STM Group, the Gibraltar-based, AIM-listed provider of QROPS and other pension products and corporate services, says it sees “opportunities” in the overseas pension transfer marketplace to potentially acquire other books of QROPS business.
These opportunities are emerging as a result of “stagnation” in certain parts of the pension transfer market that is prompting “some of the smaller QROPS providers that have not yet attained critical mass” to realise “that they will be unable to grow their books of business further”, STM’s management added, in a trading update released today.
STM’s “strong balance sheet” means that it is well placed to make opportunistic acquisitions as they present themselves, the trading update – STM’s first since the company’s AGM trading update in May – added.
The company reiterated its previous statement of confidence that the group’s “existing recurring revenue model” remains “robust”, which it said has enabled it to focus on “actively pursuing additional initiatives to further build on the group’s profitability”, in spite of “the anticipated reduction in new QROPS applications”, which it noted had indeed occurred as expected.
As reported, STM Group, like other companies in the business of helping to enable British pension scheme members to transfer their pensions overseas, was hit by the surprise news in Chancellor Philip Hammond’s budget speech in March that a new 25% tax would be levied on transfers into qualifying recognised overseas pension schemes (QROPS) based outside of the EEA, in situations in which the individual was not relocating to that country.
STM’s shares were immediately hit by the news, falling more than 22% in value on the day of the budget, but the company said, in May, that it believed “some 20% of anticipated new QROPS business [would] be unaffected” by the new tax, and that some of the potential loss of QROPS business would manifest itself in new UK self-invested personal pensions (SIPPs) business, an area into which STM has been expanding recently.
‘Down-sized new business teams’
In its statement today, STM said that in line with its expectations for a drop in new overseas pension transfers, it had “pro-actively downsized new business teams in both Malta and Gibraltar”. accordingly.
With respect to its SIPP business, STM noted that its launch, in April, of an “International SIPP” product through its UK based SIPP business, London & Colonial, via its existing worldwide network of financial intermediaries was proceeding according to planl and that “the take up of the product has progressed well” and fulfilling expectations that it would make up for some of the reduction in new QROPS applications.
“Whilst still in the early stages of marketing the new product internationally, the group has seen a very healthy uplift on new applications from month to month,” STM said.
“Current volumes of new applications of the International SIPP are some three times that of the [company’s existing] UK SIPP offering, and are likely to continue to build on that ratio.
“It is believed that the International SIPP, whilst not having the same potential advantages as that of a QROPS, is a simpler product for the UK expatriate market to understand.”
In terms of results, STM said the International SIPP applications had helped to produce a “steady” second quarter performance that complemented a “solid” first quarter performance, which had still enjoyed the benefits of the pre-25% tax QROPS regime.
The company said its board considers the group to be performing better than expected, and that its management now expects pre-tax profit in the second half of the year to be around £3.2m, on revenue of approximately £19.8m.
“With the possibility of some straight-forward ‘bolt-on’ acquisitions in the QROPS sector, along with the imminent launch of our Australian pension offering and some further efficiencies in how we process our existing business coming on stream shortly, we are currently optimistic about the group’s growth prospects,” STM Group chief executive Alan Kentish said in a statement accompanying the trading statement.
STM is due to announce its half-year results, for the period ending 30 July, on 12 September.
AIM listing in 2007
STM originally began as a corporate services adviser, listing on the Alternative Investment Market of the London Stock Exchange in 2007. As reported, STM acquired the UK SIPP provider London & Colonial last year.
Today, STM has trading operations in Gibraltar, Malta, Jersey, and Spain.
As reported, Nigel Green, the founder and chief executive of the expat-focussed deVere Group advisory business, was reported yesterday to have sold his last 2% stake in STM, after having originally acquired a 24% stake in 2012.