Financial review

 

Income and expenditure

 

Revenue for the period increased by 38.2% to £38.0 million (2020: £27.5 million), whilst administrative expenses increased by 18.8% to £28.1 million (2020: £23.7 million).

 

Operating profit before reorganisation costs increased by 157.8% to £9.9 million (2020: £3.8 million).  Statutory profit before tax increased by 213.7% to £9.7 million (2020: £3.1 million).

 

Divisional performance was as follows:

 

• Capital Markets: revenue increased by 33.3% to £26.4 million (2020: £19.8 million). Profit before tax was £7.7 million (2020: £3.9 million) with a net margin of 29.3% (2020: 19.9%).
•  Asset Management: revenue increased by 34.0% to £10.6 million (2020: £7.9 million). Profit before tax was £1.5 million (2020: £0.7 million) with a net margin of 14.4% (2020: 8.9%).
• Principal Finance: pre-tax profit of £1.1 million (2020: £0.8 million loss).

 

Earnings per Share

 

The Group generated earnings per share of 30.3p (2020: 10.0p).

 

Liquidity

 

As at the balance sheet date, available liquidity was £32.4 million (2020: £25.6 million), comprising cash of £29.6 million (2020: £23.2 million) and £2.8 million (2020: £2.4 million) of gilts and bonds. In addition, the Group had a £20 million working capital facility which was unused at the period end and prior period ends.

Balance sheet

 

The Group’s balance sheet remains strong, with total equity at the period end of £75.8 million (£66.1 million).

 

In addition to the £29.6 million of cash and £2.8 million of gilts and bonds referred to above, at the period end the Group held £7.1 million (2020:£7.0 million)in various of its Puma Funds; £6.8 million (2020: £4.0 million) net in quoted equities and a further £2.1 million (2020: £1.9 million) in other unquoted holdings.  The licences held as part of the Group’s Spectrum Investments were carried at a cost of £2.1 million (2020: £2.3 million) on a gross basis, before allowing for minority interests. Other non-current assets included £3.8 million (2020: £4.0 million) of fixed assets, and £2.8 million (2020: £2.8 million) of investment properties.

 

The remainder of the balance sheet was £18.7 million net (2020: £18.5 million), which included £20.7 million (2020: £17.6 million) of net market and other debtors in the Group’s stockbroking subsidiary.

 

Net Asset Value per Share

 

Net asset value per share at the period end was 302.8p (2020: 266.0p).

 

 

 

Dividend

 

The Board proposes to pay an interim dividend of 7.5p per share (2020: 5.0p per share). The interim dividend is expected to be paid on Wednesday 13 October 2021 to shareholders on the register as at Friday 24 September 2021. Shares will be marked ex-dividend on Thursday 23 September 2021.

 

 

Independent review report to Shore Capital Group Limited (the “Group”)

 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 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 half-yearly financial report is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the half-yearly financial report in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

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 2021is not prepared, in all material respects, in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior 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.

 

 

 

BDO LLP

Chartered Accountants

London, UK

Date: 14 September 2021

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 

Unaudited Condensed Consolidated Income Statement

For the six months ended 30 June 2021

 

	Notes	Six months ended 30 Jun 21	Six months ended 30 Jun 20	Year ended 31 Dec 20
		£’000	£’000	£’000
Revenue	3	38,035	27,514	62,556
Administrative expenditure		(28,132)	(23,673)	(49,810)
Operating profit before reorganisation costs		9,903	3,841	12,746
Reorganisation costs	4	-	(521)	(791)
Operating profit		9,903	3,320	11,955
Interest income		1	15	17
Finance costs		(243)	(255)	(522)
Profit before taxation	3	9,661	3,080	11,450
Taxation		(1,428)	(267)	(1,966)
Profit for the period/ year		8,233	2,813	9,484
Attributable to:
Equity holders of the parent		6,544	2,153	7,225
Non-controlling interests		1,689	660	2,259
		8,233	2,813	9,484
Earnings per share
Basic	5	30.3p	10.0p	33.5p
Diluted	5	30.1p	9.9p	33.3p

 

Unaudited Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2021

 

	Six months ended 30 Jun 21	Six months ended 30 Jun 20	Year ended 31 Dec 20
	£’000	£’000	£’000
Profit after tax for the period/ year	8,233	2,813	9,484
Items that may be reclassified to the income statement
Gains on cash flow hedges	-	74	74
Tax thereon	-	(14)	(14)
	-	60	60
Exchange difference on translation of foreign operations	(162)	82	197
Other comprehensive (loss)/ income for the period/ year, net of tax	(162)	142	257
Total comprehensive income for the period/ year, net of tax	8,071	2,955	9,741
Attributable to:
Equity holders of the parent	6,425	2,258	7,459
Non-controlling interests	1,646	697	2,282
	8,071	2,955	9,741

 

 

Unaudited Condensed Consolidated Statement of Financial Position

As at 30 June 2021

 

	Notes	As at 30 Jun 21	As at 30 Jun 20	As at 31 Dec 20
		£’000	£’000	£’000
Non-current assets
Intangible assets		2,146	2,288	2,237
Property, plant & equipment		3,790	4,014	4,050
Right of use assets		7,728	8,865	8,296
Investment properties		2,799	2,799	2,799
Principal Finance investments		11,017	10,562	10,297
Deferred tax asset		1,886	1,453	1,869
		29,366	29,981	29,548
Current assets
Trading assets		9,716	7,362	7,866
Trade and other receivables		120,552	120,286	99,772
Derivative financial instruments		-	-	152
Cash and cash equivalents		29,602	23,238	29,276
		159,870	150,886	137,066
Total assets	3	189,236	180,867	166,614
Current liabilities
Trading liabilities		(1,948)	(2,395)	(1,069)
Trade and other payables		(101,801)	(101,830)	(84,314)
Derivative financial instruments		(21)	(224)	-
Tax liabilities		(1,089)	(104)	(690)
Lease liabilities		(1,314)	(1,274)	(1,444)
		(106,173)	(105,827)	(87,517)
Non-current liabilities
Lease liabilities		(7,255)	(8,928)	(7,772)
Provision for liabilities and charges		(46)	(29)	(33)
		(7,301)	(8,957)	(7,805)
Total liabilities	3	(113,474)	(114,784)	(95,322)
Net assets		75,762	66,083	71,292
Capital and Reserves
Share capital		-	-	-
Share premium		1,866	1,866	1,866
Merger reserve		14,903	14,903	14,903
Other reserves		1,572	1,520	1,572
Retained earnings		46,986	39,086	43,198
Equity attributable to equity holders of the parent		65,327	57,375	61,539
Non-controlling interests		10,435	8,708	9,753
Total equity		75,762	66,083	71,292

 

Unaudited Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2021

 

	Share capital	Share Premium	Merger reserve	Other reserves	Retained earnings	Non- controlling interests	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 1 January 2020	-	1,866	14,903	1,460	37,277	9,861	65,367
Profit for the period	-	-	-	-	2,153	660	2,813
Foreign currency translation	-	-	-	-	45	37	82
Valuation change on cash flow hedge	-	-	-	74	-	-	74
Tax on cash flow hedge	-	-	-	(14)	-	-	(14)
Total comprehensive income	-	-	-	60	2,198	697	2,955
Dividends paid to/rebalancing of non-controlling interests	-	-	-	-	(389)	(556)	(945)
Capital distribution from subsidiary to non-controlling interests	-	-	-	-	-	(1,300)	(1,300)
Investment by non-controlling interest in subsidiaries	-	-	-	-	-	6	6
At 30 June 2020	-	1,866	14,903	1,520	39,086	8,708	66,083

 

 

	Share capital	Share Premium	Merger reserve	Other reserves	Retained earnings	Non- controlling interests	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 30 June 2020	-	1,866	14,903	1,520	39,086	8,708	66,083
Profit for the period	-	-	-	-	5,072	1,599	6,671
Foreign currency translation	-	-	-	-	129	(14)	115
Total comprehensive income/ (loss)	-	-	-	-	5,201	1,585	6,786
Equity dividends paid	-	-	-	-	(1,079)	-	(1,079)
Dividends paid to/rebalancing of non-controlling interests	-	-	-	-	(10)	(533)	(543)
Capital distribution from subsidiary to non-controlling interests	-	-	-	-	-	(1)	(1)
Credit in relation to share based payments	-	-	-	52	-	-	52
Investment by non-controlling interest in subsidiaries	-	-	-	-	-	(6)	(6)
At 31 December 2020	-	1,866	14,903	1,572	43,198	9,753	71,292

 

 

	Share capital	Share Premium	Merger reserve	Other reserves	Retained earnings	Non- controlling interests	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 1 January 2021	-	1,866	14,903	1,572	43,198	9,753	71,292
Profit for the period	-	-	-	-	6,544	1,689	8,233
Foreign currency translation	-	-	-	-	(119)	(43)	(162)
Total comprehensive income	-	-	-	-	6,425	1,646	8,071
Equity dividends paid	-	-	-	-	(2,157)	-	(2,157)
Dividends paid to/rebalancing of non-controlling interests	-	-	-	-	(480)	(868)	(1,348)
Capital distribution from subsidiary to non-controlling interests	-	-	-	-	-	(96)	(96)
At 30 June 2021	-	1,866	14,903	1,572	46,986	10,435	75,762

 

Unaudited Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2021

 

 

		Six months ended 30 Jun 21	Six months ended 30 Jun 20	Year ended 31 Dec 20
		£’000	£’000	£’000
Cash flows from operating activities
Profit for the period/ year		8,233	2,813	9,484
Adjustments for:
Depreciation and impairment charges		995	1,125	1,989
Share-based payment debit		-	-	52
Fair value gains on Principal Finance investments		(729)	(277)	(375)
Interest income		(1)	(15)	(17)
Finance costs		243	255	522
Increase in provision for national insurance on      options		13	-	4
Tax expense		1,428	267	1,966
Operating cash flows before movement in working capital		10,182	4,168	13,625
Increase in trade and other receivables		(20,628)	(71,932)	(51,570)
Increase in trade and other payables		17,577	63,146	45,337
Increase/ (decrease) in trading liabilities		879	(167)	(1,493)
(Increase)/ decrease in trading assets		(1,850)	603	99
Cash generated/ (utilised) by operations		6,160	(4,182)	5,998
Interest paid		(21)	(14)	(36)
Corporation tax paid		(1,115)	(113)	(1,573)
Net cash generated/ (utilised) by operating activities		5,024	(4,309)	4,389
Cash flows from investing activities
Purchases of property, plant & equipment		(178)	(146)	(662)
Sale of property, plant & equipment		-	4,551	4,741
Purchase of Principal Finance investments		-	(3,000)	(3,000)
Distribution of Principal Finance investments		9	1,552	1,915
Interest received		1	15	17
Net cash (utilised)/ generated by investing activities		(168)	2,972	3,011
Cash flows from financing activities
Capital distribution to non-controlling interests		(96)	(1,300)	(1,301)
Investment in non-controlling interest in subsidiaries		-	6	-
Principal paid on lease liabilities		(647)	(327)	(1,313)
Interest paid on lease liabilities		(222)	(241)	(486)
Dividends paid to equity shareholders		(2,157)	-	(1,079)
Dividends paid to non-controlling interests		(1,348)	(945)	(1,488)
Net cash utilised by financing activities		(4,470)	(2,807)	(5,667)
Net increase/ (decrease) in cash and cash equivalents during the period/ year		386	(4,144)	1,733
Effects of exchange rate changes		(60)	(111)	50
Cash and cash equivalents at beginning of period/ year		29,276	27,493	27,493
Cash and cash equivalents at end of period/ year		29,602	23,238	29,276

 

 

Notes to the Condensed Interim Financial Report

For the six months ended 30 June 2021 (unaudited)

 

1. Financial information

 

Basis of preparation

 

The annual financial statements of Shore Capital Group Limited, the ‘company’ and its subsidiaries (the “Group”) for the year ended 31 December 2020, and the condensed set of financial statements included in this interim financial report for the period ended 30 June 2021, are prepared in accordance with international accounting standards (in conformity with the requirements of the Companies (Guernsey) Law, 2008) other than for the full disclosure requirements of those standards

 

The Annual Report and Accounts of the Group for the year ended 31 December 2020 were issued on 19 March 2021. 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. The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenue and expenses for the period. However, the nature of estimation means that actual outcomes could differ from those estimates. In preparing the condensed financial statements, the judgement and estimates made by the Directors are consistent with those reported in the December 2020 annual 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 directors consider that the Group has the financial resources to continue in operation throughout such a period. 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 2020.  There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to 31 December 2021. The Group does not believe these standards and interpretations will have a material impact on the financial statements once adopted.

 

    

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 19 March 2021.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

 

Additional analysis of revenue and results is presented in the Chairman’s Statement.

 

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 small and mid cap stocks, fixed income broking and corporate broking and advisory for large, 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 the Group’s own balance sheet resources.

 

Management monitors the operating results of its business segments 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 arms-length basis in a manner similar to transactions with third parties.

 

Six months ended 30 Jun 21	Capital Markets	Asset Management	Central costs	Principal Finance	Total
	£'000	£'000	£'000	£'000	£'000
Revenue	26,404	10,573	-	1,058	38,035
Profit/(loss) before tax	7,742	1,521	(700)	1,098	9,661
Assets	145,169	12,884	1,241	29,942	189,236
Liabilities	(105,433)	(5,918)	(936)	(1,187)	(113,474)

 

 

Six months ended 30 Jun 20	Capital Markets	Asset Management	Central costs	Principal Finance	Total
	£'000	£'000	£'000	£'000	£'000
Revenue	19,804	7,893	-	(183)	27,514
Profit/(loss) before tax excluding reorganisation costs	4,455	700	(733)	(821)	3,601
Reorganisation costs	(521)	-	-	-	(521)
Profit/(loss) before tax	3,934	700	(733)	(821)	3,080
Assets	142,312	12,817	1,406	24,332	180,867
Liabilities	(108,485)	(4,959)	(497)	(843)	(114,784)

 

 

Year ended 31 December 2020	Capital Markets	Asset Management	Central costs	Principal Finance	Total
	£'000	£'000			£'000
Revenue	44,136	18,196	-	224	62,556
Profit/(loss) before tax excluding reorganisation costs	11,534	2,557	(1,136)	(714)	12,241
Reorganisation costs	(791)	-	-	-	(791)
Profit/(loss) before tax	10,743	2,557	(1,136)	(714)	11,450
Assets	122,860	12,857	1,370	29,527	166,614
Liabilities	(86,634)	(6,198)	(1,092)	(1,398)	(95,322)

 

 

 

 

4. Reorganisation costs

 

During the period, the Group has incurred costs outside of its normal operating expenses.

 

	Six months ended 30 Jun 21	Six months ended 30 Jun 20	Year ended 31 Dec 20
	£'000	£'000	£'000
Post-acquisition restructuring costs	-	521	791
	-	521	791

 

Post-acquisition restructuring costs relate to redundancy and early contract termination and retention costs following the Stockdale acquisition.

 

 

5. Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following:

 

	Six months ended 30 Jun 21	Six months ended 30 Jun 20	Year ended 31 Dec 20
Earnings (£)	6,544,000	2,153,000	7,225,000
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	151,059	138,133	143,026
	21,724,381	21,711,455	21,716,348
Earnings per share
Basic	30.3p	10.0p	33.5p
Diluted	30.1p	9.9p	33.3p

 

 

Earnings (£)	6,544,000	2,153,000	7,225,000
Reorganisation costs attributable to equity shareholders (£)	-	337,000	521,000
Adjusted earnings (£)	6,544,000	2,490,000	7,746,000
Adjusted earnings per share
Basic	30.3p	11.5p	35.9p
Diluted	30.1p	11.5p	35.7p

 

 

6. Dividends paid

 

	Six months ended 30 Jun 21	Six months ended 30 Jun 20	Year ended 31 Dec 20
	£’000	£’000	£’000
Amounts recognised as distributions to equity holders in the period/ year:
Interim dividend for the year ended 31 December 2020 of 5.0p per share	-	-	1,079
Final dividend for the year ended 31 December 2020 of 10.0p per share	2,157	-	-
	2,157	-	1,079

 

 

The directors propose an interim dividend for the year ending 31 December 2021 of 7.5p per share.

   

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.

                                          

 

                                                                             # # #

 

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