 52 - -
1,443 1,732 22 29
Included in trade and other receivables is an amount of
GBP817,000 (2016: GBP752,000) relating to a reclaim of VAT. The
Bank, as the Group VAT registered entity, has for some time
considered the VAT recovery rate being obtained by the business was
neither fair nor reasonable, specifically regarding the attribution
of part of the residual input tax relating to the HP business not
being considered as a taxable supply. Queries have been raised with
the Isle of Man Government Customs & Excise Division
("C&E"), and several reviews of the mechanics of the recovery
process were undertaken by the Company's professional advisors.
The decision of the First-Tier Tax Tribunal released 18 August
2011 in respect of Volkswagen Financial Services (UK) Limited
("VWFS") v HM Revenue & Customs (TC01401) ("VWFS Decision")
added significant weight to the case put by the Bank and a request
for a revised Partial Exemption Special Method was submitted in
December 2011. The proposal put forward by the Bank was that the
revised method would allocate 50.0% of costs in respect of HP
transactions to a taxable supply and 50.0% to an exempt supply. In
addition, a Voluntary Disclosure was made as a retrospective claim
for input VAT under-claimed in the last 4 years. A secondary claim
was also made to cover periods Q4 2012 to Q1 2016 for the value of
GBP230,000 and an amount of GBP130,000 has been accrued to cover
periods Q2 2016 to Q4 2017.
In November 2012, it was announced that the HMRC Upper Tribunal
had overturned the First-Tier Tribunal in relation to the VWFS
Decision. VWFS has subsequently been given leave to appeal and this
was scheduled to be heard in October 2013. However, this was
delayed and the case was heard by the Court of Appeal on 17 April
2015 who overturned the Upper Tribunal's decision ruling in favour
of VWFS. HMRC have appealed this decision to the Supreme Court,
which has referred the issue to the European Court of Justice.
The Bank's total exposure in relation to this matter is
GBP930,000, comprising the debtor balance referred to above plus an
additional GBP113,000 VAT reclaimed under the partial Exemption
Special Method, in the period from Q4 2011 to Q3 2012 (from Q4 2012
the Bank reverted back to the previous method). On the basis of the
discussions and correspondence which have taken place between the
Bank and C&E, in addition to the VWFS case, the Directors are
confident that the VAT claim referred to above will be secured.
23. Customer accounts
2017 2016
GBP000 GBP000
Retail customers: term deposits 137,399 124,398
Corporate customers: term deposits 4,873 1,554
142,272 125,952
24. Creditors and accrued charges
Group Company
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
Commission creditors 2,042 2,504 - -
Other creditors and accruals 774 363 139 82
Taxation creditors 348 108 - -
3,164 2,975 139 82
25. Block creditors
2017 2016
GBP000 GBP000
Drawdown 2 - repayable 25/07/2018,
interest payable at 5.8%, secured on
assets of MFL 95 248
Drawdown 3 - repayable 08/03/2019,
interest payable at 6.5%, secured on
assets of MFL 656 1,142
751 1,390
26. Loan notes
Group Company
2017 2016 2017 2016
Notes GBP000 GBP000 GBP000 GBP000
Related parties
J Mellon JM 1,750 1,750 1,750 1,750
Burnbrae Limited BL 1,200 1,200 1,200 1,200
Southern Rock Insurance Company Limited SR 460 460 460 460
Life Science Developments Limited LS 250 350 250 350
3,660 3,760 3,660 3,760
Unrelated parties UP 5,335 4,785 5,335 4,785
8,995 8,545 8,995 8,545
JM - Two loans, one of GBP500,000 maturing on 31 July 2022 with
interest payable of 5.0% per annum, and one of GBP1,250,000
maturing on 26 February 2020, paying interest of 6.5% per annum.
Both loans are convertible at the rate of 7.5 pence and 9 pence
respectively.
BL - One loan consisting of GBP1,200,000 maturing on 31 July
2022 with interest payable of 5.0% per annum. Jim Mellon is the
beneficial owner of BL and Denham Eke is also a director. The loan
is convertible at a rate of 7.5 pence.
SR - One loan consisting of GBP460,000 maturing on 26 February
2020 with interest payable of 6.5% per annum. The loan is
convertible at a rate of 9 pence. John Banks, a Non-executive
Director, is also a director of SR and Arron Banks is a major
shareholder of SR.
LS - One loan of GBP250,000 maturing on 3 January 2018 with
interest payable of 5.0% per annum. Denham Eke is a director of LS.
The loan was repaid after maturing.
UP - Twenty four loans consisting of an average GBP222,292 with
an average interest payable of 5.4% per annum. The earliest
maturity date is 16 May 2018 and the latest maturity is 16 November
2022.
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.
27. Pension liability
The Conister Trust Pension and Life Assurance Scheme ("Scheme")
operated by the Company 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.
The rules of the Scheme state: - "Each Employer shall pay such
sums in each Scheme Year as are estimated to be required to provide
the benefits of the Scheme in respect of the Members in its
employ".
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: -
n investment performance - the return achieved on the Scheme's
assets may be lower than expected; and
n 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 analyses 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.
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 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 2017 (2016: 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 full actuarial valuation was carried out at 1
April 2016, which showed that the market value of the Scheme's
assets was GBP1,379,000 representing 80.7% of the benefits that had
accrued to members, after allowing for expected future increases in
earnings. As required by IAS 19 this valuation has been updated by
the actuary as at 31 December 2017.
The amounts recognised in the Consolidated Statement of
Financial Position are as follows: -
2017 2016
Total underfunding in funded plans GBP000 GBP000
recognised as a liability
Fair value of plan assets 1,469 1,420
Present value of funded obligations (2,029) (2,034)
(560) (614)
2017 2016
Movement in the liability for defined GBP000 GBP000
benefit obligations
Opening defined benefit obligations at 1 January 2,034 1,666
Benefits paid by the plan (68) (68)
Interest on obligations 54 64
Actuarial loss 9 372
Liability for defined benefit obligations
at 31 December 2,029 2,034
2017 2016
Movement in plan assets GBP000 GBP000
Opening fair value of plan assets at 1 January 1,420 1,332
Expected return on assets 37 51
Contribution by employer 41 49
Actuarial gain 39 56
Benefits paid (68) (68)
Closing fair value of plan assets at
31 December 1,469 1,420
2017 2016
Expense recognised in income statement GBP000 GBP000
Interest on obligation 54 64
Expected return on plan assets (37) (51)
Total included in personnel costs 17 13
Actual return on plan assets 76 107
2017 2016
Actuarial gain / (loss) recognised GBP000 GBP000
in other comprehensive income
Actuarial gain on plan assets 39 56
Actuarial loss on defined benefit obligations (9) (372)
30 (316)
2017 2016
Plan assets consist of the following % %
Equity securities 48 47
Corporate bonds 18 16
Government bonds 25 25
Cash 5 7
Other 4 5
100 100
The actuarial assumptions used to calculate Scheme liabilities under IAS19 are as follows: 2017 2016 2015
-
% % %
Rate of increase in pension in payment: -
- - -
* Service up to 5 April 1997
* Service from 6 April 1997 to 13 September 2005 3.0 3.1 2.7
* Service from 14 September 2005 2.1 2.1 2.0
Rate of increase in deferred pensions 5.0 5.0 5.0
Discount rate applied to scheme liabilities 2.6 2.7 3.9
Inflation 3.1 3.2 2.8
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.
28. Called up share capital
Ordinary shares of no par value available for issue Number
At 31 December 2017 200,200,000
At 31 December 2016 150,000,000
Issued and fully paid: - Ordinary shares of no par value Number GBP000
At 31 December 2017 131,096,235 20,732
At 31 December 2016 102,070,252 18,933
There are a number of convertible loans at 31 December 2017 of
GBP3,410,000 (2016: GBP3,410,000). All attached warrants were
exercised during the year (31 December 2016: 28,333,333 warrants
outstanding) (see note 26 for further details). The total number of
warrants in issue at 31 December 2017 is nil (2016: 36,666,666),
29,025,983 were exercised during the year, and the remainder
lapsed.
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. 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. Of the 1,750,000 share options issued, 1,050,000
(2016:1,750,000) remain outstanding; the balance lapsed during the
year.
Performance and service conditions attached to share options
that have not fully vested are as follows: -
(a) The options granted on 25 June 2010 (1,056,000 options) will
vest if the mid-market share price of GBP0.30 is achieved during
the period of grant (10 years ending 25 June 2020); and
(b) The options granted on 25 June 2010 and 23 June 2014 require
a minimum of three years' continuous employment service in order to
exercise upon the vesting date.
The fair value of services received in return for share options
granted is based on the fair value of share options granted,
measured using a binomial probability model with the following
inputs for each award: -
23 June 25 June
2014 2010
Fair value at date of grant GBP0.08 GBP0.03
Share price GBP0.14 GBP0.11
Exercise price GBP0.14 GBP0.11
Expected volatility 55.0% 47.0%
Option life 3 3
Risk-free interest rate (based on government bonds) 0.5% 2.2%
Forfeiture rate 33.3% 0.0%
The charge for the year for share options granted was GBP22,000
(2016: GBP46,000).
29. Analysis of changes in financing during the year
2017 2016
Analysis of changes in financing during the year GBP000 GBP000
Balance at 1 January 27,478 26,198
Issue of loan notes 450 1,280
Issue of shares 1,799 -
29,727 27,478
The 2017 closing balance is represented by GBP20,732,000 share
capital (2016: GBP18,933,000) and GBP8,995,000 of loan notes (2016:
GBP8,545,000).
30. Regulator
The Group is regulated by the Isle of Man FSA and is licensed to
undertake banking activities and conduct investment business. In
addition the Group is regulated by the Financial Conduct Authority
in the United Kingdom for credit and brokerage related
activities.
31. Related party transactions
Cash deposits
During the year, the Bank held cash on deposit on behalf of Jim
Mellon (Executive Chairman of MFG) and companies related to Jim
Mellon and Denham Eke (Chief Executive Officer of MFG). Total
deposits amounted to GBP40,000 (2016: GBP76,000), at normal
commercial interest rates in accordance with the standard rates
offered by the Bank.
Funds held in a fiduciary capacity
Fiduciary deposits
The Bank acts as agent bank to a number of customers, for
balances totalling GBP8,000 (2016: GBP3,374,000). The Bank invests
these customer assets with third party banks on their behalf and in
return for this service receives a fee. These balances are not
included within the statement of financial position. The remaining
fiduciary deposits were closed out during January 2018.
All funds held and accounts maintained in connection with the
fiduciary services that the Bank offers in 2017 are to companies
connected with Jim Mellon and Denham Eke.
Staff and commercial loans
Details of staff loans are given in note 18.
Normal commercial loans have been made to various companies
connected to Jim Mellon and Denham Eke. As at 31 December 2017,
GBP299,000 of capital and interest was outstanding (2016:
GBP401,000).
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. EWA provides services to the Group in arranging its
insurance and defined contribution pension arrangements.
Loan advance to EWA
On 14 December 2016, a loan advance was made to EWA by the Bank
in order to provide the finance required to acquire MBL (see note
20). The advance was for GBP700,000 at an interest rate of 8%
repayable over 6 years. A negative pledge was given by EWA to not
encumber any property or assets or enter into an arrangement to
borrow any further monies. The balance as at 31 December 2017 was
GBP604,000 (2016: GBP700,000).
Loan advance to BLX
On 11 October 2017, a GBP4,000,000 loan facility was made
available to BLX by the Bank in order to provide the finance
required to expand its operations. The facility is for 12 months,
followed by a 3 year amortisation period. Interest is charged at
commercial rates. At 31 December 2017, GBP550,000 had been advanced
to BLX.
Investments
The Bank holds less than 1% equity in the share capital of an
investment of which Jim Mellon is a shareholder (note 15). Denham
Eke acts as co-chairman.
Subordinated loans
The Company has advanced GBP450,000 of subordinated loans in
2017 to the Bank (2016: GBP1,100,000) and GBP278,000 to EWA (2016
GBPnil) (see note 21).
Loan notes
See note 26 for a list of related party loan notes as at 31
December 2017 and 2016.
Key management personnel's remuneration including Executive
Directors
2017 2016
GBP000 GBP000
Short-term employee benefits 300 414
32. Operating leases
Non-cancellable lease rentals are payable in respect of property
and motor vehicles as follows: -
2017 2016
Leasehold Leasehold
Property Other Property Other
GBP000 GBP000 GBP000 GBP000
Less than one year 178 - 187 -
Between one and five years 738 - 801 -
Over five years 276 - 390 -
1,192 - 1,378 -
33. Subsequent events
A loan note for GBP250,000 from Life Science Developments
Limited matured on 3 January 2018 and was repaid (note 26).
The remaining fiduciary deposits held were closed out during
January 2018 and the Bank no longer has any customers utilising
this product offering (note 31).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFUFWIFASEDD
(END) Dow Jones Newswires
March 16, 2018 03:00 ET (07:00 GMT)
Manx Financial (LSE:MFX)
Historical Stock Chart
From Apr 2024 to May 2024
Manx Financial (LSE:MFX)
Historical Stock Chart
From May 2023 to May 2024