TIDMSHRE
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 GBP10.2m (H1 2017: GBP8.9m), a record six
month high
-- Costs rose by GBP1.6m (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
-- Underlying(1) profit after tax of GBP50,000 (H1 2017: GBP255,000).
Statutory loss after tax of GBP279,000 (H1 2017: profit of GBP13,000).
Statutory loss per share of 0.2p (H1 2017: 0.0p)
-- Assets under administration up by 18% to a record GBP5.0bn (H1
2017: GBP4.3bn)
-- Cash held on behalf of customers up by 19% to GBP426m (30 June
2017: GBP359m)
-- Balance sheet remains strong, with shareholders' funds at GBP17.9m
(H1 2017: GBP17.7m)
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 GBP1.5bn 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 GBP5bn 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
GBP10.2m, while assets under administration also set a new record
at GBP5.0bn, and cash held on behalf of customers rose by 19% to
GBP426m. We are also pleased to highlight the progress we are
making with funds, with over GBP1.3bn 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 GBP1.5bn+ 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 GBP110m 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 stockbrokers(2) . 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 GBP10.2m
(H1 2017: GBP8.9m), and further details of the three income streams
is provided below. Excluding interest income, revenues rose by 9%
to GBP9.3m (2017: GBP8.5m).
-- 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 GBP20 (previously GBP7.50) 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 GBP426m
(30 June 2017: GBP359m). 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 GBP10.7m (H1 2017:
GBP9.1m). This reflected three factors: firstly, with a full half
of our Computershare services, we saw an increase in our
transactional costs (GBP0.7m) 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 GBP0.6m 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 GBP209,000 to GBP293,000
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 GBP168,000 (H1 2017:
loss of GBP49,000). The increase in transactional, staff and
amortisation costs contributed to an operating loss of GBP520,000
in the first half (H1 2017: loss of GBP199,000). Underlying profit
after tax was GBP50,000 (H1 2017: GBP255,000), 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 GBP275,000 (H1 2017: profit of GBP75,000)
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 GBP9.1m at 30 June 2018
(30 June 2017: GBP7.8m). During the period, a dividend of
GBP575,000 was paid (H1 2017: GBP359,000). 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 GBP6.8m on the
balance sheet (H1 2017: GBP6.3m), and generated dividends of
GBP225,000 (H1 2017: GBP207,000). 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 GBP17.9m at the period end (2017: GBP17.7m) 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 GBP14.5m, 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 Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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 Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017 (audited)
(unaudited) (unaudited)
GBP'000 GBP'000 GBP'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
As at As at As at
Notes 30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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 Share Employee Retained Revaluation Attributable
capital redemption premium benefit earnings reserve to equity
reserve account reserve 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 Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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.
The Share Centre Fund management Total
----------------------------
2018 2017 2018 2017 2018 2017
Six months GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ended 30 June (unaudited)
---------------------------- --------- -------- -------- -------- -------- --------
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 Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
Earnings: GBP'000 GBP'000 GBP'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 Number Number
Number of shares: '000 '000 '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 Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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 GBP9.1m at 30 June 2018
(2017: GBP7.8m). 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 GBP426m (30 June 2017:
GBP359m). 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 Six months Year ended
ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------
Operating loss for the year (520) (199) (793)
Other income - - 900
Other gains - 1 1
Depreciation of property, plant
and equipment 59 66 127
Amortisation of intangible
assets 293 84 223
Share-based payments 267 271 513
Operating cash flows before
movement in working capital 99 223 971
Increase in receivables (8,840) (19,922) (12,211)
Increase in payables 8,365 17,386 12,717
Cash generated by operations (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 GBP900,000 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 Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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:
CSOP
Grant date 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 As at 31 December 2017
(unaudited) (audited)
Number of Weighted average Number of Weighted average
share options exercise price share options exercise price
(pence) (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
GBP506,000 (six months ended 30 June 2017: GBP532,000). 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
GBP267,000 (six months ended 30 June 2017: GBP271,000).
11 Other gains and losses
Six months Six months Year ended
ended ended
30 June 2018 30 June 2017 31 December
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------- --------------- -------------- -------------
Disposal of subsidiary - 66 51
Liquidation proceeds from
Greenko Group plc - 1 -
- 67 51
------------------------------------------- -------------- -------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BRGDIBSGBGIR
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