SHRE.L Regulatory News (SHRE)

AIM: SHRE

Share plc

("Share")

Interim results announcement for the six months to 30 June 2014

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 six months to 30 June 2014.

Highlights

(*) Excludes the impact of some items, in particular any large non-recurring items and share based payment charges as defined in note 6. Basic earnings per share was 0.4p and diluted earnings per share was 0.4p (2013: 0.4p and 0.4p respectively).

Commenting on the results, Richard Stone, Chief Executive, said,

"Share plc continues to make good progress and we are pleased to report a 28% increase in underlying pre-tax profit to £1.0m on revenues up 8% to £7.9m. Our market share of revenues across our peer group also reached a record high of 7.7% for the first half, with the second quarter setting an all-time high of 8.15%. Increased dealing activity helped to drive these encouraging results and they also follow the introduction of our new simple flat rate fee structure last Summer.

Looking ahead, the second half has started briskly, helped by the increase in ISA allowances and we look forward to continuing progress over the remainder of the year."

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.

Notes for Editors:

1. Share plc is the parent holding company of The Share Centre Limited and Sharefunds Limited and its shares are traded on AIM and also on Asset Match.

2. 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.

3. Retail services include Share Accounts, ISAs, CTF accounts and SIPPs, all with the benefit of investment advice, and dealing in a wide range of investments.

4. Services available to corporate clients include share plan administration and 'white-label' dealing platforms.

5. 'Clean share classes' are units within funds which attract a lower annual management charge and pay no commission payments (often referred to as 'trail commission') to distributors.

6. For more details contact 0800 800 008, or visit www.shareplc.comor www.share.com.

Share plc

Interim report and accounts 2014

Chairman's statement

In my first Interim Statement since becoming Chairman, I am pleased to report that the Share plc Group has continued to make good progress. Revenue for the six months to 30 June 2014 increased by 8% to £7.9m and underlying pre-tax profit rose by 28% to £1.0m. I am particularly pleased by the increase in our market share over the half year to a record level of 7.70% (2013: 7.07%), reflecting the Group's continuing outperformance relative to its peers. In fact for the second quarter, revenue market share set a new high of 8.15%.

These encouraging results were aided by increased dealing activity and also follow the introduction last July of our new simple flat rate fee structure, which contrasts compellingly with value-related tariffs offered by many of our competitors. Results also reflect the operationally geared nature of our business whereby revenue growth readily translates into profit growth.

Financial Results

Revenues at £7.92m (2013: £7.35m) grew by 8% over the same period last year. This was driven by increased income from dealing commission which was up 16% year-on-year, boosted by more active new customers. In addition, fee income increased by 8% year-on-year reflecting the successful introduction of our new low, fixed-rate monthly charging structure as well as success in other areas, most notably in Enterprise Investment Scheme (EIS) administration where we provide custody and dealing services to EIS fund managers. However, interest income was down 14% year-on-year. This reflected both the low interest environment and the completion of some of our fixed term deposits.

Operating profit was up 15% to £0.54m (£0.47m) and underlying profit before tax increased by 28% to £1.0m (2013: £0.8m). The underlying profit result is stated after removing any unusual one-off costs along with the share-based payment costs and cost of the Financial Services Compensation Scheme (FSCS) over which we have no control (as shown in note 6 to the condensed accounts) and so gives a more consistent view of the performance of the business. On a statutory basis, profit before tax was up 10% to £0.76m (2013: £0.69m). Underlying earnings per share rose by 27% to 0.7p (2013: 0.5p) and statutory earnings per share increased by 19% to 0.45p per share (2013: 0.38p per share).

Reported overhead costs have increased year-on-year by 7%. There are three main changes which accounted for over 80% of this rise. Firstly, increased activity, with the higher levels of dealing activity leading to a 15% rise in our direct costs of settlement. Secondly, increased marketing spend, which was up 14% year-on-year to capitalise on the opportunities offered by the ISA season and various retail public offerings and thirdly one-off fees and charges relating to our senior management changes. These comprised recruitment fees and increased share-based payment charges for long term equity incentives. 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. We intend to continue purchasing shares in the secondary market to satisfy options when exercised.

The Group continues to be highly cash generative. Net cash, excluding customer deposits is up by 7% to £12.5m at 30 June 2014 (2013: £11.7m). During the period there were two major cash outflows, the dividend of £0.7m and purchase of shares for the Employee Benefit Trust following staff exercising historic share option awards. This meant that the net cash position was lower against the year end position of £13.6m.

The Group's balance sheet remains strong with Shareholders Funds totalling £19.5m or just over 13 pence per ordinary share in issue. Of that £19.5m, c.68% is held in cash. The Group continues to hold significant levels of capital over and above the levels required by the Financial Conduct Authority (FCA). As at 30 June the Group had capital resources of £18.8m, 6.5 times the requirement (2013: 4.5 times).

Customer assets at 30 June 2014 were £2.5bn, up 6% since the end of 2013 - which compares to the flat performance of the FTSE All Share index.

Market context

The overall level of the stockmarket - as measured by the FTSE All Share index - closed the first half of the year within a few points of where it started. However, there were movements of over 6% between its low and high during the period. This UK performance is in contrast to the US where the market rose by over 2% during the period and by some 10% from its low at the beginning of February.

Corporate earnings remain good and the yield on the FTSE 100 remains above 3%. However, weaker economic performance in the Eurozone and an intensifying debate as to when interest rates will start to rise, weighed on the market. Earnings expectations around the recovery may also have become accelerated beyond what is capable of being delivered with recent reports by Ernst & Young suggesting profit warnings are increasing.

The retail investor continues to be drawn to the market in the search for income as well as capital growth. That retail interest has been strengthened in the first half of the year with further public offerings following on from Royal Mail in 2013 - in particular, TSB, Saga and Pets at Home. The removal of stamp duty from AIM shares in April was another stimulus. This all led to a particularly busy and successful ISA season. We saw record ISA account inflows during the 2013-14 tax year with our overall level of subscriptions up 48% on the previous tax year and we opened 81% more new accounts than in the previous tax year.

Market Share

Compeer is an independent company which gathers and reports data on the wealth management sector. We monitor Compeer's monthly surveys of the relative performances of a peer group of ten stockbrokers*, including ourselves. This benchmarking is a very useful guide to the Group's performance, eliminating the 'peaks and troughs' of the market and investor sentiment which may be reflected in absolute revenue numbers but not in relative performance.

The latest data shows the Group's share of revenues increased in the first half of the year to a record level of 7.70%, (2013: 7.07%). For the second quarter the revenue market share reached a new high of 8.15% (Q2 2013: 6.95%), beating the previous record quarterly high of 7.33% set in Q3 2013.

The Group outperformed its peers in dealing commission and fees. Dealing commission in the six months to 30 June grew by 16% whilst our peers saw it fall by 7%. Fee income grew by 8% while our peer group collectively showed a smaller increase of 2%.

Delivering our Strategy

The three elements of the Group's strategy - Putting Customers First, Focus on the Core Business and Signing new Partnerships or Acquisitions - remain unchanged.

The change in our fee structure, implemented in July 2013, was the most material change the business has made in many years. In line with our strategy, this was delivered with our customers at the forefront of our thinking. We believe we are now beginning to see the benefits of this. The first half of 2014 saw many of our competitors come to market with their new tariffs as the Retail Distribution Review deadline arrived in April. Many of those competitors have clung to a complex, value-related fee structure. Our flat fee approach is very competitive against this whilst also being simple and easy to understand for the customer. In particular our charging structure does not penalise the investing success or diligence of the customer by taking higher fees as account values increase. Because of the way value related charges work, why, for example, when the customer continues to receive the same service, should their ISA account fees double just because they have put in a second year's ISA subscription? With The Share Centre's fixed low rate account charges, they don't.

In Putting Customers First, we also continue to campaign hard for the interests of personal investors. Having seen several campaigns bear fruit - most notably on AIM shares being allowed into ISAs and Stamp Duty being removed from dealing in AIM shares - we continue to campaign on a range of issues including the ability of personal investors to connect with the companies in which they invest, and the ability of personal investors to access initial and secondary public offerings.

Regulation

The regulatory landscape continues to change. We welcomed the Retail Distribution Review and its intent to drive greater transparency into charging structures and we believe we are benefitting, and will continue to benefit, from that.

We find less to cheer in the recent changes to the Client Asset rules, and in particular the inability of firms such as ours to use term deposits for the client money we hold. We believe this increases systemic risk within the banking system with the billions held in cash within the wealth management sector now having to be held on call (in other words, on instant access) and thus moveable at a moment's notice. It also encourages firms who are part of banking groups to bypass the client money rules - as some have done - by treating all client money as a banking deposit which is not subject to such controls or protections.

We have taken steps through our relationships with two building societies to secure some of our client money deposits. Collateral of this nature makes the deposit significantly safer for our customers but obviously the deposit taking institution will only give up collateral for a commitment to deposit those monies for a fixed term. Outlawing such term deposits removes our ability to access collateral and thus makes our customers' deposits less secure.

At a financial level our inability to use term deposits will affect our ability to earn interest on client money we hold. This will not have a material effect on 2014 as it only has an impact as term deposits mature, but it may do so going forward to the extent that it is not offset by higher interest rates or greater customer cash balances. Although the rules are set, we continue to argue our case in the hope of winning some concessions and recognition that the collateralisation of deposits actually makes our customers' money more secure.

We continue to lobby the FCA regarding the FSCS. While the decision not to impose an interim levy for 2013-14 which had been expected at the last year end was welcome, the overall burden on our sector has increased yet again to £112m up from £78m a year earlier. We hope that the combination of a more interventionist approach of the FCA and economic recovery will mean that the levels of failure giving rise to calls on the FSCS will decline in future years. In the meantime, we continue to petition for changes to the scheme to take into account the risk profile of firms and the amount of capital they hold.

In October the settlement period reduces from three days to two: a move that should cause no issues for the Group. Our risk averse policy of always having share certificates in the office before placing sales into the market should make two day settlement easy, and nominee-based transactions can be settled electronically without delay.

Board and Management Changes

As noted above, I became Chairman at the start of the year and Richard Stone took on the role of Chief Executive, having previously been our Finance Director. In addition, Mike Birkett joined as our new Finance Director in February from Thomas Cook and has settled in extremely well. I am delighted to welcome Mike to the team and to be working with him.

We have also recently announced that Jeremy Helliwell is to retire from his role as Director of Investor Service and Technology at the end of October. Jeremy has been with the Group for over 16 years having joined from Barclays where I also worked with him for several years. We have started the search for a new Director of Customer Experience and having seen some excellent candidates; we are close to making an appointment.

Outlook and Trading Update

We remain very positive with regard to the future prospects of the Group. We believe that demographic change, the political and market landscapes and in most cases regulation are all working in our favour at present. This should enable the Group to attract new customers and continue to deliver growth at rates in excess of those of our peers. The scalability of the business means that revenue growth feeds profit growth and that in turn supports the return to shareholders.

The year ahead looks encouraging, with the market holding its strength notwithstanding international tensions. With lacklustre growth overseas and concern over referenda both in Scotland and potentially on EU membership, in addition to the looming general election, we are unlikely to see a repeat of last year's stockmarket gains but activity continues to be high as investors look for better returns than those available on cash.

Trading in the second half of the year has started briskly. The increase in the ISA allowance to £15,000 that came into effect in July is particularly welcome and is encouraging many customers to top up their annual ISA subscription to the new level. Overall therefore we continue to look forward with confidence.

In addition, I look forward to seeing The Share Centre having the opportunity to benefit from an association with Share Radio, a personal new venture of mine, which I am separately announcing today and will be launching later in the Autumn.

Gavin Oldham

Chairman

4 August 2014

(*) Benchmarked revenue peer group includes: Alliance Trust Savings, Barclays Stockbrokers, Equiniti, Halifax Sharedealing, HSBC Stockbrokers, NatWest Stockbrokers, SAGA Personal Finance, Selftrade and TD Direct Investing.

Share plc

Interim report and accounts 2014

Condensed consolidated income statement

For the six months ended 30 June 2014

All results are in respect of continuing operations.

* The Directors consider that the underlying earnings per share as presented in note 6 represents a more consistent measure of the underlying performance of the business as this measure excludes one-off items of income or expense.

Share plc

Interim report and accounts 2014

Condensed consolidated statement of comprehensive income

For the six months ended 30 June 2014

Share plc

Interim report and accounts 2014

Condensed consolidated balance sheet

This condensed set of financial statements was approved by the Board on 4 August 2014

Signed on behalf of the Board

Gavin Oldham

Share plc

Interim report and accounts 2014

Condensed consolidated statement of changes in equity

For the six months ended 30 June 2014

Share plc

Interim report and accounts 2014

Condensed consolidated cash flow statement

Share plc

Interim report and accounts 2014

Notes to the condensed 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 (IFRSs) as adopted by the European Union. However, this announcement does not itself contain sufficient information to comply with IFRSs. 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 IFRSs. A copy of the statutory accounts for that year 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.

In the current year, the following new and revised Standards and Interpretations have been adopted and have had no impact on these financial statements.

- IFRIC 21"Levies"

- IAS 19 "Defined Benefit Plans: Employee Contributions"

- Improvements 2012 Annual Improvements to IFRSs: 2010-2012 Cycle

- Improvements 2013 Annual Improvements to IFRSs: 2011-2013 Cycle

New standards, amendments and interpretations issued but not effective and yet to be endorsed by the EU are as follows:

- IFRS 11"Accounting for Acquisitions of Interests in Joint Operations"

- IAS 16 and IAS 38 "Clarification of Acceptable Methods of Depreciation and Amortisation"

- IFRS 15 "Revenue from Contracts with Customers"

New standards, amendments and interpretations issued but not effective and have been endorsed by the EU are as follows:

- IFRS 9 "Classification and Measurement"

- Annual Improvements to IFRSs 2012-2014 Cycle

- IAS 1"Disclosure Initiative"

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these condensed financial statements.

2 Accounting policies

The same accounting policies, presentation and methods of computation are followed in this condensed set of financial statements as applied in the Group's latest annual audited financial statements.

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. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Allowance for bad debts

The Group makes a provision for the element of fees which it believes will not be recovered from customers. This is based on past experience and detailed analysis of the outstanding fees position particularly with regard to the value of customers' portfolios relative to the fees owed.

Fair value of investments

The Group currently holds investments in the London Stock Exchange plc, Euroclear plc, WAY Group Limited, Professional Partners Administration Limited (PPAL), Eirx Therapeutics plc, Consort Capital (formally Investbx Limited) and Asset Match Limited. These are held as available-for-sale financial assets and are measured at fair value at the balance sheet date. In March 2014, a subsidiary of WAY Group Limited, Professional Partners Administration Limited, was demerged from WAY and the Share plc now holds investments in both WAY and PPAL.

London Stock Exchange plc shares trade in an active market and the fair value is readily determined by market price. The Euroclear plc shares do not trade in an active market, although eligible shareholders were invited to participate in a buy back. A view of fair value is therefore formed based on the weighted average price following the buy-back and the net asset value of the business adjusted for liquidity considerations. WAY Group Limited shares are carried at cost as the shares are not publicly traded and there is no other means of determining a reliable and timely fair value based on the limited publicly available information. Both the Eirx Therapeutic plc shares, Consort Capital and Asset Match Limited shares are carried at nil value given the financial position of the companies and their recent history.

Share-based payments

The Company's shares have been traded on Sharemark (now Asset Match) since 2000 and on AIM since May 2008. This provides a market price to help determine the fair value of equity-settled share-based payments but, in addition to this, estimations are made as to price volatility, risk free interest rate and expected life. These estimations enable the Black-Scholes model to then be used to determine the fair value of these equity-settled share-based payments.

Impairment

The assets on the balance sheet are reviewed for any indications of impairment. This is done with reference to the recoverability and market value of the assets concerned but may involve an element of judgement or estimation in determining whether there are any indications of impairment and the extent of any impairment loss.

4 Business and geographical segments

IAS 34 Interim Financial Reporting requires disclosure of segment information within the interim report as the Group is required to disclose segment information in its annual financial statement as required by IFRS 8 Operating Segments.

It should be noted that the accounting policies of the reportable segments are the same as the Group's accounting policies and that there were no major customers contributing more than 10% of revenues in the Group as a whole.

5 Taxation

Tax for the six month period is charged at 21.5% (six months ended 30 June 2013: 23.25%), representing the best estimate of the average annual effective tax rate expected for the full year. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. In 2014 this was 20% (2013: 23%).

6 Earnings per share

7 Cash at bank and in hand

(a) This amount is held by The Share Centre Limited in trust on behalf of clients but may be used to complete settlement of outstanding bargains and dividends due.

(b) At 30 June 2014 segregated deposit amounts held by the Group on behalf of clients in accordance with the client money rules of the Financial Conduct Authority amounted to £172.5 million (30 June 2013: £156.2 million). The Group has no beneficial interest in these deposits and accordingly they are not included on the balance sheet.

8 Cash flow

Reconciliation of operating profit to net cash inflow from operating activities

Included in other losses are the cash cost of acquiring shares on the exercise of share options under the companies' share schemes and SIP matching shares of £523,000 (six months ended 2013: £108,000)

9 Distribution to shareholders

10 Share based payments

The Group operated an Enterprise Management Incentive (EMI) approved share option scheme; however the balance sheet of the Group no longer meets the requirements to grant options under the EMI rules. During 2014, the Group implemented the Company Share Ownership Plan (CSOP) which enables the regular granting of share options on the same basis as EMI scheme.

The Group has applied the requirements of IFRS 2 in respect of share-based payments. During the first half of the year ended 30 June 2014, the Group made one equity-settled share-based payment under the Group's CSOP scheme and Unapproved share options to staff of 1,879,332 shares on 1 May 2014. 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. The main assumptions are as follows:

In addition, Richard Stone, Chief Executive, has been granted options over 4,255,000 Ordinary shares at an exercise price of 1.0 pence per share. A fair value has been determined during the year using the Black-Scholes model. The main assumptions are as follows:

Details of the share options outstanding during the year are as follows:

The weighted average market share price at the date of exercise for options exercised during the first six months of 2014 was 42.3 pence (the first six months of 2013: 22 pence).

In addition, the Group operates a Share Incentive Plan (SIP). Further detail of the 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 2014 was £1,211,000 (six months ended 30 June 2013: £118,000). This expense is then applied across the vesting periods. An adjustment is made to this figure in respect of members of staff to whom options and shares have been granted but who have left the Group's employ during the vesting period. The overall net charge taken in the income statement for the first half of 2014 is £237,000 (six months ended 30 June 2013: £110,000).