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Shore Capital Group (SGR)

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Tuesday 19 March, 2013

Shore Capital Group

Preliminary Results for the Year Ended 31 Dec 2012

RNS Number : 2795A
Shore Capital Group Limited
19 March 2013
 

For Immediate Release                                                                                               19 March 2013

 

Preliminary Results for the Year Ended 31 December 2012

 

Shore Capital Group Limited ("Shore Capital","the Company or "the Group), the independent investment group specialising in principal finance, equity capital market activities and alternative asset management, today announces its preliminary results.

 

Financial Highlights

 

·   Revenue increased 11.2% to £32.8m (2011: £29.5m)

·   Profit before tax of £3.7m (excluding Spectrum and DBD) (2011: £0.4m)

·   Profit before tax of £2.5m (including Spectrum and DBD) (2011: loss of £0.9m)

·   Earnings per share of 1.06p (excluding Spectrum and DBD) (2011: loss of 0.19p);

  0.82p (including Spectrum and DBD) (2011: loss of 0.45p)

·   Final dividend per share of 0.50p (2011: 0.25p per share)

 

Operational Highlights

 

·   Another strong performance from ECM business, delivering a pre-tax profit of £5.1m (2011: £5.0m)

- 23% increase in secondary commission in second half - giving 15% increase for year

- 32% increase in corporate finance and corporate broking revenue

·   Repositioning of Asset Management operations progressing well and providing clients with an innovative suite of new products

·   German telecoms business 'Spectrum Investments' continues to be well placed to deliver significant investment upside

- Increased holding in Spectrum since period end now gives us a majority interest

- Investment potential endorsed with the sale of two competing German licences to E-Plus during 2012

 

Howard Shore, Executive Chairman of Shore Capital, said:

 

"We continue to make good progress as a Group, bucking the trend of difficult trading conditions within ECM, whilst re-positioning our asset management activities to offer clients a diverse range of products.  The wider macro picture remains broadly unchanged with only anecdotal evidence suggesting a more substantive recovery is underway. Nevertheless, as a business we remain true to our heritage, providing capital to ambitious management teams whilst offering innovative investment opportunities for our clients.

 

Our increased investment in the German telecoms market leaves us very well placed with recent developments suggesting our persistence in nurturing this opportunity could deliver substantial future returns.

 

 



Enquiries:

 

Howard Shore

Lynn Bruce

 

Shore Capital Group Limited

+44 (0) 20 7468 7911

+44 (0) 1481 728 902

Richard Oldworth

Jeremy Garcia, Louise Hadcocks

Buchanan

+44 (0) 20 7466 5000

 




Philip Secrett

Melanie Frean

Grant Thornton UK LLP

Nominated Adviser

+44 (0) 20 7383 5100




Josh Critchley 

Oliver Hearsey

 

RBC Capital Markets

Broker

+44 (0) 20 7653 4000

 

 

 

Notes to Editors

 

Shore Capital

 

1. Shore Capital is an AIM-listed independent investment group.  It specialises in principal finance, equity capital market activities and alternative asset management.  The Equity Capital Markets division ("ECM") offers a wide range of services for companies, institutions and other sophisticated clients, including corporate finance, stockbroking and market-making. Shore Capital Limited manages specialist funds, with a particular focus on alternative asset classes.

 

2. Shore Capital is based in Guernsey, London, Liverpool, Edinburgh and Berlin. Shore Capital Limited, Shore Capital Stockbrokers Limited and Shore Capital and Corporate Limited are each authorised and regulated by the Financial Services Authority. Shore Capital Stockbrokers Limited is a member of the London Stock Exchange.

 

3. Further information on Shore Capital, its products and services can be found at www.shorecap.gg



 

 

 

 

Chairman's Statement

 

Introduction

 

I am pleased to report that the Group made considerable progress in 2012 on many fronts, enabling us to achieve solid financial results whilst also further improving our strategic positioning.

 

Revenue was up 11.2 per cent to £32.8m (2011: £29.5m) and profit before tax (excluding Spectrum and DBD) rose substantially to £3.7m (2011: £0.4m). Including Spectrum and DBD profit before tax was £2.5m compared to a loss in 2011 of £0.9m (which included the substantial write down on our investment in Puma Hotels).

 

Our ECM business produced another strong performance, achieving a 23 per cent increase in secondary commission in the second half, giving a 15 per cent increase for the full year. Corporate finance and corporate broking revenues also showed strong growth with a 32 per cent advance over 2011.

 

Good progress was also made during the year in repositioning our Asset Management operations and our innovative suite of new products in this area leaves us well placed for future growth.

 

Since the year end we increased our stake in our German telecoms business "Spectrum Investments" and now have a majority holding. We believe that Spectrum is well placed to deliver significant investment upside as endorsed by the sale of two competing German licences to E-Plus in 2012.

 

Financial Review

 

Table 1 provides an analysis of the results of the Group on a like-for-like basis for the current and comparative years, split between the results of the operating businesses and movements in the value of investments held on our balance sheet.  It is pro forma as it excludes the income and expenditure relating to Spectrum and DBD. As a result of the acquisition structure used, the accounting rules require the revenue and costs of Spectrum and DBD to be consolidated in full even though we only had a net economic interest in DBD of just under 30 per cent (via our holding in Spectrum) during the year under review.



Table 1: Analysis of the Pro forma Unaudited Consolidated Income Statement (excluding Spectrum and DBD)

 


Operating businesses

Operating businesses


Balance sheet

Balance sheet


Total excluding Spectrum / DBD

Total excluding Spectrum / DBD


2012

2011


2012

2011


2012

2011


£'000

£'000


£'000

£'000


£'000

£'000










Revenue

29,784

32,261


856

(5,037)


30,640

27,224

Administrative expenditure

(26,629)

(26,488)


-

-


(26,629)

(26,488)










Operating profit/(loss)

3,155

5,773


856

(5,037)


4,011

736










Interest income

314

283


-

-


314

283

Finance costs

(635)

(642)


-

-


(635)

(642)


(321)

(359)


-

-


(321)

(359)










Profit/(loss) before taxation

2,834

5,414


856

(5,037)


3,690

377










Taxation

(646)

(1,469)


152

1,280


(494)

(189)










Profit/(loss) for the year

2,188

3,945


1,008

(3,757)


3,196

188










Attributable to:









Equity holders of the parent

1,569

3,305


1,008

(3,757)


2,577

(452)

Non controlling interests

619

640


-

-


619

640


2,188

3,945


1,008

(3,757)


3,196

188










Earnings/(loss) per share









Basic

0.65p

1.39p


0.41p

(1.58p)


1.06p

(0.19p)

Diluted

0.65p

1.39p


0.41p

(1.57p)


1.06p

(0.18p)



Table 2 takes the total from Table 1 and shows the effect of consolidating the income and expenditure relating to Spectrum and DBD since their acquisition. During the year under review, our economic interest in DBD was held via a 51 per cent holding in Spectrum, and accordingly the balance of the loss before tax is not attributable to our shareholders.

 

Table 2: Analysis of the Unaudited Consolidated Income Statement 

 

 


Total excluding Spectrum / DBD

Total excluding Spectrum / DBD


Spectrum / DBD

Spectrum / DBD


Total

Total


2012

2011


2012

2011


2012

2011


£'000

£'000


£'000

£'000


£'000

£'000










Revenue

30,640

27,224


2,181

2,289


32,821

29,513

Administrative expenditure

(26,629)

(26,488)


(3,344)

(3,595)


(29,973)

(30,083)










Operating profit/(loss)

4,011

736


(1,163)

(1,306)


2,848

(570)










Interest income

314

283


-

5


314

288

Finance costs

(635)

(642)


-

-


(635)

(642)

Negative goodwill on acquisition of DBD

-

-


-

49


-

49


(321)

(359)


-

54


(321)

(305)










Profit/(loss) before taxation

3,690

377


(1,163)

(1,252)


2,527

(875)










Taxation

(494)

(189)


-

-


(494)

(189)










Profit/(loss) for the year

3,196

188


(1,163)

(1,252)


2,033

(1,064)










Attributable to:









Equity holders of the parent

2,577

(452)


(590)

(636)


1,987

(1,088)

Non controlling interests

619

640


(573)

(616)


46

24


3,196

188


(1,163)

(1,252)


2,033

(1,064)










Earnings/(loss) per share









Basic

1.06p

(0.19p)


(0.24p)

(0.26p)


0.82p

(0.45p)

Diluted

1.06p

(0.18p)


(0.24p)

(0.26p)


0.82p

(0.44p)

 

 

 



Income and Expenditure

 

The Group excluding Spectrum/DBD

Revenue for the year, excluding Spectrum/DBD, increased by 12.6 per cent to £30.6m (2011: £27.2m). The prior year included a reduction of £4.8m in the value of our investment in Puma Hotels ("PHP"), and there was a further provision in 2012 of £0.4m against the value of this investment. As at 31 December 2012, our investment in PHP was valued at £16,000.

 

Administrative expenses were very slightly up on the prior year at £26.6m (2011: £26.5m) providing an operating profit of £4.0m (2011: £0.7m).

 

Interest income was £0.3m (2011: £0.3m), whilst finance costs were £0.6m (2011: £0.6m) resulting in profit before tax of £3.7m (2011: £0.4m). The net margin before tax was 12.0 per cent (2011: 1.4 per cent).

 

Revenue from ECM was £22.7m (2011: £22.5m) with a net margin of 22.3 per cent (2011: 22.3 per cent).  Revenue from Asset Management was £6.3m (2011: £8.6m) with a net margin of 15.1 per cent (2011: 26.0 per cent). The lower Asset Management revenue was a consequence of closing the Group's private client discretionary management service, and lower fee income from PHP due to the reduction in its net asset value.

 

Spectrum Investments / DBD

As a result of the acquisition structure used, the accounting rules require the revenue and costs of Spectrum and DBD to be consolidated in full even though we only held a net economic interest in DBD of just under 30 per cent (via our holding in Spectrum) during the year under review.

 

The Group has actively managed the cost base of DBD and as a result the consolidated loss before tax arising from this investment has reduced to £1.2m for the year (2011: £1.3m for the nine months from acquisition). This loss reduced the profit before tax for the Group to £2.5m (2011: loss of £0.9m).

 

Basic Earnings per Share

The Group generated earnings per share of 1.06p (2011: loss of 0.19p) excluding Spectrum/DBD. Including the effects of Spectrum/DBD, the Group generated earnings per share of 0.82p (2011: loss of 0.45p).

 

Comprehensive Earnings per Share

On a Comprehensive basis, the Group generated earnings of 0.82p per share (2011: loss of 0.89p).

 

Staff Costs

Staff costs, including incentive costs, were 46.9 per cent of revenue (2011: 49.5 per cent) excluding revenue from Spectrum and DBD.

 

Liquidity

We have a £20m working capital facility (which was unutilised at the year end). During the year the Group repaid its £15m evergreen loan as the terms no longer provided the flexibility sought by the Group. 

 

As at the balance sheet date, available liquidity was £31.8m (2011: £50.5m), comprising £30.4m (2011: £47.3m) of cash and £1.3m (2011: £3.2m) of gilts and bonds.

 

Balance Sheet

Our balance sheet remains strong. Total equity at the year end was £66.4m (2011: £65.4m). The main movements comprised the retained profit for the year of £2.0m less dividends paid of £1.4m (including those to minority interests).

 

In addition to the £30.4m of cash and £1.3m of gilts and bonds (as referred to above), we held £5.5m in the various Puma Funds, £1.4m net in quoted equities, £0.4m net in the Lily Partnership and a further £1.3m in other unquoted holdings.  In addition, we held £4.1m in Spectrum Investments (on a gross basis, before allowing for minority interests).

 

The remainder of the balance sheet was £21.9m net, which included £25.5m of net market debtors in our stockbroking subsidiary less various accruals.

 

Net Asset Value per Share

Net asset value per share at the year end was 24.7p (2011: 24.2p).

 

Dividend

I previously wrote that the Board would not declare an interim dividend for 2012, but would declare a dividend for the full year. Accordingly, we propose a final dividend of 0.50p per share (2011: 0.25p). This gives a total dividend of 0.50p per share (2011: 0.50p per share).  The dividend will be paid on Thursday 25 April, 2013 to shareholders on the register as at Friday 12 April, 2013.

 

 

 

 

Operating Review

The following operating review reports on our two main areas of focus, namely Equity Capital Markets and Alternative Asset Class Fund Management/Principal Finance.

 

Equity Capital Markets ("ECM")

 

Overview

In ECM we provide research in selected UK sectors covering c.225 companies, broking for institutional and professional clients, market-making in c.1,250 UK stocks, with a particular focus on the AIM market, and corporate finance for mid and small cap companies.

 

Following on from its strong performance in the first half the ECM division had a resilient performance in the second half trading profitably in the most challenging of environments and achieving a profit before tax for the year of £5.1m (2011: £5.0m). Each of the ECM division's operating businesses continued to produce robust revenues and we continue to benefit from the division's diverse income streams. Having a strong balance sheet and continuing to be viewed as a strong and consistent counterparty by both our clients and market participants is believed to be a key strength in the current trading environment.

 

Market-making

The market making team continued its robust performance despite the backdrop of challenging market conditions, increasing the number and value of trades executed year on year. This positive momentum was demonstrated throughout the second half of 2012, with both revenue and volume significantly higher than for the comparable period in 2011.

 

The encouraging signs of recovery within the small cap segment of our business, which were indicated in our interim results, have been combined with a strong performance and growing presence in mid and large cap securities. This is demonstrated in our overall market share ranking which has seen a material and steady improvement throughout 2012. We also continue to be the third largest market maker by number of stocks covered on the London Stock Exchange.

 

Research and Sales

After a sustained period where conditions were especially challenging, the market for secondary commissions showed signs of improvement in much of the second half of 2012. Whilst the economic environment retains challenges and 'dark pools' remain a feature of execution, there has also been some capacity reduction. In this market, we continued to be pleased to build upon recent market share gains. This progress is highlighted by the 23 per cent  increase in secondary commission in the second half of the year leading to a 15 per cent increase for the full year. 

Our excellent performance in this area reflected the high regard by our clients for our equity research, sales and trading teams, reflected in our strong standing in the Thomson Reuters survey and other external awards. We continued to focus on producing idea driven, in-depth and thematic research augmented by a step up in the corporate access that we provide investors. We also further harnessed the depth that our network of offices in London, Edinburgh and Liverpool provide investors, whilst making material in-roads in our presence in the Nordic Region, the Republic of Ireland and Northern Ireland.

We continued to build upon our strong reputation for providing a platform for senior management of leading companies to present to institutional investors, making good use of our strong presence across the country. Over the last year we ran a series of events for companies such as Associated British Foods, Astra Zeneca, Legal & General, Marks & Spencer, Randgold, St. James' Place, Talk Talk and Tesco. We staged a number of road shows for our growing list of corporate clients and also a 'reverse road show' for Nordic investors in oil services stocks plus an 'alternative banking seminar' including Fairpoint, Paragon, Provident Financial and Tesco Bank.

 

Corporate Finance

Increased corporate activity during 2012 resulted in a significantly improved contribution from our corporate finance and corporate broking team with revenue from corporate finance transactions increasing by approximately 32 per cent over 2011.

 

During the period the corporate finance team completed seven admissions (comprising three IPO's, two reverse takeovers, one transfer to AIM and one transfer to the Standard Segment of the Main Market), seventeen placings raising a total of over £120m for corporate clients, two takeovers and a number of other advisory led transactions.

 

Our natural resource business continued to grow during 2012 and all the admissions completed during the period involved companies in the mining and/or oil & gas sectors including Fastnet Oil & Gas plc and Cluff Natural Resources plc in the first half of the year and Wishbone Gold plc, Ironveld plc and Premier African Minerals Limited in the second half of the year.

 

During 2012 the team witnessed an increase in advisory work and advised on a number of notable transactions. One example, the refinancing of Serviced Office Group plc, involved the restructuring of the existing debt facilities totalling £23.7m and the raising of £9m of new equity for the company. Another example was Namakwa Diamonds Limited which, following our appointment as financial adviser in April 2012, completed a US$55m refinancing in June 2012, and in August 2012 the team advised the company on its move from the Premium Segment of the Main Market to AIM. We also advised on three takeover transactions during the year which included Ai Claims plc on its acquisition by Quindell Portfolio plc and Lees Foods plc on its management buyout.

 

Continued success in growing our retained client list was achieved during 2012 adding six new clients in the period including FBD Holdings plc (market capitalisation circa €410m). We are now retained adviser to 63 companies.

 

Alternative Asset Class Fund Management

 

Funds Under Management

Funds under management as at 31 December 2012 were £0.87 billion ($1.41 billion), compared to the £1.21 billion ($1.86 billion) at 31 December 2011.

 

This reduction reflects: i) our having taken the decision to close our discretionary investment management services to private clients and transfer out those monies; ii) a revaluation of the hotel portfolio held by Puma Hotels; and iii) movements in Euro exchange rates.

 

Overview

As previously reported, having taken the decision to focus on areas where we have strong market niches, the asset management business is well advanced in developing its investment offerings focussing on two particular target audiences.  First, we are seeking to cater to our existing client base of institutional and high-net worth investors; and secondly, we are building upon our strong track record in Venture Capital Trusts with the launch of a sub-brand for investment opportunities targeting the retail investment market, namely "Puma Investments". 

 

Puma Investments has launched Puma VCT 9 and, since the year end, launched a new investment opportunity, Puma Heritage plc, to provide financing for cash starved UK businesses by offering secured, asset-backed loans. After a two year holding period, an investment in Puma Heritage is intended to benefit from Business Property Relief so that the value of the investment at death would not be liable to Inheritance Tax. 

 

We believe that the asset management business is well-positioned to grow organically by focusing on the activities in which it has critical mass.  

 

Venture Capital

 

Puma Venture Capital Trusts ("VCTs")

To date we have successfully launched eight Puma VCTs and are currently raising funds for Puma VCT 9 which will follow the same successful investment strategy, and build on the market-leading track record, of the previous Puma VCTs.  Fund-raising for Puma VCT 9 has developed strongly and as at the date of publication has reached £12m  (almost double the level achieved at the same stage last year) with a first close scheduled for 5 April 2013.

 

Each of our VCTs has a focus on providing secured loans to well-run companies finding it hard to raise finance on attractive terms from banks.  They are each limited-life vehicles, aiming to distribute to their investors the initial capital and returns after five years. Puma VCTs I-IV have each produced the highest total return of their respective peer groups.

 

 

 

Puma VCT V is also the top performing VCT of all those raised in 2007, whilst Puma High Income VCT (launched in 2010), Puma VCT VII (launched in 2011) and Puma VCT 8 have all started well and have paid out dividends to date of 21p, 10p and 10p respectively.

 

The on-going effects of the credit crisis mean that SMEs are still finding it difficult to access the funding they need from the traditional banks.  Our investment team has a strong pipeline of investment opportunities, including many established companies which have substantial assets, over which a first charge can be taken. 

 

St Peter Port Capital ("St Peter Port")

St Peter Port Capital was launched in April 2007 as a pre-IPO fund but has since widened its investment mandate to include providing bridging finance ahead of trade sales and other opportunistic investing in development capital situations. 

 

In June 2012, the shareholders voted overwhelmingly (by 94 per cent) in favour of continuing the fund for another five years, a strong endorsement of their commitment to this investment strategy and to the investment manager.

 

It last reported on 21 December 2012 when it had investments in 40 companies and had a NAV per share of 103.3p on 30 September 2012 after payment of a dividend of 3p per share.  Following on from successful realisations within its portfolio, it has paid out cumulative dividends to shareholders of 8p per share. Since inception £58.9m has been realised, generating a gain of 89 per cent on these investments. This performance is impressive given the market conditions St Peter Port has experienced since launch in 2007. St Peter Port reported that it was encouraged by the progress made by companies which are important elements of the portfolio and that it saw prospects in many cases for strong returns on the original investment.

 

In particular, St Peter Port reported that it is very encouraged by the progress made by companies in the portfolio such as Red Flat Nickel (which holds licences over two nickel laterite deposits), Mediatainment (the developer of a 3D TV platform) and Brazil Potash (which owns a potash mine in Brazil and which is investigating a flotation on Brazil's BOVESPA).  St Peter Port considers that such investments offer the possibility of very large further gains if recent progress continues.

  

 

Real Estate

 

Puma Brandenburg Limited ("PBL")

PBL continues to perform well and, despite the uncertainties surrounding the Eurozone, is well placed due to a strong portfolio of quality assets in prime locations. 

 

During the year, the mixed used property at Mulheim was sold for €6.95m, which was €230k above the March 2012 year end valuation, and all proceeds were utilised to amortise the senior loan.

 

In the second half of the year, PBL entered into interest rate swaps to lock in the extremely low swap rates currently available, thus providing additional comfort over a key element of financing over the medium term. The Board of PBL is focussed on extending debt that matures next year to provide medium term finance that matches its interest rate hedging policy.

 

We remain focused on value enhancing asset management initiatives and remain convinced of the long term potential of real estate, particularly residential, in Germany.

 

Puma Hotels ("PHP")

As previously reported, the leases with Barceló Hotels and Resorts ("Barceló") were terminated on 25 April 2012 and from this time the hotels have been operated by PHP.  Having negotiated a net termination fee of £20.3m, PHP utilised these proceeds to reduce its senior debt facility by approximately £20m. 

 

We continue to provide asset management services. Since taking over the hotel operations on 25 April 2012, PHP - with Shore Capital's assistance - has been effective in mitigating the challenges that arise in taking over a hotel group of this scale.  In pursuing its strategy to grow revenue and mitigate costs in non-guest facing areas, PHP has augmented the existing hotels team through a number of key appointments including Fredrik Korallus as Chief Executive Officer and Paul Nisbett as Commercial and Finance Director.  The hotel management team possesses significant experience in the regional UK hotel sector and also benefits from Fredrik's global experience at Rezidor and Carlson, where he was Carlson's COO for the Americas and EVP Global Revenue Generation.  

 

Hedge Funds

 

Puma Sphera

Puma Sphera continued to experience volatile markets in the second half of 2012 with the final days of the year producing the drama of averting the 'fiscal cliff' and the associated impact on world markets.  Sphera returned 0.2 per cent in December compared to -3.7 per cent by the TA-100 index ("the Index"), continuing the substantial outperformance of the fund's domestic portfolio over recent months.  The annualised return since inception of 14.9 per cent compares with a return of 6.6 per cent and 6.4 per cent from the Tel Aviv Stock Exchange and Dow Jones Credit Suisse Hedge Fund index respectively.

 

Our outlook for 2013 is for stock prices to remain positive, despite the multiple global and local challenges. The low cost of capital continues to be the most dominant theme in setting the direction for markets and risk appetiteJanuary saw a solid start to 2013 with Puma Sphera returning  2.1 per cent compared with the TA-100 return of -0.2 per cent.  Over the last 3 months, Puma Sphera has outperformed the Index by 7 per cent.

 

Principal Finance

 

Investment in German Telecoms Business

As previously reported, we had initially invested €2.9m to take a controlling interest in Spectrum Investments Limited ("Spectrum"). Spectrum was formed in 2011 to acquire a 58 per cent controlling interest in DBD Deutsche Breitband Dienste GmbH ("DBD"), a German telecoms business.

 

Since the year end Spectrum has, together with a wholly owned subsidiary, purchased the balance of the outstanding loan stock in DBD and a further 28 per cent equity shareholding in DBD from Intel Capital. As a result, Spectrum now holds, directly and indirectly, substantially all of the economic interest in DBD.  Spectrum has raised €3.3m of new capital from its investors, including Shore Capital, to fund this acquisition, and to enable it to finance DBD's further working capital needs.  Shore Capital has invested €2.13m of this amount in cash and now holds 59.26 per cent of Spectrum. 

 

As anticipated at the time of the acquisition of DBD, operating expenses have exceeded revenues within DBD.  Our share of these losses through our holding in Spectrum resulted in a reduction in basic earnings per share of 0.24p for the year.

DBD holds radio spectrum licences in Germany in the 3.5 GHz range which is increasingly being deployed around the world for providing 4G mobile services. The German mobile market is the largest in Europe, with circa 115 million subscribers recorded in 2012 generating the largest sector revenues in Europe. As in other European mobile markets, the deployment of 4G in Germany continues to drive revenue growth as subscribers demand greater levels of data capacity. DBD's spectrum is ideally placed to provide mobile operators in Germany with additional data capacity for smart phones and tablet devices.

Spectrum acquired its original interest in DBD in March 2011. The only other two 3.5 GHz licences in Germany were recently acquired by E-Plus, the fourth largest mobile operator in Germany, further endorsing this exciting investment opportunity.

 

Employees

 

I should like to thank our employees for their commitment and hard work during the year. In another volatile year for the investment markets, they are to be congratulated on the operating performance achieved. 

 

Current Trading and Prospects

 

We continue to make good progress as a Group, bucking the trend of difficult trading conditions within ECM, whilst re-positioning our asset management activities to offer clients a diverse range of products.  The wider macro picture remains broadly unchanged with only anecdotal evidence suggesting a more substantive recovery is underway. Nevertheless, as a business we remain true to our heritage, providing capital to ambitious management teams whilst offering innovative investment opportunities for our clients.

 

Our increased investment in the German telecoms market leaves us very well placed with recent developments suggesting our persistence in nurturing this opportunity could deliver substantial future returns.

 

 

 

 

 

Howard Shore

Executive Chairman

19 March 2013



Unaudited Consolidated Income Statement

For the year ended 31 December 2012

 

 



Excluding Spectrum/DBD

Spectrum/DBD

Total

Total



2012

2012

2012

2011



£'000

£'000

£'000

£'000







Revenue


30,640

2,181

32,821

29,513

Administrative expenditure


(26,629)

(3,344)

(29,973)

(30,083)







Operating profit/(loss)


4,011

(1,163)

2,848

(570)







Interest income


314

-

314

288

Finance costs


(635)

-

(635)

(642)

Negative goodwill on acquisition of DBD


-

-

-

49



(321)

-

(321)

(305)







Profit/(loss) before taxation


3,690

(1,163)

2,527

(875)







Taxation


(494)

-

(494)

(189)







Retained profit/(loss) for the year


3,196

(1,163)

2,033

(1,064)







Attributable to:






Equity holders of the parent


2,577

(590)

1,987

(1,088)

Non controlling interests


619

(573)

46

24









3,196

(1,163)

2,033

(1,064)







Earnings/(loss) per share






Basic


1.06p

(0.24p)

0.82p

(0.45p)

Diluted


1.06p

(0.24p)

0.82p

(0.44p)



















 

 

 

 

 

 



Unaudited Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

 

 



Excluding Spectrum/DBD

Spectrum/DBD

Total

Total



2012

2012

2012

2011



£'000

£'000

£'000

£'000







Retained profit/(loss) after tax for the year


3,196

(1,163)

2,033

(1,064)







(Losses)/gains on revaluation of available-for-sale investments taken to equity


-

-

-

(1,064)







Gains/(losses) on cash flow hedges

68

-

68

146

Income tax thereon


(17)

-

(17)

(39)



51

-

51

107

Exchange difference on translation of foreign operations


(93)

31

(62)

11

Other comprehensive (loss)/ income for the year, net of tax


(42)

31

(11)

118













Total comprehensive income/ (loss) for the year, net of tax


3,154

(1,132)

2,022

(2,010)







Attributable to:






Equity holders of the parent


2,540

(569)

1,971

(2,159)

Non controlling interests


614

(563)

51

149









3,154

(1,132)

2,022

(2,010)







Comprehensive earnings/(loss) per share





Basic


1.05p

(0.23p)

0.82p

(0.89p)

Diluted


1.04p

(0.23p)

0.81p

(0.87p)







 

 



Unaudited Consolidated Statement of Financial Position

As at 31 December 2012

 

 








2012


2011



£'000


£'000

Non-current assets





Goodwill


381


381

Intangible assets


4,055


4,251

Property, plant & equipment


11,669


12,516

Available-for-sale investments


4,105


4,505



20,210


21,653

Current assets





Bull positions and other holdings at fair value


4,058


7,048

Available-for-sale investments


16


450

Trade and other receivables


65,819


42,681

Tax assets


99


629

Cash and cash equivalents


30,443


47,305



100,435


98,113

Total assets


120,645


119,766






Current liabilities





Bear positions


(1,395)


(786)

Trade and other payables


(41,146)


(25,267)

Derivatives


(573)


(360)

Borrowings


(327)


(345)



(43,441)


(26,758)

Non-current liabilities





Borrowings


(10,549)


(27,264)

Deferred tax liability


(224)


(279)

Provision for liabilities and charges


(44)


(36)



(10,817)


(27,579)

Total liabilities


(54,258)


(54,337)

Net assets


66,387


65,429






Capital and reserves





Called up share capital


-


-

Share premium


336


336

Merger reserve


27,198


27,198

Other reserves


1,282


1,187

Retained earnings


30,954


29,867

Equity attributable to equity holders of the parent


59,770


58,588

Non controlling interest


6,617


6,841

Total equity


66,387


65,429






 

 

 



Unaudited Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

 

 

 


Share capital

Share Premium account

Merger reserve

Other Reserves

Retained earnings

Non controlling interest

Total


£'000

£'000

£'000

At 1 January 2011

-

5,808

69,773

Retained profit for the year

-

-

-

-

(1,088)

24

(1,064)

Revaluation of available for sale investments

-

-

-

(1,064)

-

-

(1,064)

Credit in relation to share based payments

-

-

-

52

-

-

52

Foreign currency translation

-

-

-

-

(93)

104

11

Valuation change on cash flow hedge

-

-

-

117

-

29

146

Tax on cash flow hedge

-

(8)

(39)

Equity dividends paid

-

-

(2,132)

Dividends paid to non controlling interests

-

-

-

-

-

(1,568)

(1,568)

Shares issued  in respect of options exercised

-

166

-

-

-

-

166

Repurchase/cancellation of own shares

-

-

-

-

(946)

-

(946)

Deferred tax charge recognised directly in equity

-

-

-

-

(298)

-

(298)

Investment by non controlling interest in subsidiaries including Spectrum

-

-

-

-

(60)

2,452

2,392

At 31 December 2011

-

336

27,198

1,187

29,867

6,841

65,429

 



Unaudited Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

 

 


Share capital

£'000

Share Premium account

£'000

Merger reserve

£'000

Other Reserves

£'000

Retained earnings

£'000

Non controlling interest

£'000

Total

£'000

At 1 January 2012

-

336

27,198

1,187

29,867

6,841

65,429

Retained profit for the year

-

-

-

-

1,987

46

2,033

Revaluation of available for sale investments

-

-

-

-

-

-

-

Credit in relation to share based payments

-

-

-

54

-

-

54

Foreign currency translation

-

-

-

-

(58)

(4)

(62)

Valuation change on cash flow hedge

-

-

-

55

-

13

68

Tax on cash flow hedge

-

-

-

(14)

-

(3)

(17)

Equity dividends paid

-

-

-

-

(604)

-

(604)

Dividends paid to non controlling interests

-

-

-

-

(238)

(528)

(766)

Shares issued  in respect of options exercised

-

-

-

-

-

-

-

Repurchase/cancellation of own shares

-

-

-

-

-

-

-

Deferred tax charge recognised directly in equity

-

-

-

-

-

-

-

Investment by non controlling interest in subsidiaries including Spectrum

-

-

-

-

-

252

252









At 31 December 2012

-

336

27,198

1,282

30,954

6,617

66,387

 

 

 



Unaudited Consolidated Cash Flow Statement

For the year ended 31 December 2012

 



2012


2011



£'000


£'000

Cash flows from operating activities





Operating profit/(loss)


2,848


(570)

Adjustments for:





  Depreciation charges


871


868

  Amortisation charges


243


-

  Share-based payment expense


54


52

  Loss on sale of fixed assets


-


27

  Other Losses on AFS investments


871


4,682

  Increase/(Decrease) in provision for National Insurance on options


8


(136)






Operating cash flows before movements in working capital


4,895


4,923

(Increase )/Decrease in trade and other receivables


(23,138)


20,104

Increase/(Decrease) in trade and other payables


16,160


(18,778)

Increase/(Decrease) in bear positions


609


(557)

Decrease in bull positions


2,990


1,154

Cash generated by operations


1,515


6,846

Interest paid


(635)


(642)

Corporation tax paid


(35)


(1,979)

Net cash generated by operating activities


846


4,225






Cash flows from investing activities





Purchase of fixed assets


(614)


(536)

Sale of fixed assets


-


11

Acquisition of subsidiary net of cash acquired


-


(914)

Purchase of additional intangible assets


(190)


(295)

Purchase of AFS investments


(82)


(74)

Sale of AFS investments


51


540

Purchase of shares issued by PBL and de-merged


-


-

Interest received


314


288

Net cash utilised by investing activities


(521)


(980)






Cash flows from financing activities





Shares/participations issued to Non Controlling Interests in subsidiaries including Spectrum


252


2,392

Shares issued in respect of exercise of options/share scheme


-


166

Repurchase of shares


-


(946)

Increase/(decrease) in borrowings


(16,079)


1,659

Dividends paid to Equity shareholders


(604)


(2,132)

Dividends paid to Non Controlling Interests


(766)


(1,568)

Net cash utilised by financing activities


(17,197)


(429)






Net (decrease )/increase in cash and cash equivalents


(16,872)


2,816

Effects of exchange rate changes


10


240

Cash and cash equivalents at the beginning of the year


47,305


44,249

Cash and cash equivalents at the end of the year


30,443


47,305



Notes

 

1.                            Financial information

 

Basis of preparation

The annual financial statements of Shore Capital Group Limited (the "Company") have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("Adopted IFRS").

 

Presentation of the financial statements and financial information

The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 31 December 2012 within the meaning of section 244 of the Companies (Guernsey) Law, 2008. 

 

The financial information for the year ended 31 December 2011 is derived from the statutory accounts of the Company for that year.  The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under section 263(2) or (3) of the Companies (Guernsey) Law, 2008.  Those accounts were prepared under Adopted IFRS and have been reported on by the Company's auditors and delivered to the Guernsey registry office.

 

The audit of the statutory accounts of Shore Capital Group Limited for the year ended 31 December 2012 is not yet complete.  These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement.

 

The statutory accounts will be prepared in accordance with IFRS as adopted by the European Union.  Details of the accounting policies that will be applied in the statutory accounts are set out in the 2011 Annual Report and Accounts of the Company.

 

A copy of this statement is available on the Company's website at www.shorecap.gg.

 

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.  The financial statements are rounded to the nearest thousand except where otherwise indicated.

 

Adoption of new and revised standards

 

Standards in issue but not yet effective

 

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 7 (amended)                                 Disclosures - Offsetting Financial Assets and Financial Liabilities

Annual Improvements to                    (2009 - 2011) Cycle

IFRSs

IFRS 9                                                     Financial Instruments

IFRS 10                                                   Consolidated Financial Statements

IFRS 10, IFRS 12 and IAS 27              Investment Entities

(amended)

IFRS 11                                                   Joint Arrangements

IFRS 12                                                   Disclosure of Interests in Other Entities

IFRS 13                                                   Fair Value Measurement

IAS 27 (revised)                                    Separate Financial Statements

IAS 28 (revised)                                    Investments in Associates and Joint Ventures

IAS 32 (amended)                                 Offsetting Financial Assets and Financial Liabilities

 

The directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods, except as follows:

·     IFRS 7 (amended) will increase the disclosure requirements where netting arrangements are in place for financial assets and financial liabilities;

·     IFRS 9 will impact both the measurement and disclosures of Financial Instruments;

·     IFRS 12 will impact the disclosure of interests the Group has in other entities; and

·     IFRS 13 will impact the measurement of fair value for certain assets and liabilities as well as the associated disclosures.

 

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

 

2.         Segment Information

 

Additional analysis of revenue and results is presented in the Chairman's Statement on page 2.

 

For management purposes, the Group is organised into business units based on their services, and has five reportable operating segments as follows:

 

·      Equity Capital Markets provides research in selected sectors, broking for institutional and professional clients, market-making in AIM and small cap stocks and corporate finance for mid and small cap companies.

 

·      Asset Management provides advisory and discretionary fund management services, and manages specialist funds invested in alternative asset classes.

 

·      Central Costs comprises the costs of the group's central management team and structure

 

·      Balance Sheet / Principal Finance comprises investments and other holdings acquired, together with principal finance activities conducted, using our own balance sheet resources.

 

·      Spectrum / DBD  comprises the group's investment in a German based telecoms business

 

Management monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment.  Segmental performance is evaluated based on operating profit or loss.

 

Transfer prices between operating segments are on an arm's-length basis in a manner similar to transactions with third parties.

 

 

Year ended 31 December 2012

Equity Capital Markets

Asset Management

Central costs

Balance Sheet and Principal Finance

Spectrum/DBD

Consolidated


£'000

£'000

£'000

£'000

£'000

£'000








Revenue

22,653

6,331

10

1,646

2,181

32,821








Results







Depreciation

157

153

50

511

-

871

Interest expense

72

-

11

552

-

635

Profit/(loss) before tax

5,056

955

(2,018)

(303)

(1,163)

2,527








Assets

63,792

3,830

1,179

46,314

5,530

120,645








Liabilities

(37,965)

(1,184)

(966)

(10,875)

(3,268)

(54,258)








 

No material amounts of revenue or profit before tax were generated outside of Europe.

 

 

 

Year ended 31 December 2011

Equity Capital Markets

Asset Management

Central costs

Balance Sheet and Principal Finance

Spectrum/DBD

Consolidated


£'000

£'000

£'000

£'000

£'000

£'000








Revenue

22,545

8,563

-

(3,884)

2,289

29,513








Results







Depreciation

129

180

54

505

-

868

Interest expense

(57)

-

(27)

(558)

-

(642)

Profit/(loss) before tax

5,018

2,224

(725)

(6,140)

(1,252)

(875)








Assets

47,883

5,800

1,765

56,820

7,498

119,766








Liabilities

(22,375)

(1,337)

(1,075)

(25,529)

(4,021)

(54,337)








 

 

No material amounts of revenue or profit before tax were generated outside of Europe.

 

 

3.         Rates of Dividends Paid and Proposed

 


2012

£'000

2011

£'000

Amounts recognised as distributions to equity holders in the period:

 



Final dividend for the year ended 31 December 2011 of 0.25p per share (2010 final dividend: 0.625p)

 

604

 

1,528

No interim dividend for the year ended 31 December 2012 (2011: 0.25p)

-

604


604

2,132




Proposed final dividend for the year ended 31 December 2012 of 0.50p per share (2011:  final dividend of 0.25p)

1,208


 

 

4.         Earnings per Share

 

The earnings and number of shares in issue or to be issued used in calculating the earnings per share and diluted earnings per share in accordance with IAS 33 were as follows:

 

 



2012

2011



Basic

Diluted

Basic

Diluted








Earnings/(loss)  (£)

1,987,000

1,987,000

(1,088,000)

(1,088,000)


Number of shares

241,639,601

243,361,010

243,038,613

247,529,383








Earnings/(loss) per share

0.82

0.82

(0.45)

(0.44)




















Comprehensive earnings/(loss)  (£)

1,971,000

1,971,000

(2,159,000)

(2,159,000)


Number of shares

241,639,601

243,361,010

243,038,613

247,529,383








Earnings/(loss) per share

0.82

0.81

(0.89)

(0.87)








Calculation of number of shares

2012

2011



Basic

Diluted

Basic

Diluted








Weighted average number of shares

241,639,601

241,639,601

243,038,613

243,038,613


Dilutive effect of share option schemes

-

1,721,409

-

4,490,770



241,639,601

243,361,010

243,038,613

247,529,383







 

 

As at 31 December 2012 there were 241,639,601 ordinary shares in issue (2011: 241,639,601).

 

 

5.         Related Party Transaction

 

On 14 March 2013 the Group agreed a two year extension to an existing unsecured loan of €3,500,000 that is due from PBL on 25 March 2013. The loan is held on arm's length terms and conditions and the Group will continue to receive interest at 5.345% per annum. Under the AIM rules for Companies, PBL is a related party of the Group as it has a high degree of common ownership following its de-merger from the Group, and a common director. The directors other than the common director consider, having consulted with the Company's nominated adviser, that the terms of the loan are fair and reasonable insofar as shareholders are concerned.

 

 

 

A copy of this announcement is available on the Company's website at www.shorecap.gg. The annual report & accounts will be sent to shareholders in due course and will also be available on the Company's website from the date of posting.

 


This information is provided by RNS
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