SHRE.L Regulatory News (SHRE)

AIM: SHRE.LN

SHARE PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 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 year ended 31 December 2014.

HIGHLIGHTS

· Performance in line with revised market expectations

· Revenue market share (*) at a record level - up 7% to 7.66% (2013: 7.16%)

· Revenue flat year on year at £15.0m (2013: £15.0m); excluding interest income up 2.6% to £13.2m (2013: £12.9m)

· Profit before tax decreased to £0.8m (2013: £1.7m), reflecting increased costs, including one-off costs of 0.2m and reduced interest income

· Underlying (**) basic and diluted earnings per share decreased to 1.0p (2013: 1.3p)

· Final (and total) dividend proposed of 0.62p per share up 19% (2013: 0.52p)

· Balance sheet remains strong, with net cash of £12.7m (2013: £13.6m)

· Shareholders' Funds increased further by 7% to £20.7m or 14.4 pence per share in issue (2013: £19.4m, 13.5 pence per share)

· Number One for Overall Client Satisfaction and for Customer Service in Investment Trends 2014 research

· Major new contract signed with Barclays Bank PLC post year end for Certificated Dealing Services, expected to add c.5% to revenues in 2015 - see separate announcement

· Prospects remain very encouraging, although some near term market uncertainty

(*) the peer group comprises: Alliance Trust Savings, Barclays Stockbrokers, Equiniti, Halifax Sharedealing (HBoS), HSBC Stockbrokers, Saga Personal Finance, Selftrade and TD Direct Investing.

(**) excludes the impact of some items, particularly any large non-recurring items, as defined in Note 7 to this preliminary announcement. Basic and diluted earnings per share decreased to 0.5p (2013: 0.9p)

Gavin Oldham, Chairman, commented on the results:

"In 2014, Share plc has clearly delivered against each of the three elements of our strategy - Putting Customers First, Focus on our Core Business and Establishing Partnerships and Making Selective Acquisitions. In particular, I am delighted to announce today that the Group has signed a three year contract with Barclays Stockbrokers to provide certificated dealing services to customers introduced to it by Barclays. This should have a material impact on the Group's revenues and profitability.

Our success in "Putting Customers First" is demonstrated by the number of awards that we won in 2014, not least that we came top for Overall Client Satisfaction and for Customer Service in the Investment Trends research. Importantly, we have successfully recruited into our senior management team some highly experienced and talented individuals, who have a deep understanding of the customer and customer service.

Our strategic delivery was not reflected in the short term financials, albeit headline profits were affected by some significant one-off costs from the senior level changes that we have undertaken. Despite reduced activity across the market in the second half of the year, driven by personal investors' response to increased uncertainty, the benefits of our new flat fee structure introduced in July 2013 are now more apparent against other pricing models in the market. The Group has again increased its market share to a new record level of 7.66%, highlighting a good performance relative to our peers.

The Group's balance sheet has historically been strong and Shareholders' Funds have increased further over the last year, driven by the value of our investments in the London Stock Exchange plc and Euroclear plc.

Looking forward, the UK's strengthening economic recovery, backed by loose monetary policy and low interest rates should be positive for equity markets and investors. The Board strongly believes that the Group is well positioned relative to its peers and capable of growing its customer base in the years ahead."

Richard Stone, Chief Executive, commented on the results:

"2014 was a year of two halves: after a strong first half performance, the second half saw reduced activity across the market due to increased political and economic uncertainty. Driven by the value that customers see in our pricing, we continue to see a shift in transfer activity from other brokers and significantly we have moved to a position where more accounts are now being transferred to us. We are also already seeing the benefits of pulling together the whole customer experience from acquiring new customers to serving existing customers.

The challenge for the Group now is to raise awareness of The Share Centre and grow the customer base. With the 'engine' built, scaling the Business should significantly drive revenues and profits. The agreement with Barclays, which builds on our existing certificated dealing service to customers, is an important first-step, demonstrating the Group's ability to win such business as well as highlighting our ambition.

This year, uncertainty ahead of the UK General Election will make personal investors hesitant and this is reflected in trading volumes. The usual ISA season is now open and whilst new account openings have been encouraging, the build-up so far has been a little slower than last year. The fundamentals of the Business though, not least in terms of assets under management, customer deposits and transfers, visibility of our brand and PR messaging, are all strong and we look forward to the rest of 2015 with confidence."

Contacts

Share plc

Gavin Oldham - Chairman 01296 439 100 / 07767 337 696

Richard Stone - Chief Executive 01296 439 270 / 07919 220 599

Mike Birkett - Finance Director 01296 439 479

Cenkos Securities plc (Nominated Adviser)

Stephen Keys / Ivonne Cantu / Mark Connelly 020 7397 8900

KTZ Communications (Financial Public Relations)

Katie Tzouliadis/ Deborah Walter 020 3178 6378

RISK WARNING

This document is not intended to constitute an offer or agreement to buy or sell investments and does not constitute a personal recommendation. The investments and services referred to in this document may not be suitable for every investor and if in doubt independent financial advice should be sought. No liability is accepted whatsoever for any loss howsoever arising from any information in this document subject to the rules of the Financial Conduct Authority or the Financial Services and Markets Act 2000. Share prices, values and income can go down as well as up and investors may get back less than their initial investment. The Share Centre is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority under reference 146768. Sharefunds is authorised and regulated by the Financial Conduct Authority under reference 227807.

ABOUT SHARE PLC

Share plc is the parent holding company of The Share Centre Limited and Sharefunds Limited and its shares are traded on AIM. The Share Centre started trading in 1991 and provides a range of account-based services to enable investors to share in the wealth of the stock market. These include share accounts, ISAs, CTF accounts and SIPPs, all with the benefit of investment advice, and dealing in a wide range of investments. Services available to corporate clients include share plan administration and 'white-label' dealing platforms.

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

CHAIRMAN'S STATEMENT

PROGRESS IN A TOUGH MARKET

Share plc has made good progress this year positioning itself for future growth. We remain focused on delivering against the three elements of our strategy - Putting Customers First, Focus on our Core Business and Strategic Partnerships or Acquisitions. In 2014, we have delivered against each of these as set out in our Strategic Report.

The quieter second half of the year, seen across the market, took the 'wind out of the sails' from our strong first half performance. Reduced activity was driven by personal investors' response to increased economic and political uncertainty. The Group cannot be immune from such dynamics. Nevertheless, we increased our market share of revenues (as measured by ComPeer) year on year to a record 7.66% (2013: 7.16%) demonstrating a good performance relative to our peers.

We have delivered flat revenues compared to 2013 at £15.0m (2013: £15.0m), below the long term growth rate the Board is targeting and believes the Group can achieve. Headline profits were further affected by some significant one-off costs, particularly associated with the senior level changes that we have undertaken. Underlying earnings were down year on year at £1.5m (2013: £1.8m).

The value of the Group's investments in the London Stock Exchange plc and Euroclear plc has increased substantially during the year and the overall value of Shareholders' Funds rose to £20.7m (2013: £19.4m) at the year end. These Shareholders' Funds, which represented 14.4 pence per share in issue as at the year end (2013: 13.5 pence), comprise cash and some high quality investments, with the rest of the Group's working capital being minimal.

DIVIDEND

The Board proposes an increased final (and total) dividend for the year of 0.62 pence per share. This represents a rise of 19% on the prior year (2013: 0.52p per share) and the final dividend, should shareholders so approve, will be paid on 17 June 2015 to shareholders on the register on 15 May 2015. This is the fifth consecutive year we have increased the dividend at a rate of c.20% per annum.

The policy to grow the dividend at 20% per annum will only continue for so long as the Group's performance supports such growth. This year's performance does not warrant such growth, but the Board noted that the dividend is still 1.7x covered by underlying earnings and that the balance sheet remains strong, as demonstrated by Shareholders' Funds increasing by £1.3m year on year. Both these facts support increasing the return to shareholders again this year. Performance in the future will obviously have to improve to maintain this policy. Nonetheless, the Board is confident of future prospects and continues to believe the Group can deliver significant growth in revenues, margins and earnings.

OPERATIONAL OVERVIEW

Our Strategic Report sets out in detail, how we have delivered against our strategy in 2014, and the Group's financial performance. I would highlight three points of particular note.

We have seen a substantial shift in transfer activity from other brokers to The Share Centre since changing our tariff in July 2013. Specifically we have moved to a position where significantly more accounts are now being transferred to us. This demonstrates the value customers see in our pricing proposition and the relative attractiveness of our proposition in the market.

We have made a number of significant senior management changes. Jeremy Helliwell, The Share Centre's Director of Investor Services and Technology, retired in October and Guy Knight, The Share Centre's Sales and Marketing Director, left the Group in December. We have been able to recruit some highly experienced and talented individuals to the Group, including Darren Cornish, The Share Centre's Director of Customer Experience and John Sargeant, The Share Centre's IT Director. Darren and John join Mike Birkett who joined the Group as Finance Director in February 2014. We have also recruited a new Non-Executive Director, Gareth Thomas, who joined us in December. I am pleased to welcome Mike, Darren, John and Gareth to the Team.

These appointments have a number of key aspects:

- Demonstrating the importance that we place on our systems, both to delivering a first class customer experience (on and offline) and in scaling the Business, we have now appointed a dedicated specialist IT Director.

- We have been able to draw together the whole customer experience, from attracting new customers to serving existing customers. We are already seeing benefits from these activities being more closely aligned.

- All of our new colleagues have first rate retail backgrounds from large blue chip organisations - John Lewis, Tesco, E.ON and Thomas Cook. They have some financial services experience, but predominantly they have a deep understanding of the customer and customer service, highlighting the strong importance we attach to that. Focusing on the needs of our customers, seeing investing from our customers' perspective and providing them with a simple and easy to understand way to access and manage investments regardless of their wealth or experience will be what differentiates the Group from its peers.

Finally, we have announced that we have signed a contract with Barclays Stockbrokers to provide Certificated Dealing Services to customers introduced by Barclays. We believe that this represents a significant opportunity, in that it is hoped that the contract will add c.5% to our revenues in 2015 and also have a material impact on the Group's profits. The contract also demonstrates our ability to deliver against the strategic partnership aspect of our strategy for growth. Again, this is testament to the excellent customer service that we offer and we look forward to delivering that high standard of service to customers introduced to us by Barclays.

STAFF

2014 has seen the quality of the Group's services recognised in many different forums and with numerous awards. We could not, of course, deliver any of our achievements without the excellent and committed staff who work for the Group. On behalf of the Board I would like to extend our thanks and appreciation to all our staff for their hard work in 2014. The future promises to be exciting as we seek to grow the Business more rapidly, and everyone at the Group is committed to delivering our vision.

OUTLOOK

Investor activity has undoubtedly been subdued largely as a result of political and economic uncertainty. In addition to renewed concerns over the future of the Eurozone, personal investor attention is inevitably turning to the UK general election. An uncertain outcome based on latest polling typically makes investors hesitant and this is reflected in near term dealing volumes. This is a market wide phenomenon. However, the Board continues to view the Group's prospects positively and continues to believe the Group is well positioned relative to its peers.

In 2014 we demonstrated our ability to deliver against the three strands of our strategy, and this should start to have a positive impact on our financial results this year. History would suggest that the sharp fall in oil prices will be good for global growth and corporate earnings. Against a backdrop of ongoing loose monetary policy and low interest rates this should, in our view, be positive for equity markets and ultimately for investor sentiment. We therefore look forward to the years ahead with confidence and an unstinting focus on continuing to serve personal investors to the very best of our ability.

Gavin Oldham

Chairman

4 March 2015

A REVIEW OF 2014

STRATEGIC REPORT - KEY EXTRACTS

Key extracts from the Strategic Report are set out below. The full Strategic Report will be available in the 2014 Annual Report.

DELIVERY OF THE STRATEGY

The strategy of the Group is based on three key elements, Putting Customers First, Focusing on our Core Business (The Share Centre) and Strategic Partnerships or acquisitions. In 2014 we have continued to deliver against these. In particular:

PUTTING CUSTOMERS FIRST

We continually strive to ensure that customers are at the forefront of all that we do. The pricing changes we introduced in July 2013 really started to have an impact on customer behaviour in 2014 as other firms announced their pricing and more firms opted to maintain the value-related charging structures which penalise investors' investment diligence and success. Our simple flat fee structure looks increasingly competitive in that context and this has had a measurable impact on the rate of transfers-in relative to transfers out.

As noted in the Chairman's statement we have recruited a number of new directors in 2014 and in each case we have deliberately sought values-driven individuals from retail backgrounds with a strong understanding of the customer and customer service.

We are always listening to our customers and looking at ways of improving the service we deliver to them. For example, we constantly review the information and services available on our website. In 2014, we introduced functionality to enable customers to make withdrawals from their accounts online and we have also added more content and videos to help investors make the right decisions for them, helping them navigate the market and our services. For example, we agreed a partnership with research firm Edison to make available to our customers the research that they write on companies.

In 2014 and again as we have entered 2015, we have been acting as an intermediary in a number of Initial Public Offerings (IPOs) enabling our customers to invest in those companies as they come to the stock market. Finally, during the 2015 ISA-season, we have looked at ways we can extend our services and will extend our opening hours during the week, as well as adding weekend opening in the run-up to the end of the tax year helping ensure that we are there to support our customers when they need us.

Our success in 'Putting Customers First' is measurable through customer testimony, such as that which we are now receiving on Trustpilot - a review site for customers - where our average score is 8.8 out of 10. It is also evident in awards we won in 2014 including the Investors Chronicle and Financial Times award for Best Customer Service and the fact that we came top for Overall Client Satisfaction and for Customer Service in the Investment Trends research in 2014 which incorporated the views of over 13,000 personal investors.

FOCUS ON OUR CORE BUSINESS

In recent years we have disposed of our Sharemark business and scaled back our Sharefunds operations. We continue to be focused on our core business of retail stockbroking - providing custody and transactional services to personal investors either in our own brand or through the brands of other organisations.

We continue to promote our business and brand through our advertising and public relations activities. Towards the end of 2014 we started a brand advertising campaign for the first time, and we have also been more active on social media.

Our success in 'Focusing on our Core Business' is demonstrable through growing the customer base and not taking on peripheral services or diverting our attentions beyond the core capabilities which we know we can deliver successfully and which our customers expect of us.

STRATEGIC PARTNERSHIPS OR ACQUISITIONS

We have had little material to report in this area in recent years. It is therefore particularly pleasing to be able to report the successful conclusion of a contract with Barclays to offer certificated dealing services to customers introduced by Barclays. We hope this will be a very successful partnership which can grow, as well as being a precursor to other similar relationships. Our focus is on developing relationships with large retail brands, whose customers would value an investment service, or elements thereof, as an extension of our partners' service offering. This contract demonstrates our ability to win in competitive tendering situations and we will look to repeat that success as we identify other prospects. Although no acquisition opportunities materialised during 2014, we continue to look for any suitable opportunities.

FINANCIAL PERFORMANCE

The Group's performance in 2014 was distinctly a year of 'two halves', with strong revenue growth in the first half but reduced trading activity in the second half against a backdrop of weaker market sentiment. Nevertheless, our revenue growth was stronger than our peer group, helped by our more balanced revenue model which generates predictable recurring revenue. The key elements are set out in more detail below.

REVENUE

Overall revenue at £15.0m grew by 0.2% (2013: £15.0m). As can be seen from the Key Performance Indicators below, this performance was ahead of the market as a whole enabling the Group to grow its market share further.

Revenue from fees increased by 6.3% from £6.2m to £6.6m, highlighting the strength of the core business, together with the growth of our Enterprise Investment Scheme (EIS) administration, where we provide custody and dealing services to EIS fund managers. Fees also provide an 'insulating' effect in periods of reduced trading activity.

Commission reduced slightly by 0.8% to £6.6m (2013: £6.7m). 2013 was also a strong comparative with the Royal Mail IPO and AIM shares being allowed into ISAs and whilst 2014 saw further public offerings (such as TSB, Saga and Pets at Home), these had relatively less retail interest.

Interest income reduced by 14.5% to £1.8m (2013: £2.1m) for two reasons. Firstly, client money term deposits that were historically placed at higher rates, matured into a lower interest rate environment. Secondly, with the changes to the Client Asset rules, firms such as ours are now unable to use term deposits. Excluding interest income, revenue grew by 2.6%. As a result, the revenue mix between commission, fees and interest shifted to 44%, 44% and 12% respectively in 2014 from 44%, 41% and 15% respectively in 2013.

The Group has always placed a high degree of importance on the quality of revenue and the level of recurring revenue represented by fees and interest, which in 2014 increased to £8.4m (2013: £8.3m) and covered 58% of the Group's costs (2013: 61%).

COSTS

Overall costs for the year increased by 7.4% to £14.6m (2013: £13.6m), for four reasons. Firstly, staff costs rose by 3.2% to £7.0m (2013: £6.8m), due to some staff increases in our customer-facing teams. In addition, there were one-off fees and charges of £0.2m, relating to our senior management changes, representing restructuring costs and recruitment fees. The second largest cost incurred by the Group is marketing. These costs, increased by 15% to £2.3m (2013: £2.0m), in order to capitalise on the opportunities offered by the usual ISA season and the increase in the ISA allowance in July 2014 to £15,000. Of this total, £1.3m (2013: £1.1m) was spent directly on promotional advertising online and in printed media. Finally, share-based payment charges for long term equity incentives were higher at £0.5m (2013: £0.2m). 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.

Total staff costs and marketing spend together totalled £10.0m (2013: £9.1m) being 69% (2013: 67%) of total administrative costs. Other expenditure relates to premises, IT systems and professional fees. With the reduction in activity in the second half, these costs were reviewed and savings identified. Finally the Group incurs regulatory fees and levies and irrecoverable VAT. In 2014, our costs in respect of the Financial Services Compensation Scheme (FSCS) were lower at £342,000 (2013: £481,000) as in 2013 an interim levy was raised. The basis of allocation for the FSCS levy is based on revenues rather than taking into account the risk profile of firms and the amount of capital that they hold. We continue to campaign against the basis of this allocation but it remains a material cost for the Group and beyond our control.

PROFITABILITY

The profits of the Group fell in the year as a function of the reduction in interest income and the increase in costs discussed above. As a result, overall operating profit was £0.4m (2013: £1.4m) a decrease year-on-year of 70%.The overall operating profit margin decreased to 2.8% (2013: 9.4%), well below the levels the Board believes the Group can achieve in the long run with additional scale and limited cost investment. The Board believes that underlying earnings per share which strip out one-off costs and also the FSCS levies and non-cash share-based payment charges, better reflect the performance of the business. On this basis, earnings decreased to 1.0p (2013: 1.3p). At a headline level, earnings per share were 0.5p (2013: 0.9p).

During 2014, we sold 14,384 of our 42,164 shares in Asset Match Limited (reducing our holding to 27,780 shares) at a price of £4.20 per share realising just over £60,000. These shares were valued at £nil at the end of 2013. We continued to hold the rest of the shares at £nil at the end of 2014 given the lack of visibility of value or exit, no liquidity, and no expectation that such a sale opportunity will re-occur in the foreseeable future.

DIVIDENDS

The Group has a stated dividend policy of seeking to increase dividends by 20% per annum for so long as the profitability and potential of the Group supports such growth. This has now been in place for a number of years with this year's proposed dividend meaning the dividend paid will have increased 107% since 2010. In that context, the Board of Directors are proposing a final dividend of 0.62 pence per share (2013: 0.52 pence), which represents growth of 19% on the prior year dividend. This payment is covered by underlying earnings (1.7 times covered) and the strength of our balance sheet. Subject to approval at the Annual General Meeting, the proposed dividend will be paid on 17 June 2015 to shareholders on the register on 15 May 2015.

BALANCE SHEET

The Group's balance sheet remains very strong with no debt but significant cash balances of £12.7m (2013: £13.6m). In addition, the Group's financial position is further strengthened by available-for sale investments of £9.0m (2013: £6.4m), primarily in the London Stock Exchange plc and Euroclear plc, the largest international central securities depository in the world. The dividends from these investments totalled £199,000 (2013: £180,000), which is substantially in excess of the interest return on Group cash.

During 2014, the Group took up its rights in the London Stock Exchange recent rights issue, subscribing for the full 47,727 shares at £12.95 each, a total subscription cost of £618,000. This took the Group's holding to 222,727 shares, valuing the Group's holding at 31 December 2014 at £4.9m (2013: £3.0m). As the Group's cash flow statement shows, this contributed to a reduction in cash and cash equivalents in 2014 of £1.0m. The increase in the carrying value of our shares in Euroclear plc to £3.7m (2013: £3.0m), reflects the weighted average price at which shares were recently bought back by that Company. The only other investment the Group holds to which it attributes a carrying value is WAY Group Limited, valued at £0.5m as in 2013.

Overall shareholder funds as at 31 December 2014 were £20.7m (2013: £19.4m). This represents 14.4 pence per share in issue (2013: 13.5 pence). The value of the investments plus the cash held largely equate to the total shareholder funds. The remaining working capital balances on the balance sheet principally reflect the open customer positions with the Group and the market, i.e. unsettled customer sales and purchases, which all effectively net to zero as each side has both an asset and a liability with the Group as agent in the middle. Finally the remaining balances net to a small liability largely in respect of non-current deferred tax.

KEY PERFORMANCE INDICATORS

The Group uses a number of key performance indicators to monitor and measure its progress through the year. These are both quantitative and qualitative, and relate to activity levels as well as financial metrics. The key performance indicators discussed below are consistent with those disclosed in previous Annual Reports.

BUSINESS PERFORMANCE

MARKET SHARE

The principal key performance indicator, on which the Group reports quarterly, is the market share of benchmarked revenues. This is measured using a peer group of eight other retail stockbrokers and serves to identify whether our performance is exceeding that of our peers irrespective of underlying market trends which affect the industry as a whole. The data for the measurement of this indicator is drawn from ComPeer, an independent company which gathers and provides data and analysis to the wealth management community.

The fourth quarter data showed a market share of 7.61% (Q4 2013: 7.20%). For the year as a whole, our market share increased to 7.66% (2013: 7.16%). ComPeer's data also allows us to calculate the Group's market share of peer group revenues excluding interest, which is higher than when including interest. Excluding interest, for the fourth quarter, our share also showed growth to 8.51% (Q4 2013: 7.67%) and 8.69% for 2014 (2013: 7.64%).

It is worth noting that the Group has a more balanced business model than its peers, with a greater proportion of revenues derived from fees and interest as opposed to dealing commission. For example, in 2014, 56% (2013: 56%) of the Group's revenues were fees or interest as compared to 30% (2013: 25%) of our peer group's revenues. The impact of the Retail Distribution Review could explain this increase for the peer group, as it has forced companies to review their charging structure and move to a more transparent fee-based environment. The Share Centre already changed its prices in July 2013 and charges a low fixed rate administration fee for having an account.

This data also shows that the Group has outperformed its peers during the year in terms of revenue growth. Overall revenues for the Group increased by 0.2% compared to the collective peer group which experienced a decrease of 6.4%. Excluding interest, revenue for the Group increased by 2.6% and decreased by 10.4% for the peer group. We believe that the key difference in performance was driven by commission, which fell by 13.2% for the peer group, in contrast to a 0.8% fall for the Group, indicating that the impact of the industry trend of lower trading volumes was less pronounced for the Group. Fee revenue for the Group increased by 6.3% compared to 3.2% for the peer group.

CUSTOMER INTERACTION

We measure the levels of interactions with customers and prospective customers through a range of metrics. These include the level of enquiries, accounts opened (including transfers-in from other brokers) and website traffic. This year we have seen an increase in the number of transfers-in from other brokers, underlining the relative competitiveness of our flat fee approach, which as well as being simple, does not penalise customers by taking higher fees as account values increase. Our website continues to attract high numbers of visitors and remains the predominant route through which new accounts are opened. In 2014, the average monthly number of unique visitors grew to over 160,000 (2013: 140,000). At the end of 2014, there were 251,000 accounts which contained assets (2013: 247,000).

We also closely measure the level of customer satisfaction. In 2014, we received 2.86 complaints per 1,000 customers. This was a significant decrease on the levels we experienced in 2013 (4.59 per 1,000), which was impacted by complaints from customers regarding the changes to our prices. We continue to have very low levels of complaints referred to the Financial Ombudsman, with just eight in 2014 (2013: seven), with none upheld against us (2013: none).

HEADCOUNT

The high levels of customer satisfaction we aspire to are only achievable with the dedication and commitment of our high quality employees. We are very proud of the people we employ who are all critical to our customer proposition. We monitor levels of headcount and staff costs on a monthly basis, reviewing the actual levels (149, including part-time staff at 31 December 2014 (2013: 142)), as well as assessing staff turnover rates and our success in attracting and recruiting new staff. Our staff turnover rate in 2014 was 15% (2013: 10%), partly due to a number of retiring staff. The ratio of male to female employees has remained constant at approximately 3:4.

Our core values, in particular Respect for Others, underpin the way we interact with our customers but also with each other. We offer our employees a range of benefits including the contribution of 8% of base salary into a pension of their choice, participation by all employees in the Group's profit share arrangements which pays a profit related bonus, and a Share Incentive Plan with 2:1 matching of employee contributions. This latter benefit means a significant proportion of our employees are shareholders, with over 110 employees making regular monthly contributions into the scheme.

In 2014, we repeated the annual staff survey first conducted in 2011. This again showed increased levels of satisfaction amongst our employees with 90% (2013: 80%) of staff agreeing with the assertion "I believe that this is a great place to work" and over 90% (2013: 85%) of staff agreeing that they "would recommend The Share Centre as a good employer".

FINANCIAL

REVENUE

We monitor the absolute levels of revenue and the mix between the different revenue streams. Data for these metrics is given in the 'Review of 2014' section of the Strategic Report above.

OPERATING MARGIN

We monitor the level of operating margins as explained above where the data for 2014 is given. As a result of the changes to the Client Asset rules, the potential for generating interest income and growing operating margins is reduced but as revenues expand further, and interest rates return to historically more normal levels, we would expect to see this margin increase significantly.

ASSETS UNDER ADMINISTRATION

The level of assets under administration measures the collective value of the investments and cash held by our customers. We look at this in both absolute terms and at the rate of change relative to overall market levels. At the end of the year this value was £2.55bn (2013: £2.34bn), an increase of 9%, which shows significant growth compared to a decrease in the FTSE All Share index over the same period of 2%. A rate of increase greater than the market as a whole indicates the Group's ability to attract new accounts and additional investment from existing customers. As a proxy, assuming our customers performed in line with the FTSE All Share index this would imply a net inflow of funds of c.£260m during 2014 (2013: £186m).

CASH FLOW

The Group's full cash flow statement is presented below. We monitor cash flows on a monthly basis and in particular review the Group's ability to translate post-tax profits into cash. In 2014, the overall cash balances held on the Group's own account, i.e. excluding amounts held in trust for clients to complete settlement of transactions, decreased to £11.7m from £13.0m. Excluding the impact of the Group's participation in the London Stock Exchange rights issue (£618k), cash balances would have been £12.3m at 31 December 2014.

FINANCIAL RESOURCES

Two of the entities within the Group are regulated by the FCA (The Share Centre Limited (FCA registration number: 146768) and Sharefunds Limited (FCA registration number: 227807)). This means that the Group has to hold a certain amount of regulatory capital. The Group has a stated policy to maintain at least twice the amount of regulated capital required. In recent years as profits and cash generated have been retained the level of capital has increased relative to the minimum required. As at 31 December 2014, the Group was holding 6.4 times the capital required by the FCA for 2014 (2013: 6.2 times).

In summary, the Pillar II requirement (being the amount the group has to hold as it is in excess of the Pillar I requirement) is £3.1m for 2014 (2013: £2.9m). The Group has in place an Internal Capital Adequacy Assessment Process (ICAAP) which was reviewed by the FCA (then FSA) in 2009. Full details of our capital requirements are required to be disclosed under Pillar III of the Capital Requirements Directive and can be found on our website - www.shareplc.com.

PROSPECTS

We believe the prospects for the Group are very positive with a number of factors coming together which will help us to deliver our strategic objective to become consumers' first choice for investment knowledge, guidance, dealing efficiency and fair value.

We would highlight three particular trends that we believe will support our growth.

CONTINUING LOW INTEREST RATES

Recent improvements in the overall economic climate have turned the discussion of interest rate rises from 'if' to 'when'. However, we believe that even if rates start to rise in 2016, as the market currently expects, those increases will be modest and historically low interest rates will be with us for some considerable time.

There are a number of reasons for believing that interest rates will remain low. The output gap - in other words the latent productivity of the UK labour force - has grown significantly in recent periods. This is compounded by the continuing shift to online and digital consumption increasing supply scaleability within the economy. The UK economy remains heavily burdened - corporately, individually and at state level - by debt. Reducing the annual deficit is a start but until that deficit is eliminated and a surplus is being run each year the overall debt owing continues to increase. Finally, with the UK recovery needing exports to contribute significantly, that recovery remains susceptible to global economic shocks whether through slowing growth in China, political instability, issues in emerging economies or a recurrence of issues in the Eurozone where unemployment (and youth unemployment in particular) appears to be storing up social problems which have yet to play out. The Governor of the Bank of England has already made his view clear that interest rates, even when they begin to rise, will stay at historically low levels for a prolonged period - and indeed the 'normal' interest rate associated with a growing economy may now be materially lower than it has been in the past.

In short, we are optimistic for the fortunes of the UK economy, but believing that the recovery will be steady, we believe that the future path of UK interest rates will remain low.

Continuing low interest rates will be positive for the Group in helping drive personal investor activity. Investors will continue to look to the market for income in the absence of attractive rates on cash. This is of particular assistance in generating new investors into ISAs and into the Group's own funds of funds as these act as a relatively easy entry point into the market for personal investors making the move away from cash for the first time. Continued low interest rates against a backdrop of a recovering economy should also help to support market values. Finally, although the failure of rates to rise to 3.5% and above will mean the Group continues to earn subdued levels of interest, there is considerable latent earnings potential which may be unleashed when interest rates rise. A 0.5% increase in the interest rate earned on client money balances would increase revenues and profits by c.£800,000 per annum.

IMPROVING ECONOMY AND MARKETS

As noted above, we are optimistic about the outlook for the UK economy over the next few years. This should lead to improving corporate earnings, which should be reflected in market values. A rising market helps improve personal investors' sentiment as well as their asset values. This in turn helps to underpin dealing volumes. The overall improvement in the economic situation in the UK has also led to a return to growth in real wages. Personal investors have suffered a number of years of pressure on their spending and savings as price growth has outstripped earnings growth. With this change becoming more pronounced in 2015 personal investors are likely to feel better off and be in a better position to make provision for their futures through increased savings.

As a result of the improved economic climate and the continuing demand from institutional and retail investors we have seen an increase in the number of IPOs. Not all IPOs have an element for the retail investor and we continue to campaign for increased access to such offerings for personal investors. However, increasingly corporate financiers are realising the benefit of including personal investors especially where the business itself has a significant retail customer base. 

REGULATORY CHANGES

The Retail Distribution Review ("RDR") which we fully supported was designed to improve the quality of advice customers receive and the transparency of the charges they pay to investment firms. The second element of this came into effect in April 2014 with the outlawing of commission paid by fund providers to brokers who sell their funds.

We believe this continues to represent a significant opportunity for The Share Centre. We have always held true to our belief that the customer relationship is at the core of our activity. We seek to put the customer first in all that we do and believe we can evidence this in the decisions we have taken around RDR pricing. The changes have forced many of our competitors who have based their business models on the trail commission paid to them by fund providers to introduce new transparent charges. These have typically been set as a percentage of the value of the customers fund or overall investments and range from 0.25% to 0.45% per annum.

The Share Centre will continue to charge a single low flat-rate fee for each account and we are then neutral to the customer's choice of investment within that account. With our low flat-rate account administration charge, as we work hard to help our customers build their savings and investments over time, they will not be penalised for their success through higher absolute charges. Just by way of illustration, a 0.35% fee on a £20,000 portfolio may appear modest at £70 per annum, but if that £20,000 doubles so does the fee - to £140 per annum - and yet the investor receives the same service from the provider charging that value-related fee. For this reason, as already demonstrated by the number of accounts being transferred to us, we believe that over time, as investors see the new charges appearing on statements, so they will look to move to providers such as The Share Centre and away from providers charging value-related fees.

At a strategic level, The Share Centre has always been seen as an advocate for personal investors investing in equities. This is reflected by the fact that 80% of our customer's assets are invested in equities. Meanwhile, our offering for investors looking to invest in funds, often earlier in their investment journey, may have appeared uncompetitive as compared to those providers who have appeared to charge no account fees and advertise attractive loyalty bonuses all paid for out of the trail commission they received. We are now highly competitive in the area of funds and will seek to address the challenge of ensuring investors know that The Share Centre is a provider who can meet all their investment needs across a range of investment types and wrappers (e.g. ISAs, SIPPs).

Finally, a further impact of RDR related to the initial stages of the process, was to reduce the availability of financial advisors. The so called 'advice gap' may not have seen as many independent financial advisors ("IFAs") close their businesses as was perhaps anticipated but increasingly high limits (£100,000+) are being placed on customers assets before IFAs or other wealth managers will be prepared to offer them a service. As a result personal investors with more modest portfolios or investment capacity are being forced to look at self-select routes. This again helps drive interest in businesses such as The Share Centre and we will continually look at ways we can enhance our service to offer those personal investors the support and guidance they need whilst making their investment journey simply easier when faced with the usual jargon and complexities associated with investing.

OVERALL OUTLOOK

Given the trends identified above, we look forward positively to the future. With a focused proposition, more compelling pricing now that the business models of our peers have been made transparent, a loyal and growing customer base, and our first class customer service, we believe that the Group is well positioned to take advantage of those trends and deliver our key financial objectives of increased revenues, profits and returns for all stakeholders.

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors have identified and continually monitor the principal risks and uncertainties facing the Group. These may change over time as new risks emerge and others cease to be of concern. The principal risks to the Group are detailed below. The Directors believe that the identified risks have been addressed and where possible, and within the Group's control, mitigating actions have been taken to ensure processes and procedures are in place and followed to limit any impact which could arise.

REGULATORY RISK

The Group contains regulated entities. As such it is essential that it abides by the rules and requirements of the FCA. Failure to do so, especially with regard to the treatment of customers and the handling of customer assets, could lead to sanctions and fines on entities within the Group. A significant amount of the regulations which impact the Group originate from Europe and include directives such as the Capital Requirements Directive (CRD) and the Markets in Financial Instruments Directive (MiFID). The Treasury and FCA are looking to consult on changes in respect of MiFIDII in 2015, the outcome of which could impact the business.

The Group is also subject to the decisions of the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS). In respect of the latter, the Group, through The Share Centre Limited and Sharefunds Limited, is liable for any fees levied by the FSCS to cover compensation costs incurred in respect of the customers of failed firms in our industry. These charges currently are, and may continue to be, material. The Group continues to campaign for an overhaul of the way these levies are calculated such that the burden of those levies more closely reflects the risks businesses are running.

SYSTEMS RISK

The operations of the Group are highly dependent on technology. A failure in the Group's core systems or customer interfaces could pose a significant risk to the business. Were it to affect the ability to reconcile accounts or maintain records, this could also have regulatory implications. This would also be the case were any of the Group's systems or processes in respect of data security to fail.

REPUTATIONAL RISK

The Group is continuing to spend significant sums of money on marketing and building The Share Centre's brand to attract new customers. Were the brand to be affected in any way through bad publicity or negative associations, this could impact customer confidence in that brand and damage the prospects of the business.

INVESTOR SENTIMENT

The Group has a diversified customer base and is not subject to any significant concentration risk in its retail stockbroking business. However, most revenues are derived from personal investors and were investor confidence in the stock market to be adversely affected, or were there to be a very deep, prolonged recession with very high unemployment which reduced the ability of personal investors to undertake savings and investment activity, this could impact the performance of the Group.

STOCK MARKET VOLATILITY

Changes in the value of the stock market directly impact the level of any value related fees and therefore revenues. The changes to the Group's prices in 2013 significantly reduced this risk by moving fees more directly to flat rate charges. Sharp changes in valuations can also damage investor confidence and therefore damage the prospects of the Group more widely. The Group's business model and split of revenues across commission, fees and interest help mitigate exposure to any one factor. However, a combination of falling stock values and sharply reduced investor activity could have a significant impact on the performance of the Group.

COMPETITION RISK

The Group faces competition from a number of other brokers and larger financial institutions offering similar services. The Group has successfully differentiated itself by targeting investors at an earlier stage than many brokers, by offering a clear and easy-to-use service, through its high quality customer service and low prices. However, the Group is always susceptible to the impact of short-term, cut-price offers from competitors who, in the case of the large financial institutions, may have substantial financial resources to support such initiatives.

FUND ADMINISTRATION SPECIFIC RISKS

The Group acts as Authorised Corporate Director (ACD) for some funds, including its own funds of funds. Although some activities such as fund accounting are outsourced to BNP Paribas, regulatory responsibility continues to rest with Sharefunds and therefore aspects of the risk associated with this part of the Group's business. A failure in any of these areas could have a material impact on the Group's performance.

FRAUD RISKS

Due to the nature of our business, the Group is at risk from external and internal fraud. Robust controls are maintained to mitigate these risks such as strict segregation of duties, customer verification and identification procedures and penetration testing. Insurance cover is also in place, with an excess of £40k.

BALANCE SHEET RISKS

The Group's Shareholders' Funds are comprised principally of cash and investments. The cash is held with a number of banking counterparties. Each counterparty is subject to regular reviews and a number of counterparties are used to diversify risk, however, the failure of any of those counterparties would have a material effect on the Group's assets.

The Group also holds investments in the London Stock Exchange plc, Euroclear plc and WAY Group Limited. The London Stock Exchange plc investment is relatively liquid and could be readily realised. The market value is subject to fluctuation and a significant decline in value would have a material impact on the Group's balance sheet. Euroclear plc shares are not traded on a market but the company has completed two share buybacks from shareholders in the last two years which have demonstrated an ability to realise value. The valuation of this investment would be materially affected by any significant decline in the business, asset value or prospects of Euroclear, or of the Euro as the investment is denominated in Euros.

WAY Group Limited shares are not publicly traded and in the absence of any other objective evidence the shares are held at cost. The company is loss making and there is no current prospect of being able to realise this investment. Ultimately this investment may be worth materially less than cost if the business cannot reach profitability or an exit for shareholders does not materialise.

OTHER RISKS

The Group is impacted by fluctuations in economic sentiment amongst investors. This may increase or decrease trading dependent on investors' confidence and availability of funds to invest. The Group is not exposed to currency risk or specific country risk other than through its interactions with counterparties who themselves may suffer from such exposures. For example, whilst everything the Group does is in pounds sterling, the counterparties, and in particular, the banking institutions with which it deals, will have exposure to foreign currencies and other countries which could affect their stability and in turn have an impact on the Group.

CONSOLIDATED INCOME STATEMENT

YEAR ENDED 31 DECEMBER

All results are in respect of continuing operations.

* The Directors consider that the underlying earnings per share as presented in Note 7 represent a more consistent measure of the underlying performance of the business as this measure excludes the impact of some items, including any large non-recurring items.

 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

YEAR ENDED 31 DECEMBER

NOTES TO THE PRELIMINARY ANNOUNCEMENT 

1 GENERAL INFORMATION

Share plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered office is Oxford House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ. The nature of the Group's operations and its principal activities will be set out the in Strategic Report in the Group's Annual Report for 2014, which will be available as set out in note 9 below.

The financial statements are presented in pounds Sterling which is the currency of the primary economic environment in which the Group operates.

2 BASIS OF PREPARATION

The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information is extracted from the 2014 Group financial statements which have yet to be signed and which have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB (together "IFRS") as endorsed by the European Union.

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

- Amendments to IAS 1 'Presentation of items of other comprehensive income'

- Amendments to IAS 19 'Employee benefits'

- Amendments to IFRS 7 and IAS 32 'Offsetting financial assets and financial liabilities'

- IFRS 10 Consolidated Financial Statements

- IFRS 11 'Joint arrangements'

- IFRS 12 Disclosure of Interests in Other Entities

- Amendments to IAS 36

- Amendments to IAS 39

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not yet been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

- Amendments to IAS 12 "Deferred Tax: Recovery of Underlying Assets"

- IFRS 9 'Financial Instruments'

- IFRS 15 'Revenue from Contracts with Customers'

- IAS 27 'Separate financial statements'

- IAS 28 'Investments in associates and joint ventures'

- IFRIC 21 'Levies'

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

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

- Improvements 2014 - Annual Improvements to IFRSs: 2012-2014 Cycle 

- Amendments to IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

- Amendments to IAS 16 & 38 - Clarification of Acceptable Methods of Depreciation and Amortisation

- Amendments to IFRS 15 - Revenue from Contracts with Customers

- Amendments to IAS 27 - Equity Method in Separate Financial Statements (Amendments to IAS 27)

- IFRS 14 "Regulatory Deferral Accounts"

Other than to expand certain disclosures within the financial statements, the directors do not expect that the adoption of the standards and interpretations listed above will have a material impact on the financial statements of the Group in future periods.

The Group accounts consolidate the financial statements of the Company and its subsidiaries, The Share Centre Limited, The Share Centre (Administration Services) Limited, The Shareholder Limited, and Sharefunds Limited, which all make up their annual financial statements to 31 December. Other subsidiaries are not included in the Share plc consolidation as they are not trading and not material to the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The Group has considerable financial resources and no external debt. With a diversified customer base and core recurring revenue streams along with large elements of discretionary spending in the Group's cost base, the directors believe that the Group is well placed to manage its business risks successfully despite the uncertain economic outlook. Therefore, after making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the going concern basis has continued to be used in the preparation of these financial statements.

The Group's detailed accounting policies are as detailed in the full financial statements which will be published shortly as per Note 11 below. These policies are consistent with those applied in the financial statements for the year ended 31 December 2013.

3 BUSINESS AND GEOGRAPHICAL SEGMENTS

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. The reportable segments are therefore represented by the following two business divisions:

The Share Centre - this is the main trading business and provides stockbroking and custodian services to retail investors. Operating wholly in the UK, the great majority of this business is done directly with those retail customers, though in some cases the relationship is through a third party, typically on a white-labelled basis.

Sharefunds - this is the division which operates a fund administration service. The division's customers are authorised funds for whom a range of administration services may be provided. This can include taking on the role of Authorised Corporate Director. In addition to external third party funds, Sharefunds acts as investment manager to Sharefunds' three Funds of Funds. During 2014, the Group made changes to its transfer pricing arrangements in order to enhance the visibility of the trading performance of Sharefunds which resulted in higher revenue in the year.

The split of revenues and operating profit are therefore as below.

It should be noted that the accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 2 and that there were no major customers contributing more than 10% of revenues in the Group as a whole. The assets of the Group are principally used by The Share Centre. The services offered by the Group vary by business division as described above. However, within each business division there is only one principal revenue stream and therefore there is no separate or further segmentation by service offered. Sharefunds has no material assets which would meaningfully be separated from The Share Centre, other than cash of £430,000 (2013: £378,000).

4 OTHER GAINS

The Group sold 14,384 Asset Match shares at £4.20 receiving a consideration of £60,413.

5 TAXATION

The tax assessed for the current year can be reconciled to the profit per the income statement as follows:

In addition to the amount charged to the income statement, deferred tax relating to the revaluation of the Group's investments amounting to £389,000 (2013: £425,000) has been debited directly to other comprehensive income. A current tax credit of £80,000 (2013: £9,000) and deferred tax credit of £18,000 (2013: charge of £3,500) relating to excess deductions on share-based payments have been taken directly to equity.

In March 2013, the Government announced that the main rate of corporation tax would reduce to 21% with effect from 1 April 2014 and 20% with effect from 1 April 2015. These tax rate reductions had been substantively enacted at the balance sheet date and therefore deferred tax has been recognised at 20%. The current year tax rate used above (21.5%) arises from the reduction in corporation tax rate on 1 April 2014 from 23% to 21%.

6 DIVIDENDS

The directors are proposing a final dividend of 0.62 pence per share in respect of the year to 31 December 2014. This would amount to a gross dividend payment of £891,000 given the current share capital.

7 EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming conversion of all potential dilutive ordinary shares. The potential ordinary shares consist of those share options and warrants where the exercise price is less than the average price of the Company's ordinary shares during the year. The calculation results in a difference of only a small fraction of a penny, which is eliminated in roundings.

Underlying basic and diluted earnings per share are calculated as for basic and diluted earnings per share but using an adjusted earnings figure before any one-off gains, losses, income or expense. The Directors consider that the underlying earnings per share represent a more consistent measure of the underlying performance of the Group.

8 NOTES TO THE CASH FLOW STATEMENTS

9 AVAILABILITY OF REPORT AND ACCOUNTS

The Group's full report and accounts will be dispatched to shareholders, including those in nominee accounts who have opted-in to receive it, as soon as is practicable. Copies will also be available on the Group's website, www.shareplc.com, and on request from the Group's head office at Oxford House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ.

10 ANNUAL GENERAL MEETING

The Annual General Meeting is to be held on Wednesday 10 June 2015. Notice of the AGM will be dispatched to shareholders with the Group's report and accounts.

11 PRELIMINARY ANNOUNCEMENT

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013. The financial information for the year ended 31 December 2013 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, it did not draw attention to any matters by way of emphasis without qualifying their report and it did not contain a statement under s498(2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2014 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.