STM Group 2021 is the year where strategic initiatives come to fruition

Wealth

STM Group plc (LON:STM), the multi-jurisdictional financial services group, has announced its audited final results for the 12 months ended 31 December 2020.

Financial Highlights:

 2020 (reported)2020
(underlying)**
2019
(reported)
2019
(underlying)**
Revenue£24.0m£24.0m£23.2m£22.9m
Profit before other items*£3.6m£4.0m£3.5m£4.2m
Margin15%17%15%18%
Profit before taxation (“PBT”) (and exceptional bargain purchase gain)£2.0m£2.4m£3.9m£2.6m
Earnings per share2.7pN/A5.73pN/A
Cash at bank (net of borrowings)£14.8mN/A£17.2mN/A
Final dividend (2020) / second interim dividend (2019)0.85pN/A0.75pN/A
Total dividend1.40pN/A1.50pN/A

* Profit before other items is defined as revenue less operating expenses i.e. profit before taxation, finance income and costs, depreciation, amortisation, bargain purchase gain and gain on the call options

** Underlying statistics are net of certain transactions which do not form part of the regular operations of the business as further detailed in Table 2 below

Operational Highlights:

·    Stability of recurring revenue apparent through the Covid-19 virus

·    Focussed on keeping colleagues safe through working from home and following Governments’ guidelines and maintaining customers service levels

·    The majority of our key IT projects for improved profitability are now live with the remaining concluding in the first half of 2021. Continued focus on technology to become a key differentiator.

·    UK orientated products – Shariah SIPP and Workplace Pension Plan (“WPP”) solutions – now launched, with opportunity for international solution as well

·    WPP corporate business moving towards break-even

·    Flexible annuity pipeline building, but slower than anticipated conversion

·    Active pipeline of acquisition opportunities, particularly in the UK

·    Strategic focus on core activities of pension administration and life assurance, with post period end disposals of the CTS businesses

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

“Whilst the year has had challenges, we have achieved a great deal in progressing our three year transformation and growth strategy.  We see 2021 being a year where a number of strategic initiatives come to fruition that will build on efficiencies within the business. There is an energy and focus for the remainder of 2021 in building some key partnerships that will help drive new business volumes.  Additionally, our acquisition pipeline is active and expected to be a pillar of our future growth.

“The recent Judgment in the Carey v Adams case will have implications across the whole of the Financial Services industry who have dealings on an execution only basis.  This was a historical claim and the Options management team will continue to drive the business forward as they have done since being part of the STM team.

“STM is an increasingly streamlined and more focused business. The Board is optimistic for its future and looks forward to updating on progress in 2021.”

Chairman’s statement

I am pleased to present our 2020 financial statements which reflect another challenging but progressive year against the backdrop of the significant Covid-19 complications. We have however, made significant progress in a number of areas as we continue to implement our three-year growth strategy and have also kept our colleagues safe and protected during the pandemic. 

Our operating model has come a long way since it was revised in 2019, giving much clearer demarcations of personal and Divisional accountability. We will continue to challenge and revise it where appropriate so as to adapt to changes in the marketplace, and how we need to operate.  The key criteria being that we must set a firm foundation for future profitable growth.

Following the 2019 acquisition of Options, we have further strengthened our UK operations in August 2020 with the acquisition of a small SSAS and Group Pension Plan business, that will deliver annual revenue of circa £1.7 million. This complements our aspirations of building on a stronger UK focus going forward, and we will expect to make further acquisitions in the UK in the near future.

There have been a number of important IT projects carried out during 2020, and I am pleased to say that these have progressed well, with the ‘go-live’ of Office 365 and the two administration systems for the UK businesses, alongside the two QROPS businesses due to migrate in the second quarter of 2021. These will deliver important efficiencies during the second half of 2021 and will contribute to an improvement of our operating margins going forward.

Our primary challenge during 2020 and into 2021 is how we accelerate our new business growth, which has been a frustration that I share with the executive and the wider Plc board. We have a robust and solid infrastructure that requires a healthy stream of new business. We continue to have a major focus on building our distribution network for both the UK and international markets despite Covid hindering the process. We are also actively seeking new strategic distribution partnerships in all jurisdictions.

Post period end, we realised the sale of our non-core CTSP businesses which was a key deliverable on the Group’s roadmap in order to allow STM’s executive management to focus on STM’s core activities of pension administration and provision of life assurance wrappers. Accordingly, I am acutely conscious that our numbers for 2021 have been pared back, reflecting a spreading of our fixed head-office costs over a smaller revenue base. We are actively challenging how we can mitigate this as we continue to streamline our corporate structure to focus on our core activities of pension administration and life assurance products. In addition, we are actively reviewing our capital allocation processes to obtain a more efficient solution.

Finally, I continue to watch the developments of the Adams vs Carey case, and believe that further guidance and clarity for SIPP providers, and indeed the wider UK financial services industry which operates in an execution only environment can only be beneficial to all parties. The new case law in the original ruling, and upheld in the Court of Appeal, in relation to Conduct of Business principles will be something that future Ombudsman rulings are expected to take into account.

I would like to take this opportunity to thank the Groups Directors, executive and all our colleagues for their relentless efforts during 2020, and one of my primary concerns remains protecting the welfare of our staff, their families and our clients’ service standards in these uncertain times. I would specifically like to thank our CFO, Therese Neish for her enormous efforts and ongoing professionalism in a year where she has declared her intent to move on.

Duncan Crocker

Chairman

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