TIDMSTM
RNS Number : 7302L
STM Group PLC
10 September 2019
STM Group Plc
("STM", "the Company" or "the Group")
Unaudited Interim Results for the six months ended 30 June
2019
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 2019.
Highlights include:
2019 2019 2018
(reported) (underlying)
*
Revenue GBP11.9m GBP11.6m GBP10.8m
------------- --------------- ---------
Earnings before interest, taxation, GBP2.1m GBP2.3m GBP2.5m
depreciation and amortisation
("EBITDA")
------------- --------------- ---------
Profit before taxation ("PBT") GBP3.4m GBP1.6m GBP2.1m
(and exceptional bargain purchase
gain)
------------- --------------- ---------
EBITDA margin 18% 20% 23%
------------- --------------- ---------
Earnings per share 5.30p N/A 3.21p
------------- --------------- ---------
Cash at bank (net of borrowings) GBP18.1m N/A GBP16.3m
------------- --------------- ---------
Interim dividend 0.75p N/A 0.7p
------------- --------------- ---------
* net of certain transactions which do not form part of the
regular operations for the business
Operational highlights:
-- Redefined Purpose and Vision, allowing for stronger commitment to Strategy and Values
-- Implementation of new Target Operating Model allowing for
clearer and more efficient reporting lines
-- Focus on using IT to develop greater efficiencies and enhance
margins; Interim Head of IT appointed
-- Continued to build on our risk management and governance platform
-- Integration of the Carey acquisition well advanced
-- Active pipeline of acquisition opportunities
-- Launch of our new flexible annuity product, as an alternative to a SIPP
Commenting on the results and prospects for STM, Alan Kentish,
Chief Executive Officer, said:
"The Board is pleased with the progress made in the period.
"In the early part of the year, we welcomed Pete Marr to the
newly created Board role of Chief Operating Officer, and this has
set in motion the Board's intention to redefine our Target
Operating Model (TOM). The new TOM will bring about a stronger and
more scalable platform for future growth, both organically and by
acquisition, as well as ultimately seeing improved operating
margins. As previously advised, this requires upfront investment in
both senior hires and IT infrastructure and the Group has seen its
underlying cost base increase which the Group has been able to
absorb thanks to its solid revenue base.
"I am pleased to say the integration of Carey proceeds to plan,
and has indeed opened STM's doors to new opportunities.
"The second half of the year is about concluding the initiatives
commenced in the first six months so that these benefits start to
materialise. My expectations of seeing both top line growth and PBT
uplift as a result of our recent investment programme remains
strong.
"In a pension market that remains buoyant and ever changing, and
with STM's extensive product offerings, I have every reason to be
excited about STM's prospects as we move towards 2020 and
beyond."
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
STM Group Plc
Alan Kentish, Chief Executive Officer Via Walbrook PR
Therese Neish, Chief Financial Officer www.stmgroupplc.com
finnCap Tel: +44 (0)20 7600 1658
Matt Goode / Simon Hicks - Corporate Finance www.finncap.com
Tim Redfern / Richard Chambers - ECM
Media enquiries:
Walbrook PR Tel: +44 (0) 20 7933 8780
Tom Cooper / Paul Vann Mob: +44 (0) 797 122 1972
tom.cooper@walbrookpr.com
Notes to editors:
STM is a multi jurisdictional financial services group which is
listed on the AIM Market of the London Stock Exchange. The Group
specialises in the delivery of a wide range of financial service
products to professional intermediaries and the administration of
assets for international clients in relation to retirement, estate
and succession planning and wealth structuring.
Today, STM has operations in the UK, Gibraltar, Malta, Jersey
and Spain. The Group is looking to expand through the development
of additional products and services that its ever more
sophisticated clients demand. STM has developed a specialist
international pensions division which specialises in Self-Invested
Personal Pensions (SIPPs) for expatriates, Qualifying Recognised
Overseas Pension Schemes (QROPS), Qualifying Non UK Pension Schemes
(QNUPS). STM has a Gibraltar Life Insurance Company, STM Life plc,
which provides life insurance bonds - wrappers in which a variety
of investments, including investment funds, can be held.
Further information on STM Group Plc can be found at
www.stmgroupplc.com.
Chairman's Statement
I am pleased to present my first set of interim results as
Chairman for the Group, which additionally represents my first full
six month term.
The reported interim profit before tax for 2019 is significantly
ahead of the previous year's comparator, albeit there have been a
number of one-off adjustments, as required by accounting standards,
principally relating to incorporating the Carey acquisition that
occurred earlier in the year.
Our new business volumes across our pension and life businesses
remain steady and similar to the previous six months, and the
nature of our individual business units gives the benefit of a
predictable and stable revenue stream weighing against a
predominantly fixed cost base. A high proportion of recurring
revenues translates into clear visibility of our underlying
profitability for those businesses that have reached critical mass,
and forms the backbone for future growth of the Group. For those
businesses that are still in their infancy, such as the workplace
pensions, further measures are being implemented to accelerate this
business to profitability more quickly.
With this in mind, and since joining in September last year, my
primary focus has been to look to put the essential final building
blocks in place to allow the Group to capitalise on significant
growth opportunities going forward.
Invariably this has resulted in additional costs for further
resources at Group level as we progress on this journey, but the
investment made in our infrastructure will result in a more
scalable, better protected and more robust business going forward.
In addition, we continue to build on our governance structure and
risk management framework to de-risk the business operations
further.
The UK pension's market remains in a state of uncertainty with
various high profile Court rulings awaited in relation to the legal
and expected obligations of a SIPP provider. Such rulings will
re-shape the industry going forward if they find against the
manufacturing elements. Clarity and guidance that give certainty to
the industry is welcomed and much needed for all industry
stakeholders. During this period of uncertainty, we continue to
actively seek out and pursue potential good value acquisition
targets with high quality client portfolios in the UK pensions
market, whilst at the same time simplifying our group structure in
other areas.
As the major part of the integration of Carey draws to a finish,
the UK businesses will turn their attention to a re-launch of their
key UK pension products and finalise a re-branding proposition so
as to better position ourselves in the marketplace.
The remainder of the current financial year is about finalising
our operating model incorporating the new infrastructure and
turning our ongoing revenue ideas and initiatives into solid
business performance. We are now finishing a period of increased
fixed cost investment in our business and will now turn our primary
focus to new revenue generating opportunities and realising
internal efficiencies, both will support our strong profit growth
ambition.
I look forward to updating the market with our progress.
Duncan Crocker
Chairman
10 September 2019
Chief Executive's Review
Overview
I am pleased to present the interim results for the six months
ended 30 June 2019 which shows a business that has invested in its
infrastructure in order to reset our platform for future
growth.
Our underlying businesses performed in line with expectations
with no significant material deviations, despite some of the
macroeconomic and other factors that the industry as a whole faces.
Volumes of new business have remained steady and predictable
throughout our core businesses of pension administration and life
assurance wrappers. The certainty of our recurring revenue, a key
characteristic of our business, remains unchanged, as would be
expected.
The appointment of Pete Marr as COO in January enabled us to
accelerate our transformation programme to a more robust and
efficient operating model. We have recruited a number of senior
individuals at Group level to support this process. The
commencement of such a journey invariably comes at a cost
initially, but the benefits will start to become more evident
during 2020 and thereafter.
The acquisition of Carey pensions in February has added a new
dimension to our UK operating group, and is allowing a
consolidation of our UK businesses which will give us a solid
foothold in the UK pensions market. The additional benefits of
putting two slightly sub-critical mass businesses together to
create a central UK operating hub also brings with it integration
gains. The imminent rebranding of the Carey business and the
re-launch of some niche UK SIPP orientated products in the latter
part of the year will be the culmination of a successful
integration.
Financial results
For the six month period ended 30 June 2019 the Group reported
revenues of GBP11.9 million (2018: GBP10.8 million). Within this
year's revenue, there exists a number of one-off items relating to
technical releases of life assurance reserves, acquisition
accounting for the Carey acquisition as well as a negative revenue
recognition adjustment to bring Carey's accounting policy in line
with STM's.
Stripping away these various non-recurring movements gives
underlying revenues of GBP11.6 million for 2019 compared to GBP10.8
million for 2018. Recurring revenues were GBP8.7 million (2018:
GBP8.5 million), representing 73 per cent. of underling revenues
(2018: 79%).
Profit before tax for the period amounted to GBP3.4 million
compared to GBP2.1 million for 2018, a very material increase,
albeit as noted above this year's results have significant one-off
positive adjustments of GBP2.4 million. There were also the
additional non-recurring integration costs of GBP0.3 million, and
the losses of the Carey corporate business in line with
management's forecasts of GBP0.3 million. The anticipated losses in
the corporate pensions business for the full financial period are
more than compensated for by the bargain purchase gain.
As reported earlier in the year IFRS 3 allows for this to be
adjusted for up to a year following the date of acquisition as it
recognizes that there are many intricacies to understanding a newly
acquired business and various valuation models which can be applied
to the constituent parts that make up this figure. In the case of
the Carey acquisition we have had to revalue the intangible assets
and the agreements entered into with the minority shareholder, and
the revised value of the bargain purchase gain is GBP2.0 million.
Similarly, we have carried out more work on simplifying the Group
structure which has resulted in a reconsideration of the existing
goodwill. The outcome of this is that there is no longer a
requirement to write off the previously reported amount of GBP0.7
million thus the uplift to the PBT as a result of these accounting
transactions remains GBP2.0 million, as previously reported.
Putting these various one-off adjustments aside, leaves an
underlying Profit before tax of GBP1.6 million for 2019 compared to
GBP2.1 million for 2018. This includes a loss of GBP0.3 million
from Carey and therefore stripping these out to allow for a like
for like comparison results in PBT for 2019 of GBP1.9 million. The
slightly lower PBT for this year is principally due to an increase
in Group costs in building the infrastructure as a platform for
future growth, as detailed above.
RECONCILIATION OF REPORTED TO UNDERLYING MEASURES
PROFIT BEFORE REVENUE
TAX
---------------- -------------
2019 2018 2019 2018
-------- ------ ------ -----
GBPm GBPm GBPm GBPm
-------- ------ ------ -----
Reported measure 3.4 2.1 11.9 10.8
-------- ------ ------ -----
Less: release on technical reserve (0.9) - (0.9) -
-------- ------ ------ -----
Add: adjustment on Carey revenue recognition 0.6 - 0.6 -
-------- ------ ------ -----
Add: integration and acquisition costs 0.3 - - -
for H1
-------- ------ ------ -----
Add: other non-recurring costs 0.3 - - -
-------- ------ ------ -----
Less: bargain purchase gain and derivative
asset (2.0)
-------- ------ ------ -----
Underlying measure 1.6 2.1 11.6 10.8
-------- ------ ------ -----
Add: Carey losses / Less: Carey revenue 0.3 - (0.9) -
-------- ------ ------ -----
Like for like comparison 1.9 2.1 10.7 10.8
-------- ------ ------ -----
Pleasingly, all of the Group's trading operations have performed
as expected with the underlying recurring revenue stream continuing
to be a mainstay of the overall Group.
In relation to the balance sheet, as part of the accounting for
the Carey acquisition, we have recognised two intangible assets
being the client portfolios in the SIPP and Auto-Enrolment
businesses. These assets have been valued at GBP2 million, and in
line with the Group's accounting policy will be amortised over 10
years. In addition, under IFRS 16, we now recognise the cost of the
rental and IT leases on the balance sheet as a rights of use asset
amounting to GBP1.7 million with lease liabilities of GBP2.5
million.
In addition, cash and cash equivalents at 30 June 2019 were
GBP18.1 million (30 June 2018: GBP18.8 million). As would be
expected for a Group regulated in a number of jurisdictions a
significant proportion of this balance forms part of the regulatory
and solvency requirements. As at 30 June 2019 this was
approximately GBP15.5 million.
During the six month period, the Group generated GBP2.2 million
of cash as a result of operating activities, and repaid bank debt
of GBP0.8 million, as well as paying a final dividend of GBP0.8
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 GBP1.1 million as at
the period end (2018: GBP0.9 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 GBP4.7 million (2018: GBP4.3 million).
This figure 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 2019 were GBP2.5 million showing
a marginal increase from the position as at 30 June 2018 of GBP2.3
million.
Dividend
In line with our previous approach, the Group continues to build
on its annual dividend payout, and I am pleased to announce that
the Board has declared an interim dividend of 0.75 pence per share
(2018: 0.7 pence). The interim dividend is expected to be paid on
20 November 2019 to those shareholders on the register on 25
October 2019. The ordinary shares will become ex-dividend on 24
October 2019.
Subject to trading continuing to perform in line with our
expectations, the Board expects to propose a final dividend for the
full year.
Review of operations
Pensions business
The February 2019 acquisition of Carey has reiterated our
commitment to the pension administration sector and this is without
a doubt our core business offering, representing 57% of our revenue
(2018: 54%).
Importantly, our pensions divisions are not pigeon-holed into
one specific area but have solid distribution across three
wide-ranging sectors; the UK expatriate market via our QROPS and
International SIPP, the UK resident market via our UK SIPP
businesses, and the ever-growing UK auto-enrolment market via our
workplace Master Trust.
There is further diversification in that these sectors are
administered across three different jurisdictions which each offer
a slightly different product solution for our customers and are
thus complementary.
Overall the pensions revenue for the period was GBP6.8 million
(2018: GBP5.9 million). Total revenue is split between GBP5.0
million for QROPS (2018: GBP5.1 million), GBP1.3 million (2018:
GBP0.8 million) for the SIPP business and an additional GBP0.5
million for the workplace pensions business (2018 - GBPnil).
New business applications are down for 2019 amounting to 349
compared to 671 for the same period in 2018. This appears to be
driven by macro-economic factors such as Brexit concerns by UK
expatriates, as well as industry factors such as less financial
advisers willing or able to advise on defined benefit transfers,
through to a general scepticism by some of the private pension
sector in the UK as a result of ongoing high profile civil cases in
the UK Courts.
The recurring revenue percentage of 90% together with the low
attrition rates to this business means that it remains a solid
predictor of future profitability.
The Carey pension team has slotted in well, and brings
additional resources and experience, as well as a number of UK
orientated products that the STM Group previously did not have. For
the period to 30 June 2019 specific integration costs have amounted
to GBP0.3 million. As we move into the latter part of the year and
beyond the benefits of the integration, as previously advised, are
likely to be in the region of GBP0.7 million.
In relation to the auto-enrolment business, the last four months
has been focused on progressing the Master Trust authorisation for
the Carey work-place pension. The UK Master trust sector in general
remains in a state of flux, and this has in turn created
opportunities.
Life assurance divisions
With the uncertainty of Brexit, the Group is in the enviable
position of having two life assurance businesses and can thus have
one UK facing and one to focus on the EU market. As previously
announced, STM Life is in the process of re-domiciling to Malta to
facilitate this focus. Whilst this may not be finalised before
Brexit the risk will largely be an inability to incept new policies
but should not affect our ability to continue servicing existing
customers.
Revenue for the combined life assurance businesses amounted to
GBP2.8 million as compared to GBP2.2 million in 2018. The life
assurance businesses have continued to benefit from the release of
technical reserves with this year's revenue having an amount of
GBP0.9 million in this respect (2018: GBPnil). This release
constitutes the entire reserve previously reflected in the Balance
Sheet.
The first part of 2019 has seen significant investment in
management time in a new suite of products aimed at the UK pension
market, one of which is offering an assurance contract based
alternative to the traditional private pension. The se new products
are expected to gain traction during the latter part of the year
with the benefits materialising in 2020.
CTS division
CTS, once the lifeblood of STM Group, is no longer core to our
future. CTS revenue for 2019 amounted to GBP1.9 million (2018:
GBP2.2 million) and accounts for only 16% of Group revenue (2018:
21%). STM's focus in this area is on client retention and
maintaining operating profit margins, rather than anticipating
growth. The revenue is split 54% Jersey and 46% Gibraltar.
Other divisions
This income primarily relates to the Insurance Management
division and the Spanish office, with both divisions performing in
line with management expectations. Revenue for the period amounted
to GBP0.5 million (2018: GBP0.5 million). As part of the Group's
strategy of focusing on core activities the insurance management
business was closed during the early part of 2019.
Outlook
The first six months of 2019 has been busy with significant
investment being made in the Group's future success. Whilst this
investment has increased costs the benefits, be they through
increased revenue, improved efficiencies or a more robust business,
are getting close to realisation.
The teams have worked diligently to deliver on both a successful
Carey integration and the new Operating Model as a whole which will
clearly demonstrate improved efficiencies and result in an
operating margin uplift going forward.
As previously announced, STM will have a more UK focused product
offering and, as part of that strategy, is in the process of
recruiting a UK based Head of Distribution and Product. Our UK
Company re-brand and re-launch of niche UK pension products will
set out our stall for the future.
We continue to look for earnings enhancing or strategic
acquisitions in the QROPS or UK pensions market. We are pursuing a
number of potential acquisitions and our acquisition team has never
been busier, however, with many of the acquisition targets being
privately owned, we have found the timing of the sale process
varies. Our ambition remains that acquisitive growth will form a
meaningful part of our overall growth rate.
The second half year is about bringing all the various projects
started in the year to completion so the benefits come through
early in 2020. These projects include getting our framework and
infrastructure ready for future growth, launching some key product
initiatives and bringing the Carey integration to a successful
conclusion. All of these will round-off a solid performance for the
year.
We look forward to updating the market on our progress and
journey as we tick off the opportunities and deliverables ahead of
us.
Alan Kentish
Chief Executive Officer
10 September 2019
STM GROUP PLC
CONSOLIDATED INCOME STATEMENT
For the period from 1 January 2019 to 30 June 2019
Unaudited Unaudited Audited
6 months 6 months Year to
to to 31 December
30 June 30 June 2018
Notes 2019 2018 GBP'000
GBP'000 GBP'000
Revenue 4 11,945 10,782 21,401
Administrative expenses (9,883) (8,308) (16,692)
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Profit before other items 2,062 2,474 4,709
--------------------------------------- ------- -------------------- --------------------- ----------------------------
OTHER ITEMS
Bargain purchase gain 5 1,630 - -
Gains from financial instruments
at
FVTPL 5 416 - -
Finance costs (153) (145) (249)
Depreciation and amortisation (593) (202) (427)
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Profit before taxation 3,362 2,127 4,033
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Taxation (214) (217) (350)
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Profit after taxation 3,148 1,910 3,683
OTHER COMPREHENSIVE INCOME
Items that are or may
be reclassified to profit
and loss
Foreign currency translation
differences for foreign
operations (51) (5) 3
---------------------------------------- ------- -------------------- --------------------- ----------------------------
Total other comprehensive
income (51) (5) 3
---------------------------------------- ------- -------------------- --------------------- ----------------------------
Total comprehensive income
for the period/year 3,097 1,905 3,686
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Profit attributable to:
Owners of the Company 3,301 1,910 3,683
Non-Controlling interests (153) - -
--------------------------------------- ------- -------------------- --------------------- ----------------------------
3,148 19,10 3,683
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Total comprehensive income
attributable to:
Owners of the Company 3,250 1,905 3,686
Non-Controlling interests (153) - -
--------------------------------------- ------- -------------------- --------------------- ----------------------------
3,097 1,905 3,686
--------------------------------------- ------- -------------------- --------------------- ----------------------------
Earnings per share basic (pence) 7 5.30 3.21 6.20
Earnings per share diluted 7 5.13 3.06 5.90
(pence)
--------------------------------------- ------- -------------------- --------------------- ----------------------------
The above results relate both to continuing activities and a
discontinued operation (see Note 6).
STM GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 2,783 1,189 1,096
Intangible assets 20,733 18,978 18,966
Financial assets at FVTPL 5 416 -- --
Other assets 98 -- --
Total non-current assets 24,030 20,167 20,062
------------------------------- -------- --------------------- --------------------- ----------------------
Current assets
Investments -- 77 74
Accrued income 1,138 922 787
Trade and other receivables 10 4,976 4,882 6,281
Cash and cash equivalents 9 18,137 18,763 17,267
------------------------------- -------- --------------------- --------------------- ----------------------
Total current assets 24,251 24,644 24,409
------------------------------- -------- --------------------- --------------------- ----------------------
Total assets 48,281 44,811 44,471
------------------------------- -------- --------------------- --------------------- ----------------------
EQUITY
Called up share capital 13 59 59 59
Share premium account 22,372 22,372 22,372
Reserves 12,127 9,390 10,631
Equity attributable to
owners of the Company
Non-controlling interests 34,558 31,821 33,062
(78) -- --
------------------------------- -------- --------------------- --------------------- ----------------------
Total equity 34,480 31,821 33,062
------------------------------- -------- --------------------- --------------------- ----------------------
LIABILITIES
Current liabilities
Liabilities for current
tax 888 727 908
Trade and other payables 11 10,646 11,436 10,501
------------------------------- -------- --------------------- --------------------- ----------------------
Total current liabilities 11,534 12,163 11,409
------------------------------- -------- --------------------- --------------------- ----------------------
Non-current liabilities
Other payables 12 2,267 827 --
------------------------------- -------- --------------------- --------------------- ----------------------
Total non-current liabilities 2,267 827 --
Total liabilities and equity 48,281 44,811 44,471
------------------------------- -------- --------------------- --------------------- ----------------------
STM GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
For the period from 1 January 2019 to 30 June 2019
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Operating Activities
Profit for the period/year
before
tax 3,362 2,127 4,033
Adjustments for:
Depreciation and
amortisation 593 202 425
Loss on sale of fixed asset 2 -- --
Taxation paid (234) (545) (515)
Unrealised gains on
financial
instruments at FVTPL 5 (416) -- 7
Bargain purchase gain 5 (1,630) -- --
Share based payments 18 29 55
Decrease/(increase) in
trade and
other receivables 1,592 946 (437)
(Increase)/decrease in
accrued
income (254) (31) 103
Decrease in trade and other
payables (808) (124) (1,068)
Foreign exchange losses -- 25 --
Movement in provisions -- (7) --
Net cash from operating
activities 2,225 2,622 2,603
---------------------------- ------------- --------------------------- --------------------- ---------------------------
Investing activities
Disposal of investments 74 2 --
Purchase of property, plant
and
equipment (88) (44) (60)
Increase in intangible
assets (46) (83) (185)
Consideration paid on
acquisitions (350) (800) (800)
Cash acquired on
acquisition 5 1,116 302 302
Net cash used in investing
activities 706 (623) (743)
---------------------------- ------------- --------------------------- --------------------- ---------------------------
Cash flows from financing
activities
Bank loan (825) (825) (1,650)
Treasury shares purchased (117) (56) (206)
Lease liabilities paid (358) -- --
Dividends paid 8 (772) (713) (1,129)
Net cash from financing
activities (2,072) (1,594) (2,985)
---------------------------- ------------- --------------------------- --------------------- ---------------------------
Increase in cash and cash
equivalents 859 405 (1,125)
---------------------------- ------------- --------------------------- --------------------- ---------------------------
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 859 405 (1,125)
Effect of movements in
exchange
rates on cash and cash
equivalents 11 (5) 29
Balance at start of
period/year 17,267 18,363 18,363
Balance at end of
period/year 18,137 18,763 17,267
---------------------------- ------------- --------------------------- --------------------- ---------------------------
STM GROUP PLC
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
For the period from 1 January 2019 to 30 June 2019
Shares
Based Non-Controlling
Share Share Retained Treasury Translation Payments Interests Total
Capital Premium Earnings Shares Reserve Reserve Total GBP'000 Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January
2018 59 22,372 8,327 (226) 35 89 30,656 -- 30,656
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for
the period -- -- 3,683 -- -- -- 3,683 -- 3,683
Other comprehensive income
Foreign
currency
translation
differences -- -- -- -- 3 -- 3 -- 3
Transactions with owners, recorded directly in equity
Dividend
paid -- -- (1,129) -- -- -- (1,129) -- (1,129)
Shares based
payments -- -- -- -- -- 55 55 -- 55
Treasury
shares
purchased -- -- -- (206) -- -- (206) -- (206)
-------------- --------- --------- ---------- ---------- ------------- --------- -------- ----------------- ---------
31 December
2018
and
1 January
2019 59 22,372 10,881 (432) 38 144 33,062 -- 33,062
-------------- --------- --------- ---------- ---------- ------------- --------- -------- ----------------- ---------
Adjustment
on initial
application
of IFRS 16
(net of tax)
(Note 3) -- -- (883) -- -- -- (883) -- (883)
Adjusted
balance at
1 January
2019 59 22,372 9,998 (432) 38 144 32,179 -- 31,179
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for
the period -- -- 3,301 -- -- -- 3,301 (153) 3,148
Other comprehensive income
Foreign
currency
translation
differences -- -- -- -- (51) -- (51) -- (51)
Transactions with owners, recorded directly in equity
Dividend
paid -- -- (772) -- -- -- (772) -- (772)
Share based
payments -- -- -- -- -- 18 18 -- 18
Treasury
shares
purchased -- -- -- (117) -- -- (117) -- (117)
Changes in ownership interest
Acquisition
of
subsidiary
with NCI
(Note 5) -- -- -- -- -- -- -- 75 75
-------------- --------- --------- ---------- ---------- ------------- --------- -------- ----------------- ---------
At 30 June
2019 59 22,372 12,527 (549) (13) 162 34,558 (78) 34,480
-------------- --------- --------- ---------- ---------- ------------- --------- -------- ----------------- ---------
STM GROUP PLC
NOTES TO THE CONSOLIDATED RESULTS
For the period from 1 January 2019 to 30 June 2019
1. Reporting entity
STM Group Plc (the "Company") is a company incorporated and
domiciled in the Isle of Man and was admitted to trading on the
London Stock Exchange AIM Market on 28 March 2007. The address of
the Company's registered office is 18 Athol Street, Douglas, Isle
of Man, IM1 1JA. The Group is primarily involved in financial
services.
2. Basis of preparation
Results for the period from 1 January 2019 to 30 June 2019 have
not been audited.
The consolidated results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"),
interpretations adopted by the International Accounting Standards
Board ("IASB") and in accordance with Isle of Man law and IAS 34,
Interim Financial Reporting.
3. Changes in significant accounting policies
Except as described below, the accounting policies in these
consolidated results are the same as those applied in the Group's
consolidated financial statements for the year ended 31 December
2018. The changes in accounting policies are also expected to be
reflected in the Group's consolidated financial statements for the
year ended 31 December 2019.
The Group has initially adopted IFRS 16 Leases from 1 January
2019. lFRS 16 introduced a single, on-balance sheet accounting
model for lessees. As a result, the Group, as a lessee, has
recognised right-of-use assets representing its rights to use the
underlying assets. In addition, it has recognised lease liabilities
representing its obligation to make lease payments.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised in retained earnings at 1 January 2019. Accordingly,
the comparative information presented for 2018 has not been
restated - i.e. it is presented, as previously reported, under IAS
17 and related interpretations. The details of the changes in
accounting policies are disclosed below.
The Group leases properties and IT equipment. As a lessee, the
Group previously classified leases as operating leases. Under IFRS
16, however the Group recognises right-of-use assets and lease
liabilities for most leases - i.e. these leases are now on-balance
sheet.
However, the Group has elected not to recognise right-of-use
assets and lease liabilities for some leases of low-value assets
(e.g. IT equipment). The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, and subsequently at cost less any accumulated
depreciation and impairment losses and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the Group's incremental borrowing rate.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payment
made.
On transition to IFRS 16, the Group has recognised right-of-use
assets, lease liabilities and dilapidation costs with the
difference being recognised in retained earnings. The impact on
transition is summarised below.
1 January 2019
GBP'000
Right-of-use assets presented in property, plant
and equipment 1,929
Deferred tax assets 98
Prepayments (30)
Provision for dilapidation costs (100)
Lease liabilities 2,779
Retained earnings (882)
-------------------------------------------------- -----------------------------
As a result of initially applying IFRS 16, in relation to the
leases that were previously classified as operating leases, the
Group has GBP1,699,000 of right-of-use assets and GBP2,487,000 of
lease liabilities as at 30 June 2019.
Also, in relation to those leases under IFRS 16, the Group has
charged depreciation and interest costs, rather than operating
lease expenses. During the six months ended 30 June 2019, the Group
recognised GBP230,000 of depreciation charges and GBP65,000 of
interest costs from these leases.
4. Segmental Information
STM Group has four reportable segments: Pensions, Life
Assurance, Corporate Trustee Services and Other Services. Each
segment is defined as a set of business activities generating a
revenue stream and offering different services to other operating
segments. The Group's operating segments have been determined based
on the management information reviewed by the CEO and board of
directors.
The Board assesses the performance of the operating segments
based on turnover generated. The performance of the operating
segments is not measured using costs incurred as the costs of
certain segments within the Group are predominantly centrally
controlled and therefore the allocation of these is based on
utilisation of arbitrary proportions. Management believe that this
information and consequently profitability could potentially be
misleading and would not enhance the disclosure above.
The following table presents the turnover information regarding
the Group's operating segments:
Operating Segment Unaudited Unaudited Audited
6m 2019 6m 2018 2018
GBP'000 GBP'000 GBP'000
Pensions 6,760 5,874 11,555
Life Assurance 2,798 2,179 4,669
Corporate Trustee Services 1,881 2,235 4,185
Other Services 506 494 992
---------------------------- ---------- ---------- ---------
11,945 10,782 21,401
---------------------------- ---------- ---------- ---------
Analysis of the Group's turnover information by geographical
location is detailed below:
Geographical Segment Unaudited Unaudited Audited
6m2019 6m2018 2018
GBP'000 GBP'000 GBP'000
Gibraltar 5,144 4,491 9,235
Jersey 1,011 1,417 2,611
Malta 3,750 3,759 7,383
United Kingdom 1,739 835 1,585
Other 301 280 587
---------------------- ---------- ---------- ---------
11,945 10,782 21,401
---------------------- ---------- ---------- ---------
5. Acquisition of subsidiary
On 12 February 2019, the Group acquired 100% of Carey
Administration Holdings Limited ("CAHL"). CAHL in turn owns 70% of
Carey Pensions UK LLP, offering SIPP administration products to the
UK market, and 80% of Carey Corporate Pensions UK Limited, offering
auto-enrolment workplace pensions solutions ("AE") to the UK based
SMEs. The non-controlling interests ("NCI") of both entities are
owned by Christine Hallett, who continues as Managing Director of
the Carey Pensions businesses.
The acquisition of the SIPP business is highly complementary to
the existing Group's business and strategy and will contribute to
the growth of the UK focused business. In addition, the acquisition
of the AE business enabled the Group to diversify its business by
entering a new market which is at an early stage of its lifecycle
providing the Group momentum for success. Taking control of CAHL
will also benefit from cost synergies, economies of scale and an
experienced management team that has been retained by the
Group.
The acquisition has been accounted for using the acquisition
method. Transaction costs incurred on the acquisition total
GBP67,000 and have been expensed within administrative expenses in
the consolidated statement of comprehensive income.
Consideration for the acquisition is broken down as follows:
GBP'000s
--------------------------------- ------------
Initial cash payment 100
Second cash payment 200
Contingent consideration 100
--------------------------------- ------------
Total consideration transferred 400
--------------------------------- ------------
The contingent consideration is due on the first anniversary
date following the completion of the acquisition and is dependent
on standard indemnities provided by the Sellers.
The following table summarises the fair value of the
identifiable assets and liabilities assumed of CAHL as at the date
of the acquisition.
Fair value
recognised Fair value Previous
on acquisition adjustments carrying value
GBP'000s GBP'000s GBP'000s
Tangible fixed assets 19 -- 19
Intangible assets 106 -- 106
Client portfolio 1,900 1,900 --
Accrued income 97 -- 97
Debtors 413 -- 413
Cash at bank 1,116 -- 1,116
Liabilities (664) -- (664)
Deferred income on annual
fees (540) 606 (1,146)
Deferred tax liabilities
on client portfolio (342) (342) --
Total identifiable assets 2,105 2,164 (59)
--------------------------- ----------------------- ------------------ ------------------------
At acquisition the Group performed an exercise to identify the
fair value of intangible assets acquired. As a result of that
exercise, a client portfolio asset of GBP1,200,000 relating to the
UK SIPP business and GBP700,000 related to the AE business were
recognised. In line with accounting standards the fair value of the
SIPP client portfolio has been determined on a provisional basis
given the valuation is dependent on a number of inputs which are
subject to certain management estimates, one of them being cost
synergies achieved following the complete integration of CAHL.
Currently the integration is well under way and the complete
amounts of costs synergies used to value the SIPP client portfolio
will be measured when the integration of CAHL is fully completed in
the second half of the year. Any changes to this value are not
expected to be material.
In addition, following a detailed review of the revenue
recognition policy for the Carey Pensions businesses, the Group
made a fair value adjustment of GBP606,000 to deferred income to
align the accounting policy for the SIPP business with the one for
the Group, which complies with IFRS 15. In respect to the remaining
balances, the Group determined that the fair value of the
identifiable assets and liabilities assumed was equal to the
carrying value.
From the date of acquisition CAHL has generated a revenue of
GBP1,146,000 and incurred an underlying loss of GBP282,000. If the
acquisition had occurred on 1 January 2019, management estimates
that consolidated revenue would have been GBP1,504,000 and
consolidated loss would have been GBP412,000.
A bargain purchase gain has arisen as a result of the fair value
of the identifiable net assets being higher than the consideration
transferred. This bargain purchase gain has been recognised as
follows:
GBP'000s
Total consideration transferred 400
NCI based on their proportionate interest in the
recognised amounts of the assets and liabilities 75
Fair value of identifiable net assets (2,105)
--------------------------------------------------- --------------
Bargain purchase gain (1,630)
--------------------------------------------------- --------------
The bargain purchase is attributable to the client portfolios
acquired. Under IFRS 3, this needs to be recognised in the
consolidated statement of comprehensive income for the period.
Call options to acquire non-controlling interests
As part of acquisition of CAHL, the Group entered into call
options agreements to acquire the non-controlling interests in
Carey Pensions UK LLP and Carey Corporate Pensions UK Limited from
the current owner of the NCIs. The call options are exercisable in
2022 and the prices are based on the audited financial statements
for the year ended 31 December 2021. The fair value of the call
options as at acquisition date is determined at GBP416,000 and
subject to revaluation as at each reporting date.
6. Discontinued operation
In March 2019, the Group closed down its Insurance management
business. Management committed to a plan to cease trading for this
part of the segment following an assessment of the viability of the
insurance management business and its alignment with the Group's
long term strategy to focus on its core activities.
This other services segment, of which the insurance management
business was a part of, was not previously classified as
held-for-sale or as a discontinued operation.
Results of the discontinued operation are as follows:
Unaudited Unaudited Audited
6m 2019 6m 2018 12m 2018
GBP'000s GBP'000s GBP'000s
Revenue 179 200 362
Expenditure (140) (176) (325)
Results from operating activities 39 24 37
Income tax (3) (2) (4)
Results from operating activities,
net of tax 36 22 33
Gain on sale of discontinued
operation -- -- --
Profit from discontinued operation 36 22 33
------------------------------------ ----------------- ------------------- ---------------
The profit from the discontinued operation is attributable
entirely to the owners of the Company.
7. Earnings per Share
Earnings per share for the period from 1 January 2019 to 30 June
2019 is based on the profit after taxation of GBP3,148,000 divided
by the weighted average number of GBP0.001 ordinary shares during
the period of 59,408,088 basic. Dilutive share options expired one
month after the Company announced its 2018 results, no options were
exercised.
A reconciliation of the basic and diluted number of shares used
in the period ended 30 June 2019 is:
2019 2018
Weighted average number
of shares 59,408,088 59,408,088
Dilutive share options 1,915,343 2,970,404
Diluted 61,323,431 62,378,492
========================= =========== ===========
8. Dividends
The following dividends were declared and paid by the Group
during the period:
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
1.3 pence (2018: 1.2 pence)
per qualifying ordinary share 772 713 1,129
---------- ---------- -------------
9. Cash and cash equivalents
Cash at bank earns interest at floating rates based on
prevailing rates. The fair value of cash and cash equivalents in
the Group is GBP18,138,000.
10. Trade and other receivables
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Trade receivables 2,524 2,265 3,508
Other receivables 2,452 2,617 2,773
---------- ---------- -------------
4,976 4,882 6,281
---------- ---------- -------------
11. Trade and other payables
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Deferred income 4,662 4,251 3,997
Trade payables 445 483 384
Bank Loan 825 1,648 1,650
Contingent consideration 100 150 150
Lease liabilities (Note 3) 652 -- --
Insurance technical reserve -- 1,530 947
Other creditors and accruals 3,962 3,374 3,373
---------- ----------
10,646 11,436 10,501
---------- ---------- -------------
In October 2016 the Company took out a 3 year bank loan for
GBP3.30 million which pays interest of 4% above LIBOR. The bank
loan was interest only for the first year with quarterly repayments
thereafter commencing in January 2018. The loan is secured by a
capital guarantee provided by STM Fidecs Limited.
12. Other payables - amounts falling due in more than a year
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Lease liabilities (Note 3) 1,835 -- --
Deferred tax liabilities (Note
5) 329 -- --
Provisions for dilapidation
costs (Note 3) 103 -- --
Bank loan -- 827 --
----------
2,267 827 --
---------- ---------- -------------
13. Called up share capital
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Authorised
100,000,000 ordinary shares
of GBP0.001 each 100 100 100
Called up, issued and fully
paid
59,408,088 ordinary shares
of GBP0.001 each 59 59 59
---------- ---------- -------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAXNNEAFNEFF
(END) Dow Jones Newswires
September 10, 2019 02:01 ET (06:01 GMT)
Grafico Azioni Stm (LSE:STM)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Stm (LSE:STM)
Storico
Da Apr 2023 a Apr 2024
