STM Group today posted a 43% jump in its pre-tax profit for the year to the end of December after its efforts to change its business model, in part by acquiring other companies and by adopting what it acknowledged is a “more UK-regulated focus”.
In particular, the introduction of a new, self-invested personal pension product helped it to boost its revenue, even as its business in qualifying recognised overseas pension schemes fell, as expected, in the wake of regulatory changes announced in March of last year, the STM results posted this morning showed.
Shares in the London Stock Exchange AIM-listed company leapt by more than 4.5% in early trading.
In its full-year results statement, STM said pre-tax profit in the 12 months rose to £4m, up from £2.8m in 2016, as revenue grew by 24%, to £21.5m.
The company declared a final dividend of 1.2p per share, up from 1p in 2016.
STM chief executive Alan Kentish expressed satisfaction at the “record” profits, which he noted had come “against a backdrop of a number of operational challenges”.
As a result of these challenges, he added, “our business now has a more UK regulated focus, which I think is beneficial for all our stakeholders.”
He added: “Moving into 2018, we have a solid recurring revenue platform on which to look to launch new products and to expand our distribution network, as part of a strategy to make our business even more robust.”
With respect to STM’s recent acquisitions – it completed its acquisition of a Maltese pension provider, Harbour Pensions Ltd, in February, and UK-based pension provider London & Colonial in 2016 – Kentish noted that they had helped to more than make up for the loss of QROPS business following the UK government’s surprise announcement of a 25% tax charge on pension transfers based outside of the European Economic Area when the pension scheme holder wasn’t moving to the country in question.
This tax, he noted, at the time was expected to affect “circa 80% of our new business volumes for our international pension products”.
Although this estimate proved correct, “we were able to come to the market in short order with an alternative, UK-regulated product to service our international distribution network,” he added, in a statement accompanying the results statement.
“This has seen most of this lost new QROPS business by both [number of policies] and revenue replaced by our international SIPP offering.”
This, he went on, was a contributing factor in the company’s decision to move its group head office to the UK from Gibraltar earlier this year. The company has yet to announce the location of its new UK offices, but it is understood they are in “mid-city” London, and that Kentish is among those who have made the move.
The company continues to maintain an office in its Montagu Pavilion building in Gibraltar, in addition to a registered office in the Isle of Man, and additional outposts in Malta, Spain and Jersey.
In today’s results statement, STM chairman Michael Riddell announced he won’t be standing for re-election to the board at the company’s annual general meeting in May, with his retirement becoming effective on 23 May. He noted that this would leave the board well-positioned “for the appointment of one or more UK-based non-executive directors, to reflect the new London head office status”, adding that the recruitment process had in fact already begun.
Inquiry last year
Among the “operational challenges” Kentish referred to this morning in his comments accompanying the STM 2017 results was probably an inquiry the company found itself the target of by Gibraltar’s authorities towards the end of last year, over what was said to have been an alleged failure to report to the authorities about a client who had been involved in a tax dispute.
Kentish and at least one other employee were arrested but released without charge, as the company maintained that the allegations being made in connection with the matter had “no merit”.