SHRE.L Regulatory News (SHRE)

20 March 2019

AIM: SHRE

Share plc

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

Preliminary Results

for the year ended 31 December 2018

Share plc (AIM: SHRE.LN), parent company of The Share Centre Limited (a leading independent retail stockbroker), announces its preliminary unaudited results for the year ended 31 December 2018.

HIGHLIGHTS

(*) The benchmarked revenue peer group comprises: AJ Bell; Alliance Trust Savings; Barclays Stockbrokers; Equiniti; Halifax Share Dealing; Hargreaves Lansdown; HSBC Stockbrokers; iDealing.com; Interactive Investor; ITI Capital; Jarvis Investment Management; Saga Personal Finance; Selftrade; Thomas Grant & Co; and Yorkshire Building Society.

(**) Excludes the impact of any large non-recurring items, as defined in Note 7. 

Gavin Oldham OBE, Chairman, commenting on the results said:

"Share made strong strategic and operational progress in 2018, achieving some important milestones with its digital transformation programme and other growth initiatives. Despite the difficult trading backdrop in the second half of the year, revenue reached a new high of £21.0m, up 12% year-on-year, partly reflecting the increase in our customer base. As expected, the Group also returned to headline operating profit in the second half.

We start 2019 with the business in good shape, having now completed a major part of the Group's digital transformation programme and with customer accounts at a higher level than at the same point last year. We also have a healthy pipeline of partnership opportunities and are taking a leading role in re-awakening the Child Trust Fund, as a key part of our egalitarian capitalism programme. We therefore believe that Share is well-positioned to continue to grow and develop for the long term and to navigate the continuing near term challenges."

Richard Stone, Chief Executive, said:

"The Group's digital transformation is set to be substantially completed in 2019. Over the last three years, we have improved our systems and the customer experience. The relaunch of our website, www.share.com, in 2018, was another major step forward. While the transformation project has been a major undertaking, it will help to drive the scalability of the Group and supports our ongoing aim of providing customers with outstanding service.

"The trading environment has been challenging, with trading volumes lower year-on-year. Nonetheless, we expect the Group to benefit from the material increase in the customer base over the last year, and believe that there are further opportunities to grow, with a strong pipeline of partnership opportunities."

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 Limited 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 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, Child Trust Funds and SIPPs, all with the benefit of investment guidance, and dealing in a wide range of investments. We also provide a certificate dealing service together with the three TC Share Centre Portfolio Funds of Funds which are managed in-house by The Share Centre Limited. Services available to corporate clients include Enterprise Investment Scheme and other tax advantaged schemes administration and 'White-label' dealing platforms.

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

CHAIRMAN'S STATEMENT

Introduction

The Group made strong strategic and operational progress in 2018, achieving some important milestones in its digital transformation programme and increasing its customer base both organically and through account acquisitions. Stock market volatility depressed investor activity in the second half, particularly in the final quarter of the year, and regulatory changes, including the Markets in Financial Instruments Directive ('MiFID II'), required additional cost to be incurred.

Financial results for the year show some of the benefits from the strategic and operational progress that we have made, and we expect to see further benefits in 2019. Despite the difficult backdrop, revenue represented a new record of £21.0m (2017: £18.7m), up 12% year-on-year, and the Group returned to operating profitability in the second half.

We start 2019 with the business in good shape, having completed a large part of the Group's digital transformation programme and we also have a healthy pipeline of partnership opportunities. We therefore believe that Share is well-positioned to continue to grow and develop for the long term and to navigate near term challenges.

Financial performance

Revenue growth was driven by strong trading volumes in the earlier part of the year and the benefit of a full year of our partnership with Computershare, which was launched in May 2017. Weaker trading conditions affected growth in the second half of the year but the Group still showed an uplift of 7% against the first half. This reflected the effects of the base rate increase in August 2018 and new account acquisition, particularly the take on of c.17,000 customer accounts from the administrator of Beaufort Securities.

The growth in revenue delivered a market share excluding interest of 3.78% (2017: 4.03%).

Operating losses materially improved over the year, with the Group generating an operating profit in the second half of £0.2m (H2 2017: operating loss of £0.6m), helping to reduce the overall loss for the year by 60% to £0.3m (2017: £0.8m). Underlying profit before tax, adjusting for one-off items (detailed in Note 7), increased by 63% to £0.6m (2017: £0.4m).

The reported loss before tax was £22,000 (2017: profit of £0.4m, which included a one-off receipt of £0.9m for aborted product development work completed for a prospective partner).

Overall the FTSE All-Share Index closed the year down 13%, but against this backdrop our growth in assets under administration of 3% year-on-year to £4.9bn (2017: £4.7bn) demonstrates our ability to attract and acquire new customers, and to build on existing customer relationships. Had our customers' assets performed in line with the FTSE All-Share Index, without any monies in or out, assets under administration at the year end would have been £4.1bn - indicating net inflows including account acquisitions of c.£0.8bn in the year (2017: £0.7bn).

Cash balances held on client accounts of £446m were relatively high at the end of 2018 (2017: £387m), a 15% increase on last year. We believe that this reflects the reduced level of investor confidence prevalent at the end of the year.

Share's balance sheet at the year end remained strong with shareholders' funds totalling £19.5m (2017: £18.2m). This equates to 13.5p per share (2017: 12.7p). Shareholders' funds include the value of the Group's investments in the London Stock Exchange plc ('LSE') and Euroclear Holding SA ('Euroclear'). During the year, the carrying value of our investment in Euroclear was reviewed and increased to partially reflect two recent transactions in Euroclear shares.

The capital requirement for the Group has reduced to £3.9m (2017: £5.0m) as a result of the improvement in profitability and the Group holds 3.8 times the required regulatory capital (2017: 3.0 times).

Dividend

The Board is pleased to recommend a final (and total) dividend of 0.55p per share (2018: 0.40p per share), a 37% increase on last year. This reflects the Group's improved financial position, including the growth in underlying earnings, the positive cash generated from operating activities, the reduced capital requirement of the business and the increase in the value of shareholders' funds.

The proposed final dividend will be paid on 12 June 2019 to shareholders on the register at close of business on 10 May 2019, subject to shareholder approval at the Annual General Meeting.

Strategic Delivery

The Group's growth strategy remains based on the three core elements, 'Putting Customers First', 'Focus on the Core Business' and 'Strategic Partnerships and Acquisitions'. We are pleased to have delivered against all three over the year and I would highlight the following achievements in particular:

Outlook

Investor activity over 2018 progressively reduced, impacted by a number of factors. These included concerns over the US/China relationship and a return to more protectionist policies, as well as the UK political environment with uncertainty over Brexit. This has meant that after unusually stable stock markets in 2017, 2018 was characterised by volatility, which was especially marked in the second half. While the market has recovered some of those losses in 2019, London Stock Exchange data shows a 27% decrease in trading volumes in the first two months of 2019 against the same period last year.

Whilst we believe that the trading environment may remain difficult in the near term, Share starts the new financial year in a stronger position over 2018. We continue to attract new customers in good numbers as well as retaining existing customers. The rate of retention of the customers acquired from Beaufort Securities has exceeded our expectation and we have had consistently positive feedback from the customers taken on. An agreed book of c.22,000 customer accounts which was announced in our half year announcement in August 2018, is also due to transfer into the business in 2019. We also have a strong pipeline of partnership opportunities at various stages of discussion.

Taking a longer term view, the need for individuals and families to save and invest more for their financial futures remains as strong as ever. The internet continues to provide a mechanism through which individuals can have the tools at their disposal to make their own investment decisions and to undertake the research and education to help guide those decisions. The return of real wage growth and continued relatively loose monetary policy should give individuals more scope to engage in saving and investing, but they typically require a more stable political environment in which to build the confidence to do so.

There is a real need for Government to build a more egalitarian approach to capitalism, and to engage individuals in the activity of saving and investing; thereby encouraging ownership and participation in capital markets. We continue to campaign for such initiatives and for corporate moves to achieve greater participation in equities, through public offerings, or broader customer or employee share ownership.

I conclude, by drawing attention to a key opportunity for inter-generational investing: the Child Trust Fund initiative. This Government scheme created individual accounts for all children born between September 2002 and January 2011, and the oldest recipients are now starting to gain control of these accounts, having reached the age of 16, with full access being reached at 18. With over six million accounts maturing between 2020 and 2029, this is a great opportunity to engage young people and the next generation of savers and investors. The Share Centre has one of the only self-select Child Trust Fund accounts in the market and as an ISA provider (and Junior ISA provider) can also accommodate the roll-over on maturity into an ISA. We will therefore be at the forefront of helping to ensure young people engage fully with their accounts and that the opportunity to build a new generation of investors is not wasted. As at the end of 2018, The Share Centre had 93,000 Child Trust Fund accounts.

We look forward to the future with confidence. While trading volumes may be adversely affected in the near term, we completed 2018 with considerable momentum, notwithstanding the uncertain political backdrop. We are excited by the opportunities ahead and expect to deliver further on our strategy in 2019, and to see Share make further progress.

Gavin Oldham OBE

Chairman

20 March 2019

A REVIEW OF 2018

STRATEGIC REPORT - KEY EXTRACTS

Key extracts from the Strategic Report are set out below. The full Strategic Report will be available in the 2018 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

We delivered a number of significant improvements to our digital platforms in 2018. The biggest step forward was the release of our new website, www.share.com, and, in April 2018, we launched all of our before 'account sign-in' pages. Our Mobile App continues to gain traction with customers and 8% of all our branded trades were being executed through it at the end of 2018.

We have also continued to enhance our customer service operation which, together with our flat fee pricing structure, are key points of differentiation from our peers. As part of our 'Good to Great' service programme, we introduced an innovative customer survey that is sent immediately following the end of a call. We are the first UK financial services company to introduce such a survey, and the response rate has been high at over 40%, providing us with a wealth of actionable customer feedback. Our customers are recognising the quality of the service in giving our Associates 4.76 stars out of 5, and the query resolution score was 92%. The Net Promoter Score ('NPS'), which measures customer experience, was +52.

These enhancements demonstrate our continued commitment to our customers which was once again recognised in winning 'Overall Client Satisfaction' in the 2018 Investment Trends awards for the fifth year running. This prestigious award is based on an independent survey of 11,000 individual personal investors, and is the largest annual survey of retail investor opinions undertaken in the UK.

FOCUSING ON OUR CORE BUSINESS

We completed the third year of our digital transformation programme, which is fundamentally improving our proposition and the way in which we engage and interact with customers. 2018 was another busy year as we continued our investment in customer-facing technologies and productivity improvements. In December, we tested a new 'beta' website, which is designed to improve the customer experience behind 'account sign-in' and which focuses on enhancing customers' experience on a mobile phone or tablet. This new website was implemented in early January 2019 and formed the first instalment in a series of improvements in early 2019. The site is now largely adaptive, supporting our growing customer base of mobile and tablet users, and has a fresh, modern, uncluttered feel that is "simply easier" to navigate. We intend to continue adding new functionality to it.

Work on legal, regulatory and HMRC requirements continued throughout 2018, including a programme to ensure compliance with the new MiFID II and GDPR laws. We implemented various new systems and controls relating to information security during the year as part of a sustained programme that will continue for the foreseeable future. We also continue to make changes to our underlying hardware platform as we implement new solutions designed to improve resilience and provide greater technological scale for our IT systems and website. The need for, and process of, technology renewal is ongoing and will continue to be so as we and the industry more widely embrace the opportunities presented by technology and ever increasing customer demands in that regard.

We continue to manage our three 'in-house' Funds of Funds following the transfer of our non-core Authorised Corporate Director ('ACD') role, with the sale of Sharefunds Limited in April 2017. During the year, funds under management increased by 9% to £110m from £101m. One of our Funds of Funds was ranked in the second quartile and two funds in the third quartile of their sectors (each sector representing c.150 funds) for the preceding 12 months.

STRATEGIC PARTNERSHIPS AND ACQUISITIONS

2018 was another strong year for partnership initiatives both in terms of delivery and in building a healthy pipeline for 2019 and beyond.

During the year, we signed Heads of Terms, or reached an agreement in principle for acquisitions which together account for c.39,000 customer accounts and over £1.5bn of assets under administration. As part of this, we completed the transfer of accounts from Premier Asset Management and the transfer of the majority of accounts from Beaufort Securities (which was in special administration). The transfer of c.22,000 customers included within the c.39,000 above is expected to complete in 2019.

Revenue from the administration of tax-advantaged schemes (primarily Enterprise Investment Schemes) continued to be strong in 2018. We added to the products we offer under this banner, launching an unlisted income-paying bond for one of our fund manager partners and a Business Investment Relief product.

We continue with our strategy of developing relationships with large organisations that wish to offer their customers the best possible investment custody, administration and trading services and 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 quarterly peer group of fifteen other retail stockbrokers, as per the Highlights page.

** 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 revenue increased by 12% to a new high of £21.0m from £18.7m in 2017, with second half revenue up by 10% on the same period in 2017. Revenue was up 44% on 2016. The overall increase was helped by a full year of our partnership with Computershare following its launch in May 2017 and strong trading volumes in the first half of the year.

The Group's revenue mix between commission, fees and interest has shifted, reflecting the base rate increases in November 2017 and August 2018. Accordingly, the mix was 52%, 37% and 11% respectively in 2018 from 56%, 39% and 5% respectively in 2017. Revenue excluding interest was up 5% on 2017.

The Group's market share of benchmarked revenue (excluding interest) was 3.78% (2017: 4.03%). Our performance was in line with our peer group, which saw revenue increase by 13% year-on-year.

Fourth quarter data for 2018 showed our market share excluding interest at 3.90% against our peer group, from 3.80% in Q3 2018 and 4.13% in Q4 2017. Our year-on-year revenue growth in the fourth quarter for commission and fee income was 0.3%, compared to 2.9% in the third quarter, reflecting the weaker trading volumes.

Commission income

Commission income increased by 3% to a new high of £10.9m (2017: £10.6m). This rise came despite lower trading volumes, which reduced by 6% year-on-year (2017: 14% higher than 2016) affected by deteriorating investor sentiment especially in the second half of the year. The higher average commission for Computershare services and the introduction of a minimum dealing commission of £20 (previously £7.50) for offline deals more than offset the decline in trading volumes. The change in our offline tariff was the first since 2013 and affected only a small percentage of our customers. This was implemented to reflect the significantly greater cost in maintaining a telephone dealing service compared to online dealing through our website or Mobile App. Our basic commission for online deals was unchanged.

Our growth in commission income outperformed our peer group, which saw both commission and trades fall by 7% over the year.

Fee income

Fee income increased by 7% to a record of £7.8m (2017: £7.2m). New account acquisition was healthy reflecting trends in the wider market as highlighted by the UK Online Broking Report by Investment Trends. This report suggested that, while the number of online investors continued to climb, with 960,000 unique individuals placing at least one online share deal in the 12 months to May 2018 (2017: 930,000), this growth was driven more by new investors than by dormant clients who resumed trading.

The Group's increase in fee income compared to an increase of 31% for our peer group. Consolidation in the sector has seen some models shift away from commission, based on transactional charging, towards more fee-based structures.

We took the opportunity to review accounts and closed 7,000 dormant, empty and deceased accounts. Accordingly, at the end of 2018, The Share Centre was custodian to 271,000 accounts that contained assets (2017: 258,000; 2016: 250,000). This included 14,000 of those accounts that transferred from Beaufort Securities, and we are delighted that so many have chosen to remain with The Share Centre. In 2018, the average monthly number of website visitors was 188,000 (2017: 190,000) but since the upgrade of our website in April 2018, visitors have increased to an average of 197,000.

2018 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 228 funds representing around £884m of assets under administration.

Interest income

Cash held on behalf of customers at 31 December 2018 increased by 15% to £446m (31 December 2017: £387m) reflecting, in our view, the reduced level of investor confidence at the end of the year. Interest income increased by 150% year-on-year to £2.3m (2017: £0.9m). This increase reflected a combination of increased cash balances, higher interest rates and the use of longer term deposits (up to 95 days) as permitted by the FCA from April 2017. Previously the Client Asset rules did not allow the use of term deposits. Interest income increased by 18% for our peer group.

COSTS

Costs increased by 9% to £21.4m (2017: £19.5m) over the year. This was partly driven by higher transactional costs of £4.8m (2017: £4.4m), particularly in respect of the Computershare services, whereby the Group retains a proportion of dealing commission paid by the customer, with the remainder being passed onto Computershare.

Overheads rose by 9% to £16.5m (2017: £15.1m), primarily reflecting an 11% increase in staff costs to £9.8m (2017: £8.8m), with headcount rising to 244 (2017: 224). The increase in headcount, which was lower than between 2016 and 2017 (39), was mainly in our Customer Service and Dealing Teams and included initial support for the Beaufort Securities accounts that were acquired in two tranches in September and December 2018. However, with the improvements to our digital platforms, we expect to see greater efficiencies emerge over time.

Marketing was the second largest cost incurred by the Group and our year-on-year spend was 15% lower at £1.6m (2017: £1.9m). The reduction reflects our increased ability to use our in-house capabilities rather than third parties as well as our decision to ease spend in the second half of the year as market conditions deteriorated.

Amortisation costs increased to £0.7m from £0.2m, principally due to the increased investment in systems development for our technology programme, with the upgrade of our website (before 'account sign-in') in April 2018 and our Mobile App in October 2017.

Share-based payment charges for long term equity incentives were £0.6m (2017: £0.5m). The share-based payment 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 £12.0m (2017: £11.4m) and represented 56% (2017: 59%) 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 2018, our costs in respect of the Financial Services Compensation Scheme ('FSCS') were £235,000 (2017: £283,000). By their nature these costs are unpredictable and are outside of our control.

PROFITABILITY

Group profitability improved in the year as a result of higher revenue although this was offset by increased transactional costs and staff costs. The Group's EBITDA1 has become an important key performance indicator. This increased to £0.5m in 2018 from a loss of £0.4m in 2017. Operating losses reduced by 60% to £0.3m from a loss of £0.8m in 2017.

The reported loss before tax was £22,000 (2017: £0.4m profit, including a one-off receipt of £0.9m for aborted product development work completed for a prospective partner recognised as 'Other income' in the Income Statement).

The Board believes that underlying earnings per share which strips out one-off items (such as the aforementioned 'Other income') and non-cash share-based payment charges, better reflects the performance of the Group. On this basis, earnings increased to 0.4p (2017: 0.3p). Reported earnings per share were 0.0p (2017: 0.2p).

1 As calculated by adding back depreciation and amortisation charges (per Note 9) to the Group's operating loss.

BALANCE SHEET

The Group's balance sheet remains strong with cash balances of £9.0m at the year end (2017: £10.5m) and no debt.

The Group's financial position is further strengthened by equity investments of £8.4m (2017: £6.4m), primarily in the LSE and Euroclear, the largest international central securities depository in the world. The dividends from these investments amounted to £235,000 (2017: £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 reflect the estimated fair value of each share. For the LSE this increased to £2.4m (2017: £2.3m), and Euroclear increased to £5.6m (2017: £3.9m). This investment valuation was historically based on the latest buyback value per share (2017: £641). However, in October 2017 The Royal Bank of Scotland Group plc sold its 4% shareholding in Euroclear at a significantly higher price (£1,652) to Intercontinental Exchange Holdings, and a similar sized acquisition was made by the LSE in January 2019. The Group therefore took the decision to use these recent sale valuations, discounted by 40% to reflect the larger size of shareholdings, the strategic benefits obtained from the purchase and that the transfer of shares is at the discretion of the Board of Euroclear. The only other notable investment that the Group holds to which it attributes a carrying value is Professional Partners Administration Limited ('PPAL'), valued at £0.2m, being the historic cost.

The increase in the net book value of intangible assets in 2018 to £3.7m (2017: £3.2m) principally represents systems development for our technology programme (£1.0m). We expect the upgrade of our website to complete in the first half of 2019.

Total shareholders' funds as at 31 December 2018 stood at £19.5m (2017: £18.2m). This represents 13.5p per share in issue (2017: 12.7p). 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 the matched principal 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 £4.9bn (2017: £4.7bn), an increase of 3% (2017: 27%). Even with the impact of acquiring additional accounts, this showed strong growth compared to the 13% decrease in the FTSE All-Share Index over the same period. 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.£0.8bn during 2018 (2017: £0.7bn). 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 2018, the Group was holding 3.8 times (2017: 3.0 times) the capital required as calculated by the Group's Internal Capital Adequacy Assessment Process ('ICAAP') for 2019.

The ICAAP assesses the level of capital and financial resources that should be held by the Group. In summary, the requirement (being the amount that the Group has to hold) is £3.9m for 2019 (2018: £5.0m). 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 pride ourselves on the calibre and diversity of the staff that we employ. At the year end the ratio of male female employees was 54:46 (2017: 57:43).

We regularly measure the levels of headcount, staff turnover, costs and absence. Currently staff turnover is somewhat higher than we would like, however we continue to attract talented individuals to join our team and our sickness absence rate is 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 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 ('SIP') which allows every employee to purchase the Company's shares on a tax efficient basis. Consequently, a significant number of our employees are shareholders, with 111 employees contributing to the scheme in the year under review (2017: 108).

In 2018, we welcomed three talented candidates into our inaugural graduate training programme. They have started their professional journey in our Investments and Dealing functions, and we will be supporting them in their study for relevant industry qualifications. We look forward to welcoming three further recruits in September 2019. We also have two employees who have combined working with studying to develop their knowledge and skills using the Apprenticeship Levy.

PROSPECTS & OUTLOOK

The Group's financial performance is now beginning to reflect the progress that we have made both in increasing our customer base and with our digital transformation programme. We expect to see this progress continue in 2019.

The transformation of our digital proposition remains a key focus and we anticipate this to be substantially completed in 2019. Our new relaunched website is a substantially better proposition, with enhanced navigation, presentation and content. We plan further upgrades during the first half of 2019 to improve dealing functionality and account maintenance.

As we continue to makes changes, we are as committed as ever to our aim of making investing a straightforward and enjoyable enterprise and to reducing the complexity around the language of investment, which is often a barrier to engagement. We remain dedicated to assisting our customers in navigating their way through investment decisions and arriving at products and services that most suit their needs.

Our substantial role in the Child Trust Fund market has a major part to play in this respect as young people are able to take control of their account from the age of 16. This should provide a major opportunity for our Self-Select Child Trust Fund, since we are not aware of similar services in the market and should also lead to a substantial expansion of our ISA book from September 2020 onwards.

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 2019, 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.

We continue to seek additional corporate relationships building on our past success with well-known brands including Barclays and Computershare. We are currently in discussions with a number of potential partners and have a strong pipeline of partnership opportunities including an agreed book acquisition of c.22,000 customers that is expected to transfer into the business in 2019. These opportunities typically have long lead times, with some development work and investment often required on our part but a number of these have the scope to be transformational for the business. Our track record of delivering an end-to-end solution stands us in good stead as we develop these discussions.

Undoubtedly investor confidence has been impacted by the current political environment, including Brexit uncertainty and concerns over the US/China relationship. This adversely affected trading volumes in the run up to the year end and at the start of 2019, although we have seen volumes recover somewhat since then. If and when the fog of Brexit uncertainty lifts we would anticipate investor confidence returning and investor cash balances being invested back into the market.

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. The Board therefore looks forward with confidence to the future.

CONSOLIDATED INCOME STATEMENT

YEAR ENDED 31 DECEMBER

All results are in respect of continuing operations.

* The directors consider that the underlying earnings per share as presented in Note 7 represent a more consistent measure of the underlying performance of the business as this measure excludes the impact of 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 2018, which will be available as set out in Note 10 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.

The Group financial statements consolidate those of the Company and its subsidiaries, The Share Centre Limited and The Share Centre (Administration Services) 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 10 below. These policies are consistent with those applied in the financial statements for the year ended 31 December 2018.

Changes to accounting standards

In the current year, the following new and revised Standards and Interpretations have been adopted and have had no material 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.

IFRS 9 Financial instruments

The adoption of IFRS 9 has not had a material effect on the measurement of the Group's financial assets or liabilities on the date of initial application. Upon adoption of IFRS 9 the Group had designated investments in equity instruments previously classified as available-for-sale under IAS 39 as carried at fair value through other comprehensive income. Consequently, gains or losses related to these investments are no longer recycled into profit or loss upon realisation. The Group has taken the decision to apply IFRS 9 retrospectively, but has not restated prior periods. This has had no impact on the Group's financial statements as all relevant transactions are already recognised in the retained earnings reserve.

IFRS 16 Leases

A new accounting standard has been issued, IFRS 16: Leases, which replaces IAS 17: Leases, effective from 1 January 2019. The new standard fundamentally alters the classification and measurement of operating leases for lessees, removing the distinction between operating and finance leases.

The Group has reviewed its operating leases and is expecting the following impact from the adoption of the new standard:

The above changes in accounting treatment will result in both assets and liabilities being grossed up by c.£2.5m on the balance sheet on the transition date of 1 January 2019. The impact on the 2019 income statement is expected to be immaterial.

The Group will not restate comparative information in the 2019 financial statements for operating leases as a result of IFRS 16. Prior period amendments that arise from the adoption of IFRS 16 will be recognised directly in retained earnings as of 1 January 2019.

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. 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 - this division operated a fund administration service up until the date of disposal (7 April 2017). 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 revenue 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 net revenue retained by 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.

4 OTHER INCOME & GAINS

During 2017 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 were included in Administrative expenses.

5 TAXATION

The tax assessed for the current year can be reconciled to the (loss)/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 £290,000 has been credited (2017: £86,000 charged) to other comprehensive income. A current tax credit of £8,000 (2017: £8,000) and deferred tax credit of £23,000 (2017: £7,000 charge) relating to excess deductions on share-based payments have been taken to equity.

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

6 DIVIDENDS

The directors are proposing a final dividend of 0.55p per share in respect of the year to 31 December 2018 (2017: 0.40p). This would amount to a dividend payment of £790,000 given the current share capital.

7 EARNINGS PER SHARE

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

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming conversion of all potential dilutive ordinary shares. The potential ordinary shares consist of those share options 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 INTANGIBLE ASSETS

During the year the Group acquired customer accounts from the Special Administrator of Beaufort Securities Limited and Beaufort Asset Clearing Services Limited (together "Beaufort Securities") following the company going into special administration.

In addition, the Group continues to developing its website which represents the system development additions in the year.

9 NOTES TO THE CASH FLOW STATEMENT

10 AVAILABILITY OF ANNUAL REPORT AND FINANCIAL STATEMENTS

The Group's full annual report and financial statements will be despatched 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.

11 ANNUAL GENERAL MEETING

The Annual General Meeting is to be held on Wednesday 5 June 2019. Notice of the AGM will be despatched to shareholders with the Group's annual report and financial statements.

12 PRELIMINARY ANNOUNCEMENT

The financial information set out in the announcement does not constitute the Company's statutory financial statements for the years ended 31 December 2018 or 2017. The financial information for the year ended 31 December 2017 is derived from the financial statements for that year which have been delivered to the Registrar of Companies. The auditors reported on those financial statements; 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 financial statements for the year ended 31 December 2018 is not yet complete. These financial statements 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.