TIDMSHRE
RNS Number : 3157I
Share PLC
08 August 2019
AIM: SHRE
Share plc
("Share" or "the Group" or "Company")
A leading independent retail stockbroker, operating as The Share
Centre (www.share.com)
Interim results
for the six months to 30 June 2019
HIGHLIGHTS
Financial
-- Revenues up 9% to GBP11.1m (H1 2018: GBP10.2m), reflecting
the benefits of prior acquisitions of customer accounts
-- Group returned to profitability:
- Earnings before interest, tax, depreciation and amortisation
('EBITDA') of GBP0.8m (H1 2018: loss of GBP0.2m)
- Operating profit of GBP0.1m, including GBP0.2m of one-off
costs (H1 2018: loss of GBP0.5m)
- Statutory profit before tax of GBP0.2m (H1 2018: loss
of GBP0.3m); statutory earnings per share increased to
0.1p (H1 2018: loss of 0.2p)
-- Underlying(1) profit after tax increased to GBP0.5m (H1 2018:
GBP0.1m); Underlying(1) earnings per share increased to 0.3p
(H1 2018: 0.0p)
-- Assets under administration at record level, up 5% to GBP5.3bn
(H1 2018: GBP5.0bn)
-- Significant improvement in operating cash flows, with an inflow
of GBP1.9m (H1 2018: GBP0.4m outflow)
-- Strong balance sheet, with shareholders' funds up 10% to GBP19.8m
(H1 2018: GBP17.9m)
Operational
-- The final stages of the Group's digital transformation programme
have now completed, following the release of additional functionality
and enhancements to the new website
-- Our app continues to gain traction with customers, executing
16% of their trades at the end of June 2019 (December 2018:
8%)
-- Up to 20,000 J.P. Morgan customer accounts with assets of c.GBP750m
are due to transfer in September 2019
Outlook
-- The Board expects the Group's financial performance to continue
to improve in line with market expectations, despite the continuing
challenging trading conditions, principally caused by the uncertainty
over Brexit. A recent customer survey showed that 40% favoured
leaving on 31(st) October without a deal in place while recognising
the likely negative impacts on markets and investments. We
anticipate trading volumes will recover as the political position
is resolved and personal investors re-position their portfolios
(1) Excludes the impact of some items, in particular any large
non-recurring items and share based payment charges as defined in
note 5.
Richard Stone, Chief Executive, commented:
"I am pleased to report that the Group returned to profitability
in the first half as expected, despite weaker trading conditions.
Subdued investor sentiment has resulted in a significant drop in
trading volumes across the market from which Share is not immune.
However, the engine of our growth has been the acquisition of
customer accounts, coupled with our attractive flat-fee structure
and high service levels, and this is set to continue. This was the
Group's first H1 operating profit since 2014 and it is worth noting
that had trading in the first half of 2019 been at the levels seen
in the same period in 2018, operating profit would have been
GBP0.4m higher at GBP0.5m.
"The first half also saw the substantial completion of our
digital transformation programme. This three year project has
transformed our digital proposition and will continue to support
our growth ambitions.
"While political and economic uncertainty is likely to continue
to adversely affect investor sentiment in the short term, we
believe that Share remains in a strong position to continue its
momentum over the second half. We look forward to welcoming the new
customers who will transfer from J.P. Morgan in September. We
therefore remain well-positioned to continue to build on the good
progress that we are making."
Contacts:
Share plc
Richard Stone, Chief Executive T: 01296 439 270/07919 220 599
Mike Birkett, Finance Director T: 01296 439 479
Jenny Burke, PR Manager T: 01296 439 436
Cenkos Securities plc (Nominated T : 020 7397 8900
Adviser)
Mark Connelly
KTZ Communications (Financial Public T: 020 3178 6378
Relations)
Katie Tzouliadis, Dan Mahoney
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 AIM-quoted (SHRE) parent company of a group
whose principal business is The Share Centre Limited. 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 stock market. These include Share Accounts, ISAs, Junior
ISAs, Child Trust Funds and SIPPs, all with the benefit of
investment guidance, and dealing in a wide range of investments.
The Share Centre also provides a certificate dealing service and
offers three Funds of Funds, which are managed in-house. Services
available to corporate clients include Enterprise Investment Scheme
and other tax advantaged scheme administration and 'white-label'
dealing platforms.
For more details, visit www.shareplc.com or www.share.com.
CHAIRMAN'S STATEMENT
Introduction
We are pleased to report that the Group has returned to
profitability as expected in the first half. This was achieved
despite a challenging market backdrop and reflects the benefits of
growth initiatives, including the acquisition of customer
accounts.
Revenues for the first six months of the financial year
increased by 9% to GBP11.1m (2018: GBP10.2m) and assets under
administration rose by 5% from June 2018 (GBP5.0bn) to a record
GBP5.3bn, reflecting continued inflows. This compares to a market
fall of 3% over the same period. Operating profit was GBP0.1m,
which represented a GBP0.6m turnaround against the same period last
year (2018: loss of GBP0.5m). The move into profitability would
have been stronger if one-off costs of GBP0.2m related to the
approach from Interactive Investor Services Limited ('Interactive
Investor') had been excluded. After investment revenues of GBP0.1m,
profit before tax was GBP0.2m, which compared to a loss in 2018 of
GBP0.3m including GBP0.2m of investment revenues.
Investor activity remained subdued over the period and our own
trading volumes were down 18% on the same period last year.
Reported volumes on the London Stock Exchange were down 24% on the
first half of 2018. This is a consequence of the current market
uncertainty over Brexit and the political climate. High profile
issues such as those surrounding the Woodford Equity Income Fund
also served to undermine investor confidence in the funds
industry.
In May 2019 we reported that we had been approached about a
possible combination, and subsequently confirmed that Interactive
Investor had withdrawn from discussions for reasons associated
purely with their own business. The Board's position, as set out in
my speech at our Annual General Meeting (www.share.com/agmspeech),
remains to consider any serious approach from third parties as and
when they arise but management's main focus is on pursuing its
growth plans for the business.
Strategic delivery
Our growth strategy is based on three core themes, 'Putting
Customers First', 'Focusing on the Core Business' and seeking
'Strategic Partnerships and Acquisitions' and we continued to
deliver against each.
The programme to evolve and improve our digital platform and
proposition has been a key focus over the last three years. During
the first half of the year, we made further significant
enhancements, introducing new dealing screens and new functionality
such as the 'quick deal' capability. The major elements of this
programme are now complete, however we will continue to enhance and
develop the dealing platform and customer touchpoints as an ongoing
operational programme.
The benefits of our digital transformation strategy are
therefore coming through and the proportion of trades executed
through our App, whether via a smartphone, tablet or other devices,
rose to 16% of their trades in June.
We have also continued to invest in technology that assists our
customer service teams. In the period, we introduced a third party
training tool that will help to build knowledge across the teams.
This complements other innovative technology that we have adopted
to enhance customer service by enabling timely customer
feedback.
A significant area of work that continues concerns regulatory
compliance and implementing the requirements of EU legislation,
specifically MiFID II, which took effect in January 2018. Investors
are seeing the results in their valuation statements and the
presentation of costs and charges before and after trading. We
welcome the increase in transparency and believe that investors
will benefit from being better able to identify costs, including
the potential high costs of our competitors' value-related charging
structures as compared with our own simple, flat-fee model.
Our acquisition and partnership strategy continues to make good
progress. In April, we were able to name J. P. Morgan as the
counterparty for the acquisition of a book of accounts,
representing up to 20,000 customers and GBP750m of assets. This
transfer of accounts is scheduled to start in September 2019. We
have also acquired a small book of Child Trust Fund accounts from
Witan. At any one time, there is a pipeline of partner
opportunities at various stages of discussion and we continue to
work on executing them.
Market share
The Group's performance and market share is benchmarked against
a group of 15 retail stockbrokers that are independently surveyed
by Compeer. As its latest data, which covered the first quarter of
2019, was included in our Trading Update on 28 May 2019, we will
provide a further update on the Group's performance relative to
this group when Compeer's second quarter data becomes
available.
Financial results
Revenues
Total revenues in the first half increased by 9% year-on-year to
GBP11.1m (H1 2018: GBP10.2m). This reflected higher fee income and
an increase in interest income that together offset the reduction
in dealing commission. Excluding interest income, revenues rose by
2% to GBP9.5m (2018: GBP9.3m).
-- Dealing commission income
Income from commission decreased by 9% year-on-year, reflecting
reduced trading activity. Our trading volumes were down by 18% on
the same period last year. This was better than the wider market,
with the London Stock Exchange reporting that volumes were down by
24% in the first six months of 2019 compared to the comparable
period in 2018.
-- Fee income
Fee income in the first half of the year increased by 19%
against the same period in 2018. The rise was driven by higher
customer numbers, largely the result of acquisitions made in
2018.
Having completed a review of account administration charges, the
Group implemented a small increase in charges, which took effect
from 6 July. This is the first increase we have made since 2013 and
will help to cover the additional costs associated with
implementing increasing financial regulation. HM Revenue and
Customs has also advised us that there is a change in the VAT
treatment for administration fees, with all fees now quoted as
inclusive of any applicable VAT. This will increase the Group's fee
income but will result in additional administrative expenses
through higher irrecoverable VAT, given that the proportion of the
Group's revenues that are subject to VAT will be significantly
reduced.
-- Interest income
Interest income increased by 89%, which was driven by the rise
in interest rates from August 2018. At the end of the first half,
cash held on behalf of customers decreased by 4% to GBP423m (30
June 2018: GBP439m), reflecting the lower trading volumes and
fluctuations in EIS fund balances for which we provide
administration services.
Costs
Total costs were 3% higher year-on-year at GBP11.0m (H1 2018:
GBP10.7m), although lower trading volumes saw a fall in
transactional costs and we also reduced marketing activity.
Staff costs increased by 9% compared to the first half of 2018,
which mainly reflected the increased headcount in the latter half
of last year. Headcount as at June 2019 was 257 compared to 252 at
December 2018 and 236 at June 2018. With the improvements in our
digital platforms, we expect limited growth in our headcount going
forward.
Depreciation and amortisation costs increased from GBP0.4m to
GBP0.7m due to two factors. Firstly, with the major elements of our
technology programme now complete, amortisation costs increased by
GBP0.2m. Secondly, the reclassification of our lease spend
following the implementation of IFRS 16 Leases at the start of the
year gave rise to an additional GBP0.1m of depreciation, although
there has been a corresponding reduction in overheads. The effect
on the income statement is immaterial.
Profitability
The Group generated earnings before interest, tax, depreciation
and amortisation ('EBITDA') in the first half of GBP0.8m (H1 2018:
loss of GBP0.2m).
Higher revenue, as well as reduced transactional and marketing
costs, drove a major turnaround in operating profit, with GBP0.1m
delivered in the first half of the year against a loss in the same
period last year (H1 2018: loss of GBP0.5m). Without one-off costs
of GBP0.2m incurred as a result of the approach from Interactive
Investor, this result would have been materially higher.
Underlying profit after tax increased significantly to GBP0.5m
(H1 2018: GBP0.1m), and underlying earnings per share rose to 0.3p
(H1 2018: 0.0p). These underlying figures are stated after removing
one-off items (as shown in note 5 below), which included those
costs associated with the Interactive Investor approach and
non-cash share-based payment charges.
Statutory profit before tax for the period was GBP0.2m (H1 2018:
loss of GBP0.3m), and statutory earnings per share were 0.1p (H1
2018: 0.2p loss per share).
In the first half of 2018, a dividend of GBP0.2m was received in
respect of the Group's investment in Euroclear Holding SA
('Euroclear'). Following a change in Euroclear's dividend payment
policy, dividends will now be receivable in the second half of the
year benefiting the Group's second half financial results.
Cash flows and balance sheet
Cash and cash equivalents increased to GBP9.3m at 30 June 2019
(30 June 2018: GBP9.1m). During the period, a dividend of GBP0.8m
was paid (H1 2018: GBP0.6m).
Operating cash inflows for the first half the year amounted to
GBP1.9m (H1 2018: GBP0.4m outflow). This was mainly attributable to
the Group's improved profitability and the net debtor/creditor
movements in the period.
The Group holds equity stakes in the London Stock Exchange and
Euroclear and these investments are currently valued at GBP9.0m on
the balance sheet (H1 2018: GBP6.5m). The increase in the value of
these holdings between the two halves reflects the review of the
carrying value of the Euroclear investment at the end of 2018.
Since 30 June 2019, the value of the London Stock Exchange
investment has increased markedly by GBP0.6m as at 6 August.
Debtor and creditor balances mainly comprise open positions with
the market and customers. Consequently, the movement in these
balances reflects the timing of outstanding trades with these
parties. Following the issue of IFRS 16 Leases, the Group's leases
have been reclassified and are now held on the balance sheet. This
has resulted in an increase to assets (Property, plant and
equipment) and liabilities (Trade and other payables) of GBP1.4m as
at 30 June 2019. The effect on the income statement is
immaterial.
The Group's balance sheet remains strong, with shareholders'
funds up by 10% to GBP19.8m at the period end (2018: GBP17.9m)
equivalent to 13.8p per ordinary share in issue (H1 2018:
12.5p).
Outlook
The immediate outlook remains uncertain for both stockmarkets
and personal investors, with Brexit a major factor. Our survey of
customers conducted in mid-July showed that a substantial
proportion would like the Government to 'get on' with Brexit, with
over 40% favouring leaving on 31 October 2019 without a deal in
place, while at the same time recognising that a 'hard' Brexit will
likely have a negative impact on markets and investments. A
majority believe that the stockmarket will end the year at a lower
level than current levels. It is evident that Brexit uncertainty
has cast a long shadow over trading volumes, but the customer
survey indicates a clear wish for this uncertainty to be resolved
so that investors can re-position their portfolios accordingly.
Meanwhile, we remain focused on our plans to substantially
increase the scale of the business, serving the many 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.
In the second half of the year, we will be welcoming new
customers from J.P. Morgan who will be joining us in September. As
previously stated, this follows an agreement to acquire an active
book of accounts covering up to 20,000 customers and around GBP750m
of assets under administration, predominantly investment
trusts.
We also remain active in our campaigning efforts on behalf of
personal investors. We are focusing on two areas currently, first,
shareholder rights, where we are lobbying for Part 9 of the
Companies Act to be made mandatory for regulated nominee service
providers. This is particularly important given the increased focus
on social impact investing and the desire of personal investors to
engage with the companies they are invested in, not just divest
their holdings. Secondly, we would like to see real energy put
behind the Government's Child Trust Fund programme, in particular
to ensure that all children now aged 16 (and those turning 18 next
year) are aware of their Child Trust Fund accounts, since very
large numbers of HMRC-allocated accounts are currently lost to the
young people to whom they belong. We also believe that these
accounts should be used as a catalyst to improve financial
education of young people.
The need for greater personal participation and engagement in
business from their customers and employees has never been greater,
and The Share Centre is well positioned to help drive and service
that process.
Gavin Oldham OBE
Chairman
8 August 2019
Condensed consolidated income statement
For the six months ended 30 June 2019
Notes Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------ ------ -------------- -------------- -------------
Revenue 11,117 10,175 21,039
Administrative expenses (11,013) (10,695) (21,354)
Operating profit/(loss) 104 (520) (315)
Investment revenues 68 245 293
Other income 19 - -
Lease finance costs 2 (40) - -
Profit/(loss) before tax 151 (275) (22)
Taxation 4 (20) (4) (47)
Profit/(loss) for the period 131 (279) (69)
Earnings per share:
Basic earnings/(loss) per
share (pence) * 5 0.1 (0.2) 0.0
Diluted earnings/(loss)
per share (pence) * 5 0.1 (0.2) 0.0
* The Directors consider that the underlying earnings per share
as presented in note 5 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 10 form part of these financial statements.
Condensed consolidated statement of comprehensive income
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018 (audited)
(unaudited) (unaudited)
GBP'000 GBP'000 GBP'000
----------------------------------------- -------------- -------------- -----------------
Profit/(loss) for the period 131 (279) (69)
Items that will not be classified
to profit or loss:
Gains on revaluation of investments
of equity investments 914 407 1,906
Deferred tax on gains on revaluation
of equity investments (155) (73) (343)
Exchange (losses)/gains on equity
investments - (68) 35
Deferred tax on exchange losses/(gains)
on equity investments - 12 (5)
Deferred tax impact of change
in tax rates 76 58 58
835 336 1,651
Total other comprehensive income
for the period 835 336 1,651
----------------------------------------- -------------- -------------- -----------------
Total comprehensive income for
the period attributable to equity
shareholders 966 57 1,582
----------------------------------------- -------------- -------------- -----------------
Notes 1 to 10 form part of these financial statements.
Condensed consolidated balance sheet
As at As at As at
Notes 30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------- -------------- -------------- -------------
Non-current assets
Intangible assets 3,645 3,394 3,710
Property, plant and equipment 227 281 251
Lease assets 1,346 - -
Equity investments 10 9,287 6,770 8,373
Deferred tax assets 325 215 182
14,830 10,660 12,516
-------------- -------------- -------------
Current assets
Trade and other receivables 26,971 33,513 16,915
Cash and cash equivalents 6 9,310 9,075 8,994
Current tax asset - 147 155
-------------- -------------- -------------
36,281 42,735 26,064
-------------- -------------- -------------
Total assets 51,111 53,395 38,580
-------------- -------------- -------------
Current liabilities
Trade and other payables (28,394) (34,307) (17,671)
Lease liabilities 2 (35) - -
Current tax liabilities (14) - -
-------------- -------------- -------------
(28,443) (34,307) (17,671)
Net current assets 7,838 8,428 8,393
-------------- -------------- -------------
Non-current liabilities
Lease liabilities 2 (1,370) - -
Deferred tax liabilities (1,522) (1,163) (1,442)
(2,892) (1,163) (1,442)
Total liabilities (31,335) (35,470) (19,113)
Net assets 19,776 17,925 19,467
------------------------------- ------- -------------- -------------- -------------
Equity
Share capital 718 718 718
Capital redemption reserve 104 104 104
Share premium account 1,064 1,064 1,064
Employee benefit reserve (1,417) (1,595) (1,422)
Retained earnings 12,136 12,613 12,667
Revaluation reserve 7,171 5,021 6,336
Equity shareholders' funds 19,776 17,925 19,467
------------------------------- ------- -------------- -------------- -------------
This condensed set of financial statements was approved by the
Board on 7 August 2019.
Signed on behalf of the Board
Gavin Oldham OBE
Chairman
Notes 1 to 10 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
2018 (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
Total comprehensive income
for the period - - - - 210 1,315 1,525
Purchases of ESOP shares - - - (334) - - (334)
Sales of ESOP shares - - - 76 - - 76
Cost of matching and
free shares in the SIP - - - 104 (104) - -
Profit on sale of ESOP
shares and dividends
received - - - 327 (327) - -
Share-based payment - - - - 284 - 284
Deferred tax on Share-based
payment - - - - (17) - (17)
Share-based payment current
year taxation - - - - 8 - 8
Balance at 31 December
2018 (audited) 718 104 1,064 (1,422) 12,667 6,336 19,467
Total comprehensive income
for the period - - - - 131 835 966
Dividends - - - - (765) - (765)
Purchases of ESOP shares - - - (318) - - (318)
Sales of ESOP shares - - - 227 - - 227
Cost of matching and
free shares in SIP - - - 92 (92) - -
Profit on sale of ESOP
shares and dividends
received - - - 4 (4) - -
Share-based payment - - - - 221 - 221
Deferred tax on share-based
payment - - - - 98 - 98
Share-based payment current
year taxation - - - - 2 - 2
Reclassification of Leases - - - - (122) - (122)
Balance at 30 June 2019
(unaudited) 718 104 1,064 (1,417) 12,136 7,171 19,776
------------------------------ --------- ------------ --------- --------- ---------- ------------ -------------
Notes 1 to 10 form part of these financial statements.
Condensed consolidated cash flow statement
Notes Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------- ------ -------------- -------------- -------------
Net cash from/(used in) operating
activities 7 1,856 (396) 415
Investing activities:
Interest received 42 21 58
Dividends received from trading
investments 26 154 235
Purchase of property, plant
and equipment (37) (126) (157)
Purchase of intangible assets (431) (490) (1,211)
Net cash used in investing
activities (400) (441) (1,075)
Financing activities:
Equity dividends paid 8 (765) (554) (554)
Shares purchased through
employee benefit reserve (318) (150) (484)
Shares sold through employee
benefit reserve 227 76 152
Lease payments 2 (284) - -
Net cash used in financing (1,140) (628) (886)
Net increase/(decrease) in
cash and cash equivalents 316 (1,465) (1,546)
-------------- --------------
Cash and cash equivalents
at the beginning of the period 8,994 10,540 10,540
Cash and cash equivalents
at the end of the period 9,310 9,075 8,994
Notes 1 to 10 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 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
The following standards, amendments and interpretations have
been issued with the corresponding implementation date, subject to
EU endorsement in some cases:
-- 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
-- Amendments to IAS 19 Plan Amendment, Curtailment or Settlement, effective 1 January 2019
-- AIP IFRS 3 Business Combinations and AIP IFRS 11 Joint
Arrangements - Previously held interests in joint operation,
effective 1 January 2019
-- AIP IAS 12 Income Taxes - Income tax consequences of payments
on financial instruments classified as equity, effective 1 January
2019
-- AIP IAS 23 Borrowing Costs - costs eligible for capitalisation, effective 1 January 2019
-- Amendments to IFRS 3 - Definition of a Business, effective 1 January 2020
-- Amendments to IAS 1 and IAS 8 - Definition of a Material, effective 1 January 2020
-- Conceptual Framework for Financial Reporting, effective 1 January 2020
-- IFRS 17 Insurance Contracts, effective 1 January 2021
-- 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 2019, where
relevant, have been applied to the financial statements of the
Group (for further details see note 2). The impact of future
standards and amendments on the financial statements is being
assessed by the Group.
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.
IFRS 16 Leases
A new accounting standard has been issued, IFRS 16 Leases, which
replaced IAS 17 Leases, effective from 1 January 2019. The new
standard fundamentally altered the classification and measurement
of operating leases for lessees, removing the distinction between
operating and finance leases.
This new standard has had the following impact on the Group's
accounts:
- The Group currently holds two contractual arrangements deemed
to satisfy the conditions of a lease, and which do not fall into
the exceptions of the standard. These are the contractual
arrangements in relation to rental of the office building and the
rental of photocopiers.
- Previously these leases were accounted for in the income
statement on an accruals basis under IAS 17. Under the new
standard, these two assets are now held on the balance sheet as
"right of use" assets measured at cost (deemed to be the initial
measurement of the lease liability plus any set up costs). The
lease has initially been measured as the total payments required
under the terms of the lease, discounted by the incremental
borrowing rate (as per the contract) to account for time value of
money.
- This cost includes the lease element only, excluding any
maintenance costs. Maintenance costs remain in the income
statement, as under the previous treatment.
- The payments made under the lease contracts are no longer
charged to the income statement; instead they are offset against
the liabilities on the balance sheet.
- Monthly depreciation of the assets is charged to the income statement.
- Interest on the liabilities, calculated at the incremental
borrowing rates (building lease: 4.75%, photocopier leases: 3.00%),
is charged to the income statement monthly.
Upon transition to IFRS 16, the Group applied the modified
retrospective approach and will therefore not restate comparative
information in the 2019 financial statements. Prior period
amendments that arise from the adoption of IFRS 16 have been
recognised directly in retained earnings as of 1 January 2019, as
follows:
Office building Photocopiers Total
GBP'000 GBP'000 GBP'000
-------------------------------- ---------------- ------------- ---------
Right of use assets
Value as at 1 January 2019 - - -
Reclassification of leases 1,357 123 1,480
Depreciation charge of right
of use asset (118) (16) (134)
Value as at 30 June 2019 1,239 107 1,346
Lease liabilities
Value as at 1 January 2019 - - -
Reclassification of leases (1,524) (125) (1,649)
Interest expense on lease
liability (38) (2) (40)
Cash outflows (lease payments) 264 20 284
Value as at 30 June 2019 (1,298) (107) (1,405)
The impact on the income statement was as follows:
Six months ended Six months ended
30 June 2019 30 June 2018
(unaudited) (unaudited)
GBP'000 GBP'000
-------------------------------- ----------------- -----------------
Depreciation expense of right (134) -
of use assets
Interest expense on lease (40) -
liabilities
Lease rental expense - (168)
-------------------------------- ----------------- -----------------
Total recognised in the income
statement (174) (168)
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 Taxation
Tax for the six month period is charged at 19% (H1 2018: 19%),
representing the average annual tax rate expected for the 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 2019, this is 17% (2018: 18%).
5 Earnings per share
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
Earnings: GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------------- -------------
Earnings for the purpose of
basic and diluted earnings per
share, being net profit/(loss)
attributable to equity holders
of the parent company 131 (279) (69)
Other income, gains and losses (19) - -
FSCS levies 106 158 235
Share-based payments 221 267 551
One-off redundancy/termination
costs 10 13 93
One-off costs relating to legal
and professional fees 167 - 50
Profit share impact of the above
adjustments (104) (94) (200)
Taxation impact of the above
adjustments (30) (15) (34)
Earnings for the purposes of
underlying basic and diluted
earnings per share 482 50 626
---------------------------------- -------------- -------------- -------------
Number Number Number
Number of shares: '000 '000 '000
---------------------------------------- ---------- ---------- ---------
Weighted average number of ordinary
shares 145,522 145,667 144,559
Non-vested shares held by employee
share ownership trust (4,637) (5,158) (4,759)
Basic earnings per share denominator 140,885 140,509 139,800
Effect of potential dilutive
share options 7,209 7,452 8,182
Diluted earnings per share denominator 148,094 147,961 147,982
---------------------------------------- ---------- ---------- ---------
Basic earnings per share (p) 0.1 (0.2) 0.0
Diluted earnings per share (p) 0.1 (0.2) 0.0
---------------------------------------- ---------- ---------- ---------
Underlying (basic and diluted)
earnings per share (p) 0.3 0.0 0.4
---------------------------------------- ---------- ---------- ---------
The directors believe that the underlying earnings per share
represent a more consistent measure of the underlying performance
of the Group.
6 Cash and cash equivalents
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------------- -------------
Cash at bank and in hand 6,454 6,532 7,284
Cash held in trust for customers
** 2,856 2,543 1,710
---------------------------------- -------------- -------------- -------------
9,310 9,075 8,994
---------------------------------- -------------- -------------- -------------
** 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.
At 30 June 2019 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 GBP423m (30 June 2018:
GBP439m). The Group has no beneficial interest in these deposits
and accordingly they are not included on the balance sheet.
7 Cash flow
Reconciliation of operating loss to net cash outflow from
operating activities
Six months ended Six months Year ended
ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-----------------------------------
Operating profit/(loss) for
the year 104 (520) (315)
Other income, gains and losses 19 - -
Depreciation of property, plant
and equipment 61 59 120
Amortisation of intangible
assets 495 293 698
Reclassification of leases 46 - -
Depreciation of lease assets 134 - -
Share-based payments 221 267 551
Operating cash flows before
movement in working capital 1,080 99 1,054
(Increase)/decrease in receivables (10,055) (8,840) 7,758
Increase/(decrease) in payables 10,723 8,365 (8,271)
Cash generated by/(used in)
operations 1,748 (376) 541
Income taxes received/(paid) 108 (20) (126)
-----------------------------------
Net cash from/(used in) operating
activities 1,856 (396) 415
----------------------------------- ---------------- ------------- ------------
8 Dividends
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------- -------------- -------------- -------------
2018 final dividend of 0.55p
per ordinary share paid in
current year (2017: 0.40p) 790 575 575
Less amount received on shares
held via ESOP*** (25) (21) (21)
765 554 554
*** Employee Stock Ownership Plan ('ESOP')
9 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
150,000 shares on 1 May 2019. 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 1/5/19
Share price at date of grant 28.5p
Exercise price 28.5p
Risk-free interest rate 0.50%
Dividend yield 2.00%
Volatility (based on historic
share price movements) 30.0%
Average maturity at exercise 5 years
Fair value per option 6.207p
Details of the share options outstanding during the year are as
follows:
As at 30 June 2019 As at 31 December 2018
(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 13,687,675 13.7 14,143,865 13.6
Granted during the period 150,000 28.3 1,160,576 9.8
Exercised during the period (322,686) 26.8 (1,113,149) 1.8
Expired or forfeited during
the period (51,953) 27.7 (503,617) 26.6
------------------------------ --------------- ----------------- --------------- -----------------
Outstanding at the end
of the period 13,463,036 14.0 13,687,675 13.7
------------------------------ --------------- ----------------- --------------- -----------------
Exercisable at the end
of the period 4,953,983 29.0 3,343,540 35.5
------------------------------ --------------- ----------------- --------------- -----------------
The weighted average market share price at the date of exercise
for options exercised during the first six months of 2019 was 34.3p
(the first six months of 2018: 26.0p).
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 2019 was
GBP140,000 (six months ended 30 June 2018: GBP146,000). 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 employment. The overall net charge taken in the income
statement for the first half of 2019 was GBP221,000 (six months
ended 30 June 2018: GBP267,000).
10 Equity investments
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------ -------------- -------------- -------------
Unlisted investments at fair
value 5,935 4,088 5,936
Listed investments at fair
value 3,352 2,682 2,437
9,287 6,770 8,373
The increase in the value of unlisted investments since 30 June
2018 reflects the review of the carrying value of the Euroclear
investment at the end of 2018.
Since 30 June 2019, the value of the London Stock Exchange
holding has increased by GBP0.6m as at 6 August.
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 LLFSRTLIDIIA
(END) Dow Jones Newswires
August 08, 2019 02:00 ET (06:00 GMT)
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