SHRE.L Regulatory News (SHRE)

Share plc

Preliminary Results for the Year Ended 31 December 2012

Share plc (AIM: SHRE.LN), parent company of The Share Centre (a leading independent retail stockbroker) and Sharefunds (the Group's investment management and fund administration subsidiary), announces its unaudited results for the year ended 31 December 2012.

Highlights

§ Revenue market share (*) at record level - up 11.5% to 6.8% (2011: 6.1%)

§ Revenue decreased by 2.4% to £13.9m (2011: £14.3m), reflecting reduced dealing volumes

§ Operating profit decreased by 31% to £0.9m (2011: £1.4m)

§ One-off cost of £0.7 million relating to the withdrawal from providing fund accounting services

§ Profit before tax decreased by 57% to £0.7m (2011: £1.6m) (**)

§ Underlying (***) basic and diluted earnings per share decreased to 0.9p (2011: 1.0p)

§ Final (and total) dividend proposed of 0.43p per share up 19% (2011: 0.36p)

§ Strong balance sheet - net cash increased 11% to £12.2m (2011: £11.0m)

§ Voted Stockbroker of the Year in 2012 by readers of the Financial Times and Investors Chronicle

§ Ranked #1 for overall customer satisfaction in Investment Trends 2012 survey

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

(**) profit before tax includes the cost of one-off other gains and losses of £0.6m (See Note 6) in 2012 and the Financial Services Compensation Scheme levies which have cost £0.6m over the last two years.

(***) excludes the impact of some items, particularly any large non-recurring items, as defined in Note 9 to this preliminary announcement. Basic and diluted earnings per share decreased to 0.4p (2011: 0.8p)

Sir Martin Jacomb, Chairman, commented on the results:

"Share plc has outperformed its peers in 2012 increasing its market share to a new record level. I am also delighted that the high quality, accessible, low-cost services we provide were recognised by the award of Stockbroker of the Year by readers of the Financial Times and Investors Chronicle and that we were rated No. 1 for overall customer satisfaction in an independent survey of execution only stockbrokers undertaken by Investment Trends in 2012.

In trading terms, 2012 was a challenging year with poor investor sentiment, reduced dealing volumes and continuing regulatory costs. These are reflected in the results with reduced revenues and profits. However, we have done much to focus the business and position it for growth as we move into 2013.

This includes an important early move in respect of funds. We are adopting a new approach to funds whereby we intend to convert customers' holdings automatically to 'clean share classes' starting from the end of May. Our charging structure will then treat funds substantially the same as equities. This reflects our objective of ensuring that we offer customers straightforward fair value investing with high quality customer service.

Our overriding priority in 2013 is to deliver growth; growth of the customer base, of revenues and profits. We will do this by attracting new customers and satisfying our existing customers."

Contacts

Gavin Oldham - Chief Executive 01296 439 100 / 07767 337 696

Richard Stone - Finance Director 01296 439 270 / 07919 220 599

Stephanie Reynolds - PR Manager 01296 439 256

Guy Wiehahn 0207 418 8900

Peel Hunt LLP Nominated advisor

Zoe Biddick / Katie Tzouliadis 020 3178 6378

Biddicks Financial PR

Risk Warning

This document is not intended to constitute an offer or agreement to buy or sell investments and does not constitute a personal recommendation. The investments and services referred to in this document may not be suitable for every investor and if in doubt independent financial advice should be sought. No liability is accepted whatsoever for any loss howsoever arising from any information in this document subject to the rules of the Financial Services 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 Services Authority under reference 146768.

Notes for Editors:

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

2. The Share Centre started trading in 1991 and provides a range of account-based services to enable investors to share in the wealth of the stock market.

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

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

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

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

Share plc

Preliminary results for the year ended 31 December 2012

Chairman's statement

Overview of 2012

Our 2012 annual results were achieved in a challenging year, impacted by poor investor sentiment, reduced dealing volumes, continuing high regulatory costs and some significant non-recurring items, the headline figures do not reflect the strength of the Group's growth potential. We have also made significant progress in growing market share and in developing and reshaping our operations, and enhancing our services.

A detailed review of the Group's trading performance in 2012 is set out in the Business Review by Richard Stone, Finance Director and Chief Operating Officer but I will briefly comment on the headline figures. The 2.4% decrease in revenue to £13.9 million mainly reflected reduced dealing volumes with fee income only 1% down and interest income up 18%. Given the Group's relatively fixed cost base, the reduction in revenues accounted for the decline in operating profits to £0.9 million, against £1.4 million in 2011. Exceptional items including a write-off of £0.66 million meant that the statutory profit before tax for the year was £0.7 million against £1.6 million in the prior year. Adjusting for exceptional items, underlying profit before tax was £1.2 million; while underlying earnings were 0.9 pence per share (2011: 1.0 pence per share). With the Group's balance sheet remaining very strong, with no debt and net cash of £12.2 million, the Board is pleased to be recommending an increased final (and total) dividend for the year of 0.43 pence per share, a rise of almost 20%.

Some non-financial indicators are worth highlighting alongside the headline results. The Group's market share of benchmarked revenues, which is measured consistently against a group of nine peers*, increased by 11.5% in 2012 to a record 6.8% (2011: 6.1%). Additionally, in independent research conducted by Investment Trends (the global financial services market research organisation) in 2012, The Share Centre came top for overall customer satisfaction when measured against any other broker in the market. We were also delighted when The Share Centre was voted Stockbroker of the Year in 2012 by readers of the Financial Times and Investors Chronicle. These indicators are very pleasing as we believe they demonstrate the increasing strength of our brand, underpinned by the importance we place on maintaining the integrity of our core values and our commitment to our customers. In the Chief Executive's review, Gavin Oldham discusses these values as well as our vision for the Group and the regulatory changes affecting both the Group and the financial services industry as a whole.

For firms such as ours seeking to help and support our customers, compliance with regulation is a critical part of our operations. However, the burden associated with that compliance has grown ever greater in recent years. The regulatory response to the financial crisis, which was actually caused by problems in a relatively small number of organisations, has been directed almost entirely at the imposition of greater general restrictions on the activities of businesses throughout the industry: the extract from my "Reflections on Freedom" essay published by the Centre for Policy Studies identifies some specific examples.

Finally, I would like to extend my gratitude to all our employees whose dedication, commitment and focus on the needs of our customers are fundamental to the success of the business. The efforts of our staff are key as we aim to become investors' main source of investment services and their first choice for fair value, financial information and guidance.

Current Trading and Outlook

2013 has started with a strong rally in stock markets around the world. This reflects more positive sentiment following President Obama's re-election and the avoidance of the fiscal cliff in the US (at least in the short term), along with more positive steps to resolve the crisis in the Eurozone.

The Government's 'Funding for Lending Scheme' has also had a significant impact. This scheme allows banks to borrow very cheaply from the state for up to four years. It has resulted in deposit rates falling sharply as banks no longer see any need to pay a better rate to attract deposits when such cheap money is available. This has helped fuel the rise in the London stockmarket and has resulted in a significant upturn in dealing activity in the first few weeks of 2013. As we go through 2013, we believe it will encourage private investors away from cash into equities and bonds in search of a return. However at the same time, it will also impact our potential to earn interest income on client money deposits.

Although I lament the impositions which arise from overly burdensome regulation, in some areas regulation can provide an opportunity. We believe that the Retail Distribution Review (RDR) and the FSA's subsequent platform paper which will likely prohibit trail commission payments from collective funds to distributors of those funds, including execution only platforms, will provide us with a significant opportunity. With a relatively small proportion of our customers' assets currently invested in funds we see this as an opportunity to grow our customer base and the value of assets we administer.

The FSA has indicated its intention to consult on a broader rewriting of the rules regarding client assets in 2013. This may result in an attack on the use of fixed term deposits for those funds. We will be watching this carefully as we believe the most important issue is the way a firm discharges its responsibility to safeguard those assets. We would not want to see regulations which prevent a firm from earning a reasonable and safe return on those funds and ignore the benefit of steps we have taken to protect customers' assets.

Overall, we look forward positively to the year ahead. The business is now more focused and well positioned to take advantage of the opportunities which are presenting themselves as well as to face any challenges which the market and regulatory change may lay before us.

Sir Martin Jacomb

Chairman

28 February 2013

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

Chief Executive's Review

Group Strategy

We want to continue to build the business to the benefit of all our customers, employees and shareholders and have a clearly defined strategy to deliver our vision, supported by our core values and brand. Most importantly, we wish to build our relationships with our customers based on trustworthiness and credibility.

Underpinning what we offer is the desire to enable more people to enjoy straightforward investing and as part of this we seek to deliver consistently high quality services to our customers. Our aspiration is to become consumers' first choice for investment knowledge, guidance, dealing efficiency and fair value, which means becoming the place of reference for financial information and maintaining our independence, now and in the future.

The Group's growth strategy comprises three key features:

1. Putting customers first

We will fit our services to our customers' needs, ambitions, knowledge and experience by providing the tools and guidance that are right for them.

2. Focus on our core brand: The Share Centre - www.share.com

We will keep building brand awareness and earning our customers' loyalty. This encourages our customers to act as advocates, helping to support further growth. In particular, we aim to share our expertise to empower customers' decision making: walking alongside our customers

3. Establishing partnerships and making selective acquisitions

We will use potential partners' brands to reach more customers, providing our services under a partner's brand, and we will keep an eye on our competitors for further acquisition opportunities.

Our core values of enterprise, respect for others, empowerment and responsibility, clarity, and long-term stability, support our growth strategy. They describe what we stand for as a business and underpin everything we do. They reflect the way we behave within our organisation as well as when interacting with our customers.

Our strategy, particularly in terms of growing the customer base, is supported by The Share Centre's brand. We are here to provide our customers with sound guidance and practical tools to make investing easier. This means that we seek to empower our customers on their investment journey so that they can be more successful, providing guidance and reassurance to enable customers to invest with confidence. Whether our customers are experienced traders or new to investing we seek to provide them with everything they need to get started and go further. For new investors this may involve education and familiarisation with the market, for existing investors it means providing straightforward and easy to use routes to market, and for regular traders we aim to provide more value added content in terms of research and trading tools.

Putting customers first

We strongly believe in helping people achieve their financial ambitions and potential, and maintaining the high quality of customer service that earned us the top overall customer satisfaction rating in the 2012 Investment Trends research. That achievement was external verification of the impact of putting customers first in all that we do.

We take pride in the fact that our customer service staff, all based in Aylesbury, are highly trained, knowledgeable across our full service offering, can call on experts within our organisation in the same building if needed, and are measured on the quality of their handling of the calls they deal with, not on the volume or speed.

In 2012 we have delivered against this part of our strategy by improving the customer's experience of our services in a number of ways. For example, we have introduced a mobile dealing service to allow existing customers to trade through their mobile or tablet device.

Focus on our core brand: The Share Centre - www.share.com

In 2012, we took the decision to focus our activities on our core brand - The Share Centre. Going forward we intend to maintain a much greater emphasis on our core activity of retail stockbroking. We will keep building The Share Centre's brand awareness and seeking to earn our customers' loyalty. Our aspiration is for our customers to become advocates for our services to help us grow. Indeed, in the 2012 Investment Trends research 17% of our customers who participated indicated that one of the reasons they chose to use us was because of a recommendation by someone they knew - this is a far higher percentage than personal investors in general cite in respect of their broker.

In 2012 we have taken a number of steps in pursuit of greater focus. We announced that we are withdrawing from the provision of fund accounting services to third party hosted funds. The regulatory view of 'third party hosted fund arrangements' has become increasingly negative. The systemic risks are very different to our core business and we were tied largely to one corporate client which added to concentration risk. We therefore served notice on WAY Fund Managers and effective from 31 March 2013 we will no longer be providing their fund accounting service. We will continue to act as Authorised Corporate Director (ACD) for a small number of funds and in particular our own in-house funds of funds. The fund accounting for these will be outsourced to BNP Paribas who will also be the depository and custodian.

We see an opportunity following the FSA's Retail Distribution Review to launch more of our own funds managed and overseen in-house. Any new launches will be driven by customer demand and delivered through our retail stockbroking business. The decision to withdraw from fund accounting has resulted in the write-off of £662,000 of systems development costs incurred to date on a new bespoke fund accounting system for which we will no longer have a use. This year's one-off charge to the income statement therefore brings forward depreciation charges which would otherwise have been spread over the next four years.

In December 2012 we sold Sharemark Limited to Asset Match Limited. Through Sharemark we have, since 2000, operated our own market (or Multilateral Trading Facility (MTF)). This auction based platform has never really gained the traction for smaller company shares that we thought it should: this may have reflected the emphasis Government has placed on debt rather than equity finance. We will continue to operate the market for Asset Match for a two year period while they develop their own systems, capabilities and regulatory approvals.

Establishing partnerships and making selective acquisitions

In addition to our own marketing efforts we have grown the business historically through the use of partners and selective acquisitions. We will continue to seek partners' brands where we can get more customers through providing our services under that brand or through the introduction of our services by that partner. We will also keep an active watch for any acquisition opportunities as they arise.

Historically our partners have included media groups for whom we offered share services, and we have made a number of acquisitions. In 2012 we have continued to deliver against this strand of our strategy with additional white-label services and the acquisition of the customer base of JPJShare.com from Rivington Street Holdings plc, adding approximately 5,000 customer accounts.

In summary

We will measure the success of the delivery of our strategy through metrics related to customer service, growth of market share, financial performance and regulatory compliance.

Our overriding priority in 2013 is to deliver growth; growth of the customer base, of revenues and profits. We will do this by attracting new customers and satisfying our existing customers.

Campaigning for the personal investor

We have always been active campaigners for the interests of personal investors. This included gaining a change to the Companies Act 2006 for the inclusion of nominee shareholder rights. In 2012 we continued to lobby for improvements to regulations and tax laws which will benefit personal investors. In particular, we are pleased to see the Government now committed to a consultation on the inclusion of AIM shares in ISA accounts. We will continue to argue vigorously for this and other changes including the removal of stamp duty on AIM shares, if not across the market as a whole, and a rebalancing of way the Financial Services Compensation Scheme is funded.

Regulatory change

Finally, I want to highlight the impact regulatory change has on our business. Our Chairman has already set out why he believes that excessive regulation is curtailing individual freedom with adverse outcomes for the economy as a whole as well as for individuals, including personal investors. In 2012 there were four distinct areas where regulation added burdens or resulted in changes in our business.

a. Hosted funds: The FSA has progressively changed its view of hosted funds, increasing scrutiny of arrangements where the ACD is effectively 'appointed' by the fund manager. This has caused us to re-evaluate the risks and rewards associated with the fund accounting business being undertaken by Sharefunds Limited and to withdraw from the provision of fund accounting services. We will continue to act as ACD to 5 third party funds. Our main focus going forward will be on our in-house funds where we act as ACD and fund manager and potentially launching new in-house funds.

b. Financial Services Compensation Scheme (FSCS): The FSA has consulted during the year on the funding arrangements for the FSCS. The changes have been cosmetic with the only major development being a 50% increase in the maximum level of compensation the Investment Intermediation class (of which The Share Centre Limited is a member) can be asked to contribute to cover the compensation costs of failed firms. This level would have been raised even higher had the FSA not had concerns over its affordability. In our view this misses the point. Firm failures continue at a level which suggests supervision and enforcement action is not being effective, and low risk, well managed firms (and their customers) continue to be penalised and asked to carry the cost of the failure of higher risk poorly managed firms. This drives incentives into the system to take more risk and the current culture of seeing the FSCS as underwriting investors' risk-taking results in an erosion of the principle of caveat emptor. It also represents a barrier to competition and it disproportionately impacts smaller firms: this appears contrary to the statutory objective of the new Financial Conduct Authority (FCA) to promote competition.

c. The extension of the Retail Distribution Review (RDR): From early 2014, it is likely that the RDR will be extended further to execution only firms providing a funds platform. This will prevent trail commission being paid back to those firms for distributing funds to their customers. Instead firms will have to charge those customers directly. As is pointed out in the Business Review below, this may actually present our firm with an opportunity as the value of funds held by our customers is relatively low compared to the rest of their assets. Trail commission comprised 3.8% of our revenues in 2012. It is likely to be eroded sooner than 2014 as the way funds are distributed changes. We have decided to be proactive in this respect and from May we intend to automatically convert customers' holdings to 'clean share classes' with a lower management charge as they become available.

d. Fixed term deposits: The FSA has started, in the second half of 2012, to look closely at firms' use of fixed term deposits for client money. New liquidity rules for banks have meant the fixed term deposits on offer now are 'unbreakable', and the FSA considers that this poses potentially unacceptable risks. The regulators are pulling in opposite directions here, with the FSA requiring depositors to have break clauses in deposit agreements and the Bank of England requiring deposit takers not to offer such clauses. We are confident that our current practices are within the existing client money rules and we take utmost care to protect our customers' assets. Indeed, we believe we are alone in the industry in having obtained security for a proportion of the deposits we make of our customers' money in the form of collateral from two of our deposit takers. Any moves to undermine the use of fixed term deposits could have an impact on our ability to earn interest income in the future, and to take collateral in this way. The FSA is likely to consult on a revision to the client asset rules in the summer of 2013. In any case, it is worth noting, as pointed out in the Chairman's statement, that the Government's 'Funding for Lending Scheme' has severely impacted short term deposit rates, which makes it important for us to search for ways of improving the returns we can safely earn.

Conclusion

During 2012, we significantly refined the Group's focus and growth strategy, notwithstanding the economic and regulatory challenges. Our purpose is to enable more people to enjoy straightforward investing, and we will be aligning arrangements for shares and funds to provide a radically more transparent structure than our competitors.

We will be adopting 'clean share classes' for customers, rather than leaving investors paying higher management fees (and therefore trail commission) with some token 'bonus' repayment. We will also take the opportunity to review our tariff with particular focus on our online offerings in order to provide straightforward pricing for the substantial number of people who will be left without financial adviser access following the FSA's regulatory changes.

There is a major opportunity for us to share our expertise and low-cost services to empower people to make their own investment decisions. In many walks of life there are examples of 'hand-holding' local service being replaced by informative and well-structured online alternatives, and investment is no exception. We are confident that our reputation for high quality customer service and everyday, accessible guidance will enable us to make significant progress in this brave new world.

Gavin Oldham

Chief Executive

Business Review

2012 Financial performance

Revenues

In 2012, overall revenues declined by 2.4% to £13.9 million (£14.3 million). While disappointing, in the context of the market as a whole this modest decline in revenues year-on-year appears to be a very robust performance. Revenues of the Group's peers fell by 13.0% over the same period. This enabled the Group to show a strong increase in its market share of revenues, as measured against those peers, with the Group's market share increasing to a new record of 6.8% compared to 6.1% in 2011. In Q4 2012, the Group's market share climbed to 7.23% (2011: 6.49%).

The market share metric, using monthly data collected by Compeer and which we report to the market each quarter, has been used consistently since 2006. The table below shows the progress we have made over that period:

Market share of peer group revenues - Source: Compeer

Looking at the composition of revenues the impact of relatively weak dealing volumes on the Group's overall performance is apparent. Dealing commission fell 11% to £5.0 million (2011: £5.7 million). This was less than the peer group decline of 18%. Fee income remained relatively strong at £6.5 million, (2011: £6.6 million), helped by the fact that the stockmarket recovered first half losses during the second half of the year. Indeed, the FTSE All Share Index rose by 8% over 2012 taken as a whole. The 1% decline in fee income, compared to a peer group decline of 24%, again demonstrates the robust nature of the Group's business model relative to the market. Interest income is the third element of revenue and this showed significant growth in the year, increasing by 18% to £2.4 million (2011: £2.0 million). This reflected increased cash balances held on client accounts which rose by more than £25 million in the year to over £141 million. Rates were relatively unchanged year on year with improved rates available in the early part of 2012 giving way to much lower rates by the year end as the Government's 'Funding for Lending Scheme' started to impact deposit rates.

As a result of the above, the overall revenue mix shifted in the year in favour of fees and interest. The revenue split between dealing commission, fees and interest was 36%, 47% and 17% respectively (2011: 40%, 46% and 14% respectively). We have always placed great emphasis on our customer relationship rather than the transaction, and the quality of revenue associated with the recurring nature of fees and interest rather than more volatile dealing commission. This balance between revenue streams and focus on recurring revenues helps the business demonstrate robust performance at times of reduced investor activity such as we have seen in 2012. Fees and interest comprised 64% of revenues in 2012 (2011: 60%).

Costs

Overall costs for the year increased by just 0.7% to £13.0 million (2011: £12.9 million), demonstrating a good level of cost control. It should be noted that the 2011 comparative cost values, and thus profits and earnings, have been restated as shown in Note 3.

The principal costs of the Group are related to the high quality staff we employ. Overall spend on salaries and related headcount costs was £6.7 million, an increase of 2.6% (2011: £6.6 million). The marginal increase reflects some headcount increases and a modest pay rise for staff, partially offset by lower profit share payments due to the reduced profitability of the Group. Overall headcount for the Group reduced from 148 at the start of the year to 137 at the end of the year, including Directors. The reduction principally reflected the transfer of employees out of the Group at year end as the fund accounting service for WAY Fund Managers Limited was moved from Sharefunds Limited to another provider.

Marketing costs are the second largest spend for the Group totalling £2.1 million in 2012 (2011: £2.1 million). Of this £1.1 million (2011: £1.3 million) was spent directly on promotional advertising online and in printed media.

Together staff and marketing costs comprised 68% of administrative costs (2011: 67%). Other costs related to premises, IT systems, professional and regulatory fees and irrecoverable VAT, and these costs totalled £3.0 million in 2012 (2011: £3.1 million).

One-off costs

This year we have taken significant steps to focus the business on its core retail stockbroking activities. This involved the disposal of the Sharemark business and the scaling back of the fund administration business, withdrawing from providing services as a third party administrator to other Authorised Corporate Directors, principally WAY Fund Managers Limited. This latter decision resulted in a write-off of £662,000 of capitalised development costs which had been incurred in respect of the development of a new system for that fund accounting business. That systems work will no longer be completed or have any use to the Group and hence the asset has been written off within 'other gains and losses'. Against this, the disposal of Sharemark yielded a one-off gain of £100,000 also included within 'other gains and losses'. The write-off of the systems development cost will have the impact of improving profitability over the coming years due to the absence of the depreciation cost.

Profitability

The profitability of the Group declined in 2012 largely as a result of the decline in revenues. Overall operating profit was £0.9 million (2011: £1.4 million) a fall of 31% or just over £400,000. This resulted in an operating margin of 6.7% (2011: 9.5%). The direct correlation between the movement in revenues and profits reflects the relatively fixed nature of the cost base and scalability of the business when revenues increase.

Profit before tax for the year was £0.7 million as compared to £1.6 million in 2011. This reflected the impact of the exceptional costs. Investment revenues were higher than in 2011 as a result of higher corporate cash balances and increased dividends from the investments held. Excluding the one-off items noted above and the FSCS levy (levied on our sector to cover the costs of failed firms), underlying profit before tax would have been £1.5 million (2011: £1.9 million).

Earnings and dividends

Basic and diluted earnings were 0.4 pence per share (2011: 0.8 pence per share). The Directors believe that looking at underlying earnings (see Note 9) gives a better view of the underlying performance of the business. These have been consistently adjusted for one-off items, share-based payments and the FSCS levies. Those FSCS levies have cost the Group £622,000 in the last two years. In 2012 underlying earnings were 0.9 pence per share (2011: 1.0 pence per share).

The Board of Directors is proposing a final (and total) dividend for the year of 0.43 pence per share. This continues the pattern of 20% per annum growth in the dividend payment. Subject to approval at the Annual General Meeting, the proposed dividend will be paid on 26 June 2013 to shareholders on the register on 24 May 2013.

The dividend payment is more than covered by underlying earnings (although not by headline earnings) and cash balances have grown during the year as accrued interest income has been received on some maturing cash deposits. The Board has confidence in the future prospects of the Group and hence is continuing to grow the dividend payment. The dividend will now have been increased by 20% per annum for 3 consecutive years and this will continue for as long as justified by the profitability of the Group and its potential.

Balance Sheet

The Group's balance sheet remains strong with significant cash reserves and no debt. Overall shareholder funds at the end of 2012 increased to £16.5 million (2011: £15.9 million). This represents just under 11.5 pence per ordinary share in issue (2011: 11.1 pence). The Group's cash balance represents 74% of shareholder funds (2011: 69%).

The Group continues to hold strategic investments in the London Stock Exchange plc and Euroclear plc. These were valued at £1.9 million and £1.4 million respectively at the end of 2012 (2011: £1.4 million each). The Group also has a stake in WAY Group Limited which is valued at £0.5 million - being the cost of that investment. Other holdings in Eirx Therapeutics Limited, Investbx Limited and Asset Match Limited are all held at nil value.

The remaining working capital balances on the balance sheet principally reflect the open customer positions with the Group and the market, i.e. unsettled customer sales and purchases. These are higher than in 2011 due to the increased level of activity at the end of 2012 relative to 2011. Overall these balances net to approximately zero - thus open positions within trade debtors of £7.2 million and cash held in trust for the settlement of trades of £0.7 million nets with the trade creditors balance of £7.9 million.

The Group has little in the way of any other creditors and the lower other debtors balance of approximately £3.2 million (2011: £4.2 million) reflects lower outstanding fees, prepayments and accrued income, including accrued interest on term deposits.

Capital requirement

The Group is required by the FSA to maintain a capital position so as to ensure it can always meet its current and anticipated short-term liabilities. The importance of this requirement means that the level of financial resources is viewed as a Key Performance Indicator. The Group holds significant capital over and above that required by the FSA and has a stated policy that it will always seek to hold capital of at least twice the requirement. The Group's Pillar III disclosures in this respect can be found on the Group's website (www.shareplc.com).

Operations

Customer satisfaction is one of our main targets. This supports our passion for helping personal investors by providing them with the tools and knowledge to achieve their financial objectives regardless of their wealth or experience. We are therefore delighted to be regarded so highly by our customers in independent surveys such as the Investment Trends research and in all the compliments we receive from our customers. The real test is when something goes wrong, and the level of complaints we experience continues to be very low. In 2012 we received a total of 1.6 complaints per 1,000 accounts (2011: 1.8). This was almost half the level experienced by many other execution only stockbrokers, with those included in Compeer's 2011 annual research having an average of 3.1 complaints per 1,000 customers. In 2012 we had just 3 (2011: 5) complaints referred to the Financial Ombudsman Service (FOS) and none upheld against us (2011: 1).

This high level of customer satisfaction is only achievable with the dedication and commitment of our high quality employees. We are very proud of the people we employ who are all critical to our customer proposition. At the end of 2012 we had 137 full time employees and directors (2011: 148). The ratio of male to female employees has remained constant at approximately 3:4.

Our core values, in particular Respect for Others, underpin the way we interact with our customers but also with each other. We offer our employees a range of benefits including the contribution of 8% of base salary into a pension of their choice, participation by all employees in the Group's profit share arrangements which pays a quarterly profit related bonus, and a Share Incentive Plan with 2:1 matching of employee contributions. This latter benefit means a significant proportion of our employees are shareholders with 107 employees currently making regular monthly contributions into the scheme.

In 2012 we repeated the staff survey first conducted in 2011. This again showed high levels of satisfaction amongst our employees with over 80% (2011: 80%) of staff agreeing with the assertion "I believe that this is a great place to work" and over 85% (2011: 85%) of staff agreeing that they "would recommend The Share Centre as a good employer".

The quality and reliability of our IT systems is critical to our performance. We operate and maintain a bespoke in-house system which provides us with the greatest possible independence and flexibility. 2012 saw continued investment in our IT infrastructure. This has included a rolling programme of the replacement of outdated hardware and an ongoing project to transfer much of the underlying code for the core systems to a more modern and better supported programming language. That these changes occur over time without impact on the customer service we deliver is clearly important.

The interaction between the customer proposition and the IT systems we operate is particularly evident in some of the projects which have been implemented in 2012. We have introduced a mobile dealing platform for our customers to facilitate dealing for existing customers through any mobile device such as a phone or tablet. We have also done much of the work on implementing new Content Management System software which will enable an improved website experience for our customers and prospective customers. This will be implemented in the first quarter of 2013 when the website is refreshed.

The website is our main means of interaction with our customers and potential customers. In 2012 www.share.com received an average of over 140,000 unique visitors every month (2011: 160,000) with an average of nearly 25,000 individual customers signing into their accounts each month (2011: 26,000). These figures, although lower than in 2011 reflecting the lower levels of activity across the market, demonstrate the high volume of interaction which occurs through our website and therefore the importance of that interface in terms of presentation and robustness.

Finally, it is worth noting that we provide services to a range of corporate clients (and their customers) in addition to our own personal investor customer base. These services include the provision of share-dealing and custody services on a white label basis, the provision of administrative and custodial services to Enterprise Investment Scheme (EIS) managers and the administration of Share Incentive Plans (SIPs). Overall these corporate revenue streams contributed 6.0% (2011: 5.8%) of Group revenues.

Regulatory compliance

Both The Share Centre Limited (FSA reference number: 146768) and Sharefunds Limited (FSA reference number: 227807) are authorised and regulated by the FSA and the Group as a whole complies with all the FSA's relevant rules and regulations. A strong compliance culture is maintained throughout the organisation and all staff receive regular training on matters such as Anti-Money Laundering, Bribery and Fraud. The Group also engages actively with the FSA on issues where the FSA is seeking consultation with the industry. In 2012 this has included such matters as the funding arrangements for the FSCS and questions the FSA has started to raise in respect of the use across the industry of term deposits for client money balances. Client assets, their safeguarding and protection, rightly continues to be a high priority area for the FSA. The Group takes its responsibilities in this regard very seriously and it was particularly pleasing that the statement which received the highest level of agreement in the 2012 staff survey across all our staff was that "the Group treats the safety of customer assets and the security of their data as paramount".

During 2013 the FSA will be split into the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). The FCA will regulate The Share Centre Limited and Sharefunds Limited and we will seek to engage positively with the FCA going forward as we have done with the FSA in the past.

Looking forward

The Group's continuing focus is on providing exceptional service for our customers and through doing this we seek to expand our customer base and increase revenues. That revenue growth, with the scalable nature of the business, should deliver growth in margins and profit.

We see a number of opportunities in 2013. The Retail Distribution Review (RDR) is changing the way investors are advised and the way they are charged for investing in funds. Many IFAs have already left the high street leaving customers without ready access to advice. We therefore believe there is an opportunity to offer those customers guidance and support.

In addition, RDR will make charges from fund distributors and advisors transparent and replace the existing opaque trail commission process. Trail commission is not currently prohibited for execution only firms such as The Share Centre Limited, and may not be prohibited as the final FSA rules are still awaited on whether firms operating fund platforms will be prohibited from receiving trail commission with effect from 2014. Nevertheless, the funds industry is overtaking the regulator and 'clean share classes' with a lower annual management charge for investors and no trail payment back to the distributor are already gaining significant traction and media attention. Less than 10% of our customers' assets are in funds and trail commission contributed just 3.8% (2011: 3.4%) of revenues in 2012. Without a material legacy position to protect, this gives us a significant opportunity to offer funds custody and trading solutions to personal investors at a very competitive price. We intend to do so in 2013.

We believe that the continued low interest environment and search for a return on savings and investments will continue to encourage more people to turn to self-select providers such as The Share Centre Limited for their investment needs. We will continue to work hard to increase the number of customers we serve, maintaining the focus on our high quality customer service. We believe implementation of the Content Management System for the website and other improvements will help increase the conversion rate of prospective customers visiting our website into fully engaged customers.

In 2013 we also aim to increase the number of corporate partners we are working with and through whom we are providing our services to personal investors. We have employed a new Head of Corporate Sales to drive this initiative. We will also continue to pursue suitable acquisition opportunities where and when they arise.

The Chairman and Chief Executive have both highlighted the challenges posed by regulation in their reviews. 2013 will be no different with the move to the FCA likely to herald an approach to regulation characterised by earlier direct intervention by the regulator in areas where it sees concerning practices. One such challenge we foresee will be in the forthcoming consultation on the client asset rules and in particular the rules regarding client money. We believe this may contain changes prohibiting or restricting the use of term deposits. We always place great emphasis on the security of our clients' assets, for example putting in place secured deposit arrangements with some institutions. We believe the risks to client money revolve around the quality of controls and reconciliations and the corporate governance in respect of counterparty selection and monitoring. To prohibit the use of term deposits would not benefit customers but would penalise well run and managed firms, potentially severely curtailing our ability to earn interest income and receive collateral as security to protect customer deposits. We will, of course, engage with the FCA on any proposed changes and lobby hard to ensure that well managed firms, which take the security of their customers' assets as seriously as we do, are not penalised by any new rules.

So, we see 2013 as being a year focused on delivery of the strategy as set out in the Chief Executive's review. By continuing to put customers first, growing the customer base of the core business and working in partnership with others, we believe that we will be able to grow revenues and profits over the long term to the benefit of all customers, employees and shareholders. 2013 has started well with an upturn in activity levels relative to 2012 and we hope this continues through the rest of the year.

Richard Stone

Finance Director and Chief Operating Officer

Consolidated Income Statement

All results are in respect of continuing operations.

* Restated as detailed in Note 3

** The Directors consider that the adjusted earnings per share presented in Note 9 represent a more consistent measure of the performance of the business, as this measure excludes the impact of some items, including any large non-recurring items.

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

Notes to the preliminary announcement

1 General information

Share plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered office is Oxford House, Oxford Road, Aylesbury, Buckinghamshire, HP21 8SZ. The nature of the Group's operations and its principal activities is set out above and will be set out in the Business Review in the full annual report which will be published in due course.

The preliminary announcement is presented in pounds sterling which is the currency of the primary economic environment in which the Group operates.

2 Basis of preparation

The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information is extracted from the 2012 Group financial statements which have yet to be signed and which have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB (together "IFRS") as endorsed by the European Union.

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

·; Amendments to IFRS 1 'First-time Adoption of Financial Statements - Sever Hyperinflation and Removal of Fixed Dates for First-time adopters'

·; Amendments to IFRS 7 'Financial Instruments: Disclosures - Transfer of Financial Assets'

·; Amendments to IAS 12 'Income taxes - Deferred Tax: Recovery of Underlying Assets'

At the date of this preliminary announcement, the following standards, amendments and interpretations issued but not effective and yet to be endorsed by the EU are as follows:

·; Amendments to IFRS 1 'Repeated application of IFRS 1' and 'Borrowing Costs'

·; Amendment to IAS 1'Clarification of the requirements for comparative information'

·; IFRS 9, 'Financial instruments'

·; IFRS 10, 'Consolidated financial statements'

·; IFRS 11, 'Joint arrangements'

·; IFRS 12, 'Disclosures of interests in other entities'

·; IFRS 13, 'Fair value measurement'

·; IAS 27 (revised 2011) 'Separate financial statements'

·; IAS 28 (revised 2011) 'Associates and joint ventures'

·; Amendment to IAS 12,'Income taxes' on deferred tax'

At the date of this preliminary announcement, the standards, amendments and interpretations issued but not effective which have been endorsed by the EU are as follows:

·; IAS 19 (revised 2011) 'Employee benefits'

·; Amendment to IAS 1, 'Presentation of financial statements' on OCI'

The directors do not expect that the adoption of and of the standards listed above will have a material impact on the financial statements of the Group in future periods.

The Group accounts consolidate the financial statements of the Company and its subsidiaries, The Share Centre Limited, The Share Centre (Administration Services) Limited, The Shareholder Limited, and Sharefunds Limited, which all make up their annual financial statements to 31 December. Other subsidiaries are not included in the 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's business activities, together with the factors likely to affect its future development, performance and position, are set out in the business review above and will be set out in the full Annual Report for 2012 to be published shortly (see Note 13). This will also include a discussion of the Group's cash flows and liquidity position as well as details of how the Group manages risk. The notes to the Financial Statements will include a discussion of credit and liquidity risk.

The Group has considerable financial resources and no external debt. With a diversified customer base and core recurring revenue streams along with 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. Therefore, after making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the going concern basis has continued to be used in the preparation of this preliminary announcement.

The Group's detailed accounting policies are as detailed in the full financial statements which will be published shortly as per Note 11 below. These policies are consistent with those applied in the financial statements for the year ended 31 December 2011.

3 Prior year adjustment

On 2 April 2012 The Share Centre Limited received an invoice from the Financial Services Compensation Scheme (FSCS) for £209,000. This was in respect of an interim levy for the period from April 2011 to March 2012. The Share plc Group accounts for 2011 had been approved by the Board and signed on 22 March 2012. This invoice therefore gave rise to a difference between the subsidiary accounts for 2011 and the Group's consolidated accounts.

We have therefore adjusted the Group's 2011 comparative figures in the income statement, consolidated statement of comprehensive income and balance sheet relative to those originally published as noted below. There is no impact on the Group's cash flow statement.

4 Revenue

An analysis of the Group's revenue is as follows:

5 Business and geographical segments

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

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

Sharefunds - this is the division which operates a fund administration service. The division's customers are authorised funds for whom a range of administration services may be provided. This can include taking on the role of Authorised Corporate Director. In addition to external third party funds, Sharefunds acts as investment manager to Sharefunds' three Funds of Funds.

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

It should be noted that the accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 2 and that there were no major customers contributing more than 10% of revenues in the Group as a whole. The assets of the Group are principally used by The Share Centre. The services offered by the Group vary by business division as described above. However, within each business division there is only one principal revenue stream and therefore there is no separate or further segmentation by service offered. Sharefunds has no material assets which would meaningfully be separated from The Share Centre, other than cash of £546,000 (2011: £466,000). Therefore no separate disclosure of the balance sheet is provided.

6 Other gains and losses

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

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

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 £87,000 (2011: £129,000) has been debited directly to other comprehensive income. A current tax credit of £20,000 (2011: £11,000) and deferred tax charge of £16,000 (2011: £29,000) relating to excess deductions on share-based payments have been taken directly to equity. The reduction in the main rate of UK corporation tax to 23% from 1 April 2013, followed by the proposed reduction to 21% from 1 April 2014, which has not been enacted, is not expected to materially affect future tax charges. The current year tax rate used above (24.5%) arises from the reduction in corporation tax rates in 2012 from 26% to 24%. Deferred tax has been calculated based on a rate of 23%.

8 Distribution to shareholders

The Directors are proposing a final dividend of 0.43p per share in respect of the year to 31 December 2012. This would amount to a gross dividend payment of £618,000 given the current share capital.

9 Earnings per share

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

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming conversion of all potential dilutive ordinary shares. The potential ordinary shares consist of those share options and warrants where the exercise price is less than the average price of the Company's ordinary shares during the year. The calculation results in a difference of only a small fraction of a penny, which is eliminated altogether 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 and before any share based payments charge. In 2012 the main adjustments are in respect of the write-off of systems development costs following the decision to withdraw from the provision of fund accounting services to hosted funds within the Sharefunds business unit. The Directors consider that the underlying earnings per share represent a more consistent measure of the underlying performance of the Group.

10 Note to the cash flow statement

11 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.

12 Annual General Meeting

The annual general meeting is to be held on Tuesday 18 June 2013. Notice of the AGM will be dispatched to shareholders with the Group's report and accounts.

13 Preliminary announcement

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011. The financial information for the year ended 31 December 2011 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 2012 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.