Investing through tough markets
Share's Plc (LONDON:SHRE) December trading update indicated it was continuing to invest through relatively weak trading conditions and the results confirmed this trend. The company continues to take market share, which bodes well for the future, but 2014 saw pressure on interest income and trading commission. The strong cash generation and continued profit generation have allowed further investments, especially in key management roles.
2014 results
Share plc has made further market share gains (7.66% 2014 vs 7.16% 2013), the continuation of a multi-year trend. We believe the fixed pricing adopted in 2013 has proved attractive, especially to investors with medium and large portfolios. This has helped fees rise 6.3% to £6.6m. However, interest income continues to decline (down 14.5%) as adoption of new regulatory-driven investment policies has restricted the taking of market opportunities. Additionally, investors have proved cautious in their trading (commissions down 0.8%). Overall revenue was therefore up just 0.2%. Despite this pressure, in 2014 Share has invested £0.2m in key management (including a new IT director, a new director of Customer Experience and an additional non-executive director) and increased marketing costs by £0.3m (15%). Total costs rose by £1m, 7.4%. Statutory profits thus fell to £0.8m from £1.7m. Company-basis adjusted EPS fell to 1p from 1.3p.
2015 outlook
The initial retail fund sales in 2015 have continued the disappointing trend of H214 reflecting investor uncertainty, not least due to geopolitical risk. Q215 is also likely to see election year uncertainty and the IPOs to date have not had the excitement of, say, Royal Mail (LONDON:RMG) in 2013. In addition, the full period drag of lower interest income will depress revenue. We expect these factors to offset normal market growth, but for Share to make further market share gains. The focus on fixed-price account fees does appear to be winning customers with medium and larger portfolios. The deal to effectively become the outsourcee of Barclays (LONDON:BARC)' certified share trading should add c 5% to revenue, and further such deals are possible.
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