Shore Capital Group Limited: Interim results for the six months ended 30 June 2013 Shore Capital Group Limited ("Shore Capital", the "Group", or the "Company") Interim results for the six months ended 30 June 2013 Shore Capital, the independent investment group specialising in equity capital markets, principal finance and alternative asset management, today announces its interim results for the six months ended 30 June 2013. Financial highlights *Revenue unchanged at £17.8 million (2012: £17.8 million); revenue excluding Spectrum is up 4.1% *Profit before tax up 123.2% to £3.3 million (2012: £1.5 million) *Earnings per share up 72.9% to 0.83p (2012: 0.48p) *Interim dividend per share of 0.40p (2012: nil) *Balance sheet remains strong with liquidity of £33.9 million, plus a further £20 million working capital facility that was unused at the period end Operational highlights *Equity Capital Markets operations continued to perform well, increasing pre-tax profits by 8.1% to £3.07million (2012: £2.84 million) *Named by Thomson Reuters StarMine as Europe's third most productive broker for 2013 *Corporate finance now has 65 retained clients. Secondary commission revenues increased by 11% compared to the same period in 2012 *Puma Investments brand established, targeting private investors, receiving FCA authorisation in May 2013 *Puma VCT 9 raised £28.1 million, the largest of its kind in the 2012/13 tax year. Puma VCT 10 is in its initial launch phase *Spectrum Investments purchased balance of outstanding loan stock in DBD from Intel Capital; Shore Capital increased its ownership of Spectrum to 59.3% Commenting on the results, Howard Shore, Executive Chairman, said: "The continued strength of our business demonstrates that confidence is beginning to return to the economy as more clients look to raise development capital and seek to engage with innovative, service-orientated advisers. "Based on the solid trading across the Group and the many exciting opportunities ahead, the Board looks to the future with confidence." - Ends - Enquiries: Shore Capital +44 (0) 20 7468 7911 Howard Shore, Executive Chairman +44 (0) 1481 728 902 Lynn Bruce, Director Grant Thornton UK LLP (Nominated Adviser) +44 (0) 20 7383 5100 Philip Secrett Melanie Frean RBC Capital Markets (Broker) +44 (0) 20 7653 4000 Josh Critchley Oliver Hearsey Bell Pottinger (Public Relations) +44 (0) 20 7861 3232 Olly Scott Charles Goodwin About Shore Capital Shore Capital is an AIM quoted independent investment group. Founded and owned by entrepreneurs, for nearly 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. It is a business founded on four simple values - integrity, drive, competence and trust. 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 that the Group has continued to make progress. Our businesses have performed well by offering a compelling mix of strong advisory capabilities, excellent execution and a range of products and services which deliver exciting opportunities for investors. The confidence and optimism with which our people have tackled the market's challenges is demonstrated in our results and I thank them for their continued dedication. Revenues for the period (excluding Spectrum and DBD) improved by 4.1 per cent to £17.2 million (2012: £16.6 million) delivering increased profit before tax of £2.9 million (2012: £2.2 million), up 31.8 per cent. Earnings per share (excluding Spectrum and DBD) increased 17.5 per cent to 0.74p (2012: 0.63p). In addition, Spectrum contributed earnings per share of 0.09p (2012: loss of 0.15p) as a result of the release of historic provisions for potential liabilities within DBD which are no longer required. In Equity Capital Markets we achieved strong results, with profit before tax increasing 8.1 per cent to £3.1 million (2012: £2.8 million). In Corporate Finance we now have a total of 65 retained clients; and conducted 10 fundraisings for clients. Secondary commissions have advanced by 11 per cent, demonstrating the strength of our broking team's expertise and position as a trusted counterparty. Shore Capital is the third largest market maker on the London Stock Exchange and we are ideally positioned to benefit from an increase in market activity, particularly from the expected pick up in small cap interest which appears to have already started improving. The Group's Research and Sales team remains one of the most respected in the City and its regional reach into the UK, Ireland and Nordics is valued by some of the UK's leading listed businesses, who turn to Shore Capital for high quality research and investor interaction. During the period we consolidated our private investor offering under the Puma Investments brand, receiving FCA authorisation in May 2013. Puma Investments holds some of our most exciting investment opportunities, including the market-leading Puma VCT funds and Puma Heritage. The business has a strong pipeline of new opportunities in development and has an exciting future ahead of it. In Principal Finance, our German telecoms asset, Spectrum Investments ("Spectrum"), continues to offer an attractive solution to the growing bandwidth challenges faced by telecommunications operators in that market. As such, we remain confident that this asset can lead to a profitable realisation in due course. During the period, we participated in a fundraising by Spectrum as a result of which we increased our net economic interest in Spectrum/DBD from just under 30 per cent to 59.26 per cent. Financial Review Income and expenditure Following the increase of our economic interest in Spectrum to 59.26 per cent, the financial information below presents the results for the Group as a whole, with additional analysis of the Group excluding Spectrum/DBD. Revenue for the half-year was unchanged at £17.8m (2012: £17.8m). Administrative expenses were down 10.0 per cent at £14.5m (2012: £16.1m) providing an operating profit of £3.3m (2012: £1.7m). Interest income was £0.15m (2012: £0.15m), whilst finance costs were £0.17m (2012: £0.36m), leading to a net finance cost of £0.02m (2012: £0.21m). Profit before tax of the Group increased 123 per cent to £3.3m (2012: £1.5m). This includes a profit before tax from Spectrum/DBD of £0.4m (2012: loss of £0.7m). The profit for the half year includes a credit of £1.11m (£0.66m net of minority interests) in respect of historic provisions for potential liabilities of DBD that are no longer required. The Group excluding Spectrum/DBD Revenue for the half-year increased by 4.1 per cent to £17.2m (2012: £16.6m). Administrative expenses were up 1.2 per cent at £14.3m (2012: £14.1m) providing an operating profit of £2.9m (2012: £2.4m). Profit before tax increased by 31.8 per cent to £2.9m (2012: £2.2m). The net margin before tax was 16.9 per cent (2012: 13.4 per cent). Revenue from Equity Capital Markets ("ECM") was £12.6m (2012: £11.6m). Profit before tax from ECM was £3.1m (2012: £2.8m), with a net margin of 24.4 per cent (2012: 24.6 per cent). Revenue from Asset Management was £3.9m (2012: £4.0m) with a net margin of 20.3 per cent (2012: 12.7 per cent). Balance sheet holdings contributed a net gain of £0.3m (2012: £0.6m). Basic Earnings per Share The Group generated earnings per share of 0.74p (2012: 0.63p) excluding Spectrum/DBD. Including the effects of Spectrum/DBD, the Group generated earnings per share of 0.83p (2012:0.48p). Comprehensive Earnings per Share On a Comprehensive basis, the Group generated earnings of 0.93p per share (2012: 0.48p). Liquidity As at the balance sheet date, available liquidity was £33.9m (2012: £28.8m), comprising £32.5m (2012: £25.6m) of cash and £1.4m (2012: £3.2m) of gilts and bonds. In addition, we have a £20m working capital facility which was unutilised at the period end. This liquidity demonstrates the Group's continuing ability to undertake a range of transactions as opportunities arise in the near term. Balance Sheet Our balance sheet remains strong. Total equity at the period end was £68.0m (2012: £65.2m). In addition to the £32.5m of cash and £1.4m of gilts and bonds (as referred to above), we held £5.8m in the various Puma Funds, £2.0m net in quoted equities, £0.4m net in the Lily Partnership and a further £1.4m in other unquoted holdings. In addition, the licence held in Spectrum Investments was valued at £4.2m (on a gross basis, before allowing for minority interests). The remainder of the balance sheet was £20.3m net, which included £19.8m of net market debtors in our stockbroking subsidiary. Net Asset Value per Share Net asset value per share at the period end was 24.9p (2012: 24.4p). Dividend Last year, no interim dividend was paid in order that the entire year's dividend (0.5p per share) was received in the 2013/14 tax year with a consequential lower marginal rate of income tax for the higher rate taxpayer. We are reinstating an interim dividend which for this period will be 0.4p per share (2012: nil). In addition to this, the Board intends, barring unforeseen circumstances, to pay a final dividend of not less that 0.4p per share which would make a total for the year of 0.8p per share (2012 full year: 0.5p). The interim dividend of 0.4p per share is expected to be paid on Wednesday, 9 October 2013 to shareholders on the register as at Friday, 27 September 2013. Operating Review The following operating review reports on our three main areas of focus, namely Equity Capital Markets, Alternative Asset Management and Principal Finance. Equity Capital Markets ("ECM") Overview In ECM we provide research in selected UK sectors covering 200 companies; broking for institutional and professional clients; market-making in circa 1,200 UK equities - with a strong presence on the AIM market - and corporate finance advisory services for mid and small cap companies. Following its robust results in the second half of 2012, the division delivered another strong performance in the first half of 2013, achieving a profit before tax of £3.1 million (2012: £2.8 million). Having a strong balance sheet and being viewed as a solid and consistent counterparty by both our clients and market participants is a significant advantage in the current trading environment. Each of the division's operating businesses continued to produce solid revenues and benefit from a diverse range of income streams. It is pleasing to note that at a time when commissions are declining and the market is consolidating, our secondary commission revenue increased by 11 per cent during the first half of 2013. The Group's Corporate Finance franchise continues to grow and is now retained adviser to 65 companies. Encouragingly the business enjoys a strong pipeline for the remainder of 2013. Where we identify opportunities for incremental growth in the business, we continue to add senior, experienced individuals and teams. Research and Sales The market for secondary commissions has remained challenging. Nonetheless, the high regard in which the team and its brand is held is demonstrated by our overall growth in market share. Internal reports from our clients suggest our product is highly regarded by them. This was demonstrated in two recent surveys: firstly the Thomson Reuters StarMine survey in which Shore Capital was named as Europe's third most productive broker for 2013; and secondly the 2013 Thomson Extel survey, in which Shore Capital featured in the top 10 for UK Small & Mid-Cap brokers with nine sectors voted in a top 10 position and five recorded in the top five by fund managers, namely; construction, consumer goods, healthcare, insurance and UK strategy. We sustained our work to keep investors closely informed of corporate developments with our on-going management presentation series including Astra Zeneca, Diageo, ENRC, Legal & General, Marks & Spencer, Sainsbury's, Spirit and Shire, as well as arranging investor conferences on Shale Energy and Agri-Food. Market making We deal directly with the major retail brokers as a Retail Service Provider through a broad range of electronic links, and with a diverse composition of institutions including fund managers, hedge funds and private banks.London Stock Exchange statistics continue to show us to be the third largest market maker by number of stocks covered. In contrast to some of our competitors, our market-making team has experienced a marked increase in both trading volumes and revenues generated during the first half of 2013, compared to previous periods. Facilitating client business remains the team's central focus and we are ideally positioned to benefit from increased market volumes as a result of an economic recovery, together with recent changes allowing AIM stocks to be included in ISA portfolios and the forthcoming removal of stamp duty on AIM shares in April 2014. Corporate Finance The increased level of corporate finance and corporate broking activity during 2012 has continued into 2013. Whilst there has been a reduction in corporate activity within the natural resources sector, we have seen a significant increase in the activity of our corporate clients in other sectors including real estate, financial services and support services. The corporate team has to date raised a total of approximately £90 million for clients in 10 separate fundraisings, including a placing to raise £20 million for Telford Homes plc; a £25 million placing for Randall & Quilter Investment Holdings Limited; and advising on the US$26 million reverse takeover acquisition for Zoltav Resources Inc., which simultaneously raised US$20 million. The corporate team also advised RGI International Limited on its US$340 million takeover, which was announced in January 2013 and, after the end of the period, advised Serviced Office Group plc in relation to its placing to raise £12 million of new equity to fund the acquisition of Avanta Managed Offices Limited for £15 million and Wynnstay Group plc on its £9 million placing. The team continues to achieve success in growing its retained client list. In total we are now retained adviser to 65 companies. Alternative Asset Management Overview The asset management division continues to explore innovative new products to build on its established institutional and retail fund platforms. Total funds under management as at 30 June 2013 were £0.91 billion, compared to £0.87 billion at 31 December 2012. Institutional Asset Management St Peter Port Capital ("SPPC") St Peter Port Capital is a pre-IPO fund which also provides bridging finance ahead of trade sales and is an opportunistic investor in development capital situations. At its year end of 31 March 2013 it had investments in 39 companies and a NAV per share of 111.8p, an increase of 5.5 per cent on the year and 8.2 per cent since 30 September 2012. During the period, SPPC made a further realisation of its holding in Iona Energy, a Canadian listed oil and gas company operating in the North Sea, generating CAD$1.89 million. SPPC made a number of new investments, including a £500,000 investment in Nektan Limited, a software developer in the growing mobile and online gaming industry. In addition, it made several follow-on investments during the period, including a US$938,000 investment in Brazil Potash, which owns a potash mine in Brazil and which is investigating a flotation on Brazil's BOVESPA, a C$250,000 investment in Homeland Uranium, an exploration company with uranium prospects in Niger, and a £110,000 investment Astrakhan Oil, a Russian based oil development company. The SPPC portfolio of companies continues to develop well. Over the last year, several of the oil/gas and mineral holdings have demonstrated through discoveries significant further increases in the value of the deposits they are developing. These offer the possibility of further large gains on exit. Puma Brandenburg Limited ("PBL") PBL's strong operating performance has continued in the period and revenue growth is expected to continue following rent increases applied in the Berlin residential portfolio as a result of increases in the Mietspiegel, the local index which controls the amount by which rents can be raised in certain apartments. PBL actively manages its assets which are situated in prime locations. It has recently completed the refurbishment works for the existing hotel tenant Accor in Nuremberg where a 20 year lease had been signed and the Hyatt Hotel in Cologne is performing strongly following its extensive refurbishment. Elsewhere in the portfolio, structural vacancy rates have been maintained at low levels and its successful modernisation programme continues to drive rental growth and the quality of its residential properties in Berlin. It remains focused on value enhancing asset management initiatives and particularly on extending debt that matures next year to provide long term finance for the strong portfolio of assets. Puma Hotels plc ("PHP") PHP's final results for the year ended 31 December 2012covered a period which saw significant changes to its operations.As previously reported, the leases with Barceló Hotels and Resorts were terminated on 25 April 2012 and since that time the hotels have been operated by PHP.Since taking over the hotel operations, the existing hotels team has been augmented through a number of senior appointments and, despite trading conditions remaining challenging for provincial UK hotels, the PHP team, with Shore Capital's assistance, has been effective in mitigating the challenges that arise in taking over a business of this scale. PHP generated a profit in 2012 of £10.5 million for the year.This return to profitability was driven by the net lease termination fee of £20.3 millionreceived from Barceló. The receipt of this termination fee allowed PHP to reduce its senior debt facility by approximately £20 million. As at 28 June 2013, PHP successfully completed the extension of its £323 million senior debt facility with Irish Bank Resolution Corporation in Special Liquidation ("IBRC").New terms have been agreed with IBRC until 30 May 2014 with revised covenants to reflect the current operating environment. Puma Sphera Following the decision by its largest shareholder to redeem its holdings in Puma Sphera as it had decided that it preferred to access Puma Sphera's investment strategy through a private managed account as opposed to through a fund structure, the Board of Puma Sphera determined to liquidate the fund as the remaining assets under management resulted in the fund being sub-scale and uneconomic. Following the redemptions of shares, several shareholders elected to transfer their interests to the mirror fund of Puma Sphera, namely Sphera Fund LP. Retail Asset Management Puma Investments brand launched The Group launched a sub-brand for investment opportunities targeting the private investor market, called Puma Investments. A new subsidiary, called Puma Investment Management Limited, which trades as Puma Investments, has been established and was authorised by the Financial Conduct Authority in May 2013. Puma Investments has also been appointed as the trading adviser to Puma Heritage plc and is in the process of launching several new investment opportunities, including Puma VCT 10, which will follow the same successful investment strategy of its preceding nine funds, together with Puma EIS. Puma Venture Capital Trusts ("VCTs") The on-going effects of the credit crisis mean that SMEs are still finding it difficult to access the funding they need from traditional lenders. Our VCTs seek to meet that demand and focus on providing secured loans to well-run companies.In particular, we are seeing many established businesses which have substantial assets or predictable revenue streams, over which a first charge can be taken, thereby reducing the risks usually associated with venture capital investing. Our VCTs are each limited-life vehicles, aiming to distribute the initial capital and returns to their investors after five years. Our market-leading VCT track record is reflected in the fact that the early Puma VCTs were the first limited-life VCTs to have reached the milestone of returning 100p per share in cash distributions to shareholders and Puma VCTs 1 to 4 have each produced the highest total return of their respective peer groups. Since 2005 over £130 million has been raised for Puma VCTs, and more than £60 million has been distributed as dividends to shareholders. Puma VCT 9 closed during the period raising over £28.1 million, making it the largest single company VCT fundraise in the 2012/13 tax year and accounting for over 10 per cent of the total funds raised in the VCT market in that year (excluding enhanced share buy-backs). We consider this fund-raising to be a considerable achievement and an endorsement of our standing in the VCT sector. We are pleased to be launching our tenth VCT for the current tax year and hope to capitalise on our excellent track record. Puma Heritage plc Puma Heritage was launched in June 2013 seeking minimum investments of £100,000 to operate in a range of sectors, with a primary focus on secured lending. Puma Heritage will focus on capital preservation, whilst seeking to produce regular returns for shareholders intended to counter long-term inflationary pressures. It is anticipated that Puma Heritage will expand into other activities as opportunities arise. In particular, the Board of Puma Heritage envisage that it will offer asset leasing services, as well as, in the medium to long term, purchasing and operating profitable trading businesses with asset-backing and established management teams. An investment in Puma Heritage is intended to benefit from 100 per cent relief from Inheritance Tax after two years. Puma Investments has been appointed as the trading adviser to Puma Heritage to advise the company in executing its business strategy. Puma EIS Puma Investments will launch in the second half of the year a portfolio service offering investors the opportunity to invest in asset-backed EIS qualifying companies utilising the team's strong track record and experience in asset-backed investing gained over the life of the first nine Puma VCTs. We are excited about the prospects for our Puma EIS based on the demand for EIS investments which can provide downside protection through asset-backing. Principal Finance Investment in German Telecoms Business DBD holds radio spectrum licences in Germany in the 3.5 GHz range which is increasingly being deployed around the world for providing 4G mobile services. The German mobile market is the largest in Europe, with circa 115 million subscribers recorded in 2012 generating the largest sector revenues in Europe. As in other European mobile markets, the deployment of 4G in Germany continues to drive revenue growth as subscribers demand greater levels of data capacity. DBD's spectrum is ideally placed to provide mobile operators in Germany with additional data capacity for smart phones and tablet devices. Spectrum acquired its original interest in DBD in March 2011. The other two 3.5 GHz licences in Germany were recently acquired by E-Plus, the fourth largest mobile operator in Germany. In early 2013, Spectrum raised €3.3 million of new capital from its investors, including Shore Capital, to fund its acquisition of further loan stock and equity in DBD. As a result Spectrum now holds, directly and indirectly, substantially all of the economic interest in DBD. Shore Capital invested €2.13 million in the Spectrum fundraising and now holds 59.26 per cent of Spectrum. As part of the refocusing of DBD's business that was anticipated at the time of the original acquisition, DBD's consumer business has been reducing and will cease at the end of September 2013. Following the cessation, ongoing basic operating costs are anticipated to be reduced to approximately £0.5 million per year. The consolidated profit before tax in the period arising from this investment was £0.4 million (2012: loss of £0.7 million). The profit for the half year includes a credit in respect of the release of historic provisions for potential liabilities within DBD which are no longer required. This has contributed £0.66 million to the Group net of minority interests. We remain confident that this asset can lead to a profitable realisation in due course. Current Trading and Prospects The continued strength of our business demonstrates that confidence is beginning to return to the economy as more clients look to raise development capital and seek to engage with innovative, service-orientated advisers. Based on the solid trading across the Group and the many exciting opportunities ahead, the Board looks to the future with confidence. We anticipate that the ECM business will benefit from the improving economic climate coupled with the renewed interest in AIM, fuelled in part by the recent change in law allowing investors to hold AIM stocks in their ISAs. Our highly regarded research and sales team are well placed to continue to capitalise on their recent success in external surveys, including the Thomson Reuters StarMine survey in which Shore Capital was named as Europe's third most productive broker for 2013. We are also excited about the new investment opportunities being developed by the asset management division, including the launch of Puma VCT 10 and Puma EIS which build upon our excellent track record in asset-backed investing. Howard P Shore Executive Chairman 16 September 2013 Independent review report to Shore Capital Group Limited (the "Group") We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 9. We have read the other information contained in the 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. This report is made solely to the Group in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Group those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. 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 as required by the AIM rules issued by the London Stock Exchange and the Bermuda Stock Exchange. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. 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. 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 Auditing Practices Board 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 Ireland) 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 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union, and the AIM rules of the London Stock Exchange. Deloitte LLP Chartered Accountants Guernsey, Channel Islands 16 September 2013 Consolidated Income Statement For the six months ended 30 June 2013 (unaudited) Six months Six months Year ended ended ended 31 December 30 June 2013 30 June 2012 2012 Notes £'000 £'000 £'000 Revenue 3 17,797 17,760 32,821 Administrative expenditure (14,468) (16,068) (29,973) Operating profit 3,329 1,692 2,848 Interest income 145 146 314 Finance costs (169) (357) (635) Profit before taxation 3 3,305 1,481 2,527 Taxation (552) (378) (494) Profit for the period 2,753 1,103 2,033 Attributable to: Equity holders of the parent 2,002 1,158 1,987 Non controlling interests 751 (55) 46 2,753 1,103 2,033 Earnings per share Basic 4 0.83p 0.48p 0.82p Diluted 4 0.82p 0.47p 0.82p Consolidated Statement of Comprehensive Income For the six months ended 30 June 2013 (unaudited) Six months Six months Year ended ended ended 31 December 30 June 2013 30 June 2012 2012 £'000 £'000 £'000 Profit for the period 2,753 1,103 2,033 Items that will not be reclassified subsequently to profit or loss: Gains/(losses) on cash flow hedges 263 (11) 68 Taxation (61) 3 (17) 202 (8) 51 Exchange difference on translation 52 (54) (62) of foreign operations Other comprehensive income for 254 (62) (11) the period, net of tax, from continuing operations Total comprehensive income for the 3,007 1,041 2,022 period, net of tax Attributable to: Equity holders of the parent 2,238 1,152 1,971 Non controlling interests 769 (111) 51 3,007 1,041 2,022 Comprehensive earnings per share Basic 0.93p 0.48p 0.82p Diluted 0.92p 0.47p 0.81p Consolidated Statement of Financial Position As at 30 June 2013 (unaudited) Notes As at As at As at 30 June 2013 30 June 2012 31 December 2012 £'000 £'000 £'000 Non-current assets Goodwill 381 381 381 Intangible assets 4,202 4,106 4,055 Property, plant & equipment 12,038 11,908 11,669 Available-for-sale investments 4,221 4,402 4,105 20,842 20,797 20,210 Current assets Bull positions and other holdings 4,145 9,582 4,058 designated at fair value Available-for-sale investments 16 32 16 Trade and other receivables 96,157 100,947 65,819 Tax assets - 350 99 Cash and cash equivalents 32,457 25,545 30,443 132,775 136,456 100,435 Total assets 3 153,617 157,253 120,645 Current liabilities Bear positions (660) (1,043) (1,395) Trade and other payables (73,579) (78,366) (41,146) Derivatives (351) (596) (573) Tax liabilities (415) - - Borrowings (350) (339) (327) (75,355) (80,344) (43,441) Non-current liabilities Borrowings (9,885) (11,351) (10,549) Deferred tax liability (340) (339) (224) Provision for liabilities and (54) (39) (44) charges (10,279) (11,729) (10,817) Total liabilities 3 (85,634) (92,073) (54,258) Net Current Assets 57,420 56,112 56,994 Net Assets 67,983 65,180 66,387 Equity Capital and Reserves Called up share capital - - - Share premium account 336 336 336 Merger reserve 27,198 27,198 27,198 Other reserves 1,470 1,181 1,282 Retained earnings 31,253 30,183 30,954 Equity attributable to equity 60,257 58,898 59,770 holders of the parent Non controlling interests 7,726 6,282 6,617 Total equity 67,983 65,180 66,387 Consolidated Statement of Changes in Equity For the six months ended 30 June 2013 (unaudited) Share Share Merger Other Retained Non Total capital Premium reserve reserves earnings Controlling account interests £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2012 336 27,198 1,187 29,867 6,841 65,429 Retainedprofitforthe - - - - 1,158 (55) 1,103 period Foreign currency - - - - - (54) (54) translation Valuationchangeoncash - - - (6) - (2) (8) flow hedge Equity dividends paid - - - - (604) - (604) Dividends paid to non - - - - (238) (534) (772) controlling interests Investment by non - - - - - 86 86 controlling interest in subsidiaries including Spectrum At 30 June 2012 - 336 27,198 1,181 30,183 6,282 65,180 Share Share Merger Other Retained Non Total capital Premium reserve reserves earnings Controlling account interests £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 30 June 2012 - 336 27,198 1,181 30,183 6,282 65,180 Retained loss for - - - - 829 101 930 the period Credit - - - 54 - - 54 inrelationtoshare based payments Foreign currency - - - - (58) 50 (8) translation Valuation change on - - - 47 - 12 59 cash flow hedge Dividends paid to - - - - - 6 6 non controlling interests Investment by non - - - - - 166 166 controlling interest in subsidiaries including Spectrum At 31 December 2012 - 336 27,198 1,282 30,954 6,617 66,387 Consolidated Statement of Changes in Equity (continued) For the six months ended 30 June 2013 (unaudited) Share Share Merger Other Retained Non Total capital Premium reserve reserves earnings Controlling account interests £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2013 - 336 27,198 1,282 30,954 6,617 66,387 Retained profit for the - - - - 2,002 751 2,753 year Foreign currency - - - - 74 (22) 52 translation Creditinrelationtoshare - - - 26 - - 26 based payments Valuation change on cash - - - 162 - 40 202 flow hedge Equity dividends paid - - - - (1,208) - (1,208) Dividends paid to non - - - - (239) (590) (829) controlling interests Investment by non - - - - - 138 138 controlling interest in subsidiaries other than Spectrum/DBD Adjustments arising from - - - - (330) 792 462 change in non controlling interest in Spectrum/DBD (see note 7) At 30 June 2013 - 336 27,198 1,470 31,253 7,726 67,983 Consolidated Cash Flow Statement For the six months ended 30 June 2013 (unaudited) Six months Six months Year ended ended ended 31 December 30 June 2013 30 June 2012 2012 £'000 £'000 £'000 Cash flows from operating activities Operating profit 3,329 1,692 2,848 Adjustments for: Depreciation charges 469 598 871 Amortisation charges 73 - 243 Share-based payment expense 26 36 54 (Profit)/loss on available-for-sale (173) 502 871 investments Increase in provision for NIC on 10 3 8 options Operating cash flows before movement in 3,734 2,831 4,895 working capital Increase in trade and other (30,338) (58,266) (23,138) receivables Increase in trade and other payables 32,474 53,288 16,160 (Decrease)/increase in bear (735) 257 609 positions (Increase)/decrease in bull positions (87) (2,534) 2,990 Cash generated/(utilised) by operations 5,048 (4,424) 1,516 Interest paid (169) (357) (635) Corporation tax paid 22 (36) (35) Net cash generated/(utilised) by 4,901 (4,817) 846 operating activities Cash flows from investing activities Purchases of fixed assets (109) (28) (614) Acquisition of further holding in DBD (1,731) - - (see note 7) Proceeds on disposal /(purchase) of 57 (6) (190) AFS investments Purchase of additional intangible - (180) (82) assets Sale of AFS investments - 25 51 Interest received 145 146 314 Net cash utilised by investing (1638) (43) (521) activities Cash flows from financing activities Shares/participations issued in 1,142 86 252 subsidiaries to non controlling interests (see note 7) Decrease in borrowings (175) (15,650) (16,079) Dividends paid to non controlling (829) (772) (766) interests Dividends paid to Equity Holders (1,208) (604) (604) Net cash utilised by financing (1,070) (16,940) (17,197) activities Net increase/(decrease) in cash and 2,193 (21,800) (16,872) cash equivalents during the period Effects of exchange rate changes (179) 40 10 Cash and cash equivalents at beginning 30,443 47,305 47,305 of period Cash and cash equivalents at end of 32,457 25,545 30,443 period Notes to the Interim Financial Report For the six months ended 30 June 2013 (unaudited) 1. Financial information Basis of preparation The annual financial statements of Shore Capital Group Limited (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 2013 has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union. 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 on pages 3 to 9, 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 despite the current uncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Group has 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 the condensed set of financial statements as are applied in the Group's latest audited Annual Report and Accounts for the year ended 31December 2012. 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 2013. The Group's activities comprise equity market activities 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 reportable operating segments as follows: *Equity Capital Markets provides research in selected sectors, broking for institutional and professional clients, market-making in AIM and small cap stocks and corporate finance for mid and small cap companies. *Asset Management and Principal Finance provides advisory and discretionary fund management services, manages specialist funds invested in alternative asset classes, and conducts principal finance activities using our own balance sheet. *Balance sheet holdings comprises investments made using our own balance sheet. Spectrum represents our investment in a German Telecoms business. 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. 6 months ended Equity Asset Balance Central Spectrum Consolidated 30 June 2013 Capital Management Sheet and costs Markets Principal Finance £'000 £'000 £'000 £'000 £'000 £'000 Revenue 12,605 3,882 744 - 566 17,797 Results Depreciation 128 56 262 23 - 469 Segment profit/ 3,074 789 (275) (676) 393 3,305 (loss) before tax Assets 99,211 4,760 42,012 1,335 6,299 153,617 Liabilities (73,390) (1,271) (9,362) (391) (1,220) (85,634) 6 months ended Equity Asset Balance Central Spectrum Consolidated 30 June 2012 Capital Management Sheet and costs Markets Principal Finance £'000 £'000 £'000 £'000 £'000 £'000 Revenue 11,550 3,972 1,028 - 1,210 17,760 Results Depreciation 63 79 257 26 173 598 Segment profit/ 2,839 504 (123) (1,010) (729) 1,481 (loss) before tax Assets 101,554 5,882 41,388 2,097 6,332 157,253 Liabilities (77,641) (144) (9,782) (884) (3,622) (92,073) Year ended Equity Asset Balance Central Spectrum Consolidated 31 December 2012 Capital Management Sheet and costs Markets Principal Finance £'000 £'000 £'000 £'000 £'000 £'000 Revenue 22,653 6,331 1,646 10 2,181 32,821 Results Depreciation 157 153 511 50 - 871 Segment profit/ 5,056 955 (303) (2,018) (1,163) 2,527 (loss) before tax Assets 63,792 3,830 46,314 1,179 5,530 120,645 Liabilities 37,965 1,184 10,875 966 3,268 54,258 4. 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 December 30 June 2013 30 June 2012 2012 Earnings (£) 2,002,000 1,158,000 1,987,000 Number of shares Basic Weighted average number of shares 241,639,601 241,639,601 241,639,601 Diluted Dilutive effect of share option scheme 2,137,378 2,273,236 1,721,409 243,776,979 243,912,837 243,361,010 Earnings per share Basic 0.83p 0.48p 0.82p Diluted 0.82p 0.47p 0.82p 5. Rates of dividends paid and proposed Six months Six months Year ended ended ended 31 December 2012 30 June 2013 30 June 2012 £'000 £'000 £'000 Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 1,208 604 604 31December 2012 of 0.50p (2011: 0.25p) per share No interim dividend for the year - - - ended 31 December 2012 1,208 604 604 Proposed interim dividend for the 967 year ended 31December 2013 of 0.40p per share 6. Called up share capital Shore Capital Group Limited - ordinary shares of Number of shares £'000 nil par value At 1 January 2012 241,639,601 - - - At 30 June 2012 241,639,601 - - - At 31 December 2012 241,639,601 - - - At 30 June 2013 241,639,601 - 7. Events during the period Further investment in Spectrum/DBD: During the period, Spectrum raised €3.30 million of new capital from its investors, with €2.13 million being invested by Shore Capital and €1.17 million (£1.004 million) being invested by other existing shareholders. Of the money raised, €2.0 million (£1.731 million) was utilised to acquire further equity and the remaining shareholder loans in DBD. The following table is an analysis of adjustments arising from this further investment as shown in the Consolidated Statement of Changes in Equity: Retained Non controlling Total earnings interest £'000 £'000 £'000 Investment by non controlling interests in - 1,004 1,004 Spectrum Acquisition by Spectrum of equity (1,028) (703) (1,731) and shareholder loans in DBD Net cash movement (1,028) 301 (727) Shareholder loans acquired in DBD 698 491 1,189 Net gain/(loss) in Statement of (330) 792 462 Changes in Equity 8. Events after the period i. Dividend: The Group has declared an interim dividend of 0.40p per share (see note 5). ii. Acquisition of shares: The Group notified the market that following acquisitions of shares on 29 July and 13 August 2013, it has a beneficial interst of 21.99% in The Hotel Corporation plc. 9. 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 portfolio assets and liabilities, financial assets and liabilities designated at fair value and financial investments available-for-sale 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 June 2013 Level 1 Level 2 Level 3 Quoted Market Non- Total market observable market price inputs observable inputs £'000 £'000 £'000 £'000 Available-for-sale financial investments 2,815 16 1,406 4,237 Bull positions and other holdings at fair 4,145 - - 4,145 value Total financial assets 6,960 16 1,406 8,382 Bear positions 660 - - 660 Derivatives - 351 - 351 Total financial liabilities 660 351 - 1,011 30 June 2012 Level 1 Level 2 Level 3 Quoted Market Non- Total market observable market price inputs observable inputs £'000 £'000 £'000 £'000 Available-for-sale financial investments 3,111 32 1,291 4,434 Bull positions and other holdings at 9,582 - - 9,582 fair value Total financial assets 12,693 32 1,291 14,016 Bear positions 1,043 - - 1,043 Derivatives - 596 - 596 Total financial liabilities 1,043 596 - 1,639 31 December 2012 Level 1 Level 2 Level 3 Quoted Market Non- Total market observable market price inputs observable inputs £'000 £'000 £'000 £'000 Available-for-sale financial investments 2,793 16 1,312 4,121 Bull positions and other holdings at fair 4,058 - - 4,058 value Total financial assets 6,851 16 1,312 8,179 Bear positions 1,395 - - 1,395 Derivatives - 573 - 573 Total financial liabilities 1,395 573 - 1,968 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). There may be uncertainty about a valuation, resulting from the choice of valuation technique or model used, the assumptions embedded in those models, the extent to which inputs are not market observable, or as a result of other elements affecting such uncertainties and are deducted from the fair value produced by valuation techniques. 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 Losses Purchases Sales and At 30 January recorded and transfers June 2013 2013 in profit transfers or loss £'000 £'000 £'000 £'000 £'000 Total financial assets 1,312 89 47 (42) 1,406 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 announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Shore Capital Group Limited via Thomson Reuters ONE HUG#1729246
Shore Capital Group Limited: Interim results for the six months ended 30 June 2013
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