Latest Results

Final Results for the 12 months ended 31 December 2017

The full results are available to
view and download in PDF format

STM Group Plc (AIM: STM), the multi-jurisdictional financial services group, is pleased to announce its audited final results for the 12 months ended 31 December 2017.

Chief Executive's statement


I am pleased to present the annual results for STM Group Plc for the year ended 31 December 2017. The second year of my tenure has certainly been more eventful than I would have wished. Despite some unexpected and significant challenges, it is a proud feeling to be able to state that we have delivered record profits during 2017, significantly up on 2016.

STM's acquisition of London & Colonial Holdings Limited (LCH) in late 2016, has played a key part in helping us to adapt and widen our product offerings to the expatriate market; which was a necessity following the UK Spring budget that announced an Overseas Tax Charge of 25% on certain overseas pension transfers. As stated at the time, this was expected to affect circa 80% of our new business volumes for our international pension products.

This estimate proved correct but due to management's innovation and flexibility, we were able to come to the market in short order with an alternative, UK regulated, product to service our international distribution network. This has seen most of this lost new QROPS business by both policy number and revenue replaced by our International SIPP offering.

With a significant amount of new business falling under our UK regulated entity, this in turn has given us a more UK centric focus, and has contributed to the decision to move our Group head office from Gibraltar to the UK from January 2018.

As part of this move, it allows the Group Executive function to recruit from a larger population and will also see some additional appointments to our PLC board which will further strengthen our depth of knowledge and capabilities.

Certain STM Gibraltar regulated entities have been working in a collaborative way with the GFSC on a third-party review (a Skilled Person Review) being carried out under Section 7 of the Financial Services (Information Gathering and Co-operation) Act 2013, on certain aspects of the various businesses (the "Report").  It is expected that the Report will now be finalised by 30 April 2018 and will include recommendations, if appropriate. The Group has no appetite for risk in respect of its relationships and dealings with the regulators and we are determined that we will move the Group forward in line with that level of risk appetite.

Overall, it is very clear that our underlying business continues to perform according to plan, demonstrating the quality and predictability of our recurring revenue streams which are key component parts of any robust business model.

During the last quarter of 2017, we signed the Sale and Purchase Agreement for the acquisition of Harbour Pensions Limited. Regulatory approval came through in February 2018 allowing completion to occur. We are now in the process of integrating this business with that of our existing Malta business, which once complete, we expect to result in a further increase of some £0.4 million profit before tax per annum to the Malta operation.

On behalf of the Board and the Company, a special thank you goes out to Mike Riddell, STM's chairman for the past three years and board member for seven years, who is not putting himself forward for re-election having decided that it is time for him to leave his working life behind and enjoy more time with his family. His stewardship in guiding us through the re-invention phase of our recent history has been invaluable, and has protected and enhanced shareholder value for all concerned.

Operational Overview


Our pensions businesses have all seen significant changes to their modus operandi following the UK Spring Budget.

Total revenue across our pensions businesses amounted to £10.2 million (2016: £9.2 million) and accounted for 47% of total Group revenue (2016: 52%).

As predicted since the UK Spring Budget, our Gibraltar operation has seen almost no new business with regards to ROPS, whilst Malta is now only receiving new business from the EEA. Conversely, our UK SIPP business has become the focus of new business growth.

To put this in context, for the nine months following the Budget, new business numbers were 217 ROPS (2016: 1,224) administered by our Malta and Gibraltar offices and 755 SIPPS (2016: 162) administered from our UK operations.

Malta remains the largest of our three jurisdictions with pension turnover of £6.1 million (2016: £6.5 million), with Gibraltar generating £2.6 million (2016: £2.4 million) of turnover, and finally, in its first full year under STM's ownership, the UK generated £1.5 million of revenue (2016: £0.3 million).

An important KPI remains the annual recurring revenue statistic which has been determined as the contractual element of any trustee fee due or any fees under the life assurance policies, which are billed on an annual basis. For 2017 this amounted to £9.6 million (2016: £8.5 million) which represents 95% (2016: 93%) of total pension revenue, giving a highly visible and predictable future revenue stream.

Life assurance

The acquisition of London & Colonial in late 2016, and with it the Gibraltar based life assurance company (LCA), has allowed STM to significantly grow its life assurance business.

This is seen from the 2017 combined revenue figure of £5.8 million as compared to £2.8 million for 2016.

Pleasingly, organic growth for STM Life during the year has delivered a 26% uplift, to generate turnover for 2017 of £2.4 million (2016: £1.9 million). Within this revenue figure, recurring revenue, annual fees and investment income amounted to £1.8 million compared to £1.4 million in 2016. This provides a steady and highly visible annuity income stream.

In addition, LCA has performed as expected with its long standing and predictable customer base delivering a revenue of £2.1 million for the year, with a further release from technical reserves of £1.3 million (2016: £0.5 million) as a result of the reduction in the administrative costs per policy.

Corporate and Trustee Services

Turnover from the Corporate and Trustee Services (CTS) division for the year was £4.3 million (2016: £4.4 million) thus accounting for 20% of the Group's total turnover (2016: 25%). This business is generated in Jersey and Gibraltar, with Jersey revenue accounting for circa 57% (2016: 56%) of the CTS business at £2.5 million (2016: £2.5 million) and Gibraltar generating turnover of £1.8 million (2016: £1.9 million).

As noted in previous year's reports, the CTS environment and sector remains challenging, and it is accepted by the Group that this will be a difficult segment to grow organically.

Other trading divisions and new initiatives

Trading in other divisions, which are mainly insurance management and the Spanish office, was broadly in line with management expectations. These are expected to continue at similar levels going forward having generated revenue of £1.2 million in the year (2016: £1.1 million).

Financial Review

Performance in the year

Profitability has seen a step change in 2017, compared to that of 2016, but reflects the hard work of building the infrastructure and business development function in previous years.

Clearly, the integration of the LCH acquisition has enabled us to restructure the cost base of those businesses acquired and ensured that profit margins were enhanced.

Group revenue for 2017 amounted to £21.5 million (2016: £17.4 million), and as anticipated EBITDA (Earnings before interest, taxation, depreciation and amortisation) has increased by 55% from £3.1 million in 2016 to £4.8 million in 2017.

Reassuringly, the amount of recurring annuity revenue business continues to increase and still accounts for 75% of 2017 total revenues (2016: 75%).

Finance costs amounted to £0.3 million (2016: £0.1 million) and reflects the debt financing in place for the LCH acquisition. The depreciation and amortisation charge has in turn increased as a result of amortising the client portfolio acquired with LCH and the investment in offices across various jurisdictions. This is £0.5 million in 2017 (2016: £0.3 million).

Profit before tax was £4.0 million for the year being a pleasing uplift of 43% above the 2016 PBT result of £2.8 million notwithstanding one-off costs and the technical reserve release referred to above.

Tax Charge and Earnings per Share

The tax charge for the year was £0.1 million (2016: £0.4 million).

The tax charge for the year has been impacted by the refund received in Malta on tax due on dividends paid to companies outside the Group. Whilst the corporate rate on Malta profits is 35% the refund is 30% on tax due on dividends.

In Malta's infancy and growing stage, the tax charge was higher than the refund as profits were higher than dividends. This year, dividends have been in excess of profits due to the payment of a dividend from last year's reserves. Hence the refund is higher than the charge. But this is a one-off and as profits in Malta become consistent year on year the position will stabilise and the Group's effective rate will remain at circa 15%.

This significantly lower than expected tax charge together with the increased profitability has resulted in a healthy uplift to the earnings per share from 3.99p in 2016 to 6.69p in 2017. Diluted earnings per share takes into consideration the long-term incentive plan approved by the Company as approved by the shareholders at the Annual General Meeting on 18 May 2016 which stipulates a maximum dilution factor of 5% resulting in diluted EPS of 6.37p (2016 3.87p).


Overall net cash balances at the year end have continued to increase, resulting in cash and cash equivalents of £18.4 million at 31 December 2017 (2016: £11.9 million). Whilst part of this increase is due to cash generated from operating activities of £4.0 million (2016: £1.4 million) part of this is also as a result of the sale of investments acquired as part of the LCH acquisition.

During the year the Group also made the final deferred consideration payment on the LCH acquisition of £0.8 million, having accrued £1.15 million in the previous years accounts.

The Company continues to have bank borrowings of £3.3 million taken out in October 2016 for the purposes of the acquisition of LCH with repayments being quarterly over the forthcoming two years and as such the first repayment was in January 2018.

As with most services businesses, the Group had accrued income in the form of work performed for clients but not yet billed at the year end of £0.9 million (2016: £1.2 million). The Group policy for pensions is to recognise this accrued income over the period from when an application has been received up to the point when the pension funds are received, at which point the invoice is raised. The decrease in accrued income this year is predominantly as a result of the decrease in QROPS new business in favour of the International SIPP accrued income which is much quicker to convert.

Deferred income (a liability in the statement of financial position), representing fees billed in advance yet to be credited to the statement of total comprehensive income, has remained consistent with the balance as at 31 December 2016 of £3.8 million.

Both the accrued and deferred income will be invoiced and earned in 2018 thus providing visibility on fees for the forthcoming year.

Other large balance sheet items relate to trade and other receivables which stood at £5.6 million as at 31 December 2017 (2016: £5.2million). Of this amount, trade receivables at the year end stood at £3.4 million (2016: £3.4 million).

Dividend Policy

The Group board continues to follow its progressive dividend policy having re-commenced paying dividends in March 2016. In this regard, I am pleased to advise that the Board is recommending the payment of a final dividend of 1.2p per share (2016: 1.0p per share). This together with the interim dividend paid of 0.6p in November 2017 (2016: 0.5p) makes a proposed total dividend for the year of 1.8p per share (2016: 1.5p).

Subject to approval at the Company's Annual General Meeting, the final dividend will be paid on 27 June 2018 to shareholders on the register at the close of business on 1 June 2018. The ordinary shares will become ex-dividend on 31 May 2018.


2017 has demonstrated that STM is flexible and able to take advantage of the opportunities that present themselves, whilst managing the challenges that will invariably manifest from time to time. To see 80% of new pensions business literally fall away overnight in March 2017, and still meet original market expectations is testament to that.

Expectations are that 2018 new business volumes, and client retention rates will remain in line with those of 2017 post the UK budget. In addition, we continue to seek earnings enhancing acquisitions in the ROPS and UK SIPP sector. We are confident in the Group's prospects and that we will deliver trading results in line with our previous management expectations for the new financial year.

Furthermore, our key deliverable for the current year is to continue to build on our governance framework and to place more reliance on IT efficiencies.

Our medium term strategy continues to move forward, with an emphasis on improving profit margins, as well as looking to diversify our product range both within the expatriate, as well as UK market. In turn, this will allow us to expand our intermediary base, all of which continues to re-enforce the robustness of the business model.

I would like to take this opportunity to thank all my STM colleagues for their continued hard work and professionalism in carrying out their duties.

I look forward to updating the market on our achievements during the course of the coming year.


Alan Kentish
Chief Executive Officer


Page last up-dated: 27 March 2018


"STM Group PLC strives to be the provider of choice for cross-border investors, entrepreneurs and expatriates by offering clear, innovative and impartial financial and commercial solutions which help clients protect and grow their investments."