Close Brothers Group PLC Representation of key ratios (6744J)

TIDMCBG

RNS Number : 6744J

Close Brothers Group PLC

13 September 2016

Re-presentation of key ratios

Following a review of our financial reporting, we have implemented minor changes to the calculation of key metrics in the Banking division to better represent the contribution of operating lease assets and the role of Treasury. These changes will take effect in the group's forthcoming preliminary results for the 2016 financial year on 27 September 2016, and the 2015 comparatives will be re-presented accordingly. This announcement sets out the changes and provides re-presented historical figures to aid comparability at the time of the preliminary results.

These adjustments do not reflect any changes in the underlying business and will have no effect on adjusted operating profit, operating profit before tax, earnings per share, balance sheet or regulatory capital measures.

Overview

The definition of our net interest margin has been adjusted to take into account operating lease depreciation and operating lease assets on the balance sheet. In addition, all Treasury income will be included in the net interest margin, to reflect Treasury's role solely as a cost centre to provide funding for our lending businesses. In aggregate, these changes will result in a reduction in the 2015 net interest margin to 8.6% (as reported: 8.8%). This is offset by a reduction in the Banking expense/income ratio to 48% (as reported: 50%), with no impact on adjusted operating profit.

The calculation of the bad debt ratio and return on net loan book have also been adjusted to include operating lease assets. The amendment does not result in a material change in either of these ratios.

Depreciation of operating lease assets will now be reported as a cost of sales and included in operating income in the group's consolidated income statement, and the 2015 financial statements will be re-presented to reflect this change.

The following page sets out the changes to previously reported figures and key metrics for both the group and the Banking division for the 2015 financial year and 2016 half year.

Enquiries

 
                      Close Brothers Group 
 Sophie Gillingham     plc                     020 7655 3844 
                      Close Brothers Group 
 Eva Hatfield          plc                     020 7655 3350 
                       Close Brothers Group 
  Lois Hutchings        plc                     020 7655 3468 
 Andy Donald          Maitland                 020 7379 5151 
 

About Close Brothers

Close Brothers is a leading UK merchant banking group providing lending, deposit taking, wealth management services and securities trading. We employ over 3,000 people, principally in the UK. Close Brothers Group plc is listed on the London Stock Exchange and is a member of the FTSE 250.

Key performance indicators - Re-presented

CLOSE BROTHERS GROUP

 
                                 As reported           Re-presented 
                                 GBP million   Notes    GBP million 
-----------------------------  -------------  ------  ------------- 
 
 H1 2016 
 Operating income                      341.0     (1)          331.6 
 Adjusted operating expenses         (213.1)     (1)        (203.7) 
 Impairment losses on 
  loans and advances                  (16.7)                 (16.7) 
 Adjusted operating profit             111.2                  111.2 
-----------------------------  -------------  ------  ------------- 
 
 Operating margin                        33%                    34% 
 Expense/income ratio                    62%     (1)            61% 
 
 
 
 FY 2015 
 Operating income                 689.5   (1)     672.8 
 Adjusted operating expenses    (422.7)   (1)   (406.0) 
 Impairment losses on 
  loans and advances             (41.9)          (41.9) 
-----------------------------  --------  ----  -------- 
 Adjusted operating profit        224.9           224.9 
-----------------------------  --------  ----  -------- 
 
 Operating margin                   33%             33% 
 Expense/income ratio               61%   (1)       60% 
-----------------------------  --------  ----  -------- 
 

BANKING DIVISION

 
                                 As reported               Re-presented 
                                 GBP million       Notes    GBP million 
 -------------------------------------------  ----------  ------------- 
 
 H1 2016 
 Operating income                      258.1         (1)          248.7 
 Adjusted operating expenses         (133.0)         (1)        (123.6) 
 Impairment losses on loans 
  and advances                        (16.7)                     (16.7) 
 Adjusted operating profit             108.4                      108.4 
----------------------------------  --------  ----------  ------------- 
 
 Net interest margin                    8.5%   (1)(2)(3)           8.3% 
 Expense/income ratio                    52%         (1)            50% 
 Bad debt ratio                         0.6%         (2)           0.6% 
 Return on net loan book                3.7%         (2)           3.6% 
 
 Average loan book and operating 
 lease assets                                        (2)        5,986.8 
----------------------------------  --------  ----------  ------------- 
 
 FY 2015 
 Operating income                      498.6         (1)          481.9 
 Adjusted operating expenses         (248.0)         (1)        (231.3) 
 Impairment losses on loans 
  and advances                        (41.9)                     (41.9) 
 Adjusted operating profit             208.7                      208.7 
----------------------------------  --------  ----------  ------------- 
 
 Net interest margin                    8.8%   (1)(2)(3)           8.6% 
 Expense/income ratio                    50%         (1)            48% 
 Bad debt ratio                         0.8%         (2)           0.7% 
 Return on net loan book                3.8%         (2)           3.7% 
 
 Average loan book and operating 
  lease assets                                       (2)        5,629.2 
----------------------------------  --------  ----------  ------------- 
 
 
 
 Notes: 
 (1) Depreciation of operating lease assets, previously 
  included in operating expenses, now included in operating 
  income (H1 2016 GBP9.4 million; FY 2015 GBP16.7 million) 
 (2) Average operating lease assets (H1 2016 GBP133.5 
  million; FY 2015 GBP115.4 million) now included in 
  denominator for calculation of key ratios 
 (3) Treasury income (H1 2016 GBP10.4 million; FY 
  2015 GBP13.4 million) now fully allocated to lending 
  businesses and included in the net interest margin 
  calculation 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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September 13, 2016 05:04 ET (09:04 GMT)