SHRE.L Regulatory News (SHRE)

8 March 2018

AIM: SHRE

Share plc

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

Preliminary Results

for the year ended 31 December 2017

Share plc (AIM: SHRE.LN), parent company of The Share Centre (a leading independent retail stockbroker), announces its unaudited results for the year ended 31 December 2017.

HIGHLIGHTS

Financial

Operational

Outlook

(*) the monthly peer group comprises: Alliance Trust Savings, Barclays Stockbrokers, Equiniti, Halifax Sharedealing, HSBC Stockbrokers, Saga Personal Finance, Selftrade and TD Direct Investing (and Interactive Investor from October 2017)

(**) excludes the impact of some items, particularly any large non-recurring items, as defined in Note 9.

Gavin Oldham, Chairman, commenting on the results said:

"We are pleased to report record revenues, with commission and fee income reaching new highs. This excellent result was helped by favourable trading conditions, and the benefits of growth initiatives coming through, including a major new commercial relationship with Computershare. Our Digital Transformation Programme remained a key focus in 2017 and we are pleased with the progress made. It remains a core area for us in 2018.

"We put our customers at the heart of our business and are tremendously proud of our high customer service levels and flat fee model, which remain key differentiators. We were therefore delighted to win Investment Trend's prestigious award for "Overall Client Satisfaction" for the fourth year running as well as "Best Stockbroker".

"We see much to look forward to in the year ahead and believe that the Group remains well-positioned to continue to improve its financial performance."

Richard Stone, Chief Executive, said:

"The Group's strong revenue growth, its improved underlying earnings and the uplift in assets under administration all reflect the strategic initiatives put in place some two years ago. Our focused effort to acquire accounts from, and work with, large partners and well-known brands was a key contributor to these results and remains an important part of our growth strategy.

"What is also encouraging is that our revenue market share (excluding interest income) against our bench-marked peers has also risen significantly and stands at a new high for the year.

"Market conditions for personal investors remain favourable and global economic indicators for corporate earnings also look positive. While we expect to see greater stock market volatility and there is scope for political events, both domestically and on the international stage, to unsettle the trading environment, the new financial year has started well and we remain positive about our future prospects."

Contacts

RISK WARNING

This announcement 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 announcement 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 announcement subject to the rules of the Financial Conduct Authority or the Financial Services and Markets Act 2000. Share prices, values and income can go down as well as up and investors may get back less than their initial investment. The Share Centre is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority under reference 146768.

ABOUT SHARE PLC

Share plc is the parent holding company of The Share Centre 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, Junior ISAs and SIPPs, all with the benefit of investment guidance, and dealing in a wide range of investments. Services available to corporate clients include Enterprise Investment Scheme administration and 'White-label' dealing platforms. Following approval from the Financial Conduct Authority ('FCA'), on 7 April 2017 the Authorised Corporate Director ('ACD') role was transferred to Treasury Capital Ltd, as part of the sale of the Sharefunds Limited entity. The three TC Share Centre Portfolio Funds of Funds continue to be managed in-house by The Share Centre Limited.

For more details contact 01296 41 41 41, or visit www.shareplc.com or www.share.com.

CHAIRMAN'S STATEMENT

Introduction

The Group achieved record revenues in 2017 and record market share against its independently benchmarked peer group, with revenues up by 28% to £18.7m and revenue market share (excluding interest) increasing to 12.81%, up from 9.85%. The value of assets under management also grew strongly, up 27%, to a new high of £4.7bn (2016: £3.7bn). This mainly reflected the increase in customer numbers and further new inflows from existing customers.

We are encouraged by these results, which have been driven by the growth initiatives that we put in place over the last two years. These initiatives have focused on expanding our reach, organically, via partnership agreements and through the acquisition of customer accounts. Our track record of excellent customer service and high customer satisfaction ratings have helped to underpin our progress. At the same time, we have continued to invest significantly in our Digital Transformation Programme and made good progress. Our IT platform fundamentally supports our growth strategy and will remain an important area of ongoing investment.

We completed 2017 showing good momentum and believe that growth prospects for the business remain positive.

Financial performance

Stock markets performed well for investors in 2017, with the FTSE All-Share climbing 9% in the year. Concerns regarding the impact of the election of Donald Trump in the US and the Brexit process did not translate into weakness and stock market volatility was at near record lows. This created a favourable environment for long-term 'buy and hold' investors who lie at the heart of our business.

Strong investor activity over the year and the launch of services for Computershare in May 2017 were the key factors behind the record annual revenue. They also resulted in the Group increasing its market share of revenue (excluding interest income) to a new high of 12.81% (2016: 9.85%), as measured by Compeer. This peer group comprises Alliance Trust Savings, Barclays Stockbrokers, Equiniti, Halifax Sharedealing, HSBC Stockbrokers, Saga Personal Finance, Selftrade and TD Direct Investing (and from October 2017, Interactive Investor).

As expected, our programme of investment in the Group's services and technology, including additional headcount, along with the cost of implementing regulatory changes in 2017, adversely affected the Group's profitability. However, the Group's operating loss of £0.8m (2016: £1.3m) was materially lower year-on-year as a result of revenue growth. As we reported previously, the business received a payment of £0.9m for development work completed for a prospective new partner, which more than offset this loss. This fee has been accounted for as 'Other income' given the one-off nature of the payment.

Underlying earnings (which exclude large non-recurring items as defined in Note 9) improved to £0.4m (2016: £0.0m) and underlying basic and diluted earnings per share increased to 0.3p (2016: 0.0p). Reported basic and diluted earnings per share were 0.2p (2016: 0.5p, including the £2.1m benefit from the disposal of London Stock Exchange plc ('LSE') shares).

Cash generation from operating activities improved to £1.1m (2016: £0.5m) and the balance sheet remains robust, with net cash of £10.5m (2016: £11.4m), and available for sale investments of £6.4m (2016: £6.0m) at 31 December 2017.

Dividend

The Board is pleased to recommend a final (and total) dividend of 0.4p per share (2016: 0.25p per share). This reflects the growth in underlying earnings, the improvement in cash generated from operating activities and the increase in shareholders' funds during the year.

The proposed final dividend, which is subject to shareholder approval at the Annual General Meeting, is expected to be paid on 13 June 2018 to shareholders on the register at the close of business on 11 May 2018.

Strategic Delivery

The Group's growth strategy remains underpinned by its three pillars of 'Putting Customers First', 'Focusing on the Core Business', and 'Strategic Partnerships and Acquisitions'. In particular, growth continues to be based on building our own brand and customer base, enhancing our services and products, and providing outsourced services for others brands. We made very good progress against each of these elements over the year and a significant part of revenue growth over the year was generated from outsourced services.

We are very pleased to highlight the following achievements in 2017:

Outlook

Personal investors enjoyed rising markets during 2017, with the expected increase in volatility following the UK's EU Referendum result and the election of Donald Trump as US President in 2016 proving unfounded. Although the UK stock market has not performed as strongly as its US equivalent, returns have been good and demand for equities has been underpinned by increasing global growth and continued accommodative monetary policy.

In these circumstances it was not surprising that in February 2018 stock markets throughout the world reacted to the prospect of interest rates rising sooner and further than hitherto expected: indeed interest rates have been so low for so long that people have almost forgotten what 'normal interest rates' feel like.

New technology has driven a substantial reduction in production costs and has suppressed wages in developed countries as their economies have been flooded with cheap imports from developing nations and the Internet has enabled services and information to be provided for free. This has all contributed to the decline in real wages. We believe a plateau is now being reached and as workers start to test the labour market for higher wages so businesses will start to flex their pricing models. As a result inflation, although it will remain subdued, can no longer be assumed to settle back down again quite as before, and interest rates should therefore trend upwards to take excess heat out of the business cycle.

Looking forward we believe that global economic growth will continue to be supportive of corporate earnings and performance. It is relatively rare that all the major economic areas of the world are demonstrating robust growth as at present. The UK should be able to benefit from this as the devaluation of Sterling following the EU Referendum means that UK exports remain competitive. Domestically, real incomes have been falling and this has been a challenge for personal investors trying to find disposable income to save and invest. With unemployment remaining low and a reduction in inward migration impacting labour availability both contributing to rising wages, so real incomes should start to rise again in 2018. This will help to further drive UK economic growth further.

The above leads us to conclude that UK economic growth will be relatively robust in 2018, and the Bank of England has signalled that it will take measures to tighten monetary policy and raise interest rates more quickly than they have hitherto anticipated. Indeed, Capital Economics is forecasting three rate rises in 2018.

There is therefore much for us to be positive about as we move forward in 2018. A return to real income growth should enable personal investors to save and invest more. Increases in interest rates will boost the Group's revenues and profits through higher interest income, and global economic growth should underpin corporate performance to enable companies to deliver earnings growth and support current market valuations. The market may see further corrections, or take a bit of a breather at points in 2018, given the rises it has seen over recent years. Political events also have the ability to unsettle markets; should Brexit negotiations become antagonistic, drawn out and seemingly unable to find common ground - that may be one such unsettling scenario.

Our business model is designed to cater for a rising volume of accounts and we continue to demonstrate our ability to attract new customers - both personal investors, whether with large or small accounts, and corporate partners. We also continue to work with Government and others to press for a new drive to build personal share ownership and to make changes to improve the prospects for personal investors. Meanwhile we remain focused on the three elements at the heart of our strategy in 2018 and look forward with confidence to the benefits of the delivery against that strategy being realised in the Group's financial performance.

Gavin Oldham OBE

Chairman

7 March 2018

A REVIEW OF 2017

STRATEGIC REPORT - KEY EXTRACTS

Key extracts from the Strategic Report are set out below. The full Strategic Report will be available in the 2017 Annual Report.

DELIVERY OF THE STRATEGY

The business strategy of the Group is founded on three key elements: Putting Customers First; Focusing on our Core Business; and delivering Strategic Partnerships and Acquisitions.

PUTTING CUSTOMERS FIRST

During 2017 we started a fundamental transformation of our website, with a number of new initiatives. In March, we launched a new funds research centre within our website, which enables customers to research, select and buy funds more easily than before. Following the successful launch of our first App in 2016, in October 2017, we enabled customers to fund into their account and to deal through the App. Accounting for around 4% of trades, the App has already proved a popular addition to our product offering, providing our customers with greater flexibility 'on the move' using their tablet or mobile phone.

We continue to believe that our market leading customer service and flat fee pricing structure are key to differentiating our proposition from our peers. We were therefore delighted to achieve "Best Stockbroker" in the 2017 Investment Trends UK Online Broking Report, with the highest "Overall Client Satisfaction" rating among share investors, for the fourth consecutive year. This prestigious award was based on an independent survey of 13,800 individual personal investors, making it the largest annual survey of retail investor opinions undertaken in the UK. We also secured a number of other awards in the year, including "Best Online Stockbroker" and "Best Self-Select Stockbroker", both from ADVFN International Financial Awards, and "Best Stockbroker" and "Best Customer Service" from Online Personal Wealth Awards. In addition we won the UK CX "Customer At The Heart Of Everything (Use of Technology)" award, a non-financial services specific accolade.

In our Interim Results, we reported our tracking of Net Promoter Scores ('NPS'). These scores have been encouraging with the Investment Trends survey in July independently recording a NPS for The Share Centre of +49, the highest level of client advocacy of any online broker. Our own internal monitoring continues to support strong scoring in terms of NPS.

FOCUSING ON OUR CORE BUSINESS

From a systems perspective, 2017 was a busy and productive year. The Group builds and maintains its own technology platform in-house, enabling us to be fast-to-market with product and proposition developments. In April, at the start of the new tax year, we were one of only three brokers to launch a new stocks and shares Lifetime ISA, an excellent product aimed at younger investors.

In the latter part of 2017, we completed the installation of a new client asset reconciliation system to provide automation and enhance governance. We also implemented a number of key regulatory-related IT projects in a year which saw a significant amount of regulatory activity, driven by the Markets in Financial Instruments Directive II ('MiFID II') and Packaged Retail and Insurance-based Investment Products ('PRIIPs') regulations. 

In April, we completed the transfer of our non-core Authorised Corporate Director role, with the sale of Sharefunds Limited. We continue to manage our three 'in-house' Funds of Funds. During the year, funds under management increased by 43% to £101m from £70m. One of our Funds of Funds was ranked in the first quartile and two funds in the second quartile of their sectors for the preceding 12 months. In August, we reduced the ongoing charges figure ('OCF') by a minimum of 0.25% and this has led to our funds being represented across the majority of key platforms as well as beginning to appear on various preferred selection lists, broadening their potential appeal into the Independent Financial Advisor ('IFA') market.

STRATEGIC PARTNERSHIPS AND ACQUISITIONS

2017 was a strong year for partnership initiatives: in April, we completed the transfer of an acquired book of ISAs and General Investment Accounts from Invesco Perpetual and are now servicing these as customers of The Share Centre. Following on from the launch of the Computershare Deceased Estates Sales Service at the end of 2016, in May 2017, we implemented four new branded services on behalf of Computershare. This was followed by the transfer of existing Computershare customers from the incumbent supplier. The process involved many months of IT development to offer services including Certificate Dealing and Corporate Nominee Dealing to shareholders of Computershare's corporate clients, as well as ISA and Trading Accounts (General Investment Accounts). Computershare customers can now open and manage all these services through a single interface.

During the year, we worked closely with a prospective new partner in developing a new product. As we previously reported, this partner decided not to proceed with the launch of that product in 2017 and made a one-off payment of £0.9m to us for product development work completed but not progressing. While it was disappointing that the launch of the product did not proceed, our relationship with this potential partner remains strong.

Given the number of material third party relationships now established and our active engagement in a pipeline of opportunities, in August we created a new role of Director of Partnerships and Change. This move reinforces our strategy of developing relationships with large organisations that wish to offer their customers the best possible investment custody and administration services. We also continue to look for suitable corporate or customer book acquisition opportunities.

FINANCIAL PERFORMANCE

The Group uses both quantitative and qualitative key performance indicators ('KPIs') to monitor and measure progress against the Board's strategic objectives. They are listed below and are consistent with those disclosed in previous Annual Reports.

* Measured independently by Compeer against a monthly peer group of eight other retail stockbrokers. From October 2017, the monthly peer group included the combined Interactive Investor and TD Direct Investing businesses; previously only TD Direct Investing was included. Going forward, we will benchmark our market share against a wider peer group of 16 other retail stockbrokers, which will have the effect of reducing the share reported.

** Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld.

REVENUE

Group revenues increased by 28% to £18.7m from £14.6m, with second half growth up by 33% on the prior period in 2016 (H1 2017: 23%). This increase was helped by the launch of our services to Computershare in May 2017, which has also shifted the revenue mix between commission, fees and interest to 56%, 39% and 5% respectively in 2017 from 48%, 46% and 6% respectively in 2016. Revenue excluding interest was up 29% on 2016.

The Group's performance over the year compares very strongly against its peer group as measured by Compeer. Our market share of benchmarked revenues (excluding interest) increased to a year end record of 12.81% (2016: 9.85%). Our performance was ahead of our peer group, which saw revenues fall by 4% year-on-year. The wider peer group of 16 other retail stockbrokers (the "quarterly peer group") saw revenues increase by 6% over the same period.

Fourth quarter data for 2017 showed our market share at 13.55% against our benchmarked peers, up from 9.79% in Q4 2016. This increase would have been even higher but for the inclusion of Interactive Investor in the peer group. Our year-on-year revenue growth in the fourth quarter for commission and fee income was 33%, compared to 29% in the third quarter.

Against the broader quarterly peer group (which includes Hargreaves Lansdown), our market share for 2017 increased to 3.87% (2016: 3.21%), with the fourth quarter showing a share of 3.96% (Q4 2016: 3.30%).

Commission income

Commission income increased by 51% to a new record high of £10.6m (2016: £7.0m), helped by favourable stock market conditions, especially when compared to the heightened volatility of 2015 and 2016. Trading volumes grew strongly, up by 14% year-on-year (2016: 11%), with the second half benefiting from a full half of our Computershare services. The average commission per trade is higher for Computershare services reflecting a greater proportion of certificated dealing. The Share Centre retains a proportion of dealing commission paid by the customer, with the remainder being passed onto Computershare.

This growth in commission income significantly outperformed both our monthly and quarterly peer groups, which delivered growth of 1% and 4% respectively over the year. Our monthly and quarterly peer groups both saw increases in trading volumes of 1% over the same period.

Fee income

Fee income increased by 7% to a new high of £7.2m (2016: £6.8m). New account acquisition was strong and included a large number of accounts transferred in from other providers, particularly in the second half, which seems to have been driven by platform migrations and the resultant disruption that these bring. The strong growth in new accounts reflected trends in the wider market as highlighted by the July 2017 UK Online Broking Report by Investment Trends, which reported that the number of online investors continued to climb, with 930,000 unique individuals placing at least one online share deal in the 12 months to May 2017.

The Group's 7% increase in fee income compared to a decrease of 24% and an increase of 9% for the monthly and quarterly peer groups respectively.

At the end of 2017, The Share Centre was custodian to 258,000 accounts that contained assets (2016: 250,000; 2015: 248,000). In 2017, the average monthly number of website visits was 190,000 (2016: 190,000).

2017 was also another successful year for our Enterprise Investment Scheme ('EIS') and other tax advantaged schemes administration business, which provides custody and dealing services to around 225 funds representing around £680m of assets under administration.

Interest income

Cash held on behalf of customers at 31 December 2017 increased by 31% to £387m (31 December 2016: £296m). Interest income increased by 14% year-on-year to £0.9m (2016: £0.8m). This increase reflected the impact of the previously announced permission issued in April 2017 by the FCA, which allowed The Share Centre to deposit up to 60% of its client money balances for up to 95 days. The FCA has subsequently amended its rules for all brokers in line with this permission.

In November 2017, base rates were increased to 0.50% from 0.25%, and interest income should materially benefit going forward to the extent that our banking counterparties reflect this or any future rise in their deposit rates.

Interest income for the monthly peer group increased by 9% and by 15% for the quarterly peer group.

COSTS

Total costs for the year increased by 22% to £19.5m (2016: £16.0m). This was partly driven by higher transactional costs of £4.4m (2016: £2.2m), particularly in respect of the Computershare services. Overheads rose by 10% to £15.1m (2016: £13.8m), primarily reflecting an 11% increase in staff costs to £8.8m (2016: £7.9m), with headcount rising to 224 (2016: 185). The increased headcount was mainly in our Customer Service and Dealing teams for the new Computershare services, where much of the customer contact is transacted offline. Some of the increase also reflected recruitment related to regulatory changes, primarily MiFID II. In order to comply with these changes, we had to invest in a number of areas of our business, including Compliance, Client Asset ('CASS') Reconciliations and our customer-facing functions.

The second largest cost incurred by the Group is marketing and our year-on-year spend was 4% higher at £1.9m (2016: £1.8m), with the increase largely focused on our online advertising. Amortisation costs increased to £223,000 from £108,000, with the purchase of customer accounts from third parties and systems development for our technology programme, primarily our App.

Share-based payment charges for long term equity incentives reduced to £0.5m (2016: £0.6m), reflecting personnel changes in the year. 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 including share-based payment charges and marketing spend together totalled £11.4m (2016: £10.4m) and represented 59% (2016: 65%) of total costs. Other expenditure related to premises, IT systems and professional fees.

The Group also incurs regulatory fees and levies and irrecoverable VAT. In 2017, our costs in respect of the Financial Services Compensation Scheme ('FSCS') were £282,000 (2016: £270,000). A 40% rise in 2015, and the reduced cost in 2016 and 2017 highlights the unpredictable nature of what is a material expense to the Group and one which is outside our control.

PROFITABILITY

Group profitability improved in the year as a result of higher commission income although this was offset by increased transactional costs and staff costs. Operating losses of £0.8m showed a 41% reduction from the loss of £1.3m in 2016. The one-off payment of £0.9m for product development work completed for a prospective partner has been recognised as 'Other income' after operating losses in the Income Statement.

Reported profit before tax was £383,000 (2016: £1.0m, including a profit of £2.1m from the sale of 85,727 shares in the LSE).

The Board believes that underlying earnings per share which strip out one-off items (such as the aforementioned 'Other income') and non-cash share-based payment charges, better reflects the performance of the Group. The principal adjustment to underlying earnings is the write back of Other income. However, it does not include the costs associated with the delivery of product development work for a prospective partner, which are included in Administrative expenses. On this basis, earnings increased to 0.3p (2016: 0.0p). At a reported level, earnings per share were 0.2p (2016: 0.5p).

BALANCE SHEET

The Group's balance sheet remains very strong with no debt and significant cash balances, which stood at £10.5m (2016: £11.4m) at the year end. The Group's financial position is further strengthened by available-for-sale investments of £6.4m (2016: £6.0m), primarily in the LSE and Euroclear plc, the largest international central securities depository in the world. The dividends from these investments totalled £216,000 (2016: £216,000), which is substantially in excess of the possible current interest return on Group cash.

The carrying value of our investments held in the LSE and Euroclear plc reflect the estimated fair value of each share. For the LSE this increased to £2.3m (2016: £1.7m), whereas Euroclear plc remained unchanged at £3.9m (2016: £3.9m). This investment valuation is based on the latest buyback value of £641 (2016: £651) per share as at 31 December 2017. Although we note the disposal by The Royal Bank of Scotland Group plc of its 4% shareholding in Euroclear plc at a significantly higher price (£1,652) to Intercontinental Exchange Holdings in October 2017, the Group considers that this transaction may not have been at an arm's length basis due to the size of the holding sold. The only other significant investment that the Group holds to which it attributes a carrying value is Professional Partners Administration Limited ('PPAL'), valued at £0.2m.

The increase in the value of intangible assets in 2017 to £3.2m (2016: £2.0m) principally represents systems development for our technology programme (£1.3m).

Cash generated from operating activities increased to £1.1m (2016: £0.5m).

Total shareholders' funds as at 31 December 2017 stood at £18.2m (2016: £17.7m). This represents 12.7p per share in issue (2016: 12.3p). The remaining working capital on the balance sheet principally reflects 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 liability largely in respect of non-current deferred tax.

ASSETS UNDER ADMINISTRATION

At the end of the year, the value of investments and cash held by our customers was £4.7bn (2016: £3.7bn), an increase of 27% (2016: 32%). Even with the impact of acquiring additional accounts, this showed strong growth compared to the 9% increase in the FTSE All-Share Index over the same period. This increase was shared between all asset classes but helped by our flat fee pricing structure and the new research centre within our website funds again showed significant growth, up 66% on December 2016. 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.£650m during 2017 (2016: £570m). It is worth observing that the Computershare services add little to assets under administration as the customer interactions are currently more transactional and not typically based around a custody relationship.

FINANCIAL RESOURCES

As The Share Centre Limited is regulated by the FCA (FCA registration number: 146768), the Group holds regulatory capital, and it has been the long-standing policy to maintain at least twice the amount of regulated capital required. As at 31 December 2017, the Group was holding 3.0 times the capital required as calculated by the Group's Internal Capital Adequacy Assessment Process ('ICAAP') for 2017 (2016: 2.6 times).

The ICAAP assesses the level of capital and financial resources that should be held by the Group. In summary, the Pillar II requirement (being the amount that the Group has to hold, as it is in excess of the Pillar I requirement) is £5.0m for 2018 (2017: £5.6m). 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.

PEOPLE

Our people are critical to our customer proposition and we are very proud of the staff that we employ. We continuously measure the levels of headcount, staff turnover, costs and absence. Although staff turnover has been somewhat higher than we would have liked, we continue to attract talented individuals to join our team and our sickness absence rate is low overall, close to the UK's private sector business average of 2.2% working hours lost.

We aim to support our employees' personal and professional needs and seek to stay ahead of corporate best practice in many areas. This includes making significant contributions to employees' personal pension plans (8% per annum with no contribution required from the employee). All employees participate in the Group's profit share arrangement which pays a profit-related bonus. We also offer an Employee Share Incentive Plan which allows every employee to purchase the Company's shares on a tax efficient basis. Consequently, a significant proportion of employees are shareholders, with 117 employees enrolled in the scheme (2016: 107).

In 2017, we launched our inaugural graduate training programme, which is aimed at attracting high quality candidates to start their professional journey in our Investments function and to be supported in their study for relevant industry qualifications. We look forward to welcoming three recruits in September 2018.

PROSPECTS & OUTLOOK

Our clearly defined growth strategy will remain focused around our three core elements of Putting Customers First, Focusing on the Core Business and Strategic Partnerships and Acquisitions. Progress is now beginning to be reflected in the Group's financial performance and we expect this to continue in 2018.

Transforming our digital proposition remains a key aspect of our plans going forward. In 2018, we expect to see the substantial completion of our investment to transform our digital channels. Our main focus is on redeveloping our website, initially to enhance navigation, presentation and content, with further phases to improve dealing functionality and account maintenance. We will also continue to invest in new tools and improved research.

We strongly believe that investing should be an enjoyable enterprise and the complexity of the language and process that normally surrounds financial services often acts as a barrier to engagement. We therefore remain dedicated to assisting our customers navigate their way through investment decisions in a simple and straightforward way, arriving at products and services that most suit their needs.

We have also demonstrated an ability to acquire accounts from, and work with, large partners and well-known brands including Barclays, Henderson, Invesco Perpetual and Computershare. We are actively seeking other corporate relationships and are currently in discussions with a number of potential partners. These opportunities typically have long lead times, with some development work and investment often required on our part. Our track record of delivery stands us in good stead as we develop these discussions.

The three Funds of Funds that we offer allow an easy access point for retail investors into what is an otherwise complex and crowded funds market. In 2018, the aim is to leverage our competitive pricing and expand the distribution channels for these funds, particularly through independent financial advisers. In doing so, we expect to accelerate the growth of funds under management.

The Board looks forward with confidence to the future. Whilst we expect a risk of continued political volatility within the EU and the US, the domestic political environment remains favourable with the Government placing increasing emphasis on encouraging individuals and families to save more for their financial futures.

On the assumption that market conditions and the government/regulatory backdrop remain supportive, we expect to see the continuing delivery of our strategy being demonstrated through increased revenue and headline earnings, accelerated further if additional partnership or acquisition opportunities crystallise.

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 9 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 in the Strategic Report in the Group's Annual Report for 2017, which will be available as set out in Note 12 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 Group financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC') of the IASB as endorsed by the European Union.

The Company's financial statements have been prepared on the same basis and as permitted by Section 408 of the Companies Act 2006; no income statement is presented for the Company.

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

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). The impact of these amendments is yet to be determined.

The Group accounts consolidate the financial statements of the Company and its subsidiaries, The Share Centre Limited, The Share Centre (Administration Services) Limited, and formerly 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 political and 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 and at least 12 months. 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 stated in the full financial statements which will be published shortly as per Note 12 below. These policies are consistent with those applied in the financial statements for the year ended 31 December 2016.

3 DISPOSAL OF SUBSIDIARY

On 7 April 2017, Share plc disposed of all its shares in Sharefunds Limited, a wholly owned subsidiary for a total cash consideration of £80,000. After costs, the pre-tax gain was calculated to be £51,000.

The results of Sharefunds Limited for the period up until disposal have been included in the Group's Income Statement and are presented below:

4 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. There has been no aggregation of segments and 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. Additionally, The Share Centre acts as investment manager to the TC Share Centre Portfolio Funds of Funds.

Sharefunds - during the year this division operated a fund administration service up until the date of disposal. The division's customers were authorised funds for whom a range of administration services were provided. This included taking on the role of Authorised Corporate Director ('ACD').

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

*Figures shown for 2017 are up until the date of disposal (i.e. 1 January 2017 to 7 April 2017)

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 varied by business division as described above up until the date of disposal of Sharefunds. However, within each business division no further segmentation by service was offered.

Following the sale of Sharefunds Limited, the majority of its revenue remained within the Group as the three TC Share Centre Portfolio Funds of Funds continue to be managed by The Share Centre.

5 OTHER INCOME

During the year the Group worked with a prospective new partner in developing a new product. This partner decided not to proceed with the launch of that product and paid the Group a one-off, non-refundable fee of £0.9m for product development work completed but not progressing. This amount was to cover the costs associated with the delivery of product development work, which are included in Administrative expenses.

6 OTHER GAINS

During the year the Group disposed of Sharefunds Limited, a subsidiary of the Group, giving rise to a gain on disposal of £51,000 (see Note 3 for further details). Gains for 2016 relate to the sale of 85,727 LSE 5p ordinary shares for a total consideration of £2.4m.

7 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 £86,000 has been charged (2016: £340,000 credited) to other comprehensive income. A current tax credit of £8,000 (2016: £4,000) and deferred tax charge of £7,000 (2016: £7,000 credit) relating to excess deductions on share-based payments have been taken to equity.

The current year tax rate used above (19.25%) arises from the reduction in the corporation tax rate on 1 April 2017 from 20% to 19%. The standard rate of corporation tax in the UK is expected to change from 19% to 17% with effect from 1 April 2020.

8 DIVIDENDS

The directors are proposing a final dividend of 0.4p per share in respect of the year to 31 December 2017 (2016: 0.25 pence). This would amount to a dividend payment of £575,000 given the current share capital.

9 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 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.

The principal adjustment to underlying earnings is the write back of Other income. However, this does not include the costs associated with the delivery of product development work for a prospective partner which are included in Administrative expenses.

10 INTANGIBLE ASSETS

During the year, the Group made a further payment in consideration of accounts previously acquired.

In addition, the Group is currently developing its website and has launched a Mobile App, which together represents the system development additions in the year.

11 NOTES TO THE CASH FLOW STATEMENT

12 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.

13 ANNUAL GENERAL MEETING

The Annual General Meeting is to be held on Wednesday 6 June 2018. Notice of the AGM will be despatched to shareholders with the Group's report and accounts.

14 PRELIMINARY ANNOUNCEMENT

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016. The financial information for the year ended 31 December 2016 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 2017 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 before the Company's Annual General Meeting.