STM Group PLC Trading Update (9847B)
October 14 2020 - 01:00AM
UK Regulatory
TIDMSTM
RNS Number : 9847B
STM Group PLC
14 October 2020
STM Group Plc
("STM" or "the Company" or "the Group")
Trading Update
STM Group Plc (AIM:STM), the cross-border financial services
provider, updates on trading in relation to new business generation
for the remainder of the year.
As previously reported, the economic backdrop created by
Covid-19 has caused delays in securing new business, as many
individuals and businesses defer significant financial decisions.
Traditionally though, the last quarter of the year has seen solid
new business growth for STM, and this was certainly the expectation
for 2020, particularly for our workplace pensions solution, as well
as our new flexible annuity product. However, we are now seeing
that certain initiatives are not yet delivering the volumes of
business that we had expected and believe that it is prudent that
we take a more conservative stance on our new business numbers for
the remainder the year.
Despite our Options workplace pensions solution business
currently achieving a 50% revenue uplift year-on-year, it is now
expected to fall short of its overall revenue target by circa
GBP0.32 million, as a direct result of lower than expected new
business for September and anticipated shortfalls in the remaining
three months. In particular, delays and postponements of bulk
transfers have meant our previous expectations for the last quarter
were over-optimistic. Whilst management believes that this has
created a timing delay for new business, it will also mean the
membership base is lower going into 2021. Although the expected
cost savings have been made since the acquisition, the business has
a largely fixed cost base. Whilst this creates an operational
gearing effect, it also means that the fall in revenue will
translate into a corresponding reduction of profit for the
Group.
In a similar vein, we have previously highlighted that the
pipeline of flexible annuity new business continues to grow, but
that conversion rates into applications remains frustratingly slow.
Given that this is a relatively new product, expectations from
management were that this rate would accelerate over time. To date,
we have not seen this happen and therefore it is appropriate to
scale-back our anticipated new business numbers for the remainder
of 2020 and into 2021. The anticipated impact on new business
revenue for the last quarter is GBP0.15 million, with this again
directly impacting 2020 PBT.
As would be expected, our recurring revenue across the Group
remains as steady and predictable as previously, and with low
attrition rates. In addition, our costs base does not materially
change month on month, giving us the solid base for future earnings
growth, as and when our new business revenues accelerate.
There remain a number of specific initiatives and opportunities
that remain in play for 2020 and into 2021, which have the ability
to clawback some of the 2020 new business shortfall, however there
is not sufficient certainty on their delivery to include them
within our new 2020 business expectations.
Importantly, all our significant IT projects remain on track for
completion in the latter part of 2020 and early part of 2021, and
as previously stated, these will play an important part in
delivering enhanced operating margins in 2021. We continue to
actively pursue our acquisition and non-core business disposal
strategy and are pleased to confirm that the integration of the
recently acquired Berkeley Burke businesses continues in line with
management expectations.
Alan Kentish, CEO of STM Group commented:
"It is incredibly disappointing to have to reduce our
anticipated new business numbers, particularly given all the hard
work involved in bringing the Options business into the STM family.
Covid-19 has certainly created a more difficult backdrop in which
to do business, and whilst we have looked after our existing
clients admirably, it is apparent that our new business
expectations for 2020 will not be met. We believe that much of the
new business shortfall is a timing issue and thus expect it to come
through in 2021, supporting our confidence in expected material
growth in profit before tax for 2021."
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
STM Group Plc www.stmgroupplc.com
Alan Kentish, Chief Executive Officer Tel: Via Walbrook
Therese Neish, Chief Financial Officer
finnCap www.finncap.com
Matt Goode / Emily Watts - Corporate Finance Tel: +44 (0) 20 7220
Tim Redfern / Richard Chambers - ECM 0500
Walbrook www.walbrookpr.com
Tom Cooper / Paul Vann Tel: +44 (0) 20 7933
8780
Mob: +44 (0) 797 122
1972
tom.cooper@walbrookpr.com
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 administration of client assets in relation to
retirement, estate and succession planning and wealth
structuring.
Today, the Group has operations in the UK, Gibraltar, Malta,
Jersey and Spain. STM has developed a range of pension products for
UK nationals and internationally domiciled clients and has two
Gibraltar Life Assurance Companies which provide life insurance
bonds - wrappers in which a variety of investments, including
investment funds, can be held.
STM's growth strategy is focussed on both organic initiatives
and strategic acquisitions.
Further information on STM Group can be found at
www.stmgroupplc.com
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