STM Group Recurring revenue remains predictable

Investments

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 2021.

Financial Highlights:

 2021202120202020
 (reported)(underlying)**(reported)(underlying)**
Revenue£11.4m£11.4m£11.8m£11.8m
Profit before other items*£1.5m£1.7m£1.8m£1.9m
Profit before taxation (“PBT”)£0.9m£0.8m£1.0m£1.1m
Profit before other items margin13%15%15%16%
Earnings per share1.28pN/A1.33pN/A
Cash at bank (net of borrowings)£16.5m £17.6m 
     
Interim dividend0.60p 0.55p 

* 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 the table below

Highlights:

· Recurring revenue remains predictable and a cornerstone of the business, and now represents 88% of the Group’s reported revenue

· Disinvestment of both CTS businesses allowing the Board to concentrate on growing our core activities

· Strategic focus on updating and revising operating model to drive increased “topline” growth

· Three of four IT projects now gone “live” with intention of having two core administration systems – improving operating margins

· Adapted to a “hybrid” working environment to keep our colleagues safe and maximise flexibility and efficiencies

· The Berkeley Burke acquisition of August 2020 is now fully integrated and delivering the profit that was anticipated

· Acquisitions are a core pillar of our growth strategy

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

“The first six months of the year have been busy with two disposals and three of the four key IT projects having gone “live”.  As one would expect with our business model, the recurring revenue nature of our pensions and life assurance businesses underpins the predictability of our performance, with some 88% of total revenue meeting this classification. 

“The simplification of our overall Group structure and our business lines remains a focus of the Plc board, and we are pleased to be able to state that we have now exited the Trust and Corporate Services sector, having found good homes for both the Gibraltar and Jersey clients and colleagues. The Berkeley Burke acquisition of August last year is now fully integrated and delivering the profit that was anticipated.

“There continues to be a strong appetite for further acquisitions as a key pillar for revenue and profit growth, to sit alongside the organic growth opportunities.

“We look forward to updating shareholders with our progress in the near future. “

Investor Presentation: 1.30pm on Wednesday 15 September 2021

The Directors will hold a presentation to introduce STM Group Plc to investors and cover the Interim Results and prospects at 1.30 p.m. on Wednesday 15 September 202 1 .

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   STM@walbrookpr.com or in real time during the presentation via the “Ask a Question” function.  

Chairman’s Statement

I am pleased to present the results for the first six months of 2021. It has been a period of considerable actual and ongoing evolution within the Group against a backdrop of the continuing challenges of the pandemic, where we continue to support all our colleagues, clients and stakeholders. This backdrop has been made all the more challenging as it has coincided with us finalising a number of major IT migration projects, which will ultimately move the Group to a healthier operating margin.

The recurring revenue base has held up well and continues to form our foundation stone for building our new business revenues, which is our stated strategic priority. Revenue (excluding discontinued operations) grew year on year by 3.9% although the first half of 2021 was relatively disappointing with regards to new business volumes in certain areas, with some partnership arrangements being slower to come to fruition than expected. The Group has, however, maintained its overall profitability through prudent and agile attention to our resourcing and cost base.

We continue to realign our business to be more focused on revenue growth and are now making real tangible changes to our operating model to support this strong ambition. The investment that we have made in the infrastructure over the last few years gives us confidence that we are able to cope with accelerating our revenue growth and improve operating margins by sweating our existing infrastructure and capability.

Board Evolution

Going into the second half of 2021, our operating model changes further as we move down to a two-person Plc executive team, and the creation of a dedicated senior Group role for business development, which will be a non-Board post. We will continue to proactively review our top to toe governance structure and also our stated risk appetite profile so as to ensure that it is conducive to our stated top and bottom line growth expectations.

I must express my deepest thanks to Therese Neish and Pete Marr for their huge contribution to the Group over the years, both of whom will be stepping down from the Board before my next Chairman’s report.

Finally, I would like to take the opportunity to thank all my STM colleagues for their continuing hard work in a complicated and unpredictable working environment.

Duncan Crocker

Chairman

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