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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Share Plc | LSE:SHRE | London | Ordinary Share | GB0001977866 | ORD 0.5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 25.75 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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.
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August 08, 2019 02:00 ET (06:00 GMT)
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