ISLAMIC BANK OF BRITAIN PLC (the “Company”) Interim Results Islamic Bank of Britain PLC (the "Company") is pleased to announce its interim results for the 6 month period ended 30 June 2009. The interim report will be available from the Company's website, www.islamic-bank.com For further information please contact: Gerry Deegan, Islamic Bank of Britain Plc (tel: 0121 452 7300) Gerald Beaney, Grant Thornton UK LLP (Nominated Adviser) (tel: 020 7383 5100)
Chairman’s statement I am pleased to present the Interim Report of Islamic Bank of Britain PLC for the six months ended 30 June 2009. During the period, growth in finance assets and customer deposits has been achieved through continued product innovation. However the unprecedented market conditions have significantly impacted the income of the Bank. Highlights • • •
Customer numbers increased by 3% to over 48,000 Deposits increased by 9% to £172m Customer financing increased by 24% to £29m
Current environment and trading performance The challenging market conditions experienced in 2008 have continued this year. The Bank’s main source of revenue is the profits earned on deposits. Net margins on these deposits continued to fall during the period due to the decline in yields in the interbank market. This has significantly reduced the income of the Bank. The loss for the period increased to £4.6m (6 month period to 30 June 2008: £3.1m) as net income from financing transactions fell by £1.6m compared to the same period last year. Improvements in economic conditions and the Islamic money markets are not expected until 2010, and therefore the results of the Bank for the full year are likely to be similarly affected. Products Despite the difficult conditions, the Bank made progress against its key business objectives of achieving growth in finance assets funded by longer term customer deposits. The Bank’s Home Purchase Plan (HPP) product, launched in September 2008, continues to be the key focus for achieving asset growth, with HPP assets increasing to £14.4m (31 December 2008: £7.0m). The HPP range was expanded during the period with a fixed rental product and a product adapted for the Scottish market. The Bank now has the widest Sharia-compliant Home Finance range in the UK. The growth in the HPP product has been achieved in accordance with prudent credit policies, with currently no arrears within the secured finance portfolios. The realignment of the customer deposit base in favour of longer term products has continued with the launch of an extended range of term deposits. This follows the launch of the Notice Savings account in December 2008, which has performed above expectation during the period. The Bank continues to use retail deposits to fund all customer finance assets and has no reliance on wholesale funding. In the first half of the year, the Bank embarked on a number of initiatives that are expected to contribute to future profitability and diversify income sources, including the distribution of investment products and services. These initiatives continue to be progressed, however significant contributions are not expected until 2010. Capital New capital of £7.5m was raised via a placing of new shares in January 2009. While the Bank continues to have sufficient capital for its current requirements, the Board is in discussions with its advisors and interested parties regarding the raising of additional capital to support planned future growth. If additional capital is not raised, the Bank may need to scale back its growth plans and operations during 2010 in order to ensure that regulatory capital requirements continue to be achieved. I would like to thank Islamic Bank of Britain’s customers, shareholders, and staff for their continued support and commitment to the Bank.
Mohsen Moustafa Chairman
23 September 2009
Condensed statement of comprehensive income for the 6 month period ended 30 June 2009 Note
6 month period ended 30 Jun 2009 £
6 month period ended 30 Jun 2008 £
Year ended 31 Dec 2008 £
1,692,414 (880,541)
4,284,281 (1,859,492)
8,307,297 (3,811,516)
Net income from Islamic financing transactions
811,873
2,424,789
4,495,781
Fee and commission income Fee and commission expense
233,243 (37,974)
250,843 (51,345)
527,212 (94,783)
Net fee and commission income
195,269
199,498
432,429
1,007,142
2,624,287
4,928,210
(200,637) (2,601,307) (2,202,997) (370,228) (254,602)
(180,277) (2,385,682) (2,244,490) (399,805) (473,869)
(325,971) (4,831,978) (4,017,168) (775,007) (888,786)
Total operating expenses
(5,629,771)
(5,684,123)
(10,838,910)
Loss before income tax
(4,622,629)
(3,059,836)
(5,910,700)
-
-
-
Loss for the period
(4,622,629)
(3,059,836)
(5,910,700)
Total comprehensive income for the period
(4,622,629)
(3,059,836)
(5,910,700)
Loss attributable to Owners of the Company
(4,622,629)
(3,059,836)
(5,910,700)
Total comprehensive income attributable to Owners of the Company
(4,622,629)
(3,059,836)
(5,910,700)
(0.87)
(0.73)
(1.41)
Income receivable from Islamic financing transactions Returns payable to customers and banks
Operating income Net impairment loss on financial assets Personnel expenses General and administrative expenses Depreciation Amortisation
Income tax expense
6
4
Loss per ordinary share Basic and diluted (pence)
All income and expenditure relates to continuing operations.
3
Condensed statement of financial position At 30 June 2009 Note
30 Jun 2009 £
30 Jun 2008 £
31 Dec 2008 £
460,974
596,072
546,953
162,779,424 6,062,688 14,412,247 8,774,552 2,961,012 426,405 1,061,613
146,747,433 9,262,838 8,523,880 3,361,790 912,938 2,310,996
151,687,736 7,878,292 6,980,840 8,597,893 3,265,745 578,713 1,263,128
196,938,915
171,715,947
180,799,300
975,534 171,355,388 2,939,692
6,241,907 140,744,059 2,930,263
5,094,119 153,280,754 3,480,891
175,270,614
149,916,229
161,855,764
5,464,700 54,806,652 (38,646,801) 43,750
4,190,000 48,747,255 (31,188,401) 50,864
4,190,000 48,747,255 (34,046,165) 52,446
Total equity
21,668,301
21,799,718
18,943,536
Total equity and liabilities
196,938,915
171,715,947
180,799,300
Assets Cash Commodity Murabaha and Wakala receivables and other advances due from banks Consumer finance accounts and other advances to customers Net investment in home purchase plans Net investment in commercial property finance Property and equipment Intangible assets Other assets
6
Total assets
Liabilities and equity Liabilities Deposits from banks Deposits from customers Other liabilities
7 8
Total liabilities Equity Called up share capital Share premium Retained deficit Profit stabilisation reserve
9
These financial statements were approved by the Board of Directors on 23 September 2009 and were signed on its behalf by:
Gerry Deegan Managing Director
Condensed statement of changes in equity for the 6 month period ended 30 June 2009 Note
£
Share premium account £
4,190,000
48,747,255
(28,137,072)
25,126
24,825,309
-
-
(3,059,836) (25,738) 34,245
25,738 -
(3,059,836) 34,245
Balance at 30 June 2008
4,190,000
48,747,255
(31,188,401)
50,864
21,799,718
Balance at 1 July 2008
4,190,000
48,747,255
(31,188,401)
50,864
21,799,718
-
-
(2,850,864) (1,582) (5,318)
1,582 -
(2,850,864) (5,318)
Balance at 31 December 2008
4,190,000
48,747,255
(34,046,165)
52,446
18,943,536
Balance at 1 January 2009
4,190,000
48,747,255
(34,046,165)
52,446
18,943,536
Total comprehensive income for the period Transfer to profit stabilisation reserve Credit in respect of share based payments charge Issue of ordinary share capital
1,274,700
6,059,397
(4,622,629) 8,696 13,297 -
(8,696) -
(4,622,629) 13,297 7,334,097
5,464,700
54,806,652
(38,646,801)
43,750
21,668,301
Balance at 1 January 2008 Total comprehensive income for the period Transfer to profit stabilisation reserve Credit in respect of share based payments charge
Total comprehensive income for the period Transfer to profit stabilisation reserve Charge in respect of share based payments
Balance at 30 June 2009
9
Share capital
Profit Profit and loss stabilisation account reserve £ £
Total
£
Condensed statement of cash flows for the 6 month period ended 30 June 2009 Note
6 month period ended 30 Jun 2009 £
6 month period ended 30 Jun 2008 £
Year ended 31 Dec 2008 £
(4,622,629)
(3,059,836)
(5,910,700)
370,228 254,602 200,637 13,297
399,805 473,869 180,277 34,245
775,007 888,786 325,971 28,927
(10,036,319)
(7,682,833)
(12,784,885)
1,614,967 (176,659) (7,431,407) 201,515 (4,118,585) 18,074,634 (541,199)
220,180 (2,431,998) (113,172) 3,743,603 6,103,447 (42,339)
1,459,032 (2,506,011) (6,980,840) 934,696 2,601,729 18,634,228 508,289
(6,196,918)
(2,174,752)
(2,025,771)
Cash flows from investing activities Purchase of property and equipment Purchase of intangible assets
(65,495) (102,294)
(318,240) (124,576)
(597,397) (205,268)
Net cash used in investing activities
(167,789)
(442,816)
(802,665)
7,334,097
-
-
7,334,097
-
-
969,390
(2,617,568)
(2,828,436)
(3,012) 2,614,484
5,664,506
(221,586) 5,664,506
3,580,862
3,046,938
2,614,484
Cash flows from operating activities Loss for the period Adjustments for: Depreciation Amortisation Net impairment loss on financial assets Share based payment charge Change in Commodity Murabaha and Wakala receivables Change in consumer finance accounts and other advances to customers Change in net investment in commercial property finance Change in net investment in home purchase plans Change in other assets Change in deposits from banks Change in deposits from customers Change in other liabilities Net cash used in operating activities
Cash flows financing activities Issue of ordinary share capital
9
Net cash generated from financing activities
Net change in cash and cash equivalents Foreign exchange gains Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
5
Notes to the condensed interim financial statements 1
Accounting policies and basis of preparation
Islamic Bank of Britain PLC (‘the Company’) is a company incorporated in the UK. The annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the EU. The interim financial information included in this half-yearly report has been prepared in accordance with the disclosure requirements of AIM Rules and the recognition and measurement requirements of IFRSs as adopted by the EU excluding IAS34 ‘Interim Financial Reporting’, applying the accounting policies and presentation that were applied in the preparation of the Company’s published financial statements for the year ended 31 December 2008. The directors anticipate that these accounting policies will be used in the preparation of the Company’s annual financial statements for the year ended 31 December 2009. The interim financial statements are condensed and do not include all of the information required for full annual financial statements. The information in this interim report is unaudited. Going Concern The interim financial statements of the Company have been prepared on the going concern basis. In making the going concern assessment, the directors have prepared detailed financial forecasts of the Company, including its funding and capital position, for the twelve months from the date of approval of these interim financial statements. As noted in the Chairman’s Statement, the Board is in discussions with its advisors and interested parties regarding the raising of additional capital to support planned future growth. The directors have considered the effect upon the Company of more pessimistic scenarios of its business, in particular the worsening of the economic environment and if new capital is not raised as planned. The scenarios show that if new capital is not raised, the directors may need to scale back the Bank’s growth plans and operations during 2010 in order to ensure that regulatory capital requirements continue to be achieved. The directors are prepared to implement appropriate management actions to address any potential regulatory capital deficit as required, including a cost reduction exercise. Based on these forecasts, the directors are confident that the Company has adequate resources to continue in operational existence and will continue to comply with all relevant regulatory requirements for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements.
2
Segmental Reporting
The company has one class of business and all other services provided are ancillary to this. All business is conducted from the United Kingdom.
3
Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated by dividing the loss for the financial period attributable to equity shareholders by the weighted average number of ordinary shares in issue in the 6 month period ended 30 June 2009 of 530,272,155 (6 month period ended 30 June 2008: 419,000,000, Year ended 31 December 2008: 419,000,000). The Company has established an HMRC approved Company Share Option Plan (‘CSOP’) under which options to subscribe for the Company’s ordinary shares of 1p each have been awarded to certain employees. At 30 June 2009 1,481,037 options remain outstanding (30 June 2008: 3,200,469, 31 December 2008: 1,600,230). Diluted loss per share is the same as basic loss per share since the outstanding share options have not been taken into account due to their anti-dilutive effect. This arises since the Company is currently loss making.
4
Income tax expense
There were no taxable profits or recoverable losses for the 6 month period ended 30 June 2009 (6 month period ended 30 June 2008: £nil, Year ended 31 December 2008: £nil) and accordingly the Company has not provided for a tax charge or a tax debtor.
As at 30 June 2009, the Company had potential deferred tax assets in respect of tax losses carried forward of £8,734,271 (30 June 2008: £6,855,212, 31 December 2008: £7,555,394) and in respect of timing differences on capital allowances of £1,518,551 (30 June 2008: £1,251,716, 31 December 2008: £1,437,613). The corporation tax rate used to calculate potential deferred tax assets was 28%. In respect of the recognition of deferred tax assets, for the purposes of applying the requirements of IAS 12 (‘Income Taxes’), it has been considered that the Company is not currently at a sufficiently advanced stage in its development to confidently assert future offsetting tax liabilities. Capital allowances to be claimed are being finalised and therefore the level of the potential asset shown above may change. 5
Cash and cash equivalents 30 Jun 2009 £
30 Jun 2008 £
31 Dec 2008 £
Cash Other advances to banks
460,974 3,119,888
596,072 2,450,866
546,953 2,067,531
Total cash and cash equivalents
3,580,862
3,046,938
2,614,484
6 month period ended 30 Jun 2009 £
6 month period ended 30 Jun 2008 £
Year ended 31 Dec 2008 £
145,707 (105,734)
194,309 50,373 (112,825)
194,309 64,223 (112,825)
39,973
131,857
145,707
939,908 200,637 (476,046)
818,708 129,904 (86,166)
818,708 261,748 (140,548)
664,499
862,446
939,908
1,085,615 200,637 (581,780)
1,013,017 180,277 (198,991)
1,013,017 325,971 (253,373)
704,472
994,303
1,085,615
6
Impairment allowance
Specific allowances for impairment Balance at beginning of period Charge for the period Amounts written off during the period Balance at end of period Collective allowances for impairment Balance at beginning of period Charge for the period Amounts written off during the period Balance at end of period Total allowances for impairment Balance at beginning of period Charge for the period Amounts written off during the period Balance at end of period
This impairment allowance relates to consumer finance accounts and other advances to customers.
7
Deposits from banks 30 Jun 2009 £
30 Jun 2008 £
31 Dec 2008 £
Repayable on demand 3 months or less but not repayable on demand 1 year or less but over 3 months
319,637 655,897 -
6,175 6,000,000 235,732
94,119 5,000,000 -
Total deposits from banks
975,534
6,241,907
5,094,119
Comprising: Non profit sharing Profit sharing/paying accounts
319,637 655,897
6,000 6,235,907
94,119 5,000,000
Total deposits from banks
975,534
6,241,907
5,094,119
30 Jun 2009 £
30 Jun 2008 £
31 Dec 2008 £
Repayable on demand 3 months or less but not repayable on demand 1 year or less but over 3 months
102,867,109 47,651,745 20,836,534
87,885,144 43,097,222 9,761,693
94,232,981 45,392,618 13,655,155
Total deposits from customers
171,355,388
140,744,059
153,280,754
Comprising: Non profit sharing Profit sharing/paying accounts
32,413,000 138,942,388
26,237,158 114,506,901
24,755,496 128,525,258
Total deposits from customers
171,355,388
140,744,059
153,280,754
30 Jun 2009 £
30 Jun 2008 £
31 Dec 2008 £
Authorised: Equity: 725,00,000 (30 June 2008: 500,000,000, 31 December 2008 725,000,000) ordinary shares of £0.01 each
7,250,000
5,000,000
7,250,000
Allotted, called up and fully paid: Issued ordinary share capital
5,464,700
4,190,000
4,190,000
8
9
Deposits from customers
Called up share capital
On 19 December 2008, an ordinary resolution was passed at an extraordinary general meeting increasing the authorised share capital of the Company from £5,000,000 to £7,250,000 by the creation of an additional 225,000,000 new Ordinary Shares. On 23 January 2009, an additional 127,470,000 shares were allotted for consideration of £7,488,863 before expenses. Expenses of £154,766 were incurred in the placing resulting in an increase to equity of £7,334,097.
10
Related party disclosures
At 30 June 2009, directors of the Company and their immediate relatives controlled 0.03% of the voting shares of the Company (30 June 2008: 0.04%, 31 December 2008: 0.04%).
Transactions with key management personnel Key management of the Company are the Board of Directors and Management Committee members. The compensation of key management personnel, including the directors, is as follows: 6 month period ended 30 Jun 2009 £
6 month period ended 30 Jun 2008 £
Year ended 31 Dec 2008 £
Key management emoluments including social security costs Company contributions to pension plans
735,161 27,722
788,216 21,950
1,376,291 49,251
Total
762,883
810,166
1,425,542
Deposit balances, operated under standard customer terms and conditions, held by key management personnel, including directors, totalled £399,571 as at 30 June 2009 (30 June 2008: £162,379, 31 December 2008: £242,923). The highest balance during the 6 month period ended 30 June 2009 was £458,601 (6 month period ended 30 June 2008: £279,043, Year ended 31 December 2008: £322,988). Total returns paid on these accounts for the 6 month period ended 30 June 2009 totalled £1,221 (6 month period ended 30 June 2008: £1,664, Year ended 31 December 2008: £2,895). Outstanding consumer finance and home purchase plan account balances relating to key management personnel, including directors, totalled £225,195 as at 30 June 2009 (30 June 2008: £63,638, 31 December 2008: £54,302). Returns recognised and rent received on these accounts for the 6 month period ended 30 June 2009 totalled £2,816 (6 month period ended 30 June 2008: £1,941, Year ended 31 December 2008: £3,553). All consumer finance and home purchase plan facilities taken by key management personnel and directors were offered in line with standard customer terms and conditions.
11
Interim Report and statutory accounts
The comparative figures for the financial year ended 31 December 2008 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. - END -
