Stm Grp. Regulatory News (STM)

4 Mar 2008 07:01

STM Group PLC04 March 2008 Press Release 4 March 2008 STM Group Plc ("STM", "the Company" or "the Group") Preliminary Results for the 11 months ended 31 December 2007 STM Group Plc (AIM:STM), the cross border financial services provider, announcesits preliminary results for the 11 months ended 31 December 2007. Highlights • Raised £7.5 million through IPO in March 2007 • Successfully acquired and integrated: o Fidecs Group Limited o Atlas Group Limited o Parliament Corporate Services Limited o Compagnie Fiduciaire Trustees Limited • Revenue of £5.29 million* • Profit before tax of £1.78 million* • EPS at 5.29 pence* * Figures are not for the full year, rather from 1 February 2007 to 31 December2007 (although they relate to just a nine month trading period post theacquisition of Fidecs on 28 March 2007). Commenting on the results, Tim Revill, Chief Executive Officer, said: "2007 hasbeen an exceptional year for STM, with the Group achieving its goals of growingthrough strategic acquisitions and organic growth. The Group enters 2008 with apro-forma annual turnover of approximately £7.5 million, before any furtherorganic growth or acquisitions, and therefore looks forward to the coming yearwith confidence." For further information, please contact: STM Group Plc Tim Revill, Chief Executive Officer Tel: 00 350 51610 tim.revill@stmgroupplc.im www.stmgroupplc.com Daniel Stewart & Company Plc Lindsay Mair / Stewart Dick Tel: +44 (0) 20 7776 6550 www.danielstewart.co.uk Media enquiries: Abchurch Henry Harrison-Topham / Charlie Jack Tel: +44 (0) 20 7398 7706 henry.ht@abchurch-group.com www.abchurch-group.com Chairman's Statement Overview I am delighted to present STM Group plc's ("STM", "the Company", or "the Group")maiden preliminary results for the period from 1 February 2007 to 31 December2007. These results reflect the transition from a private company to an AIMtraded public company, and encompass the Company's move from a dormant status tothat of a trading group. STM was created specifically to build a leadingfinancial services group operating in the international corporate and trusteeservices provider ("CTSP") sector. STM's strategy is to build an international group of CTSPs operating from anumber of complementary tax efficient jurisdictions, with each offering itsclients high quality products and services. Potential acquisition targets aresubject to extensive due diligence, with a focus on the quality of the clientportfolio, client service and compliance, and each acquisition will be requiredto adhere to STM group-wide standards following acquisition. The Group was admitted to trading on AIM on 28 March 2007, raising £7.5 millionthrough the issue of 15.0 million new shares to institutional and otherinvestors at 50 pence per share, and on the same day completed the acquisitionof the entire issued share capital of Fidecs Group Limited (renamed "STM Fidecs"). STM Fidecs, one of the largest CTSPs based in Gibraltar, was theCompany's principal trading subsidiary during the period under review. Duringthe remainder of 2007, STM Fidecs acquired three further CTSPs, two of whichoperate in Gibraltar and one in Jersey. Accordingly, STM's consolidated results for the eleven month period to 31December 2007 include trading activities for the period from 28 March 2007 to 31December 2007 only. However for the benefit of shareholders and for the ease ofcomparative purposes, we have also included some additional pro-forma financialinformation on STM Fidecs for the full year to 31 December 2007. The "buy and build" strategy, as set out in our AIM Admission Document,continues to progress well and would not be possible without the continuedsupport of our shareholders. Our established formula for such purchases hasproven to be efficient, effective and earnings enhancing, and confirms ourassertion that the CTSP sector is ripe for consolidation. Furthermore, I'mparticularly pleased to announce that the organic growth shown by all theacquired business has exceeded our expectations and bodes well for the future. STM is a people and relationship business and its strength is in the quality ofits management and staff. 2007 has been a year of significant change for mostof the people within STM and, on behalf of the whole board, I would like toexpress thanks for their continued dedication, professionalism and hard workover the last year. Bernard GallagherNon-Executive Chairman4 March 2008 Chief Executive Officer's Review Summary of the year 2007 2007 was a transformational year for STM Group plc. On 28 March 2007, theCompany was admitted to the London Stock Exchange's AIM market (AIM:STM),raising £7.5 million through a placing of 15.0 million shares and, on the sameday, acquiring Fidecs Group (renamed "STM Fidecs"). The Group then set about its stated objective of growing both organically andvia acquisition. In June, STM acquired Gibraltar based Atlas Group and, inAugust, acquired Parliament Corporate Services also based in Gibraltar. Both ofthese businesses and all the staff have been successfully integrated into STMFidecs. In December, STM made its first acquisition outside Gibraltar, buyingCompagnie Fiduciaire Trustees, a fully licensed trust company in Jersey. We are delighted to report that each of the Group's businesses, followingacquisition has achieved strong organic growth. We have a clear understandingof our clients' needs and we devote considerable effort to improving processesand developing products to meet them. Although, the statutory consolidatedaccounts for STM only include nine months trading since its first acquisition(STM Fidecs) at the end of March, the 2007 unaudited annual turnover of STMFidecs alone (excluding the effect of Atlas and Parliament) increased by morethan 22 per cent. to £6.1 million compared to 2006. Our corporate structure is designed to allow the management of each of ouroperating divisions a high degree of autonomy, but within a single group-widecode of governance and a high level of client service, common to all divisions. We share best practice and experience throughout the Group, but avoidduplication of overheads by sharing such matters as treasury, risk managementand, I.T. systems. Our Group management agrees clear objectives with eachdivisional board and they are then left to get on with their business, reportingon a monthly basis. Strategy STM's purpose is to provide innovative and unbiased financial solutions to HighNet Worth Individuals ("HNWI"), who are investing or moving cross-border oropening a business overseas, explained in a language they understand. Once ourclient is happy with the solution proposed, we implement our advice. Ourstrategy is designed to achieve this mission. With the European Union now comprising 27 member states, in which EuropeanCitizens have the right of establishment and freedom to purchase real estate andother assets, there is a rapidly expanding market for our cross-border advisoryservices and financial products. Gibraltar is part of the UK Member State forEU purposes (unlike the Channel Islands and the Isle of Man) which means thatSTM's Gibraltar subsidiaries benefit from the fundamental freedom to providefinancial products and services directly to 456 million EU citizens. There arealso increasing numbers of EU citizens moving to work or retire outside Europein such areas as the Middle East (esp. Dubai), Thailand, Malaysia, Australia andNew Zealand. STM looks to develop a long-term professional relationship with our clients,based on mutual trust, which results in repeat business and referrals fromsatisfied clients. It is estimated that 19% of children of HNWIs now live in adifferent jurisdiction from their parents, so expertise in planning forcross-border wealth transfer is required. The sophistication and international involvement of our HNWI clients is growingday-by-day and our products, services and processes have to keep pace. For thisreason STM will continue its "buy and build" strategy, acquiring CTSPs incomplementary jurisdictions, to achieve global spread. We will also develop newfinancial products and services to satisfy market demand. Operational Results The operational highlights in 2007 for each of the main divisions follows. Forthe purposes of reporting the Group's progress during 2007, the principaltrading divisions were Corporate and Trustee Services ("CTS") and InsuranceManagement, as well a number of other smaller, but growing divisions offeringcomplementary services. Pro-forma turnover and other figures stated are for thefull 12 months, so that like-for-like comparisons can be made. Corporate and Trustee Services ("CTS") During the twelve months to December 2007, pro-forma like for like turnover ofSTM Fidecs CTS division increased by 8% to £2.734 million, compared to 2006.Due to the fact that our CTS fees comprise a fixed annual fee per entity plustime charges for ongoing administration and are not based on the value of assetsunder management, we have not been unduly affected by the instability recentlyexperienced in the wider financial markets in the latter part of 2007. The total number of entities administered by STM Fidecs appears to have remainedvirtually static between the date of acquisition and the year end. In fact wegained 31 trusts and 48 companies, which replace the 13 trusts and 50 companies,which ceased operations during 2007. These figures show an annual attritionrate slightly less than the generally accepted industry average of 10%. The two bolt-on Gibraltar acquisitions, Atlas and Parliament, added a further£0.2 million and £0.5 million of fee income respectively, since the date oftheir acquisition, bringing with them a combined total of 145 trusts and 335companies. The number of entities on acquisition and at 31 December 2007 were: Date of Business Trusts on Companies on Trusts at Companies at acquisition acquired acquisition acquisition 31/12/07 31/12/07 March STM Fidecs 375 550 393 548June Atlas 30 60 30 65August Parliament 115 275 112 272December Comp. Fid. 23 0 23 0 Total 543 885 558 885 The above analysis shows how successfully Atlas and Parliament have beenintegrated, resulting in almost 100% client retention. In the same vein, STMFidecs' core business has continued to grow organically, despite the extrademands placed on its management. Since the year-end, STM has also purchased a portfolio of 284 Gibraltarcompanies from Jordans (Gibraltar). Insurance Management ("STM FIM") STM FIM had a frustrating 2007, with a number of new licence applications whichwere expected to be completed in 2007 being deferred into 2008. This, coupledwith a lower than expected level of premium income of several of the managedinsurance companies due to the soft conditions in the insurance marketgenerally, (which is cyclical), resulted in pro-forma annual income for 2007dropping to £1.53 million from £1.7 million in 2006. However, there was anotable increase in activity towards the end of the year and STM FIM iscurrently managing three licence applications, the benefit of which will be feltin 2008. Working closely with other divisions within STM, considerable resource wasinvested during the year in the development and the application for a licencefor STM's own life assurance company, STM Life Assurance PCC Plc ("STM Life").All STM FIM's development costs on this project have been expensed during 2007. Other Divisions Tax and Financial Advisory STM operates a number of other complementary divisions, the largest of which isTax and Financial Advisory. The requirement for international tax and financialadvisory services was buoyant throughout 2007, with pro-forma annual incomeincreasing to £0.6 million from £0.3 million the previous year. Advice given bythe division resulted in the establishment of over twenty new entities to beadministered by the corporate and trustee services division. The division hasbuilt and is cultivating a broad base of professional intermediaries, reducingSTM's dependence on any particular network. As with STM FIM, our tax plannersalso invested a considerable amount of time in researching and developing STMLife, where again all development time costs were expensed in 2007. STM Nummos The re-establishment of STM Nummos, the Group's Spanish subsidiary was completedduring 2007 following the acquisition of the balance of the outstanding sharesin the previous year. STM Nummos' business is the provision of legal, includingconveyancing, tax planning, tax and accounting compliance services toexpatriates. Fee income for STM Nummos almost doubled to £0.4 million in 2007. In 2007 we incorporated a new subsidiary and made the necessary applications foran insurance intermediary licence to provide medical insurance throughout Spainrepresenting BUPA and Sanitas. The strategy behind this move is that it shouldlead to considerably increased 'footfall' of HNWI expatriates to STM's officesto whom we will cross-sell the full range of STM Group services. Pensions This division was launched during 2007 and has immediately established areputation as the specialist pension advisers and administrators in Gibraltar.Introductions are beginning to flow from the banks and other financialintermediaries in Gibraltar and the division is currently setting up a sizeableself-administered pension scheme for one of the major online gambling companies. Demand for Qualifying Recognised Overseas Pension Schemes (QROPS), which areeligible for tax-free transfers from the UK, has exceeded expectations and timespent in developing this service in 2007 will bear fruit in 2008. Financial Review The Group's statutory accounts only take into account the post acquisitiontrading (effectively from the date of admission to trading on AIM onwards,amounting to nine months trading). Trading in STM commenced on 28 March 2007 with the acquisition of STM Fidecs.During the period to 31 December 2007, the Group recorded turnover of £5.29million and a profit after tax of £1.65 million. Turnover was slightly ahead ofour expectations, primarily due to approximately £0.3 million of shared officeestablishment costs, recharged to previously associated businesses, which ifextracted, would result in a 33 per cent. net profit margin, in line with ourexpectations. STM's taxation charge for the year was on budget at £0.14million. Basic EPS for the period was 5.29 pence. In line with all CTSP businesses, the Group had accrued income, in the form ofwork performed for clients but not yet billed at the balance sheet date, of£1.56 million (up from £1.2 million at 30 June 2007). This provides someimmediate visibility of billable fees for 2008, a good proportion of which havealready been billed in the first two months of the current year. Trade receivables at the year end of £1.99 million was up from the interim stage(30 June 2007: £1.65 million) due to increased billing from organic growth andthe effect of second half acquisitions. Since the year end, cash ofapproximately £1.2 million has been collected. The Group ended the year with cash of £0.97 million, having spent approximately£7.4 million of cash on acquisitions between 28 March and 31 December. Deferredcash consideration relating to acquisitions made in 2007 of approximately £0.72million is expected to be paid out of operating cash flow in 2008. Year on year comparators As stated above, we believe that it is in the best interests of Shareholders toalso include, and comment upon, the trading results for the full year to 31December 2007 in respect of STM's largest acquisition to date, that of STMFidecs, albeit based upon annual unaudited numbers which will not, in theirentirety, form part of the Group's statutory accounts for the current financialperiod. This, will demonstrate the year on year organic growth of STM'sbusinesses in spite of STM's own relatively short history. Accordingly, STM Fidecs' turnover in the full year to 31 December 2007, on alike-for-like basis stripping out the effect of subsequent acquisitions, was£6.09 million compared to £4.97 million in 2006, an increase of more than 22%.Inclusive of the subsequent acquisitions (principally Atlas and Parliament), STMFidecs' annual turnover in 2007 was £6.83 million, an increase of more than 37%on the previous year. Annual operating profit margin in 2007 grew to 35.3%, upfrom 32.6% in 2006. The results from the period under review show the Company to be in good healthand trading comfortably in line with our expectations. In line with the statement made at the time our IPO, no dividend has beendeclared in respect of the period ended 31 December 2007. Our people STM is a people business and its strength is in the quality of its managementand staff. We seek to attract, retain and develop the very best people. Wehave attractive incentive and reward schemes, which encourage both personalperformance and contribution to team success. As we are in a 'knowledge business', our staff are encouraged to pursuecontinuous professional education to maintain their technical capability andunlock their potential. Today the team numbers over ninety people. I would like to thank each one ofthem for the contribution they have made, to the success of STM Group in 2007. Current Trading and outlook Trading in 2008 has started well and is in line with market expectations. In addition to the continued global growth in the number of HNWI and theincreased migration of HNWI, we will also undoubtedly benefit from the UKGovernment's recent changes to taxation of non domiciled residents. This hasgiven rise to numerous enquiries from UK intermediaries concerning how torestructure their clients' overseas assets or where their clients shouldrelocate to. We have solutions for them and this should result in considerablenew business for STM Group during 2008. The CTSP sector remains buoyant, with significant opportunities forconsolidation activity, providing confidence in our stated "buy and build"strategy is being executed at an opportune time. The Company will continue tofocus on both accelerating organic growth and seeking out high quality earningsenhancing acquisitions in both existing and complementary jurisdictions. Weremain confident of our prospects for the future. Timothy RevillChief Executive Officer4 March 2008 CONSOLIDATED INCOME STATEMENTfor the period from 1 February 2007 to 31 December 2007 Unaudited *Unaudited Notes 1 February 2007 to Proforma year to 31 December 31 December 2007 2007 £'000 £'000 Revenue 5,292 6,833Administrative expenses (3,520) (4,422) Operating Profit 1,772 2,411Share of profit of associate 12 25 Profit on ordinary activities before 1,784 2,436taxationTaxation 5 (137) (135) Profit on ordinary activities after 1,647 2,301taxationDividends - - Retained profit for the period 1,647 2,301 Earnings per share basic (pence) 4 5.3 6.4Earnings per share diluted (pence) 4 5.2 6.3 *For reference purposes only before Plc costs The Directors consider the activities of the Group to be derived from continuingactivities. There were no gains or losses for any period other than those recognised in theincome statement. CONSOLIDATED BALANCE SHEETas at 31 December 2007 Unaudited Notes 31 December 2007 £'000ASSETSNon-current assetsProperty, plant and equipment 7 503Intangible assets 6 15,184Investments 8 74 Total non-current assets 15,761 Current assetsAccrued income 1,558Trade and other receivables 10 3,219Cash and cash equivalents 9 971 Total current assets 5,748 Total assets 21,509 EQUITYCalled up share capital 12 38Share premium account 15,898Reserves 1,579 Total equity attributable to equity 17,515shareholders LIABILITIES Trade and other payables 11 3,994 Total liabilities and equity 21,509 COMPANY BALANCE SHEETas at 31 December 2007 Unaudited Notes 31 December 2007 £'000ASSETSNon-current assetsInvestments in subsidiaries 8 14,267 Total non-current assets 14,267 Current assetsTrade and other receivables 10 1,578Cash and cash equivalents 9 91 Total current assets 1,669 Total assets 15,936 EQUITYCalled up share capital 12 38Share premium account 15,898Reserves (198) Total equity attributable to equity 15,738shareholders LIABILITIESCurrent liabilities Trade and other payables 11 198 Total liabilities and equity 15,936 CONSOLIDATED CASH FLOW STATEMENTfor the period from 1 February 2007 to 31 December 2007 Unaudited 31 December 2007 £'000Reconciliation of operating profit to net cash flow from operating activities Profit for the period before tax 1,784Adjustments for:-Profit on sale of investments (9)Depreciation 67Share of associate profits (12)Shares issued for services performed 22Taxation paid (3)Increase in trade and other receivables (2,919)Increase in accrued income (1,558)Increase in trade and other payables 3,860 Net cash from operating activities 1,232 Investing activitiesAcquisition of investments of property, plant and equipment (570)Acquisition of treasury shares (68)Acquisition of investments -cash consideration (7,747)Cash acquired as part of investments 1,182 Net cash used in investing activities (7,203) Cash flows from financing activitiesNet cash consideration from shares issued 6,942 Net cash from financing activities 6,942 Increase in cash balances 971 Analysis of cash and cash equivalents during the periodBalance at start of period -Increase in cash and cash equivalents 971 Balance at end of period 971 CONSOLIDATED CHANGES IN EQUITYfor the period from 1 February 2007 to 31 December 2007 Share Share Profit & Loss Treasury Unaudited Capital Premium Reserve Shares Total £000 £000 £000 £000 At 1 February 2007 6 294 - - 300Profit for the period - - 1,647 - 1,647Shares Issued 32 15,604 - - 15,636Treasury shares purchased - - - (68) (68) At 31 December 2007 38 15,898 1,647 (68) 17,515 NOTES TO THE CONSOLIDATED PRELIMINARY RESULTSfor the period from 1 February 2007 to 31 December 2007 1. Reporting entity STM Group Plc (the "Company") is a company domiciled in the Isle of Man. Theaddress of the Company's registered office is PO Box 227, Clinch's House, LordStreet, Douglas, IM99 1RZ. 2. Basis of preparation The interim financial information has been prepared on the basis of theaccounting policies set out in note 3. Results for the period from 1 February 2007 to 31 December 2007 have not beenaudited. a) Statement of compliance The Consolidated Financial Statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRSs"). b) Functional and presentation currency These Consolidated Financial Statements are presented in Pounds Sterling (£)which is the Company's functional currency. c) Use of estimates and judgments The preparation of financial statements requires management to make judgments,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actualresults may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised and in any future periods affected. 3. Significant accounting policies The accounting policies set out below have been applied consistently to allperiods presented in these Consolidated Financial Statements. a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when theGroup has the power to govern the financial and operating policies of an entityso as to obtain benefits from its activities. In assessing control, potentialvoting rights that presently are exercisable are taken into account. Thefinancial statements of subsidiaries are included in the Consolidated FinancialStatements from the date that control commences until the date that controlceases. (ii) Associates (equity accounted investees) Associates are those entities in which the Group has significant influence, butnot control, over the financial and operating policies. Associates areaccounted for using the equity method (equity accounted investees). Theconsolidated financial statements include the Group's share of the income andexpenses of equity accounted investees, after adjustments to align theaccounting policies with those of the Group, from the date that significantinfluence or control commences until the date that significant influence orcontrol ceases. When the Group's share of losses exceeds its interest in anequity accounted investee the carrying amount of that interest is reduced to niland the recognition of further losses is discontinued except to the extent thatthe Group has an obligation or has made payments on behalf of the investee. (iii) Transactions eliminated on consolidation Intra-group balances, and any unrealised income and expenses arising fromintra-group transactions, are eliminated in preparing the Consolidated FinancialStatements. Unrealised gains arising from transactions with equity accountedinvestees are eliminated against the investment to the extent of the Group'sinterest in the investee. Unrealised losses are eliminated in the same way asunrealised gains, but only to the extent that there is no evidence ifimpairment. b) Revenue Revenue is derived from the provision of services and is recognised in theincome statement in proportion to the stage of completion of the transaction atthe reporting date on an accruals basis. c) Accrued income Accrued income represents billable time spent on the provision of services toclients which has not been invoiced at the reporting date. Accrued income isrecorded at the staff charge-out rates in force at the reporting date, less anyspecific provisions against the value of accrual income where recovery will notbe made in full. d) Property and office equipment (i) Recognition and measurement Items of property and office equipment are measured at cost less accumulateddepreciation and impairment losses. Cost includes expenditures that aredirectly attributable to the acquisition of the asset and bringing it into use. (ii) Depreciation Depreciation is recognised in the income statement on a reducing balance basisover the estimated useful lives of each part of an item of property, plant andequipment. Leased assets are depreciated over the shorter of the lease term orthe estimated useful life. The rates in use on a reducing balance basis are as follows: Office equipment - 25%Motor vehicles - 25%Leasehold improvements - 10% Depreciation methods, useful lives and residual values are reassessed at thereporting date. e) Investments Investments are carried at fair value, subject to provisions for impairmentwhere the current value of the investment is considered to be less than cost.Impairment losses are recognised in the profit and loss account. Investmentsare reviewed for impairment at each year end. Investments in associates areaccounted for on an equity accounting basis. f) Operating leases Payments under operating leases are charged directly to the income statement ona straight line basis over the term of the lease. g) Employee benefits The Group operates a defined contribution pension plan. Obligations forcontributions to defined contribution pension plans are recognised as an expensein the income statements when they are due. h) Finance income and expense Finance income comprises interest income on funds invested, dividend income andforeign currency gains. Interest income is recognised as it accrues using theeffective interest method. The Group also earns interest on pooled client monies, which under the clientagreements is shared by the Group and its clients. This interest income isincluded in revenue. Finance expense comprises interest in borrowings and foreign currency losses.Interest expense is charged to the income statement using the effective interestmethod. i) Income tax expense Income tax expense comprises current and deferred tax. Income tax expense isrecognised in the income statement. Current tax is the expected tax payable on the taxable income for the periodusing enacted tax rates, adjusted for previous period adjustments. Deferred tax is recognised using the balance sheet method, providing fortemporary differences between carrying amounts of assets and liabilities forfinancial reporting purposes and for tax purposes. Deferred tax is not providedin respect of goodwill. Deferred tax is measured at the tax rates expected tobe enacted when they reverse. j) Foreign currency Transactions in foreign currencies are translated to the functional currency ofthe Group at exchange rates ruling at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies at the reporting dateare translated at the exchange rate ruling at the reporting date. The resultinggain or loss is recognised in the income statement. k) Cash and cash equivalents Cash and short term deposits in the balance sheet comprise cash at banks and inhand and short term deposits with an original maturity of three months or less. l) Intangible Assets - Goodwill Goodwill arises on the acquisitions of subsidiaries and associates. Goodwillrepresents the excess of the cost of the acquisition over the Group's interestin the net fair value of the identifiable assets and liabilities of theacquiree. Goodwill is measured at cost. An annual impairment review isundertaken. m) Impairment A financial asset is considered to be impaired if objective evidence indicatesthat one or more events have had a negative effect on the estimated future cashflows of that asset. An impairment loss in respect of a financial asset measured at amortised cost iscalculated as the difference between its carrying amount, and the present valueof the estimated future cash flows discounted at the original effective interestrate. An impairment loss in respect of an available-for-sale financial asset iscalculated by reference to its current fair value. Individually significant financial assets are tested for impairment on anindividual basis. The remaining financial assets are assessed collectively ingroups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss inrespect of an available-for-sale financial asset recognised previously in equityis transferred to the income statement. An impairment loss is reversed if the reversal can be related objectively to anevent occurring after the impairment loss was recognised. For financial assetsmeasured at amortised cost and available-for-sale financial assets that are debtsecurities, the reversal is recognised in profit & loss. For available-for-salefinancial assets that are equity securities, the reversal is recognised directlyin equity. The carrying amounts of the Group's non-financial assets are reviewed at eachreporting date to determine whether there is any indication of impairment. Ifany such indication exists then the asset's recoverable amount is estimated. Forgoodwill and intangible assets that have indefinite lives, the recoverableamount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. A cash -generating unit isthe smallest identifiable asset group that generates cash flows that largely areindependent from other assets and groups. Impairment losses are recognised inprofit or loss. Impairment losses recognised in respect of cash-generating unitsare allocated first to reduce the carrying amount of any goodwill allocated tothe units and then to reduce the carrying amount of the other assets in the unit(group of units) on a pro-rata basis. 4. Earnings per Share Earnings per share for the period from 1 February 2007 to 31 December 2007 isbased on the profit after taxation of £1,647,000 divided by the weighted averagenumber of £0.001 ordinary shares during the period of 31,143,626 (basic) and31,730,450 (dilutive). A reconciliation of the basic and diluted number of shares used in the periodended 31 December 2007 is: Weighted average number of shares 31,143,626Dilutive share options and contingent consideration shares 586,824Diluted 31,730,450 5. Tax on profit on ordinary activities Tax is based upon the profit on ordinary activities. The Company's main trading subsidiaries are based in Gibraltar and thesecompanies relinquished their tax exempt status on 28 March 2007, being the datethat they were acquired by STM Group Plc. The Corporation tax rate relating toincome derived from and accrued in Gibraltar is 35% (33% as from 1 July 2007). 6. Acquisition of subsidiaries STM Fidecs Limited On 28 March 2007 the STM Group Plc acquired 100% of the issued equity of FidecsGroup Limited a company incorporated in the Isle of Man. Following acquisitionit was renamed STM Fidecs Limited. The results for the period sinceacquisition are included within the consolidated results. The acquisition hadthe following effect on the assets and liabilities of STM Group Plc atacquisition. £'000 Net identifiable assets and liabilities 1,842Goo Goodwill 12,083Consideration paid including costs 13,925 Atlas Trust Company Limited On 26 June 2007 STM Fidecs Limited acquired 100% of the issued equity of AtlasTrust Limited a company incorporated in Gibraltar. The results for the periodsince acquisition are included within the consolidated results. The acquisitionhad the following effect on the assets and liabilities of STM Group Plc atacquisition. £'000 Net identifiable assets and liabilities 85Goodwill 580Consideration paid including costs (including contingent consideration) 665 Parliament Corporate Services Limited On 3 September 2007 STM Fidecs Limited acquired 100% of the issued equity ofParliament Corporate Services Limited a company incorporated in Gibraltar. Theresults for the period since acquisition are included within the consolidatedresults. The acquisition had the following effect on the assets and liabilitiesof STM Group Plc at acquisition. £'000 Net identifiable assets 50Goodwill 2,250Consideration 2,300 Compagnie Fiduciaire Trustees Limited On 28 December 2007 STM Fidecs Limited acquired 100% of the issued equity ofCompagnie Fiduciaire Trust Limited, a company incorporated in Jersey. Thebalance sheet as at that date is included within the consolidated results. Theacquisition had the following effect on the assets and liabilities of STM GroupPlc at acquisition. £'000 Net identifiable assets and liabilities 69Goodwill 271Consideration paid including costs 340 7. Property, plant and equipment Office Motor Leasehold Equipment Vehicles Improvements Total £'000 £'000 £'000 £'000CostsAs at 1 February 2007 - - - -Acquired on acquisition at net book 172 6 296 474valueAdditions at cost 96 - - 96 As at 31 December 2007 268 6 296 570 DepreciationAs at 1 February 2007 - - - -Change for the period 34 1 32 67 As at 31 December 2007 34 1 32 67 Net book valueAs at 31 December 2007 234 5 264 503 As at 1 February 2007 - - - - STM Group Plc holds no tangible fixed assets. 8. Investments The fair value of investments comprises: Group Cost £'000InvestmentsBalance at 1 February 2007 -Additions on acquisitions 76Disposals (2) Balance at 31 December 2007 74 Company Cost £'000Investments in subsidiariesBalance at 1 February 2007 -Additions 14,267 Balance at 31 December 2007 14,267 9. Cash and cash equivalents Cash at bank earns interest at floating rates based on prevailing rates and thebalance. The fair value of cash and cash equivalents in the Group is £971,000and in the company is £91,000. 10. Trade and other receivables Group 2007 £'000 Trade receivables 1,985Disbursements recoverable 108Other receivables 486Other related company balances 640 3,219 Company 2007 £'000 Other receivables 199Owed by related undertakings 1,379 1,578 Amounts owed to related undertakings are unsecured, interest free and repayableon demand. 11. Trade and other payables Group 2007 £'000 Loans from related parties 1,333Deferred income 384Trade payables 327Corporation tax 134Deferred and contingent consideration 904Other creditors and accruals 912 3,994 Company: Trade and other payables 2007 £'000Owed to related undertakings 46Other creditors and accruals 152 198 Loans from related parties amount to £1,333,000 and relate to a loan by EquitySpecial Situations Limited, a shareholder of STM Group Plc. The loan isrepayable entirely by 31 December 2008. This loan amount is unsecured andnon-interest bearing. 12. Called up share capital 31 December 2007 £'000Authorised50,000,000 ordinary shares of £0.001 each 50Called up, issued and fully paid37,542,274 ordinary shares of £0.001 each 38 - Ends - This information is provided by RNS The company news service from the London Stock Exchange