TIDM70NN
RNS Number : 6462B
Skipton Building Society
22 February 2011
SKIPTON CONTINUES TO BUILD ITS FINANCIAL STRENGTH
Skipton Building Society has further increased its financial
strength, whilst remaining dedicated to serving its members and the
communities in which they live and work.
The Skipton Group, headed by the building society, has increased
its operating profit by 94%, from GBP18m to GBP35m, as well as
materially increasing capital levels.
Financial Performance in the year to 31 December 2010 at a
glance:
Improved trading profits
-- Group profit before tax from continuing operations of GBP35m,
compared to GBP18m in 2009 (ie excluding the one-off gain of GBP40m
from the sale of Callcredit Information Group in December 2009 and
the profits it generated that year).
Improved capital strength
-- Core Tier One capital ratio up 18% to 11.1% (2009: 9.4%);
-- Tier One capital ratio up 17% to 12.6% (2009: 10.8%);
-- Solvency ratio up 14% to 16.6% (2009: 14.5%).
Effective management of funding base
-- The Group's strong diversified funding base has been
maintained - the ratio of funding from retail balances has
increased to 82% (2009: 79%), with 97% of mortgage lending funded
by members' deposits.
Prudent, measured growth in mortgage lending
-- Group total mortgage lending up 18% to GBP481m (2009:
GBP407m).
Maintained strong liquidity
-- The Group has continued to hold high levels of liquidity
throughout the challenging economic environment. At the yearend
total liquidity stood at 28% with a significant increase in the
proportion held in high quality liquid assets.
2010 Business Highlights:
-- Our merger with Chesham Building Society completed on 1 June
2010, increasing our total membership and enhancing the Society's
distribution capacity by adding three extra branches to our
network;
-- We recognised the need to continue to act prudently and
undertook a business restructuring programme in the Spring, which
together with a controlled reduction of our balance sheet, has
paved the way for longer term growth;
-- Once again, our investment in subsidiary businesses
contributed to our growth in profits. Our estate agency business,
Connells, returned a profit of GBP48m despite a more challenging
housing market during 2010 and we have managed down losses within
the core Mortgages and Savings division, from GBP33m to GBP7m;
-- The quality of our lending improved further during the year,
with falling arrears and possessions resulting in a much reduced
charge for impairment losses of GBP15m (2009: GBP44m);
-- We took steps to re-focus on core business activities,
reaffirming our members' status at the heart of everything we do.
This resulted in - among other things - the sale of our subsidiary
mortgage distribution business Pink Home Loans for a profit of
GBP1.2m;
-- In March, to mitigate the impact of exceptional market
conditions and to protect the business for the long-term benefit of
the membership as a whole we exercised our right to remove the
ceiling on our mortgage Standard Variable Rate (SVR). At 4.95%, our
increased SVR remains below the average of the top 10 UK building
societies and our low interest rate margin continues to reflect
value being passed to our members.
Enhanced products and services for members:
-- Introduced innovative new products and services for varying
circumstances, including a Telephone Saver account and the My
Savings online range helping members achieve their savings
goals;
-- At the time of launch we offered one of the only 95% LTV
mortgages, in line with our principal purpose of helping people to
achieve their homeownership aspirations;
-- For our Savers we maintained our strong track record for
straightforward, transparent and dependable long-term good value -
complemented by regular special offers as an extra reward for our
customers;
-- Our positive product offering was recognised with 471
independent best buy table endorsements in national media during
the year;
-- Underlined our commitment to outstanding personal service by
opening 13 new sub-branches in the Wirral, North Devon, the Home
Counties and South Yorkshire;
-- Became the first UK building society to retain the
prestigious Customer First standard for service excellence.
Our role in the communities where our members live and work:
-- More than GBP100,000 donated to 69 good causes across the
country by the Skipton Building Society Charitable Foundation;
-- 75 donations given by Skipton branches to grassroots clubs
and charities which reflect our charitable priorities such as the
Arts, Sport, Education, Money Advice and Community Enhancement,
through the Society's Community Contribution Award scheme;
-- Sponsorship of major community partners included Ilkley
Literature Festival, Grassington Festival, the Great Yorkshire
Show, the Skipton Building Society Camerata community orchestra and
Molesey Boat Club, with its 2012 Olympic rowing team.
David Cutter, Skipton Group Chief Executive, said: "Despite
continued buffets from external market developments such as the
impact of government austerity measures on our still-fragile
economy, the Society has continued to underline its financial
strength through prudent, cautious management coupled with a
strategy to now grow the business whilst maintaining appropriate
levels of capital and liquidity.
"We've held our margin steady at a low enough rate to give great
value to members whilst being high enough to operate the business
in a prudent manner.
"Skipton remains a successful mutual building society with
tremendous future opportunities. It is thanks to the tireless
commitment and team effort of our people that we remain optimistic
about the future and our ability to overcome any further challenges
which arise."
He added: "It is widely recognised that mutuals like ourselves
face a rare opportunity to meet consumers' desire for greater
competition, diversity and alternative solutions in financial
services, in this immediate post-credit crunch environment.
"Consequently, we believe we are in a key phase of our history
and are seizing the opportunity to commence a business
transformation programme, focusing on everything from systems
capability to the kinds of products and services we offer. This
will emphasise our mutual commitment to offering the best possible
experience to our customers for many years to come."
ENDS
For further information or to arrange interviews, please contact
the Skipton Press Office on
08456 017247, email newsline@skipton.co.uk or visit the press
section of our website at www.skipton.co.uk
Tracy Fletcher, Head of Corporate Communications
Tel: 01756 705855
If outside Press Office hours (8am - 6pm, Monday to Friday),
please call 07867 851628
Skipton Building Society
Results for the year ended 31 December 2010
Consolidated income statement
2010 2009
-----------------------------------------------
GBPm GBPm
----------------------------------------------- -------- --------
Continuing operations
Interest receivable and similar income 363.6 421.8
Interest payable and similar charges (308.7) (368.5)
----------------------------------------------- -------- --------
Net interest receivable 54.9 53.3
Fees and commissions receivable 381.7 389.0
Fees and commissions payable (20.8) (19.4)
Fair value gains on financial instruments 2.0 3.9
Profit on disposal of subsidiary undertakings 1.2 -
Share of profits from joint ventures
and associates 0.3 0.2
Other income 24.1 13.0
----------------------------------------------- -------- --------
Total income 443.4 440.0
Administrative expenses (395.5) (383.7)
Negative goodwill arising on merger 3.1 -
Impairment losses on loans and advances (14.8) (43.6)
Impairment (losses) / recoveries on
debt securities (0.1) 1.3
Provisions for liabilities (1.1) 4.0
Profit before tax 35.0 18.0
Tax expense (9.8) (4.3)
----------------------------------------------- -------- --------
Profit for the financial year from
continuing operations 25.2 13.7
----------------------------------------------- -------- --------
Discontinued operation
Profit from discontinued operation - 43.9
----------------------------------------------- -------- --------
Profit for the financial year 25.2 57.6
----------------------------------------------- -------- --------
Profit for the financial year attributable
to:
Members of Skipton Building Society
Profit for the financial year from
continuing operations 25.5 13.5
Profit for the financial year from
discontinued operations - 43.9
----------------------------------------------- -------- --------
25.5 57.4
Non-controlling interests
(Loss)/ profit for the financial year
from continuing operations (0.3) 0.2
----------------------------------------------- -------- --------
(0.3) 0.2
----------------------------------------------- -------- --------
25.2 57.6
----------------------------------------------- -------- --------
The Group's total profits include a number of items which we
consider to be non-routine and the following table seeks to adjust
the reported profit and provide a clearer representation of the
underlying performance of the Group.
2010 2009
------------------------------------------------------
GBPm GBPm
------------------------------------------------------ ------ -------
Profits before tax from continuing operations 35.0 18.0
Profit before tax from discontinued operations - 5.8
Profit on sale of discontinued operations* - 39.7
Group profit before tax 35.0 63.5
Non-routine items:
Profit on sale of subsidiary companies (1.2) (39.7)
Financial Services Compensation Scheme levy 0.9 (4.3)
Impairment /(recoveries) of investment securities 0.1 (1.3)
Curtailment gain on closure of pension schemes - (10.4)
Impairment of goodwill 7.5 12.0
Net gains losses from fair value volatility (2.0) (3.9)
Merger expenses 2.9 4.8
Negative goodwill arising on merger (3.1) -
Profits from sale and leaseback (5.7) -
------------------------------------------------------ ------ -------
Profit before tax after adjusting for non-routine
items 34.4 20.7
------------------------------------------------------ ------ -------
* The sale of Callcredit Information Group in December 2009
The current period adjustments highlighted above are as a result
of the following:
-- During the year the Group disposed of its holding in Pink
Homeloans generating a GBP1.2m profit for the Group.
-- The majority of the provision charge for the Financial
Services Compensation scheme levy relates to a specific FSCS levy
within the Financial Advice division due to the demise of Keydata,
and the subsequent nil value rating of investments placed in its
Lifemark counterparty. This had the effect of exhausting the FSCS
limit within the Investment Intermediation class. Whilst none of
the companies within Skipton Group had advised on any such plans,
the specific levy placed on them totalled GBP0.7m.
-- Impairment of investment securities represents the loss on
sale of a debt security.
-- Due to the continuing market uncertainty and reductions in
business volumes the Group recognised GBP7.5m of goodwill
impairment against a number of subsidiary undertakings.
-- Net movements in the fair value of certain financial
instruments arising from hedge accounting; these timing differences
reverse over time.
-- Merger expenses represent legal and other expenses following
the merger with the Chesham Building Society and the integration of
the Specialist Mortgage Services business into HML.
-- The merger with Chesham Building Society did not involve the
transfer of any cash consideration. Instead, in line with IFRS 3,
Business Combinations (2008 Revised), an imputed consideration was
calculated which represented the fair value of the Chesham
business. This resulted in a value of GBP6.1m attributed to the
imputed consideration whilst the fair value of the net assets
amounted to GBP9.2m. The GBP3.1m difference is negative goodwill
and must be credited to the Income Statement.
-- During the year, the Society recognised a profit of GBP5.7m
from the sale and leaseback of several properties.
Skipton Building Society
Results for the year ended 31 December 2010
Consolidated statement of comprehensive income
2010 2009
---------------------------------------------------------
GBPm GBPm
--------------------------------------------------------- ------ -------
Profit for the financial year 25.2 57.6
--------------------------------------------------------- ------ -------
Other comprehensive income:
Available-for-sale investments: valuation
(losses) / gains taken to equity (0.5) 9.4
Cash flow hedges: gains taken to equity 22.6 7.1
Exchange differences on translation of foreign
operations 1.4 2.6
Movement in reserves attributable to non-controlling
interests (0.1) (1.1)
Non-controlling interests share restructure - 0.5
Actuarial gain / (loss) on retirement benefit
obligations 9.7 (17.9)
Income tax relating to components of other
comprehensive income (9.7) 0.7
--------------------------------------------------------- ------ -------
Other comprehensive income for the year, net
of tax 23.4 1.3
Total comprehensive income for the year 48.6 58.9
--------------------------------------------------------- ------ -------
Total comprehensive income attributable to:
Members of Skipton Building Society 48.9 58.7
Non-controlling interests (0.3) 0.2
--------------------------------------------------------- ------ -------
48.6 58.9
--------------------------------------------------------- ------ -------
Skipton Building Society
Results for the year ended 31 December 2010
Consolidated statement of financial position
2010 2009
-------------------------------------------
GBPm GBPm
------------------------------------------- --------- ---------
Assets
Cash in hand and balances with the
Bank of England 664.6 1,272.1
Loans and advances to credit institutions 293.9 447.5
Debt securities 2,421.2 2,339.3
Derivative financial instruments 140.6 265.5
Loans and advances to customers 9,814.7 10,813.3
Current tax asset 1.9 5.6
Deferred tax asset 26.2 45.0
Investments in group undertakings 1.5 1.7
Intangible assets 190.9 182.2
Property, plant and equipment 89.4 88.7
Investment property 6.8 10.3
Other assets 87.8 97.6
Total assets 13,739.5 15,568.8
------------------------------------------- --------- ---------
Liabilities
Shares 9,388.5 10,470.2
Amounts owed to credit institutions 853.6 942.2
Amounts owed to other customers 1,088.8 1,203.9
Debt securities in issue 846.2 1,405.6
Derivative financial instruments 260.8 263.7
Other liabilities 69.6 89.7
Accruals and deferred income 39.0 50.0
Provisions for liabilities 31.3 19.3
Deferred tax liability 9.9 13.8
Retirement benefit obligations 31.8 47.4
Subordinated liabilities 214.2 213.0
Subscribed capital 84.7 83.6
------------------------------------------- --------- ---------
Total liabilities 12,918.4 14,802.4
Members' interests
General reserve 819.6 781.5
Available-for-sale reserve (6.9) (6.2)
Cash flow hedging reserve 0.3 (16.0)
Translation reserve 5.0 3.6
Attributable to Members of Skipton
Building Society 818.0 762.9
Non-controlling interests 3.1 3.5
------------------------------------------- --------- ---------
Total members' interests 821.1 766.4
------------------------------------------- --------- ---------
Total members' interests and liabilities 13,739.5 15,568.8
------------------------------------------- --------- ---------
Skipton Building Society
Results for the year ended 31 December 2010
Consolidated statement of changes in members' interests
Available-for-sale Cash Translation
General financial flow of foreign Sub Non-controlling
reserve assets hedges operations Total interests Total
-------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ------------------- ------- ------------ ------ ---------------- ------
Balance at 1
January 2010 781.5 (6.2) (16.0) 3.6 762.9 3.5 766.4
Profit /(loss) for
the financial
year 25.5 - - - 25.5 (0.3) 25.2
Other
comprehensive
income
Actuarial gain
on retirement
benefit
obligations 6.5 - - - 6.5 - 6.5
Net (losses)
/gains from
changes in fair
value - (0.7) 16.3 - 15.6 - 15.6
Exchange
differences on
translation of
foreign
operations - - - 1.4 1.4 - 1.4
Movement in
reserves
attributable to
non-controlling
interests - - - - - (0.1) (0.1)
Total other
comprehensive
income 6.5 (0.7) 16.3 1.4 23.5 (0.1) 23.4
Total
comprehensive
income for the
year 32.0 (0.7) 16.3 1.4 49.0 (0.4) 48.6
------------------- -------- ------------------- ------- ------------ ------ ---------------- ------
Transfer of
engagements 6.1 - - - 6.1 - 6.1
------------------- -------- ------------------- ------- ------------ ------ ---------------- ------
Balance at 31
December 2010 819.6 (6.9) 0.3 5.0 818.0 3.1 821.1
------------------- -------- ------------------- ------- ------------ ------ ---------------- ------
Available-for-sale Cash Translation
General financial flow of foreign Sub Non-controlling
reserve assets hedges operations Total interests Total
-------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ------------------- ------- ------------ ------- ---------------- -------
Balance at 1
January 2009 737.0 (13.2) (21.2) 1.0 703.6 3.9 707.5
Profit for the
financial year 57.4 - - - 57.4 0.2 57.6
Other
comprehensive
income
Actuarial loss
on retirement
benefit
obligations (12.9) - - - (12.9) - (12.9)
Net gains from
changes in fair
value - 5.6 5.2 - 10.8 - 10.8
Exchange
differences on
translation of
foreign
operations - - - 2.6 2.6 - 2.6
Movement in
reserves
attributable to
non-controlling
interests - - - - - (1.1) (1.1)
Non-controlling
interests share
restructure - - - - - 0.5 0.5
Transfer of
engagements - 1.4 - - 1.4 - 1.4
------------------- -------- ------------------- ------- ------------ ------- ---------------- -------
Total other
comprehensive
income (12.9) 7.0 5.2 2.6 1.9 (0.6) 1.3
Total
comprehensive
income for the
year 44.5 7.0 5.2 2.6 59.3 (0.4) 58.9
------------------- -------- ------------------- ------- ------------ ------- ---------------- -------
Balance at 31
December 2009 781.5 (6.2) (16.0) 3.6 762.9 3.5 766.4
------------------- -------- ------------------- ------- ------------ ------- ---------------- -------
Skipton Building Society
Results for the year ended 31 December 2010
Consolidated statement of cash flows
2010 2009
------------------------------------------------------
GBPm GBPm
------------------------------------------------------ ---------- ----------
Cash flows from operating activities
Profit before taxation from continuing operations 35.0 18.0
Profit before taxation from discontinued operations - 45.5
Adjustments for:
Impairment losses on loans and advances 14.8 43.6
Impairment losses / (recoveries) on debt
securities 0.1 (1.3)
Loans and advances written off, net of recoveries (21.1) (29.9)
Goodwill impairment 7.5 12.0
Depreciation and amortisation 19.9 23.2
Interest on capital and subordinated liabilities 25.1 23.3
(Profit) / loss on sale of property, plant and
equipment and investment property (6.7) 0.2
Impairment of investment property 1.4 -
Negative goodwill arising on merger (3.1) -
Share of profits from joint ventures and
associates (0.3) (0.2)
Dividends received from joint venture 0.5 -
Profit on disposal of subsidiary undertakings (1.2) (39.7)
Other non-cash movements 71.3 54.2
------------------------------------------------------ ---------- ----------
143.2 148.9
Changes in operating assets and liabilities:
Movement in prepayments and accrued income 2.3 7.9
Movement in accruals and deferred income (10.6) (197.8)
Movement in provisions for liabilities 11.8 (8.3)
Movement in loans and advances to customers 1,192.8 811.6
Movement in shares (1,268.4) 713.9
Net movement in amounts owed to credit
institutions and other customers (225.3) (1,152.8)
Net movement in debt securities in issue (502.5) 47.7
Net movement in loans and advances to credit
institutions 157.5 851.7
Net movement in other assets 17.6 3.2
Net movement in other liabilities (28.2) 16.1
Income taxes paid (4.9) (0.3)
------------------------------------------------------ ---------- ----------
Net cash flows from operating activities (514.7) 1,241.8
------------------------------------------------------ ---------- ----------
Skipton Building Society
Results for the year ended 31 December 2010
Consolidated statement of cash flows (continued)
2010 2009
----------------------------------------------------
GBPm GBPm
---------------------------------------------------- ---------- ----------
Net cash flows from operating activities (514.7) 1,241.8
---------------------------------------------------- ---------- ----------
Cash flows from investing activities
Purchase of debt securities (3,623.8) (6,036.0)
Proceeds from disposal of debt securities 3,555.4 5,771.8
Purchase of intangible assets (8.9) (11.7)
Purchase of property, plant and equipment
and investment property (11.2) (23.9)
Proceeds from disposal of property, plant
and equipment and investment property 9.8 0.9
Dividends paid to non-controlling interests (3.3) (3.8)
Cash acquired on transfer of engagements 0.1 17.9
Further investment in subsidiary undertakings (20.9) (6.9)
Cash received from sale of subsidiary undertakings 1.6 97.8
Debt repaid on sale of subsidiary undertakings - (19.7)
---------------------------------------------------- ---------- ----------
Net cash flows from investing activities (101.2) (213.6)
---------------------------------------------------- ---------- ----------
Cash flows from financing activities
Interest paid on subordinated liabilities (16.9) (16.2)
Interest paid on Permanent Interest Bearing
Shares (8.2) (7.1)
Net cash flows from financing activities (25.1) (23.3)
---------------------------------------------------- ---------- ----------
Net (decrease) / increase in cash and cash
equivalents (641.0) 1,004.9
Cash and cash equivalents at 1 January 1,396.3 391.4
---------------------------------------------------- ---------- ----------
Cash and cash equivalents at 31 December 755.3 1,396.3
---------------------------------------------------- ---------- ----------
Analysis of the cash balances as shown in the Statement of
Financial Position:
2010 2009
---------------------------------------------
GBPm GBPm
--------------------------------------------- ------- --------
Cash in hand and balances with the Bank
of England 664.6 1,272.1
Mandatory reserve deposit with the Bank
of England (11.2) (11.7)
--------------------------------------------- ------- --------
653.4 1,260.4
Loans and advances to credit institutions
repayable on demand 101.9 135.9
--------------------------------------------- ------- --------
Cash and cash equivalents as at 31 December 755.3 1,396.3
--------------------------------------------- ------- --------
Skipton Building Society
Key ratios
2010 2009
% %
Group net interest margin 0.37 0.36
Society net interest margin 0.21 0.21
Group management expenses / mean assets 2.70 2.63
Group profit after tax / mean assets 0.17 0.39
Total asset growth (11.75) 14.08
Group loans and advances growth (9.57) 13.30
Group share account growth (10.47) 28.84
Liquidity ratio 27.75 28.95
Funding ratio 17.63 20.58
Gross capital ratio 9.20 7.58
Free capital ratio 7.01 5.79
Solvency ratio 16.60 14.48
This information is provided by RNS
The company news service from the London Stock Exchange
END
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