The business model of the Group is relatively simple with three revenue drivers – fees, dealing commission and interest income – and an emphasis on efficient back-office processing to minimise costs.
Revenues have historically been relatively evenly split between the three sources and the balance between fees and dealing commissions in particular means the Group is less susceptible than many of its competitors to significant fluctuations in market sentiment or equity values. The level of fee and interest income also creates an attractive recurring revenue aspect to the Group’s performance.
Costs are predominantly driven by staff and marketing activity. The Group has taken the strategic decision not to outsource any business critical functions and so maintains control of all IT and systems resource and development. This enables it to respond rapidly to any new or changing circumstances and aids the efficiency of transaction processing. The Group is generally risk averse, and because The Share Centre has the responsibility of holding and handling customer funds it has a strict policy of “cash before a purchase and stock before a sale” resulting in few circumstances where the company is owed money by customers or counterparties. Suppliers are paid in a timely fashion by the end of the month following the month of receipt of an invoice.
The above results in little working capital being tied up on the balance sheet and enables profit generated by the company to be readily turned into cash. The company has been largely self funded and profitable since 1996 – including through the downturn at the start of the new millennium. As such, the company currently has no debt on its balance sheet. The Group continues to hold LSE shares as well as an investment in Euroclear plc.
The company has consistently paid dividends to its shareholders.
