TIDMMFX
RNS Number : 5901T
Manx Financial Group PLC
21 March 2023
F OR IMMEDIATE RELEASE 21(st) March 2023
Manx Financial Group PLC (the 'Company' or the 'Group')
Report and accounts for the year ended 31 December 2022
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 MFX Limited presents its audited final
results for the year ended 31 December 2022.
Jim Mellon, Executive Chairman, commented: " The year's
financial performance sets a record despite the continued economic
uncertainty in the Isle of Man and the UK throughout 2022. Profit
before tax payable increased by GBP2.2 million to GBP5.2 million,
an increase of over 70%. As a result, we are well-positioned to
support the growth in profitability for 2023."
The 2022 Audited Annual Report and Accounts will be posted to
Shareholders and will be available from the Company's website
www.mfg.im shortly. Details concerning the 2023 Annual General
Meeting will be announced in due course.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation No. 596/2014 on market abuse. Upon
the publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
For further information, please contact:
Manx Financial Group PLC Beaumont Cornish Limited Greentarget Limited
Denham Eke, Roland Cornish/James Biddle J amie Brownlee
Executive Vice Chairman Tel +44 (0) 20 7628 3396 Tel +44 (0) 20 3307
Tel +44 (0)1624 694694 5726
Dear Shareholders
Introduction
In my report last year, I discussed the negative economic
environment and how it would result in higher interest rates and
higher inflation despite a tight employment market. With the Isle
of Man and UK economy now proving more resilient, with inflation
falling faster than expected, and the labour market remaining
robust, it appears likely that the Bank of England will avoid
declaring a further interest rate rise. Indeed, in now looks as if
the UK will avoid a recession altogether. Notwithstanding, I also
predicted that excellent acquisition opportunities would arise in
this environment, and I still believe this to be the case, and that
our strengthened balance sheet positions us well to take advantage
of them.
Our principal operating subsidiaries' strategy of growth through
gaining market share in recession-proof markets, both organically
and through acquisition, has allowed us this year to take advantage
of opportunities in a prudent and compliant manner. In our
Interims, I was pleased to report our strongest profit before tax
payable in more than a decade and now I am equally pleased to
report a record full-year profit before tax payable of GBP5.2
million (2021: GBP3.0 million) - an increase of 71.2%.
These record results have improved our balance sheet by GBP70.5
million to GBP379.3 million (2021: 308.8 million) and our
shareholder equity by GBP4.8 million to GBP29.8 million (2021:
GBP25.0 million). This further underpins the Board's commitment to
return 10.0% of the Group's profit available to shareholders each
year in the form of cash and shares. This year, the total dividend
available for payment is GBP0.433 million (2021: GBP0.279 million).
Thus, the amount recommended for shareholder approval will be
0.3764 pence per share (2021: 0.2443 pence per share), a 54.1%
uplift, as we continue to reward our loyal shareholders.
Financial Performance
This year's financial performance is a record year despite the
continued economic uncertainty in the Isle of Man and the UK.
Profit before tax payable increased by GBP2.2 million to GBP5.2
million (2021: GBP3.0 million), a growth of over 70%. For the
second year running, Conister Bank Limited set a new lending
milestone of GBP231.4 million (2021: GBP212.6 million), an increase
of 8.8%. Whilst the cost of deposits increased in the second half
of the year as the Bank of England increased interest rates to
dampen inflationary pressures, the Group improved its Net Interest
Margin by GBP6.4 million to GBP24.4 million (2021: GBP18.0
million). With other subsidiaries making a positive contribution,
notably Conister Finance & Leasing Limited, MFX Limited and
Payment Assist Limited, this resulted in Operating Income of
GBP26.1 million (2021: GBP20.0 million), despite last year
benefitting from a GBP0.7 million revaluation credit.
Operating Expenses, excluding provisions, increased by GBP4.3
million to GBP16.9 million (2021: GBP12.6 million), with GBP2.6
million relating to incremental personnel expenses, driven by
acquisitions and further investment in our UK headcount, in
readiness of receiving our recently applied for UK Branch deposit
taking licence. The balance, GBP1.7 million, relates to further IT
investment; increased travel costs post the pandemic; general
overheads; and the impairment of a portion of the goodwill carried
in respect of our Isle of Man based IFA. Impairments reduced by
GBP0.4 million to GBP4.0 million (2021: GBP4.4 million) and total
overheads, including operating expenses and impairments, increased
by GBP3.9 million to GBP20.9 million (2021: GBP17.0 million). Our
Profit Before Tax ratio, measured as profit before tax as a
percentage of total income, improved by 3.7% to 17.0% (2021:
13.3%). Another key operational efficiency measure, our Loan to
Deposit ratio, also improved, this time by 5.4% to 95.8% (2021:
90.4%).
Turning to our balance sheet, our Total Assets increased by
GBP70.5 million to GBP379.3 million (2021: GBP308.8 million), a
growth of 22.8%. This was driven mostly by a GBP62.2 million
increase in our loan book. As part of our prudent approach to
maintaining our balance sheet, we continue to value any government
backed assets monthly on a mark-to-market basis so that their
carrying value always reflects their true current market value. Our
Isle of Man depositors continued to support the business, with
deposits increasing by GBP50.7 million to GBP304.2 million (2021:
GBP253.5 million). Total Liabilities stood at GBP349.5 million
(2021: GBP283.8 million), leading to an increase in total equity of
GBP4.8 million to GBP29.8 million (2021: GBP25.0 million). A
measure of the Company's financial wellbeing, our Debt to Asset
ratio, which we measure on a conservative basis as being total debt
as a percentage of total tangible assets (discounting goodwill and
intangibles) remains robust at 91.7% (2021: 92.4%), meaning our
liabilities are covered by assets 1.1 times (2021: 1.1 times).
Key Objectives
Whilst the drivers of economic uncertainty have shifted over the
last four years, our key objective of safely growing shareholder
value has remained unchanged. Thus, our strategic focus has
continued to be as previously reported, namely to:
-- Provide the highest quality of service throughout our
operations to all customers, ensuring that their treatment is both
fair and appropriate;
-- Adopt a pro-active strategy to managing risk within a structured and compliant manner;
-- Concentrate on developing our core business by considered
acquisitions, increasing prudential lending, and augmenting the
range of financial services we offer;
-- Prudently progress the implementation of an enhanced and
scalable IT infrastructure to better service the operational
requirements of a growing Group without the requirement for a
disproportionate increase in headcount and other associated
operational costs;
-- Continue to develop our Treasury management to improve the
return on the liability side of our balance sheet; and
-- Manage our balance sheet to exceed the regulatory requirements for capital adequacy.
Our Strategic Report is set out in greater detail later in these
accounts. Our approach to Risk Management is set out later in these
accounts.
Environmental, Social and Corporate Governance
Climate change presents financial and reputational risks for the
financial services industry. The Board consider climate change a
material risk as per the Board-approved risk appetite framework,
which provides a structured approach to risk-taking within agreed
boundaries. The assessment framework is proportional at present,
but it will develop over time as the Group generates further
resources, and industry consensus emerges. Whilst it is difficult
to assess how climate change will unfold, the Group is continually
assessing various risk exposures. Both Isle of Man and the UK have
committed to cut their greenhouse gas emissions to "net-zero" by
2050. There is growing consensus that an orderly transition to a
low-carbon economy will bring substantial adjustments to the global
economy, which will have financial implications while bringing
risks and opportunities. The risk assessment process has been
integrated into our existing risk frameworks and will be governed
through the various risk governance structures, including review
and recommendations by the Group's Risk Committee.
The Group is continuously developing a suitable strategic
approach to climate change and the unique challenges it poses. In
addition to the modelling of various scenarios and various
governance reviews, the Group will continue to monitor requirements
through its relationship with UK Finance and the equivalent Isle of
Man forums.
Our Corporate Governance Report and a review of our compliance
with the principles of the Quoted Companies Alliance Code is set
out in greater detail later in these accounts. A more detailed
review of our ESG compliance is set out on later in these
accounts.
Conister Bank Limited and Conister Finance and Leasing
Limited
Both the Bank and CF&L continued to progress with prudent
lending strategies, with the loan book increasing by GBP57.7
million to GBP292.1 million (2021: GBP234.4 million). We recorded
growth in both of our markets, namely, our home market, the Isle of
Man, and the UK.
The Isle of Man market's demand for loan finance has virtually
returned to its pre-pandemic levels, and the Bank has improved its
market share through flexible online offerings. On Island, the Bank
lent a record GBP50.5 million (2021: GBP42.9 million) to consumers
and Small and Medium Sized Enterprises ("SMEs"), with over 65.0%
(2021: 60.0%) of this originating from our online portal.
In the UK, the Bank lent GBP150.0 million (2021: GBP114.1
million) in its Structured Finance division, which has been
identified as a future key area of growth for the Bank. These
products are designed in such a manner as to provide the Bank with
additional collateral enhancements. This allows the Bank to hold
lower loss provisions, supporting its demonstrable history of safe
lending in this market.
With Government guarantee support schemes tapering off, it is
encouraging to see our UK SME Broker division return to pre-Covid
levels of lending of GBP30.9 million (2021: GBP11.1 million). These
guarantee schemes were an important lending stream for the
Bank.
The Bank continues to seek acquisitions that provide access to
niche lending markets in the UK. By owning the customer, the Bank
continued its strategy to reduce its reliance on other introducers
and their expensive commissions. In the last year, I am pleased to
say that whilst interest income increased by GBP3.3 million to
GBP25.3 million (2021: GBP22.0 million), commissions decreased by
6.6%, or GBP0.3 million, to GBP3.2 million (2021: GBP3.5
million).
The Bank's Isle of Man depositor base remains very loyal, with a
retention rate in excess of 78.0% (2021: 70.0%). Whilst we continue
to introduce new products for this market, it remains our intention
to reduce our on-Island reliance. As such, we have embarked on an
application to the PRA to raise UK deposits through a UK Branch
licence.
During the year, the Bank continued to attract deposits to fund
lending, with deposits from customers increasing to GBP304.2
million (2021: GBP253.5 million), improving the Loan-to-Deposit
ratio efficiency to 96.0% (2021: 92.5%). This helped to offset the
rising interest rates, driven by the Bank of England base rate
increases in its attempt to curb inflation. The Bank's average cost
of funds at the end of the year had increased to 2.4% (2021: 1.5%).
The Bank continues to hold significant cash reserves and debt
securities totalling GBP57.9 million (2021: GBP58.5 million).
Turning to overheads, personnel expenses increased by GBP1.0
million, reflecting the additional staff costs associated with our
UK growth strategy, but overall, overheads decreased to GBP8.0
million (2021: GBP8.3 million). Despite loan book growth of GBP57.7
million, provisioning decreased by GBP0.9 million to GBP3.4 million
(2021: GBP4.3 million), reflecting the emergence from Covid related
stresses in the credit book. Depreciation and amortisation narrowly
fell by GBP0.1 million to GBP0.5 million (2021: GBP0.6 million). In
total, the Bank's cost base increased by GBP0.6 million to GBP13.8
million (2021: GBP13.2 million), but driven by the increase in Net
Interest Margin, the Bank's profit before tax margin increased by
3.4% to 8.2% (2021: 4.8%).
Total assets grew by GBP57.9 million to GBP354.7 million (2021:
GBP296.8 million), a growth of 19.5%. Shareholder funds increased
by GBP3.4 million to GBP34.6 million (2021: GBP31.2 million). The
CET1 ratio reduced by 2.8% to 12.4% (2021: 15.2%), in line with
loan book growth - a figure which is a prudent 3.9% above the
Bank's regulatory minimum of 8.5%.
Edgewater Associates Limited
We have re-focused and resourced this business to meet the
demands of legislation relating to the provision of regulated
financial advice on the Isle of Man. In addition, through a project
to improve our technology, our customer segmentation will allow an
improved customer focused journey, which will also deliver
operational efficiencies. In light of these two projects, revenue
and profitability has remained fairly consistent year-on-year.
Manx FX Limited
Our foreign exchange advisory continued to perform positively
and recorded a record profit for the year of GBP1.4 million (2021:
GBP1.2 million), with a marginal reduction in its Cost-to-Income
ratio to 18.5% (2020: 18.8%). This is a highly cash-generative
business which contributed GBP1.8 million (2021: GBP1.0 million) to
the Group's treasury.
Blue Star Business Solutions Limited
Despite the challenging economic environment, Blue Star grew its
brokered lending in the year by GBP0.7 million to GBP15.0 million
(2021: GBP14.3 million). Of the total advanced, the Bank wrote
GBP7.6 million (2021: GBP8.8 million), with the balance being
passed to other funders - this business model will be developed in
2023 as a safe haven for growth for the Group.
The business was profitable in its own right and contributed
GBP0.7 million (2021: GBP0.5 million) to the Group's operating
income this year.
Ninkasi Rentals & Finance Limited
The business continued to be the largest fermentation tank
lessor in the UK brewing market with a fleet size of 278 (2021:
261), providing 1.3 million litres of brewing capacity (2021: 1.2
million litres).
A key measure of performance is the deployment of its fleet,
which is currently 81.0% (2021: 88.0%). The business, in addition
to being profitable in its own right, generated GBP1.7 million
(2021: GBP1.4 million) to the Group's income this year.
The Business Lending Exchange Limited
This is the first year in consolidating the full-year results of
the Business Lending Exchange. Its loan book grew to GBP8.3 million
(2021: GBP5.0 million) and its Group contribution of profit before
tax increased to GBP0.5 million (2021: GBP0.1 million). When
eliminating the impact of intra-group funding, the business
contributed GBP1.1 million to Group profitability.
This business specialises in prudent lending through its
experienced management team to the profitable sub-prime SME market,
a sector to which the Bank lacked meaningful access.
Payment Assist Limited
On 21 September 2022, the Group announced its acquisition of
50.1% of Payment Assist's shares. Payment Assist ("PAL") was
incorporated in 2013 to capitalise on the opportunity in the
automotive sector to improve garage customer retention rates by
providing a user-friendly method of enabling customers to spread
their payments over a small period of time.
Since the acquisition, PAL has contributed GBP0.7 million of
profit before tax. The PAL acquisition shows every sign that this
will be a significantly profitable operation and an important
contributor to the Group's profitability in the coming years.
Outlook
The set of results within this report demonstrates the value of
the Group's diversified portfolio.
For our banking and lending subsidiaries, we will continue our
strategy of investing in resilient and profitable growth sectors,
which will allow us to protect our Net Interest Margin. By
broadening our access to liquidity through our UK branch
deposit-taking licence application, we will be able to arbitrage
deposit rates to maximise this margin for the future. On the asset
side of our balance sheet, demand for our products in both the Isle
of Man and UK remains strong, and as a result, I would expect our
2023 Interim lending to be in excess of that reported in 2022's
equivalent period. With the economic outlook suggesting a
shallower, shorter recession than predicted in 2022, provisioning
going forward should not be in excess of our historical norm. In
summary, our lending businesses are well-positioned for this
year.
In summary, our various business streams are well-positioned to
support the growth in profitability for this year. Our Executive
team will continue to safeguard each of these and to maximise
suitable opportunities as they arise, whether they be through
organic growth or accretive acquisitions.
Our Executive team will continue to protect our business and to
maximise opportunities as they arise, whether they be through
organic growth or accretive acquisitions.
Board changes
Whilst there has been no changes to your Board of Directors
since the announcement of our Interim results, I would like again
to put on record my sincere thanks to David Gibson, who retired
after thirteen years serving this Board and five years acting as
Chairman of our banking subsidiary.
Conclusion
Finally, I would like to thank each of our staff for their hard
work and dedication in making this splendid result possible. I
would also like to thank my fellow shareholders and other
stakeholders for their enduring loyalty and support.
Jim Mellon
Executive Chairman
20 March 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
2022 2021
For the year ended 31 December Notes GBP000 GBP000
------------------------------------------------- ------ -------- --------
Interest revenue calculated using the effective
interest rate method 28,978 21,010
Other interest income 1,765 1,937
Interest expense (6,391) (4,967)
Net interest income 9 24,352 17,980
Fee and commission income 10 4,719 4,621
Fee and commission expense 10 (3,569) (3,339)
Depreciation on leasing assets 22 (16) (269)
Net trading income 25,486 18,993
Other operating income 314 365
(Loss) / gain on financial instruments 19 (19) 30
Realised gain / (loss) on debt securities 18 292 (1)
Revaluation on acquisition of subsidiary 32 - 660
Operating income 26,073 20,047
Personnel expenses 11 (9,764) (7,156)
Other expenses 12 (5,806) (4,500)
Provision for impairment on loans and advances
to customers 13 (3,990) (4,360)
Depreciation 22 (738) (675)
Amortisation and impairment of intangibles 23 (582) (458)
Share of profit of equity accounted investees,
net of tax 30 18 32
VAT recovery 21 - 113
Profit before tax payable 14 5,211 3,043
Income tax expense 15 (537) (234)
Profit for the year 4,674 2,809
-------- --------
2022 2021
For the year ended 31 December Notes GBP000 GBP000
-------------------------------------------------------- ------ -------- ---------
Profit for the year 4,674 2,809
Other comprehensive income:
Items that will be reclassified to profit or
loss
Unrealised gain / (loss) on debt securities 18 131 (18)
Items that will never be reclassified to profit
or loss
Revaluation gain on property, plant and equipment 22 - 15
Actuarial gain on defined benefit pension scheme
taken to equity 28 407 172
Recognition of deferred tax credit on defined
benefit pension - 67
Total comprehensive income for the period attributable
to owners 5,212 3,045
-------- ---------
Profit attributable to:
Owners of the Company 4,331 2,793
Non-controlling interests 32 343 16
-------- ---------
4,674 2,809
Total comprehensive income attributable to:
Owners of the Company 4,869 3,029
Non-controlling interests 32 343 16
-------- ---------
5,212 3,045
-------- ---------
Earnings per share - Profit for the year
Basic earnings per share (pence) 16 4.07 2.46
Diluted earnings per share (pence) 16 3.15 1.97
Earnings per share - Total comprehensive income
for the year
Basic earnings per share (pence) 16 4.54 2.66
Diluted earnings per share (pence) 16 3.50 2.13
The Directors believe that all results derive
from continuing activities.
COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
2022 2021
For the year ended 31 December Notes GBP000 GBP000
------------------------------------------------- ------ -------- --------
Dividend income 1,575 1,259
Interest income 522 518
Other income 69 78
Operating income 2,166 1,855
Personnel expenses 11 (127) (129)
Administration expenses - (59)
Depreciation expense 22 (65) (91)
Amortisation expense (2) (2)
Impairment of intercompany receivable - (545)
Profit before tax payable 1,972 1,029
Tax payable - -
Profit for the year 1,972 1,029
Total comprehensive income for the year 1,972 1,029
------------------------------------------------- ------ -------- --------
The Directors believe that all results derive
from continuing activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2022 2021
As at 31 December Notes GBP000 GBP000
----------------------------------- ----------- -------- --------
Assets
Cash and cash equivalents 17 22,630 20,279
Debt securities 18 40,675 40,987
Equity held at Fair Value Through
Profit or Loss 33 122 68
Loans and advances to customers 20 291,475 229,251
Trade and other receivables 21 4,211 1,947
Property, plant and equipment 22 6,714 7,257
Intangible assets 23 2,703 2,508
Investment in associates 30 155 136
Goodwill 34 10,576 6,320
Total assets 379,261 308,753
Liabilities
Deposits from customers 24 304,199 253,459
Creditors and accrued charges 25 13,108 4,745
26, 6(ii),
Deferred consideration 32 262 1,023
Loan notes 27 31,332 23,672
Pension liability 28 237 687
Deferred tax liability 15 353 182
Total liabilities 349,491 283,768
Equity
Called up share capital 29 19,195 19,133
Profit and loss account 10,371 5,781
Revaluation reserve 22 15 15
Non-controlling interest 32 189 56
Total equity 29,770 24,985
Total liabilities and equity 379,261 308,753
COMPANY STATEMEENT OF FINANCIAL POSITION
As at 31 December 2022 2021
Notes GBP000 GBP000
------------------------------------- -------- -------- --------
Assets
Cash and cash equivalents 17 1,761 430
Trade and other receivables 21 562 472
Amounts due from Group undertakings 35 9,907 6,104
Property, plant and equipment 22 201 263
Intangible assets 25 20
Investment in subsidiaries 31 23,597 22,597
Subordinated loans 35 7,728 7,728
Total assets 43,781 37,614
Liabilities
Creditors and accrued charges 25 440 501
Amounts due to Group undertakings 35 122 3,309
Loan notes 27 31,332 23,672
Total liabilities 31,894 27,482
Equity
Called up share capital 29 19,195 19,133
Profit and loss account (7,308) (9,001)
Total equity 11,887 10,132
Total liabilities and equity 43,781 37,614
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
Attributable to owners
of the Company
---- ---- --------- ---- ---------------------------------------------- -------- ---------------------------
Profit Non-controlling
Share and Revaluation interests Total
capital loss reserve Total GBP000 equity
Group GBP000 account GBP000 GBP000 GBP000
GBP000
--------------------------------- --------- -------- -------------- -------- ---------------- --------
Balance as at 1 January
2021 19,121 3,230 - 22,351 84 22,435
Profit for the year - 2,793 - 2,793 16 2,809
Other comprehensive
income - 221 15 236 - 236
Transactions with
owners
Dividends declared 12 (197) - (185) - (185)
Acquisition of subsidiary
with non-controlling
interest - (266) - (266) (44) (310)
Balance as at 31 December
2021 19,133 5,781 15 24,929 56 24,985
Profit for the year - 4,331 - 4,331 343 4,674
Other comprehensive
income - 538 - 538 - 538
Transactions with
owners
Dividend declared
(see note 29) 62 (279) - (217) - (217)
Acquisition of subsidiary
with non-controlling
interest - - - - (210) (210)
Balance as at 31
December 2022 19,195 10,371 15 29,581 189 29,770
Profit
Share and loss Total
capital account equity
Company GBP000 GBP000 GBP000
---------------------------------- ---------- ---------- ---------
Balance as at 1 January 2021 19,121 (9,833) 9,288
Profit for the year - 1,029 1,029
Dividends declared (see note 29) 12 (197) (185)
Balance as at 31 December 2021 19,133 (9,001) 10,132
Profit for the year - 1,972 1,972
Transactions with owners 62 (279) (217)
Dividend declared (see note 29)
Balance as at 31 December 2022 19,195 (7,308) 11,887
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 2021
Notes GBP000 GBP000
--------------------------------------------------- -------- --------- ---------
RECONCILIATION OF PROFIT BEFORE TAXATION TO
OPERATING CASH FLOWS
Profit before tax 5,211 3,043
Adjustments for:
Depreciation 22 754 944
Amortisation of intangibles 23 582 458
Share of profit of equity accounted investees 30 (18) (32)
Contingent consideration interest expense 6(ii) 102 114
Pension charge included in personnel expenses 28 14 13
Gain / (loss) on financial instruments 19 19 (30)
Revaluation on acquisition of subsidiary 32 - (660)
6,664 3,850
Changes in:
Equity at FVTPL - 4
Trade and other receivables (2,228) 223
Creditors and accrued charges 1,436 (109)
Net cash flow from trading activities 5,872 3,968
Changes in:
Loans and advances to customers (83,066) (53,816)
Deposits from customers 50,740 35,174
Pension contribution 28 (57) (98)
Cash (outflow) / inflow from operating activities (26,511) (14,772)
CASH FLOW STATEMENT
Cash from operating activities
Cash (outflow) / inflow from operating activities (26,511) (14,772)
Interest received 30,136 22,624
Interest paid (6,184) (4,936)
Income taxes paid (157) (10)
Net cash (used in) / from operating activities (2,716) 2,906
Cash flows from investing activities
Purchase of property, plant and equipment, excluding
right-of-use assets 22 (1,473) (2,109)
Purchase of intangible assets 23 (504) (481)
Sale of property, plant and equipment 22 2,083 961
Acquisition of subsidiary or associate, net of
cash acquired 32 (1,785) (555)
Sale / (purchase) of debt securities 442 (15,473)
Deferred consideration on acquisition of subsidiary 6(ii),26 (937) (120)
Net cash used in investing activities (2,174) (17,777)
Cash flows from financing activities
Receipt of loan notes 27 7,660 1,450
Payment of lease liabilities (capital) 37 (202) (201)
Dividend paid 29 (217) (152)
Net cash from financing activities 7,241 1,097
Net increase / (decrease) in cash and cash equivalents 2,351 (13,774)
Cash and cash equivalents at 1 January 20,279 34,053
Cash and cash equivalents at 31 December 22,630 20,279
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2022 2021
Notes GBP000 GBP000
-------------------------------------------------------- -------- -------- --------
RECONCILIATION OF PROFIT BEFORE TAXATION TO
OPERATING CASH FLOWS
Profit before tax 1,972 1,029
Adjustments for:
Depreciation 22 63 91
Amortisation 2 2
Dividend income (1,575) (1,259)
462 (137)
Changes in:
Amounts due from group undertakings (2,228) (2,910)
Trade and other receivables (90) (163)
Creditors and accrued charges 100 66
Amounts due to Group undertakings (4,187) 1,012
Cash outflow from operating activities (5,943) (2,132)
CASH FLOW STATEMENT
Cash from operating activities
Cash outflow from operating activities (5,943) (2,132)
Net cash used in operating activities (5,943) (2,132)
Cash flows from investing activities
Purchase of intangible assets (8) (15)
Net cash used in investing activities (8) (15)
Cash flows from financing activities
Receipt of loan notes 27 7,660 1,450
Payment of finance lease liability (99) (99)
Dividend paid (279) (152)
Net cash from financing activities 7,282 1,199
Net increase / (decrease) in cash and cash equivalents 1,331 (948)
Cash and cash equivalents at 1 January 430 1,378
Cash and cash equivalents at 31 December 1,761 430
The notes form part of these financial statements.
1. Reporting entity
Manx Financial Group PLC ("Company") is a company incorporated
in the Isle of Man. The Company's registered office is at Clarendon
House, Victoria Street, Douglas, Isle of Man, IM1 2LN. The
consolidated financial statements of the Company for the year ended
31 December 2022 comprise the Company and its subsidiaries
("Group") including Conister Bank Limited (the "Bank"). The Group
is primarily involved in the provision of financial services.
2. Basis of accounting
The consolidated and the separate financial statements of the
Company have been prepared in accordance with international
accounting standards in accordance with UK-adopted international
accounting standards ("UK-adopted IFRS" or "IFRSs"), on a going
concern basis as disclosed in the Directors' Report.
3. Functional and presentation currency
These financial statements are presented in pounds sterling,
which is the Company's functional currency. All amounts have been
rounded to the nearest thousand, unless otherwise indicated. All
subsidiaries of the Group have pounds sterling as their functional
currency.
4. Use of judgements and estimates
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties at
year-end that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities in the
next financial year is included in the following notes:
-- Note 23 and 34 - impairment test of intangible assets and
goodwill: key assumptions underlying recoverable amounts;
-- Note 44(G)(vii) - measurement of Expected Credit Loss ("ECL")
allowance for loans and advances to customers and assessment of
impairment allowances where loans are in default or arrears: key
assumptions in determining the weighted-average loss rate; and
5. Financial instruments - Classification
For description of how the Group classifies financial assets and
liabilities, see note 44(G)(ii).
The following table provides reconciliation between line items
in the statement of financial position and categories of financial
instruments.
Group FVOCI FVOCI Total
Mandatorily Designated - debt - equity Amortised carrying
at FVTPL as at instruments instruments cost amount
FVTPL
31 December 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash equivalents - - - - 22,630 22,630
Debt securities - - 40,675 - - 40,675
Equity held at Fair
Value Through Profit
or Loss - 122 - - - 122
Loans and advances
to customers - - - - 291,475 291,475
Trade and other receivables - - - - 4,211 4,211
---------------------------- -------------- ------------- ------------- ------------- ------------ ----------
Total financial assets - 122 40,675 - 318,316 359,113
---------------------------- -------------- ------------- ------------- ------------- ------------ ----------
Deposits from customers - - - - 304,199 304,199
Creditor and accrued
charges - - - - 13,108 13,108
Deferred consideration - 262 - - - 262
Loan notes - - - - 31,332 31,332
---------------------------- -------------- ------------- ------------- ------------- ------------ ----------
Total financial liabilities - 262 - - 348,639 348,901
---------------------------- -------------- ------------- ------------- ------------- ------------ ----------
Group FVOCI FVOCI Total carrying
Mandatorily Designated - - equity Amortised amount
at FVTPL as at debt instruments instruments cost
FVTPL
31 December 2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents - - - - 20,279 20,279
Debt securities - - - 40,987 - 40,987
Equity held at Fair
Value Through
Profit
or Loss - 68 - - - 68
Loans and advances
to customers - - - - 229,251 229,251
Trade and other
receivables - - - - 1,947 1,947
-------------------- --------------- ------------- ------------------ ------------- ------------ ---------------
Total financial
assets - 68 - 40,987 251,477 292,532
-------------------- --------------- ------------- ------------------ ------------- ------------ ---------------
Deposits from
customers - - - - 253,459 253,459
Creditor and
accrued
charges - - - - 4,745 4,745
Deferred
consideration - - 1,023 - - 1,023
Loan notes - - - - 23,672 23,672
-------------------- --------------- ------------- ------------------ ------------- ------------ ---------------
Total financial
liabilities - - 1,023 - 281,876 282,899
-------------------- --------------- ------------- ------------------ ------------- ------------ ---------------
Company FVOCI FVOCI Total
Mandatorily Designated - debt - equity Amortised carrying
at FVTPL as at instruments instruments cost amount
FVTPL
31 December 2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents - - - - 1,761 1,761
Trade and other
receivables - - - - 562 562
Amounts due from Group
undertakings - - - - 9,907 9,907
Subordinated loans - - - - 7,728 7,728
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Total financial assets - - - - 19,958 19,958
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Creditor and accrued
charges - - - - 440 440
Amounts due to Group
undertakings - - - - 122 122
Loan notes - - - - 31,332 31,332
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Total financial
liabilities - - - - 31,894 31,894
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Company FVOCI FVOCI Total
Mandatorily Designated - debt - equity Amortised carrying
at FVTPL as at instruments instruments cost amount
FVTPL
31 December 2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents - - - - 430 430
Trade and other
receivables - - - - 472 472
Amounts due from Group
undertakings - - - - 6,104 6,104
Subordinated loans - - - - 7,728 7,728
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Total financial assets - - - - 14,734 14,734
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Creditor and accrued
charges - - - - 501 501
Amounts due to Group
undertakings - - - - 3,309 3,309
Loan notes - - - - 23,672 23,672
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
Total financial
liabilities - - - - 27,482 27,482
------------------------- --------------- -------------- -------------- ------------- ------------ ----------
6. Financial instruments - Fair values
For description of the Group's fair value measurement accounting
policy, see note 44(G)(vi).
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Carrying Fair value
amount
--------- --------------------------------------
Total Level Level Level Total
31 December 2022 GBP000 1 2 3 GBP000
GBP000 GBP000 GBP000
------------------------------------ --------- -------- -------- -------- --------
Financial assets measured at fair
value
Debt securities 40,675 - 40,675 - 40,675
Equity held at Fair Value Through
Profit or Loss 122 - - 122 122
--------- -------- -------- -------- --------
40,797 - 40,675 122 40,797
--------- -------- -------- -------- --------
Financial assets not measured at
fair value
Cash and cash equivalents 22,630 - - - -
Loans and advances to customers 291,475 - - - -
Trade and other receivables 4,211 - - - -
--------- -------- -------- -------- --------
318,316 - - - -
--------- -------- -------- -------- --------
Financial liabilities measured
at fair value
Deferred consideration 262 - - 262 262
--------- -------- -------- -------- --------
262 - - 262 262
--------- -------- -------- -------- --------
Financial liabilities not measured
at fair value
Deposits from customers 304,199 - - - -
Creditors and accrued charges 13,108 - - - -
Loan notes 31,332 - - - -
---------
348,639 - - - -
------------------------------------ --------- -------- -------- -------- --------
Carrying Fair value
amount
--------- --------------------------------------
Total Level Level Level Total
31 December 2021 GBP000 1 2 3 GBP000
GBP000 GBP000 GBP000
------------------------------------ --------- -------- -------- -------- --------
Financial assets measured at fair
value
Debt securities 40,987 - 40,987 - 40,987
Equity held at Fair Value Through
Profit or Loss 68 - - 68 68
--------- -------- -------- -------- --------
41,055 - 40,987 68 41,055
--------- -------- -------- -------- --------
Financial assets not measured at
fair value
Cash and cash equivalents 20,279 - - - -
Loans and advances to customers 229,251 - - - -
Trade and other receivables 1,947 - - - -
--------- -------- -------- -------- --------
251,477 - - - -
--------- -------- -------- -------- --------
Financial liabilities measured at
fair value
Deferred consideration 1,023 - - 1,023 1,023
--------- -------- -------- -------- --------
1,023 - - 1,023 1,023
--------- -------- -------- -------- --------
Financial liabilities not measured
at fair value
Deposits from customers 253,459 - - - -
Creditors and accrued charges 4,745 - - - -
Loan notes 23,672 - - - -
--------- -------- -------- -------- --------
281,876 - - - -
------------------------------------ --------- -------- -------- -------- --------
Measurement of fair values
i. Valuation techniques and significant unobservable inputs
Type Valuation technique Significant unobservable Inter-relationship
inputs between significant
unobservable inputs
and fair value measurement
Debt securities Market comparison Not applicable. Not applicable.
/ discounted cash
flow: The fair value
is estimated considering
a net present value
calculated using
discount rates derived
from quoted yields
of securities with
similar maturity
and credit rating
that are traded
in active markets.
-------------------------- ------------------------- ----------------------------
Equities at Fair Net asset value Expected net cash The estimated fair
Value Through Profit flows derived from value would increase
or Loss the entity (decrease) if the
expected cash flows
were higher (lower).
-------------------------- ------------------------- ----------------------------
Deferred consideration Discounted cash Expected cash flows The estimated fair
flows: The valuation GBP291,340 (2021: value would increase
model considers GBP1,133,820). (decrease) if:
the present value -the expected cash
of the expected Risk-adjusted discount flows were higher
future payments, rate 14% (2021: (lower); or
discounted using 14%). -the risk-adjusted
a risk-adjusted discount rate was
discount rate. lower (higher).
-------------------------- ------------------------- ----------------------------
ii. Level 3 recurring fair values
Reconciliation of Level 3 fair values
The following table shows a reconciliation from the opening
balances to the closing balances for Level 3 fair values.
2022 2021
GBP000 GBP000
--------------------------------------- -------- --------
Balance at 1 January 1,023 672
Assumed in a business combination
(Note 32) - 387
Finance costs 102 114
Net change in fair value (unrealised) 74 (30)
-------- --------
176 84
Payment (note 26) (937) (120)
Balance at 31 December 262 1,023
----------------------------------------- -------- --------
Sensitivity analysis
For the fair value of contingent consideration, reasonably
possible changes at the reporting date to one of the significant
unobservable inputs, holding other inputs constant would have the
following effects.
Profit or loss
--------------------
31 December 2022 Increase Decrease
GBP000 GBP000
------------------------------------ --------- ---------
Expected cash flows (10% movement) 29 (29)
Risk-adjusted discount rate (1%
movement) 5 (3)
-------------------------------------- --------- ---------
Profit or loss
--------------------
31 December 2021 Increase Decrease
GBP000 GBP000
------------------------------------ --------- ---------
Expected cash flows (10% movement) 113 66
Risk-adjusted discount rate (1%
movement) 12 (8)
-------------------------------------- --------- ---------
7. Financial risk review
Risk management
This note presents information about the Group's exposure to
financial risks and the Group's management of capital. For
information on the Group's financial risk management framework, see
note 42.
A. Group Credit risk
For definition of credit risk and information on how credit risk
is mitigated by the Group, see note 42.
The key assumptions used in determining the weighted-average
loss rate are loss given default rate and probability of default.
These metrics are calculated at individual product level (for
example Hire Purchase, Lease). In determining probability of
default, the Group considers market consensus estimates of the UK's
forecast GDP, inflation and interest rate over the applicable loan
term of the product. Over the next 3 years, the Group has forecast
average GDP growth of -0.6%, inflation of 4.1% and BOE base rate of
2.6%.
i. Credit quality analysis
Loans and advances to customers
Explanation of the terms 'Stage 1', 'Stage 2' and 'Stage 3' is
included in note 44(G)(vii).
An analysis of the credit risk on loans and advances to
customers is as follow s:
Group 2022 2021
Stage Stage Stage Total Stage Stage Stage Total
1 2 3 GBP000 1 2 3 GBP000
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- -------- -------- --------- --------- -------- -------- -------- --------
Grade A 273,332 - - 273,332 213,102 - - 213,102
Grade B - 5,006 9,347 14,353 - 5,735 5,594 11,329
Grade C 391 - 17,622 18,013 342 541 12,656 13,539
Gross value 273,723 5,006 26,969 305,698 213,444 6,276 18,250 237,970
Allowance for impairment (303) (3) (13,917) (14,223) (503) (124) (8,092) (8,719)
-------- -------- --------- --------- -------- -------- -------- --------
Carrying value 273,420 5,003 13,052 291,475 212,941 6,152 10,158 229,251
-------------------------- -------- -------- --------- --------- -------- -------- -------- --------
Loans are graded A to C depending on the level of risk. Grade A
relates to agreements with the lowest risk, Grade B with medium
risk and Grade C relates to agreements with the highest of
risk.
The following table sets out information about the overdue
status of loans and advances to customers in Stage 1, 2 and 3:
Group 2022 2021
Stage Stage Stage Total Stage Stage Stage Total
31 December 1 2 3 GBP000 1 2 3 GBP000
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- -------- -------- -------- -------- -------- -------- -------- ----------
Current 269,130 - - 269,130 210,491 - - 210,491
Overdue < 30 days 4,593 604 - 5,197 2,953 - - 2,953
Overdue > 30 days - 4,402 26,969 31,371 - 6,276 18,250 24,526
273,723 5,006 26,969 305,698 213,444 6,276 18,250 237,970
------------------- -------- -------- -------- -------- -------- -------- -------- ----------
For Stage 3 loans and advances, the Bank holds collateral with a
value of GBP12,927,000 (2021: GBP11,625,250) representing security
cover of 48% (2021: 64%).
Debt securities, cash and cash equivalents
The following table sets out the credit quality of liquid
assets:
Group 2022 2021
GBP000 GBP000
------------------------------------- --------- ---------
Government bonds and treasury bills
Rated A to A+ 40,675 40,987
Cash and cash equivalents
Rated A to A+ 22,630 20,279
Trade and other receivables
Unrated 4,211 1,947
67,516 63,213
------------------------------------- --------- ---------
The analysis has been based on Standard & Poor's
ratings.
ii. Collateral and other credit enhancements
The Group holds collateral in the form of the underlying assets
(typically private and commercial vehicles, plant and machinery) to
loan arrangements as security for HP, finances leases, vehicle
stocking plans, block discounting, wholesale funding arrangements,
integrated wholesale funding arrangements and secured commercial
loan balances, which are sub-categories of loans and advances to
customers. In addition, the Group will take debentures, mortgages,
personal and corporate guarantees, fixed and floating charges on
specific assets such as cash and shares. The terms of enforcing
such security can only occur on default, and when realised can only
be used to settle the amount of debt and related collection fees.
On occasion the Bank may realise a surplus if the defaulting party
loses title to the underlying security as part of enforcement. In
addition, the commission share schemes have an element of capital
indemnified. During 2022, 61.0% of loans and advances had an
element of capital indemnification (2021: 76.0%).
At the time of granting credit within the sub-categories listed
above, the loan balances due are secured over the underlying assets
held as collateral.
iii. Amounts arising from ECL
See accounting policy in note 44(G)(vii).
IFRS 9 significantly overhauled the requirements and methodology
used to assess credit impairments by transitioning to a
forward-looking approach based on an expected credit loss model.
The new impairment model applies to financial assets measured at
amortised cost, contract assets and debt investments at FVOCI, but
not to investments in equity instruments.
After a detailed review, the Group devised and implemented an
impairment methodology in light of the IFRS 9 requirements outlined
above noting the following:
-- A Significant Increase in Credit Risk ("SICR") is always
deemed to occur when the borrower is 30 days past due on its
contractual payments. If the Group becomes aware ahead of this time
of non-compliance or financial difficulties of the borrower, such
as loss of employment, avoiding contact with the Group then a SICR
has also deemed to occur.
-- A receivable is always deemed to be in default and
credit-impaired when the borrower is 90 days past due on its
contractual payments or earlier if the Group becomes aware of
severe financial difficulties such as bankruptcy, individual
voluntary arrangements, abscond or disappearance, fraudulent
activity or other similar events.
-- The ECL was derived by reviewing the Group's loss rate and
loss-given-default over the past 5 years by product and
geographical segment.
-- The Group has assumed that the future economic conditions
will broadly mirror the current environment and therefore the
forecasted loss levels in the next 3 years will match the Group's
experience in recent years.
-- For portfolios where the Group has never had a default in its
history or has robust credit enhancements such as credit insurance
or default indemnities for the entire portfolio, then no IFRS 9
provision is made.
-- If the Group holds objective evidence through specifically
assessing a credit-impaired receivable and believes it will go on
to completely recover the debt due to the collateral held and
cooperation with the borrower, then no IFRS 9 provision is
made.
There have been no significant changes to ECL assumptions from
the prior year.
iv. Concentration of credit risk
Geographical
Lending is restricted to individuals and entities with Isle of
Man, UK or Channel Islands addresses.
Segmental
The Bank is exposed to credit risk with regard to customer loan
accounts, comprising HP and finance lease balances, unsecured
personal loans, secured commercial loans, block discounting,
vehicle stocking plan loans and wholesale funding agreements. In
addition, the Bank lends via significant introducers into the UK.
There was no introducer that accounted for more than 20% of the
Bank's total lending portfolio at the end of 31 December 2022
(2021: none).
B. Group Liquidity risk
For the definition of liquidity risk and information on how
liquidity risk is manged by the Group, see note 41.
i. Exposure to liquidity risk
The key measure used by the Group for managing liquidity risk is
the ratio of net liquid assets to deposits from customers and
short-term funding. For this purpose, net liquid assets includes
cash and cash equivalents and investment-grade debt securities for
which there is an active and liquid market.
Details of the reported Group ratio of net liquid assets to
deposits from customers at the reporting date and during the
reporting year were as follows:
2022 2021
---------------------- ----- -----
At 31 December 20% 24%
Average for the year 22% 25%
Maximum for the year 25% 28%
Minimum for the year 19% 20%
---------------------- ----- -----
ii. Maturity analysis for financial liabilities and financial
assets
The table below shows the Group's financial liabilities
classified by their earliest possible contractual maturity, on an
undiscounted basis including interest due at the end of the deposit
term. Based on historical data, the Group's expected actual cash
flow from these items vary from this analysis due to the expected
re-investment of maturing customer deposits.
Residual contractual maturities of financial liabilities as at
the reporting date (undiscounted):
>8 >1 >3 >3
days month months >6 >1 years
31 December Sight- - - - months year -
2022 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
Deposits 10,878 6,838 27,346 65,153 104,662 81,670 14,557 - 311,104
Other
liabilities 691 116 1,796 3,717 13,196 22,354 6,697 590 49,157
Total
liabilities 11,569 6,954 29,142 68,870 117,858 104,024 21,254 590 360,261
>8 >1 >3 >6 >1 >3
days month months months year years
31 December Sight- - 1 - 3 - 6 - 1 - 3 - 5 >5
2021 8 days month months months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Deposits 6,864 4,743 18,359 63,733 61,891 88,036 16,738 - 260,364
Other
liabilities 291 83 1,210 1,253 10,995 9,091 9,053 869 32,845
Total
liabilities 7,155 4,826 19,569 64,986 72,886 97,127 25,791 869 293,209
Maturity of assets and liabilities at the reporting date:
>8
days >1 >3 >6 >1 >3
31 December Sight- - month months months year years
2022 8 1 - 3 - 6 - 1 - - >5
days month months months year 3 years 5 years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash 22,630 - - - - - - - 22,630
Debt
securities 3,986 7,987 20,785 7,917 - - - - 40,675
Loans and
advances 8,038 10,952 27,913 40,730 47,813 106,755 46,176 3,098 291,475
Other assets 122 - - - 5,786 - 5,140 13,433 24,481
Total assets 34,776 18,939 48,698 48,647 53,599 106,755 51,316 16,531 379,261
Liabilities
Deposits 10,878 6,380 26,552 64,251 103,561 78,984 13,593 - 304,199
Other
liabilities 650 - 1,500 3,286 12,399 20,627 6,240 590 45,292
Total
liabilities 11,528 6,380 28,052 67,537 115,960 99,611 19,833 590 349,491
Maturity of assets and liabilities at the reporting date:
>8 >1 >3 >6 >1 >3
days month months months year years
31 December Sight- - 1 - 3 - 6 - 1 - 3 - 5 >5
2021 8 days month months months year years years years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash 20,279 - - - - - - - 20,279
Debt
securities - 5,001 20,994 14,992 - - - - 40,987
Loans and
advances 9,271 8,372 12,378 25,458 30,835 94,395 44,081 4,462 229,252
Other assets 68 - - - 3,186 - 6,018 8,964 18,236
Total assets 29,618 13,373 33,372 40,450 34,021 94,395 50,099 13,426 308,754
Liabilities
Deposits 6,864 4,285 17,565 62,831 60,790 85,350 15,774 - 253,459
Other
liabilities 238 - 1,000 946 10,512 7,967 8,777 869 30,309
Total
liabilities 7,102 4,285 18,565 63,777 71,302 93,317 24,551 869 283,768
iii. Liquidity reserves
The following table sets out the components of the Group's
liquidity reserves:
2022 2022 2021 2021
Carrying Fair Carrying Fair
amount value amount value
GBP000 GBP000 GBP000 GBP000
------------------------------ ---------- ------- ---------- -------
Balances with other banks 20,954 20,954 20,279 20,279
Unencumbered debt securities 40,675 40,675 40,987 40,987
Total liquidity reserves 61,629 61,629 61,266 61,266
------------------------------ ---------- ------- ---------- -------
C. Group Market risk
For the definition of market risk and information on how the
Group manages the market risks of trading and non-trading
portfolios, see note 42.
The following table sets out the allocation of assets and
liabilities subject to market risk between trading and non-trading
portfolios:
Market risk measure
Carrying Trading Non-trading
amount portfolios portfolios
31 December 2022 GBP000 GBP000 GBP000
--------------------------------------------- --------- ------------ ------------
Assets subject to market risk
Debt securities 40,675 - 40,675
Equity held at Fair Value Through Profit or
Loss 122 - 122
Total 40,797 - 40,797
--------------------------------------------- --------- ------------ ------------
Market risk measure
Non-trading
Carrying Trading portfolios
amount portfolios
31 December 2021 GBP000 GBP000 GBP000
--------------------------------------------- ----------- ------------- ------------
Assets subject to market risk
Debt securities 40,987 - 40,987
Equity held at Fair Value Through Profit or
Loss 68 - 68
Total 41,055 - 41,055
--------------------------------------------- ----------- ------------- ------------
i. Exposure to interest rate risk
The following tables present the interest rate mismatch position
between assets and liabilities over the respective maturity dates.
The maturity dates are presented on a worst-case basis, with assets
being recorded at their latest maturity and deposits from customers
at their earliest.
>3
>1 years
Sight- >1month >3months year -
31 December 1 - - >6months- - 5 >5 Non-Interest
2022 month 3months 6months 1 year 3 years years years Bearing Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash & cash
equivalents 22,630 - - - - - - - 22,630
Debt
securities 11,973 20,785 7,917 - - - - - 40,675
Loans and
advances
to customers 18,990 27,913 40,730 47,813 106,755 46,176 3,098 - 291,475
Other assets - - - - - - - 24,481 24,481
Total assets 53,593 48,698 48,647 47,813 106,755 46,176 3,098 24,481 379,261
Liabilities
and
equity
Deposits from
customers 17,258 26,552 64,251 103,561 78,984 13,593 - - 304,199
Other
liabilities 650 1,500 3,286 905 20,627 6,240 237 11,847 45,292
Total equity - - - - - - - 29,770 29,770
Total
liabilities
and equity 17,908 28,052 67,537 104,466 99,611 19,833 237 41,617 379,261
Interest
rate
sensitivity
gap 35,685 20,646 (18,890) (56,653) 7,144 26,343 2,861 (17,136) -
Cumulative 35,685 56,331 37,441 (19,212) (12,068) 14,275 17,136 - -
>1 >3
Sight- >1month >3months year years
1 - - >6months- - 3 - 5 >5 Non-Interest
31 December month 3months 6months 1 year years years years Bearing Total
2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Cash & cash
equivalents 20,279 - - - - - - - 20,279
Debt
securities 5,001 20,994 14,992 - - - - - 40,987
Loans and
advances
to customers 17,642 12,378 25,458 30,835 94,395 44,081 4,462 - 229,251
Other assets - - - - - - - 18,236 18,236
Total assets 42,922 33,372 40,450 30,835 94,395 44,081 4,462 18,236 308,753
Liabilities
and
equity
Deposits from
customers 11,149 17,565 62,831 60,790 85,350 15,774 - - 253,459
Other
liabilities 238 1,000 946 7,050 7,967 8,777 687 3,644 30,309
Total equity - - - - - - - 24,985 24,985
Total
liabilities
and equity 11,387 18,565 63,777 67,840 93,317 24,551 687 28,629 308,753
Interest
rate
sensitivity
gap 31,535 14,807 (23,327) (37,005) 1,078 19,530 3,775 (10,393) -
Cumulative 31,535 46,342 23,015 (13,990) (12,912) 6,618 10,393 - -
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
(2021: 2.0%). The following tables set out the estimated total
impact of such a change based on the mismatch at the reporting
date:
>1
year >3
31 December Sight- >3months >6months - years
2022 1 >1month - - 3 - >5 Non-Interest
month -3months 6months 1 year years 5 years years Bearing Total
Interest
rate
sensitivity
gap
GBP000 35,685 20,646 (18,890) (56,653) 7,144 26,343 2,861 (17,136) -
Weighting 0.000 0.003 0.007 0.014 0.027 0.054 0.115 - -
GBP000 - 62 (132) (793) 193 1,423 329 - 1,082
>1 >3
Sight- >3months >6months year years
31 December 1 >1month - - - 3 - 5 >5 Non-Interest
2021 month -3months 6months 1 year years years years Bearing Total
Interest
rate
sensitivity
gap
GBP000 31,535 14,807 (23,327) (37,005) 1,078 19,530 3,775 (10,393) -
Weighting 0 0.003 0.007 0.014 0.027 0.054 0.115 0 0
GBP000 - 44 (163) (518) 29 1,055 434 - 881
D. Group Capital Management
i. Regulatory capital
MFG and its subsidiaries maintain sufficient capital stock to
cover risks inherent in their principal operating activities. The
lead regulator of the Group's wholly owned subsidiary, the Bank, is
the FSA. The FSA sets and monitors capital requirements for the
Bank. The Bank maintains a capital base to meet the capital
adequacy requirements of the FSA. There have been no changes to its
approach to capital management from the prior year.
The Bank's regulatory capital consists of the following
elements.
-- Common Equity Tier 1 ("CET1") capital, which includes
ordinary share capital, retained earnings and reserves after
adjustment for deductions for goodwill, intangible assets and
intercompany receivable.
-- Tier 2 capital, which includes qualifying subordinated
liabilities and any excess of impairment over expected losses.
The Bank's Tier 1 and Total Capital regulatory ratios stood at
12.4% (2021: 15.2%) and 15.2% (2021: 19.1%) respectively as at 31
December 2022. The Bank complied with all capital requirements
externally imposed on it in the year with minimum Tier 1 and
Overall Capital ratio of 8.5% and 14% respectively.
The FSA's approach to the measurement of capital adequacy is
primarily based on monitoring the relationship of the capital
resources requirement to available capital resources. The FSA sets
individual capital guidance ("ICG") for the Bank in excess of the
minimum capital resources requirement. A key input to the ICG
setting process is the Bank's internal capital adequacy assessment
process ("ICAAP").
The Bank is also regulated by the FCA in the UK for credit and
brokerage related activities.
Further details of the Bank's management of capital are
described in the Risk Management Report on page 10.
ii. Capital allocation
Management uses regulatory capital ratios to monitor its capital
base. The allocation of capital between specific operations and
activities is, to a large extent, driven by optimisation of the
return achieved on the capital allocated. The amount of capital
allocated to each operation or activity is based primarily on
regulatory capital requirements.
E. Company Financial Risk Review
i. Credit risk
The Company is exposed to credit risk primarily from deposits
with banks and from its financing activities of Group entities.
These balances include Trade and other receivables, Amounts due
from Group undertakings, Investment in subsidiaries and
Subordinated loans. Cash balances are held with institutions with a
credit rating of A to A+. The Group's primary credit exposure is to
the Bank. The Investment in subsidiary and subordinated loan
balance counterparties are disclosed in Note 31 and 35
respectively. Amounts due from Group undertakings relate to
balances advanced to the Group's subsidiary (MVL) for the
acquisition of other subsidiaries including PAL, BBSL, BLX and NRF.
The Group manages its credit risk by ensuring that sufficient
resources are allocated to credit management and capital allocation
and using reputable financial institutions to hold its cash
balances.
ii. Liquidity risk
The value and term of short term assets are monitored against
those of the Company's liabilities. The Company maintains
sufficient liquid assets to meet liabilities as they fall due
either by retaining Interest income from the Subordinated loan,
Dividend income from subsidiary companies or raising funds through
the issue of Loan notes. Amounts due to / from Group undertakings
are unsecured, interest-free and repayable on demand.
iii. Market risk
The Company does not have exposure to foreign exchange risk as
transactions are made in and balances held in Sterling. The Company
has both interest-bearing assets and liabilities. In order to
manage interest rate risk, the Companies Subordinated loans and
Loan notes are charged exclusively at fixed rates.
8. Operating segments
Segmental information is presented in respect of the Group's
business segments. The Directors consider that the Group currently
operates in one geographic segment comprising of the Isle of Man,
UK and Channel Islands. The primary format, business segments, is
based on the Group's management and internal reporting structure.
The Directors consider that the Group operates in three (2021:
three) product orientated segments in addition to its investing
activities: Asset and Personal Finance (including provision of HP
contracts, finance leases, personal loans, commercial loans, block
discounting, vehicle stocking plans and wholesale funding
agreements); Edgewater Associates Limited (provision of financial
advice); and MFX Limited (provision of foreign currency transaction
services).
Asset
and Edgewater MFX Investing
Personal Associates Limited Activities Total
For the year ended 31 December Finance GBP000 GBP000 GBP000 GBP000
2022 GBP000
Interest revenue calculated using
the effective interest rate method 28,978 - - - 28,978
Other interest income 1,765 - - - 1,765
Interest expense (6,391) - - - (6,391)
---------- ------------- ---------- ------------- ---------
Net interest income 24,352 - - - 24,352
Components of Net Trading Income (2,696) 2,096 1,734 - 1,134
---------- ------------- ---------- ------------- ---------
Net trading income 21,656 2,096 1,734 25,486
Components of Operating Income 587 - - - 587
---------- ------------- ---------- ------------- ---------
Operating Income 22,243 2,096 1,734 - 26,073
Depreciation (640) (31) (2) (65) (738)
Amortisation and impairment of
intangibles (494) (81) (5) (2) (582)
Share of profit of equity accounted
investees, net of tax - - - 18 18
All other expenses (17,226) (1,943) (314) (77) (19,560)
Profit / (loss) before tax payable 3,883 41 1,413 (126) 5,211
Capital expenditure 1,794 55 3 1 1,853
Total assets 332,689 2,248 543 43,781 379,261
Total liabilities 316,921 513 163 31,894 349,491
Asset
and Edgewater MFX Limited Investing
Personal Associates GBP000 Activities Total
For the year ended 31 December Finance GBP000 GBP000 GBP000
2021 GBP000
Interest revenue calculated
using the effective interest
rate method 21,010 - - - 21,010
Other interest income 1,937 - - - 1,937
Interest expense (4,967) - - - (4,967)
Net interest income 17,980 - - - 17,980
Components of Net Trading
Income (2,783) 2,282 1,514 - 1,013
Net Trading Income 15,197 2,282 1,514 - 18,993
Components of Operating Income 1,054 - - - 1,054
Operating income 16,251 2,282 1,514 - 20,047
Depreciation (560) (22) (2) (91) (675)
Amortisation and impairment
of intangibles (373) (80) (3) (2) (458)
Share of profit of equity
accounted investees, net of
tax 58 - - (26) 32
Intercompany write-off - - - (545) (545)
All other expenses (12,848) (2,066) (282) (162) (15,358)
Profit / (loss) before tax
payable 2,528 114 1,227 (826) 3,043
Capital expenditure 3,083 13 1 5 3,102
Total assets 292,721 2,330 802 12,900 308,753
Total liabilities 265,751 638 61 17,318 283,768
9. Net interest income
2022 2021
GBP000 GBP000
Interest income
Loans and advances to customers 28,978 21,010
Total interest income calculated using the effective
interest method 28,978 21,010
Operating lease income 1,765 1,937
Total interest income 30,743 22,947
Interest expense
Deposits from customers (4,601) (3,512)
Loan note interest (1,610) (1,299)
Lease liability (78) (42)
Contingent consideration: interest expense (102) (114)
Total interest expense (6,391) (4,967)
Net interest income 24,352 17,980
10. Net fee and commission income
In the following table, fee and commission income from contracts
with customers in the scope of IFRS 15 - Revenue from Contracts
with Customers is disaggregated by major type of services. The
table includes a reconciliation of the disaggregated fee and
commission income with the Group's reportable segments. See note
44D regarding revenue recognition.
2022 2021
GBP000 GBP000
Major service lines
Independent financial advice income 2,096 2,282
Foreign exchange trading income 1,743 1,528
Asset and personal finance: Brokerage services income 590 510
Debt collection 290 301
Fee and commission income 4,719 4,621
Fee and commission expense (3,569) (3,339)
Net fee and commission income 1,150 1,282
Fee and commission expense relates to commission paid to
Brokerages which introduce new business to the Bank.
11. Personnel expenses
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Staff gross salaries (7,403) (5,416) - -
Executive Directors' remuneration (507) (440) - -
Non-executive Directors' fees (207) (176) (127) (129)
Executive Directors' pensions (41) (34) - -
Executive Directors' performance related
pay (68) (51) - -
Staff pension costs (397) (330) - -
National insurance and payroll taxes (818) (623) - -
Staff training and recruitment costs (305) (86) - -
Equity Settled Restricted Stock Units (18) - - -
(Note 29)
(9,764) (7,156) (127) (129)
The Company's personnel expenses consist exclusively of
Directors remuneration and fees for services rendered to the
Company.
12. Other expenses
2022 2021
GBP000 GBP000
Professional and legal fees (1,427) (1,367)
Marketing costs (363) (264)
IT costs (1,210) (1,001)
Establishment costs (366) (317)
Communication costs (152) (129)
Travel costs (297) (104)
Bank charges (314) (124)
Insurance (333) (344)
Irrecoverable VAT (362) (268)
Other costs (782) (582)
Impairment loss on goodwill (See Note 34) (200) -
(5,806) (4,500)
13. Impairment on loans and advances to customers
The charge in respect of allowances for impairment comprises,
excluding loss allowances on financial assets managed on a
collective basis.
2022 2021
GBP000 GBP000
Impairment allowances made (7,642) (5,457)
Reversal of allowances previously made 3,612 1,055
Total charge for provision for impairment (4,030) (4,402)
The credit in respect of allowances for impairment on financial
assets managed on a collective basis comprises:
2022 2021
GBP000 GBP000
Collective impairment allowances made (244) (77)
Release of allowances previously made 284 119
Total credit for allowances for impairment on financial
assets managed on a collective basis 40 42
Total charge for allowances for impairment (3,990) (4,360)
14. Profit before tax payable
The profit before tax payable for the year is stated after
charging:
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Auditor's remuneration: as Auditor
current year (255) (232) - -
non-audit services (11) (2) - -
Pension cost defined benefit scheme (14) (13) - -
Expenses relating to short-term leases
and low value assets (92) (64) - -
15. Income tax expense
Group 2022 2021
GBP000 GBP000
Current tax expense
Current year (366) (132)
Changes to estimates for prior years - (50)
(366) (182)
Deferred tax expense
Origination and reversal of temporary differences (171) (52)
Tax expense (537) (234)
-------
Group 2022 2021
% GBP000 % GBP000
Reconciliation of effective tax rate
Profit before tax 5,211 3,043
Tax using the Bank's domestic tax rate (10.0) (521) (10.0) (304)
Effect of tax rates in foreign jurisdictions 3.6 186 5.0 152
Tax exempt income (2.4) (127) (1.2) (36)
Changes to estimates for prior years (0.8) (43) (4.7) (144)
R&D claim - - (1.4) (42)
-------
Tax expense (10.3) (537) (7.7) (234)
-------
The main rate of corporation tax in the Isle of Man is 0.0%
(2021: 0.0%). However, the profits of the Group's Isle of Man
banking activities are taxed at 10.0% (2021: 10.0%). The profits of
the Group's subsidiaries that are subject to UK corporation tax are
taxed at a rate of 19.0% (2021: 19.0%). The Company is subject to
0.0% tax.
The value of tax losses carried forward reduced to nil and there
is now a temporary difference related to accelerated capital
allowances resulting in a GBP353,000 liability (2021: GBP182,000
liability). This resulted in an expense of GBP171,000 (2021:
GBP52,000) to the Consolidated Income Statement offset by a
deferred tax credit on the defined benefit pension through the OCI
of GBPnil (2021: GBP67,000).
16. Earnings per share
2022 2021
Profit for the year GBP4,674,000 GBP2,809,000
Weighted average number of Ordinary
Shares in issue (basic) 114,763,883 114,291,639
Basic earnings per share (pence) 4.07 2.46
Diluted earnings per share (pence) 3.15 1.97
Total comprehensive income for the GBP5,212,000 GBP3,045,000
year
Weighted average number of Ordinary
Shares in issue (basic) 114,763,883 114,291,639
Basic earnings per share (pence) 4.54 2.66
Diluted earnings per share (pence) 3.50 2.13
The basic earnings per share calculation is based upon the
profit for the year after taxation and the weighted average of the
number of shares in issue throughout the year.
As at: 2022 2021
Reconciliation of weighted average number
of Ordinary Shares in issue between basic
and diluted
Weighted average number of Ordinary Shares
(basic) 114,763,883 114,291,639
Number of shares issued if all convertible
loan notes were exchanged for equity 38,225,772 36,555,556
Dilutive element of share options if exercised 830,035 -
Weighted average number of Ordinary Shares
(diluted) 153,819,660 150,847,195
Reconciliation of profit for the year
between basic and diluted
Profit for the year (basic) GBP4,674,000 GBP2,809,000
Interest expense saved if all convertible GBP171,415 GBP166,250
loan notes were exchanged for equity
Profit for the year (diluted) GBP4,845,415 GBP2,975,250
The diluted earnings per share calculation assumes that all
convertible loan notes and share options have been converted /
exercised at the beginning of the year where they are dilutive.
As at: 2022 2021
Reconciliation of total comprehensive income
for the year between basic and diluted
Total comprehensive income for the year (basic) GBP5,212,000 GBP3,045,000
Interest expense saved if all convertible loan GBP171,415 GBP166,250
notes were exchanged for equity
Total comprehensive income for the year (diluted) GBP5,383,415 GBP3,211,250
17. Cash and cash equivalents
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Cash at bank and in hand 20,651 18,278 1,761 430
Fixed deposit (less than 90 days) 1,979 2,001 - -
22,630 20,279 1,761 430
Cash at bank includes an amount of GBP24,000 (2021: GBP56,000)
representing receipts which are in the course of transmission.
18. Debt securities
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Financial assets at fair value through
other comprehensive income:
UK Government treasury bills 40,675 40,987 - -
40,675 40,987 - -
UK Government Treasury Bills are stated at fair value and
unrealised changes in the fair value are reflected in other
comprehensive income. There were realised gains of GBP292,000
(2021: realised losses of GBP1,000) and unrealised gains of
GBP131,000 (2021: unrealised losses of GBP18,000) during the
year.
19. Financial assets
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Financial assets at FVOCI:
(Loss) / gain on Deferred consideration
(see note 6(ii)) (74) 30 - -
Gain on equity instrument 55 - - -
(19) 30 - -
The Bank acquired a new equity instrument in the previous
financial year (See note 33).
20. Loans and advances to customers
2022 2021
Gross Impairment Carrying Gross Impairment Carrying
Amount Allowance Value Amount Allowance Value
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
HP balances 87,142 (4,093) 83,049 71,789 (4,107) 67,682
Finance lease balances 21,513 (3,782) 17,731 28,131 (3,317) 24,814
Unsecured personal
loans 47,735 (5,282) 42,453 31,267 (537) 30,730
Vehicle stocking plans 1,918 - 1,918 1,675 - 1,675
Wholesale funding arrangements 30,904 - 30,904 15,447 - 15,447
Block discounting 46,294 - 46,294 16,465 - 16,465
Secured commercial
loans 12,753 (595) 12,158 11,099 (519) 10,580
Secured personal loans 1,867 (90) 1,777 1,739 - 1,739
Government backed loans 55,572 (381) 55,191 60,358 (239) 60,119
305,698 (14,223) 291,475 237,970 (8,719) 229,251
20. Loans and advances to customers
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.
2022 2021
Allowance for impairment GBP000 GBP000
Balance at 1 January 8,464 6,824
Acquisition 4,620 -
Allowance for impairment made 7,642 5,457
Release of allowances previously made (3,612) (1,055)
Write-offs (3,106) (2,762)
Balance at 31 December 14,008 8,464
2022 2021
Collective allowance for impairment GBP000 GBP000
Balance at 1 January 255 297
Collective allowance for impairment made 244 77
Release of allowances previously made (284) (119)
Balance at 31 December 215 255
Total allowances for impairment 14,223 8,719
Advances on preferential terms are available to all Directors,
management and staff. As at 31 December 2022 GBP1,228,334 (2021:
GBP945,625) had been lent on this basis. In the Group's ordinary
course of business, advances may be made to Shareholders, but all
such advances are made on normal commercial terms (see note
36).
At the end of the current financial year 13 loan exposures
(2021: 5) exceeded 10.0% of the capital base of the Bank:
Outstanding Outstanding
Balance Balance Facility
2022 2021 Limit
Exposure GBP000 GBP000 GBP000
Block discounting facility 68,209 16,465 40,536
Wholesale funding agreement 34,975 25,645 28,819
HP and finance lease receivables
Loans and advances to customers include the following HP and
finance lease receivables:
2022 2021
GBP000 GBP000
Less than one year 51,368 34,833
Between one and five years 57,287 58,949
Gross investment in HP and finance lease receivables 108,655 93,782
The investment in HP and finance lease receivables net of
unearned income comprises:
2022 2021
GBP000 GBP000
Less than one year 47,646 32,495
Between one and five years 53,134 54,994
Net investment in HP and finance lease receivables 100,780 87,489
21. Trade and other receivables
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Other debtors 2,334 1,449 494 1
Prepayments 1,877 498 68 100
VAT claim - - - 371
4,211 1,947 562 472
After consultation with its professional advisors, the Bank made
a notice of error correction ("NEC") to the Isle of Man Government
Customs & Exercise Division in respect of a repayment for
overpaid VAT to the amount of GBP534,000 exclusive of statutory
interest. The NEC relates to bad debt relief that was not claimed
during the period from 1 April 1989 to 18 March 1997. The Bank
recognised a receivable and income of GBP534,000 during 2020. The
VAT claim was settled in full and the Bank received GBP699,000
during 2021. An additional recovery of GBP113,000 over and above
the carrying amount was recognised in the previous year's statement
of profit or loss.
22. Property, plant and equipment and right-of-use assets
Buildings
and Leasehold IT Furniture Motor Right-of-use
Group Improvements Equipment and Vehicles assets Total
GBP000 GBP000 Equipment (1) GBP000 GBP000
GBP000 GBP000
Cost
As at 1 January 2022 681 522 5,814 818 1,444 9,279
Acquisition of subsidiary - - 14 196 136 346
Additions 64 81 1,280 48 380 1,853
Disposals - - (1,369) (866) - (2,235)
---------------
As at 31 December
2022 745 603 5,739 196 1,960 9,243
Accumulated depreciation
As at 1 January 2022 427 387 765 238 205 2,022
Acquisition of subsidiary - - 14 65 - 79
Charge for year 15 69 452 38 180 754
Disposals - - (70) (256) - (326)
As at 31 December
2022 442 456 1,161 85 385 2,529
Carrying value at
31 December 2022 303 147 4,578 111 1,575 6,714
Carrying value at
31 December 2021 254 124 5,120 520 1,239 7,257
(1) Included in motor vehicles are operating leases with the
Group as lessor. Depreciation on leasing assets was GBP16,000
(2021: GBP269,000).
Buildings with an original cost of GBP160,000 were revalued by
independent valuers Vospers Limited to GBP175,000 on the basis of
market value as at 15 September 2021. The valuation conforms to
International Valuation Standards and was based on recent market
transactions on arm's length terms for similar properties. The
Directors consider the valuation of the buildings as at 31 December
2022 remains GBP175,000. The carrying amount that would have been
recognised had the building been carried under the cost model would
be GBP160,000.
Leasehold IT Furniture Right-of
Improvements Equipment and use-assets Total
Company GBP000 GBP000 Equipment GBP000 GBP000
GBP000
Cost
As at 1 January 2022 234 18 17 424 693
Additions - 2 1 - 3
As at 31 December 2022 234 20 18 424 696
Accumulated depreciation
As at 1 January 2022 234 6 9 181 430
Charge for year - - 2 63 65
As at 31 December 2022 234 6 11 244 495
Carrying value at 31
December 2022 - 14 7 180 201
Carrying value at 31
December 2021 - 12 8 243 263
23. Intangible assets
IT Software
Customer Intellectual and Website
Contracts Property Development Total
Group GBP000 Rights GBP000 GBP000
GBP000
Cost
As at 1 January 2022 2,657 749 2,541 5,947
Acquisition of subsidiary
(see note 32) 273 - - 273
Additions - 496 8 504
As at 31 December 2022 2,930 1,245 2,549 6,724
Accumulated amortisation
As at 1 January 2022 865 523 2,051 3,439
Charge for year 296 - 286 582
As at 31 December 2022 1,161 523 2,337 4,021
Carrying value at 31
December 2022 1,769 722 212 2,703
Carrying value at 31
December 2021 1,792 226 490 2,508
24. Deposits from customers
2022 2021
GBP000 GBP000
Retail customers: term deposits 291,238 242,788
Corporate customers: term deposits 12,961 10,671
304,199 253,459
25. Creditors and accrued charges
Group Company
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Other creditors and accruals 10,096 1,380 232 182
Commission creditors 1,398 1,520 - -
Lease liability 1,614 1,295 208 319
Taxation creditors - 550 - -
13,108 4,745 440 501
26. Deferred consideration
Deferred consideration relates to contingent payments due to the
sellers on the acquisition of BBSL and BLX respectively.
On acquisition of BBSL on 16 April 2019, the Group agreed to pay
the selling shareholders:
-- 50% of net profits in BBSL for 3 years post completion;
and
-- 50% of the incremental net profit that the Group benefits
from as a result of taking up BBSL loan proposals post completion
up until the third anniversary.
This was to be paid on each anniversary with a final payment in
year 4 for the unrealised lending profit. The Group made final
instalment and settlement of this contingent consideration when it
made the final payment of GBP781,095 during the period.
On the acquisition of BLX on 11 October 2021, the Group agreed
that a further conditional consideration of up to GBP483,663 is
payable to the sellers in addition to the cash consideration paid.
The total amount payable is contingent on the recovery of certain
loans and advances found to be in default at acquisition. The fair
value on acquisition date was determined to be GBP387,000. The
Group made a payment of GBP156,093 to the sellers during the
period.
2022 2021
GBP000 GBP000
BBSL - 636
BLX 262 387
262 1,023
27. Loan notes
Group Company
2022 2021 2022 2021
Notes GBP000 GBP000 GBP000 GBP000
Related parties
J Mellon JM 1,750 1,750 1,750 1,750
Burnbrae Limited BL 3,200 3,200 3,200 3,200
Culminant Reinsurance Ltd CR 1,000 1,000 1,000 1,000
5,950 5,950 5,950 5,950
Unrelated parties UP 25,382 17,722 25,382 17,722
31,332 23,672 31,332 23,672
JM - Two loans, one of GBP1,250,000 maturing on 26 February 2025
with interest payable of 5.4% per annum, and one of GBP500,000
maturing on 31 July 2027, paying interest of 7.5% per annum. Both
loans are convertible to ordinary shares of the Company at the rate
of 7.5 pence.
On 22 July 2022, JM and BL agreed to extend outstanding
unsecured convertible loans of GBP1,750,000, expiring on 31 July
2022, for a further five years to 31 July 2027. A loan of
GBP1,250,000 million is from BL and the remaining loan of GBP0.5
million is from JM himself. The new annual interest rate will be
7.5% (previously 5.0%) and the new conversion price will be 8.0
pence per share (previously 7.5 pence). All other terms are
unchanged, including the ability for the Company to repay the loans
at any time during the period.
BL - Three loans, one of GBP1,200,000 maturing on 31 July 2027,
paying interest of 7.5% per annum, one of GBP1,000,000 maturing 25
February 2025, paying interest of 5.4% per annum, and one of
GBP1,000,000 maturing 28 February 2025 paying interest of 6% per
annum. Jim Mellon is the beneficial owner of BL and Denham Eke is
also a director. The GBP1,200,000 loan is convertible at a rate of
7.5 pence.
CR - One loan consisting of GBP1,000,000 maturing on 12 October
2025, paying interest of 6.0% per annum. Greg Bailey, a director,
is the beneficial owner of CR.
UP - Forty loans (2021: Forty-three), the earliest maturity date
is 5 January 2023 and the latest maturity is 1 September 2027.
With respect to the convertible loans, the interest rate applied
was deemed by the Directors to be equivalent to the market rate at
the time with no conversion option.
28. Pension liability
The Conister Trust Pension and Life Assurance Scheme ("Scheme")
operated by the Bank is a funded defined benefit arrangement which
provides retirement benefits based on final pensionable salary. The
Scheme is closed to new entrants and the last active member of the
Scheme left pensionable service in 2011.
The Scheme is approved in the Isle of Man by the Assessor of
Income Tax under the Income Tax (Retirement Benefit Schemes) Act
1978 and must comply with the relevant legislation. In addition, it
is registered as an authorised scheme with the FSA in the Isle of
Man under the Retirement Benefits Scheme Act 2000. The Scheme is
subject to regulation by the FSA but there is no minimum funding
regime in the Isle of Man.
The Scheme is governed by two corporate trustees, Conister Bank
Limited and Boal & Co (Pensions) Limited. The trustees are
responsible for the Scheme's investment policy and for the exercise
of discretionary powers in respect of the Scheme's benefits.
Exposure to risk
The Company is exposed to the risk that additional contributions
will be required in order to fund the Scheme as a result of poor
experience. Some of the key factors that could lead to shortfalls
are:
-- investment performance - the return achieved on the Scheme's
assets may be lower than expected; and
-- mortality - members could live longer than foreseen. This
would mean that benefits are paid for longer than expected,
increasing the value of the related liabilities.
In order to assess the sensitivity of the Scheme's pension
liability to these risks, sensitivity analysis have been carried
out. Each sensitivity analysis is based on changing one of the
assumptions used in the calculations, with no change in the other
assumptions. [The same method has been applied as was used to
calculate the original pension liability and the results are
presented in comparison to that liability]. It should be noted that
in practice it is unlikely that one assumption will change without
a movement in the other assumptions; there may also be some
correlation between some of these assumptions. It should also be
noted that the value placed on the liabilities does not change on a
straight line basis when one of the assumptions is changed. For
example, a 2.0% change in an assumption will not necessarily
produce twice the effect on the liabilities of a 1.0% change.
No changes have been made to the method or to the assumptions
stress-tested for these sensitivity analyses compared to the
previous period. The investment strategy of the Scheme has been set
with regard to the liability profile of the Scheme. However, there
are no explicit asset-liability matching strategies in place.
Restriction of assets
No adjustments have been made to the statement of financial
position items as a result of the requirements of IFRIC 14 - IAS
19: The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction, issued by IASB's International
Financial Reporting Interpretations Committee.
Scheme amendments
There have not been any past service costs or settlements in the
financial year ending 31 December 2022 (2021: none).
Funding policy
The funding method employed to calculate the value of previously
accrued benefits is the Projected Unit Method. Following the
cessation of accrual of benefits when the last active member left
service in 2011, regular future service contributions to the Scheme
are no longer required. However, additional contributions will
still be required to cover any shortfalls that might arise
following each funding valuation.
The most recent triennial full actuarial valuation was carried
out at 31 March 2022, which showed that the market value of the
Scheme's assets was GBP1,432,000 representing 65.2% of the benefits
that had accrued to members, after allowing for expected future
increases in earnings. As required by IAS 19: Employee Benefits,
this valuation has been updated by the actuary as at 31 December
2022.
The amounts recognised in the Consolidated Statement of
Financial Position are as follows:
2022 2021
Total underfunding in funded plans recognised GBP000 GBP000
as a liability
Fair value of plan assets 1,289 1,543
Present value of funded obligations (1,526) (2,230)
(237) (687)
2022 2021
Movement in the liability for defined benefit GBP000 GBP000
obligations
Opening defined benefit obligations at 1 January 2,230 2,350
Benefits paid by the plan (75) (74)
Interest on obligations 44 32
Actuarial gain (673) (78)
Liability for defined benefit obligations at
31 December 1,526 2,230
2022 2021
Movement in plan assets GBP000 GBP000
Opening fair value of plan assets at 1 January 1,543 1,406
Expected return on assets 30 19
Contribution by employer 57 98
(Loss) / gain (266) 94
Benefits paid (75) (74)
Closing fair value of plan assets at 31 December 1,289 1,543
2022 2021
Expense recognised in income statement GBP000 GBP000
Interest on obligation 44 32
Expected return on plan assets (30) (19)
Total included in personnel costs 14 13
Actual (loss) / return on plan assets (236) 113
2022 2021
Actuarial gain / (loss) recognised in other comprehensive GBP000 GBP000
income
(Loss) / gain on plan assets (266) 94
Actuarial gain on defined benefit obligations 673 78
407 172
2022 2021
Plan assets consist of the following % %
Equity securities 61 52
Corporate bonds 13 26
Government bonds 21 17
Cash 2 2
Other 3 3
100 100
2022 2021 2019
The actuarial assumptions used to calculate Scheme % % %
liabilities under IAS19 are as follows:
Rate of increase in pension in payment:
- - -
* Service up to 5 April 1997
* Service from 6 April 1997 to 13 September 2005 3.1 3.4 2.9
* Service from 14 September 2005 2.1 2.2 2.1
Rate of increase in deferred pensions 5.0 5.0 5.0
Discount rate applied to scheme liabilities 5.0 1.7 1.8
Inflation 3.2 3.5 3.0
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.
29. Called up share capital
Ordinary shares of no par value available for issue Number
At 31 December 2022 200,200,000
At 31 December 2021 200,200,000
Issued and fully paid: Ordinary shares of no Number GBP000
par value
At 31 December 2022 115,072,988 19,195
At 31 December 2021 114,291,639 19,133
A. Analysis of changes in financing during the year
2022 2021
GBP000 GBP000
Balance at 1 January 44,100 41,846
Issue of loan notes 7,659 1,450
Issue of lease liability 520 993
Issue of shares via scrip dividend 62 12
Payment of lease liabilities (201) (201)
Balance at 31 December 52,140 44,100
The 2022 closing balance is represented by GBP19,195,000 share
capital (2021: GBP19,133,000), GBP31,332,000 of loan notes (2021:
GBP23,672,000) and GBP1,614,000 lease liability (2021:
GBP1,295,000).
B. Dividends
On 25 May 2022, MFG declared a dividend of GBP279,200 (2021:
GBP196,800) which could either be taken up in cash or new ordinary
shares. 781,349 new shares (2021: 161,562 new shares) were admitted
to the Alternative Investment Market ("AIM") at 8.0205 pence per
share (2021: 7.0575 pence per share), at a total cost of GBP62,000
(2021: GBP12,000).
C. Convertible loans
There are three convertible loans totalling GBP2,950,000 (2021:
GBP2,950,000) (refer to note 27).
D. Share options and Restricted Stock Options
i. Issued during the financial year ended 31 December 2022
On 5 July 2022 and 27 October 2022, MFG granted Restricted Stock
Units ("RSUs") under its 2022 RSU Plan. The Group has issued, in
total, RSUs over 2,435,000 ordinary shares representing 2.1% of the
issued share capital of the Group, including 1,250,000 to certain
directors and 1,185,000 to certain employees. The RSUs will have a
2-year term and are subject to certain vesting conditions based
upon an overall growth in profitability. Any RSUs granted will fall
away should the recipient leave employment before the 2-year term
expires. Should the individual vesting conditions be satisfied at
the end of the term, the stock will be exercised at nil cost.
The Group directors who received RSUs are as follows:
-- Douglas Grant, Group Chief Executive Officer, who currently
owns 533,951 ordinary shares in the Company representing a holding
of 0.45% was issued 1,075,000 RSUs. Including 700,000 Share Options
issued 24 June 2014, he would hold a total of 2,308,951 ordinary
shares, being 1.98% of the issued share capital of the Company on a
fully diluted basis; and
-- James Smeed, Group Finance Director, was issued 175,000 RSUs.
On the same basis, he would hold 0.15% of the new issued share
capital of the Company.
The terms and conditions of the grants are as follows: and will
be settled by the physical delivery of shares.
Contractual
Number life of
Grant date / employees entitled of Units options
RSUs granted to key employees at 5 July 2022 1,020,000 2 years
RSUs granted to directors at 5 July 2022 1,100,000 2 years
RSUs granted to key employees at 27 October 2022 165,000 2 years
RSUs granted to directors at 27 October 2022 150,000 2 years
Total RSUs 2,435,000
The fair value of employee services received in return for
restricted stock units granted is based on the fair value of them
measured using the Black-Scholes formula. Service related and
non-market performance conditions were not taken into account in
measuring fair value. The inputs used in measuring the fair values
at the grant of the equity-settled restricted stock unit payment
plans were as follows.
Grant at Grant at
Fair value of restricted stock units and 5 July 27 October
assumptions 2022 2022
Share price at grant date 8.5 pence 14.0 pence
Exercise price nil nil
Expected volatility * ^ 55.14% 107.71%
Expected life (weighted average) 2 years 2 years
Risk-free interest rate (based on government
bonds) * ^ 1.65% 3.15%
Forfeiture rate 0.00% 0.00%
Fair value at grant date 8.5 pence 14.0 pence
^ Based on past 3 years
* Annual rates
The expected volatility is based on both historical average
share price volatility and implied volatility derived from traded
options over the group's ordnary shares of maturity similar to
those of the employee options.
The fair value of the liability is remeasured at each reporting
date and at settlement date.
The charge for the year for share options granted was GBP18,000
(2021: GBPnil).
ii. Issued during the financial year ended 31 December 2014
On 23 June 2014, 1,750,000 share options were issued to
Executive Directors and senior management within the Group at an
exercise price of 14 pence per share.
The options vest over three years with a charge based on the
fair value of 8 pence per option at the date of grant. The period
of grant is for 10 years less 1 day ending 22 June 2024, with the
condition of three-years continuous employment being met.
Of the 1,750,000 share options issued, 1,050,000 (31 December
2021:1,050,000) remain outstanding.
The fair value of services received in return for share options
granted is based on the fair value of share options granted,
measured using a binomial probability model with the following
inputs for each award:
23 June
2014
Fair value at date of grant GBP0.08
Share price at date of grant GBP0.14
Exercise price GBP0.14
Expected volatility 55.0%
Option life 3
Risk-free interest rate (based on government
bonds) 0.5%
Forfeiture rate 33.3%
30. List of associates
Set out below is a list of associates of the Group:
Group Group
2022 2021
GBP000 GBP000
Payitmonthly Ltd ("PIML") 155 136
155 136
In December 2017, 40.0% of the share capital of BLX was acquired
for nil consideration. During 2021 financial year, the Group
obtained control of the subsidiary. Prior to obtaining control, the
share of the associate's total comprehensive income during the year
was GBPnil (2021: GBP22,000).
In August 2018, 30% of the share capital of PIML was acquired
for GBP90,000 consideration. The Group's resulting share of the
associate's total comprehensive income during the year was
GBP18,000 (2021: GBP10,000).
31. List of subsidiaries
Set out below is a list of direct subsidiaries of the Group:
Nature of 31 December Date of
Business 2022 Incorporation 2022 2021
Carrying value % Holding GBP000 GBP000
of investments
Asset and
Conister Bank Limited Personal Finance 100 05/12/1935 21,592 20,592
Edgewater Associates
Limited Wealth Management 100 24/12/1996 2,005 2,005
TransSend Holdings
Limited Holding Company 100 05/11/2007 - -
Manx Ventures Limited Holding Company 100 15/05/2009 - -
---
23,597 22,597
All subsidiaries are incorporated in the Isle of Man.
32. Subsidiaries and non-controlling interests
A. Acquisition of subsidiary
Payment Assist Limited ("PAL")
On 16 May 2022, the Group (through MVL) announced that it
entered into an agreement to acquire 50.1% of the shares and voting
interests in UK focused, point of sale lender PAL for a total
consideration of GBP4.244 million payable in cash. The acquisition
was completed in September 2022.
Payment Assist ("PAL"), the UK's leading automotive repair
point-of-sale finance provider, works with premier national chains
such as National Tyres, Halfords and Formula One. PAL has
diversified into insured products and retail.
The agreement with PAL continues MFG's strategy of acquiring
interests in high quality specialist lenders.
PAL has contributed revenue of GBP3,407,000 and profit of
GBP701,000 to the Group's results. If the acquisition had occurred
on 1 January 2022, management estimates that the impact on
consolidated interest income would have been GBP9,190,000 and the
impact on consolidated profit for the period would have been
GBP1,473,000.
In addition to the acquisition, MVL has agreed an option to
acquire the remaining 49.9% of Payment Assist for a variable cash
consideration of 2 times the average net profit per share at the
point of exercise, subject to a maximum of GBP5 million (the
"Option"). The Option can be exercised by MVL at any time for the
period until PAL has declared a dividend for the financial year
ended 31 December 2026.
i. PAL - Consideration transferred
The following table summarises as at the acquisition date the
fair value of each major class of consideration transferred:
GBP000
Cash 4,244
Settlement of pre-existing relationship 23,490
27,734
ii. PAL - Settlement of pre-existing relationship
The Bank and PAL were parties to a Integrated Wholesale Facility
loan agreement and a Coronavirus Business Interruption Loan with
the Bank as lender and PAL as borrower. This pre-existing
relationship was GBP23,102,116 when the Group acquired PAL.
iii. PAL - Acquisition-related costs
The Group incurred acquisition-related costs of GBP101,229
relating to external legal fees and due diligence costs. These
costs have been included in 'other costs' in the consolidated
statement of profit or loss and other comprehensive income.
iv. PAL - Identifiable assets acquired, and liabilities
assumed
The following table summarises the recognised amounts of assets
acquired, and liabilities assumed at the date of acquisition:
GBP000
Intangible assets - customer related 273
Property and equipment 269
Trade and other receivables 10
Loans and advances to customers 25,384
Cash and cash equivalents 1,875
Creditors and accrued charges (4,744)
Total identifiable net assets acquired 23,067
v. PAL - Measurement of fair values
The valuation techniques used for measuring the fair value of
material assets acquired were as follows:
Assets acquired Valuation technique
Intangible assets Multi-period excess earnings method:
The multi-period excess earnings
method considers the present value
of net cash flows expected to be
generated by the customer relationships.
vi. PAL - Goodwill
The goodwill arising from the acquisition has been recognised as
follows:
GBP'000
Total consideration transferred 27,734
Non-controlling interest, based on their proportionate
interest in the recognised amounts (211)
Fair value of identifiable net assets (23,067)
Goodwill 4,456
The Business Lending Exchange ("BLX")
On 11 October 2021, the Group (through MVL) announced that it
entered into an agreement to acquire 60% of the shares and voting
interests in BLX. As a result, the Group's equity interest in BLX
increased from 40% to 100%, thereby obtaining control of BLX.
Regulated by the FCA under Consumer Credit Authorisations, BLX
primarily lends to start-up companies and small businesses which
require asset backed finance.
The acquisition strengthens the Group's strategy of developing a
network of niche loan brokers within the UK.
The consideration transferred was GBP6,524,000 and transaction
costs of GBP25,000 were incurred. The net fair value of
identifiable assets acquired and liabilities assumed was
GBP5,488,000. Goodwill of GBP1,098,000 was recognised.
In 2021 the remeasurement to fair value of the Bank's existing
20% interest in BLX resulted in a gain of GBP660,000 (GBP872,000
less the GBP212,000 carrying amount of the equity accounted
investee at the date of acquisition). This amount was included
separately in prior year's statement of profit or loss and other
comprehensive income.
Blue Star Business Solutions Limited ("BBSL")
On 16 April 2019, the Group (through MVL) acquired 100% of the
shares and voting interest in BBSL, obtaining control of BBSL. The
Group agreed to pay the selling shareholders:
-- 50% of net profits in BBSL for 3 years post completion;
and
-- 50% of the incremental net profit that the Group benefits
from as a result of taking up BBSL loan proposals post completion
up until the third anniversary.
This is to be paid on each anniversary with a final payment in
year 4 for the unrealised lending profit. The total consideration
is to have a cap of GBP4,000,000 in total. The contingent
consideration is calculated by forecasting 3 years of net profits
discounted using an interest rate of 14.0% per annum. The range of
contingent consideration payable is GBPnil to GBP2,500,000.
The remaining contingent consideration payable was remeasured
during the period with an interest expense charge of GBP35,067 and
remeasurement loss of GBP109,916. A final payment of GBP781,095 was
paid during the period. There is no further consideration or
amounts due to the sellers of BBSL.
B. NCI in subsidiaries
The following table summarises the information about the Group's
subsidiaries that have material NCI, before any intra-group
eliminations.
31 December 2022
GBP'000 PAL NRF Total
NCI percentage 49.9% 10%
Cash and cash equivalents 2,584 219
Loans and advances to customers 9,818 -
Trade and other receivables 1,116 941
Property, plant and equipment 15 4,507
Intangible assets 251 27
Loans and borrowings (3,089) (4,355)
Creditors and accrued charges (10,416) (628)
Deferred tax - (217)
Net assets 279 494
Carrying amount of NCI 140 49 189
Revenue 3,407 1,660
Profit 701 238
OCI - -
Total comprehensive income 724 238
Profit allocated to NCI 350 (7) 343
OCI allocated to NCI - - -
Operating activities cashflows 585 87
Investing activities cashflows 124 (158)
Financing activities cashflows - (12)
Net increase / (decrease)
in cashflows 709 (82)
33. 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 GBP6,250,000 to RFG. The commitment fee is an integral
part of the effective interest rate of the associated loan
facilities issued to RFG.
The Group is not considered to have a significant influence over
RFG as it holds less than a 20% shareholding and is not considered
to participate in the policy making decisions of the entity. The
10% shareholding has thus been classified as a financial
instrument.
The Group continues to obtain information necessary to measure
the fair value of the shares obtained. The fair value of the
financial instrument received has been determined as GBP122,000
(2021: GBP68,000) based on the proportionate share of the net asset
value of RFG. There has been no change to fair value at
year-end.
As part of the transaction, the Group has been granted two
warrants to acquire further shares. The first warrant is for 5% of
the share capital and the second warrant is for a further 5% of the
share capital.
The two warrants are exercisable dependent upon the Group's
banking subsidiary, the Bank, contracting with RFG, for a larger
facility. The fair value of the two warrants has been determined to
be nil due to the significant uncertainty that exists at
acquisition date and the period end in issuing a further debt
facility.
34. Goodwill
Group Group
2022 2021
Cash generating unit GBP000 GBP000
PAL (see Note 32) 4,456 -
EAL 1,649 1,849
BLX 1,908 1,908
BBSL 1,390 1,390
NRFL 678 678
Manx Collections Limited ("MCL") 454 454
Three Spires Insurance Services Limited ("Three
Spires") 41 41
10,576 6,320
As at 31 December 2022, no indications of impairment have been
assessed on the PAL goodwill following its recognition on the
Group's Statement of Financial Position (see Note 32).
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 key assumptions used in the
estimation of the recoverable amount are set out in this note. The
recoverable amount of the CGUs discussed in this note were each
based on value in use. The values assigned to key assumptions
represents management's assessment of future trends in the relevant
industries and have been based on historical data from both
external and internal sources.
The estimated recoverable amount in relation to the EAL CGU
(including also goodwill generated on acquisition of EAL) 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
14.0% discount factor. The sensitivity of the analysis was tested
using additional discount factors of 15.0% and 20.0% on stable
profit levels. An impairment loss on EAL goodwill of GBP200,000 has
been recognised during the year.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of BLX is based on forecasted 3 year
interest income calculated at an average yield of 8%, with a
terminal value calculated using a 3.0% growth rate of net income
and then discounted using a 14.0% discount factor. The sensitivity
of the analysis was tested using additional discount factors of up
to 20.0% on varying interest income growth rates.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of BBSL is based on forecasted 3 year
interest income calculated at an average yield of 8%, with a
terminal value calculated using a 3.0% growth rate of net income
and then discounted using a 14.0% discount factor. The sensitivity
of the analysis was tested using additional discount factors of up
to 20.0% on varying interest income growth rates.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of NRFL is based on a 4 year sales
forecast, extrapolated to 14 years using a 1.5% annual increment,
and then discounted using a 12% discount factor. The sensitivity of
the
analysis was tested using additional discount factors of up to
20.0% on varying sales volumes. On the basis of the above reviews
no impairment to goodwill has been made in the current year.
The estimated recoverable amount in relation to the goodwill
generated on the purchase of MCL is based on forecasted 3-year
sales interest income calculated at 5.0% margin. This is
extrapolated to 10 years using a 2.0% annual increment, and then
discounted using a 11.0% discount factor. The sensitivity of the
analysis was tested using additional discount factors of 15.0% and
20.0% on varying sales volumes.
The goodwill generated on the purchase of Three Spires has been
reviewed at the current year end and is considered adequate given
its income streams referred to EAL. Based on the above no
impairment to goodwill has been made in the current year.
35. Investment in Group undertakings
Amounts owed to Group undertakings
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 EAL.
Interest 2022 2021
Creation Maturity rate GBP000 GBP000
% p.a.
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 7.0 450 450
12 June 2018 12 June 2038 7.0 2,000 2,000
Edgewater Associates
Limited
21 February 2017 21 February 2027 7.0 150 150
14 May 2017 14 May 2027 7.0 128 128
7,728 7,728
36. Related party transactions
Cash deposits
During the year, the Bank held cash on deposit on behalf of Jim
Mellon (Executive Chairman of MFG). At 31 December total deposits
amounted to GBP94,475 (2021: GBP507,908), at normal commercial
interest rates in accordance with the standard rates offered by the
Bank.
Key management remuneration including Executive Directors
2022 2021
GBP000 GBP000
Remuneration 516 440
Performance Related Pay 68 51
Pension 41 34
-------- --------
625 525
-------- --------
Employment benefits include gross salaries, performance related
pay, employer defined contributions and restricted stock units
(Note 29D).
As at 31 December 2022, Douglas Grant had GBP376,163 (2021:
GBP107,386) outstanding to repay in Loans and advances to Conister
Bank Limited, paying an average interest of 7.0% (2021: 2.54%); and
James Smeed, GBP15,463 (2021: GBP29,756), paying an average
interest of 3.01% (2021: 2.65%). No impairment is held in respect
of these amounts.
Intercompany recharges
Various intercompany recharges are made during the course of the
year as a result of the Bank settling debts in other Group
companies.
Loan advance to EAL
On 14 December 2016, a loan advance was made to EAL by the Bank
in order to provide the finance required to acquire MBL. The
advance was for GBP700,000 at an interest rate of 8% per annum
repayable over 6 years. A negative pledge was given by EAL to not
encumber any property or assets or enter into an arrangement to
borrow any further monies. The balance as at 31 December 2022 was
GBPnil (2021: GBP140,950).
Loan advance to PIML
On 24 May 2018, a GBP500,000 loan facility was made available to
PIML by the Bank in order to provide the finance required to expand
its operations. The facility is for 12 months. Interest is charged
at commercial rates. At 31 December 2022, GBP1,241,000 (2021:
GBP1,219,000) had been advanced to PIML. No impairment is held in
respect of these amounts.
Subordinated loans
The Company has advanced GBP7,450,000 (2021: GBP7,450,000) of
subordinated loans to the Bank and GBP278,000 (2021: GBP278,000) to
EAL as at 31 December 2022. See note 34 for more details.
37. Leases
A. Leases as lessee
The Group leases the head office building in the Isle of Man.
The lease's term is 10 years with an option to renew the lease
after that date. Lease payments are renegotiated every 10 years to
reflect market rentals.
The Group leases an office unit in the United Kingdom and IT
equipment with contract terms of 2 to 3 years. These leases are
short-term and / or leases of low-value items. The Group has
elected not to recognise right-of-use assets and lease liabilities
for these leases.
Information about leases for which the Group is a lessee is
presented below.
i. Right-of-use assets
Right-of-use assets related to leased properties that do not
meet the definition of investment property are presented as
property, plant and equipment.
Land
and Buildings Total
Group GBP000 GBP000
Cost
As at 1 January 2022 1,444 1,444
Acquisition of subsidiary 136 136
Additions 380 380
As at 31 December 2022 1,960 1,960
Accumulated depreciation
As at 1 January 2022 205 205
Charge for the year 180 180
Eliminated on disposals - -
As at 31 December 2022 385 385
Carrying value at 31 December 2022 1,575 1,575
Carrying value at 31 December 2021 1,239 1,239
ii. Amounts recognised in profit or loss
2022 2021
GBP000 GBP000
Interest on lease liabilities 78 42
Depreciation expense 180 162
Expenses relating to short-term leases and low-value assets 92 64
iii. Amounts recognised in statement of cash flows
2022 2021
GBP000 GBP000
Total cash outflow for leases 280 243
iv. Non-cancellable operating lease rentals are payable in
respect of property as follows:
2022 2021
GBP000 GBP000
Less than one year 92 64
Between one and five years 184 128
Over five years - -
Total operating lease rentals payable 276 192
38. Regulators
Certain Group subsidiaries are regulated by the FSA and the FCA
as detailed below.
The Bank and EAL are regulated by the FSA under a Class 1(1) -
Deposit Taking licence and Class 2 - Investment Business licence
respectively. The Bank and CFL are regulated by the FCA to provide
regulated products and services.
39. Contingent liabilities
The Bank is required to be a member of the Isle of Man
Government Depositors' Compensation Scheme which was introduced by
the Isle of Man Government under the Banking Business (Compensation
of Depositors) Regulations 1991 and creates a liability on the Bank
to participate in the compensation of depositors should it be
activated.
40. Non-IFRS measures
Non-IFRS measures included in the financial statements include
the following:
Measure Description
Net trading Net trading income represents net interest income and contributions
income from non-interest income activities.
Operating income Operating income represents net trading income other operating
income and gains or losses on financial instruments
41. Subsequent events
There were no subsequent events occurring after 31 December
2022.
42. Financial risk management
A. Introduction and overview
The Group has exposure to the following risks from financial
instruments:
-- credit risk;
-- liquidity risk;
-- market risk; and
-- operational risk.
Risk management framework
The Board has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Board has
established the ARCC, which is responsible for approving and
monitoring Group risk management policies. The ARCC is assisted in
its oversight role by Internal Audit. Internal Audit undertakes
both regular and ad hoc reviews of risk management controls and
procedures, the results of which are reported to the ARCC.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
The risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's activities.
The Group, though its training and management standards and
procedures, aims to develop a disciplined and constructive control
environment in which all employees understand their roles and
obligations.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's loans and advances to customers and investment debt
securities. Credit risk includes counterparty, concentration,
underwriting and credit mitigation risks.
Management of credit risk
The Bank's Board of Directors created the Credit Committee which
is responsible for managing credit risk, including the
following:
-- Formulating credit policies in consultation with business
units, covering collateral requirements, credit assessments, risk
grading and reporting, documentary and legal procedures, and
compliance with regulatory and statutory requirements;
-- Establishing the authorisation structure for the approval and
renewal of credit facilities. Authorisation limits are allocated in
line with credit policy;
-- Reviewing and assessing credit risk: The Credit Committee
assesses all credit exposures in excess of designated limits,
before facilities are committed to customers. Renewals and reviews
of facilities are subject to the same review process.
-- Limiting concentrations of exposures to counterparties,
geographies and industries, by issuer, credit rating band, market
liquidity and country (for debt securities);
-- Developing and maintaining risk gradings to categorise
exposures according to the degree of risk of default. The current
risk grading consists of 3 grades reflecting varying degrees of
risk of default;
-- Developing and maintaining the Group's process for measuring
ECL: This includes processes for:
o initial approval, regular validation and back-testing of the
models used;
o determining and monitoring significant increase in credit
risk; and
o the incorporation of forward-looking information; and
-- Reviewing compliance with agreed exposure limits. Regular
reports on the credit quality of portfolios are provided to the
Credit Committee which may require corrective action to be
taken.
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. Liquidity risk arises from mismatches in the
timing and amounts of cash flows, which is inherent to the Group's
operations and investments.
Management of liquidity risk
The Group's approach to managing liquidity is to ensure, as far
as possible, that it will always have enough liquidity to meet its
liabilities when they are due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. The key elements of the Group's
liquidity strategy are as follows:
-- Funding base: offering six-months to five-year fixed term
deposit structure with no early redemption option. This means the
Bank is not subject to optionality risk where customers redeem
fixed rate products where there may be a better rate available
within the market;
-- Funding profile: the Bank has a matched funding profile and
does not engage in maturity transformation which means that on a
cumulative mismatch position the Bank is forecast to be able to
meet all liabilities as they fall due;
-- Monitoring maturity mismatches, behavioural characteristics
of the Group's financial assets and financial liabilities, and the
extent to which the Group's assets are encumbered and so not
available as potential collateral for obtaining funding;
-- Liquidity buffer: the Bank maintains a liquidity buffer of
10.0% of its deposit liabilities, with strict short-term mismatch
limits of 0.0% for sight to three months and -5.0% for sight to six
months. This ensures that the Bank is able to withstand any
short-term liquidity shock; and
-- Interbank market: the Bank has no exposure to the interbank
lending market. The Bank has no reliance on liquidity via the
wholesale markets. In turn, if market conditions meant access to
the wholesale funding was constrained as per the 2008 credit
crisis, this would have no foreseeable effect on the Bank.
The Bank's liquidity position is monitored daily against
internal and external limits agreed with the FSA and according to
the Bank's Liquidity Policy. The Bank also has a Liquidity
Contingency Policy and Liquidity Contingency Committee in the event
of a liquidity crisis or potential liquidity disruption event
occurring.
The Treasury department receives information from other business
units regarding the liquidity profile of their financial assets and
financial liabilities and details of other projected cash flows
arising from projected future business. Treasury then maintains a
portfolio of short-term liquid assets, largely made up of
short-term liquid investment securities, loans and advances to
banks and other inter-bank facilities, to ensure that sufficient
liquidity is maintained within the Group as a whole.
Regular liquidity stress testing is conducted under a variety of
scenarios covering both normal and more severe market conditions.
The scenarios are developed considering both Group-specific events
and market-related events (e.g. prolonged market illiquidity).
D. Market risk
Market risk is the risk that of changes in market prices; e.g.
interest rates, equity prices, foreign exchange rates and credit
spreads (not relating to changes in the obligor's / issuer's credit
standing), will affect the Group's income or value of its holdings
of financial instruments. The objective of the Group's market risk
management is to manage and control market risk exposures within
acceptable parameters to ensure the Group's solvency while
optimising the return on risk.
Management of market risks
Overall authority for market risk is vested in the Assets and
Liabilities Committee ("ALCO") which sets up limits for each type
of risk. Group finance is responsible for the development of risk
management policies (subject to review and approval by the ALCO)
and for the day-to-day review of their implementation.
Foreign exchange risk
The Bank is not subject to foreign exchange risks and its
business is conducted in pounds sterling.
Equity risk
The Group has investment in associates which are carried at cost
adjusted for the Group's share of net asset value. The Bank has
access to these accounts. The Bank's exposure to market risk is not
considered significant given the low carrying amount of the
investment.
The Group's does not hold any investments in listed
equities.
Interest rate risk
The principal potential interest rate risk that the Bank is
exposed to is the risk that the fixed interest rate and term
profile of its deposit base differs materially from the fixed
interest rate and term profile of its asset base, or basis and term
structure risk.
Additional interest rate risk may arise for banks where (a)
customers are able to react to market sensitivity and redeem fixed
rate products and (b) where a bank has taken out interest rate
derivate hedges especially against longer-term interest rate risk,
where the hedge moves against the bank. However, neither of these
risks apply to the Bank.
Interest rate risk for the Bank is not deemed to be currently
material due to the Bank's matched funding profile. Any interest
rate risk assumed by the Bank will arise from a reduction in
interest rates, in a rising environment due to the nature of the
Bank's products and its matched funded profile. The Bank should be
able to increase its lending rate to match any corresponding rise
in its cost of funds, notwithstanding its inability to vary rates
on its existing loan book. The Bank attempts to efficiently match
its deposit taking to its funding requirements.
E. Operational risk
Operational risk is the risk of direct or indirect loss arising
from a wide variety of causes associated with the Group's
processes, personnel, technology and infrastructure, and from
external factors other than credit, market and liquidity risks -
e.g. those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour. Operational
risks arise from all of the Group's operations.
Management of operational risk
The Group's objective is to manage operational risk so as to
balance the avoidance of financial losses and damage to the Group's
reputation with overall cost effectiveness and innovation. In all
cases, Group policy requires compliance with all applicable legal
and regulatory requirements.
The Group has developed standards for the management of
operational risk in the following areas:
-- Business continuity planning;
-- Requirements for appropriate segregation of duties, including
the independent authorisation of transactions;
-- Requirements for the reconciliation and monitoring of
transactions;
-- Compliance with regulatory and other legal requirements;
-- Documentation of controls and procedures;
-- Periodic assessment of operational risks faced, and the
adequacy of controls and procedures to address the risks
identified;
-- Requirements for the reporting of operational losses and
proposed remedial action;
-- Development of contingency plans;
-- Training and professional development;
-- Ethical and business standards;
-- Information technology and cyber risks; and
-- Risk mitigation, including insurance where this is
cost-effective.
Compliance with Group standards is supported by a programme of
periodic reviews undertaken by Internal Audit. The results of
Internal Audit reviews are reported to the ARCC.
43. Basis of measurement
The financial statements are prepared on a historical cost
basis, except for the following material items:
Items Measurement basis
FVTPL - Trading asset Fair value
FVOCI - Debt securities Fair value
Land and buildings Fair value
Deferred consideration Fair value
Net defined benefit liability Fair value of plan assets less
the present value of the defined
benefit obligation
44. Significant accounting policies
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
2022:
-- Amendment to IFRS 1 First-time Adoption of International
Financial Reporting Standards-Subsidiary as a First-time Adopter
(issued on 12 April 2022);
-- Amendment to IFRS 9 Financial Instruments-Fees in the '10 per
cent' Test for Derecognition of Financial Liabilities (issued on 12
April 2022);
-- Amendment to IAS 41 Agriculture - Taxation in Fair Value
Measurements (issued on 12 April 2022);
-- Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling
a Contract (issued on 12 April 2022);
-- Amendments to IAS 16: Property and Equipment: Proceeds before
Intended Use (issued on 12 April 2022); and
-- Amendments to References to the Conceptual Framework in IFRS
Standards (issued on 12 April 2022).
No significant changes followed the implementation of these
standards and amendments.
New standards and amendments to standards, adopted but not yet
effective with an initial application of 1 January 2023:
-- Adoption of IFRS 17 Insurance Contracts (issued on 17 May
2022);
-- Adoption of Disclosure of Accounting Policies (Amendments to
IAS 1 and IFRS Practice Statement 2) (issued on 2 December
2022);
-- Adoption of Definition of Accounting Estimates (Amendments to
IAS 8) (issued on 2 December 2022); and
-- Adoption of Deferred Tax related to Assets and Liabilities
arising from a Single Transaction (Amendments to IAS 12) (issued on
2 December 2022)
No significant changes are anticipated followed the
implementation of the standards and amendments effective on 1
January 2023.
The Group has consistently applied the following accounting
policies to all periods presented in these financial
statements.
Set out below is an index of the significant accounting
policies:
A. Basis of consolidation of subsidiaries and separate financial
statements of the Company
i. Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group. The
consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the
date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instruments
is classified as equity, then it is not measured, and settlement is
accounted for within equity. Otherwise, other contingent
consideration is remeasured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
ii. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity if it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its control over the entity. The Group
reassesses whether it has control if there are changes to one or
more of the elements of control. This includes circumstances in
which protective rights held (e.g. those resulting from a lending
relationship) become substantive and lead to the Group having power
over an investee. The financial statements of subsidiaries are
included in the consolidated financial statements from the date on
which control commences until the date on which control ceases.
iii. Non-controlling interests ("NCI")
NCI are measured initially at their proportionate share of the
acquiree's identifiable net assets at the date of acquisition.
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions.
iv. Loss of control
When the Group loses control over a subsidiary, it derecognises
the assets and liabilities of the subsidiary, and any related NCI
and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former
subsidiary is measured at fair value when control is lost.
v. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements. Unrealised
losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
vi. Separate financial statements of the Company
In the separate financial statements of the Company, interests
in subsidiaries, associates and joint ventures are accounted for at
cost.
B. Interests in equity accounted investees
The Group's interests in equity accounted investees may comprise
interests in associates and joint ventures.
Associates are those entities in which the Group has significant
influence, but not control or joint control, over the financial and
operating policies. A joint venture is an arrangement in which the
Group has joint control, whereby the Group has rights to the net
assets of the arrangement, rather than rights to its assets and
obligations for its liabilities.
Interests in associates and joint ventures are accounted for
using the equity method. They are initially recognised at cost,
which includes transaction costs. Subsequent to initial
recognition, the consolidated financial statements include the
Group's share of the profit or loss and OCI of equity accounted
investees, until the date on which significant influence or joint
control ceases.
C. Interest
Interest income and expense are recognised in profit or loss
using the effective interest rate method.
i. Effective interest rate
The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts of the financial
instrument to the gross carrying amount of the financial asset or
amortised cost of the financial liability. When calculating the
effective interest rate for financial assets, the Group estimates
future cash flows considering all contractual terms of the
financial instruments, including origination fees, loan incentives,
broker fees payable, estimated early repayment charges, balloon
payments and all other premiums and discounts. It also includes
direct incremental transaction costs related to the acquisition or
issue of the financial instrument. The calculation does not
consider future credit losses.
ii. Amortised cost and gross carrying amount
The amortised cost of a financial asset or financial liability
is the amount at which the financial asset or financial liability
is measured on initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between that initial amount and
the maturity amount and, for financial assets, adjusted for any
expected credit loss allowance.
The gross carrying amount of a financial asset is the amortised
cost of a financial asset before adjusting for any expected credit
loss allowance.
iii. Calculation of interest income and expense
In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount of the asset
(when the asset is not credit-impaired) or to the amortised cost of
the liability.
However, for financial assets that have become credit-impaired
subsequent to initial recognition, interest income is calculated by
applying the effective interest rate to the amortised cost of the
financial asset. If the asset is no longer credit-impaired, then
the calculation of interest income reverts to the gross basis.
D. Fee and commission income
The Group generates fee and commission income through provision
of independent financial advice, insurance brokerage agency,
introducer of foreign exchange services and commissions from
brokering business finance for small and medium sized
enterprises.
Independent financial advice and insurance brokerage agency
Income represents commission arising on services and premiums
relating to policies and other investment products committed during
the year, as well as renewal commissions having arisen on services
and premiums relating to policies and other investment products
committed during the year and previous years and effective at the
balance sheet date. Income is recognised on the date that policies
are submitted to product providers with an appropriate discount
being applied for policies not completed. As a way to estimate what
is due at the year-end, a "not proceeded with" rate of 10.0% for
pipeline life insurance products and 0.0% for non-life insurance
pipeline is assumed. Renewal commissions are estimated by taking
the historical amount written pro-rata to 3 months.
Other
Income other than that directly related to the loans is
recognised over the period for which service has been provided or
on completion of an act to which the fee relates.
E. Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
i. As a lessee
At commencement or on modification of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease component on the basis of its relative
stand-alone prices. However, for the leases of property the Group
has elected not to separate non-lease components and as a result,
accounts for the lease and non-lease components as a single lease
component.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or
to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying
asset to the Group by the end of the lease term or the cost of the
right-of-use asset reflects that the Group will exercise a purchase
option. In that case the right-of-use asset will be depreciated
over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition,
the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining
interest rates from various external financing sources and makes
certain adjustments to reflect the terms of the lease and the type
of the asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
-- Fixed payments, including in-substance fixed payments;
-- Variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- Amounts expected to be payable under a residual value
guarantee; and
-- The exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an
extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to
zero.
The Group presents right-of-use assets that do not meet the
definition of investment property in 'property, plant and
equipment' and lease liabilities in 'loans and borrowings' in the
statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and
lease liabilities for leases of low-value assets and short-term
leases, including IT equipment. The Group recognises the lease
payments associated with these leases as an expense on a
straight-line basis over the lease term.
ii. As a lessor
At inception or on modification of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease component on the basis of their relative
stand-alone prices.
When the Group acts as a lessor, it determines at lease
inception whether each lease is a finance or an operating
lease.
To classify each lease, the Group makes an overall assessment of
whether the lease transfers substantially all of the risks and
rewards incidental to ownership of the underlying asset. If this is
the case, then the lease is a finance lease; if not, then it is an
operating lease. As part of this assessment, the Group considers
certain indicators such as whether the lease is for the major part
of the economic life of the asset.
Finance leases and HP contracts
When assets are subject to a finance lease or HP contract, the
present value of the lease payments is recognised as a receivable.
The difference between the gross receivable and the present value
of the receivable is recognised as unearned finance income. HP and
lease income is recognised over the term of the contract or lease
reflecting a constant periodic rate of return on the net investment
in the contract or lease. Initial direct costs, which may include
commissions and legal fees directly attributable to negotiating and
arranging the contract or lease, are included in the measurement of
the net investment of the contract or lease at inception.
Operating leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss and other
comprehensive income on a straight-line basis over the period of
the lease.
F. Income tax
Current and deferred taxation
Current taxation relates to the estimated corporation tax
payable in the current financial year. Deferred taxation is
provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial
statements. Deferred tax is not recognised for taxable temporary
differences arising on the initial recognition of goodwill and
temporary differences related to investments in subsidiaries and
associates to the extent that the Group is able to control the
timing of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable future.
Deferred taxation is determined using tax rates, and laws that
have been enacted or substantially enacted by the reporting date
and are expected to apply when the related deferred tax is
realised. Deferred taxation assets are recognised to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
G. Financial assets and financial liabilities
i. Recognition and initial measurement
The Group initially recognises loans and advances, deposits,
debt securities issued and subordinated liabilities on the date on
which they are originated. All other financial instruments
including regular-way purchases and sales of financial assets are
recognised on the trade date, which is the date on which the Group
becomes party to the contractual provisions of the instrument.
A financial asset or financial liability is measured initially
at fair value plus, for an item not at FVTPL, transaction costs
that are directly attributable to its acquisition or issue.
ii. Classification
Financial assets
On initial recognition, a financial asset is classified as
measured at amortised cost, FVOCI or FVTPL.
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
-- The asset is held within a business model whose objective is
to hold assets to collect contractual cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest (" SPPI").
A debt instrument is measured at FVOCI only if it meets both of
the following conditions and is not designated as FVTPL:
-- The asset is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling
financial assets; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are SPPI.
On initial recognition of an equity investment that is not held
for trading, the Group may irrevocably elect to present subsequent
changes in fair value in OCI. This election is made on an
investment-by-investment basis.
All other financial assets are classified as measured at
FVTPL.
In addition, on initial recognition, the Group may irrevocably
designate a financial asset that otherwise meets the requirements
to be measured at amortised cost or at FVOCI as at FVTPL if doing
so eliminates or significantly reduces an accounting mismatch that
would otherwise arise.
Business model assessment
The Group makes an assessment of the objective of a business
model in which an asset is held at a portfolio level because this
best reflects the way the business is managed and information
provided to management.
Assessment of whether contractual cash flows are solely payments
of principal and interest
For the purposes of this assessment, 'principal' is defined as
the fair value of the financial asset on initial recognition.
'Interest' is defined as consideration for the time value of money
and for the credit risk associated with the principal amount
outstanding during a particular period of time and for other basic
lending risks and costs (e.g. liquidity risk and administrative
costs), as well as profit margin.
In assessing whether the contractual cash flows are SPPI, the
Group considers the contractual terms of the instrument. This
includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this
condition.
Reclassifications
Financial assets are not reclassified subsequent to their
initial recognition, except in the period after the Group changes
its business model for managing financial assets.
Financial liabilities
The Group classifies its financial liabilities, other than
financial guarantees and loan commitments, as measured at amortised
cost.
iii. Derecognition
Financial assets
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire, or when
it transfers the rights to receive the contractual cash flows in a
transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the
Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the
financial asset.
On derecognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset derecognised) and the sum of (i) the
consideration received (including any new asset obtained less any
new liability assumed) and (ii) any cumulative gain or loss that
had been recognised in OCI is recognised in profit or loss.
Financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expire.
iv. Modifications of financial assets and financial
liabilities
Financial assets
If the terms of a financial asset are modified, then the Group
evaluates whether the cash flows of the modified asset are
substantially different.
If the cash flows are substantially different, the contractual
rights to cash flows from the original financial asset are deemed
to have expired. In this case, the original financial asset is
derecognised and a new financial asset is recognised at fair value
plus any eligible transaction costs.
If the cash flows are modified when the borrower is in financial
difficulties, then the objective of the modification is usually to
maximise recovery of the original contractual terms rather than to
originate a new asset with substantially different terms. If the
Group plans to modify a financial asset in a way that would result
in forgiveness of cash flows, then it first considers whether a
portion of the asset should be written off before the modification
takes place. This approach impacts the result of the quantitative
evaluation and means that the derecognition criteria are not
usually met in such cases.
If the modification of a financial asset measured at amortised
cost or FVOCI does not result in derecognition of the financial
asset, then the Group first recalculates the gross carrying amount
of the financial asset using the original effective interest rate
of the asset and recognises the resulting adjustment as a
modification gain or loss in profit or loss. Any costs or fees
incurred and fees received as part of the modification adjust the
gross carrying amount of the modified financial asset and are
amortised over the remaining term of the modified financial asset.
If such modification is carried out because of financial
difficulties of the borrower, then the gain or loss is presented
together with impairment losses. In other cases, it is presented as
interest income calculated using the effective interest rate
method.
Financial liabilities
The Group derecognises a financial liability when its terms are
modified and the cash flows of the modified liability are
substantially different. In this case, a new financial liability
based on the modified terms is recognised at fair value. The
difference between the carrying amount of the financial liability
derecognised and consideration paid is recognised in profit or
loss. Consideration paid includes non-financial assets transferred,
if any, and the assumption of liabilities, including the new
modified financial liability.
If the modification of a financial liability is not accounted
for as derecognition, then the amortised cost of the liability is
recalculated by discounting the modified cash flows at the original
effective interest rate and the resulting gain or losses recognised
in profit or loss. Any costs and fee incurred are recognised as an
adjustment of the carrying amount of the liability and amortised
over the remaining term of the modified financial liability by
re-computing the effective interest rate on the instrument.
v. Offsetting
Financial assets and financial liabilities are offset and the
net amount presented in the statement of financial position when,
and only when, the Group currently has a legally enforceable right
to set off the amounts and it intends either to settle them on a
net basis or to realise the asset and settle the liability
simultaneously.
Income and expenses are presented on a net basis only when
permitted under IFRS, or for gains and losses arising from a group
of similar transactions such as in the Group's trading
activity.
vi. Fair value measurement
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in
its absence, the most advantageous market to which the Group has
access at the date. The fair value of a liability reflects its
non-performance risk.
The Group recognises transfers between levels of the fair value
hierarchy as of the end of the reporting period during which the
change has occurred.
The Group measures fair values using the following fair value
hierarchy, which reflects the significance of the inputs used in
making the measurements:
-- Level 1: inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes
instruments valued using: quoted market prices in active markets
for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data; and
-- Level 3: inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments for which significant unobservable adjustments
or assumptions are required to reflect differences between the
instruments.
The fair values of financial assets and financial liabilities
that are traded in active markets are based on quoted market prices
or dealer price quotations. For all other financial instruments,
the Group determines fair values using other valuation
techniques.
For financial instruments that trade infrequently and have
little price transparency, fair value is less objective, and
requires varying degrees of judgement depending on liquidity,
concentration, uncertainty of market factors, pricing assumptions
and other risks affecting the specific instrument.
vii. Impairment
A financial instrument that is not credit-impaired on initial
recognition is classified in 'Stage 1' and has its credit risk
continuously monitored by the Group.
If a SICR since initial recognition is identified, the financial
instrument is moved to 'Stage 2' but is not yet deemed to be credit
impaired.
-- An SICR is always deemed to occur when the borrower is 30
days past due on its contractual payments. If the Group becomes
aware ahead of this time of non-compliance or financial
difficulties of the borrower, such as loss of employment, avoiding
contact with the Group then an SICR has also deemed to occur;
and
-- A receivable is always deemed to be in default and
credit-impaired when the borrower is 90 days past due on its
contractual payments or earlier if the Group becomes aware of
severe financial difficulties such as bankruptcy, individual
voluntary arrangement, abscond or disappearance, fraudulent
activity and other similar events.
If the financial instrument is credit-impaired, the financial
instrument is then moved to 'Stage 3'. Financial instruments in
Stage 3 have their ECL measured based on expected credit losses on
an undiscounted lifetime basis.
The Group measures loss allowances at an amount equal to
lifetime ECL, except for debt investment securities that are
determined to have low credit risk at the reporting date for which
they are measured as a 12-month ECL. Loss allowances for lease
receivables are always measured at an amount equal to lifetime
ECL.
12-month ECL are the portion of ECL that result from default
events on a financial instrument that are possible within the 12
months after the reporting date. Financial instruments for which a
12-month ECL is recognised are referred to as 'Stage 1 financial
instruments'.
Lifetime ECL are the ECL that result from all possible default
events over the expected life of a financial instrument. Financial
instruments for which a lifetime ECL is recognised but which are
not credit-impaired are referred to as 'Stage 2 financial
instruments'.
Measurement of ECL
After a detailed review, the Group devised and implemented an
impairment methodology in light of the IFRS 9 requirements outlined
above noting the following:
-- The ECL was derived by reviewing the Group's loss rate and
loss given default over the past 9 years by product and
geographical segment;
-- The Group has assumed that the future economic conditions
will broadly mirror the current environment and therefore the
forecasted loss levels in the next 3 years will match the Group's
experience in recent years;
-- For portfolios where the Group has never had a default in its
history or has robust credit enhancements such as credit insurance
or default indemnities for the entire portfolio, then no IFRS 9
provision is made. At 2022 year-end, 28.8% had such credit
enhancements (2021: 36.6%); and
-- If the Group holds objective evidence through specifically
assessing a credit-impaired receivable and believes it will go on
to completely recover the debt due to the collateral held and
cooperation with the borrower, then no IFRS 9 provision is
made.
ECL are probability-weighted estimates of credit losses. They
are measured as follows:
-- Financial assets that are not credit-impaired at the
reporting date: as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in
accordance with the contract and the cash flows that the Group
expects to receive);
-- Financial assets that are credit-impaired at the reporting
date: as the difference between the gross carrying amount and the
present value of estimated future cash flows; and
-- Undrawn loan commitments: as the present value of the
difference between the contractual cash flows that are due to the
Group if the commitment is drawn down and the cash flows that the
Group expects to receive.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial
assets carried at amortised cost and debt financial assets carried
at FVOCI, and finance lease receivables are credit-impaired
(referred to as 'Stage 3 financial assets'). A financial asset is
credit-impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset
have occurred.
Evidence that a financial asset is credit-impaired includes the
following observable date:
-- Significant financial difficulty of the borrower or
issuer;
-- A breach of contract such as a default or past due event;
-- The restructuring of a loan or advance by the Group on terms
that the Group would not consider otherwise;
-- It is becoming probable that the borrower will enter
bankruptcy or another type of financial reorganisation; or
-- The disappearance of an active market for a security because
of financial difficulties.
A loan that has been renegotiated due to a deterioration in the
borrower's condition is usually considered to be credit-impaired
unless there is evidence that the risk of not receiving contractual
cash flows has reduced significantly and there are no other
indicators of impairment. In addition, a retail loan that is
overdue for 90 days or more is considered credit-impaired even when
the regulatory definition of default is different.
In assessing of whether an investment in sovereign debt is
credit impaired, the Group considers the following factors:
-- The market's assessment of creditworthiness as reflected in
the bond yields;
-- The rating agencies' assessments of creditworthiness;
-- The country's ability to access the capital markets for new
debt issuance;
-- The probability of debt being restructured, resulting in
holders suffering losses through voluntary or mandatory debt
forgiveness; and
-- The international support mechanisms in place to provide the
necessary support as 'lender of last resort' to that country, as
well as the intention, reflected in public statements, of
governments and agencies to use those mechanisms. This includes an
assessment of the depth of those mechanisms and, irrespective of
the political intent, whether there is the capacity to fulfil the
required criteria.
Presentation of allowance for ECL in the statement of financial
position
Loss allowances for ECL are presented in the statement of
financial position as follows:
-- Financial assets measured at amortised cost: as a deduction
from the gross carrying amount of the assets;
-- Loan commitments: generally, as a provision; and
-- Debt instruments measured at FVOCI: no loss allowance is
recognised in the statement of financial position because the
carrying amount of these assets is their fair value. However, the
loss allowance is disclosed and is recognised in the fair value
reserve.
Write-off
Loans and debt securities are written off (either partially or
in full) when there is no reasonable expectation of recovering a
financial asset in its entirety or a portion thereof. This is
generally the case when the Group determines that the borrower does
not have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write-off. This
assessment is carried out at the individual asset level.
Recoveries of amounts previously written off are included in
'impairment losses on financial instruments' in the statement of
profit or loss and OCI.
Financial assets that are written off could still be subject to
enforcement activities in order to comply with the Group's
procedures for recovery of amounts due.
H. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash
equivalents comprise cash and deposit balances with an original
maturity date of three months or less.
I. Loans and advances
Loans and advances' captions in the statement of financial
position include:
-- Loans and advances measured at amortised cost (see note 44
(G)). They are initially measured at fair value plus incremental
direct transaction costs, and subsequently at their amortised cost
using the effective interest method; and
-- Finance lease receivables (see note 44 (E)).
J. Property, plant and equipment
Items of property, plant and equipment are stated at historical
cost less accumulated depreciation (see below). Historical cost
includes expenditure that is directly attributable to the
acquisition of the items. Buildings are carried at a revalued
amount, being fair value at the date of revaluation less subsequent
depreciation and impairment and are revalued annually.
If an asset's carrying amount is increased as a result of a
revaluation, the increase shall be recognised in other
comprehensive income and accumulated in equity under the heading of
revaluation surplus. However, the increase shall be recognised in
profit or loss to the extent that it reverses a revaluation
decrease of the same asset previously recognised in profit or
loss.
If an asset's carrying amount is decreased as a result of a
revaluation, the decrease shall be recognised in profit or loss.
However, the decrease shall be recognised in other comprehensive
income to the extent of any credit balance existing in the
revaluation surplus in respect of that asset. The decrease
recognised in other comprehensive income reduces the amount
accumulated in equity under the heading of revaluation surplus.
The assets' residual values and useful economic lives are
reviewed, and adjusted if appropriate, at each reporting date. An
asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
When parts of an item of property, plant and equipment have
different useful lives, those components are accounted for as
separate items of property, plant and equipment.
Depreciation and amortisation
Assets are depreciated or amortised on a straight-line basis, so
as to write off the book value over their estimated useful lives.
The estimated useful lives of property, plant and equipment and
intangibles are as follows:
Property, plant and equipment
Leasehold improvements to expiration of the lease
IT equipment 4 - 5 years
Motor vehicles 2 - 5 years
Furniture and equipment 4 -10 years
Plant and machinery 5 - 20 years
K. Intangible assets and goodwill
i. Goodwill
Goodwill that arises on the acquisition of subsidiaries is
measured at cost less accumulated impairment losses.
ii. Software
Software acquired by the Group is measured at cost less
accumulated amortisation and any accumulated impairment losses.
Expenditure on internally developed software is recognised as an
asset when the Group is able to demonstrate: that the product is
technically feasible, its intention and ability to complete the
development and use the software in a manner that will generate
future economic benefits, and that it can reliably measure the
costs to complete the development. The capitalised costs of
internally developed software include all costs directly
attributable to developing the software and capitalised borrowing
costs, and are amortised over its useful life. Internally developed
software is stated at capitalised cost less accumulated
amortisation and any accumulated impairment losses.
Software is amortised on a straight-line basis in profit or loss
over its estimated useful life, from the date on which it is
available for use. Amortisation methods, useful lives and residual
values are reviewed at each reporting date and adjusted if
appropriate.
iii. Other
Intangible assets that are acquired by an entity and having
finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
Intangible assets 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.
The useful lives of intangibles are as follows:
Customer contracts and lists to expiration of the agreement
Business intellectual property rights 4 years - indefinite
Website development costs indefinite
Software 5 years
L. Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets (other than deferred tax assets) to
determine whether there is any indication of impairment. If any
such indication exists, the asset's recoverable amount is
estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that is largely independent of the cash inflows of
other assets or Cash Generating Units ("CGUs"). Goodwill arising
from a business combination is allocated to CGUs or groups of CGUs
that are expected to benefit from the synergies of the
combination.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less cost to sell. Value in use is
based on the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount.
The Group's corporate assets do not generate separate cash
inflows and are used by more than one CGU. Corporate assets are
allocated to CGUs on a reasonable and consistent basis and tested
for impairment as part of the testing of the CGUs to which the
corporate assets are located.
Impairment losses are recognised in profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying amounts of
the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
M. Deposits, debt securities issued and subordinated
liabilities
Deposits, debt securities issued and subordinated liabilities
are the Group's sources of debt funding.
The Group classifies capital instruments as financial
liabilities or equity instruments in accordance with the substance
of the contractual terms of the instruments.
Deposits, debt securities issued and subordinated liabilities
are initially measured at fair value minus incremental direct
transaction costs, and subsequently measured at their amortised
cost using the effective interest method.
N. Employee benefits
i. Long-term employee benefits
Pension obligations
The Group has pension obligations arising from both defined
benefit and defined contribution pension plans.
A defined contribution pension plan is one under which the Group
pays fixed contributions into a separate fund and has no legal or
constructive obligations to pay further contributions. Defined
benefit pension plans define an amount of pension benefit that an
employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and remuneration.
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 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.
ii. Share-based compensation
The Group maintains a share option programme which allows
certain Group employees to acquire shares of the Group. The change
in the fair value of options granted is recognised as an employee
expense with a corresponding change in equity. The fair value of
the options is measured at grant date and spread over the period
during which the employees become unconditionally entitled to the
options.
At each reporting date, the Group revises its estimate of the
number of options that are expected to vest and recognises the
impact of the revision to original estimates, if any, in the income
statement, with a corresponding adjustment to equity.
The fair value is estimated using a proprietary binomial
probability model. The proceeds received, net of any directly
attributable transaction costs, are credited to share capital
(nominal value) and share premium when the options are
exercised.
O. Share capital and reserves
Share issue costs
Incremental costs that are directly attributable to the issue of
an equity instrument are deducted from the initial measurement of
the equity instruments.
P. Earnings per share ("EPS")
The Group presents basic and diluted EPS data for its Ordinary
Shares. Basic EPS is calculated by dividing the profit or loss that
is attributable to ordinary Shareholders of MFG by the
weighted-average number of Ordinary Shares outstanding during the
period. Diluted EPS is determined by adjusting profit or loss that
is attributable to Ordinary Shareholders and the weighted-average
number of Ordinary Shares outstanding for the effects of all
dilutive potential Ordinary Shares, which comprise share options
granted to employees.
Q. Segmental reporting
A segment is a distinguishable component of the Group that is
engaged either in providing products or services (business
segment), or in providing products or services within a particular
economic environment (geographical segment), which is subject to
risks and rewards that are different from those of other segments.
The Group's primary format for segmental reporting is based on
business segments.
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses relating to transactions
with any of the Group's other components, whose operating results
are regularly reviewed by the CEO who is the chief operating
decision maker ("CODM") to make decisions about resources to be
allocated to the segment and assess its performance, and for which
discrete financial information is available.
Segment results reported to the CEO include items that are
directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
Appendix - Glossary of terms
ALCO Assets and Liabilities Committee
ARCC Audit, Risk and Compliance Committee
BBSL Blue Star Business Solutions Limited
BL Burnbrae Limited
BLX The Business Lending Exchange Limited
Bank Conister Bank Limited
Bank's Board The Bank's Board of Directors
BOE Bank of England
BSL Beer Swaps Limited
CEO Chief Executive Officer
CET1 Common Equity Tier 1
CFL Conister Finance & Leasing Ltd
CGU Cash Generating Unit
CODM Chief Operating Decision Maker
Company Manx Financial Group PLC
EAL Edgewater Associates Limited
ECF ECF Asset finance PLC
ECL Expected Credit Loss
ESG Environmental, Social and Governance
EPS Earnings Per Share
FCA UK Financial Conduct Authority
Fraud risks Risk of Material Misstatement Due to Fraud
FSA Isle of Man Financial Services Authority
FVOCI Fair Value Through Other Comprehensive Income
FVTPL Fair Value Through Profit or Loss
Group Comprise the Company and its subsidiaries
HP Hire Purchase
IAS International Accounting Standard
ICAAP Internal Capital Adequacy Assessment Process
ICG Individual Capital Guidance
IFA Independent Financial Advisors
IFRIC International Financial Reporting Interpretations
Committee
IFRS International Financial Reporting Standards
Interim financial Condensed consolidated interim financial statements
statements
IOM Isle of Man
ISA International Standards of Auditing
JM Jim Mellon
LSE London Stock Exchange
MBL MBL Financial Limited
MCL Manx Collections Limited
MFG Manx Financial Group PLC
MFX Manx FX Limited
MFX.L Manx Financial Group PLC ticker symbol on the LSE
MVL Manx Ventures Limited (previously Bradburn Limited)
NEC Notice of Error Correction
NOMCO Nomination Committee
NRFL Ninkasi Rentals & Finance Limited (previously Beer
Swaps Limited)
OCI Other Comprehensive Income
PAL Payment Assist Limited
PIML Payitmonthly Limited
QCA Quoted Companies Alliance
REMCO Remuneration Committee
RFG Rivers Finance Group Plc
RMF Risk Management Framework
SBA Share Buyback Agreement
Scheme The Conister Trust Pension and Life Assurance Scheme
SICR Significant Increase in Credit Risk
SPPI Solely Payments of Principal and Interest
SR Southern Rock Insurance Company Limited
Subsidiaries MFG's subsidiaries being Bank, BBSL, BLX, CFL, ECF,
EAL, MFX, MVL, NRFL
TCF Treating Customers Fairly
Three Spires Three Spires Insurance Services Limited
UK United Kingdom
UP Unrelated parties
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