SHRE.L Regulatory News (SHRE)

11 March 2014

AIM: SHRE

Share plc

("Share" or the "Group" or "Company")

Parent company of leading independent retail stockbroker, The Share Centre

Preliminary Results for the Year Ended 31 December 2013

Highlights

§ Strong performance aided by increased dealing activity

§ Revenue up by 8% to £15.0m (2012: £13.9m)

§ Outperformed peer group with revenue market share*¹ at record level of 7.16% - up 5% (2012: 6.80%)

§ Operating profit up by 51% to £1.4m (2012: £0.9m)

§ Profit before tax up 157% to £1.7m (2012*²: £0.7m)

§ Underlying *³ basic and diluted EPS up 44% to 1.3p (2012: 0.9p)

§ Proposed final (and total) dividend of 0.52p per share - up 21% (2012: 0.43p)

§ Strong balance sheet - net cash increased 11% to £13.6m (2012: £12.2m)

§ Voted "Online Stockbroker of the Year" and "Execution-Only Stockbroker of the Year" in 2013*4

§ Launch of new simple low fixed-fee pricing structure

§ Board succession completed - Gavin Oldham becoming Chairman and Richard Stone, Chief Executive, and Mike Birkett appointed Finance Director

*¹ the peer group comprises: Alliance Trust Savings, Barclays Stockbrokers, Equiniti, Halifax Sharedealing (HBoS), HSBC Stockbrokers, NatWest Stockbrokers (RBS), Saga Personal Finance, Selftrade and TD Direct Investing.

*² PBT in 2012 included the cost of one-off other gains and losses of £0.6m (See Note 4) and the Financial Services Compensation Scheme levies which were £0.5m in 2013.

*³ excludes the impact of some items, including any large non-recurring items, as defined in Note 7 to this preliminary announcement. Statutory basis and diluted EPS more than doubled to 0.9p (2012: 0.4p)

*4 Investors Chronicle & Financial Times Investment Awards

Gavin Oldham, Chairman, commented on the results:

"I am delighted to be reporting good results. Helped by improved stockmarket conditions, Share plc has outperformed its peer group again in 2013 and our revenue market share reached a new annual high of over 7%.

2013 has been a turning point for the Group with its renewed focus on its core strategy now delivering results. We also launched our new price structure in July 2013. This was considerably ahead of the regulatory deadlines set by the Financial Conduct Authority's Retail Distribution Review. Significantly, we have chosen not to levy value-related charges for holding funds within our customer accounts but to introduce a simple flat rate fee structure. As investors build their savings over time, value-related fund charges of the sort that many of our peers have introduced penalise investors' efforts and successful investing. In addition, latterly investors across the market have seen pricing become increasingly complex with numerous 'add-on' charges - for processing dividends or attending company meetings for instance. This airline-style approach to pricing does not serve the interests of the personal investor and we believe our new highly transparent flat fee approach coupled with our low dealing charges sets The Share Centre apart from other competitors and should help us to increase our customer base."

Richard Stone, Chief Executive, commented on the results:

"The performance of the Group was substantially improved in 2013 reflecting the benefits of the refocusing undertaken during 2012. Our pricing is now highly competitive as other business models have been forced to expose the high value-related charges on which they have built their success. The challenge now is to ensure our message is heard as widely as possible. Growing the customer base and the Group's revenues and profits are our principal aims for 2014. We will do this by attracting new customers, identifying new partners and continuing to focus heavily on satisfying our existing customers.

2014 has started promisingly for our business. There have been further public market offerings which follow in the wake of the Royal Mail IPO last autumn and continue to spur investor interest in the market. Interest rates also look set to remain low for some considerable time, and regulatory change is supporting the approach we take to customers, helping us to be more competitive in the market. In the first two months of 2014 we have seen the number of new Share Accounts, ISAs and SIPPs opened by customers increase by 34% on the same two months in 2013. This increased level of account opening activity, and of activity within those accounts, means we believe we can look forward to the rest of 2014 with confidence."

Enquiries:

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:

Share plc is the parent holding company of The Share Centre Limited, which trades as The Share Centre, and Sharefunds Limited. Share's shares are traded on AIM and also on Asset Match.

The Share Centre, which started trading in 1991, provides a range of account-based services to enable investors to share in the wealth of the stock market. 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. As well as providing online execution-only dealing services to private investors, The Share Centre also provides services to corporate clients including share plan administration and 'white-label' dealing platforms.

'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.

For more details on Share plc and The Share Centre, please visit www.shareplc.com and www.share.com.

Share plc

Preliminary results for the year ended 31 December 2013

Chairman's statement

Introduction

I am delighted with Share's progress over 2013 and our improved results reflect the strength of the Group's growth potential with revenue up 8% to £15.0m, profit before tax up 157% to £1.7m and underlying earnings per share up 44% to 1.3p. This performance, which also demonstrates our business model's scalability, was driven principally by increased dealing activity, stimulated by the improvement in stockmarkets over the year. It also demonstrates some of the benefits of the operational refocusing and improvements we undertook in 2012. What is extremely encouraging is that we outperformed our peer group*¹ again and our revenue market share is now at a record level of 7.16%, an increase of 5% year-on-year (2012: 6.80%). We believe this reflects our determination to provide our customers with very high quality services, which also offer fair value.

Financial Results

Revenue for the year to 31 December 2013 increased by 8% to £15.0 million (2012: £13.9m). This was achieved despite a £0.5m reduction in revenue from the Group's investment management and fund administration subsidiary, Sharefunds, as a result of our decision in 2012 to discontinue fund-accounting. Dealing commission has risen to 44% of revenue at £6.7m (2012: £5.0m, representing 36% of total revenues) and total fees accounted for 41% at £6.2m (2012: £6.5m, representing 47% of total revenues). Interest income reduced by 9% to £2.1m (2012: £2.4m), reflecting the ongoing low interest rate environment as some higher rate term deposits have matured. Operating profit rose by 51% to £1.4m (2012: 0.93m), profit before tax increased by 157% to £1.7m (2012: £0.7m) and underlying earnings per share rose by 44% to 1.3p (2012: 0.9p). Headline earnings per share more than doubled to 0.9p (2012: 0.4p).

The Group's balance sheet remains very strong, with no debt and net cash up by 11% to £13.6m (2012: £12.2m).

Dividend

The Board is pleased to propose an increased final (and total) dividend for the year of 0.52 pence per share. This represents a rise of 21% on the prior year (2012: 0.43p per share) and the final dividend will be paid on 18 June 2014 to shareholders on the register on 23 May 2014. This is the fourth consecutive year we have increased the dividend at a rate of c.20% per annum.

Operational Overview

In this overview, I will briefly comment on some key operational and market highlights. Our Strategic Report sets out in more depth our business model, how we have delivered against our strategy in 2013, and the Group's financial performance. Key extracts are published in this preliminary announcement with the full Strategic Report to be available in our Annual Report.

In 2012, we refocused our growth strategy, implementing significant organisational changes to concentrate on our core activity and brand, The Share Centre. I am pleased that we can now show headline figures which reflect the strength of the Group's growth potential and our business model's scalability.

We also made some important changes in 2013, which we expect to help drive ongoing growth. A milestone event was the unveiling of our new price structure in July 2013. Based on extensive customer research, a key feature of our new price structure was the introduction of flat monthly administration fees for our share accounts, ISAs and now on our newly-introduced Self-Invested Personal Pension ("SIPP"). We believe that this clear, fixed pricing, accessible to all investors regardless of wealth or experience, helps to mark us out compellingly against our competitors. It also reflects our desire to make investment simply easier for customers. Alongside this, under our frequent trader option, it is now possible to deal online for just £5.25 for any transaction, on the basis that the customer also holds 500 or more shares in Share plc.

 As the rest of our industry sets out their charging structures in the wake of the Retail Distribution Review (RDR), the contrast in custody charges, in particular for holding funds, is now becoming particularly apparent. As part of our pricing review we did not introduce fees based on a percentage of the value of the funds held by a customer and are actively converting our customers' holdings to 'clean classes'. We believe these two key aspects of our proposition demonstrate our commitment to putting customers first, enabling them to benefit from lower annual fund management charges and ensuring their investment growth is not penalised by value related charges. The contrast in custody fees for holding £50,000 worth of funds in a dealing account is now stark and is illustrated below:

(Correct as at 11 March 2014)

In March 2013, before launching our new price structure, we 'went live' with our new improved website, www.share.com. With our enhanced website and new price structure, we believe that the Group is now well placed to compete vigorously for inward transfers of investment accounts, for the consolidation of accounts held elsewhere by existing customers and for new customer accounts.

We continue to strive to maintain excellent customer service levels and we were pleased that The Share Centre was voted "Execution-only Stockbroker of the Year" and "Online Stockbroker of the Year" in 2013, by readers of the Financial Times and Investors Chronicle. In addition, I was delighted to accept the "Editors' Award for Services to Private Investors".

With the improvement in trading conditions in 2013, we saw the re-emergence of new issues. The Royal Mail Group's flotation in October was a particular highlight and we were pleased both to be involved and that many investors of relatively modest means benefited. This high profile IPO as well as others such as Merlin Entertainments are helping to encourage new investors into the marketplace and we are well placed to assist them. There are also increasing signs of renewed new issue activity for small and medium-sized businesses. Another boost for trading activity came in August, when AIM shares were permitted to be held in ISAs. This resulted in a significant uplift in AIM trading volumes. In April 2014, the abolition of Stamp Duty on AIM shares will provide another stimulus for investors wishing to trade shares in AIM companies.

Championing the rights of personal investors

Both the admission of AIM shares to ISAs and the abolition of Stamp Duty on AIM shares followed requests we have made to HM Treasury for many years. We are delighted that, notwithstanding public spending austerity, the Government has made these decisions and we remain committed to championing the rights of personal investors. In my new role as Chairman, I will be able to focus more strongly on such campaigning activities.

During autumn 2013 our industry's trade association decided to change its name to the Wealth Management Association ("WMA"). We were concerned that the change did not focus enough on shares, populist access to equities, or to self-directed investing. We therefore proposed the establishment of a new council within WMA. Our proposal has been accepted and the new council, to be called the "Wider Share Ownership Council", is being established. It will, of course, embrace our competitors as well as The Share Centre, but it is another example of the Group leading the way to benefit people wishing to invest in British businesses.

The Share Foundation

The Share Centre also provides its Junior ISA service to a charity called The Share Foundation (www.sharefound.org), following independent account allocation guidance given by Kleinwort Benson. It has been a busy first year for this unique organisation which establishes and oversees accounts for children and young people in care throughout the United Kingdom, and of which I am also the Founder and Chairman of Trustees.

Staff

We could not, of course, deliver all the above 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 2013 and we look forward to a busy year ahead.

The Board

We completed our management succession in 2013 as, at the end of the year, I passed the Chief Executive role to Richard Stone, previously Chief Operating Officer and Finance Director, and took up the position of Chairman. In February 2014, we also appointed Mike Birkett as Finance Director. Mike was previously Finance Director at Thomas Cook Online, the e-commerce centre of excellence within Thomas Cook Group Plc. Prior to that he worked for eight years with Betfair Group plc, initially as Head of Financial Planning and Analysis and then as Finance Director of Betfair Group plc's financial trading exchange, LMAX.

As we have already reported our previous Chairman, Sir Martin Jacomb, continues to give us the benefit of his wisdom in his role as a Special Adviser.

Prospects

At the end of each calendar year we are requested by the media to forecast what the FTSE 100 will be at the end of the coming year. In December 2012 we forecast that the index would beat 6666, and the stockmarket duly obliged with a year end figure of 6749. This year we have stayed with the pattern and forecast 7777.

This reflects our view that there are indeed brighter skies ahead after such a long period of recovery. Our quarterly review of UK corporate earnings, Profit Watch UK, also bears this out with a distinct improvement in profitability across the board. We believe that interest rates will stay low, and that central banks will not allow confidence building to be disrupted by allowing long bond yields to rise too quickly.

There are, of course, some clouds on the horizon; many countries in Europe are still struggling to escape from stagnant Gross Domestic Product, high unemployment and deflation, and a vote for Scottish independence could be very unsettling for the UK market.

Our challenge at Share plc is to ensure that the very strong offering we are now making to personal investors is heard in the busy marketplace and that our strategic and financial strength is properly recognised. When combined with our award-winning levels of customer service we are confident that this will deliver good business performance in the year ahead.

Gavin Oldham

Chairman

11 March 2014

*¹ the peer group comprises: Alliance Trust Savings, Barclays Stockbrokers, Equiniti, Halifax Sharedealing (HBoS), HSBC Stockbrokers, NatWest Stockbrokers (RBS), Saga Personal Finance, Selftrade and TD Direct Investing.

Strategic Report - Key Extracts

Following changes to the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, the Group is required to provide a Strategic Report, separately approved by the Board, as part of its annual report. Key extracts from the Strategic Report are set out below and replace the Business Review section which has appeared in previous years. The full Strategic Report will be available in the 2013 Annual Report.

A review of 2013

Delivering the strategy

The strategy of the Group is based on three key elements, putting customers first, focusing on our core brand (The Share Centre) and establishing partnerships and making selective acquisitions. In 2013 we have continued to deliver against these. In particular:

(a) Putting customers first

In July 2013 we revised our pricing. This was the first time we have done so in many years. We believe the approaches we have adopted demonstrate our commitment to putting customers first. In particular, unlike many of our peers, we have not sought to replace the trail commission we received from fund providers with a value-related custody fee for funds. Unlike many of our peers we are actively converting customers' fund holdings into 'clean share classes' which do not pay trail commission and which therefore typically have a lower annual management charge. This programme is expected to complete by the end of Q3 2014.

We believe the value-related fees now being seen across the market penalise investors seeking to build their investment and savings portfolio. Such charging structures are typically complex and perpetuate historic business models which were based on percentage fees received out of the sight of the customer. The FCA's Retail Distribution Review has forced companies to make these charges explicit but we believe that value-related fees do not reflect the costs of doing business and mean customers will likely be worse off as their investments grow - relative to the alternative of a low cost fixed-fee arrangement which we have adopted. In addition, we do not penalise customers by charging different amounts for dealing depending on how customers choose to interact with us. Finally, we have kept our charging structure transparent and simple, with no additional hidden fees or any other fees for dividend processing or attending company meetings for example, all of which act to prevent the investor fully engaging with their investments.

(b) Focus on our core brand - The Share Centre

In March 2013 we launched a new version of our website www.share.com. This is the main route through which our customers interact with us and through which we attract new business (see Key Performance Indicators). This new website is based on enhanced technology which allows us to change the content more dynamically. We believe it has led to an improved user experience and better navigation around our site. We have a continuous process for enhancing and improving the functionality of our web offering and the content available on our website.

We completed the scaling back of our Sharefunds operations at the end of March 2013. This involved the withdrawal from providing fund accounting services to WAY Fund Managers Limited and we moved to a new third party depository (BNP Paribas) for the remaining funds for which we act as Authorised Corporate Director ("ACD"). This process involved a small number of redundancies and some additional costs associated with the scaling back of these operations in the first quarter of the year. The Board has determined that we are unlikely to take on any further host-ACD funds - i.e. funds where we are not both ACD and fund manager. In addition, any new funds we do launch will have a clear link to our values, strategy and the demands of our customers.

Finally, we continue to promote our business and brand through our public relations activities. We have appointed a new firm to assist us with search engine optimisation and have actively sought to develop relationships with media outlets during the course of the year. This has led to articles featuring The Share Centre, our spokespeople and in some cases customer case studies in numerous investment publications as well as national media.

(c) Establishing partnerships and making selective acquisitions

We established a number of new partnerships in 2013, including the launch of share dealing services for First Shares and Red Hot Penny Shares. In addition, we continue to make good progress in the field of Enterprise Investment Scheme ("EIS") administration. This service for EIS fund managers uses all of the same processes in respect of investment custody and administration that are used by The Share Centre in its core business. We are one of the market leaders in this field and agreed arrangements with a number of new EIS fund managers during the year. Although no suitable acquisition opportunities materialised during 2013, we continue to look for any suitable opportunities.

Financial performance

The Group's performance improved in 2013 and was ahead of market expectations. Below the key elements are set out in more detail.

Revenues

Overall revenues at £15.0m grew by 7.8% (2012: £13.9m, decline of 2.4%). When the impact of scaling back the Sharefunds operations is excluded, like-for-like revenues at £14.7m showed growth of 12.3% (2012: a decline of 2.1%). 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.

The principal driver of revenue growth was increased dealing activity in the market. Dealing commission increased by 32% to £6.7m (2012: £5.0m). Like-for-like fee income, excluding the scaling back of the Sharefunds business, increased by 4% to £5.9m. Total fees, including the Sharefunds business, reduced by 5% to £6.2m (2012: £6.5m). Interest income reduced by 9% to £2.1m (2012: £2.4m). This reflected continued weakness in rates particularly as term deposits placed at higher rates matured. As a result the revenue mix between commission, fees and interest shifted to 44%, 41% and 15% respectively in 2013 from 36%, 47% and 17% respectively in 2012.

The Group has always placed a high degree of importance on the quality of revenues and the level of recurring revenue represented by fees and interest. In 2013 this was 56% (2012: 64%) of overall revenues and covered 61% of the Group's costs (2012: 68%).

Finally, it is worth noting that revenues were boosted in 2013 by the return of large scale retail initial public offerings ("IPOs") - most notably the Royal Mail. This led to a significant increased interest in investing amongst the general public and saw many people open new accounts in order to invest. We strongly supported the populist allocation policy which was adopted and the great majority of investors who applied through The Share Centre received an allocation. Other IPOs included Merlin Entertainments and Infinis and we expect there to be more in 2014, potentially including the Government disposing of its stake in Lloyds Bank.

Costs

Overall costs for the year increased by 4.7% to £13.6m (2102: £13.0m). This demonstrated good cost control enabling margin expansion.

The principal cost incurred by the Group relates to the high quality staff employed. Total staff costs, including salaries, training, profit share, and related employment taxes rose to £7.0m (2012: £6.7m). This increase of 4.5% reflected increased profit share (due to the increased profitability of the Group) as well as salary increases and some one-off costs related to the scaling back of the Sharefunds business.

The second largest cost incurred by the Group is marketing. In 2013 this was £2.0m (2012: £2.1m). Of this total, £1.1m (2012: £1.1m) was spent directly on promotional advertising online and in printed media.

Staff costs and marketing spend together totalled £9.1m (2012: £8.7m) being 67% (2012: 68%) of total administrative costs. Other expenditure related to premises, IT systems, professional fees, regulatory fees and levies and irrecoverable VAT. It is worth noting that, due to continued failures of firms in our sector, the Financial Services Compensation Scheme (FSCS) levies we have incurred in 2013 totalled £481,000 (2012: £283,000), the increase in those levies accounting for the total increase in other costs. Shareholders should refer to our 2012 Annual Report for further commentary on the FSCS.

Profitability

The profits of the Group increased significantly in the year as a function of the growth in revenues and well controlled costs. Overall operating profit was £1.4m (2012: £0.9m) an increase year-on-year of 51%. This demonstrates the scalability of the business as 44% of the growth in revenues went straight through to profits. The overall operating profit margin increased to 9.4% (2012: 6.7%) although this remains well below the levels the Board believes the Group can achieve in the long run with additional scale.

In 2012 the Group incurred a number of one-off costs associated with its decision to withdraw from the provision of fund accounting services. The impact of these and the fact that 2013 saw improved dividends from the Group's investments in the London Stock Exchange plc and Euroclear plc mean that profit before tax rose by 157% to £1.7m (2012: £0.7m).

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. These increased to 1.3p (2012: 0.9p). At a headline level, earnings per share were 0.9p (2012: 0.4p).

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 73% since 2010. In that context the Board of Directors are proposing a final dividend of 0.52 pence per share (2012: 0.43 pence), which represents growth of 21% on the prior year dividend. This payment is clearly well covered by headline and underlying earnings (2.5 times covered). Subject to approval at the Annual General Meeting, the proposed dividend will be paid on 18 June 2014 to shareholders on the register on 23 May 2014.

Balance sheet

The Group's balance sheet remains very strong with significant cash balances and no debt. The Group's cash flow statement demonstrates that it generated a net cash flow of £1.4m (2012: £1.1m) in 2013.

Overall shareholder funds at 31 December 2013 were £19.4m (2012: £16.5m). This represents 13.5 pence per share in issue (2012: 11.5p).

The significant increase in shareholder funds year-on-year in part reflects the Group's profitability but also reflects the increase in value of the investments held by the Group - in particular our shares in the London Stock Exchange plc and Euroclear plc. These were valued at £3.0m and £2.9m respectively at the end of 2013 (2012: £1.9m and £1.4m respectively). The increase in value in the London Stock Exchange plc shares reflects the increased market value, and in reflect of Euroclear plc, the increased carrying value reflects the weighted average price at which shares were recently bought back by the 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 2012.

The level of cash held by the Group increased by 11% to £13.6m (2012: £12.2m) of which £13.0m (2012: £11.5m) are the Group's own balances.

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 against a peer group of nine 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, the independent company which gathers and provides data and analysis to the wealth management community.

The fourth quarter data showed a market share of 7.20% (Q4 2012: 7.23%). For the year as a whole the market share was 7.16% (2012: 6.80%). This data shows that the Group has outperformed its peers during the year in terms of revenue growth. Overall revenues for the Group increased by 7.8% (or by 12.3% when the scaling back of Sharefunds is excluded). This compared to an increase of just 1.4% experienced by the collective peer group.

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 2013, 56% of the Group's revenues were fees or interest as compared to 25% of our peer group's revenues.

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 and website usage. Our website continues to attract increasing numbers of visitors and remains the predominant route through which new accounts are opened. In 2013 the average monthly number of unique visitors was over 140,000 (2012: 140,000) and an average of nearly 26,500 individuals signed-in to www.share.com to access their accounts each month (2012: 25,000).

When reviewing our pricing we took the opportunity to close a number of accounts which were dormant and contained no assets. The price changes also led to a number of customers - particularly those holding just a few Share plc shares - closing their accounts. This resulted in a 4% reduction of overall account numbers to 268,000 (2012: 279,000). Going forward we will report the number of accounts which contain assets - that was 247,000 as at the end of 2013.

Of the new Share Accounts opened during the year 92% were opened online (2012: 92%).

We also closely measure the level of customer satisfaction. In 2013 we received 4.59 complaints per 1,000 customers. This was a significant increase on the levels we have experienced historically (2012: 1.6). An analysis shows that this principally reflects complaints from customers regarding the changes to our prices. We continue to have very low levels of complaints referred to the Financial Ombudsman, just seven in 2013 (2012: three), with none upheld against us (2012: 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 (142 at 31 December 2013 (2012: 137)) as well as assessing staff turnover rates and our success in attracting and recruiting new staff. In 2013 our staff turnover rate was 10.0% (2012: 24.9%) - a more normal level following the unusually high turnover in 2012 arising from our scaling back of fund accounting activities. 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 quarterly 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 100 employees making regular monthly contributions into the scheme.

In 2013 we repeated the staff survey first conducted in 2011. This again showed high levels of satisfaction amongst our employees with over 80% (2012: 80%) of staff agreeing with the assertion "I believe that this is a great place to work" and over 85% (2012: 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 2013 section of the Strategic Report above.

Operating margin

We monitor the level of operating margins as explained above where data for 2013 is given. The Group considers an operating margin, between 25% and 30%, to be its longer term aspiration. As revenues expand further, and interest rates return to more historically normal levels, we would expect to see this margin increase.

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 absolute terms and at the rate of change relative to overall market levels. At the end of the year this value was £2.34bn (2012: £1.84bn), an increase of 27% which compares favourably to an increase in the FTSE All Share index over the same period of 17%. 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.£186m during 2013 (2012: £205m).

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 2013 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, increased to £13.0m from £11.5m.

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 2013 the Group was holding 6.2 times the capital required by the FCA for 2014. (2012: 4.7 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 £2.9m for 2014 (2013: £3.6m). The Group has in place an Internal Capital Adequacy Assessment Process (ICAAP) which was reviewed by the FSA in 2009. Full details of our capital requirements as required to be disclosed under Pillar III of the Capital Requirements Directive 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 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 late 2014 or early 2015 as the market currently expects those rises will be very 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 dematerialising activity 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 therefore 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.£750,000 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 will also lead this year 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 likely to change in 2014 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 started to see a significant increase in the number of Initial Public Offerings (IPOs). This included Royal Mail, Merlin Entertainments and Infinis in 2013, and has already seen Pets At Home amongst others in 2014. 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

We fully support the principles behind the Retail Distribution Review ("RDR") which 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 comes into effect in April 2014 with the outlawing of commission paid by fund providers to brokers who sell their funds.

We believe this heralds 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, as noted in the Chairman's Statement.

The Share Centre derived relatively little of its income from trail commission. As such we have not seen the need to introduce new custody charges for holding investments, be they funds or equities, on our platform. We 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, 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 80% of our customer's assets which 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 relatively 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 compared 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 the business models of our peers have been made transparent, a loyal and growing customer base, and our high quality hard-working team of staff dedicated to delivering first class customer service we believe The Share Centre 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). MiFID is still being reviewed by the European Union and consultations are taking place, the outcome of which could impact the business. CRD IV came into effect in January 2014 and will change aspects of the Group's regulatory reporting and capital requirements.

In 2014 we are expecting the FCA to publish a policy statement following on from its consultation paper CP13/5 on Client Assets. This may include new rules in respect of the placing of client money on term deposit which may impact the Group's ability to earn interest on client money deposits at rates in excess of those available on instant access accounts.

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 in which 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 in the Group's prices in 2013 have 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 as, therefore, will aspects of the risk associated with this aspect of the Group's business. A failure in any of these areas could have a material impact on the Group's performance.

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.

Richard Stone

Chief Executive

11 March 2014

Consolidated income statement

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

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

 Notes to the preliminary announcement

1 General information

Share plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered office is Oxford House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ. The nature of the Group's operations and its principal activities will be set out in the Strategic Report in the Group's Annual Report for 2013 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 2013 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 affected the amounts reported in these financial statements:

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

- IFRS 10 "Consolidated financial statements"

- IFRS 11 "Joint arrangements"

- IFRS 12 "Disclosure of interests in other entities"

The Group has applied the amendments to IAS 1. The amendment increases the required level of disclosure within the statement of comprehensive income. The amendments have been applied retrospectively, and hence the presentation of items of comprehensive income has been restated to reflect the change.

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

- IAS 19 "Employee benefits"

- IFRS 13 "Fair value measurement"

- Amendments to IFRS 7 "Financial Instruments Disclosures"

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

- Improvements 2011 - "Annual Improvements to IFRSs: 2009-2011 Cycle"

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):

- IFRS 9 "Financial Instruments"

- IAS 27 "Separate financial statements"

- IAS 28 "Investments in associates and joint ventures"

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 2012.

 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 vast 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. Previously the majority of revenues were derived from fees in respect of administration services provided to funds administered by WAY Fund Managers. The service agreement with WAY Fund Managers ceased in April 2013.

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 £378,000 (2012: £546,000).

4 Other gains and losses

During 2012, the Group disposed of Sharemark Limited, and sold a number of corporate client contracts and intellectual property related to the Sharemark market, to Asset Match Limited. The proceeds were £100,000 and an equity stake in Asset Match Limited. The Group will operate the market for Asset Match Limited for a period of two years and will be paid for doing so as part of a service contract.

Following the decision to withdraw from providing fund accounting services, the Group had no use for the partially developed bespoke fund accounting system which was being developed to support the expected growth in the Sharefunds business unit. The Group therefore wrote off the development cost related to that system which was previously being capitalised as an intangible asset on the balance sheet. This totalled £662,000.

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 £425,000 (2012: £87,000) has been debited directly to other comprehensive income. A current tax credit of £9,000 (2012: £20,000) and deferred tax charge of £3,500 (2012: £16,000) 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 (23.25%) arises from the reduction in corporation tax rate on 1 April 2013 from 24% to 23%.

6 Distribution to shareholders

The directors are proposing a final dividend of 0.52p per share in respect of the year to 31 December 2013. This would amount to a gross dividend payment of £747,000 given the current share capital.

7 Earnings per share

Basic earnings per share is 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 statement

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 Tuesday 10 June 2014. 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 2013 or 2012. The financial information for the year ended 31 December 2012 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; it's 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 2013 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.