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Share PLC (SHRE)

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Wednesday 08 August, 2018

Share PLC

Half year results

RNS Number : 1217X
Share PLC
08 August 2018
 

8 August 2018

AIM: SHRE.LN

Share plc

("Share" or "the Group" or "Company")

 

A leading independent retail stockbroker, which operates as The Share Centre

 

Half year results

for the six months to 30 June 2018

 

HIGHLIGHTS

 

Financial

Revenues up 15% to £10.2m (H1 2017: £8.9m), a record six month high

 

Costs rose by £1.6m (18%) year-on-year, primarily relating to regulatory changes (largely MiFID II and GDPR) and increased transactional costs. Mitigating actions are expected to benefit the second half

 

Underlying1 profit after tax of £50,000 (H1 2017: £255,000).  Statutory loss after tax of £279,000 (H1 2017: profit of £13,000).  Statutory loss per share of 0.2p (H1 2017: 0.0p)

 

Assets under administration up by 18% to a record £5.0bn (H1 2017: £4.3bn)

 

Cash held on behalf of customers up by 19% to £426m (30 June 2017: £359m)

 

Balance sheet remains strong, with shareholders' funds at £17.9m (H1 2017: £17.7m)

 

Operational

Continued investment in Digital Transformation Programme - innovations being delivered

 

Market-leading customer satisfaction levels - reflected in a number of awards, including 'Overall Client Satisfaction' award in 2018 Investment Trends UK Online Broking Report for the fifth consecutive year

 

New Business

Three agreements have been reached, including with the Special Administrator of Beaufort Securities Limited, to acquire a combined total of c.38,000 customer accounts and over £1.5bn of assets under administration

 

-

The Beaufort Securities agreement relates to c.15,000 customer accounts

 

Outlook

Benefits of these new acquisitions are expected to be felt from Q4 2018, and the Bank of England's recent increase in the base rate will assist in raising interest income

 

Group's trading performance remains encouraging and the flow of new business opportunities remains strong

 

The Board looks forward positively to the future and a return to sustainable and growing profitability

 

 

1 Excludes the impact of some items, in particular any large non-recurring items and share based payment charges as defined in note 6.

 

Richard Stone, Chief Executive, commented:

 

"These results show the positive progress the business continues to make. We continue to grow our own brand business as well as being seen as a 'good home' for customer books and a trusted partner for third parties. Strong revenue growth and assets now totalling £5bn for the first time are evidence of our progress and we are delighted that our service levels continue to be recognised by high profile industry awards. Today's announcement of three acquisitions covering c.38,000 customer accounts is particularly encouraging, and we are especially pleased to welcome, in a few weeks' time, customers of Beaufort Securities, who have endured a very difficult period since the collapse of that business in March. 

 

"We are also pleased with the advances we made with our Digital Transformation Programme, which underpins the Group's long-term growth opportunity. The first half of 2018 was challenging in terms of the changes required to accommodate new regulations, principally MiFID II and GDPR, and the impact on customer service, with MiFID II adding 'grit' to the customer journey and lengthening many offline interactions.

 

"These regulatory changes have been a contributory factor in an increase in the Group's cost base.  We have taken steps to mitigate this and we expect the benefit of these commercial changes (which took effect in July) to have a positive impact on the second half financials.

 

"Looking ahead, the future remains bright and we have plans to substantially increase the scale of the business, both organically and through acquisitions and partnerships. The Board continues to be encouraged by progress and looks forward positively to the rest of this financial year and beyond." 

 

 

Contacts:

 

Richard Stone - Chief Executive

01296 439 270/07919 220 599

Mike Birkett - Finance Director

01296 439 479

Sophie Eeles - PR Manager

01296 439 129

 

 

Cenkos Securities plc (Nominated Adviser)

Mark Connelly    

020 7397 8900

 

 

KTZ Communications (Financial Public Relations)

Katie Tzouliadis/Emma Pearson     

020 3178 6378 

 

Risk warning

 

This document is not intended to constitute an offer or agreement to buy or sell investments and does not constitute a personal recommendation. The investments and services referred to in this document may not be suitable for every investor and if in doubt independent financial advice should be sought. No liability is accepted whatsoever for any loss howsoever arising from any information in this document subject to the rules of the Financial Conduct Authority or the Financial Services and Markets Act 2000. Share prices, values and income can go down as well as up and investors may get back less than their initial investment. The Share Centre is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority under reference 146768.

 

About Share plc:

 

Share plc is the parent holding company of The Share Centre Limited and its shares are traded on AIM. The Share Centre started trading in 1991 and provides a range of account-based services to enable personal investors to share in the wealth of the stock market. Retail services include Share Accounts, ISAs, Junior ISAs and SIPPs, all with the benefit of investment advice, and dealing in a wide range of investments. Services available to corporate clients include Enterprise Investment Scheme administration and 'white-label' dealing platforms.

 

www.shareplc.com or www.share.com.

Chairman's statement

 

Introduction

 

Share has continued to make good progress in the first half of 2018, delivering a new website, navigating significant regulatory change and winning a number of high profile customer service awards. Revenues in the period reached a six month high of £10.2m, while assets under administration also set a new record at £5.0bn, and cash held on behalf of customers rose by 19% to £426m. We are also pleased to highlight the progress we are making with funds, with over £1.3bn of customer assets held in funds at the end of the period, up 30% since 30 June 2017. We believe that this reflects the attraction of our fixed-rate account administration fee against the widespread model of fees based on the value of customer holdings.

 

The Company's profitability in the first half was affected by significant additional costs in respect of regulatory change, mostly relating to Markets in Financial Instruments Directive ('MiFID II'), and amortisation costs for systems development. However, we have implemented a number of initiatives to mitigate increased regulatory costs, which are expected to benefit the second half of the year.

 

We are also delighted to announce today that we have signed Heads of Terms, or reached an agreement in principle, for three acquisitions, which together account for c.38,000 customer accounts and £1.5bn+ of assets under administration. One of these agreements, which was secured in a competitive tender process, is with the Special Administrator of Beaufort Securities Limited and Beaufort Asset Clearing Services Limited (together "Beaufort Securities"). These three acquisitions represent a significant increase in overall customer numbers, and we look forward to welcoming them all to The Share Centre as the acquisitions complete.


Strategic Delivery

 

Our growth strategy has three key elements, 'Putting Customers First', 'Focus on the Core Business' and 'Strategic Partnerships and Acquisitions' and we are pleased to report on continued delivery against all three.

 

In terms of the first two elements of our strategy, 2018 marks a third year of major investment as we continue with our Digital Transformation Programme. The Programme supports the Group's long term growth ambitions and will help us to innovate and enhance customer service levels and experience. We are already seeing the impact of that investment, which included the launch of our App and the introduction of funding and trading capability in October 2017. Trades through our App now account for around 6% of all our branded trades. In April, we completed a significant upgrade to our website, www.share.com, which has improved the customer experience of the site. Further improvements to functionality are scheduled to take effect later in the year. These include enhancements to enable customers to 'self-serve' more easily, which should also help to drive efficiencies in our customer-facing teams.

 

Innovations such as these, together with our emphasis on customer service, underpin our reputation in the marketplace and, over the first half, we were delighted to win a number of awards, including the Investment Trends Award for 'Overall Client Satisfaction' for the fifth consecutive year. We were also pleased to win 'Best Customer Service' award at The Telegraph and Boring Money's inaugural Consumer Investment Awards, and the UK Digital Experience Award for 'Digital Change and Transformation', a non-financial services industry specific award, recognising what we are delivering in the area of digital change. We were especially proud to win The Telegraph and Boring Money's award since we were not on the original pre-selected shortlist and it came about as a result of customers writing in to support us.

 

In independent research from Investment Trends we attained a Net Promoter Score ('NPS') of +29, higher than any of our execution-only peers.

 

The first half saw the successful delivery of regulatory changes, in particular those required by MiFID II, and the new General Data Protection Regulation ('GDPR'). Both sets of regulations necessitated adaptations to our engagement processes with new and existing customers, and led to a material increase in our service costs during the first half, to cater for the rise in customer contact, particularly offline. As a result of these additional costs, we took the decision in July to increase the offline tariff, the effects of which will benefit the financials in the second half of the year.

 

We continued to build our three Funds of Funds, which now have over £110m in funds under management.

 

Our acquisition and partnership strategy continues to make excellent progress. At any one time, we are typically engaged in reviewing a number of opportunities and we are pleased to report the expected acquisition of three separate books of business. Whilst we are currently unable to report details of two of the three agreements, as the customers have yet to be informed, we can report that the agreement with the Special Administrator of Beaufort Securities to acquire the customer base of that business represents c.15,000 customer accounts. These customers have suffered as a consequence of that business going into administration and have not been able to trade or access their accounts for many months. We are delighted to have been selected to provide these customers with a secure home and service for their investments and we look forward to building our relationship with them - and rebuilding their trust in our industry - over the months ahead. We expect the transfer of Beaufort Securities' customers to The Share Centre to commence in September and anticipate activity flowing from those accounts in the fourth quarter of this year.


Market share

 

In our 2017 Annual Report, we reported that we intended to benchmark the Group's performance and market share against a wider group of 15 retail stockbrokers2. This group is independently surveyed quarterly by Compeer, which gathers and reports data on the wealth management sector. As the latest data released by Compeer for the group was for Q1 2018 (which was included in our Trading Update on 1 June 2018), we will provide a further update when the Q2 2018 data is available.

 

2 The benchmarked revenue peer group comprises: AJ Bell; Alliance Trust Savings; Barclays Stockbrokers; Equiniti; Halifax Share Dealing; Hargreaves Lansdown; HSBC Stockbrokers; iDealing; Interactive Investor; ITI Capital; Jarvis Investment Management; Norwich & Peterborough Building Society; Saga Personal Finance; Selftrade and Thomas Grant & Co.

 

Financial results

 

Revenues

 

Total revenues in the first half increased by 15% to £10.2m (H1 2017: £8.9m), and further details of the three income streams is provided below. Excluding interest income, revenues rose by 9% to £9.3m (2017: £8.5m).

 

Dealing commission income

Income from commission increased by 14% year-on-year benefiting from a full half of our Computershare services, which launched in May 2017. Trading volumes increased by 3%.

 

In July 2018, we reviewed our tariff and introduced a minimum dealing commission of £20 (previously £7.50) for offline deals. There had not been an increase in our tariff since 2013 and this change, which will only impact a small percentage of our customers, reflects the significantly greater cost in maintaining a telephone dealing service than to deal online or through our App. Our basic commission for online deals remained unchanged.

 

Fee income

On a like-for-like basis, excluding income generated from our non-core Authorised Corporate Director ('ACD') role, which we exited in April 2017, fee income increased by 5%. The Share Centre's flat fee model continues to highlight the cost-effectiveness of our services for personal investors and we continue to see good rates of account opening.  Overall fee income, including ACD generated income, increased by 2% year-on-year.

 

Interest income

Cash held on behalf of customers increased by 19% to £426m (30 June 2017: £359m). Interest income increased by 157% but interest remains a much smaller proportion of the Group's revenues than in 2012. This rise was driven by both the base rate increase to 0.50% from 0.25% in November 2017 and the rule change in the FCA Client Assets Sourcebook, which now allows brokers to deposit a proportion of their client money balances for up to 95 days. Interest income should materially benefit from the recent 25 basis point increase in the base rate to 0.75%, the highest level in almost a decade, to the extent that our banking counterparties reflect this rise in their deposit rates.

 

 

 

 

Costs

 

Total costs were 18% higher year-on-year at £10.7m (H1 2017: £9.1m). This reflected three factors: firstly, with a full half of our Computershare services, we saw an increase in our transactional costs (£0.7m) and staff costs as much of the customer contact is transacted offline. As a result of regulatory changes, primarily MiFID II, we experienced an increase in the number of customer calls and the length of those calls. MiFID II changes included, for example, a new requirement for customers to provide their nationality and national client identifier (commonly their national insurance number) before dealing. Over the course of January 2018, we received 50% more calls than in December 2017, and, over the first half, we experienced a 32% increase in the volume of customer calls compared to the same period in 2017. As a result we took on additional headcount in our customer-facing functions and overall staff costs increased by £0.6m over the same period in 2017. We now have the team in place to support the expected levels of customer contact and to continue to provide our award-winning customer service.

 

Amortisation costs have increased by £209,000 to £293,000 due primarily to the investment in systems development for our technology programme, primarily our App and the upgrade to our website. Our external marketing spend in 2018, whilst weighted towards the first half, reduced slightly in comparison with 2017.

 

Profitability

 

The Group generated a loss before interest, tax, depreciation and amortisation ('EBITDA') in the period of £168,000 (H1 2017: loss of £49,000). The increase in transactional, staff and amortisation costs contributed to an operating loss of £520,000 in the first half (H1 2017: loss of £199,000). Underlying profit after tax was £50,000 (H1 2017: £255,000), however underlying earnings per share decreased to 0.0p (2017 H1: 0.2p). These underlying figures are stated after removing one-off items (as shown in note 6 below), which included non-cash share-based payment charges.

 

On a statutory basis, the loss before tax for the six months ended 30 June 2018 was £275,000 (H1 2017: profit of £75,000) and the statutory loss per share was 0.2p (H1 2017: 0.0p per share).

 

Cash flows and balance sheet

 

Cash and cash equivalents increased to £9.1m at 30 June 2018 (30 June 2017: £7.8m). During the period, a dividend of £575,000 was paid (H1 2017: £359,000). The Group's financial position is strengthened by its investments, primarily in the London Stock Exchange plc and Euroclear plc. These investments at Fair Value through Other Comprehensive Income ('FVOCI'; formerly "available-for-sale" investments) are valued at £6.8m on the balance sheet (H1 2017: £6.3m), and generated dividends of £225,000 (H1 2017: £207,000). Debtor and creditor balances mainly comprise open positions with the market and customers. Consequently, the growth in these balances reflects increased trading activity.

 

The Group's balance sheet remains strong, with shareholders' funds totalling £17.9m at the period end (2017: £17.7m) or 12.5p per ordinary share in issue (H1 2017: 12.3p). The Group continues to hold significant levels of capital over and above the levels required by the FCA. As at 30 June 2018, the Group had capital resources of £14.5m, 2.9 times the requirement (H1 2017: 2.7 times).

 

Outlook

 

We have plans in place to substantially increase the scale of the business, serving the millions of actual and potential personal investors in the UK. This includes growing both organically and through acquisitions and partnerships to access new and larger customer bases. Today's announcement of three further acquisitions reflects these aims, and we remain focused on the opportunities in front of us to grow the business, and expect to continue to demonstrate our ability to execute against them.

 

We very much look forward to welcoming all our new customers, especially those from Beaufort Securities who we expect to join The Share Centre from September. We remain passionately committed to the interests of personal investors and are currently campaigning for the re-linking of up to one million Child Trust Funds, which have become decoupled from the children to whom those accounts belong, a particularly timely initiative as the oldest recipients of Child Trust Funds reach 16 years of age this September.

 

We will continue to invest in our technology solutions and, in particular, our digital offerings to support the Group's ongoing growth. Looking ahead over the remainder of the year and into 2019, the Board remains encouraged, reaffirms its positive view of progress and looks forward positively to the future and a return to sustainable profitability.

 

 

 

Gavin Oldham OBE

Chairman

8 August 2018

 

Condensed consolidated income statement

 

For the six months ended 30 June 2018

 

 

 

Notes

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

 

 

£'000

£'000

£'000

 

 

 

 

 

Revenue

4

10,175

8,875

18,726

 

 

 

 

 

Administrative expenses

 

(10,695)

(9,074)

(19,519)

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(520)

(199)

(793)

 

 

 

 

 

Investment revenues

 

245

207

225

 

 

 

 

 

Other income

 

-

-

900

 

 

 

 

 

Other gains

11

-

67

51

 

 

 

 

 

 

 

 

 

 

(Loss)/profit before tax

(275)

75

383

 

 

 

 

 

Taxation 

5

(4)

(62)

(73)

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the period

 

(279)

13

310

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic earnings per share (pence) *

6

(0.2)

0.0

0.2

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share (pence) *

6

(0.2)

0.0

0.2

 

 

 

 

 

 

* The Directors consider that the underlying earnings per share as presented in note 6 represents a more consistent measure of the underlying performance of the business as this measure excludes one-off items of income or expense.

 

Notes 1 to 11 form part of these financial statements.

 

Condensed consolidated statement of comprehensive income

 

 

 

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017 (audited)

 

£'000

£'000

£'000

 

 

 

                             

(Loss)/profit for the period

(279)

13

310

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be classified subsequently to profit or loss:

 

 

 

 

 

 

 

Gains on revaluation of investments at FVOCI** taken to equity

407

247

335

 

 

 

 

 

Deferred tax on gains on revaluation of investments at FVOCI taken to equity

(73)

(44)

(61)

 

 

 

 

Exchange (losses)/gains on investments at FVOCI taken directly to equity

 

(68)

99

133

Deferred tax on exchange losses/(gains) on available-for-sale investments at FVOCI taken directly to equity

12

(19)

(25)

 

Deferred tax impact of change in tax rates


58

 

-

 

-

 

336

283

382

Items that have been re-classified to profit or loss:

 

 

 

 

 

 

 

Disposal of subsidiary: transfer of net assets

-

-

(26)

 

 

 

 

 

                                  -

-

(26)

 

 

 

 

Net gain recognised directly in equity

336

283

356

 

 

 

 

Total comprehensive income for the period

57

296

666

 

 

 

 

Attributable to equity shareholders

57

296

666

 

** Fair Value through Other Comprehensive Income ('FVOCI')

 

Notes 1 to 11 form part of these financial statements.

 

Condensed consolidated balance sheet

 

 

Notes

 

As at

30 June 2018

(unaudited)

As at

30 June 2017

(unaudited)

As at

31 December 2017

(audited)

 

 

£'000

£'000

£'000

Non-current assets

 

 

 

 

 

 

 

 

 

Intangible assets

 

3,394

2,602

3,197

Property, plant and equipment

 

281

245

214

Investments at FVOCI

 

6,770

6,309

6,432

Deferred tax assets

 

215

130

143

 

 

 

 

 

 

 

10,660

9,286

9,986

Current assets

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

33,513

32,384

24,673

Cash and cash equivalents

7

9,075

7,754

10,540

Current tax asset

 

147

52

87

 

 

42,735

40,190

35,300

Total assets

 

53,395

49,476

45,286

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Trade and other payables

 

(34,307)

(30,611)

(25,942)

 

 

(34,307)

(30,611)

(25,942)

 

 

 

 

 

Net current assets

 

8,428

9,579

9,358

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

(1,163)

(1,158)

(1,155)

Total liabilities

 

(35,470)

(31,769)

(27,097)

 

 

 

 

 

 

Net assets

 


17,925

 

17,707


18,189

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Share capital

 

718

718

718

Capital redemption reserve

 

104

104

104

Share premium account

 

1,064

1,064

1,064

Employee benefit reserve

 

(1,595)

(1,600)

(1,631)

Retained earnings

 

12,613

12,835

13,249

Revaluation reserve

 

5,021

4,586

4,685

 

 

 

 

 

Equity shareholders' funds

 

17,925

17,707

18,189

 

This condensed set of financial statements was approved by the Board on 7 August 2018.

 

Signed on behalf of the Board

 

 

 

Gavin Oldham
Chairman

 

Notes 1 to 11 form part of these financial statements.

 

Condensed consolidated statement of changes in equity

                                                                                

 

Share capital

Capital redemption reserve

Share premium account

Employee benefit reserve

Retained earnings

Revaluation reserve

Attributable to equity holders of the company

Balance at 1 January 2017 (audited)

718

104

1,064

(1,863)

13,418

4,303

17,744

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

13

283

296

Dividends

-

-

-

-

(346)

-

(346)

Purchases of ESOP shares

-

-

-

(327)

-

-

(327)

Sales of ESOP shares

-

-

-

83

-

-

83

Cost of matching and free shares in SIP

-

-

-

137

(137)

-

-

Profit on sale of ESOP shares and dividends received


-


-

 

-

 

370

 

(370)

 

-

 

-

Share-based payment

-

-

-

-

271

-

271

Deferred tax on share-based payment

-

-

-

-

10

-

10

Disposal of subsidiary (net assets less share capital)

 

-

 

-

 

-

 

-

 

(24)

 

-

 

(24)

Balance at 30 June 2017 (unaudited)

718

104

1,064

(1,600)

12,835

4,586

17,707

Total comprehensive income for the period

-

-

-

-

271

99

370

Purchases of ESOP shares

-

-

-

(236)

-

-

(236)

Sales of ESOP shares

-

-

-

92

-

-

92

Cost of matching and free shares in the SIP

-

-

-

92

(92)

-

-

Profit on sale of ESOP shares and dividends received

 

-

 

-

 

-

 

21

 

(21)

 

-

 

-

Share-based payment

-

-

-

-

242

-

242

Deferred tax on share-based payment

-

-

-

-

(18)

-

(18)

Share-based payment current year taxation

 

-

 

-

 

-

 

-

 

8

 

-

 

                 8

Disposal of subsidiary (net assets less share capital)

 

-

 

-

 

-

 

-

 

24

 

-

 

24

 

 

 

 

 

 

 

 

Balance at 31  December 2017 (audited)

718

104

1,064

(1,631)

13,249

4,685

18,189

Total comprehensive (loss)/income for the period

 

-

 

-

 

-

 

-

 

(279)

 

336

 

57

Dividends

-

-

-

-

(554)

-

(554)

Purchases of ESOP shares

-

-

-

(150)

-

-

(150)

Sales of ESOP shares

-

-

-

76

-

-

76

Cost of matching and free shares in SIP

-

-

-

98

(98)

-

-

Profit on sale of ESOP shares and dividends received


-


-

 

-

 

12

 

(12)

 

-

 

-

Share-based payment

-

-

-

-

267

-

267

Deferred tax on share-based payment

-

-

-

-

40

-

40

 

 

 

 

 

 

 

 

Balance at 30 June 2018 (unaudited)

718

104

1,064

(1,595)

12,613

5,021

17,925

 

Notes 1 to 11 form part of these financial statements.

 

Condensed consolidated cash flow statement

 

 

Notes

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

 

 

£'000

£'000

£'000

 

 

 

 

 

Net cash (used in)/from operating activities

8

(396)

(2,482)

1,147

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

Interest received

 

21

-

9

 

 

 

 

 

Dividends received from trading investments

 

154

141

216

 

 

 

 

 

Purchase of property, plant and equipment

 

(126)

(48)

(78)

 

 

 

 

 

Purchase of intangible assets

 

(490)

(714)

(1,450)

 

 

 

 

 

Net proceeds from the disposal of subsidiary

 

-

67

51

 

 

 

 

 

Cash and cash equivalents transferred in disposal of subsidiary

 

-

(41)

(41)

 

 

 

 

 

Net cash used in investing activities

 

(441)

(595)

(1,293)

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

Equity dividends paid

9

(554)

(346)

(564)

 

 

 

 

 

Shares purchased through employee benefit reserve

 

(150)

(327)

(346)

 

 

 

 

 

Shares sold through employee benefit reserve

 

76

83

175

 

 

 

 

 

Net cash used in financing

 

(628)

(590)

(735)

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(1,465)

(3,667)

(881)

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

10,540

11,421

11,421

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

9,075

7,754

10,540

 

 

 

 

 

Notes 1 to 11 form part of these financial statements.

 

Notes to the interim accounts

 

1              Basis of preparation

 

The financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') as adopted by the European Union. However, this announcement does not itself contain sufficient information to comply with IFRS. The financial information contained in these Interim Financial Statements does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's published full financial statements comply with IFRS. A copy of the latest statutory accounts has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

The following standards, amendments and interpretations have been issued with the corresponding implementation date, subject to EU endorsement in some cases:

 

IFRS 15 Revenue from Contracts with Customers, effective 1 January 2018

IFRS 9 Financial Instruments, effective 1 January 2018

Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions, effective 1 January 2018

IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration, effective 1 January 2018

AIP IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice, effective 1 January 2018

IFRS 16 Leases, effective 1 January 2019

IFRIC Interpretation 23 Uncertainty over Income Tax Treatments, effective 1 January 2019

Amendments to IFRS 9 Prepayment Features with Negative Compensation, effective 1 January 2019

Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures, effective 1 January 2019

AIP IAS 12 Income Taxes - Income tax consequences of payments on financial instruments classified as equity, effective 1 January 2019

Conceptual Framework for Financial Reporting, effective 1 Jan 2020

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, postponed indefinitely

 

Those amendments with an effective date of 1 January 2018, where relevant to the financial statements of the Group, have been applied (for further details see note 2). The impact of future standards and amendments on the financial statements is being assessed by the Group and the Company.

 

The Group accounts consolidate the financial statements of the Company and its subsidiaries, The Share Centre Limited and The Share Centre (Administration Services) Limited, which make up their financial statements. Other subsidiaries are not included in the Share plc consolidation as they are not trading and not material to the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these condensed financial statements.


 

2              Accounting policies

 

The same accounting policies, presentation and methods of computation are followed in this condensed set of financial statements as applied in the Group's latest annual audited financial statements.

 

Two new accounting standards which affect the Group have been issued with effect from 1 January 2018.

 

The first is IFRS 9: Financial Instruments, which replaces IAS 39: Financial Instruments: Recognition and Measurement. The new legislation alters the classification, measurement and de-recognition of financial assets and financial liabilities. Following this change, the Group has elected to hold its available-for-sale investments at fair value through other comprehensive income ('FVOCI'). This applies the same treatment as previously applied, except for when shares are sold. In such cases, any profit or loss upon disposal will now be recognised through other comprehensive income rather than profit or loss (as previously treated). In addition, the Group's calculation of "bad debt" provisions on customer fees is based on a forward-looking expected credit loss ('ECL') model, for which a simplified approach is applied. This new method incorporates historic customer data, alongside future economic conditions to calculate expected loss on receivables. This change has not had a material impact on the financial statements.

 

The second new standard is IFRS 15: Revenue from Contracts with Customers, which replaces IAS 18 for contracts for goods and services and IAS 11 covering construction contracts. The Group has concluded that under the new standard, for those customer accounts which are charged a fee for ongoing maintenance and administration services are done so over time and, given that the customer simultaneously receives and consumes the benefits provided by the Group, the revenue for these service contracts should be recognised over time rather than at one given point. For all other services, the Group concluded that the performance obligation is satisfied at a point in time and will be recognised at that point in time, as was the previous practice and will therefore have no impact on the accounting.

 

Following the adoption of these new standards, the Group will not restate comparative information in its financial statements.

 

 

3              Critical accounting judgements and key sources of estimation uncertainty

 

In the application of the Group's accounting policies the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis, but currently remain unchanged against those applied in the Group's latest annual audited financial statements.

 

 

4              Business and geographical segments

 

IAS 34 Interim Financial Reporting requires disclosure of segment information within the interim report as the Group is required to disclose segment information in its annual financial statement under IFRS 8 Operating Segments.

 

Six months

ended 30 June (unaudited)

The Share Centre

Fund management

         Total

2018

2017

2018

2017

2018

2017

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

9,912

8,474

263

401

10,175

8,875

Operating (loss)/profit

(783)

(406)

263

207

(520)

(199)

 

It should be noted that the accounting policies of the reportable segments are the same as the Group's accounting policies and that there were no major customers contributing more than 10% of revenues in the Group as a whole.

 

Following the sale of Sharefunds Limited in 2017, The Share Centre continued to manage the three Funds of Funds and therefore the majority of Sharefunds revenue has remained within the Group.

 

5              Taxation

 

Tax for the six month period is charged at 19% (six months ended 30 June 2017: 19.25%), representing the best estimate of the average annual effective tax rate expected for the full year. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. In 2018, this is 18% (2017: 19%).

 

 

6              Earnings per share

 

 

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

Earnings:

£'000

£'000

£'000

Earnings for the purpose of basic and diluted earnings per share, being net (loss)/profit attributable to equity holders of the parent company

(279)

13

310

Other gains and losses

-

(67)

(951)

FSCS levies

158

96

283

Share-based payments

267

271

513

One-off redundancy/termination/recruitment costs

13

-

62

One-off costs relating to regulatory changes

-

-

52

Profit share impact of the above adjustments

(94)

(65)

9

Taxation impact of the above adjustments

(15)

7

105

 

 

 

 

Earnings for the purposes of underlying basic and diluted earnings per share

50

255

383

 

 

 

 

 

 

Number of shares:

Number

'000

Number

'000

Number

'000

Weighted average number of ordinary shares

145,667

144,781

144,695

Non-vested shares held by employee share ownership trust

 

(5,158)

 

(5,097)


(5,276)

 

 

 

 

Basic earnings per share denominator

140,509

139,684

139,419

Effect of potential dilutive share options

7,452

3,177

8,494

 

 

 

 

Diluted earnings per share denominator

147,961

142,861

147,913

 

 

 

 

 

 

 

 

Basic earnings per share (p)

(0.2)

0.0

0.2

 

 

 

 

Diluted earnings per share (p)

(0.2)

0.0

0.2

 

 

 

 

Underlying (basic and diluted) earnings per share (pence)

0.0

0.2

0.3

 

The directors believe that the underlying earnings per share represent a more consistent measure of the underlying performance of the Group.

7              Cash and cash equivalents

 

 

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

 

£'000

£'000

£'000

Cash at bank and in hand

6,532

6,471

8,037

Cash held in trust for customers ***

2,543

1,283

2,503

 

9,075

7,754

10,540

 

*** This amount is held by The Share Centre Limited in trust on behalf of customers but may be used to complete settlement of outstanding bargains and dividends due.

Cash and cash equivalents increased to £9.1m at 30 June 2018 (2017: £7.8m). The increase in cash against June 2017 is linked to the increase in cash held on trust for customers, which remains in line with the year end balance.

At 30 June 2018 segregated deposit amounts held by the Group on behalf of customers in accordance with the client money rules of the Financial Conduct Authority amounted to £426m (30 June 2017: £359m). Deposits at 30 June 2018 were somewhat inflated by client money held but awaiting investment in respect of our Enterprise Investment Scheme administration business. The Group has no beneficial interest in these deposits and accordingly they are not included on the balance sheet.


 

8              Cash flow

 

Reconciliation of operating loss to net cash outflow from operating activities

 

 

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

 

£'000

£'000

£'000

(520)

(199)

(793)

-

-

900

-

1

1

59

66

127

293

84

223

267

271

513

99

223

971

(8,840)

(19,922)

(12,211)

8,365

17,386

12,717

(376)

(2,313)

1,477

Income taxes paid

(20)

(169)

(330)

Net cash (used in)/from operating activities

(396)

(2,482)

1,147

 

During the year ended 31 December 2017, the Group worked with a prospective new partner in developing a new product. This partner decided not to proceed with the launch of that product and paid the Group a one-off, non-refundable fee of £900,000 for product development work completed but not progressing. This amount is included for the year ended 31 December 2017 within 'Other income' above.

 

9              Dividends

 

 

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

 

£'000

£'000

£'000

 

 

 

 

2017 final dividend of 0.40p per ordinary share paid in current year (2016: 0.25p)

575

359

359

 

 

 

 

Less amount received on shares held via ESOP

(21)

(13)

(13)

 

 

 

 

 

 

 

 

 

554

346

346

 

 

 

 

 

 

 

10           Share-based payments

 

The Group continues to grant share options under Company Share Ownership Plan ('CSOP') at six-monthly intervals and discretionary grants to senior managers and directors as deemed appropriate by the Board Remuneration Committee. In addition, the Group has an Unapproved Share Option Scheme, Long Term Equity Incentive Plan ('LTEIP') and a Co-ownership Equity Incentive Plan ('CEIP'). There are a number of options still outstanding on the Enterprise Management Incentive ('EMI') scheme. All options expire ten years after the date of grant and, with the exception of some options granted under the unapproved and LTEIP share option scheme, the vesting period for options is three years.

 

In respect of the CEIP, the shares are jointly held with the Employee Benefit Trust. The individual recipients are able to sell the shares concerned between three and ten years after the grant date and benefit from the excess of the sales price at that time over and above the price specified in the Co-ownership agreement. That price is set at a c.20% premium to the market price at the date of grant.

 

The Group has applied the requirements of IFRS 2 in respect of share-based payments. In the period, the Group made an equity-settled share-based payment under the Group's CSOP scheme of 250,000 shares on 1 May 2018. In all cases, all options have been granted with an exercise price equal to market value - being the closing mid-price on the day prior to grant. A fair value has been determined during the year using the Black Scholes model.

 

Fair values have been determined for the grant made during the period using the Monte Carlo and Black Scholes models. The main assumptions are as follows:

 

 

Grant date

CSOP

1/5/18

 

Share price at date of grant

27.0p

 

Exercise price

27.0p

 

Risk-free interest rate

0.50%

 

Dividend yield

1.00%

 

Volatility (based on historic share price movements)

30.0%

 

Average maturity at exercise

5 years

 

Fair value per option

6.795p

 

 

Details of the share options outstanding during the year are as follows:

 

 

As at 30 June 2018

(unaudited)

As at 31 December 2017

(audited)

 

Number of share options

Weighted average exercise price (pence)

Number of share options

Weighted average exercise price (pence)

Outstanding at the beginning of the period

14,143,865

28.8

11,179,356

25.1

Granted during the period

250,000

27.0

7,330,000

2.2

Exercised during the period

(37,770)

17.4

(1,184,321)

3.2

Expired or forfeited during the period

(332,645)

27.0

(3,181,170)

21.1

Outstanding at the end of the period

14,023,450

13.5

14,143,865

13.6

Exercisable at the end of the period

4,192,031

26.9

1,696,205

28.8

 

The weighted average market share price at the date of exercise for options exercised during the first six months of 2018 was 26.0p (the first six months of 2017: 25.0p).

 

In addition the Group operates a Share Incentive Plan ('SIP'); further detail of this scheme is available from the Group's annual report and accounts.

 

The total expense for equity-settled share-based payments for the Group in respect of awards made in the first half of 2018 was £506,000 (six months ended 30 June 2017: £532,000). This expense is then applied across the three years to the vesting date. An adjustment is made to this figure in respect of members of staff to whom options and shares have been granted but who have left the Group's employ during the vesting period. The overall net charge taken in the income statement for the first half of 2018 is £267,000 (six months ended 30 June 2017: £271,000).

 

 

11           Other gains and losses

 

 

Six months ended

30 June 2018

(unaudited)

Six months ended

30 June 2017

(unaudited)

Year ended

31 December 2017

(audited)

 

£'000

£'000

£'000

 

 

 

 

Disposal of subsidiary

-

66

51

 

 

 

 

Liquidation proceeds from Greenko Group plc

-

1

-

 

 

 

 

 

-

67

51

 


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