INVESTOR RELATIONS

Latest Results

Unaudited Interim Results for the six months ended 30 June 2022

STM Group Plc (AIM: STM), the multi-jurisdictional financial services group, is pleased to announce its unaudited interim results for the six months ended 30 June 2022.

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Financial Highlights:

  2022
(reported)
2022
(underlying)**
2021
(reported)
2021
(underlying)**
Revenue £11.3m £11.3m £11.4m £10.6m
EBITDA* £1.4m £1.7m £1.5m £1.6m
Profit before taxation (“PBT”) £0.5m £0.8m £0.9m £0.7m
Profit before other items margin 12% 15% 13% 15%
Earnings per share 0.62p N/A 1.28p N/A
Cash at bank (net of borrowings) £17.0m £16.5m
Interim dividend 0.60p 0.60p

 

* EBITDA is defined as revenue from continuing operations less operating expenses i.e. profit from continuing operations before taxation, net finance income costs, depreciation, amortization, and non operating items such as bargain purchase gains and gains on the sale of investments

** Underlying statistics are net of certain transactions which do not form part of the regular operations of the business as further detailed in the table below

Operating Highlights:

  • Predictable recurring revenue remains a cornerstone of the business
  • UK Corporate Pensions business revenues continue to grow despite “small pot” legislation having come into effect
  • Strategic partnerships continue to be developed in the UK, for example Options SIPP is partnering with IG Group to provide its pensions SIPP wrapper
  • The Mercer SIPP and SSAS acquisition recently completed, post period end, adds further scale to the UK offering, in line with the strategy, doubling the UK SIPP & SSAS business
  • Further development of operating model to drive increased revenue growth
  • Significant new business now being generated in H2 2022 from our niche annuity products

Commenting on the results and prospects, Alan Kentish, Chief Executive Officer, said:

“As previously reported, the first six months of the year have been slower than anticipated for new business, although both the pensions and insurance businesses show an uplift in revenues relative to the prior year comparable period.

“The completion of the SIPP and SASS portfolio acquisition from Mercer Ltd as well as the continued development of several strategic partnerships in the UK further augment the Group’s UK focus and provide scale for further growth. Equally, the Corporate pensions business continues to grow despite changes in legislation coming into effect.

“Cost management and operating efficiencies remain key areas of focus for the Plc board.

“Further to the recently announced Board changes, I take this opportunity to express my thanks to Duncan Crocker and Malcolm Berryman who recently stepped down from their roles as Chair and independent Non-Executive Director respectively.  I equally take this opportunity to welcome Nigel Birrell as he assumes the role of Group Chair and as independent Non-Executive Director, I look forward to working closely with him in the coming months.

“There remain a number of exciting opportunities which, albeit slower to come to fruition than we would have liked, makes us optimistic for the future despite the unsettled macro-economic outlook. In particular, our niche annuity products are now starting to produce significant new business.”

Investor Presentation: 2.00pm today, 14 September 2022

The Directors will hold a presentation to introduce STM Group Plc to investors and cover the Interim Results and prospects at 2.00 p.m. today, Wednesday 14 September 2022.

The presentation will be hosted through the digital platform Investor Meet Company. Investors can sign up to Investor Meet Company and add to meet STM Group Plc via the following link https://www.investormeetcompany.com/stm-group-plc/register-investor.

For those investors who have already registered and added to meet the Company, they will automatically be invited. 

Questions can be submitted pre-event to [email protected] or in real time during the presentation via the "Ask a Question" function. 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (as it forms part of retained EU law as defined in the European Union (Withdrawal) Act 2018).

Chief Executive’s Review

Overview

The first half of 2022 was slower than anticipated for new business, although both our pensions’ businesses and life assurance businesses are showing an uplift in revenue compared to the previous half year position. Revenues from our businesses in Gibraltar and Malta remain consistent and in line with management expectations, but revenues in the UK SIPP business are behind plan as some strategic partners, whilst onboarded, have yet to fully roll out the product to their distribution network. UK Corporate pensions business revenues continue to grow despite the impact of the “small pots” legislation coming into force. 

Recurring revenue, a cornerstone of our business, continues to hold up well and gives the predictability to build a strategy around organic growth. Like-for-like revenue comparison shows a steady uplift compared to the previous 2021 half year.

Operational expenses for the first six months were £10.8m (2021: £10.6m), broadly in line with management expectations, with overruns in certain businesses being compensated by savings in others. In relation to non-operational expenses, as classified as “other items” on the income statement, the non-cash item of amortisation of the client portfolios and IT development programs are higher than originally anticipated, leading to a reduction in the reported PBT number.

Optimisation of the operating model continues so as to improve efficiency and increase margins.  This is primarily driven by the roll-out of our internal administration system and the automation of processes which will continue into the second half of the year, with margin improvements expected in second half year and into 2023.

Financial review

Financial performance in the period

The Group delivered revenue in the six months to 30 June 2022 of £11.3m (2021: £11.4m). The prior year included revenues from the Corporate Trust Services business of £0.8m which was disposed of in March 2021. Hence, on a like-for-like basis we have seen revenue growth of 7% across the pensions and life businesses.

Recurring revenues for the period have remained consistent whilst organic growth has been achieved in the UK Corporate pensions business and Gibraltar life business.

Profit before other items for the period is £1.4 million (2021: £1.5 million), with reported profit before tax of £0.5 million (2021: £0.9 million). During the period there have been a number of one-off and non-recurring costs such as costs associated with internal restructures. Thus, underlying profit before other items is £1.7 million (2021: £1.6 million) and underlying profit before tax of £0.8 million (2021: £0.7 million).

The reconciliation of reported measures to underlying measures is made up of items which are either non-recurring or exceptional and thus do not form part of the normal course of business. This reconciliation for all three key financial measures is shown in the table below:

RECONCILIATION OF REPORTED TO UNDERLYING MEASURES
 REVENUE EBITDA PROFIT BEFORE TAX
 2022 2021 2022 2021 2022 2021
 £m £m £m £m £m £m
       
Reported measure 11.3 11.4 1.4 1.5 0.5 0.9
       
Add: integration and acquisition costs for H1
Add: other non-recurring costs 0.3 0.2 0.3 0.2
Less: gain on sale of investments (0.1)
Less: bargain purchase gain and derivative asset (0.2)
Less: effect of disposal of Companies and Trust Services  (0.8)  (0.1)  (0.1)
Underlying measure 11.3 10.6 1.7 1.6 0.8 0.7

Cashflows

Cash and cash equivalents at 30 June 2022 were £18.1 million (2020: £18.3 million) with cash generated from operating activities being £1.2 million (2021: £1.2 million) thus exceeding our reported profit before tax.

Whilst cash balances have decreased compared to the same period for the prior year, they have remained fairly consistent since the half-year end.

During the period we also repaid £0.3 million of our bank loan with £1.1 million still outstanding. Net cash and cash equivalents as at 30 June 2022 was therefore £17.0 million (2021: £17.3 million).  Whilst the Group had £4.4 million available in the credit facility as at the balance sheet date, this has been fully drawn down to fund the portfolio acquisition from Mercer that completed on 31 August 2022.

As would be expected for a Group which is regulated in several jurisdictions, a significant proportion of our cash balance forms part of the regulatory and solvency requirements. It is not possible to determine exactly how much of the cash and cash equivalents are required for solvency purposes as other assets can also be used to support the regulatory solvency requirement. However, the total regulatory capital requirement across the Group as at 30 June 2022 was £16.9 million.  

The balance sheet also gives visibility of future revenue and cash generation and, in line with all administration services businesses, the Group had accrued income in the form of work performed for clients but not yet billed of £1.6 million as at the period end (2021: £1.5 million). This gives some visibility of revenue still to be billed and collected as cash at bank.

Additionally, deferred income relating to annual fees invoiced but not yet earned stood at £3.9 million (2021: £4.0 million). This figure also gives good visibility of revenue that is still to be earned through the Income Statement in the coming months. 

Trade receivables as at 30 June 2022 were £3.4 million (2021: £3.1 million).

Dividend

I am pleased to announce that the Board has declared an interim dividend of 0.60 pence per share which is in line with the prior year. The interim dividend is expected to be paid on 16 November 2022 to those shareholders on the register on 21 October 2022. The ordinary shares will become ex-dividend on 20 October 2022.

Subject to trading continuing to perform in line with our revised expectations, the Board expects to propose a final dividend for the full year.

Review of operations

Pensions

The pensions administration businesses continue to be the cornerstone of our operations.

Pensions revenue for the period was £9.1 million (2021: £8.7 million) representing 81% (2021: 76%) of total Group revenues. Total revenue is split between £4.9 million for QROPS (2021: £4.9 million), £1.9 million (2021: £1.7 million) for the SIPP and SSAS businesses and a further £1.8 million (2021: £1.5 million) for the workplace pensions business. In addition, this year the Group also has a revenue contribution of £0.6 million (2021: £0.6 million) from third party administration and Group Pension Plans.

The recurring revenue percentage for this operating segment remains at 92%, and when combined with the relatively low attrition rates, remains a solid predictor of future divisional profitability.

Opportunities and challenges around the pensions businesses are focused on improving margins in the UK, as well as capitalising on volumes of new business from our strategic partners. Internationally, the focus is on increasing revenue through our occupational pension schemes for international businesses.

Life Assurance

Revenue for the combined Life Assurance businesses amounted to £1.9 million compared to £1.6 million in 2021.   In a similar manner to the pensions operating segment, our life assurance business also has high levels of recurring fees.  

Our flexible annuity products aimed at the UK market remain the key focus for sustainable organic growth within our life businesses. Conversion times for new business remain slow and unpredictable, and continued effort to expand our intermediary base is an important part of improving our new business numbers.  In addition, the businesses are in the process of launching a suite of portfolio bonds for the UK market, which will produce a steady flow of new revenue, giving additional predictability to future organic growth. Distribution of these products will be via our strategic partners and thus additional costs for such products will be minimal.

Outlook

In the second half of 2022, we anticipate a healthy uplift in new business flow for our life assurance businesses in relation to certain of our annuity products, as well as increased new business flows for our SIPP business through our strategic partners; such an example being the recent announcement in relation to our partnering with IG Index.

However, a further benefit of our strategic partner program is that we anticipate that some of our other core products will also be made available soon via these platforms.

Having completed the acquisition of the SIPP and SSAS books from Mercer on 31 August, it is paramount that we integrate this business, and the staff, into our UK Options business in an orderly and efficient manner. The acquisition doubles our UK SIPP and SSAS business and will allow us to gain some benefits of scale. The team based in Cardiff is experienced and keen to bring its own new business relationships and opportunities into the STM family.  

As previously announced, we anticipate the acquisition will generate approximately £0.87m in additional EBIT to STM's current UK business, Options, on an annualised basis, after a twelve month phased integration process.  As a result of transaction costs of £0.3 million, and specific integration costs of £0.3 million, it is anticipated for the four months to 31 December 2022 that the acquisition will be a negative contribution of £0.3 million to the Group's result.

As we move forward towards the last quarter of 2022, we have made some significant changes within our board structure, as well as at subsidiary board level both at non-executive, as well as senior management level. All of the above is conducive to accelerating our revenue growth and improving our profit margins.

I look forward to updating the market with our progress in due course.

 

 

Alan Kentish

Chief Executive Officer

CONSOLIDATED INCOME STATEMENT  
For the period from 1 January 2022 to 30 June 2022

  Notes Unaudited
6 months to
30 June
2022
£’000
Unaudited
6 months to
30 June
2021
£’000
Audited
Year to
31 December
2021
£’000
 Revenue 4 11,323 11,386 22,355
 Administrative expenses  (10,744) (10,629) (20,982)
 Profit before other items  579 757 1,373
 OTHER ITEMS
Gain on disposal of subsidiaries
 -  
 
120
219
 Gains on revaluation of financial instruments  - 222 406
 Finance costs  (99) (152) (330)
 Movement on deferred consideration  - - 330
 Impairment of goodwill  - - (798)
 Profit before taxation  480 947 1,200
 Taxation  (111) (187) 542
  Profit after taxation  369 760 1,742
OTHER COMPREHENSIVE INCOME
Items that are or may be reclassified to profit and loss
Foreign currency translation differences for foreign operations
 13 (37) (33)
Total other comprehensive income/(loss)  13 (37) (33)
 Total comprehensive income for the period/year  382 723 1,709
 Profit attributable to:
Owners of the Company
 305 800 1,749
 Non-Controlling interests  64 (40) (7)
   369 760 1,742
 Total comprehensive income
attributable to:
Owners of the Company
 318 763 1,716
 Non-Controlling interests  64 (40) (7)
   382 723 1,709
 Earnings per share basic (pence) 5 0.62 1.28 2.94
 Earnings per share diluted (pence) 5 0.62 1.28 2.94

The results for the period from 1 January 2022 to 30 June 2022 relate to continuing activities. The results for the period from 1 January 2021 to 31 December 2021 include both continuing and discontinued activities (see Note 6).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022

 Notes Unaudited
30 June
2022
£’000
Unaudited
30 June
2021
£’000
Audited
31 December
2021
£’000
ASSETS     
Non-current assets     
Property, plant and equipment  1,317 1,692 1,663
Intangible assets  19,437 20,066 19,355
Financial assets  881 697 881
Deferred tax asset  76 85 76
Total non-current assets  21,711 22,540 21,975
     
Current assets     
Accrued income  1,550 1,447 1,311
Trade and other receivables 9 6,549 4,019 7,699
Receivables due from insurers  24,130 3,600 24,130
Cash and cash equivalents 8 18,118 18,574 18,207
Total current assets  50,347 27,640 51,347
Total assets  72,058 50,180 73,322
     
EQUITY     
Called up share capital 12 59 59 59
Share premium account  22,372 22,372 22,372
Retained earnings  14,734 13,836 14,429
Other Reserves  (467) (482) (480)
Equity attributable to owners of the Company  36,698 35,785 36,380
Non-controlling interests  (388) (485) (452)
Total equity  36,310 35,300 35,928
 
LIABILITIES
    
Current liabilities     
Liabilities for current tax  786 890 640
Trade and other payables 10 9,325 8,081 10,532
Provisions  24,130 3,600 24,130
Total current liabilities  34,241 12,571 35,302
Non-current liabilities     
Other payables 11 1,074 1,774 1,628
Deferred tax liabilities  433 535 464
Total non-current liabilities  1,507 2,309 2,092
Total liabilities and equity  72,058 50,180 73,322

 

CONSOLIDATED CASH FLOW STATEMENT
For the period from 1 January 2022 to 30 June 2022

 Notes Unaudited
30 June
2022
£’000
Unaudited
30 June
2021
£’000
Audited
31 December
2021
£’000
Operating Activities     
Profit for the period/year before tax  408 947 1,200
Adjustments for:     
Depreciation of property, plant and equipment  333 369 659
Amortisation of intangible assets  445 391 791
Impairment of goodwill  798
Taxation paid  35 (447) (14)
Unrealised gains on financial instruments at FVTPL  (222) (406)
(Increase)/decrease in trade and other receivables  1,150 (996) (2,226)
(Increase) in receivables due from insurers  (20,530)
Decrease/(increase) in accrued income  (239) 291 8
Increase/(decrease) in trade and other payables  (1,018) 817 (936)
Increase in provisions   20,530
Net cash from operating activities  1,186 1,150 (126)
 
Investing activities
    
Disposal of investments  2,330 4,821
Purchase of property, plant and equipment  (13) (193) (352)
Increase in intangible assets  (527) (546) (1,032)
Net cash used in investing activities  (540) 1,591 3,437
Cash flows from financing activities     
Proceeds from Bank loans  500 900
Bank loan repayment  (275) (138) (1,050)
Lease liabilities paid  (473) (437) (469)
Dividends paid 7 (505) (861)
Net cash from financing activities  (748) (580) (1,480)
Increase/(decrease) in cash and cash
equivalents
 (102) 2,161 1,831
Reconciliation of net cash flow to movement in net funds     
Analysis of cash and cash equivalents during the period/year     
Increase/(decrease) in cash and cash equivalents  (102) 2,161 1,831
Effect of movements in exchange rates on cash and cash equivalents  13 4 (33)
Balance at start of period/year  18,207 16,409 16,409
Balance at end of period/year  18,118 18,574 18,207

 

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
For the period from 1 January 2022 to 30 June 2022

  Share
Capital
£000’s
Share
Premium
£000’s
Retained
Earnings
£000’s
Treasury
Shares
£000’s
Foreign Currency Translation
Reserve
£000’s
Shares
Based
Payments
Reserve
£000’s
Total
£000’s
Non-Controlling Interests
£000’s
Total Equity
£000’s
Balance at
1 January 2021 59 22,372 13,541 (549) (60) 162 35,525 (445) 35,080
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for the year1,7491,749(7)1,742
Other comprehensive income
Foreign currency translation differences(33) (33) (33)
Transactions with owners, recorded directly in equity
Dividend paid(861) (861) (861)
Changes in ownership interest
31 December 2021 and
1 January 2022 59 22,372 14,429 (549) (93) 162 36,380 (452) 35,928
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for the year305 305 64 369
Other comprehensive income
Foreign currency translation differences13 13 13
Transactions with owners, recorded directly in equity
Dividend paid
Changes in ownership interest
At 30 June 2022 59 22,372 14,734 (549) (80) 162 35,398 (388) (36,310)

 

Page last up-dated: 14 September 2022

UNITED KINGDOM

Options UK 
(part of STM Group Plc)
1st Floor Lakeside House
Shirwell Crescent
Furzton Lake
Milton Keynes
Buckinghamshire
MK4 1GA

UNITED KINGDOM

London & Colonial Services Limited
(part of STM Group Plc)
1st floor
21 Perrymount Road
Haywards Heath
West Sussex
RH16 3TP
UK

GIBRALTAR

PO Box 575
Montagu Pavilion
8-10 Queensway
Gibraltar
GX11 1AA

MALTA

San Gwakkin Building
Level 1
Triq is-Salib tal-Imriehel
Zone 4
Central Business District
Birkirkara, CBD4020
Malta

SPAIN

Edif. Sotovila
Plaza Mayor
P.N. de Guadiaro
Sotogrande
Cadiz
11311
Spain

HEAD OFFICE

Suite 315
5 Chancery Lane
London,EC4A 1BL
UK

REGISTERED OFFICE

1st Floor,
Viking House,
St Paul’s Square, Ramsey,
Isle of Man,
IM8 1GB.

STM is a multi-jurisdictional financial services group listed on AIM, a market operated by the London Stock Exchange.
The Group specialises in the administration of client assets in relation to retirement, estate and succession planning and wealth structuring.

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STM Group companies are regulated where required in their host jurisdictions.

STM in the UK (London & Colonial and Options UK): Financial Conduct Authority - STM in Gibraltar: Gibraltar Financial Services Commission - STM in Malta: Malta Financial Services Authority - STM in Spain: Director General de Seguros, Fondos y Pensiones: STM Nummos, SL figura inscrita en el Registro Mercantil de Cádiz, Tomo 1612, Hoja 6697, Libro 0, Folio 14. CIF B-11301199.

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