STM prepares fireworks for 2011

STM, the cross-border financial services firm, more than doubled profits in 2010, in line with expectations, and "two little fireworks" could make 2011 a winning year.The company, which helps individuals and businesses with tax, legal, trust and pensions needs, made £1.5m before tax and after exchange gains, up from £0.6m in 2009. A 43% surge at the core corporate and trustee services (CTS) business to £7.6m pushed overall revenue to £10.5m, up 24% on the year before. That's despite down-time for integration and new, upgraded back office software platform installation.Zenith, bought in April 2010 for £5.1m, has provided the much needed platform for Jersey. Revenue was £2.2m last year and analysts expect a full-year contribution for 2011, perhaps as much as £0.3m, to lift group profit to between £1.8m and £2m.Talking to ShareCast earlier, chief executive Colin Porter and finance boss Alan Kentish predicted "robust" organic growth this year, but were "incredibly excited" by prospects for their overseas pensions product aimed at ex-pats, one of the two "little fireworks". About £1.5bn has been transferred out of the UK already, but the target market for qualifying recognised overseas investment schemes (QROPS) is almost £600bn, and there are few competitors, says STM. "Every 100 pensions we export is worth about £0.5m to us," said Porter. "So, it doesn't take much to change the profile of our revenue streams and profitability. Achieving 360 QROPS in a year could alter the profile quite dramatically."Life bonds for offshore and overseas taxpayers, a product embraced by huge swathes of Europe, is firework number two. It will also be a focus for the current financial year."Although only very early days, the growth potential in these two areas is significant for a business the size of STM," reckon analysts at finnCap.Things haven't gone quite as well in Switzerland though. It lost less in the second half than the first, but its days could be numbered. It has 3-6 months to start showing progress, ShareCast is told."Current trading and outlook benefits from robust underlying revenue base, with billable fees providing pleasing revenue visibility for early part of 2011," STM said."The board views 2011 as a year in which to continue to consolidate the initiatives of previous years in order to deliver enhanced profitable growth. Acquisition activity is likely to be limited in 2011."The Malta overseas pensions product (QROPS) has been approved by UK authorities and the pipeline and interest for this product is "growing significantly". STM wants to double turnover to around £0.6m."With the company back on delivery mode, we expect the shares will perform and we are raising our recommendation from Add to Buy," says broker Evolution.A final dividend of 0.4p a share takes the total payout for the year to 0.6p.