TIDMSHRE
RNS Number : 9274Y
Share PLC
09 March 2017
AIM: SHRE
SHARE PLC
("Share" or "the Company" or "the Group")
PRELIMINARY RESULTS FOR THE YEARED
31 DECEMBER 2016
Share plc (AIM: SHRE.LN), parent company of The Share Centre (a
leading independent retail stockbroker) and Sharefunds (the Group's
investment management and fund administration subsidiary),
announces its unaudited results for the year ended 31 December
2016.
HIGHLIGHTS
Financial
-- Results slightly ahead of revised market expectations in a year of major investment
-- Revenue market share excluding interest (*) reached a record high of 9.85% (2015: 9.39%)
-- Revenue up by 4% to GBP14.6m (2015: GBP14.1m). Excluding
interest income, revenue grew by 8% to GBP13.8m (2015:
GBP12.8m)
o commission income rose to a record GBP7.0m (2015: GBP6.4m)
o fee income grew to a record GBP6.8m (2015: GBP6.4m)
o interest income reduced to GBP0.8m (2015: GBP1.3m)
-- Assets under administration increased to a record GBP3.7bn (2015: GBP2.8bn)
-- Profit before tax of GBP1.0m (2015: GBP0.9m), including a
GBP2.1m one-off net gain (2015: GBP1.7m) from the partial sale of
shares in the London Stock Exchange Group plc
-- Underlying earnings of GBP4,000 (2015: GBP555,000)
-- Underlying (**) basic and diluted earnings per share of 0.0p
(2015: 0.4p). Basic and diluted earnings per share of 0.5p (2015:
0.5p)
-- Final (and total) dividend proposed of 0.25p per share (2015: 0.74p)
-- Balance sheet remains strong, with net cash of GBP11.4m (2015: GBP11.7m)
-- Shareholders' funds of GBP17.7m or 12.3p per share in issue
(2015: GBP18.7m, 13.0p per share)
Operational
-- Major programme of investment in IT systems ongoing
o enables innovation in customer engagement and enhanced
customer services
-- Customer satisfaction remains at very high levels - eight
industry awards for customer service, including prestigious
Investment Trends award for highest 'Overall Client Satisfaction' -
retained for third consecutive year
o first to market with Flexible ISA functionality
-- Major new partnerships and account acquisitions agreed with
Computershare, Barclays Bank plc and Invesco Perpetual
o full benefits to come through in 2017
Outlook
-- After a year of significant investment, 2017 is expected to be a year of further investment, transformation and increased delivery
o 2017 has started well and the Group is well positioned for
revenue and earnings growth
(*) the peer group comprises: Alliance Trust Savings, Barclays
Stockbrokers, Equiniti, Halifax Sharedealing, HSBC Stockbrokers,
Saga Personal Finance, Selftrade and TD Direct Investing
(**) excludes the impact of some items, particularly any large
non-recurring items, as defined in Note 7.
Gavin Oldham, Chairman, commented on the results:
"It is good to announce results ahead of market expectations,
especially in a year of major investment and transformation,
designed to position the Group for ongoing growth. We made
significant progress in 2016 across many fronts but in particular
with our technology platform, customer proposition and commercial
partnerships.
We continue to place the greatest possible emphasis on customer
service and we are particularly pleased to have won eight awards
over the year, including Investment Trends' prestigious award for
highest 'Overall Client Satisfaction', which we retained for the
third consecutive year.
We view prospects for 2017 with a high degree of confidence and
the Group is well positioned for revenue and underlying earnings
growth."
Richard Stone, Chief Executive, commented on the results:
"Share plc made excellent strategic progress in 2016, which was
an important year of investment. We made particular progress with
our partnerships and acquisitions, and can already look forward in
2017 to launching services for Computershare and welcoming
customers from Invesco Perpetual.
The second half of 2016 saw substantially increased dealing
activity after the Brexit vote, which helped generate record
commission and fee revenue, together with record revenue market
share against our peer group.
The Board has significant growth ambitions and we will continue
to invest in the Group's technology to ensure we deliver a
market-leading customer experience. We continue to have a strong
balance sheet, a clear focus and a talented team. We have laid
strong foundations for growth in 2016, and look forward to the
benefits of our investment strategy starting to flow through in
increased revenue, underlying earnings and assets under
administration."
Contacts
Share plc
Gavin Oldham, Chairman T: 01296 439 100 / 07767
337 696
Richard Stone, Chief Executive T: 01296 439 270 / 07919
220 599
Mike Birkett, Finance Director T: 01296 439 479
Joe Dumont, Head of Corporate T: 01296 439 426
Communications
Cenkos Securities plc (Nominated T: 020 7397 8900
Adviser)
Ivonne Cantu, Mark Connelly
KTZ Communications (Financial T: 020 3178 6378
Public Relations)
Katie Tzouliadis, Emma Pearson
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. Sharefunds is authorised and regulated by the
Financial Conduct Authority under reference 227807.
ABOUT SHARE PLC
Share plc is the parent holding company of The Share Centre
Limited and Sharefunds 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 investors to share in the wealth
of the stockmarket. These 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. In 2016, we announced that we were
in advanced discussions to transfer our Authorised Corporate
Director ('ACD') role to another party, which impacts all seven
funds. In January 2017, the transfer to Treasury Capital Ltd
received regulatory approval by the Financial Conduct Authority
('FCA') and, together with the sale of the Sharefunds Limited
entity, is due to complete on 24 March 2017.
For more details contact 01296 41 41 41, or visit
www.shareplc.com or www.share.com.
CHAIRMAN'S STATEMENT
Introduction
We are pleased to report that financial results for the year are
ahead of market expectations, helped by strong dealing volumes in
the second half. The Group's revenue market share over the year,
excluding interest, also hit a record high and we won eight
industry awards, including Investment Trends' prestigious award for
'Overall Client Satisfaction' for the third consecutive year.
The year marked a period of major investment in our IT systems
and infrastructure. As we reported previously, we are establishing
a new enhanced platform for ongoing growth and completed some key
projects in the period, including changing the underlying database
technology for our core systems. This is enabling us to introduce
new ways of engaging with our customers.
We continued to drive the Group's growth with new partnerships
and account acquisitions, agreeing contracts with Computershare,
Barclays Bank plc and Invesco Perpetual. The benefits of these
initiatives will come through more fully in 2017 and they underline
the strength of our offering, including our flat-fee pricing
model.
Financial performance
Revenue increased by 4% to GBP14.6m and, excluding interest
income, by 8% to GBP13.8m. Our benchmarked revenue market share
excluding interest income, as measured independently by Compeer,
recorded a high of 9.85% (2015: 9.39%). After a weak first half,
dealing activity strengthened in the second half of the year,
following the vote for Brexit, with volumes increasing through the
third and fourth quarters.
As expected, the planned programme of investment impacted
profitability and underlying earnings reduced to GBP4,000 (2015:
GBP555,000). This was ahead of revised market expectations.
Reported earnings were GBP737,000 (2015: GBP665,000), benefiting
from the GBP2.1m net gain (2015: GBP1.7m) from the sale of shares
in the London Stock Exchange Group plc ('LSE').
Assets under administration grew strongly, up 32% to a record
GBP3.7bn (2015: GBP2.8bn) and significantly outstripping the 12%
growth in the FTSE All Share over the year. The rise in assets
reflected a combination of stock market performance, new fund flows
and transfers-in and acquisitions.
Dividend
I reported in my statement last year that we were moving the
dividend policy to one based on earnings and cash generation. The
Board proposes a final and total dividend for the year of 0.25p per
share (2015: 0.74p), underpinned by the Group being breakeven on an
underlying earnings basis, its balance sheet strength and the
proceeds from the partial sale of our holding in LSE.
It is expected that the proposed final dividend, which is
subject to shareholder approval at the Annual General Meeting, will
be paid on 14 June 2017 to shareholders on the register at close of
business on 12 May 2017.
Partial sale of holding in the London Stock Exchange Group
plc
We took the decision to sell a proportion of our holding in LSE
ahead of the EU Referendum given our view of the perceived risks to
the deal with Deutsche Borse at that time. Towards the end of the
year, we also took the opportunity to crystallise some of the
substantial increase in the valuation.
Strategic Delivery
Our growth strategy remains focused on the three elements of
'Putting Customers First', 'Focus on our Core Business' and
delivering 'Strategic Partnerships and Acquisitions'. We are very
pleased with the significant progress we have made against each of
these elements over 2016 and I am delighted to highlight the
following achievements:
- We have acquired customer accounts from Barclays Bank plc and
European Pensions Management Limited and agreed an acquisition of
accounts with Invesco Perpetual;
- We announced a major partnership with Computershare and have
already launched a new service helping the estates of deceased
shareholders;
- We were the only broker to introduce Flexible ISA
functionality as soon as it was possible on 6 April 2016;
- We have successfully changed the underlying database technology for our core systems;
- We launched our first mobile application for iOS and Android;
- We agreed the sale of Sharefunds Limited to Treasury Capital
Ltd, with completion expected on 24 March 2017;
- We were placed first for 'Overall Client Satisfaction' in the
Investment Trends 2016 survey for the third year running.
Investment Trends 2016 UK Online Broking Report is based on a
survey of over 12,000 individual personal investors, making it the
largest annual survey of retail investor opinions undertaken in the
UK. Given that we compete against several large brands in the
sector, this provides our existing customers and prospective
investors with confidence to stay with or choose The Share
Centre.
Market Backdrop
During 2016, the market was characterised by politically-driven
volatility. The vote for Brexit in June and the election of Donald
Trump as President of the US in November were the two key events.
Market nervousness in the run up to the EU Referendum resulted in a
subdued first half performance and our own surveys of personal
investors indicated their expectation that a vote for Brexit would
result in a drop in market values. However that drop was
short-lived, with the impact of weak Sterling boosting the market
valuations of exporting companies and those generating substantial
proportions of their revenue and profits from overseas. As a
result, the FTSE 100 moved higher and the market delivered a strong
performance in 2016 as a whole. We experienced our busiest ever day
on 24 June 2016 and saw markedly higher trading volumes over the
second half as market values hit new highs.
Positive investor sentiment was supported by the domestic
political environment. Measures in the last two budgets, which
included a cut in capital gains tax, increases in ISA allowances
and the introduction from April 2017 of a new Lifetime ISA product
for 18-40 year olds, were aimed at encouraging individuals to save
more for their financial futures.
We plan to launch a Lifetime ISA product on 6 April 2017
following the lead we took when we were first to market with
Flexible ISA functionality in April 2016.
The regulatory backdrop is also looking a little more
accommodating. While not directly impacting The Share Centre, the
sunset clause in the Retail Distribution Review ('RDR') came into
effect in April 2016. Brokers' customers whose charges had
effectively been subsidised by return commission payments from fund
houses to those brokers will, in many cases, see the fees they have
been charged explicitly laid out for the first time in their 2017
tax year end statements. This provides us with a further
opportunity to make clear the benefits of our flat-fee charging
structure.
As we enter 2017, we continue to argue for the need to have
greater flexibility in the way we can place client money since the
banking sector, which is already awash with liquidity, is averse to
taking on-call deposits for regulatory reasons. We also continue to
argue for a more risk-based approach to the apportionment of the
fees levied by the Financial Services Compensation Scheme ('FSCS')
and we are optimistic of progress on both fronts in 2017.
Outlook
Looking forward, we expect to see a return to higher levels of
inflation. In the UK, this will be largely fuelled by the fall in
Sterling feeding through to import and commodity prices. In the US,
it appears likely to be driven by President Trump's 'America First'
policies stemming the flow of cheap goods from overseas. Increased
inflation, accompanied by continued high employment and growth on
the upside of expectations (as it has been since the EU
Referendum), will be likely to lead to higher interest rates both
in the US and in time in the UK. It is possible that the long
period of ultra-low inflation and interest rates will come to an
end as supply tightens, wage-push pressures increase and demand
continues to be strong, fuelled by infrastructure spending. In our
view, an interest rate rise of 0.25% in the UK is a distinct
possibility this year.
Personal investors will need to be positioned to withstand
continued political volatility as a number of major EU countries
have general or presidential elections in 2017. The results may
change the shape of EU politics and the coalitions in those
countries. They will also therefore shape the nature of the EU with
which the Prime Minister must negotiate our exit after Article 50
is triggered, expected by the end of March. It should be noted
that, in contrast to many financial services companies, the Group's
business has little exposure concerns over access to the Single
Market.
We remain focused on innovation in 2017 as we begin to move from
'Investing' to 'Transforming and Delivering'. We plan to launch new
services and products, including a new version of our mobile app to
incorporate dealing and funding functionality and the Lifetime ISA.
We will also be refreshing our website, commencing services for
Computershare and taking on customers from Invesco Perpetual.
Assuming that market conditions and the government/regulatory
backdrop remain supportive, the Group is well positioned for
revenue and underlying earnings growth as well as further growth in
assets under administration.
For these reasons, in addition to 2017 starting well, we look
forward with a high degree of confidence to the future and to
reporting on progress as we move through the year.
Gavin Oldham
Chairman
8 March 2017
A REVIEW OF 2016
STRATEGIC REPORT - KEY EXTRACTS
Key extracts from the Strategic Report are set out below. The
full Strategic Report will be available in the 2016 Annual
Report.
DELIVERY OF THE STRATEGY
The business strategy of the Group is based on three key
elements: 'Putting Customers First'; 'Focus on our Core Business';
and delivering 'Strategic Partnerships or Acquisitions'.
PUTTING CUSTOMERS FIRST
Ensuring that customers are at the forefront of all that we do
remains a core principle. Our simple flat-fee structure introduced
in July 2013 looks increasingly competitive compared to other firms
who have opted to maintain value-related charging structures, which
penalise investors' investment diligence and success. Over the
year, we continued to see strong rates of transfers-in relative to
transfers-out and our revenue from fees in 2016 has outperformed
our peer group.
We believe that our strong commitment to putting customers first
is reflected in the eight industry awards we won over the year.
These included Investment Trends' prestigious award for 'Overall
Client Satisfaction', which we won for the third successive year
against all the larger brands in the sector. The award was based on
a survey of over 12,000 individual personal investors, making it
the largest annual survey of retail investor opinions undertaken in
the UK. Visitors to our website will see the eight industry awards
that we won during 2016, matching the eight in 2015. We also ended
the year with an average rating of 8.8/10 from over 500 reviews on
the Trustpilot review site.
Technological innovation is a dominant theme for the business
and 2016 saw the start of our technology investment programme to
improve and significantly enhance our systems. Our focus has been
on customer-facing technology and during the year we built and
launched our first mobile and tablet application for both Android
and iOS (Apple) users, allowing customers to view account, market
and company information. The app was received very positively by
users and we plan to add funding and trading functionality in
2017.
We also made significant improvements to our website, including
its charting capability, and launched new select lists to help
customers navigate the market, focusing on exchange traded
products, index tracking funds and investment trusts. We were also
the first and only broker to introduce Flexible ISA functionality
as soon as it was possible on 6 April 2016.
We have also been working with a specialist website design
agency to enhance our website and the first deliverables are due in
2017.
Our three in-house 'Fund of Funds' increased the value of funds
under management by 40% to GBP70m from GBP50m. This bodes well for
investor appetite for these straightforward investment options in
2017.
We have worked hard to ensure that we provided a continual flow
of investment guidance during 2016. It was particularly heartening
to see that over 75% of trades on the day of the EU Referendum
result were 'buys' as our retail investor customers recognised the
opportunity that the initial market 'wobble' presented.
We held four customer events in 2016, with topics ranging from
Exchange Traded Funds ('ETFs') and investment trusts, to global
events and their impact on the markets. In addition, as part of our
continuing efforts to listen to our customers, we have a group of
50 investors who provide us with their counsel, as we look to make
further improvements to our customers' digital experience.
FOCUS ON OUR CORE BUSINESS
As planned, during 2016, we successfully changed the underlying
database technology for our core systems and commenced a review of
our operational processes ready for the creation of our new
back-office systems that will support the Group's administrative
operations. This replacement will be a careful multi-year
programme, with the objective of creating a new core systems
platform that is ready to take advantage of the latest
technological advances in the future.
We have taken the deliberate decision to build our new systems
internally, positioning The Share Centre at the forefront of our
industry when delivering the latest products and innovation for our
customers. This approach will also provide us with greater
flexibility when delivering services for our corporate
partners.
We continue to be focused on our core business of retail
stockbroking - providing custody and transactional services to
personal investors either in our own brand or through the brands of
other organisations. Advertising and public relations activities
remain key tools to promote our services and, in 2016, we achieved
a record amount of media coverage. In 2016 we agreed the disposal
of Sharefunds to Treasury Capital Ltd. That disposal has received
regulatory approval and we expect it to complete on 24 March
2017.
STRATEGIC PARTNERSHIPS OR ACQUISITIONS
We acquired three further books of customer accounts over the
year. These were from Barclays Bank plc ('Barclays'), European
Pensions Management Ltd ('EPML') and Invesco Perpetual. The
accounts we acquired from Barclays comprised investment clubs,
corporate and charity accounts, and the transfer took place in
February 2016. This second agreement with Barclays followed the
launch of our certificated dealing service to Barclays' customers
in 2015. In August, we acquired a small number of ISA client
accounts from EPML, following its insolvency. Our agreement with
Invesco Perpetual was signed in December 2016 and was our largest
acquisition of customer accounts in the year. Under the agreement,
we have acquired a book of accounts covering up to 8,700 customers
and over GBP200m of assets under administration, predominantly in
ISA accounts. We expect the acquisition to complete in April 2017
and are delighted that Invesco Perpetual chose The Share Centre as
the best home for its customers.
In addition to these acquisitions, we signed an agreement with
Computershare to provide certificated dealing and corporate nominee
dealing services to shareholders of Computershare's corporate
clients. We look forward to launching these new services in the
next few months. We have also already launched a new service
helping the estates of deceased shareholders.
We aim to secure further similar agreements and our focus is on
developing relationships with large organisations looking to offer
their customers the best possible investment custody and
administration services. We will also continue to look for any
suitable corporate acquisition opportunities.
FINANCIAL PERFORMANCE
The market backdrop in the first half was relatively weak, with
subdued trading activity ahead of the EU Referendum, and, as we
reported, first half revenue excluding interest was up 1%
year-on-year. Following the EU Referendum result, trading volumes
strengthened, helped by the acquired Barclays accounts. Revenue
growth excluding interest in the second half was up 15%
year-on-year, although this also reflects a much weaker comparative
in 2015. Despite strong client money balances, the reduction in
interest rates by the Bank of England in August impacted interest
income with a number of our counterparties ceasing to pay
interest.
One feature of the second half was the rise in stock markets,
with the FTSE All Share climbing 10%. The RDR required companies to
review their charging structures by April 2016 and, with trail
commission no longer available, a number of our peers have shifted
their revenue models towards fee-based charges. These fees are
often based on the value of customer holdings and therefore
increase or decrease with the value of those holdings. In a rising
market, as we saw in the second half, this penalises the customer.
By contrast, The Share Centre has adopted a simple low fixed-rate
account administration fee. This positions The Share Centre very
competitively, especially against value-related fee structures and
particularly in inactive markets, relative to its peers. However we
do not benefit to the same extent in rising markets as the second
half demonstrated.
The key elements of the Group's financial performance are set
out in more detail below.
REVENUE
Overall revenue increased by 4% to GBP14.6m (2015: GBP14.1m).
Excluding interest, revenue increased by 8% to GBP13.8m (2015:
GBP12.8m). As can be seen from the Key Performance Indicators
below, this performance was ahead of the market as a whole and
resulted in record market share.
Commission income
The Group generated its highest ever annual commission revenue
over the year, with commission revenue increasing by 10% to GBP7.0m
(2015: GBP6.4m). This reflected a number of factors including
stronger investor activity in the second half and the impact of new
partnerships and acquisitions, in particular the benefit of a full
year of the Barclays certificated dealing service and the
acquisition of Barclays investment clubs.
Our commission revenue growth significantly outperformed our
peer group, which delivered commission revenue growth of 2%.
Compeer, an independent company which gathers and provides data and
analysis to the wealth management community, estimates that
on-exchange trades by retail firms increased by 3% in 2016 compared
to 2015. The Group grew its trading volumes by 11%, indicating that
the Group also outperformed its wider peers.
Fee income
Revenue from fees increased by 6% from GBP6.4m to GBP6.8m, again
a record, compared to an increase of 4% for the peer group. New
account acquisition was again strong in 2016 and included a large
number of transfers-in of accounts from other providers. This
reflected trends in the wider market as highlighted by the July
2016 UK Online Broking Report by Investment Trends, which estimated
that in the last year 900,000 online investors placed one trade or
more, with nearly one in ten of them having been inactive for at
least a year and resuming their trading activity. 2016 was also
another successful year for our Enterprise Investment Scheme
('EIS') and Business Property Relief ('BPR') administration
business, which provides core custody and dealing services to a
growing number of around 180 funds and 24 fund managers.
Interest income
Cash held on behalf of customers at 31 December 2016 was up 65%
to GBP296m (31 December 2015: GBP179m). This was partly due to the
acquisition of accounts but also reflected customers' inability to
earn an interest return on their cash elsewhere. Interest income
however reduced by 35% to GBP0.8m (2015: GBP1.3m), which reflected
the decrease in interest rates by the Bank of England. In addition,
a number of our counterparties, for regulatory reasons, are showing
limited appetite to accept client money deposits and stopped paying
interest. As we have said before in previous reports, a number of
our peers are part of larger banking entities and so can benefit
from higher internal rates on cash deposits. We also believe that
some of our peers are now using relatively higher risk
counterparties, where money can be placed at higher rates.
Reflecting both these factors, interest income for the peer group
increased by 16%. Consequently, we believe that to exclude interest
from our key performance indicator of market share of benchmarked
revenue, is currently a more appropriate core business indicator of
our relative performance against our peer group.
With the reduction of interest income and improved trading
activity, the revenue mix between commission, fees and interest
shifted to 48%, 46% and 6% respectively in 2016 from 45%, 46% and
9% respectively in 2015.
Over the last five years, commission has grown by 24%, which
together with the growth in fees has more than compensated for the
loss of interest earned at historically higher rates.
The Group has always placed a high degree of importance on the
quality of its revenue and the level of recurring revenue
represented by fees and interest in 2016 was GBP7.6m (2015:
GBP7.7m) and covered 48% of the Group's costs (2015: 51%).
COSTS
Overall costs for the year increased by 7% to GBP16.0m (2015:
GBP14.9m), this was partly driven by an increase in transactional
costs from GBP1.9m to GBP2.2m. This reflected higher trading
volumes and a full year of the Barclays certificated dealing
service. Overheads of GBP13.8m (2015: GBP13.0m) were up 6%,
primarily due to staff costs rising by 8% to GBP7.9m (2015:
GBP7.3m). This followed our decision to strengthen our IT and
Digital Marketing expertise, as we invest in our systems and
transform our customer proposition. We only needed to implement a
limited increase in headcount in our customer facing and support
functions despite launching new services and acquiring accounts,
highlighting the scalability of our core business.
The second largest cost incurred by the Group is marketing.
Trading conditions were more conducive to customer account
acquisition in the second half of the year and we increased our
marketing activity accordingly. Overall, year-on-year spend on
marketing reduced to GBP1.8m (2015: GBP1.9m) as we were able to
utilise our investment in in-house digital marketing capability to
reduce spend with third parties by 3%.
Share-based payment charges for long term equity incentives were
GBP0.6m (2015: GBP0.6m). The share-based charge is recorded as a
cost and then credited back to reserves as it does not impact the
financial resources of the business.
Staff costs and marketing spend together totalled GBP10.4m
(2015: GBP9.8m) and represented 65% (2015: 65%) of total costs.
Other expenditure relates to premises, IT systems and professional
fees.
The Group also incurs regulatory fees and levies and
irrecoverable VAT. In 2016, our costs in respect of the FSCS were
43% lower at GBP270,000 (2015: GBP478,000). This was due to a lower
charge in 2016, together with a refund received after the year end.
After a 40% rise in 2015, the reduced cost in 2016 highlights the
unpredictable nature of what is a material cost to the Group and
one which is outside our control. The basis of allocation for the
FSCS levy is based on past revenues rather than taking into account
the risk profile of firms and the amount of capital that they hold.
As we have reported before, we believe this basis of allocation
remains inherently unfair, penalising firms with lower risk
profiles.
PROFITABILITY
As expected, Group profitability decreased in the year as a
result of three key factors: higher staff costs relating to our
transformation programme; reduced interest income and increased
transactional costs from higher trading volumes. The increase in
commission and fee income mitigated to some extent these factors
but the net result was that the Group made an overall operating
loss of GBP1.3m (2015: loss of GBP0.9m). During 2016, we sold
85,727 of our 145,727 shares in LSE, realising proceeds of GBP2.4m,
which further strengthened the Group's balance sheet. A net profit
on the sale of GBP2.1m was recognised in our consolidated income
statement.
The Board believes that underlying earnings per share which
strip out one-off items (such as the sale of LSE shares) and
non-cash share-based payment charges, better reflects the
performance of the Group. On this basis, earnings decreased to 0.0p
(2015: 0.4p). At a reported level, earnings per share were 0.5p
(2015: 0.5p).
BALANCE SHEET
The Group's balance sheet remains very strong with no debt and
significant cash balances of GBP11.4m (2015: GBP11.7m) with the
sale of our shares in LSE offsetting the operational cash outflow.
During the year the financial statements were updated to correct
the accounting treatment of employee benefits and foreign exchange
gains and losses on available-for-sale assets. These
reclassifications resulted in a restatement of prior year balances
within the consolidated balance sheet. The restatements have had no
impact on the consolidated income statement.
The Group's financial position is further strengthened by
available-for-sale investments of GBP6.0m (2015: GBP7.6m),
primarily in LSE and Euroclear plc, the largest international
central securities depository in the world. The dividends from
these investments totalled GBP216,000 (2015: GBP207,000), which is
substantially in excess of the possible current interest return on
Group cash.
The increase in the carrying value of our shares in Euroclear
plc to GBP3.9m (2015: GBP3.3m), predominately arising from the rise
in the value of the Euro in the period, reflects the estimated fair
value of each share. The only other significant investment that the
Group holds to which it attributes a carrying value is Professional
Partners Administration Limited ('PPAL'), valued at GBP0.2m.
The increase in the value of intangible assets in 2016 to
GBP2.0m (2015: GBP0.1m), represents the purchase of customer
accounts from third parties (GBP0.8m), purchased software (GBP0.2m)
and systems development for our technology programme (GBP1.0m).
Overall shareholder funds as at 31 December 2016 stood at
GBP17.7m (2015: GBP18.7m). This represents 12.3p per share in issue
(2015: 13.0p). The remaining working capital balances on the
balance sheet principally reflect open customer positions with the
Group and the market, i.e. unsettled customer sales and purchases,
which all effectively net to zero as each side has both an asset
and a liability with the Group as agent in the middle. Finally the
remaining balances net to a liability largely in respect of
non-current deferred tax.
KEY PERFORMANCE INDICATORS
The Group uses a number of key performance indicators to monitor
and measure its progress through the year. These are both
quantitative and qualitative, and relate to activity levels as well
as financial metrics. The key performance indicators discussed
below are consistent with those disclosed in previous Annual
Reports.
BUSINESS PERFORMANCE
MARKET SHARE
The principal key performance indicator, on which the Group
reports quarterly, is its market share of benchmarked revenues.
This is measured using the peer group of eight other retail
stockbrokers and serves to benchmark our performance irrespective
of underlying market trends which affect the industry as a whole.
The data for the measurement of this indicator is drawn from
Compeer.
The data shows that the Group has outperformed its peers during
the year in terms of revenue growth. Commission and fee revenue
increased by 8% compared to the collective peer group which
experienced an increase of 2%. For the year as a whole, our market
share excluding interest increased to a record 9.85% (2015: 9.39%).
The fourth quarter data showed a market share of 9.79% (Q4 2015:
8.98%). Overall revenues for the Group increased by 4% compared to
the collective peer group which experienced an increase of 6%. For
the year as a whole, reflecting the factors driving the growth in
interest income for the peer group, our market share including
interest decreased to 7.64% (2015: 7.79%). The fourth quarter data
showed a market share of 7.48% (Q4 2015: 7.17%).
MARKETING AND CUSTOMERS
We measure the levels of interactions with customers and
prospective customers through a range of metrics. As for other
online businesses, these metrics include our website up-time and
analysing our marketing 'funnel' from website traffic to accounts
opened (including transfers-in from other brokers). Our website
continues to attract high numbers of visitors and remains the
predominant route through which new accounts are opened. In 2016,
the average monthly number of unique visitors grew to over 190,000
(2015: 173,000). We also monitor our customer activity and income
they generated by product. At the end of 2016, there were 250,000
accounts which contained assets (2015: 248,000). Whilst net new
account acquisition was positive during the year, we took the
opportunity to close 4,000 dormant, empty and deceased
accounts.
We closely measure the level of customer satisfaction, primarily
through Trustpilot, a review site for customers. Our average score
in 2016 was 8.8/10 (2015: 8.8/10) and we received 2.66 complaints
per 1,000 customers (2015: 2.18). We continue to have very low
levels of complaints referred to the Financial Ombudsman, with just
12 in 2016 (2015: 7), with none upheld against us (2015: 1).
PEOPLE
The high levels of customer satisfaction that we aspire to are
only achievable with the dedication and commitment of our
employees. All our people are critical to our customer proposition
and we are very proud of the staff we employ. We monitor levels of
headcount, staff costs and absence on a monthly basis. At 31
December 2016, reflecting out investment programme, our headcount
increased to 185 (2015: 169). We also assess staff turnover rates
which in 2016 decreased to 21% (2015: 22%), reflecting the
relatively higher turnover experienced by businesses such as The
Share Centre who provide customer contact operations. The ratio of
male to female employees was approximately 50:50.
We offer our employees a range of benefits including the
contribution of 8% of base salary into a pension of their choice,
participation by all employees in the Group's profit share
arrangements which pays a profit related bonus, and a Share
Incentive Plan with 2:1 matching of employee contributions. This
latter benefit means a significant proportion of our employees are
shareholders, with 107 employees making regular monthly
contributions into the scheme.
Our annual staff survey, first conducted in 2011, again showed
strong levels of satisfaction amongst our employees with 86% (2015:
87%) of staff agreeing with the assertion "I am proud to work for
The Share Centre", and 86% (2015: 87%) of staff agreeing that they
"would recommend The Share Centre as a good employer".
FINANCIAL
REVENUE
We monitor the absolute levels of revenue and the mix between
the different revenue streams. Data for these metrics is given in
the 'Review of 2016' section above.
OPERATING PROFIT
We monitor operating profit as explained above where the data
for 2016 is given. As a result of the changes that have been made
to the Client Asset rules, the potential for generating interest
income and growing operating profit is reduced but as revenue
increases further we expect to see profits increase, even without
the benefit of interest rate rises.
ASSETS UNDER ADMINISTRATION
The level of assets under administration measures the collective
value of the investments and cash held by our customers. We look at
this in both absolute terms and at the rate of change relative to
overall market levels. At the end of the year, this value was
GBP3.7bn (2015: GBP2.8bn), which represented an increase of 32%
year-on-year. Even with the impact of acquiring additional
accounts, this still shows strong growth compared to the 12%
increase in the FTSE All Share index over the same period. The
increase of 32% was shared between all asset classes but funds
showed a more significant growth, highlighting the attractiveness
of our fixed fee pricing. A rate of increase greater than the
market as a whole indicates the Group's ability to attract new
accounts, additional investment from existing customers and new
partnerships or acquisitions. As a proxy, assuming our customers
performed in line with the FTSE All Share index this would imply a
net inflow of funds of c.GBP570m during 2016 (2015: c.GBP320m).
CASH FLOW
The Group's full cash flow statement is presented on Page 20. We
monitor cash flows on a monthly basis and in particular review the
Group's ability to translate post-tax profits into cash.
FINANCIAL RESOURCES
Two of the entities within the Group are regulated by the FCA,
The Share Centre Limited (FCA registration number: 146768) and
Sharefunds Limited (FCA registration number: 227807). This means
that the Group has to hold a certain amount of regulatory capital.
The Group has a stated policy to maintain at least twice the amount
of regulated capital required. As at 31 December 2016, the Group
was holding 2.6 times the capital required as calculated by the
FCA's Internal Capital Adequacy Assessment Process ('ICAAP') for
2016 (2015: 3.6 times).
The ICAAP assesses the level of capital and financial resources
that should be held by the Group. In summary, the Pillar II
requirement (being the amount that the Group has to hold, as it is
in excess of the Pillar I requirement) is GBP5.6m for 2017 (2016:
GBP5.1m). Full details of our capital requirements are required to
be disclosed under Pillar III of the Capital Requirements Directive
and can be found on our website - www.shareplc.com.
PROSPECTS
The Board believes that 2017 represents a major opportunity for
The Share Centre. In 2016, we highlighted the three key elements to
our five year Business Plan, 'Investing, Transforming and
Delivering'. Having made substantial progress with our investment
element, we expect to be demonstrating greater 'Transformation and
Delivery' in 2017. In particular, we anticipate customer numbers
rising and the Group showing progress in the return to greater
underlying, and then headline, profitability.
Our clearly defined strategy will remain focused around its
three core elements:
PUTTING CUSTOMERS FIRST
Transforming our digital proposition remains a key aspect of our
plans going forward. In 2017, we expect to see the fruition of our
investment in transforming our digital channels. This will include
further development of our mobile app and looking for ways to
enhance the customer experience. We strongly believe that investing
should be an enjoyable enterprise and the complexity of the
language and process which normally surrounds financial services
often acts as a barrier to engagement. We therefore remain
dedicated to the idea of keeping investment as simple and
straightforward as possible and will continue to invest in new
tools and improved research. In this way, we will help customers
navigate their way through investment decisions and arrive at
products and services which most suit their needs.
FOCUS ON THE CORE BUSINESS
At the heart of our business is the customer relationship. That
relationship is based on the provision of custody for the
customer's assets and the facilitation of trading in those assets.
We will continue to ensure we remain focused on that provision of
custody and transaction services for the personal investor.
The three Fund of Funds that we offer - currently through the SF
Portfolio - remain a core part of The Share Centre's proposition.
They allow an easy access point for retail investors into what is
an otherwise complex and crowded funds market. In 2016, we
announced that we were in advanced discussions to transfer our ACD
role, which covers a total of seven funds, four of which are
managed elsewhere, to another party. In January 2017, the transfer
to Treasury Capital Ltd received regulatory approval by the FCA
and, together with the sale of the Sharefunds Limited entity, is
due to complete on 24 March 2017. The Group will continue to manage
the three SF Portfolio Fund of Funds and the sale of Sharefunds
should enable us to look at expanding the distribution channels for
these funds thereby helping to grow funds under management.
STRATEGIC PARTNERSHIPS AND ACQUISITIONS
Retail investment service firms have experienced a number of
significant challenges to their business models. We too have been
affected although not to the same extent as others. We believe that
this is because of our focus on the long term stability of the
Group and the more balanced revenue model that we have operated.
The loss of interest income as rates have remained low and the loss
of trail commission - both of which have also been impacted by
regulatory change - have caused firms to run losses and require
additional capital. We believe that these changes should drive
opportunities in the market for The Share Centre.
We have demonstrated an ability to acquire accounts from, and
work with, large partners and well-known brands including Barclays,
Henderson, Computershare and more recently with Invesco
Perpetual.
The Group is in discussions on a number of other corporate
relationships which could deliver significant benefits to the
Group. There is, of course, no certainty that these will
materialise, but our increasing number of successes provides a
track record of delivery to help win other opportunities. These
opportunities typically have a lead time with some development work
and investment required up front before incremental revenue
generation.
OVERALL OUTLOOK
The Board looks forward with a high degree of confidence to the
future. Whilst we can expect continued political volatility within
the EU, the domestic political environment remains supportive of
personal investors as the Government tries harder still to
encourage individuals and families to save more for their financial
futures. In that context, the Board is confident in continuing to
invest in the business, transforming the proposition but with an
increased emphasis on delivery for stakeholders. On the assumption
that market conditions and the government/regulatory backdrop
remain supportive, we expect to see the benefits of our investment
strategy start to flow through in increased revenue, underlying
earnings and assets under administration, accelerated further if
more partnership or acquisition opportunities materialise.
CONSOLIDATED INCOME STATEMENT
YEARED 31 DECEMBER 2016
Notes 2016 2015
(unaudited) (audited)
GBP'000 GBP'000
--------------------------- ------ -------------- ------------
Revenue 3 14,610 14,050
Administrative expenses (15,956) (14,944)
Operating loss (1,346) (894)
Investment revenues 248 276
Other gains 4 2,119 1,479
Profit before taxation 1,021 861
Taxation 5 (284) (196)
Profit for the year 737 665
Basic earnings per share* 7 0.5p 0.5p
Diluted earnings per
share* 7 0.5p 0.5p
All results are in respect of continuing operations.
* The directors consider that the underlying earnings per share
as presented in Note 7 represent a more consistent measure of the
underlying performance of the business as this measure excludes the
impact of some items, including any large non-recurring items.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2016
Year ended Year ended
31 31
December December
2016 2015
(unaudited) (audited)
GBP'000 GBP'000
----------------------------------------------- -------------- ------------
Profit for the year 737 665
Items that may be classified subsequently
to profit or loss:
Gains on revaluation of available-for-sale
investments taken to equity 110 982
Deferred tax on gains on revaluation
of available-for-sale investments
taken to equity (19) (194)
Exchange gains/(losses) on available-for-sale
investments taken to equity 577 (238)
Deferred tax on exchange (gains)/losses
on available-for-sale investments
taken to equity (115) 47
Deferred tax impact of change 50 -
in tax rates
603 597
Items that have been classified
subsequently to profit or loss:
Gains on revaluation of available-for-sale
investments taken to profit and
loss on disposal (2,122) (1,723)
Deferred tax on revaluation of
available-for-sale investments
taken to profit and loss account
on disposal 424 344
-------------- ------------
(1,698) (1,379)
Total other comprehensive (loss)/income (1,095) (782)
Total comprehensive (loss)/income
for the year (358) (117)
-------------- ------------
Attributable to equity shareholders (358) (117)
-------------- ------------
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
2016 2015
(unaudited) (restated)
GBP'000 GBP'000
-------------------------- ---- ---- -------------- ------------
Non-current assets
Intangible assets 1,970 117
Property, plant
and equipment 263 222
Available-for-sale
investments 5,963 7,637
Deferred tax assets 145 107
8,341 8,083
-------------- ------------
Current assets
Trade and other
receivables 12,462 7,978
Cash and cash
equivalents 11,421 11,663
Current tax asset - 75
23,883 19,716
Total assets 32,224 27,799
-------------- ------------
Current liabilities
Trade and other
payables (13,225) (7,681)
Current tax liability (159) -
(13,384) (7,681)
Net current assets 10,499 12,035
-------------- ------------
Non-current liabilities
Deferred tax liabilities (1,096) (1,418)
Total liabilities (14,480) (9,099)
Net assets 17,744 18,700
Equity and reserves
Equity share capital 718 718
Capital redemption
reserve 104 104
Share premium
account 1,064 1,064
Employee benefit
reserve (1,863) (2,010)
Retained earnings 13,418 13,426
Revaluation reserve 4,303 5,398
Equity shareholders'
funds 17,744 18,700
-------------------------------------- -------------- ------------
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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2015 718 104 1,064 (805) 13,490 6,106 20,677
Prior year adjustments - - - - (74) 74 -
------------------------- --------- ------------ --------- --------- ---------- ------------ -------------
Balance at 1
January 2015
(restated) 718 104 1,064 (805) 13,416 6,180 20,677
Total comprehensive
(loss)/income
for the period - - - - 665 (782) (117)
Dividends - - - - (878) - (878)
Purchase of ESOP
shares - - - (1,849) - - (1,849)
Sales of ESOP
shares - - - 310 - - 310
Cost of matching
& free shares
in the Share
Incentive Plan - - - 215 (215) - -
Profit on sale
of ESOP shares
and dividends
received - - - 119 (124) - (5)
Share-based payment
credit - - - - 551 - 551
Deferred tax
on share-based
payment - - - - (1) - (1)
Share-based payment
current year
taxation - - - - 12 - 12
Balance at 31
December 2015
(restated) 718 104 1,064 (2,010) 13,426 5,398 18,700
Total comprehensive
(loss)/income
for the period - - - - 737 (1,095) (358)
Dividends - - - - (1,019) - (1,019)
Reclassification
of employee benefit
reserve - - - 34 - - 34
Purchase of ESOP
shares - - - (426) - - (426)
Sales of ESOP
shares - - - 227 - - 227
Cost of matching
& free shares
in the Share
Incentive Plan - - - 241 (241) - -
Profit on sale
of ESOP shares
and dividends
received - - - 71 (98) - (27)
Share-based payment
credit - - - - 602 - 602
Deferred tax
on share-based
payment - - - - 7 - 7
Share-based payment
current year
taxation - - - - 4 - 4
Balance at 31
December 2016 718 104 1,064 (1,863) 13,418 4,303 17,744
------------------------- --------- ------------ --------- --------- ---------- ------------ -------------
CONSOLIDATED CASH FLOW STATEMENT
YEARED 31 DECEMBER 2016
Notes 2016 2015
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------------------- ------ --- -------------- -----------
Net cash received/(used in)
from operating activities 9 294 (2,104)
Investing activities
Interest received 32 69
Dividend received from investments 216 207
Purchase of property, plant
and equipment (162) (85)
Proceeds from the disposal
of property, plant and equipment - 2
Purchase of available-for-sale
investments (3) (65)
Proceeds of disposal of available-for-sale
investments 2,360 1,936
Purchase of intangible investments (1,960) (74)
Net cash received from/(used
in) investing activities 483 1,990
Financing activities
Equity dividends paid 6 (1,019) (878)
Net cash used in financing
activities (1,019) (878)
Net decrease in cash and
cash equivalents (242) (992)
Cash and cash equivalents
at the beginning of the year 11,663 12,655
Cash and cash equivalents
at the end of the year 11,421 11,663
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 GENERAL INFORMATION
Share plc is a company incorporated in the United Kingdom under
the Companies Act. The address of the registered office is Oxford
House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ. The
nature of the Group's operations and its principal activities will
be set out in the Strategic Report in the Group's Annual Report for
2016, which will be available as set out in Note 10 below.
The financial statements are presented in pounds Sterling which
is the currency of the primary economic environment in which the
Group operates.
2 BASIS OF PREPARATION
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards ('IFRS') as issued
by the International Accounting Standards Board ('IASB') and
interpretations issued by the International Financial Reporting
Interpretations Committee ('IFRIC') of the IASB (together 'IFRS')
as endorsed by the European Union.
The Company's financial statements have been prepared on the
same basis and as permitted by Section 408 of the Companies Act
2006; no income statement is presented for the Company.
In the current year, the following new and revised Standards and
Interpretations have been adopted and have had no impact on these
financial statements.
- IAS 1 Disclosure Initiative, effective 1 January 2016
- IAS 16 and 38 - Clarification of Acceptable Methods of
Depreciation and Amortisation, effective 1 January 2016
- IAS 19 Employee Benefits - Discount rate: regional market
issue, effective 1 January 2016
- IAS 27 - Equity Method in Separate Financial Statements,
effective 1 January 2016
- IAS 34 Interim Financial Reporting - Disclosure of information
'elsewhere in the financial report', effective 1 January 2016
- IFRS 7 Financial Instruments: Disclosures, effective 1 January
2016
- IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the
Consolidation Exception, effective 1 January 2016
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not yet 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).
The impact of these amendments is yet to be determined.
- IAS 7 Disclosure Initiative - Amendments to IAS 7, effective 1
January 2017
- IAS 12 Recognition of Deferred Tax Assets for Unrealised
Losses - Amendments to IAS 12, effective 1 January 2017
- IFRS 2 Classification and Measurement of Share-based Payment
Transactions, effective 1 January 2018
- IFRS 9 Financial Instruments, effective 1 January 2018
- IFRS 15 Revenue from Contracts with Customers, effective 1
January 2018
- IFRS 16 Leases, effective 1 January 2019
The Group accounts consolidate the financial statements of the
Company and its subsidiaries, The Share Centre Limited, The Share
Centre (Administration Services) Limited, and Sharefunds Limited,
which all make up their annual financial statements to 31 December.
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 Group has considerable financial resources and no external
debt. With a diversified customer base and core recurring revenue
streams along with large elements of discretionary spending in the
Group's cost base, the directors believe that the Group is well
placed to manage its business risks successfully despite the
uncertain political and economic outlook. An analysis of the
Group's principal business risks will be published in the full
financial statements. After making enquiries, the directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future and at least 12 months. Accordingly, the going concern basis
has continued to be used in the preparation of these financial
statements.
The Group's detailed accounting policies are as stated in the
full financial statements which will be published shortly as per
Note 10 below. These policies are consistent with those applied in
the financial statements for the year ended 31 December 2015.
2015 Restatement
During the year the consolidated financial statements were
restated to correct the accounting for foreign exchange gains and
losses on available-for-sale assets. These had historically been
included within retained earnings rather than in the revaluation
reserve, which represents the accumulated other comprehensive
income, (as detailed in IAS 21) and so have been reclassified.
The restatement has no effect on the consolidated income
statement. The effect of the restatement on the balance sheet is as
follows:
Consolidated 2014 Application 2014 2015 Application 2015
balance sheet previously of IAS restated Previously of IAS restated
(extract): reported 21 relating reported 21 relating
to periods to 2015
preceding
2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------ ------------- ---------- ------------ ------------- ----------
Employee benefit
reserve (805) - (805) (2,010) - (2,010)
Retained earnings 13,490 (74) 13,416 13,309 117 13,426
Revaluation
reserve 6,106 74 6,180 5,515 (117) 5,398
Equity shareholders'
funds 20,677 - 20,677 18,700 - 18,700
3 BUSINESS AND GEOGRAPHICAL SEGMENTS
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Chief Executive to allocate resources to
the segments and to assess their performance. There has been no
aggregation of segments and the reportable segments are therefore
represented by the following two business divisions:
The Share Centre - this is the main trading business and
provides stockbroking and custodian services to retail investors.
Operating wholly in the UK, the great majority of this business is
done directly with those retail customers, though in some cases the
relationship is through a third party, typically on a
white-labelled basis. Additionally, The Share Centre acts as
investment manager to the SF Portfolio.
Sharefunds - this is the division which operates a fund
administration service. The division's customers are authorised
funds for whom a range of administration services may be provided.
This can include taking on the role of ACD.
The split of revenues and operating profit are therefore as
below.
The Share Sharefunds Total
Centre
2016 2015 2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- ----------- ---------- -------- --------
Revenue 13,763 13,387 847 663 14,610 14,050
Operating (loss)/profit (1,526) (1,012) 180 118 (1,346) (894)
------------------------- -------- -------- ----------- ---------- -------- --------
It should be noted that the accounting policies of the
reportable segments are the same as the Group's accounting policies
described in Note 2 and that there were no major customers
contributing more than 10% of revenues in the Group as a whole. The
assets of the Group are principally used by The Share Centre. The
services offered by the Group vary by business division as
described above. However, within each business division no further
segmentation by service is offered. Sharefunds has no material
assets which would meaningfully be separated from The Share Centre,
other than cash of GBP774,000 (2015: GBP556,000).
4 OTHER GAINS
2016 2015
(unaudited) (audited)
GBP'000 GBP'000
---------------------------------- ------------- -----------
Disposal of available-for-sale
investments 2,122 1,723
Write down of available-for-sale
investments (3) (246)
Profit on disposal of property,
plant and equipment - 2
2,119 1,479
---------------------------------- ------------- -----------
In the year the Group sold 85,727 (2015: 77,000) London Stock
Exchange Group plc 5p ordinary shares at an average price of
GBP27.53 (2015: GBP25.14), receiving total consideration of GBP2.4m
(2015: GBP1.9m). The average weighted cost of the shares to the
Group was GBP2.77 (2015: GBP2.77) per share.
5 TAXATION
2016 2015
(unaudited) (audited)
GBP'000 GBP'000
------------------------------------- -------------- ------------
Current tax:
Corporation tax charge on the
income for the year (249) (204)
Adjustments in respect of prior
periods (47) 3
Deferred tax:
Origination and reversal of timing
differences 12 5
(284) (196)
------------------------------------- -------------- ------------
The tax assessed for the current year can be reconciled to the
profit per the income statement as follows:
2016 2015
(unaudited) (audited)
GBP'000 GBP'000
------------------------------- -------------- ------------
Profit before taxation 1,021 861
------------------------------- -------------- ------------
Tax at 20% (2015: 20%) (204) (174)
Effects of
Items not deductible for tax
purposes (21) (3)
Foreign tax suffered (25) (20)
Prior year adjustments (47) 5
Exempt dividend income 43 42
Tax payment made on behalf of
Employee benefit scheme (3) (11)
Share-based payments (27) (35)
------------------------------- -------------- ------------
(284) (196)
------------------------------- -------------- ------------
In addition to the amount charged to the income statement,
deferred tax relating to the revaluation of the Group's investments
amounting to GBP340,000 (2015: GBP197,000) has been credited to
other comprehensive income. A current tax credit of GBP4,000 (2015:
GBP12,000) and deferred tax credit of GBP7,000 (2015: GBP1,000
charge) relating to excess deductions on share-based payments have
been taken to equity.
The current year tax rate used above (20%) is based on the
corporation tax rate from 1 April 2015 to 31 March 2017. The
standard rate of corporation tax in the UK will change from 20% to
19% with effect from 1 April 2017, and 17% with effect from 1 April
2020 as per the Finance Act 2016, enacted on 15 September 2016.
6 DIVIDS
2016 2015
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------------- -------------- ------------
Amounts recognised as distributions
to equity holders in the period
2015 final dividend paid of 0.74p
per ordinary share 1,063 891
Less dividend due to shares held via
ESOP (44) (13)
-------------------------------------- -------------- ------------
1,019 878
-------------------------------------- -------------- ------------
The directors are proposing a final dividend of 0.25 pence per
share in respect of the year to 31 December 2016 (2015: 0.74
pence). This would amount to a dividend payment of GBP345,000 given
the current share capital.
7 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares during the year.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue assuming
conversion of all potential dilutive ordinary shares. The potential
ordinary shares consist of those share options and warrants where
the exercise price is less than the average price of the Company's
ordinary shares during the year. The calculation results in a
difference of only a small fraction of a penny, which is eliminated
in roundings.
Underlying basic and diluted earnings per share are calculated
as for basic and diluted earnings per share but using an adjusted
earnings figure before any one-off gains, losses, income or
expense. The directors consider that the underlying earnings per
share represent a more consistent measure of the underlying
performance of the Group.
2016 2015
(unaudited) (audited)
Earnings GBP'000 GBP'000
Earnings for the purpose of basic
and diluted earnings per share, being
net profit attributable to equity
holders of the parent company 737 665
Other gains and losses (2,122) (1,723)
FSCS levies 272 478
Share-based payments 602 551
One-off Board changes (recruitment,
bonus and related costs) - 73
One-off redundancy/termination costs 24 58
One-off adjustment to available-for-sale
investment valuation 3 246
Profit share impact of the above adjustments 154 40
Taxation impact of the above adjustments 334 167
-------------- ------------
Earnings for the purposes of underlying
basic and diluted earnings per share 4 555
-------------- ------------
2016 2015
Number of shares Number Number (000s)
(000s)
Weighted average number of ordinary
shares 145,007 145,147
Non-vested shares held by employee
share ownership trust (5,679) (5,917)
-------- --------------
Basic earnings per share denominator 139,328 139,230
Effect of potential dilutive share
options 4,111 4,312
-------- --------------
Diluted earnings per share denominator 143,439 143,542
-------- --------------
Basic earnings per share (pence) 0.5 0.5
Diluted earnings per share (pence) 0.5 0.5
Underlying basic earnings per
share (pence) 0.0 0.4
Underlying diluted earnings per
share (pence) 0.0 0.4
-------- --------------
8 INTANGIBLE ASSETS
Share.com Purchased Purchased Systems Total
domain customer software development
name accounts
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2015 164 57 59 - 280
Additions - 57 17 - 74
At 31 December
2015 164 114 76 - 354
Additions - 799 185 976 1,960
Amounts written
off in the year - (57) - - (57)
------------------ ---------- ---------- ---------- ------------- --------
At 31 December
2016 164 856 261 976 2,257
------------------ ---------- ---------- ---------- ------------- --------
Amortisation
At 1 January
2015 164 51 1 - 216
Charge for the
year - 7 14 - 21
------------------ ---------- ---------- ---------- ------------- --------
At 31 December
2015 164 58 15 - 237
Charge for the
year - 77 15 15 107
Amounts written
off in the year - (57) - - (57)
------------------ ---------- ---------- ---------- ------------- --------
At 31 December
2016 164 78 30 15 287
------------------ ---------- ---------- ---------- ------------- --------
Net book value
At 31 December
2016 - 778 231 961 1,970
------------------ ---------- ---------- ---------- ------------- --------
At 31 December
2015 - 56 61 - 117
------------------ ---------- ---------- ---------- ------------- --------
During the year, the Group purchased customer accounts from
Barclays Bank plc and European Pensions Management Limited,
together with initial consideration in respect of those accounts to
be acquired from Invesco Perpetual.
In addition, the Group is currently developing its website and
has launched a mobile application, which is represented by systems
development additions in the year.
Amounts written off during the year relate to the Wills & Co
customer list which was purchased in 2010. As at 1 January 2016 the
asset had been surpassed its useful life of five years and the
carrying value was GBPnil.
9 NOTES TO THE CASH FLOW STATEMENT
2016 2015 (audited)GBP'000
(unaudited)
GBP'000
----------------------------- --- --- ------------- ---------------------
Operating loss (1,346) (894)
Other losses including
ESOP (192) (1,544)
Depreciation of property,
plant and equipment 121 111
Amortisation of intangible
assets 108 21
Share-based payments 602 551
Operating cash flows
before movement in working
capital (707) (1,755)
(Increase)/decrease
in receivables (4,484) 442
Increase/(decrease)
in payables 5,544 (769)
Cash generated by/(used
in) operations 1,060 (327)
Income taxes paid (59) (22)
------------- ---------------------
Net cash received from/(used
in) operating activities 294 (2,104)
--------------------------------------- ------------- ---------------------
10 AVAILABILITY OF REPORT AND ACCOUNTS
The Group's full report and accounts will be dispatched to
shareholders, including those in nominee accounts who have opted-in
to receive it, as soon as is practicable. Copies will also be
available on the Group's website, www.shareplc.com, and on request
from the Group's head office at Oxford House, Oxford Road,
Aylesbury, Buckinghamshire, HP21 8SZ.
11 ANNUAL GENERAL MEETING
The Annual General Meeting is to be held on Wednesday 7 June
2017. Notice of the AGM will be despatched to shareholders with the
Group's report and accounts.
12 PRELIMINARY ANNOUNCEMENT
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31
December 2016 or 2015. The financial information for the year ended
31 December 2015 is derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The
auditors reported on those accounts; their report was unqualified,
it did not draw attention to any matters by way of emphasis without
qualifying their report and it did not contain a statement under
s498(2) or (3) Companies Act 2006. The audit of the statutory
accounts for the year ended 31 December 2016 is not yet complete.
These accounts will be finalised on the basis of the financial
information presented by the directors in this preliminary
announcement and will be delivered to the Registrar of Companies
before the Company's Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUAAWUPMGRR
(END) Dow Jones Newswires
March 09, 2017 02:00 ET (07:00 GMT)
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