TIDMSGR
RNS Number : 7513N
Shore Capital Group Limited
26 September 2019
Shore Capital Group Limited
("Shore Capital," the "Group" or the "Company")
Interim results for the six months ended 30 June 2019
Shore Capital, the independent investment group specialising in
capital markets, asset management and principal finance, today
announces its interim results for the six months ended 30 June
2019.
Financial highlights
-- Revenue up 12.2% to GBP24.3 million, (2018: GBP21.6
million)
-- Profit before tax, excluding reorganisation costs* associated
with the acquisition of Stockdale Securities, up 7.5% to GBP2.7
million, (2018: GBP2.6 million)
-- Earnings per share, excluding reorganisation costs associated
with the acquisition of Stockdale Securities, up 33.8% to 9.9p,
(2018: 7.4p)
-- Statutory profit before tax of GBP1.3 million, (2018: GBP2.6
million)
-- Statutory earnings per share 5.1p, (2018: 7.4p)
-- Dividend of 5.0p, (2018: 5.0p)
*Reorganisation costs of GBP1.4 million associated with the
acquisition of Stockdale Securities
Operational highlights
-- Capital Markets completed the acquisition of Stockdale
Securities on 31 March 2019, elevating the Group to become London's
fourth largest corporate broking and advisory business, with 123
retained clients
-- Strong mix of M&A and fundraising mandates for clients
including Marks & Spencer plc, Safecharge International Group
Ltd and Dairy Crest Group plc. 58 clients added, comprising the 52
joining with the acquisition of Stockdale Securities, and six new
clients, including Arbuthnot Banking Group plc
-- Asset Management AUM surpassed GBP1 billion as the business
continued to grow and asset valuations improved
-- Continued momentum in Puma Investments, where Puma Property
Finance has passed GBP500 million of loans and construction
projects executed, the evergreen Puma Alpha VCT has been launched
and Puma AIM celebrated its five-year anniversary
-- Strong valuations from recent 5G spectrum licence auctions in
Germany are very encouraging for prospects of good future returns
from the investment in DBD
Commenting on the results, Howard Shore, Chairman, said:
"The Group continued to demonstrate the strength of its
diversified business model, exploiting opportunities for growth
across its primary areas of operation as larger market participants
retrench, and produced an excellent outcome, given the market
conditions.
"Capital Markets completed the acquisition of Stockdale
Securities, increasing the scale and scope of its services and
worked on a range of mandates, in addition to organically growing
its retained client base. Asset Management continues its recent
growth, surpassing GBP1 billion of AUM. In Principal Finance we
were very encouraged by the results of the 5G auction in Germany
and the future prospects of good returns from the investment in
DBD."
- Ends -
Enquiries:
+44 (0) 20 7468 4050
Shore Capital
Simon Fine, Co-Chief Executive
David Kaye, Co-Chief Executive
Lynn Bruce, Director +44 (0) 14 8172 8902
Grant Thornton UK LLP (Nominated
Adviser)
Philip Secrett
Jamie Barklem +44 (0) 20 7383 5100
Montfort Communications (Public
Relations)
Olly Scott +44 (0) 78 1234 5205
About Shore Capital
Shore Capital is an AIM quoted independent investment group.
Founded and majority owned by entrepreneurs, for three decades
Shore Capital has been helping entrepreneurial businesses reach
their full potential, find committed long-term investors and
develop into significant enterprises. The business offers
innovative corporate advice; a leading market making business; some
of the most respected investment research available in the UK; and
a diverse range of high-quality investment opportunities, including
its hugely successful VCTs and principal finance activities.
The Group is based in Guernsey, London, Liverpool, Edinburgh and
Berlin. Shore Capital Stockbrokers Limited, Shore Capital and
Corporate Limited, Shore Capital Limited and Puma Investment
Management Limited are each authorised and regulated by the
Financial Conduct Authority. Shore Capital Stockbrokers Limited is
a member of the London Stock Exchange.
www.shorecap.gg
Chairman's statement
Introduction
I am pleased to report strong progress across the Group's main
operating divisions during the first half of the year. Our strategy
of targeted investment has enabled us to enter a new phase of
development, giving us confidence that we can continue to grow
despite subdued capital markets and political uncertainty.
Our Capital Markets business completed the acquisition of
Stockdale Securities, adding new clients organically and through
the acquisition, broadening its capabilities and future
opportunities. Similarly, our Asset Management operations surpassed
GBP1 billion of assets under management, driven by improved
valuations in our institutional portfolios and strong inflows to
our compelling Puma Investments offerings.
During the period, Group revenues grew by 12.2% to GBP24.3
million, (2018: GBP21.6 million) whilst profits before tax
increased by 7.5% to GBP2.7 million, (2018: GBP2.6 million)
excluding costs of GBP1.4 million resulting from the Group's
reorganisation and move to new premises associated with the
acquisition of Stockdale Securities. The Group generated basic
earnings per share excluding these costs of 9.9p, (2018: 7.4p).
The Stockdale Securities team has integrated into the Group very
well, enhancing the Capital Markets division's capabilities and
achieving resilient trading against a backdrop of subdued market
sentiment. Revenues in the division grew by 11.3% to GBP15.0
million, (2018: GBP13.5 million) with profit before tax excluding
reorganisation costs steady at GBP2.7 million.
The acquisition elevated Shore Capital Markets to become
London's fourth largest corporate broking and advisory business by
retained quoted clients, with enhanced corporate broking, advisory,
investment funds and research expertise. We serve 123 retained
corporate clients, including eight FTSE 350 companies.
The division acted on a diverse mix of M&A and fundraising
mandates, including Marks & Spencer plc's GBP601 million rights
issue to fund its joint venture with Ocado Group plc; the US$899
million takeover of Safecharge International Group Limited by Nuvei
Corporation; and Dairy Crest Group plc's GBP975 million takeover by
Saputo Dairy UK Ltd. During the period we added six new clients,
including Arbuthnot Banking Group plc and AFH Financial plc.
Our highly regarded research team has continued to enhance its
offering, with the addition of investment funds coverage and the
commencement of professional services coverage. The Group's market
making team continued to deliver a strong performance for the
business and sustained its strong counterparty reputation and
continues to benefit from being one of the three largest market
makers on the London Stock Exchange.
In Asset Management we maintained momentum, growing revenues by
10.8% to GBP8.1 million, (2018: GBP7.3 million) with a profit
before tax excluding reorganisation costs of GBP1.5 million, (2018:
GBP1.3 million). A combination of strong fundraisings and
beneficial valuations took the division's assets under management
through the GBP1 billion barrier, from where we expect previous
investments in infrastructure and expertise will enable continued
growth.
In the Puma Investments business, there has been good progress
across the three focus areas of private equity, property finance
and listed equities. Puma Private Equity launched its evergreen
Puma Alpha VCT - the Group's 14(th) VCT - building on our
substantial experience in the VCT and EIS arena. Since 2005, the
Group has raised nearly GBP320 million for its VCT and EIS
offerings and invested into more than 50 qualifying companies.
Puma Property Finance has now passed the landmark of having
executed on GBP500 million of loans and construction projects since
inception and concluded an excellent six months of deal flow,
executing nearly GBP100 million of loans during the period and
deploying GBP50 million of the GBP200 million institutional funding
line from RoundShield Partners LLP. In addition, our Puma Heritage
lending business has also grown to approximately GBP100 million
from a combination of strong lending returns and new
subscriptions.
Meanwhile, the Puma AIM Service celebrated its five-year
anniversary and has continued to attract inflows, growing assets
under management to approximately GBP30 million at the time of
writing having widened its availability through inclusion on the
Fidelity investment platform. Since launch it has delivered
compound annual growth of 7.8% net of management and dealing fees,
outperforming the FTSE AIM All Share Index by 5.4%.
In the Institutional asset management business, the Group
continued to assist Brandenburg Realty and Puma Brandenburg, to
implement their strategies, supporting a variety of asset
management and value creation initiatives.
In Principal Finance we were very encouraged by the results of
the 5G auction in Germany and the potential impact on the future
returns of our investment in DBD.
Finally, subject to approval by shareholders at a forthcoming
General Meeting, we propose to cancel the Group's admission of
ordinary shares to trading on AIM. The lack of liquidity in the
Group's shares has, in our view, led to an undervaluation of the
Company which contradicts our belief in the prospects of a business
that is doing well and continuing to grow, as evidenced by
Directors and senior management increasing their holding in the
business by c.14% since the beginning of 2017 to a total of over
67%. In addition, we have sufficient capital to meet our growth
ambitions, obviating the need to access new equity capital in the
London markets by being admitted to trading on AIM. The Company is
retaining its listing on the Bermuda Stock Exchange.
Financial review
Income and expenditure
Revenue for the period increased by 12.2% to GBP24.3 million,
(2018: GBP21.6 million) whilst administrative expenses increased by
12.9% to GBP21.4 million, (2018: GBP18.9 million). Group profit
before tax excluding reorganisation costs of GBP1.4 million
increased by 7.5% to GBP2.7 million, (2018: GBP2.6 million).
Statutory profit before tax, (including reorganisation costs) was
GBP1.3 million, (2018: GBP2.6 million).
Reorganisation costs of GBP1.4 million incurred in the period
relate to the acquisition expenses and post-acquisition integration
of the Stockdale business and associated move to new London
premises.
Revenue from the Capital Markets division increased by 11.3% to
GBP15.0 million, (2018: GBP13.5 million). Profit before tax
excluding reorganisation costs was GBP2.7 million, (2018: GBP2.7
million) with a net margin of 17.9%, (2018: 20.3%).
Revenue from the Asset Management division was up 10.8% to
GBP8.1 million, (2018: GBP7.3 million) with a profit before tax
excluding reorganisation costs of GBP1.5 million, (2018: GBP1.3
million) representing a net margin of 18.5%, (2018: 17.7%).
The Principal Finance division recorded a pre-tax loss of GBP0.5
million, (2018: loss of GBP0.7 million).
Basic earnings per share
The Group generated adjusted basic earnings per share excluding
reorganisation costs of 9.9p, (2018: 7.4p). Statutory earnings per
share was 5.1p.
Liquidity
As at the balance sheet date, available liquidity was GBP17.8
million, (2018: GBP27.6 million) comprising GBP15.0 million, (2018:
GBP24.8 million) of cash and GBP2.8 million, (2018: GBP2.8 million)
of gilts and bonds. The Group repaid borrowings of GBP6.5 million
in the period since 30 June 2018. In addition, the Group has a
GBP20 million working capital facility which was undrawn at the
period end.
Balance sheet
The Group's balance sheet remains strong. Total equity at the
period end was GBP66.9 million, (2018: GBP68.1 million) the
decrease reflecting the profits for the period less dividend
payments.
In addition to the GBP15.0 million of cash and GBP2.8 million of
gilts and bonds, (as referred to above) at the period end the Group
held GBP5.2 million in various of its Puma Funds; GBP4.7 million
net in quoted equities; and a further GBP1.7 million in other
unquoted holdings. The licences held as part of the Group's
Spectrum Investments were carried at a cost of GBP2.3 million on a
gross basis, before allowing for minority interests. Other
non-current assets included GBP8.9 million of fixed assets, GBP3.7
million of goodwill of which GBP3.4m arises from the acquisition of
Stockdale Securities and GBP2.6 million of investment
properties.
The remainder of the balance sheet was GBP20.0 million net,
which included GBP17.5 million of net market and other debtors in
the Company's stockbroking subsidiary.
Net Asset Value per Share
Net asset value per share at the period end was 266.3p, (2018:
270.5p).
Dividend
On 24 April 2019 a final dividend for the year ending 31
December 2018 of 5.0p per share was paid to shareholders making the
total for the year 10.0p per share.
The Board proposes to pay an interim dividend of 5.0p per share,
(2018: 5.0p per share). The interim dividend is expected to be paid
on Wednesday 30 October 2019 to shareholders on the register as at
Friday 11 October 2019. Shares will be marked ex-dividend on 10
October 2019.
Operating review
Capital Markets
Overview
The Stockdale Securities team has integrated into the Group very
well, enhancing the Capital Markets division's capabilities and
achieving a resilient trading performance against a backdrop of
subdued capital markets activity and continued domestic political
uncertainty.
The acquisition completed on 31 March 2019, adding 52 retained
corporate clients together with an established investment funds
franchise and elevating Shore Capital to become London's fourth
largest corporate broking and advisory business by retained
businesses.
Elsewhere, we have continued to grow our retained client base
organically and to enhance our corporate broking and equity
research offering. This places the business in a stronger position
to weather further market uncertainty and take advantage of
opportunities as they arise.
Corporate Broking & Advisory
During the period under review the corporate advisory team has
participated in a number of significant transactions spanning
M&A and multiple secondary fundraisings. Notable transactions
during the period include:
-- Joint Corporate Broker and Co-Bookrunner to FTSE 250 Marks
& Spencer plc on the GBP601 million rights issue to fund its
joint venture with Ocado Group plc;
-- Joint bookrunner on the GBP107 million placing and open offer
by Randall & Quilter Investment Holdings Limited;
-- Sole bookrunner to Arbuthnot Banking Group plc in respect of
a GBP15.3 million secondary placing of its stake in Secure Trust
Bank plc; and
-- Broker to Dairy Crest Group plc in relation to its GBP975
million takeover by Saputo Dairy UK Ltd.
During the period we added 58 clients, comprising 52 joining as
a result of the Stockdale Securities acquisition and six new
clients, including Arbuthnot Banking Group plc. Following
completion of the acquisition of Stockdale Securities, Shore
Capital now has 123 corporate retained clients including eight FTSE
350 companies.
After the period end we completed our mandate as Rule 3 Adviser
to Safecharge International Group Limited in relation to its US$899
million takeover by Nuvei Corporation and have also been appointed
as broker to Greencore plc.
Research and distribution
Shore Capital Markets continues to believe that its
communication with the market is an integral feature of the
business, which has sustained its robust operating performance. We
do that through our growing independent and house stock equity and
investment funds research plus the idea generation and stock
broking of our expanded distribution team.
The acquisition of Stockdale Securities has added a high-quality
coverage of investment funds, expands our house analysis, bolsters
our institutional relationships and also enables us to commence
independent coverage of professional services' stocks.
Additionally, the sales reach and idea generation activities of
Shore Capital Markets have been further augmented and widened.
Market Making
The Market Making business continued to deliver a strong
performance for the business, with underlying revenue growth and
the highly welcome addition of the Investment Funds business
following the Stockdale acquisition. We are proud of our reputation
as a robust and trusted counterparty, ensuring market liquidity
across a broad range of equities.
Although clearly sensitive to the overall market environment,
Shore Capital remains focused and adaptable to changing trading
conditions and client needs. The team comprises highly experienced
traders who can identify revenue opportunities whilst operating
within a risk framework that ensures loss days are a rare
occurrence.
Asset Management
Overview
The Asset Management division enjoyed a strong period, growing
revenues and underlying profits. Overall AUM for the Asset
Management division passed the GBP1 billion mark during the period,
driven by fundraising in the Puma Investments operations and
increased valuations in our Institutional portfolios.
Puma Investments
Overview
Puma Investments, our UK fund management business, has enjoyed
an active period in which revenues have grown by over 10%. Profits
are in line with the equivalent period last year, reflecting the
recent investments in headcount and infrastructure and the one-off
costs associated with our London office move.
There has been good progress in all three of the business's
focus areas of private equity, property finance and listed
equities. Puma Private Equity has recently launched its new
evergreen VCT, Puma Alpha VCT - the Group's 14(th) VCT - building
on our substantial experience in the VCT and EIS arena. Puma
Property Finance has recorded a very strong six months of deal
flow, closing nearly GBP100 million of loans in the period and
deploying substantial amounts from our new institutional funding
line. The Puma AIM Service has recorded further good inflows during
the period and has widened its availability to financial advisers'
clients through inclusion on the Fidelity investment platform,
alongside Ascentric, Standard Life and Transact.
Following the investment in recent years, the business is
well-resourced and strategically well-placed to take advantage of
the opportunities available to continue growing.
Puma Private Equity
Puma Private Equity offers retail investors access to tax
efficient private equity strategies through our long-standing
Venture Capital Trust ("VCT") and Enterprise Investment Scheme
("EIS") offerings. We are sector-agnostic and seek to back
well-positioned businesses led by high-quality, credible management
teams who have the potential and aspiration to deliver material
growth.
Since 2005, the Group has raised nearly GBP320 million for its
Puma VCT and Puma EIS offerings. Currently available offerings are
Puma Alpha EIS and the newly launched Puma Alpha VCT.
Across its VCT and EIS offerings, the Group has now invested
into more than 50 qualifying companies, offering substantial
support to the UK SME sector alongside the Group's other
activities.
Puma Property Finance
Puma Property Finance offers investors access to secured first
charge loans on UK real estate across a range of sectors. The
platform provides lending solutions to professional borrowers
throughout the lifecycle of property development, via three
principal offerings: pre-development bridge loans; development
finance; and development exit loans. Transaction sizes typically
range from GBP3 million to GBP30 million and the team is active
across residential, commercial and more specialist areas of real
estate, including hotels, student accommodation and healthcare. At
the time of writing, Puma Property Finance had recently passed the
landmark of GBP500 million loans executed since inception.
For a number of years, Private Client investors have been able
to access these activities through an investment into Puma Heritage
plc, which utilises its diversified loan book, (totalling over 450
loans to date) to generate regular returns for shareholders
intended to counter long-term inflationary pressures. An investment
in Puma Heritage is intended to benefit from 100% relief from
Inheritance Tax after being held for two years.
The net asset value of Puma Heritage has grown to approximately
GBP100 million at the time of writing from a combination of strong
lending returns and additional subscriptions. The business has a
strong pipeline of loan opportunities to drive future growth.
In December 2018 we were delighted to agree an institutional
funding line of up to GBP200 million from funds advised by
RoundShield Partners LLP and affiliates ("RoundShield") for
deployment in our Puma Property Finance business. The RoundShield
deal confirms the institutional quality of our real estate
activities and enables us to engage with the high level of demand
we face for our development finance product as well as investing in
our infrastructure and high-quality, experienced lending team.
We have been active in deploying our available funds during the
period, closing nearly GBP100 million of new loans, including
almost GBP50 million of the RoundShield committed funds.
Listed Equities
The business offers retail investors access to a discretionary
equity portfolio service through its Puma AIM IHT Service, (the
"AIM Service") which seeks to mitigate Inheritance Tax by investing
in a carefully selected portfolio of AIM shares. The AIM Service is
particularly attractive for those that wish to utilise these tax
advantages whilst also investing within their ISA wrapper. At the
end of June 2019, the AIM Service celebrated its fifth anniversary.
Since launch it has delivered a compound annual growth of 7.8% net
of management and dealing fees, outperforming the FTSE AIM All
Share Index by 5.4%.
The AIM Service also delivered positive performance for the
first half of 2019, comfortably outperforming its FTSE AIM All
Share Index benchmark. We continued to grow assets under management
reaching approximately GBP30 million at the time of writing. A
proportion of our growth was generated as a result of our
availability on the Ascentric, Standard Life and Transact
platforms. We have also added the Fidelity platform during the
period with the first financial advisers already signed-up.
Social Care
The business continues to identify opportunities for revenue
generation in the social care sector, leveraging our many years of
experience providing development funding in this area. Our broad
range of relationships has enabled us to partner with external
funds investing in the supported living sector, where we are
providing a holistic service to source, structure and negotiate
acquisitions. This strategy has again delivered additional revenues
to our core operations during the period, albeit at a lower level
than in the previous year.
We are exploring possibilities to build a further pipeline of
opportunities in the broader social care sector and remain
optimistic about prospects for further revenues in this space.
Institutional Asset Management
Brandenburg Realty
Brandenburg Realty, (the "Fund") continues to expand its
investments in high-quality real estate opportunities and implement
its asset management programme to enhance value creation across the
portfolio.
During the period, the Fund took possession of the two assets
notarised in December 2018 and also notarised the acquisition of a
further asset in May 2019. All three assets are in prime, central
locations in Berlin. The completion of the asset notarised in May
has subsequently taken place.
The team also continues to assist the Fund's implementation of
its strategy for the other commercial and residential assets. At
several assets the condominium separation process is either
completed or at an advanced stage and sales are expected to
commence during Q3 of 2019. Condominium sales at the
Monumentenstrasse asset are also ongoing.
The team continues to assist Mixer Global to identify and
evaluate new co-working sites, especially in Germany and the US.
Mixer's third location in Israel, Mixer Herzliya, is now open and
has attracted a number of high-quality tenants including Samsung.
Construction work has commenced at the fourth site, City Garden,
which is in the heart of Tel Aviv and a new lease for Mixer's first
location outside of Israel was signed on 24 April 2019 for premises
at 600 Massachusetts Ave, Washington D.C.
Puma Brandenburg Limited ("PBL")
PBL is now wholly owned by Howard and Andrée Shore. The Group
has continued to assist PBL to execute its strategy, including:
-- The signing of a new financing facility with LBBW covering a
substantial proportion of PBL's residential portfolio; and
-- PBL's participation in the Mixer Global investment, as noted
above.
St Peter Port Capital ("SPPC")
SPPC announced its results for the year ended 31 March 2019 on
14 June. As at that date, it had investments in six companies,
(excluding companies in the portfolio it had written down to
zero).
SPPC reported that a number of the companies in the portfolio
continued to report new developments during the year, but were no
closer to an exit or liquidity event. For these reasons, further
write downs were recorded in respect of some of the companies.
On 2 September 2019, SPPC reported the board's proposal to
terminate its discretionary investment management agreement with St
Peter Port Investment Management Limited with immediate effect and
become a self-managed fund. The effect of these changes is to
reduce investment management costs by more than half from their
current, already reduced, level.
SPPC intends in the near future to convene a general meeting to
enable shareholders to vote on continuing the life of the
company.
Principal Finance
The Principal Finance division seeks to use the Group's strong
balance sheet to invest in attractive opportunities and seed new
funds.
Investment in DBD
The division holds the Group's investment in DBD, which holds,
through a subsidiary, 32 regional radio spectrum licences in
Germany of indefinite duration (the "Licences"). Shore Capital
holds a 59.94% interest in Spectrum Investments Limited, the parent
company of DBD.
Following previous updates in respect of communications with the
German Telecoms Regulator, ("BNetzA") the Licences have now been
reallocated from the 3.5 GHz frequency band to the 3.700-3.730 GHz
frequency band at no cost. The licences will continue to be for
perpetual duration, on a "flexibilised" basis, meaning without
historic technical restrictions limiting their usage. The
flexibilisation will enable their use for modern services such as
4G and 5G.
During the period we were encouraged to see strong results from
German 5G spectrum licence auctions, giving us increased confidence
in the future prospects for DBD's business and the value that can
accrete from it.
Current trading and prospects
The Group continued to demonstrate the strength of its
diversified business model, exploiting opportunities for growth
across its primary areas of operation as larger market participants
retrench, and produced an excellent outcome, given the market
conditions.
Capital Markets completed the acquisition of Stockdale
Securities, increasing the scale and scope of its services and
worked on a range of mandates, in addition to organically growing
its retained client base. Asset Management continues its recent
growth, surpassing GBP1 billion of AUM. In Principal Finance we
were very encouraged by the results of the 5G auction in Germany
and the future prospects of good returns from the investment in DBD
.
Howard P Shore
Chairman
26 September 2019
Independent review report to Shore Capital Group Limited (the
"Group")
Introduction
We have been engaged by Shore Capital Group Limited to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2019 which
comprises the unaudited consolidated income statement, the
unaudited consolidated statement of comprehensive income, the
unaudited consolidated statement of financial position, the
unaudited consolidated statement of changes in equity and the
unaudited consolidated cash flow statement.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Group's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the Group a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the Group in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement has been expressly authorised to do so by our written
consent. Save as above, we do not accept responsibility for this
report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2019 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
BDO Limited
Chartered Accountants
Place Du Pre,
Rue Du Pre,
St Peter Port,
Guernsey,
Channel Islands
26 September 2019
Unaudited Consolidated Income Statement
For the six months ended 30 June 2019
Notes Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun18 18
19
GBP'000 GBP'000 GBP'000
----------------------------------- ------ ----------- ----------- -----------
Revenue 4 24,271 21,641 43,334
Administrative expenditure (21,368) (18,923) (38,929)
Operating profit before
reorganisation costs 2,903 2,718 4,405
Reorganisation costs 5 (1,411) - -
Operating profit 1,492 2,718 4,405
Interest income 16 20 43
Finance costs (164) (174) (380)
Profit before taxation 3 1,344 2,564 4,068
Taxation (167) (451) (485)
Profit for the period/ year 1,177 2,113 3,583
=========== =========== ===========
Attributable to:
Equity holders of the parent 1,109 1,603 2,727
Non-controlling interests 68 510 856
1,177 2,113 3,583
=========== =========== ===========
Earnings per share
Basic 6 5.1p 7.4p 12.6p
Diluted 6 5.1p 7.3p 12.5p
Adjusted earnings per share
Basic (excluding reorganisation
costs) 6 9.9p 7.4p 12.6p
Diluted (excluding reorganisation
costs) 6 9.8p 7.3p 12.5p
Unaudited Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 18
19 18
GBP'000 GBP'000 GBP'000
------------------------------------ ----------- ----------- -----------
Profit after tax for the period/
year 1,177 2,113 3,583
----------- ----------- -----------
Items that may be reclassified
to the income statement
Gains/(losses) on cash flow hedges 9 11 (201)
Tax thereon (2) (2) 38
----------- ----------- -----------
7 9 (163)
Exchange difference on translation
of foreign operations 132 381 299
Other comprehensive income for
the period/ year, net of tax 139 390 136
----------- ----------- -----------
Total comprehensive income for
the period/ year, net of tax 1,316 2,503 3,719
=========== =========== ===========
Attributable to:
Equity holders of the parent 1,243 1,947 2,785
Non-controlling interests 73 556 934
1,316 2,503 3,719
=========== =========== ===========
Unaudited Consolidated Statement of Financial Position
As at 30 June 2019
Notes As at As at As at
30 Jun 30 Jun 31 Dec
19 18 18
GBP'000 GBP'000 GBP'000
---------------------------------- ------ --------- --------- ---------
Non-current assets
Goodwill 3,740 381 381
Intangible assets 2,255 2,232 2,263
Property, plant & equipment 8,866 7,633 7,653
Right of use assets 8 11,002 - -
Investment properties 2,643 2,643 2,643
Principal Finance investments 5,894 7,315 5,357
Deferred tax asset 141 139 108
34,541 20,343 18,405
--------- --------- ---------
Current assets
Trading assets 9,569 8,326 9,837
Trade and other receivables 80,948 78,263 42,058
Cash and cash equivalents 15,044 24,789 31,015
105,561 111,378 82,910
--------- --------- ---------
Total assets 3 140,102 131,721 101,315
--------- --------- ---------
Current liabilities
Trading liabilities (1,126) (564) (708)
Trade and other payables (60,149) (55,832) (27,877)
Derivative financial instruments (268) (173) (135)
Tax liabilities (324) (837) (165)
Borrowings 9 - (4,191) (4,299)
Lease liabilities 8 (1,446) - -
(63,313) (61,597) (33,184)
--------- --------- ---------
Non-current liabilities
Borrowings 9 - (1,862) -
Lease liabilities 8 (9,791) - -
Provision for liabilities
and charges (67) (198) (68)
(9,858) (2,060) (68)
Total liabilities 3 (73,171) (63,657) (33,252)
--------- --------- ---------
Net assets 66,931 68,064 68,063
========= ========= =========
Capital and Reserves
Share capital - - -
Share premium 1,866 1,866 1,866
Merger reserve 14,903 14,903 14,903
Other reserves 1,348 1,651 1,348
Retained earnings 39,329 39,943 39,992
Equity attributable to
equity holders of the parent 57,446 58,363 58,109
Non-controlling interests 9,485 9,701 9,954
Total equity 66,931 68,064 68,063
========= ========= =========
Unaudited Consolidated Statement of Changes in Equity
For the six months ended 30 June 2019
Share capital Share Merger Other Retained Non- Total
Premium reserve reserves earnings controlling
interests
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------------- ------------- ------------- ------------- ------------- ------------- --------
At 1 January
2018 - 1,866 14,903 1,596 39,882 8,923 67,170
Transition
adjustment -
IFRS 9
Financial
Instruments - - - 48 (48) - -
-------------- ------------- ------------- ------------- ------------- ------------- --------
At 1 January
2018 (as
restated) - 1,866 14,903 1,644 39,834 8,923 67,170
-------------- ------------- ------------- ------------- ------------- ------------- --------
Profit for the
period - - - - 1,603 510 2,113
Foreign currency
translation - - - - 337 44 381
Valuation change
on cash flow
hedge - - - 9 - 2 11
Tax on cash flow
hedge - - - (2) - - (2)
Total
comprehensive
income - - - 7 1,940 556 2,503
Equity dividends
paid - - - - (1,079) - (1,079)
Dividends paid
to/rebalancing
of
non-controlling
interests - - - - (752) (1,054) (1,806)
Investment by
non-controlling
interest in
subsidiaries - - - - - 1,276 1,276
At 30 June 2018 - 1,866 14,903 1,651 39,943 9,701 68,064
============== ============= ============= ============= ============= ============= ========
Share Share Merger Other Retained Non- controlling Total
capital Premium reserve reserves earnings interests
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- --------- --------- ---------- ---------- ----------------- --------
At 30 June 2018 - 1,886 14,903 1,651 39,943 9,701 68,064
---------- --------- --------- ---------- ---------- ----------------- --------
Profit for the period - - - - 1,124 346 1,470
Foreign currency
translation - - - - (113) 31 (82)
Valuation change
on cash flow hedge - - - (212) - - (212)
Tax on cashflow
hedge - - - 40 - - 40
Total comprehensive
income - - - (172) 1,011 377 1,216
Equity dividends
paid - - - - (1,079) - (1,079)
Dividends paid to/rebalancing
of non-controlling
interests - - - - 117 (254) (137)
Credit in relation
to share based payments - - - (131) - - (131)
Investment by non-controlling
interest in subsidiaries - - - - - 130 130
At 31 December 2018 - 1,866 14,903 1,348 39,992 9,954 68,063
========== ========= ========= ========== ========== ================= ========
Share Share Merger Other Retained Non- controlling Total
capital Premium reserve reserves earnings interests
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- --------- --------- ---------- ---------- ----------------- --------
At 1 January 2019 - 1,866 14,903 1,348 39,992 9,954 68,063
Transition adjustment
- IFRS 16 - - - - (84) - (84)
---------- --------- --------- ---------- ---------- ----------------- --------
At 1 January 2018
(as restated) - 1,866 14,903 1,348 39,908 9,954 67,979
---------- --------- --------- ---------- ---------- ----------------- --------
Profit for the period - - - - 1,109 68 1,177
Foreign currency
translation - - - - 127 5 132
Valuation change
on cash flow hedge - - - - 9 - 9
Tax on cash flow
hedge - - - - (2) - (2)
Total comprehensive
income - - - - 1,243 73 1,316
Equity dividends
paid - - - - (1,079) - (1,079)
Dividends paid to/rebalancing
of non controlling
interests - - - - (743) (711) (1,454)
Investment by non-controlling
interest in subsidiaries - - - - - 169 169
At 30 June 2019 - 1,866 14,903 1,348 39,329 9,485 66,931
========== ========= ========= ========== ========== ================= ========
Unaudited Consolidated Cash Flow Statement
For the six months ended 30 June 2019
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 18
19 18
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ----------- -----------
Cash flows from operating activities
Operating profit 1,492 2,718 4,405
Adjustments for:
Depreciation and impairment charges 1,382 409 1,262
Share-based payment credit - - (131)
Fair value gains on Principal
Finance investments (326) (41) (367)
(Decrease)/increase in provision
for national insurance on options (1) 132 (36)
Operating cash flows before movement
in working capital 2,547 3,218 5,133
(Increase)/decrease in trade and
other receivables (37,726) (25,436) 11,787
Increase/(decrease) in trade and
other payables 31,548 21,372 (6,833)
Decrease in trading liabilities (7,046) (453) (309)
Decrease/(increase) in trading
assets 6,059 (172) (1,683)
Cash (utilised)/generated by operations (4,618) (1,471) 8,095
Interest paid (164) (174) (380)
Corporation tax paid (299) (572) (1,207)
Net cash (utilised)/generated by
operating activities (5,081) (2,217) 6,508
----------- ----------- -----------
Cash flows from investing activities
Purchases of property, plant &
equipment (1,448) (192) (882)
Acquisition of subsidiary, net
of cash acquired (2,248) (826) (826)
Purchase of Principal Finance
investments (382) (803) (803)
Sale of Principal Finance investments 171 4 1,270
Investment in non-controlling
interest in subsidiaries 169 1,201 1,331
Interest received 16 20 43
Net cash (utilised)/generated by
investing activities (3,722) (596) 133
----------- ----------- -----------
Cash flows from financing activities
Payment of lease liability (519) - -
Decrease in borrowings (4,239) (9,944) (12,192)
New borrowings - 4,313 4,458
Dividends paid to equity shareholders (1,079) (1,079) (2,158)
Dividends paid to non-controlling
interests (1,454) (1,806) (1,943)
Net cash utilised by financing
activities (7,291) (8,516) (11,835)
----------- ----------- -----------
Net decrease in cash and cash equivalents
during the period/ year (16,094) (11,329) (5,194)
Effects of exchange rate changes 123 445 536
Cash and cash equivalents at beginning
of period/ year 31,015 35,673 35,673
----------- ----------- -----------
Cash and cash equivalents at end
of period/ year 15,044 24,789 31,015
=========== =========== ===========
Notes to the Interim Financial Report
For the six months ended 30 June 2019 (unaudited)
1. Financial information
Basis of preparation
The annual financial statements of Shore Capital Group Limited,
the 'company' and its subsidiaries (the "Group") are prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial
statements included in this interim financial report for the period
ended 30 June 2019 has been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting",
as adopted by the European Union.
The information for the year ended 31 December 2018 does not
constitute statutory accounts. The Annual Report and Accounts of
the Group were issued on 22 March 2019. The auditor's report on
those accounts was not qualified and did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying the report.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's statement, together with the
financial position of the Group, its liquidity position and
borrowing facilities. In addition, the principal risks and
uncertainties of the Group are discussed in note 2 to this interim
financial report.
The Group has considerable financial resources together with an
established business model. As a consequence, the directors believe
that the Group is well-placed to manage its business risks
successfully.
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, they continue to adopt the going concern basis in
preparing the financial statements.
Significant accounting policies
The same accounting policies, presentation and methods of
computation are followed in these condensed set of financial
statements as are applied in the Group's latest audited Annual
Report and Accounts for the year ended 31 December 2018, except for
those that relate to new standards and interpretations effective
for the first time for periods beginning on (or after) 1 January
2019, and will be adopted in the 2019 annual financial statements.
New standards impacting the Group that will be adopted in the
annual financial statements for the year ending 31 December 2019,
and which have given rise to changes in the Group's accounting
policies are:
-- IFRS 16 Leases
Details of the impact this standard has had are given below.
Other new and amended standards and Interpretations issued by the
IASB that will apply for the first time in the next annual
financial statements are not expected to impact the Group as they
are either not relevant to the Group's activities or require
accounting which is consistent with the Group's current accounting
policies.
IFRS 16 Leases
This standard has been adopted on its mandatorily effective date
of 1 January 2019 and applied on a modified retrospective basis
which recognises the cumulative effect of initially applying the
standard as an adjustment to equity at the date of initial
application. There impact of applying the standard resulted in an
adjustment of GBP84,000 which reduced the opening balance of
retained earnings. Adoption of IFRS 16 has resulted in the Group
recognising right of use assets and lease liabilities for all
contracts that are, or contain, a lease.
The weighted average incremental borrowing rate applied to lease
liabilities on 1 January 2019 was 4.50%.
The aggregate lease liability recognised in the statement of
financial position at 1 January 2019 and the group's operating
lease commitment at 31 December 2018 can be reconciled as
follows:
GBP'000
----------------------------------------------------- --------
Operating lease commitment at 31 Dec 2018 1,947
Effect of discounting those lease commitments at an
annual rate of 4.50% (60)
Lease liability at 1 Jan 2019 1,887
========
On 12 March 2019 the Group signed a 10-year occupational lease
with a five-year break clause for its new London office. The
signing of this new lease has resulted in a right of use asset of
GBP9,120,000 and lease liability of GBP8,910,000 being recorded. A
further right of use asset and lease liability of GBP752,000 was
recorded upon acquisition of Stockdale Securities Limited. A
breakdown of the movement in the period of the right of use asset
and lease liabilities is shown in note 8.
All leases are accounted for by recognising a right of use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a term of 12 months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value
guarantee;
-- the exercise price of any purchase option granted in favour
of the group if it is reasonable certain to assess that option;
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before commencement of the
lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased
asset (typically leasehold dilapidations.
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right of use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term.
When the group renegotiates the contractual terms of a lease
with the lessor, the accounting depends on the nature of the
modification:
-- if the renegotiation results in one or more additional assets
being leased for an amount commensurate with the standalone price
for the additional rights of use obtained, the modification is
accounted for as a separate lease in accordance with the above
policy
-- in all other cases where the renegotiated increases the scope
of the lease (whether that is an extension to the lease term, or
one or more additional assets being leased), the lease liability is
remeasured using the discount rate applicable on the modification
date, with the right of use asset being adjusted by the same
amount
-- if the renegotiation results in a decrease in the scope of
the lease, both the carrying amount of the lease liability and
right-of-use asset are reduced by the same proportion to reflect
the partial of full termination of the lease with any difference
recognised in profit or loss. The lease liability is then further
adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified
lease payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted by the same
amount.
Goodwill
On the acquisition of a business or an interest in a business
which is to be consolidated, fair values are attributed to the
share of identifiable net assets acquired. Where the cost of
acquisition exceeds the fair value attributable to such assets, the
difference is treated as purchased goodwill. Cost comprises the
fair value of assets given, liabilities assumed and equity
instruments issued, plus the amount of any non-controlling
interests in the acquiree plus, if the business combination is
achieved in stages, the fair value of the existing equity interest
in the acquiree. Contingent consideration is included in cost at
its acquisition date fair value and, in the case of contingent
consideration classified as a financial liability, remeasured
subsequently through profit or loss. Direct costs of acquisition
are recognised immediately as an expense. Goodwill arising on
acquisitions is tested for impairment at that date. The Group
evaluates goodwill annually and whenever circumstance indicates the
possibility of impairment. Such evaluation is based on comparing
the fair value of the cash-generating unit to its carrying value.
Where the carrying value exceeds its fair value, an impairment loss
is recorded for the difference.
Revenue
Where the Group has contracts with customers which include an
element of variable consideration in the transaction price, the
Group has adopted the "expected value" method to constrain the
revenue in order that it is highly probable that there will not be
a future reversal in the amount of revenue recognised.
2. Principal risks and uncertainties
The Group's policies for managing the risks arising from its
activities are set out in the last audited Annual Report and
Accounts of the Group that were issued on 22 March 2019. The
Group's activities comprise equity market activities, fund
management and investment in alternative assets and property, and
its income is therefore subject to the level of general activity,
sentiment and market conditions in each of the markets in which it
operates.
3. Segmental information
For management purposes, the Group is organised into business
units based on their services, and has four reportable operating
segments as follows:
-- Capital Markets provides research in selected sectors,
broking for institutional and professional clients, market making
in AIM and small cap stocks, fixed income broking and corporate
broking and advisory for mid and small cap companies.
-- Asset Management provides advisory services, and manages
specialist funds.
-- Central Costs comprises the costs of the Group's central
management team and structure.
-- Principal Finance comprises investments and other holdings
acquired, together with principal finance activities conducted,
using our own balance sheet resources.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment. Segmental performance is
evaluated based on operating profit or loss. Transfer prices
between operating segments are on an arm's-length basis in a manner
similar to transactions with third parties.
Six months ended Capital Asset Management Central Principal Total
30 Jun 19 Markets costs Finance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- ----------------- -------- ---------- ---------
Revenue 15,028 8,074 - 1,169 24,271
--------- ----------------- -------- ---------- ---------
Profit/(loss) before
tax excluding reorganisation
costs 2,696 1,496 (985) (452) 2,755
--------- ----------------- -------- ---------- ---------
Reorganisation costs (1,165) (196) (50) - (1,411)
Profit/(loss) before
tax 1,531 1,300 (1,035) (452) 1,344
========= ================= ======== ========== =========
Assets 99,127 10,721 1,430 28,824 140,102
--------- ----------------- -------- ---------- ---------
Liabilities (67,034) (3,866) (312) (1,959) (73,171)
--------- ----------------- -------- ---------- ---------
Six months ended Capital Asset Management Central Principal Total
30 Jun 18 Markets costs Finance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- ----------------- -------- ---------- ---------
Revenue 13,507 7,290 - 844 21,641
--------- ----------------- -------- ---------- ---------
Profit/(loss) before
tax 2,742 1,292 (772) (698) 2,564
--------- ----------------- -------- ---------- ---------
Assets 86,209 12,080 1,318 32,114 131,721
--------- ----------------- -------- ---------- ---------
Liabilities (54,131) (7,482) (233) (1,811) (63,657)
--------- ----------------- -------- ---------- ---------
Year ended 31 Dec Capital Asset Management Central Principal Total
18 Markets costs Finance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- ----------------- -------- ---------- ---------
Revenue 25,452 15,843 - 2,039 43,334
--------- ----------------- -------- ---------- ---------
Profit/(loss) before
tax 4,058 3,166 (1,637) (1,519) 4,068
--------- ----------------- -------- ---------- ---------
Assets 56,658 10,018 1,599 33,040 101,315
--------- ----------------- -------- ---------- ---------
Liabilities (23,337) (3,651) (855) (5,409) (33,252)
--------- ----------------- -------- ---------- ---------
4. Revenue
a) Revenue disaggregated by division and geographical market
below:
Six months ended Capital Markets Asset Management Principal Total
30 Jun 19 Finance
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ----------------- ---------- --------
UK 15,028 6,403 904 22,335
Rest of Europe - 1,671 265 1,936
---------------- ----------------- ---------- --------
15,028 8,074 1,169 24,271
---------------- ----------------- ---------- --------
Six months ended Capital Markets Asset Management Principal Total
30 Jun 18 Finance
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ----------------- ---------- --------
UK 13,507 5,823 489 19,819
Rest of Europe - 1,467 355 1,822
---------------- ----------------- ---------- --------
13,507 7,290 844 21,641
---------------- ----------------- ---------- --------
Year ended 31 Dec Capital Markets Asset Management Principal Total
18 Finance
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------------- ----------------- ---------- --------
UK 25,452 12,489 1,185 39,126
Rest of Europe - 3,354 854 4,208
---------------- ----------------- ---------- --------
25,452 15,843 2,039 43,334
---------------- ----------------- ---------- --------
b) Revenue disaggregated by division and timing of recognition
below:
Six months ended Capital Markets Asset Management Principal Total
30 Jun 19 Finance
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ----------------- ---------- --------
Point in time 12,566 3,296 1,169 17,031
Over time 2,462 4,778 - 7,240
15,028 8,074 1,169 24,271
---------------- ----------------- ---------- --------
Six months ended Capital Markets Asset Management Principal Total
30 Jun 18 Finance
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ----------------- ---------- --------
Point in time 11,811 3,182 844 15,837
Over time 1,696 4,108 - 5,804
13,507 7,290 844 21,641
---------------- ----------------- ---------- --------
Year ended 31 Dec Capital Asset Management Principal Total
18 Markets Finance
GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- ----------------- ---------- --------
Point in time 21,319 7,982 2,039 31,340
Over time 4,133 7,861 - 11,994
25,452 15,843 2,039 43,334
--------- ----------------- ---------- --------
5. Reorganisation costs
During the period, the Group has incurred costs outside of its
normal operating expenses.
Six months
ended
30 Jun 19
GBP'000
-------------------------------------- -----------
Acquisition expenses 266
Post-acquisition restructuring costs 583
Pre-opening office costs 562
1,411
-----------
Acquisition expenses relate to legal and due diligence costs
incurred as part of the Stockdale acquisition.
Post-acquisition restructuring costs relate to redundancy and
early contract termination costs following the Stockdale
acquisition.
Pre-opening costs relate to rent and rates on the Group's new
London premises incurred subsequent to the signing of the lease but
prior to occupation, while the Group remained in occupation of its
previous premises.
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following:
Six months Six months Year ended
ended ended 31 Dec
30 Jun 30 Jun 18 18
19
------------------------------------ ----------- ----------- -----------
Earnings (GBP) 1,109,000 1,603,000 2,727,000
=========== =========== ===========
Number of shares
Basic
Weighted average number of shares 21,573,322 21,573,322 21,573,322
Diluted
Dilutive effect of share option
scheme 234,978 452,242 267,032
----------- ----------- -----------
21,808,300 22,025,564 21,840,354
=========== =========== ===========
Earnings per share
Basic 5.1p 7.4p 12.6p
=========== =========== ===========
Diluted 5.1p 7.3p 12.5p
=========== =========== ===========
Earnings (GBP) 1,109,000 1,603,000 2,727,000
Reorganisation costs attributable 1,020,000 - -
to equity shareholders (GBP)
----------- ----------- -----------
Adjusted earnings (GBP) 2,129,000 1,603,000 2,727,000
=========== =========== ===========
Number of shares
Basic
Weighted average number of shares 21,573,322 21,573,322 21,573,322
Diluted
Dilutive effect of share option
scheme 234,978 452,242 267,032
----------- ----------- -----------
21,808,300 22,025,564 21,840,354
=========== =========== ===========
Adjusted earnings per share
Basic 9.9p 7.4p 12.6p
=========== =========== ===========
Diluted 9.8p 7.3p 12.5p
=========== =========== ===========
7. Dividends paid
Six months Six months Year ended
ended ended 31 Dec 18
30 Jun 19 30 Jun 18
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- -----------
Amounts recognised as distributions
to equity holders in the period/
year:
Final dividend for the year ended
31 December 2017 of 5.0p per share - 1,079 1,079
Interim dividend for the year
ended 31 December 2018 of 5.0p
per share - - 1,079
Final dividend for the year ended 1,079 - -
31 December 2018 of 5.0p per share
1,079 1,079 2,158
----------- ----------- -----------
The directors propose an interim dividend for the year ending 31
December 2019 of 5.0p per share.
8. Right of use assets and Lease liabilities
Right of use
assets Land & Buildings Total
GBP'000 GBP'000
----------------- ----------------- --------
At 1 January
2019 1,803 1,803
Additions 9,120 9,120
Amortisation (673) (673)
Acquisition 752 752
At 30 June 2019 11,002 11,002
----------------- --------
Lease liabilities Land & Buildings Total
GBP'000 GBP'000
------------------- ----------------- --------
At 1 January
2019 1,887 1,887
Additions 8,911 8,911
Interest expense 163 163
Lease payments (476) (476)
Acquisition 752 752
At 30 June 2019 11,237 11,237
----------------- --------
On 12 March 2019 the Group signed a 10-year occupational lease
with a five-year break clause for its new London office. The
signing of this new lease has resulted in a right of use asset of
GBP9,120,000 and lease liability of GBP8,910,000 being recorded. If
the five year break clause is exercised, the right of use asset and
the lease liability would be reduced to GBP5,157,000 and to
GBP4,948,000 respectively. A further right of use asset and lease
liability of GBP752,000 was recorded upon acquisition of Stockdale
Securities Limited.
The table below reflects the contractual maturities including
interest, of the Group's lease liabilities:
At 30 June 2019
Between Between Between
Up to 3 3 and 12 1 and 2 2 and 5 Over 5
months months year years years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- ---------- --------- --------- --------
Lease liabilities 366 1,080 2,228 6,162 6,216
======== ========== ========= ========= ========
9. Borrowings
On 25 June 2019, the Group repaid in full its borrowings of
$5,485,000 (GBP4,299,000).
10. Share capital
Ordinary shares of nil par value Number of
shares GBP'000
------------------------------------ ----------- ----------
At 1 January 2018, 31 December 2018 21,573,322 -
At 30 June 2019 21,573,322 -
11. Business combination
On 31 March 2019 the Group acquired 100% of the ordinary share
capital of Stockdale Securities Limited ("Stockdale"), a limited
company registered in the United Kingdom, whose primary activity is
offering corporate advisory and corporate broking, equity research,
sales and trading services to an institutional and corporate client
base.
The amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are as set out in the table
below.
Book value Fair value Fair value
adjustments of assets
and liabilities
acquired
GBP'000 GBP'000 GBP'000
Fixed assets 519 - 519
Right of use asset 752 - 752
Investments 136 - 136
Cash & deposits 3,159 - 3,159
Trade debtors 6,052 - 6,052
Other debtors 1,264 (495) 769
Deferred tax 230 (230) -
Trade creditors (4,922) - (4,922)
Other creditors (1,641) - (1,641)
5,549 (725) 4,824
=========== ============= =================
Initial consideration of GBP5,408,000 was paid in cash in the
period. The Group has also recorded contingent consideration of
GBP2,775,000 in trade and other payables on the Statement of
Financial Position at 30 June 2019, resulting in estimated total
consideration of GBP8,183,000.
The contingent consideration arrangement requires the Group to
pay up to GBP4.0m based on the revenues earned from former
Stockdale clients in the 18 months following the acquisition.
Contingent consideration could range from nil to GBP4.0 million
depending upon performance against three separate revenue targets.
The fair value of contingent consideration of GBP2,775,000 was
estimated using the historic performance of the Stockdale business
and an assessment of the general market outlook.
The fair value of the financial assets acquired included
receivables with a fair value and gross contractual value of
GBP6,052,000. Of this balance, GBP105,000 remains outstanding.
Stockdale contributed GBP2,213,000 to revenue and GBP533,000 to
the Group's profit for the period between the date of acquisition
and the balance sheet date. Based on the results of Stockdale for
the period 1 January 2019 to 31 March 2019, if the acquisition of
Stockdale had been completed on the first day of the period, group
revenues and pre-tax profits for the period would have been higher
by GBP2,268,000 and GBP94,000 respectively.
Goodwill arising on the acquisition was as follows:
GBP'000
----------------------------------------------- --------
Total consideration 8,183
Fair value of assets and liabilities acquired (4,824)
Goodwill arising on acquisition 3,359
========
The goodwill relates to the synergies of combining Stockdale
with the Group. None of the goodwill is expected to be deductable
for tax purposes.
Goodwill in the Statement of Financial Position as at 30 June
2019 is as follows:
GBP'000
------------------------------------- --------
Goodwill as at 1 January 2019 381
Arising on acquisition of Stockdale 3,359
Goodwill as at 30 June 2019 3,740
========
12. Financial instruments
Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction.
For trading assets and liabilities, and financial assets and
liabilities designated at fair value which are listed or otherwise
traded in an active market, for exchange-traded derivatives, and
for other financial instruments for which quoted prices in an
active market are available, fair value is determined directly from
those quoted market prices (level 1).
For financial instruments which do not have quoted market prices
directly available from an active market, fair values are estimated
using valuation techniques, based wherever possible on assumptions
supported by observable market prices or rates prevailing at the
balance sheet date (level 2). This is the case for some unlisted
investments and other items which are not traded in active
markets.
For some types of financial instruments, fair values cannot be
obtained directly from quoted market prices, or indirectly using
valuation techniques or models supported by observable market
prices or rates. This is the case for certain unlisted investments.
In these cases, fair value is estimated indirectly using valuation
techniques for which the inputs are reasonable assumptions, based
on market conditions (level 3).
30 Jun 19 Level 1 Level 2 Level 3
Quoted Market Non-market Total
market observable observable
price inputs inputs
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ------------ ------------ --------
Principal Finance investments 381 - 5,513 5,894
Trading assets 9,569 - - 9,569
Total financial assets 9,950 - 5,513 15,463
-------- ------------ ------------ --------
Trading liabilities 1,126 - - 1,126
Derivative financial instruments - 268 - 268
Total financial liabilities 1,126 268 - 1,394
-------- ------------ ------------ --------
30 Jun 18 Level 1 Level 2 Level 3
Quoted Market Non-market Total
market observable observable
price inputs inputs
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ------------ ------------ --------
Principal Finance investments 938 - 6,377 7,315
Trading assets 8,326 - - 8,326
Total financial assets 9,264 - 6,377 15,641
-------- ------------ ------------ --------
Trading liabilities 564 - - 564
Derivative financial instruments - 173 - 173
Total financial liabilities 564 173 - 737
-------- ------------ ------------ --------
31 Dec 2018 Level 1 Level 2 Level 3
Quoted Market Non-market Total
market observable observable
price inputs inputs
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ------------ ------------ --------
Principal Finance investments 654 - 4,703 5,357
Trading assets and other
holdings at fair value 9,837 - - 9,837
Total financial assets 10,491 - 4,703 15,194
-------- ------------ ------------ --------
Trading liabilities 708 - - 708
Derivative financial instruments - 135 - 135
-------- ------------ ------------ --------
Total financial liabilities 708 135 - 843
-------- ------------ ------------ --------
Included in the fair value of financial instruments carried at
fair value in the statement of financial position are those
estimated in full or in part using valuation techniques based on
assumptions that are not supported by market observable prices or
rates (level 3). For such financial instruments, the directors have
generally made reference to published net asset values (derived the
manager of such instruments) and used judgement over the use of
those net asset values. The net asset values are generally derived
from the underlying portfolios which are themselves valued using
unobservable inputs. The significant unobservable inputs comprise
the long term revenue growth rate, long term pre-tax operating
margin and discounts for lack of marketability. A change in any of
these inputs may result in a change in the fair value of such
investments.
There have been no significant movements between level 1 and
level 2 during the period.
The following table shows a reconciliation of the opening and
closing amount of Level 3 financial assets and liabilities which
are recorded at fair value:
At 1 Jan Gains recorded Purchases Sales and At 30 Jun
2019 in profit and transfers transfers 2019
or loss
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- --------------- --------------- ----------- ----------
Total financial
assets 4,703 436 382 (8) 5,513
========= =============== =============== =========== ==========
Based on the established fair value and model governance
policies and the related controls and procedural safeguards the
Group employs, management believe the resulting estimates in fair
values recorded in the statement of financial position are
reasonable and the most appropriate at the balance sheet date.
The interim report will be posted in due course to shareholders
on the register. Further copies of this report are available on the
Company's website at www.shorecap.gg.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LIFSEARIRFIA
(END) Dow Jones Newswires
September 26, 2019 02:02 ET (06:02 GMT)
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