17 Dec 2010 16:46
Share plc
PRESS RELEASE
2010 Trading Update and Building Society Initiative
2010 Trading Update
Share plc (AIM:SHRE.LN), parent company of retail stockbroker The Share Centre, has benefited significantly from three factors during the second half of 2010:
- Market values have increased significantly: the FTSE 100 has risen from just over 4,900 at the end of June to approaching 5,900 today; an increase of almost 20%. This increase in market values has driven fee revenue higher as well as increasing the average dealing commission per deal.
- Dealing volumes: The level of activity undertaken by The Share Centre's customers has not reduced towards the year end, as normally experienced, thereby maintaining the levels seen earlier in the year. Indeed, dealing volumes in November were 22% higher than the same month last year.
- Market share: The Group has been able to increase its market share as highlighted in previous quarterly updates. The market share of revenues when compared with a peer Group of 9 other retail stockbrokers increased from 5.83% in Q3 2009 to 7.23% in Q3 2010 (4.80% to 6.09% excluding the benefit of the interest rate floor policy).
The impact of these three factors has been to increase revenues more rapidly than anticipated. Costs have remained well controlled, as was shown in the Group's half year results to 30 June 2010, published in August, and will show a relatively modest percentage rise on 2009.
As a result, Share plc is likely to deliver net revenue growth ahead of market expectations, the majority of which will feed through into increased profits. Operating profit, profit before tax and earnings per share are expected to exceed the current market forecasts for the year to 31 December 2010.
The results for the full year should demonstrate a strong performance reflecting the Group's ability to attract new customers, the activity levels of those customers and the scalability of the business model. However, whilst the year will outperform current market expectations, management consider market expectations for 2011 remain fair, since, in the absence of the benefit of the interest rate floor policy, it will be a more challenging year. The announcement below regarding a new initiative to place deposits with building societies reflects some of the progress in identifying new means to address the low interest rate environment.
Building Society Initiative
The Share Centre business model attracts revenue from three areas; dealing commission, fees and interest income. In an environment of very low interest rates, delivering the interest income element of that revenue mix is challenging. The Group has benefited from an interest rate floor policy as described in previous announcements and our annual report. That policy paid out £4.96m since November 2007 but came to an end on 1 November 2010.
The market for deposits is a complex one at present. High rates are advertised on the high street for retail deposits of limited size but the rates available to depositors such as The Share Centre - viewed as a corporate depositor - are a fraction of those advertised rates. For example three month fixed term deposits currently attract a rate of base + 0.20%. Meanwhile, building societies obtain a proportion of their funding from the wholesale market (borrowing from other financial institutions). The rates payable on such borrowing have increased as a function of the credit crisis.
The Share Centre has now reached an agreement with a building society for depositing up to £10m at a variable rate of 2.5% over the prevailing base rate. The rate payable is significantly ahead of rates currently published in the market for similar term deposits.
The Share Centre's highest priority is the security of its customers' assets and the building society has granted The Share Centre a first charge over assets to the value of 1.5 times the value of any deposits. That security takes the form of mortgage assets where those assets meet specified criteria including the loan to value ratio and repayment history. The composition of the security offered will be reviewed monthly to ensure it is still of sufficient value and still meets these requirements.
This arrangement, which the Board believes to be unique within its industry sector, has the potential to add up to £250,000 per annum to the income and operating profit of The Share Centre and Share plc. The Share Centre will seek to pursue similar arrangements with a number of other building societies.
The Directors are pleased to be able to make a positive announcement at this stage of the year and would thank all the Group's customers and staff for their contribution to the Group's continued success.
The Group expects to publish its full year results on 1 March 2011.
Change of Adviser Name
Share plc has been advised that, with effect from Monday 13 December 2010, its Nominated Adviser and Broker changed its legal status and name to Peel Hunt LLP.
For further information please contact:
Share plc 01296 414 141
Gavin Oldham, Chief Executive 01296 439 100 (Mob. 07767 337 696)
Richard Stone, Finance Director 01296 439 270 (Mob. 07919 220 599)
Peel Hunt LLP, Nominated Adviser and Broker 020 7418 8900
Guy Wiehahn / Emma Riza
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 Ltd and Sharefunds Limited and its shares are traded on Sharemark (www.sharemark.com), the auction-based trading platform designed especially for growing companies, as well as on AIM and PLUS Markets.
2. The Share Centre (www.share.com) was formed in 1990 and provides a range of account-based services to enable investors to share in the wealth of the stock market. It believes in more people enjoying straightforward investing, and this is reflected in its tariff, with dealing commission of 1% with a minimum of just £7.50 and a quarterly administration charge of £2.50 plus VAT. There's also a 'Trader' option which fixes the dealing commission at a flat £7.50 for deals up to £25,000. The charge for this option is £20 plus VAT per quarter.
3. Sharefunds (www.sharefunds.com) was established in 2003 to provide an in-house fund management solution for the Share plc Group, which has since expanded into the provision of third party fund administration solutions.
4. For more details on the Share plc Group contact 0800 800 008, or visit www.shareplc.com.