Counter-cyclical investment strengthens the group

Shore Capital Group 11 April 2019 Update
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Shore Capital Group

Counter-cyclical investment strengthens the group

FY18 results

Financial services

11 April 2019

Price

224p

Market cap

£48m

Net cash (£m) end December 2018

26.7

Shares in issue

21.6m

Free float

40.8%

Code

SGR

Primary exchange

AIM

Secondary exchange

BSX

Share price performance

%

1m

3m

12m

Abs

1.8

9.3

(17.0)

Rel (local)

(2.1)

2.5

(18.2)

52-week high/low

285p

200p

Business description

Shore Capital Group is an independent investment group with three main areas of business: Capital Markets, Asset Management and Principal Finance (on-balance sheet investments). It has offices in Guernsey, London, Liverpool, Edinburgh and Berlin, and has over 160 staff serving 75 retained corporate broking and advisory clients.

Next events

Interim results

September 2019

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Shore Capital Group is a research client of Edison Investment Research Limited

Shore Capital’s (SGR’s) 2018 results were close to expectation and had a number of features that are encouraging for the future. Although Capital Markets revenue was lower reflecting the weak market in the final quarter, corporate retainers and transaction fees were up, while the market-making activity remained profitable through Q4. Asset Management made strong progress with revenue growth of over 20%. Selective counter-cyclical investment meant lower pre-tax profit but, like the purchase of Stockdale at a difficult time in the market, should help generate stronger growth and returns on equity on a medium-term view.

Year end

Revenue (£m)

PBT
(£m)

EPS**
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15*

42.0

11.7

26.1

0.0***

8.6

0.0

12/16

39.4

2.4

5.8

5.0

38.8

2.2

12/17

41.9

4.6

12.8

10.0

17.5

4.5

12/18

43.3

4.1

12.5

10.0

17.9

4.5

Note: *2015 figures include radio spectrum sale. **Fully diluted. ***There was a £10m share buyback in 2015.

FY18 results

SGR reported FY18 numbers broadly in line with our estimates. Revenue of £43.3m was 3.4% ahead of the prior year, costs were up 8.4% as selective counter-cyclical investment was made to strengthen the business and pre-tax profits were down 11.1% at £4.1m. After a lower tax charge, diluted EPS was down just 3% to 12.5p and the dividend of 10p was unchanged. Capital Markets revenue was 6.5% lower, reflecting the weak Q4 in equity markets but within this revenue from corporate retainers and transactions was higher, an encouraging indicator of the strength of the franchise. Asset Management revenue was up 23% reflecting higher AUM (+6.4% to £920m), particularly within the private client, tax efficient investments area.

Background and outlook

The company’s outlook comments are positive while acknowledging the uncertain current market backdrop. Developments across the existing activities are encouraging and the Stockdale acquisition, which completed at the end of March, should bring c 50 additional retained corporate and funds clients, taking the total to over 120. The initial cash consideration is £4.9m with a maximum deferred payment of £4.0m. Even on the maximum payment the price to book and earnings multiples (FY18 numbers) would be 1.6x and 7.5x. Successful integration should benefit both returns and the valuation.

Valuation: Still cautious

SGR shares trade below book value and, based on the share price at time of writing, a ROE/COE model indicates the market is assuming an ROE of 7.2%. This is above the 2018 level of 4.7% but developments in the existing business and integration of Stockdale could put this well within reach.

FY18 results

As at the half-year stage, SGR’s FY18 results demonstrated the benefit of the diversity of the group’s activities with overall group revenues ahead of the prior year despite the difficult background for the Capital Markets activities. Before looking more closely at the result compared with 2017, we show the average revenue analysis over the five years to 2018 (Exhibit 1) and the segmental evolution of revenues over the same period (Exhibit 2). The first chart makes clear that the Capital Markets business remains the dominant part of the group but Asset Management made a significant and growing contribution, as shown in the second chart; in 2018 Asset Management accounted for 36% of revenue. The other point to note is that while Principal Finance accounts for a relatively small part of revenues (and has recorded a pre-tax loss for the last three years), it has periodically made significant contributions to profits as is evident in 2015 when the £9m revenue contribution related to the profit on sale of German radio spectrum licences owned by an investee company.

Exhibit 1: Revenue analysis – average 2014–18

Exhibit 2: Five-year revenue evolution

Source: Shore Capital Group, Edison Investment Research

Source: Shore Capital Group, Edison Investment Research

Exhibit 1: Revenue analysis – average 2014–18

Source: Shore Capital Group, Edison Investment Research

Exhibit 2: Five-year revenue evolution

Source: Shore Capital Group, Edison Investment Research

Our next table sets out the half- and full-year revenue progression for revenue, pre-tax profit and earnings per share for 2017 and 2018.

Exhibit 3: Revenue and profit analysis

£000 unless stated

H117

H217

H118

H218

% change H218/H217

FY17

FY18

% change

Revenue

Capital Markets

14,756

12,474

13,507

11,945

-4.2

27,230

25,452

-6.5

Asset Management

4,904

8,002

7,290

8,553

6.9

12,906

15,843

22.8

Principal Finance

669

1,091

844

1,195

9.5

1,760

2,039

15.9

Group

20,329

21,567

21,641

21,693

0.6

41,896

43,334

3.4

Profit before tax

Capital Markets

3,387

1,806

2,742

1,316

-27.1

5,193

4,058

-21.9

Asset Management

408

2,593

1,292

1,874

-27.7

3,001

3,166

5.5

Principal Finance

(424)

(1,542)

(698)

(821)

-46.8

(1,966)

(1,519)

-22.7

Central/other

(876)

(775)

(772)

(865)

11.6

(1,651)

(1,637)

-0.8

Group

2,495

2,082

2,564

1,504

-27.8

4,577

4,068

-11.1

Pre-tax profit margin (%)

Capital Markets

23.0

14.5

20.3

11.0

19.1

15.9

Asset Management

8.3

32.4

17.7

21.9

23.3

20.0

Earnings per share

EPS basic (p)

6.7

6.3

7.4

5.2

-17.6

13.1

12.6

-3.8

EPS diluted (p)

6.6

6.2

7.3

5.2

-16.4

12.8

12.5

-2.7

Source: Shore Capital, Edison Investment

Key features of the results included the following points with comparisons between FY18 and FY17 unless stated.

Group revenue was up 3.4% with Capital Markets down 6.5%, a moderate reduction given the market background, particularly in the final quarter. Asset Management revenues were very strong with revenues up 22.8% with AUM up 6.4% to £920m.

Administrative expenses increased by 8.4% as the group made targeted investment across its main operating divisions.

As a result, pre-tax profits were down 11.1%. Divisionally, profits were lower in Capital Markets and Principal Finance but Asset Management recorded profit 5.5% higher, despite investment in staff to support further growth in the business.

The tax charge was lower at 12% versus 20% so the reduction in earnings per share was limited to 3.8% (basic) or 2.7% (diluted).

The full year dividend is maintained at 10p (final 5p, unchanged).

The balance sheet remained strong with year-end net cash of £26.7m and £2.8m of gilts and bonds. Additional liquidity is available in the form of a £20m working capital facility.

Capital Markets

Here the most important development has been the acquisition of Stockdale Securities, which was announced in February 2019 and completed at the end of March; we discuss this further in the outlook section. Within Capital Markets the company reported that income from corporate mandates and transactions increased in 2018, demonstrating the development of the franchise that has taken place reflecting investment in the business over a number of years.

During the year Shore Capital advised on five admissions (two IPOs and three reverse takeovers), undertook 18 secondary fundraisings and advised on three public takeovers. Exhibit 4 shows a selection of the transactions together with Shore Capital’s role and the funds raised or value as appropriate. These illustrate diversity within its client base, a feature that should be enhanced following the acquisition of Stockdale Securities.

Exhibit 4: Significant transactions 2018

Company

Description

Role

Funds raised

Applegreen

Acquisition of interest in Welcome Break

Nomad, global co-ordinator and joint bookrunner

€175m

Nucleus Financial Group

IPO

Nomad, sole bookrunner and broker

£32.1m

Playtech

Placing of shares in GVC

Joint bookrunner

£198m

Dairy Crest

Placing of shares

Joint bookrunner

£70m

Inspired Energy

Acquisition of Improva Finance

Nomad, joint bookrunner

£19m

Motorpoint Group

Placing of shares

Joint bookrunner

£22.5m

Savannah Petroleum

Placing and readmission to AIM

Lead manager

$125m

Value

Produce Investments

Takeover by Promethean Inv.

Adviser

£55.3m

Zenith Hygiene

Takeover by Bain & Co

Adviser

£100m

Styles & Wood

Takeover by Central Square Hdgs.

Adviser

£42.5m

Source: Shore Capital

The retained client base has increased with nine new clients added including Marks & Spencer and Sirius Minerals (respectively FTSE 100 and FTSE 250 constituents). The retained corporate client count stands at 75.

On the research and sales side of the division, the group acknowledged the disruptive effect on the industry of MiFID II implementation, but highlighted extensive engagement with investors and has been focusing on extending its coverage, particularly in industrials and providing cross-sector commentary on the impact of digital technology.

The equity market downturn in the final quarter had an adverse impact on the market-making activity, as would be expected, but it remained profitable in this period and for the year as a whole is reported to have achieved a solid, profitable result, albeit on lower revenues.

Asset Management

As highlighted above, the divisional AUM increased by 6.4% to £920m; since 2014 AUM has grown at a compound rate of 7.8%. Divisional activities fall into two areas: Puma Investments, the UK fund management activity and Institutional Asset Management, which primarily comprises the management of Brandenburg Realty and Puma Brandenburg real estate investment companies, both with asset portfolios in Germany.

Puma Investments’ mainly tax-efficient products are managed by teams with expertise in private equity, property finance and listed equities. In the private equity area, Venture Capital Trust (VCT) funds raised have totalled more than £240m with over £140m returned to investors in the form of dividends. The most recent offering was closed early due to strong demand. Enterprise Investment Scheme (EIS) funds under management have reached over £75m in March this year versus c £65m at the same time last year.

The Puma Property Finance activity provides first charge loans of £3m to £30m through three main offerings: pre-development bridging, development finance and development exit loans. By sector, loans are made across residential, commercial and more specialist areas. Individual investors can access the team’s expertise through Puma Heritage, an investment in which is intended to qualify for business property relief from inheritance tax. The NAV of Puma Heritage has grown from over £50m last year to over £75m in March through trading profits and additional subscriptions.

In November 2018 Puma Investments reached a funding agreement with RoundShield Partners for £200m for deployment by Puma Property Finance, effectively endorsing the management credentials of this team and providing an opportunity to meet the demand from borrowers that the business is experiencing. RoundShield has the right to acquire an equity stake of up to 25% in the property finance business as the funding line is deployed, providing it with an interest in the broader development of the activity. Puma Property Finance will earn management and transaction fees on loans executed over a four-year period. As the agreement came towards the end of the year, the impact will only be felt from 2019 onwards.

The listed equities area, which is responsible for the AIM IHT Service, continued to attract assets that stood at £24m at the year end. The team has been enlarged, enabling the business to plan for availability of the service on a wider range of platforms in 2019, broadening the scope for asset gathering.

The group has substantial experience in providing finance for social care property and as a result has built a network of contacts in this area and the ability to offer a service sourcing, structuring and negotiating transactions. This generates fee income without any associated AUM, helping to boost the overall divisional revenue yield on average AUM (for 2018 this was 1.75% compared with 1.56% for 2017). In addition to this advisory role Shore Capital invested £0.8m during 2018 to take a 75% stake in a business (EA Capital) that invests in social care property.

Institutional Asset Management has continued its active management of assets for Puma Brandenburg and Brandenburg Realty. As an illustration, for Brandenburg Realty this included taking possession of new assets, submitting applications for condominium titles for them and planning renovations; a debt financing was also arranged. The team also oversaw the participation of both investment companies in Mixer Global, a Tel Aviv-based provider of co-working spaces that is expanding globally.


Principal Finance

Here the main development took place post year end with an announcement relating to its radio spectrum investment in Germany. A 59.94% interest is held in 32 regional licences via DBD. It has now been concluded that the licences will be reallocated to an adjacent frequency at no cost and will continue be for a perpetual duration. The licences will be more flexible, enabling use of the spectrum for services such as 4G and 5G. There is no indication on the timing of further developments but management is confident on the future of DBD and the potential to generate value from the investment. The investment is held at a gross value of £2.3m, before minority interests.

Background and outlook

Starting with the equity market background the next two charts illustrate the weakness seen in Q418 with raised volatility.

Exhibit 5: FTSE AIM, All-Share and Small Cap indices

Exhibit 6: FTSE 100 volatility index

Source: Refinitiv

Source: Refinitiv

Exhibit 5: FTSE AIM, All-Share and Small Cap indices

Source: Refinitiv

Exhibit 6: FTSE 100 volatility index

Source: Refinitiv

Subsequently volatility has subsided and indices have regained some of the ground lost in 2018 (Exhibit 7). The AIM index experienced greater weakness and is further from its five-year high point than FTSE All-Share and FTSE Small Cap indices.

Exhibit 7: Equity indices recent performance

FTSE AIM All-Share

FTSE All-Share

FTSE Small Cap

2018

-18%

-13%

-12%

2019 YTD

8%

10%

7%

Current from 5-year high

-16%

-3%

-6%

Source: Refinitiv as at 9 April 2019

Our next two charts (Exhibits 8 and 9) show the monthly trend in new and follow-on issuance on the Main and AIM markets to February this year.

Exhibit 8: LSE Main Market new and further issuance

Exhibit 9: LSE AIM new and further issuance

Source: London Stock Exchange

Source: London Stock Exchange

Exhibit 8: LSE Main Market new and further issuance

Source: London Stock Exchange

Exhibit 9: LSE AIM new and further issuance

Source: London Stock Exchange

While the monthly pattern is bumpy, the second half of 2018 was relatively subdued and January was particularly quiet for both markets, even in the context of prior January levels. Although equity indices have seen a recovery since Q418, as shown above, sentiment remains uncertain with the difficulties surrounding Brexit an important contributor. Resolution of these issues at some point should provide corporates with greater confidence to take decisions currently on hold and could therefore prompt a surge in activity. Even ahead of this, we note that Numis, in its H119 update, indicated that its pipeline has strengthened in recent weeks and that it had seen a notable increase in M&A opportunities.

Leaving aside the uncertain equity market background, SGR notes the recent developments within each of its business areas and underlines its optimistic view for the business with its diversified range of activities.

Acquisition of Stockdale

As noted earlier, the integration of Stockdale Securities will be an important feature of the current year and it is set to strengthen the group’s franchise, potentially enlarging its corporate client base to c 128 and further broadening its client diversity. The earnings and book multiples to be paid appear undemanding. A summary of the terms and characteristics of the business, drawn from our February note on the transaction, is given below.

Stockdale Securities (previously Westhouse Securities) is an investment banking and institutional stockbroking firm with 41 employees, 53 small and medium-sized corporate clients and dealing relationships with 200 institutional clients. It restructured in 2015 to focus its efforts primarily on winning and carrying out transactions for good-quality corporate clients. SGR sees Stockdale as complementary to its existing corporate advisory, broking, research, sales and trading expertise. The initial acquisition cash consideration was £4.9m with a maximum deferred cash consideration of £4.0m subject to reaching various revenue targets at the end of an 18-month period following completion. The price to book and earnings multiples to be paid, based on reported FY18 numbers, would be 0.9x and 4.1x, respectively, using the initial consideration only, or 1.6x and 7.5x on the maximum potential payment.

The recent history of Stockdale revenue, profit, and per client and per head revenues are shown in Exhibits 10 and 11. Profitability has clearly improved since the restructuring in 2015, with revenues per client and per head also ahead, although the figures for 2018 were below the 2017 level.

Exhibit 10: Stockdale revenue and profit history

Exhibit 11: Revenue per corporate client and per head

Source: Stockdale, Edison Investment Research

Source: Stockdale, Edison Investment Research

Exhibit 10: Stockdale revenue and profit history

Source: Stockdale, Edison Investment Research

Exhibit 11: Revenue per corporate client and per head

Source: Stockdale, Edison Investment Research

Next, we include an updated version of a table that collates a number of metrics including revenue, the number of retained corporate clients and revenue per client and per staff member for Shore Capital, Stockdale and, for reference, Arden, Cenkos and Numis. This shows the different scale and financial profile of the businesses. Stockdale is closest in terms of size to Arden but the latter company recorded a loss in FY18 (albeit this was partly caused by restructuring and a second-half profit was achieved on an underlying basis). Stockdale’s return on equity was over 20% and the valuation measures, even on the maximum potential consideration, do not appear demanding (price to book 1.6x and price to earnings 7.5x). Revenue per corporate client of £214,000 was below the figure for Shore Capital (and below figures for Cenkos and Numis). Stockdale highlighted that while it completed 45 transactions during FY18, none of them generated a fee of over £1m, in contrast to FY17. This is likely to have reflected a combination of market conditions and a natural variation in the incidence of corporate transactions within the client base.

Exhibit 12: Comparative table for Shore Capital and Stockdale

Shore Capital

Stockdale

Arden

Cenkos

Numis

Year end

Dec

Sept

Oct

Dec

Sept

Revenue FY18 (£m)

43.3

11.3

7.4

45.0

136.0

Corporate clients (last reported)

75

53

51

116

210

Average staff (last reported)

163

41

48

110

253

Price to book (initial consideration for Stockdale x)

0.72

0.86

0.22

1.18

1.86

Price to book (full consideration for Stockdale, x)

1.56

ROE (%)

4.7

23.3

loss

8.4

22.7

Revenue per corp client (£)

339,360

213,962

144,431

387,526

647,619

Revenue per head (£)

257,031

276,585

153,458

408,664

537,549

Total staff cost per head (£)

131,315

145,902

119,167

263,073

297,731

Mkt cap or value/PBT (x)

10.6

5.9

loss

11.9

8.4

Mkt cap or initial consideration/earnings (x)

17.9

4.1

loss

16.2

10.8

Full consideration/earnings (x)

7.5

Source: Company releases, Edison Investment Research. Notes: Edison estimates marked ‘e’. Shore Capital revenue per corporate client based on Capital Markets revenue alone.

Financials

We intend to publish 2019 estimates in due course pending further detail once the integration of Stockdale has made further progress.

As noted earlier, the balance sheet remains strong with end December gross cash of £31m and net cash of £26.7m. In addition there was £2.8m invested in gilts and bonds and £6.8m held in funds advised by the group.

One point to note on costs for 2019 is that the group is to move to a new head office (expected to take place in June) and has entered into a lease for the property in St James’s that will provide space to accommodate staff from Stockdale and allow for future expansion. The group expects the move to give rise to one-off costs of £0.5m.

Valuation

An updated peer valuation is shown in Exhibit 13. Given the lack of 2019 estimates for most of this group we have omitted a prospective earnings multiple. The historical SGR P/E ratio is above peers but prospectively the diversifying character of asset management earnings and benefits from the Stockdale acquisition may be supportive for Shore Capital relative to others. The price to book ratio for Shore Capital at 0.8x is below the peer average (1.3x).

On this price to book, the market price at time of writing of 224p implies a cautious assumption for return on equity of 7.2% within a ROE/COE model (other assumptions include a cost of equity of 8%, growth of 3% and a book value of 269.4p). The implied return is above the 2018 level (4.7%) but, on a longer view, successful integration of Stockdale would accelerate the move towards a higher sustainable return supporting the valuation.

Exhibit 13: Quoted UK broker comparison

Price
(p)

Market
cap (£m)

Last reported P/E (X)

Yield
(%)

ROE last reported (%)

P/BV last reported (x)

Shore Capital

223

48

17.9

4.5

4.7

0.8

Arden Partners

26

8

Loss

0.0

N/A

0.8

Cenkos

68

39

5.2

5.9

25.3

1.4

Numis

248

264

10.7

4.8

19.3

1.8

WH Ireland

47

20

Loss

0.0

N/A

1.3

UK average

7.9

2.7

22.3

1.3

Source: Refinitiv, Edison Investment Research. Note: Prices as at 9 April 2019.

Exhibit 14: Financial summary

Year end 31 December

2012

2013

2014

2015

2016

2017

2018

PROFIT & LOSS

Year to 31-Dec

Capital Markets

22,653

25,796

30,129

23,350

28,286

27,230

25,452

Asset Management

6,331

7,334

8,478

9,500

10,446

12,906

15,843

Principal Finance

3,837

2,635

1,968

9,102

676

1,760

2,039

Total revenue

32,821

35,765

40,575

41,952

39,408

41,896

43,334

Costs

(28,805)

(29,262)

(31,117)

(29,086)

(33,130)

(35,006)

(37,798)

EBITDA

4,016

6,503

9,458

12,866

6,278

6,890

5,536

Depreciation and amortisation

(1,114)

(1,102)

(1,064)

(1,039)

(1,046)

(892)

(1,262)

Share-based payments

(54)

0

(17)

(4)

(11)

(8)

131

Balance sheet impairments

(2,664)

(1,883)

0

Share of associates' results

0

805

0

Operating profit

2,848

5,401

8,377

11,823

2,557

4,912

4,405

Net interest

(321)

8

(68)

(126)

(152)

(335)

(337)

Other

0

0

0

0

0

0

0

Profit before tax

2,527

5,409

8,309

11,697

2,405

4,577

4,068

Tax

(494)

(1,100)

(1,804)

(1,002)

(554)

(912)

(485)

Non-controlling interests

(46)

(911)

(1,297)

(4,250)

(549)

(839)

(856)

Profit after tax (FRS 3)

1,987

3,398

5,208

6,445

1,302

2,826

2,727

Average number of shares outstanding (m)

24.2

24.2

24.2

23.8

21.8

21.6

21.6

Average, fully diluted no. of shares (m)

24.3

24.5

25.1

24.7

22.6

22.0

21.8

EPS (p)

8.2

14.1

21.6

27.1

6.0

13.1

12.6

EPS (p) fully diluted

8.2

13.9

20.8

26.1

5.8

12.8

12.5

Dividend per share (p)

5.0

8.0

10.0

0.0

5.0

10.0

10.0

EBITDA margin (%)

12.2

18.2

23.3

30.7

15.9

16.4

12.8

Operating margin (%)

8.7

15.1

20.6

28.2

6.5

11.7

10.2

NAV per share (p)

247.4

253.5

265.6

268.7

269.5

270.0

269.4

ROE (%)

3.4

5.6

8.3

9.2

2.2

4.9

4.7

BALANCE SHEET

Non-current assets

20,210

19,901

19,100

19,555

23,045

16,933

18,405

Intangibles and goodwill

4,436

4,406

4,002

2,222

2,516

2,610

2,644

Property, plant and equipment

11,669

10,897

10,969

10,864

9,423

7,699

7,653

Investments and other

4,105

4,598

4,129

6,469

11,106

6,624

8,108

Current assets

100,435

111,185

95,406

103,250

88,124

96,626

82,910

Bull positions

4,058

4,557

4,636

9,344

12,290

8,154

9,837

Cash

30,443

41,395

30,658

22,113

23,937

35,673

31,015

Debtors and other

65,934

65,233

60,112

71,793

51,897

52,799

42,058

Current liabilities

(43,441)

(52,883)

(32,445)

(45,972)

(33,316)

(46,323)

(33,184)

Bear positions

(1,395)

(1,033)

(846)

(946)

(765)

(1,017)

(708)

Short-term borrowings

(327)

(321)

(341)

(360)

(431)

(9,726)

(4,299)

Other current liabilities

(41,719)

(51,529)

(31,258)

(44,666)

(32,120)

(35,580)

(28,177)

Long-term liabilities

(10,817)

(9,241)

(9,640)

(9,791)

(10,768)

(66)

(68)

Long-term borrowings

(10,549)

(8,892)

(9,105)

(9,256)

(10,649)

0

0

Other long-term liabilities

(268)

(349)

(535)

(535)

(119)

(66)

(68)

Net assets

66,387

68,962

72,421

67,042

67,085

67,170

68,063

CASH FLOW

Net cash from operations

846

15,123

(7,181)

774

8,312

12,635

6,508

Fixed asset investment

(614)

(340)

(412)

(363)

(517)

(601)

(882)

Acquisitions/disposals

0

(1,731)

0

0

0

0

(826)

Other investing activities

93

297

211

7,121

(4,313)

4,099

510

Share issuance

0

0

0

0

0

1,530

0

Share purchases

0

0

0

(10,047)

0

(2,248)

0

Ordinary dividends

(604)

(2,175)

(2,175)

(1,208)

0

(2,167)

(2,158)

Other financing

(514)

230

(1,070)

(4,914)

(1,719)

(1,228)

(612)

Other

654

1,342

(574)

(530)

(1,894)

961

(2,307)

Net cash flow

(139)

12,746

(11,201)

(9,167)

(131)

12,981

233

Opening net (debt)/cash

19,696

19,567

32,182

21,212

12,497

12,857

25,947

FX

10

(131)

231

452

491

109

536

Closing net (debt)/cash

19,567

32,182

21,212

12,497

12,857

25,947

26,716

Source: Shore Capital accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Shore Capital Group and prepared and issued by Edison, in consideration of a fee payable by Shore Capital Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Shore Capital Group and prepared and issued by Edison, in consideration of a fee payable by Shore Capital Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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