Trading & Corporate Update and Notice of Results
13 July 2016
STM Group Plc (AIM: STM), the cross border financial services provider, announces the following trading and corporate update:
STM's growth strategy is to further extend its sales reach into existing markets and to develop new products and markets through expanding its business development platform. Both elements of this strategy are accessed via introducer relationships with financial advisor intermediaries. The Group's Pension division, and in particular its Qualifying Recognised Overseas Pension Scheme ("QROPS") product has been a key growth driver over the last twenty-four months.
In pursuit of this growth strategy, the Group made considerable financial and management resource investment in 2015 to develop the business development infrastructure. By the end of 2015, the Group had representative offices in the Middle East, South East Asia, Africa and Europe, with Australia coming on stream in the second quarter of 2016.
To support the drive into new markets and strengthen relationships with existing introducer advisers, in April 2016, management took the decision to significantly change the pricing structure for new business by waiving the QROPS establishment fee for an initial trial period of six months, with the aim of driving new client business. This made STM unique in the market place and provided a compelling reason for intermediaries to use the Group's QROPS product. This benefits STM by continuing to build the Group's recurring revenue streams as each new QROPS client won has an expected fee generating life of 20-25 years. The extent to which this change in pricing structure would impact the Group's 2016 revenue is dependent on the uplift in new QROPS policies, offset by the waiving of the QROPS establishment fee.
Good progress has been made in generating these new relationships with financial intermediaries and generating increased sales from existing intermediaries. Since management's pricing decision in April, there has also been a reasonable uplift in new QROPS applications in the last two months. However, the revenues generated within the first half of the year have not matched management's expectations with regards to the level of new business anticipated from our QROPS product. Contributing factors for this include competitor's more aggressive pricing policies and macro-economic factors such as the UK Referendum on EU membership.
Whilst the referendum decision for the UK to leave the EU is not expected to impact the QROPS product in itself, it is believed that the uncertainty around the result of the vote on 23 June resulted in expatriates delaying their decisions as to whether to export their pension out of the UK into a QROPS. Now that the referendum outcome is known, and given the concerns about the UK economy, certain of our intermediaries believe that there is potential for an increase in QROPS applications by expatriates wishing to have more certainty on their pension benefits. Given the time lag for applications to materialise this uplift would only be seen towards the end of 2016 and into 2017.
As a result of the above, management's expectations for the first half of 2016, is that profit before tax will be approximately £1.2 million (2015 H1: £1.37 million) based on a turnover of £7.9 million (2015 H1: £8.3 million), after restructuring costs and other one off costs of approximately £0.2 million. As a point of comparison, new QROPS applications in 2015 were particularly strong in the run-up to the 2015 UK pension reforms. Furthermore, management now expect the Group's profit before tax for 2016 as a whole to be comparable with 2015.
The Group's balance sheet remains strong, and management's optimism in the future business performance is reflected in the recently announced dividend policy, supported by net cash on the balance sheet as at 30 June 2016 in excess of £9 million, some of which is required for regulatory purposes.
As previously announced, STM is intending to enter the UK SIPP market as part of its expansion and accommodation strategy for its QROPS clients and intermediaries, and this, coupled with opportunities being researched in the Australian market, are intended to drive growth going into 2017. It is with this diversification of pension products and jurisdictions in mind that STM has created a Head of Pensions role and is pleased to announce that David Easton has been appointed to this role. David Easton has been the Managing Director of our Gibraltar pensions business since November 2014 and has 15 years of pensions experience specialising in SIPP and SSAS products.
STM is seeking a further Non-Executive Director, in addition to Malcolm Berryman who joined STM in May of this year, to replace Jonathan Shearman who stood down from the Board on 30 June 2016. The Board thanks Jonathan for his contribution and wishes him well for the future.
Alan Kentish, Interim CEO, commented:
"Our ambition is to continue to maximise the global growth potential of the Group, and drive future profitability from the solid base that already exists.
"It is still relatively early days to assess exactly how many new QROPS applications will result from the April pricing initiative however it has certainly put STM at the forefront of intermediaries' minds when they are advising their client base on the QROPS product.
"Following the considerable investment of time and money in 2015, we now have the business development infrastructure in place to drive future growth, in addition to STM's longstanding reputation. We are particularly focused on driving new business and remain conscious that each new client application is contributing to a highly visible and very lengthy recurring revenue stream."
Notice of Results:
STM will announce its Interim results for the six months to 30 June 2016 on Tuesday 13 September 2016.
For further information, please contact:
|STM Group Plc
|Alan Kentish, Interim CEO
|Tel: 00 350 200 42686
|Therese Neish, Chief Financial Officer
|Tel: 00 350 200 42686
|Matt Goode / Emily Watts - Corporate Finance
|Tel: +44 (0) 20 7220 0500
|Mia Gardner - Corporate Broking
|Tom Cooper / Paul Vann
Mob: +44 (0) 797 122 1972
Notes to editors:
STM is a multi-jurisdictional financial services group listed on the Alternative Investment Market of the London Stock Exchange. The Group specialises in the delivery of a wide range of financial service products to professional intermediaries and in the administration of assets for international clients in relation to retirement, estate and succession planning, and wealth structuring.
Today, STM has trading operations in Gibraltar, Malta, Jersey, and Spain. It has also recently opened satellite offices in South East Asia, the Middle East, and South Africa. The Group continues to expand through the development of additional products and services that its ever-more sophisticated clients demand.
STM has, for example, a dedicated international pensions division which specialises in Qualifying Recognised Overseas Pension Schemes (QROPS) and Qualifying Non-UK Pension Schemes (QNUPS); it also has a Gibraltar Life Insurance Company, STM Life Assurance PCC PLC, which provides life insurance bonds - wrappers in which a variety of investments, including investment funds, can be held.
Further information on STM Group can be found at www.stmgroupplc.com