STM first-half profit leaps as SIPP business drives new biz revenues

STM Group, the Gibraltar-based, AIM-listed provider of QROPS and other pension products and corporate services, reported a 25% gain in pre-tax profit, net of its 2016 acquisition, in the six months to the end of June, as its efforts to diversify its product range away from qualifying recognised overseas pension schemes began to kick in.

Pre-tax profit in the six month period hit £1.5m, up from £1.2m in the same period last year, on revenue that grew 36% to £10.7m, the company reported this morning.

Taking out the cost of acquiring UK SIPP provider London & Colonial last year, the profit figure was £2.4m.

By afternoon London time, the shares were up 13% at 60.5p, having gone as high as 63.2p earlier.

Chief executive Alan Kentish said the results were a “record”, and noted that they came “despite the unprecedented UK spring budget announcement that effectively curtailed new QROPS business by 80%”.

Going forward, the company plans to continue to expand organically through the expansion of its “various pension product offerings, including the launch of an Australian superannuation solution which is HMRC compliant”, while non-organic growth “will be targeted through opportunistic purchases of books of QROPS business in Malta and Gibraltar, as circumstances allow”, STM chairman Michael Riddell said in a statement accompanying the results.

‘Healthy replacement’

That STM’s acquisition of London & Colonial last year was a strategically shrewd move was evident in today’s results, Kentish noted.

“There is no doubt that the International SIPP catering for the UK expatriate market is a healthy replacement for the expected reduced new business volumes in our QROPS market-place,” he said.

“The fact that the product is more straight-forward to understand as compared to a QROPS, supported by the fact that it is administered by a UK regulated firm, has attracted the interest of the UK expat.”

He said a release during the six-month period of technical reserves, to profit from STM’s life insurance company, had been successful and that the company anticipated further such releases in the foreseeable future.

With its shares back above 60p today, STM has more than recovered the ground it lost immediately after Philip Hammond’s surprise announcement, in March, that a 25% charge would be introduced on pension transfers to overseas schemes. From around 51p a share before the news broke, they fell over the next few days to just over 30p a share. (See chart, below.)

As reported last October,  STM announced plans to launch a new, STM-branded superannuation scheme in Australia in order to accommodate those seeking to transfer pensions there. The announcement came around 18 months after HM Revenue & Customs removed all but one Australian qualifying recognised pension scheme (QROPS) from its list of schemes, and less than two months after STM revealed plans to acquire UK SIPP provider London & Colonial.

   STM Group share price, March – September 2017Source: London Stock Exchange 

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