Unaudited Interim Results to 30 June 2021

RNS Number : 4003N

Manx Financial Group PLC

29 September 2021

 

FOR IMMEDIATE RELEASE  29 September 2021

Manx Financial Group PLC (the 'Company')

Unaudited Interim Results for the 6 months to 30 June 2021

Manx Financial Group PLC (LSE: MFX), the financial services group which includes Conister Bank Limited, Conister Finance & Leasing Ltd, Blue Star Business Solutions Limited, Edgewater Associates Limited and Manx FX Limited, presents the Interim results for the six months ended 30 June 2021.

Jim Mellon, Executive Chairman, commented: "Each of our business units is making steady progress. I have great confidence that the 2021 full year will see the Group well on the way to recording the levels of growth and profitability we experienced prior to the onset of this awful pandemic."

Copies of the Interim Report will shortly be available on our website www.mfg.im

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU No. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

For further information, please contact:

Manx Financial Group PLC Denham Eke, Chief Executive Tel [phone]

Beaumont Cornish Limited Roland Cornish/James Biddle Tel [phone]

Greentarget Limited Dafina Grapci-Penney Tel [phone]

Dear Shareholders

I am pleased to present my half-year report for the period ended 30 June 2021.

The effects of COVID-19 on our various businesses continued to be an issue during the first half of 2021. Against this complex backdrop, it is encouraging to report that the Group's pre-tax profit for the first six months of the year was just over £1.1 million (2020: £1.0 million) - an increase of 13% on the same period last year. Each of our business units is making steady progress and, unless there is a resumption of lock-downs and associated measures - events which I believe to be extremely unlikely, I have great confidence that the 2021 full year will see the Group well on the way to recording the levels of growth and profitability we experienced prior to the onset of this awful pandemic.

Financial Review

Our operating income showed an increase of 6.2% to £9.0 million (2020: £8.5 million), including gains in both net interest income of 9.5% to £8.6 million (2020: £7.8 million), and in net trading income of 12.2% to £8.9 million (2020: £7.9 million). Our interest yield on loans fell slightly to 10.9% (2020: 11.6%), due mainly to our success in promoting the Government-backed loan schemes and our move away from sub-prime lending to prime and near prime propositions. Our interest expense on deposits showed a marginal decrease to 2.2% (2020: 2.4%). Operating expenses grew by 5.3% to £7.8 million (2020: £7.5 million), principally as a result of our prudent policy of recognising further impairments of £2.1 million (2020: £1.9 million) to protect the integrity of our balance sheet. As a result, and as already stated, our profit before tax increased to £1.1 million.

Turning to our balance sheet, despite the challenges of the trading environment, our net loan book has increased by 16.4% to £211.4 million (2020: £181.6 million), with impairments falling to 2.9% (2020: 3.3%) of the gross total. We continue to ensure that liquidity is maintained to provide a prudent buffer until the economic situation fully normalises and, as a result, our cash and debt securities stand at £57.2 million (2020: £64.0 million) - a decrease of 10.7%, keeping us in a more advantageous competitive position with our capacity for increased lending. Our customer deposits have grown by 6.2% to £231.2 million (2020: £217.8 million) and are carefully managed by our Treasury function, especially important at this time.

All of which leads to an 8.8% growth in our total asset base to £283.8 million (2020: £260.7 million). Shareholder equity has increased by 6.0% to £23.1 million (2020: £21.8 million), providing net assets per share, adjusted for the post-period script dividend, of 20.2 pence (2020: 19.1 pence).

Business Review

Conister Bank Limited ("Bank")

In my last Chairman's Statement, I promised to provide an update on the Bank's second VAT claim of £0.6 million. I am pleased to report that the Bank resolved its claim against the Isle of Man's Customs and Excise and has been paid in full. A subsequent claim of statutory interest due on this claim has been lodged with the first-tier tribunal in the UK, alongside other High Street Banks, but no value has been recognised in these financial statements for the claim.

The Bank continues to attract deposits at historically low market rates which will position it well against any inflationary pressure. With UK Gilts attracting negative interest rates, our treasury management strategy increased our cash balance to £25.6 million (2020: £6.0 million) and reduced our debt securities to £27.6 million (2020: £57.0 million).

The Bank continues to be supportive of both the Isle of Man and UK Governments' business support schemes and has now been accredited for the UK Government's Recovery Loan Scheme. Along with this, the Bank has repositioned its distribution to support more COVID-19 and recession-proof markets. This repositioning, including moving to a more prime customer base, drove loan book growth to 16.4% (2020: 6.8%), which is encouraging during a period of short-notice economic lockdowns.

This loan book growth resulted in the net interest income margin net of commissions increasing by 5.4% (2020: 2.2%) but we expect a normalised position over the life of these loans due to their prime nature and the Government guarantees.

Personnel expenses increased by £0.1 million as the Bank's headcount increased by nine as part of launching a new debt collection company, Manx Collections Limited, which generated £0.1 million of profitability in the first six months of trading. Overheads increased by £0.2 million, which is primarily due to the recovery costs on delinquent debts. During these uncertain times we continue to operate a prudent provisioning policy, with an allowance of £2.1 million (2020: £1.9 million). Finally, in relation to our cost base, depreciation and amortisation increased by £0.1 million to £0.4 million (2020: £0.3 million), driven by continued investment in our IT strategy.

Edgewater Associates Limited

Our independent financial advisory business remains the largest on the Isle of Man and had a difficult half-year with the trading conditions negatively impacted by COVID-19. Meeting clients became problematic and many sought to delay investment decisions due to market turbulence. Despite a UK economic recovery being underway, the sustained threat of inflation has dampened client confidence and stifled investment. As a result, profitability has remained broadly similar year-on-year despite assets under management increasing by 11.6% to £375.0 million (2020: £336.0 million) and renewal income increasing to £0.6 million (2020: £0.5 million).

Manx FX Limited ("MFX")

Our foreign exchange advisory business has had a remarkable half-year. Whereas our IFA business suffered from market volatility, MFX benefitted, demonstrating the importance in having a diversified financial services group. Turnover remained constant at £0.9 million, particularly trading in Euros and South African Rand following the wide-ranging impact of BREXIT. The business continues to have a very liquid balance sheet and declared an interim dividend to the Group of £0.6 million during the half-year (2020: £nil).

Beer Swaps Limited ("BSL")

On 14 June 2021, the Bank acquired further shares in BSL to increase its ordinary shareholding to 90% for a cash consideration of £0.3 million. For the period under ownership, BSL reported turnover of £0.6 million and a profit before tax of £0.2 million with net assets of £0.3 million. BSL is now the largest tank lessor in the UK brewing market.

Blue Star Business Solutions Limited ("BBSL")

BBSL has traded well through difficult economic conditions in which the economic impact of UK Government support schemes distorted the credit broker sector. However, and notwithstanding, BBSL has reported a £0.1 million profit (2020: £0.0 million). BBSL brokered £6.4 million (2020: £3.8 million) of which £3.8 million (2020: £2.1 million) was referred to the Bank. BBSL receives no loan interest income for lending placed with the Bank, but if it did, the imputed profitability for the first half would have been £0.5 million.

Strategic Objectives for 2021

Our strategic priorities for 2021 remain unchanged, and I will report on these in detail in my next Chairman's Statement. As ever, we strive to increase shareholder value, both in a prudent yet progressive manner. I repeat our 2021 key objectives:

§ Treating customers in both as fair and appropriate manner as possible. Our Treating Customers Fairly ("TCF") regime continues to be enhanced throughout our businesses and I am pleased to report that we have a negligible level of complaints, all of which have been settled to the customers' satisfaction. TCF is the cornerstone of all our operations as we make every effort to ensure that our customer service offering is second to none.

§ Adopting a pro-active strategy of managing risk. We have taken active steps to rebase our loan book away from sub-prime lending into prime and near-prime advances. In doing so, we recognise that the gross interest rates may diminish somewhat, but we anticipate that this erosion will be more than compensated by a lower incidence of arrears and write-offs. Our new segregated debt collection subsidiary - Manx Collections Limited - received its FCA licence in June 2021 and has already made significant progress not only in recoveries, but also in the early identification of problems, working with our customers to ensure a better outcome for the Bank. We continue to make prudential impairments as part of our policy of strengthening our balance sheet to minimise the risk of any unforeseen event adversely affecting our profitability.

§ Developing our core businesses by considered acquisitions. The current economic environment has produced a number of interesting potential acquisition opportunities. Each of these is evaluated carefully before commitment. We also recognise that our recent acquisitions have become significant contributors to our profitability.

§ Developing and implementing a coherent digital infrastructure. We recognise the importance of IT to service the operational requirements of a growing Group and to remain competitive.  We continue with our investment in core systems which is already minimising the time taken to consider advances, allowing us to redeploy staff into more productive areas.

§ Managing the liabilities side of our balance sheet. Our new Treasury management function is working well, ensuring that our liquidity matches the anticipated growth of our lending. Our recently launched Isle of Man notice accounts continue to gain traction and we will continue to develop attractive deposit products with competitive interest rates for our depositors.

§ Managing our balance sheet to exceed the regulatory requirements for capital adequacy. We are well capitalised with our Total Capital Ratio standing at 17.8% (2020: 16.0%). We will maintain our strategy of converting Group retained earnings into Tier 1 capital for the Bank to support its lending growth. Meanwhile, we will continue to maintain a heightened level of cash liquidity.

§ Increase shareholder value. The discount between Net Asset Value and market capitalisation is an issue that we are working to rectify. The strategic aim of returning to being a dividend paying company has now been achieved and I see no reason to prevent us returning 10% of profit attributable to shareholders as a dividend for the foreseeable future. This, together with enhanced investor relations, should help the market in rerating our shares.

Current trading and outlook

The Isle of Man economy continues to be resilient under the strain of COVID-19 and our local new business growth shows no signs of slowing down. The UK also shows signs of a real return to growth with Gross Domestic Product for Quarter 2 this year increasing by 22.2% over the same quarter last year, and our UK lending growth reflects this. Taken together, I have every confidence that our full year will show a significant improvement in profitability providing the requirement for impairments remain at their current level.

The Bank's appointments as accredited lenders to the various Government-backed schemes will help second-half lending growth and we will continue to strengthen our balance sheet by maintaining adequate liquidity.

It remains for me, as always, to thank on behalf of the Board, our staff for their splendid efforts coping with the additional demands of dealing with the COVID pandemic whilst continuing to develop the Group in such a successful manner and, finally, to thank our shareholders for their enduring loyalty.

Jim Mellon

Executive Chairman

27 September 2021

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

	Notes		For the six months ended 30 June 2021 £'000 (unaudited)			For the six months ended 30 June 2020 £'000 (unaudited)		For the year ended 31 December 2020 £'000 (audited)
Interest income	6			10,979		10,428		20,692
Interest expense				(2,424)		(2,617)		(5,222)
Net interest income				8,555		7,811		15,470
Fee and commission income				2,356		2,157		3,865
Fee and commission expense				(1,878)		(1,870)		(3,481)
Depreciation on leasing assets				(173)		(203)		(406)
Net trading income				8,860		7,895		15,448
Other operating income				129		111		200
Gain on financial instruments				-		6		259
Realised (loss) / gain on debt securities				(1)		212		261
Revaluation on acquisition of subsidiary				-		237		237
Operating income				8,988		8,461		16,405
Personnel expenses				(3,241)		(3,337)		(6,823)
Other expenses				(2,099)		(1,772)		(3,707)
Impairment on loans and advances to customers				(2,142)		(1,895)		(3,950)
Depreciation				(323)		(222)		(490)
Amortisation and impairment of intangibles				(216)		(172)		(374)
Share of profit / (loss) of equity accounted investees, net of tax				59		(91)		54
VAT recovery				113		36		906
Profit before tax payable				1,139		1,008		2,021
Income tax expense				(122)		(16)		(53)
Profit for the period / year				1,017		992		1,968

	Notes		For the six months ended 30 June 2021 £'000 (unaudited)			For the six months ended 30 June 2020 £'000 (unaudited)				For the year ended 31 December 2020 £'000 (audited)
Profit for the period / year			1,017			992				1,968
Other comprehensive income:
Items that will be reclassified to profit or loss
Unrealised (loss) / gain on debt securities			(9)			102				(51)
Items that will never be reclassified to profit or loss
Actuarial loss on defined benefit pension scheme taken to equity			-			-				(241)
Total comprehensive income for the period / year			1,008			1,094				1,676
Profit attributable to:
Owners of the Company			1,029			997				1,935
Non-controlling interest			(12)			(5)				33
			1,017			992				1,968
Total comprehensive income attributable to:
Owners of the Company			1,020			1,099				1,643
Non-controlling interest			(12)			(5)				33
			1,008			1,094				1,676
Earnings per share - profit for the period / year
Basic earnings per share (pence)	8		0.89			0.87				1.65
Diluted earnings per share (pence)	8		0.73			0.71				1.37
Earnings per share - total comprehensive income for the period / year
Basic earnings per share (pence)	8		0.88			0.96				1.41
Diluted earnings per share (pence)	8		0.72			0.78				1.19

Condensed Consolidated Statement of Financial Position

As at	Notes		30 June 2021 £'000 (unaudited)		30 June 2020 £'000 (unaudited)		31 December 2020 £'000 (audited)
Assets
Cash and cash equivalents			29,577		6,991		34,053
Debt securities	9		27,610		57,036		25,532
Trading assets			-		4		4
Loans and advances to customers	5,10		211,445		181,581		193,143
Trade and other receivables	11		1,458		2,521		2,170
Property, plant and equipment			6,472		5,793		6,045
Intangible assets			2,329		2,290		2,286
Investment in associate			375		171		316
Other investments	17		68		-		-
Goodwill	12		4,412		4,361		4,412
Total assets			283,746		260,748		267,961
Liabilities
Deposits from customers			231,179		217,758		218,285
Creditors and accrued charges	13		4,058		3,148		3,206
Contingent consideration			613		921		672
Loan notes	14		23,722		16,222		22,222
Pension liability			846		688		944
Deferred tax liability			195		141		197
Total liabilities			260,613		238,878		245,526
Equity
Called up share capital	15		19,121		19,121		19,121
Retained earnings			3,984		2,686		3,230
Equity attributable to owners of the Company			23,105		21,807		22,351
Non-controlling interest			28		63		84
Total equity			23,133		21,870		22,435
Total liabilities and equity			283,746		260,748		267,961

Condensed Consolidated Statement of Changes in Equity

			Attributable to owners of the Company
For the six months ended 30 June 2021			Share capital £'000		Retained earnings £'000		Total £'000		Non-controlling interest £'000		Total equity £'000
Balance at 1 January 2020			20,732		1,587		22,319		-		22,319
Total comprehensive income for the period:
Profit for the period			-		997		997		(5)		992
Other comprehensive income			-		102		102		-		102
Total comprehensive income for the period			-		1,099		1,099		(5)		1,094
Transactions with owners:
Purchase of ordinary shares			(1,611)		-		(1,611)		-		(1,611)
Total transactions with owners of the Company			(1,611)		-		(1,611)		-		(1,611)
Changes in ownership interests:
Change in ownership interest of a subsidiary			-		-		-		68		68
Total changes in ownership interests			-		-		-		68		68
Balance at 30 June 2020			19,121		2,686		21,807		63		21,870
Balance at 1 July 2020			19,121		2,686		21,807		63		21,870
Total comprehensive income for the period:
Profit for the period			-		938		938		38		976
Other comprehensive income			-		(394)		(394)		-		(394)
Total comprehensive income for the period			-		544		544		38		582
Changes in ownership interests:
Change in ownership interest of a subsidiary			-		-		-		(17)		(17)
Total changes in ownership interests			-		-		-		(17)		(17)
Balance at 31 December 2020			19,121		3,230		22,351		84		22,435
Balance at 1 January 2021			19,121		3,230		22,351		84		22,435
Total comprehensive income for the period:
Profit for the period			-		1,029		1,029		(12)		1,017
Other comprehensive income			-		(9)		(9)		-		(9)
Total comprehensive income for the period			-		1,020		1,020		(12)		1,008
Changes in ownership interests:
Acquisition of subsidiary with non-controlling interest (Note 16)			-		(266)		(266)		(44)		(310)
Total changes in ownership interests			-		(266)		(266)		(44)		(310)
Balance at 30 June 2021			19,121		3,984		23,105		28		23,133

Condensed   Consolidated Statement of Cash Flows

	Notes		For the six months ended 30 June 2021 £'000 (unaudited)		For the six months ended 30 June 2020 £'000 (unaudited)		For the year ended 31 December 2020 £'000 (audited)
RECONCILIATION OF PROFIT BEFORE TAXATION TO OPERATING CASH FLOWS
Profit before tax			1,139		1,008		2,021
Adjustments for:
Depreciation			496		425		896
Amortisation and impairment of intangibles			216		172		374
Realised gain on debt securities			-		(212)		(237)
Share of (profit) / loss of equity accounted investees			(59)		91		(54)
Contingent consideration interest expense			61		58		122
Pension charge included in personnel costs			-		-		15
Gain on acquisition of subsidiary			-		(237)		(253)
			1,853		1,305		2,884
Changes in:
Trading asset			4		15		15
Trade and other receivables	11		712		73		415
Creditors and accrued charges	13		767		(15)		315
Net cash flow from trading activities			3,336		1,378		3,629
Changes in:
Loans and advances to customers	10		(18,302)		(4,461)		(16,023)
Deposits from customers			12,894		7,825		8,352
Pension contribution			(98)		-		-
Cash (outflow) / inflow from operating activities			(2,170)		4,742		(4,042)

	Notes		For the six months ended 30 June 2021 £'000 (unaudited)		For the six months ended 30 June 2020 £'000 (unaudited)		For the year ended 31 December 2020 £'000 (audited)
CASH FLOW STATEMENT
Cash from operating activities
Cash (outflow) / inflow from operating activities			(2,170)		4,742		(4,042)
Income taxes paid			-		-		(172)
Net cash (outflow) / inflow from operating activities			(2,170)		4,742		(4,214)
Cash flows from investing activities
Purchase of property, plant and equipment			(1,172)		(322)		(1,187)
Purchase of intangible assets			(259)		(35)		(231)
Sale of property, plant and equipment			249		-		127
Acquisition of subsidiary or associate, net of cash acquired	16		(310)		(622)		(648)
(Purchase) / sale of debt securities at fair value through other comprehensive income	9		(3,188)		(3,608)		1,101
Sale / (purchase) of debt securities at amortised cost	9		1,101		(6,322)		20,108
Contingent consideration			(120)		-		(59)
Net cash (outflow) / inflow from investing activities			(3,699)		(10,909)		19,211
Cash flows from financing activities
Receipt / (repayment) of loan notes	14		1,500		(1,360)		4,640
Lease payments			(107)		(102)		(204)
Net cash inflow / (outflow) from financing activities			1,393		(1,462)		4,436
Net (decrease) / increase in cash and cash equivalents			(4,476)		(7,629)		19,433
Cash and cash equivalents - opening			34,053		14,620		14,620
Cash and cash equivalents - closing			29,577		6,991		34,053
Included in cash flows are:
Interest received - cash amounts			10,757		10,741		20,274
Interest paid - cash amounts			(2,345)		(2,669)		(5,053)

Notes

For the six months ended 30 June 2021

1.  Reporting entity

Manx Financial Group PLC ("Company" or "MFG") is a company incorporated in the Isle of Man. These condensed consolidated interim financial statements ("interim financial statements") as at and for the six months ended 30 June 2021 comprise the Company and its subsidiaries ("Group").

2.  Basis of accounting

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the last annual consolidated financial statements as at and for the year ended 31 December 2020 ("last annual financial statements"). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

3.  Functional and presentation currency

These financial statements are presented in pounds sterling, which is the Group's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. All subsidiaries of the Group have pounds sterling as their functional currency.

4.  Use of judgements and estimates

In preparing these interim financial statements, management make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those described in the last annual financial statements other than those described in Note 17 - Acquisition of financial instrument.

5.  Credit risk

A summary of the Group's current policies and practices for the management of credit risk is set out in Note 7 - Financial risk review and Note 37 - Financial risk management on pages 46 and 71 respectively of the Annual Financial Statements 2020.

An explanation of the terms Stage 1, Stage 2 and Stage 3 is included in Note 39 (G)(vii) on page 80 of the Annual Financial Statements 2020.

A.  Summary of credit risk on loans and advances to customers

	2021					2020
30 June (unaudited)	Stage 1 £'000	Stage 2 £'000	Stage 3 £'000	Total £'000		Stage 1 £'000	Stage 2 £'000	Stage 3 £'000	Total £'000
Grade A	195,141	-	-	195,141		164,648	-	-	164,648
Grade B	-	4,437	7,255	11,692		-	2,252	-	2,252
Grade C	589	50	10,248	10,887		5,558	2,211	13,074	20,843
Gross value	195,730	4,487	17,503	217,720		170,206	4,463	13,074	187,743
Allowance for ECL	(698)	(14)	(5,563)	(6,275)		(220)	(38)	(5,904)	(6,162)
Carrying value	195,032	4,473	11,940	211,445		169,986	4,425	7,170	181,581

	2020					2019
31 December (audited)	Stage 1 £'000	Stage 2 £'000	Stage 3 £'000	Total £'000		Stage 1 £'000	Stage 2 £'000	Stage 3 £'000	Total £'000
Grade A	173,673	-	-	173,673		168,796	-	-	168,796
Grade B	-	5,728	7,751	13,479		1,143	1,675	-	2,818
Grade C	335	9	12,771	13,115		-	1,985	10,544	12,529
Gross value	174,008	5,737	20,522	200,267		169,939	3,660	10,544	184,143
Allowance for ECL	(423)	(18)	(6,683)	(7,124)		(116)	(467)	(4,190)	(4,773)
Carrying value	173,585	5,719	13,839	193,143		169,823	3,193	6,354	179,370

Loans are graded A to C depending on the level of risk. Grade C relates to agreements with the highest of risk, Grade B with medium risk and Grade A relates to agreements with the lowest risk.

B.  Summary of overdue status of loans and advances to customers

	2021					2020
30 June 2020 (unaudited)	Stage 1 £000	Stage 2 £000	Stage 3 £000	Total £000		Stage 1 £000	Stage 2 £000	Stage 3 £000	Total £000
Current	193,435	-	-	193,435		159,467	-	-	159,467
Overdue < 30 days	2,293	-	-	2,293		5,181	-	-	5,181
Overdue > 30 days	-	4,488	17,504	21,992		5,558	4,463	13,074	23,095
	195,728	4,488	17,504	217,720		170,206	4,463	13,074	187,743

	2020					2019
31 December (audited)	Stage 1 £000	Stage 2 £000	Stage 3 £000	Total £000		Stage 1 £000	Stage 2 £000	Stage 3 £000	Total £000
Current	170,436	-	-	170,436		145,373	-	-	145,373
Overdue < 30 days	3,572	-	-	3,572		24,259	-	-	24,259
Overdue > 30 days	-	5,737	20,522	26,259		307	3,660	10,544	14,511
	174,008	5,737	20,522	200,267		169,939	3,660	10,544	184,143

6.  Interest income

Interest income represents charges and interest on finance and leasing agreements attributable to the period or year after adjusting for early settlements and interest on bank balances, excluding the Terminal funding portfolio.

7.  Operating segments

Segmental information is presented in respect of the Group's business segments. The Directors consider that the Group currently operates in one geographic segment comprising of the Isle of Man, UK and Channel Islands. The primary format, business segments, is based on the Group's management and internal reporting structure. The Directors consider that the Group operates in three (2020: three) product orientated segments in addition to its investing activities: Asset and Personal Finance (including provision of HP contracts, finance leases, personal loans, commercial loans, block discounting, vehicle stocking plans and wholesale funding agreements); EAL and MFX.

For the 6 months ended 30 June 2021 (unaudited)	Asset and Personal Finance £'000		EAL £'000		MFX £'000		Investing Activities £'000		Total £'000
Net interest income / (expense)	9,201		-		-		(646)		8,555
Fee and commission income	469		1,031		856		-		2,356
Operating income / (expense)	6,456		1,031		852		649		8,988
Profit / (loss) before tax payable	759		(12)		717		(325)		1,139
Capital expenditure	1,384		-		24		23		1,431
Total assets	274,832		2,150		615		6,259		283,856
Total liabilities	243,136		545		8		17,034		260,723

For the 6 months ended 30 June 2020 (unaudited)	Asset and Personal Finance £'000		EAL £'000		MFX £'000		Investing Activities £'000		Total £'000
Net interest income / (expense)	8,287		-		-		(476)		7,811
Fee and commission income	207		1,075		875		-		2,157
Operating income / (expense)	6,932		1,075		872		(215)		8,664
Profit / (loss) before tax payable	843		6		785		(626)		1,008
Capital expenditure	357		-		-		-		357
Total assets	257,310		2,292		321		825		260,748
Total liabilities	228,416		633		7		9,822		238,878

For the year ended 31 December 2020 (audited)	Asset and Personal Finance £000		EAL £000		MFX £000		Investing Activities £000		Total £000
Net interest income	15,470		-		-		-		15,470
Fee and commission income	430		2,103		1,332		-		3,865
Operating income	13,206		2,103		1,096		-		16,405
Profit / (loss) before tax payable	1,316		(94)		1,096		(297)		2,021
Capital expenditure	1,138		46		2		1		1,187
Total assets	260,155		2,638		536		4,632		267,961
Total liabilities	230,001		660		12		14,853		245,526

8.  Earnings per share

		For the 6 months ended 30 June 2021  (unaudited)		For the 6 months ended 30 June 2020  (unaudited)		For the year ended 31 Dec 2020  (audited)
Profit for the period / year		£1,017,000		£992,000		£1,968,000
Weighted average number of ordinary shares in issue (basic)		114,130,077		114,130,077		118,964,270
Basic earnings per share (pence)		0.89		0.87		1.65
Diluted earnings per share (pence)		0.73		0.71		1.37
Total comprehensive income for the period / year		£1,008,000		£1,094,000		£1,676,000
Weighted average number of ordinary shares in issue (basic)		114,130,077		114,130,077		118,964,270
Basic earnings per share (pence)		0.88		0.96		1.41
Diluted earnings per share (pence)		0.72		0.78		1.19

The basic earnings per share calculation is based upon the profit for the period / year after taxation and the weighted average of the number of shares in issue throughout the period / year.

As at		30 June 2021 (unaudited)		30 June 2020 (unaudited)		31 Dec 2020 (audited)
Reconciliation of weighted average number of ordinary shares in issue between basic and diluted
Weighted average number of ordinary shares (basic)		114,130,077		114,130,077		118,964,270
Number of shares issued if all convertible loan notes were exchanged for equity		36,555,556		36,555,556		36,555,556
Dilutive element of share options if exercised		-		-		-
Weighted average number of ordinary shares (diluted)		150,685,633		150,685,633		155,519,826
Reconciliation of profit for the period / year between basic and diluted
Profit for the period / year (basic)		£1,017,000		£992,000		£1,968,000
Interest expense saved if all convertible loan notes were exchanged for equity		£83,125		£83,125		£166,250
Profit for the period / year (diluted)		£1,100,125		£1,075,125		£2,134,250

The diluted earnings per share calculation assumes that all convertible loan notes and share options have been converted / exercised at the beginning of the period where they are dilutive.

As at		30 June 2021 (unaudited)		30 June 2020 (unaudited)		31 Dec 2020 (audited)
Reconciliation of total comprehensive income for the period / year between basic and diluted
Total comprehensive income for the period / year (basic)		£1,008,000		£1,094,000		£1,676,000
Interest expense saved if all convertible loan notes were exchanged for equity		£83,125		£83,125		£166,250
Total comprehensive income for the period / year (diluted)		£1,091,125		£1,177,125		£1,842,250

9.  Debt securities

As at		30 June 2021 £'000 (unaudited)		30 June 2020 £'000 (unaudited)		31 Dec 2020 £'000 (audited)
Financial assets at fair value through other comprehensive income:
UK Government treasury bills		27,610		48,612		24,431
Financial assets at amortised cost:
UK Certificates of Deposit		-		8,424		1,101
		27,610		57,036		25,532

UK Government Treasury Bills are stated at fair value and unrealised changes in the fair value are reflected in other comprehensive income. There were realised losses of £1,000 (30 June 2020: realised gains of £212,000 and 31 December 2020: realised gains of £261,000) and unrealised losses of £9,000 (30 June 2020: unrealised gains of £102,000 and 31 December 2020: unrealised losses of £51,000) for the period.

10. Loans and advances to customers

As at	Gross Amount £'000		Impairment Allowance £'000		30 June 2021 Carrying Value £'000 (unaudited)		30 June 2020 Carrying Value £'000 (unaudited)		31 Dec 2020 Carrying Value £'000 (audited)
HP	69,747		(2,115)		67,632		70,168		71,151
Finance lease	32,775		(3,237)		29,538		35,841		31,132
Wholesale funding arrangements	16,890				16,890		18,832		17,272
Block discounting	13,488		-		13,488		14,911		13,430
Unsecured personal loans	32,040		(432)		31,608		24,788		27,398
Secured commercial loans	10,170		(469)		9,701		12,237		9,091
Secured personal loans	1,746		-		1,746		3,182		2,152
Vehicle stocking plans	1,520		-		1,520		1,622		1,807
Government backed loans	39,344		(22)		39,322		-		19,710
	217,720		(6,275)		211,445		181,581		193,143

11. Trade and other receivables

As at		30 June 2021 £'000 (unaudited)		30 June 2020 £'000 (unaudited)		31 Dec 2020 £'000 (audited)
VAT claim		-		871		586
Prepayments		360		309		482
Other debtors		1,098		1,341		1,102
		1,458		2,521		2,170

The VAT claim was settled in full and the Bank received £699,000 during the period. An additional recovery of £113,000 over and above the carrying amount recognised at year end has been recognised in profit and loss.

12. Goodwill

As at		30 June 2021 £'000 (unaudited)		30 June 2020 £'000 (unaudited)		31 Dec 2020 £'000 (audited)
EAL		1,849		1,849		1,849
BBSL		1,390		1,390		1,390
BSL		678		627		678
ECF Asset Finance PLC ("ECF")		454		454		454
Three Spires Insurance Services Limited ("Three Spires")		41		41		41
		4,412		4,361		4,412

13. Creditors and accrued charges

As at		30 June 2021 £'000 (unaudited)		30 June 2020 £'000 (unaudited)		31 Dec 2020 £'000 (audited)
Commission creditors		2,345		1,110		1,748
Other creditors and accruals		999		1,089		822
Lease liability		396		605		503
Taxation creditors		254		344		133
Deferred interest (Note 17)		64		-		-
		4,058		3,148		3,206

14. Loan notes

As at	Notes		30 June 2021 £'000 (unaudited)		30 June 2020 £'000 (unaudited)		31 Dec 2020 £'000 (audited)
Related parties
J Mellon	JM		1,750		1,750		1,750
Burnbrae Limited	BL		3,200		2,200		3,200
			4,950		3,950		4,950
Unrelated parties	UP		18,772		12,272		17,272
			23,722		16,222		22,222

JM   - Two loans, one of £1,250,000 maturing on 26 February 2025 with interest payable of 5.4% per annum, and one of £500,000 maturing on 31 July 2022, paying interest of 5.0% per annum. Both loans are convertible to ordinary shares of the Company at the rate of 7.5 pence and 9 pence respectively.

BL - Three loans, one of £1,200,000 maturing on 31 July 2022, paying interest of 5.0% per annum, one of £1,000,000 maturing on 25 February 2025, paying interest of 5.4% per annum, and one of £1,000,000 maturing on 28 February 2025 paying interest of 6% per annum. Jim Mellon is the beneficial owner of BL and Denham Eke is also a director. The £1,200,000 loan is convertible to ordinary shares of the Company at a rate of 7.5 pence.

UP   -   Thirty-six loans consisting of an average £521,447 with an average interest payable of 5.7% per annum. The earliest maturity date is 4 May 2022 and the latest maturity is 30 March 2026.

With respect to the convertible loans, the interest rate applied was deemed by the Directors to be equivalent to the market rate at the time with no conversion option.

15. Called up share capital

Ordinary Shares of no-par value available for issue	Number
At 30 June 2021, 31 December 2020 and 30 June 2020	200,200,000

Issued and fully paid ordinary Shares of no par value	Number	£'000
At 31 December 2020 and 30 June 2020	114,130,077	19,121
At 30 June 2021	114,130,077	19,121

There are three convertible loans totalling £2,950,000 (30 June and 31 December 2020: three convertible loans totalling £2,950,000). On 23 June 2014, 1,750,000 share options were issued to Executive Directors and senior management within the Group at an exercise price of 14 pence per share.

The options vest over three years with a charge based on the fair value of 8 pence per option at the date of grant. The period of grant is for 10 years less 1 day ending 22 June 2024.

Of the 1,750,000 share options issued, 1,050,000 (30 June and 31 December 2020:1,050,000) remain outstanding.

16. Acquisition of non-controlling interest

On 14 June 2021, the Group increased its shareholding in Beer Swaps Limited ("BSL"), trading as Ninkasi Rentals and Finance, to 90% (30 June and 31 December 2020: 75%) for a cash consideration of £310,000.

The carrying value of non-controlling interest acquired at the date of acquisition was £44,000. The consideration in excess of the carrying amount of £266,000 has been charged directly to the profit and loss account.

17. Acquisition of financial instrument

On 9 June 2021 the Group acquired 10% of the issued share capital of RFG for nil consideration. The receipt of the issued share capital is considered to be a commitment fee receivable by the Group in order to originate loan facilities in aggregate not exceeding £6,250,000 to RFG. The commitment fee is an integral part of the effective interest rate of the associated loan facilities issued to RFG.

The Group is not considered to have a significant influence over RFG as it holds less than a 20% shareholding and is not considered to participate in the policy making decisions of the entity. The 10% shareholding has thus been classified as a financial instrument.

The Group continues to obtain information necessary to measure the fair value of the shares obtained. The fair value of the financial instrument received has been provisionally determined as £68,000 at initial recognition based on the proportionate share of the net asset value of RFG.

As part of the transaction, the Group has been granted two warrants to acquire further shares. The first warrant is for 5% of the share capital and the second warrant is for a further 5% of the share capital.

The two warrants are exercisable dependent upon the Group's banking subsidiary, the Bank, contracting with RFG, for a larger facility. The fair value of the two warrants has been determined to be nil due to the significant uncertainty that exists at acquisition date and the period end in issuing a further debt facility.

18. Regulators

Certain Group subsidiaries are regulated by the FSA and the FCA as detailed below.

The Bank and EAL are regulated by the FSA under a Class 1(1) - Deposit Taking licence and Class 2 - Investment Business licence respectively. The Bank and CFL are regulated by the FCA to provide regulated products and services.

19. Contingent liabilities

The Bank is required to be a member of the Isle of Man Government Depositors' Compensation Scheme which was introduced by the Isle of Man Government under the Banking Business (Compensation of Depositors) Regulations 1991 and creates a liability on the Bank to participate in the compensation of depositors should it be activated.

20. Subsequent events

On 7 July 2021, the Company announced a dividend of 0.1724 pence per Ordinary Share for the period from 1 January 2020 to 31 December 2020, calculated as being 10% of the profit after tax available to Shareholders.  The dividend was paid on 10th August 2021 to holders of Ordinary Shares recorded on the register on 16 July 2021. MFG also offered a Script Dividend Scheme under which Shareholders could elect to receive New Ordinary Shares in lieu of the cash dividend.

There were no other significant subsequent events identified after 30 June 2021.

21. Approval of interim financial statements

The interim financial statements were approved by the Board on 27 September 2021. The interim report will be available from that date at the Group's website - www.mfg.im and at the Registered Office: Clarendon House, Victoria Street, Douglas, Isle of Man, IM1 2LN. The Group's nominated adviser and broker is Beaumont Cornish Limited, Building 3, 566 Chiswick High Road, London W4 5YA. The interim and annual financial statements along with other supplementary information of interest to shareholders, are included on the Group's website. The website includes investor relations information, including corporate governance observance and contact details.

Appendix - Glossary of terms

BBSL	Blue Star Business Solutions Limited
BL	Burnbrae Limited
BSL	Beer Swaps Limited
Bank	Conister Bank Limited
CFL	Conister Finance & Leasing Ltd
Company	Manx Financial Group PLC
EAL	Edgewater Associates Limited
ECF	ECF Asset finance PLC
FCA	UK Financial Conduct Authority
FSA	Isle of Man Financial Services Authority
Group	Comprise the Company and its subsidiaries
HP	Hire Purchase
IFA	Independent Financial Advisors
Interim financial statements	Condensed consolidated interim financial statements
JM	Jim Mellon
LSE	London Stock Exchange
MFG	Manx Financial Group PLC
MFX	Manx FX Limited
MFX.L	Manx Financial Group PLC ticker symbol on the LSE
RFG	Rivers Finance Group Plc
Subsidiaries	MFG's subsidiaries being EAL, MFX, BBSL, BSL, Bank, CFL, ECF, Three Spires
UK	United Kingdom
UP	Unrelated parties

 

END

 

 

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