Stm Grp. Regulatory News (STM)

STM Group Plc

("STM", the "Group")

Trading Update

STM, the cross border financial services provider, today provides the following update on trading.

As reported at the time of our interim results announcement in September, the Group has continued to invest in the business during 2019, to capitalise on changes in the pensions market and to ensure we have the right structures in place to take advantage of emerging growth opportunities and make the businesses more efficient and robust for the future.

The acquisition of the Carey Group in February 2019 is one such investment. Whilst integration is well advanced, two factors have affected new business levels at Carey; the rebranding has taken longer than expected and this has caused delays to the relaunch of products; and the successful application of the Carey Master Trust to The Pensions Regulator was more lengthy and time-consuming than anticipated, delaying new business flows and incurring an increase in one-off professional costs.

In addition, partly as a result of some uncertainties and concerns in the general UK pension sector,  levels of new business applications within the Pensions divisions are lower than originally budgeted and whilst new business applications have increased during the second half of the year, the increase is not expected to make up for the lower rate earlier in the year. The pipeline of new business following the relaunch of the UK flexible annuity in June this year continues to grow within the life assurance companies but is materialising slower than originally expected. Our non-core Companies and Trust Services business has also seen lower than expected revenues.

The business has identified a number of specific IT projects that will improve operating margins going forward but will have an initial cost in 2020. Furthermore, as a direct result of the challenges faced by the SIPP market specifically, and extrapolated to the QROPS market, the Group has also seen costs directly attributable to its Professional Indemnity insurance increase by over £0.5 million on an annual basis, commencing in the latter part of 2019. The relevant proportion of this cost together with additional one-off costs, such as the professional fees in relation to the authorisation process referred to above, amount to, in aggregate, approximately £0.3 million in 2019.

As a result of the above, the Board now expects 2019 Revenue to be approximately £23.0m, reported PBT is expected to be approximately £3.8m, with Underlying PBT* of approximately £2.5m. As noted above, our outlook for 2020 will also be impacted by the slower new product revenue and the additional ongoing costs detailed above. However, the Board remains confident that the Group's strategy, and the benefits that are anticipated to flow from the investments made in 2019 and 2020, will ensure the Group is well placed for the future.

Alan Kentish, CEO of STM Group plc commented: "The last six months have been incredibly frustrating, the headwinds on completing certain initiatives such as the Carey rebranding and our flexible annuity rollout have slowed down our new business pipeline. 

"We continue to invest in our future as part of our new Target Operating Model, key to this is a building of our governance platform as part of protecting our business and delivering on our IT efficiencies to step-change our operating margins. 

"Outside of our control, there has been a seismic change in the Professional Indemnity insurance market capacity resulting in disproportionate increases in premiums. Certainly, this is likely to remain the case for the next couple of years until the insurance cycle moves on. Ironically, opportunities will arise for acquisitions as some firms will look to exit the market as a result of these increases.

"Whilst it is disappointing to start on a rebased 2020 PBT, I feel confident that we have the right tools in place and growth opportunities available to us to deliver enhanced underlying profitability. I look forward to updating the market as to our successes on these various matters as we progress into 2020."

*Underlying PBT is profit before tax net of non-recurring costs and other exceptional items including bargain purchase gains and technical reserve releases that do not form part of the normal course of business.

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

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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 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 SIPPs, 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 can be found at www.stmgroupplc.com