TIDMSTM

RNS Number : 6223L

STM Group PLC

14 September 2021

STM Group Plc

("STM", "the Company" or "the Group")

Unaudited Interim Results for the six months ended 30 June 2021

& Investor Presentation

STM Group Plc (AIM: STM), the multi-jurisdictional financial services group, is pleased to announce its unaudited interim results for the six months ended 30 June 2021.

Financial Highlights:

 
                             2021             2021             2020             2020 
                           (reported)     (underlying)**     (reported)     (underlying)** 
 Revenue                     GBP11.4m           GBP11.4m       GBP11.8m           GBP11.8m 
                        -------------  -----------------  -------------  ----------------- 
 Profit before                GBP1.5m            GBP1.7m        GBP1.8m            GBP1.9m 
  other items* 
                        -------------  -----------------  -------------  ----------------- 
 Profit before                GBP0.9m            GBP0.8m        GBP1.0m            GBP1.1m 
  taxation ("PBT") 
                        -------------  -----------------  -------------  ----------------- 
 Profit before 
  other items 
  margin                          13%                15%            15%                16% 
                        -------------  -----------------  -------------  ----------------- 
 Earnings per 
  share                         1.28p                N/A          1.33p                N/A 
                        -------------  -----------------  -------------  ----------------- 
 Cash at bank                                   GBP16.5m                          GBP17.6m 
  (net of borrowings) 
                        --------------------------------  -------------------------------- 
 Interim dividend                     0.60p                             0.55p 
                        --------------------------------  -------------------------------- 
 

* Profit before other items is defined as revenue less operating expenses i.e. profit before taxation, finance income and costs, depreciation, amortisation, bargain purchase gain and gain on the call options

** Underlying statistics are net of certain transactions which do not form part of the regular operations of the business as further detailed in the table below

Highlights:

-- Recurring revenue remains predictable and a cornerstone of the business, and now represents 88% of the Group's reported revenue

-- Disinvestment of both CTS businesses allowing the Board to concentrate on growing our core activities

-- Strategic focus on updating and revising operating model to drive increased "topline" growth

-- Three of four IT projects now gone "live" with intention of having two core administration systems - improving operating margins

-- Adapted to a "hybrid" working environment to keep our colleagues safe and maximise flexibility and efficiencies

-- The Berkeley Burke acquisition of August 2020 is now fully integrated and delivering the profit that was anticipated

   --             Acquisitions are a core pillar of our growth strategy 

Commenting on the results and prospects, Alan Kentish, Chief Executive Officer at STM, said:

"The first six months of the year have been busy with two disposals and three of the four key IT projects having gone "live" . As one would expect with our business model, the recurring revenue nature of our pensions and life assurance businesses underpins the predictability of our performance, with some 88% of total revenue meeting this classification.

"The simplification of our overall Group structure and our business lines remains a focus of the Plc board, and we are pleased to be able to state that we have now exited the Trust and Corporate Services sector, having found good homes for both the Gibraltar and Jersey clients and colleagues. The Berkeley Burke acquisition of August last year is now fully integrated and delivering the profit that was anticipated.

"There continues to be a strong appetite for further acquisitions as a key pillar for revenue and profit growth, to sit alongside the organic growth opportunities.

"We look forward to updating shareholders with our progress in the near future. "

Investor Presentation: 1.30pm on Wednesday 15 September 2021

The Directors will hold a presentation to introduce STM Group Plc to investors and cover the Interim Results and prospects at 1.30 p.m. on Wednesday 15 September 202 1 .

The presentation will be hosted through the digital platform Investor Meet Company. Investors can sign up to Investor Meet Company and add to meet STM Group Plc via the following link https://www.investormeetcompany.com/stm-group-plc/register-investor .

For those investors who have already registered and added to meet the Company, they will automatically be invited.

Questions can be submitted pre-event to STM@walbrookpr.com or in real time during the presentation via the "Ask a Question" function.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (as it forms part of retained EU law as defined in the European Union (Withdrawal) Act 2018).

For further information, please contact:

 
 STM Group Plc 
 Alan Kentish, Chief Executive Officer        Via Walbrook PR 
 Therese Neish, Chief Financial Officer   www.stmgroupplc.com 
 
 
 finnCap                                        Tel: +44 (0)20 7600 1658 
 Matt Goode / Emily Watts - Corporate Finance            www.finncap.com 
  Tim Redfern / Richard Chambers - ECM 
 

Media enquiries:

 
 Walbrook PR              Tel: +44 (0) 20 7933 8780 
 Tom Cooper / Paul Vann   Mob: +44 (0) 797 122 1972 
                                 STM@walbrookpr.com 
 

Notes to editors:

STM is a multi-jurisdictional financial services group traded on AIM, a market operated by 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 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

Chairman's Statement

I am pleased to present the results for the first six months of 2021. It has been a period of considerable actual and ongoing evolution within the Group against a backdrop of the continuing challenges of the pandemic, where we continue to support all our colleagues, clients and stakeholders. This backdrop has been made all the more challenging as it has coincided with us finalising a number of major IT migration projects, which will ultimately move the Group to a healthier operating margin.

The recurring revenue base has held up well and continues to form our foundation stone for building our new business revenues, which is our stated strategic priority. Revenue (excluding discontinued operations) grew year on year by 3.9% although the first half of 2021 was relatively disappointing with regards to new business volumes in certain areas, with some partnership arrangements being slower to come to fruition than expected. The Group has, however, maintained its overall profitability through prudent and agile attention to our resourcing and cost base.

We continue to realign our business to be more focused on revenue growth and are now making real tangible changes to our operating model to support this strong ambition. The investment that we have made in the infrastructure over the last few years gives us confidence that we are able to cope with accelerating our revenue growth and improve operating margins by sweating our existing infrastructure and capability.

Board Evolution

Going into the second half of 2021, our operating model changes further as we move down to a two-person Plc executive team, and the creation of a dedicated senior Group role for business development, which will be a non-Board post. We will continue to proactively review our top to toe governance structure and also our stated risk appetite profile so as to ensure that it is conducive to our stated top and bottom line growth expectations.

I must express my deepest thanks to Therese Neish and Pete Marr for their huge contribution to the Group over the years, both of whom will be stepping down from the Board before my next Chairman's report.

Finally, I would like to take the opportunity to thank all my STM colleagues for their continuing hard work in a complicated and unpredictable working environment.

Duncan Crocker

Chairman

Chief Executive's Review

Overview

The first six months of the year have been busy with two disposals and the completion of some important IT projects. In operational terms the business has, overall, performed in line with management's expectations .

Our UK workplace pensions business delivered higher than anticipated revenues, although new business revenue overall was slower than was expected, particularly around UK SIPP business and our flexible annuity product. In addition, our cost base was managed accordingly.

As one would expect with our business model, the recurring revenue nature of our pensions and life assurance businesses underpins the predictability of our performance, with some 88% of total revenue meeting this classification.

The delivery of our key IT projects is now well underway, with three of the four projects now having gone "live". Whilst there is still development work to be completed, we have moved a very significant step forward to our strategic aim of having one administration platform for our private pensions and life businesses, and one platform for our workplace and occupational pensions. We believe that moving into 2022, we will see improved operating margins as a result of these administration platforms, and that they will help the Group to differentiate itself from others in the marketplace.

The simplification of our overall Group structure and our business lines remains a focus of the Plc board, and we are pleased to be able to state that we have now exited the Trust and Corporate Services sector, having found good homes for both the Gibraltar and Jersey clients and colleagues. The Berkeley Burke acquisition of August last year is now fully integrated and delivering the profit that was anticipated at the time of acquisition.

Financial review

Financial performance in the period

The Group delivered revenue growth from continuing operations of 3.9% from GBP10.2 million in 2020 to GBP10.6 million) with growth in revenues from our Pensions division offset by a slight reduction in our Life assurance division. Reported revenues for the first half of the year were GBP11.4 million (2020: GBP11.8 million) with the main reason for the decrease being as a result of the disposals of the Group's corporate & trustee services ("CTS") businesses earlier in the year. Revenue contribution from these businesses accounted for GBP1.6 million in 2020 as compared to GBP0.8 million in the period from 1 January 2021 to the respective dates of disposal.

Recurring revenues for the period have remained consistent at GBP10.0 million (2020: GBP10.0 million), representing 88% of total revenues (2020: 85%). The sale of the CTS business has contributed to a higher percentage given that CTS businesses had a high proportion of transactional based revenue which was not considered recurring as this was less predictable than the fixed fees generated from the pensions and life assurance businesses. These high levels of recurring revenues remain an important key performance measure for the business and demonstrate the quality of the Group's revenues.

Profit before other items for the period is GBP1.5 million (2020: GBP1.8 million) with reported profit before tax of GBP0.9 million (2020: GBP1.0 million). However, during the period there have been a number of one-off and non-recurring costs such as costs associated with internal restructures and a capital management review engagement. Thus, the underlying profit before other items is GBP1.7 million (2020: GBP1.9 million) and underlying profit before tax of GBP0.8 million (2020: GBP1.0 million).

In line with revenue, the reason for the decrease in profitability is largely down to the sale of the CTS businesses. Whilst not significant these sales have resulted in the loss of profit contribution and in addition to this some of the centralised costs having to be absorbed by the wider Group.

The reconciliation of reported measures to underlying measures is made up of items which are either non-recurring or exceptional and thus do not form part of the normal course of business. This reconciliation for all three key financial measures is shown in the table below:

 
 RECONCILIATION OF REPORTED TO UNDERLYING MEASURES 
                                        REVENUE      PROFIT BEFORE     PROFIT BEFORE 
                                                      OTHER ITEMS           TAX 
                                     ------------  ----------------  ---------------- 
                                      2021   2020    2021     2020     2021     2020 
                                     -----  -----  -------  -------  --------  ------ 
                                      GBPm   GBPm    GBPm     GBPm     GBPm     GBPm 
                                     -----  -----  -------  -------  --------  ------ 
 
 Reported measure                     11.4   11.8    1.5      1.8       0.9      1.0 
                                     -----  -----  -------  -------  --------  ------ 
 
 Add: integration and acquisition 
  costs for H1                         -      -       -       0.1        -       0.1 
                                     -----  -----  -------  -------  --------  ------ 
 Add: other non-recurring costs        -      -      0.2       -        0.2       - 
                                     -----  -----  -------  -------  --------  ------ 
 Less: gain on sale of investments     -      -       -        -       (0.1) 
                                     -----  -----  -------  -------  --------  ------ 
 Less: bargain purchase gain           -      -       -        -       (0.2)      - 
  and derivative asset 
                                     -----  -----  -------  -------  --------  ------ 
 Underlying measure                   11.4   11.8    1.7      1.9       0.8      1.1 
                                     -----  -----  -------  -------  --------  ------ 
 

Cashflows

Cash and cash equivalents at 30 June 2021 were GBP18.6 million (2020: GBP18.3 million) with cash generated from operating activities being GBP1.2 million (2020: GBP1.7 million) thus exceeding our reported profit before tax.

Whilst cash balances have remained fairly consistent as compared to the same period for the prior year they have increased since the year end. This is largely as a result of the sales of the two CTS businesses earlier in the year. These disposals generated net cash inflows of GBP1.6 million.

During the period we also repaid GBP0.3 million of our bank loan with GBP1.3 million still outstanding. Net cash and cash equivalents as at 30 June 2021 were therefore GBP17.3 million (2020: GBP17.6 million). The Group has a credit facility in place with GBP3.9 million available to be drawn down for acquisitions and other growth opportunities.

As would be expected for a Group regulated in a number of jurisdictions , a significant proportion of our cash balance forms part of the regulatory and solvency requirements. It is not possible to determine exactly how much of the cash and cash equivalents are required for solvency purposes as other assets can also be used to support the regulatory solvency requirement. However, the total regulatory capital requirement across the Group as at 30 June 2021 is GBP16.9 million.

The balance sheet also gives visibility of future revenue and cash generation and, in line with all administration services businesses, the Group had accrued income in the form of work performed for clients but not yet billed of GBP1.4 million as at the period end (2020: GBP1.7 million). This gives some visibility of revenue still to be billed and collected as cash at bank.

Additionally, deferred income relating to annual fees invoiced but not yet earned stood at GBP4.0 million (2020: GBP4.4 million). This figure also gives good visibility of revenue that is still to be earned through the Income Statement in the coming months.

Trade receivables as at 30 June 2021 were GBP3.1 million (2020: GBP3.2 million).

Dividend

I am pleased to announce that the Board has declared an interim dividend of 0.60 pence per share representing a 9% increase on last year (2020: 0.55 pence). The interim dividend is expected to be paid on 17 November 2021 to those shareholders on the register on 22 October 2021. The ordinary shares will become ex-dividend on 21 October 2021.

Subject to trading continuing to perform in line with our revised expectations, the Board expects to propose a final dividend for the full year.

Review of operations

Pensions

The pensions administration businesses continue to be the cornerstone of our operations with this half-year period being the first full 6 month contribution from the Berkeley Burke acquisition made in August 2020.

Overall, the pensions revenue for the period was GBP8.7 million (2020: GBP7.9 million) representing 76% (2020: 67%) of total Group revenues. Total revenue is split between GBP4.9 million for QROPS (2020: GBP5.1 million), GBP1.7 million (2020: GBP1.9 million) for the SIPP and SSAS businesses and a further GBP1.5 million (2020: GBP1.0 million) for the workplace pensions business. In addition, this year the Group also has a revenue contribution of GBP0.6 million from third party administration and Group Pension Plans.

The recurring revenue percentage for this operating segment remains at 93% in line with that of the same period for 2020. This combined with the relatively low attrition rates means that it remains a solid predictor of future divisional profitability.

The new business applications for QROPS and SIPPs have seen a decrease from the same period last year at 372 (2020: 473).

The final pensions revenue stream within the Group is the auto-enrolment business acquired as part of the Carey acquisition, now branded Options Corporate. Whilst this business started the year with a higher number of members than budgeted, the number of new members in the first six months has been lower than expected at circa 30,000. However, July and August have seen some of the transfers expected in the first half of the year with a total of circa 17,500 in these two months alone. Management is therefore confident that this revenue stream will deliver as expected.

Life assurance

Revenue for the combined life assurance businesses amounted to GBP1.6 million as compared to GBP1.9 million in 2020. This decrease is largely due to lower investment income and AUA based fees as a result of the lower interest rates and markets following the global pandemic as previously reported.

In a similar manner to the pensions operating segment, our life assurance business also has high recurring fees. A total of 98% of total revenues for the period are recurring (2020: 95%). The reason for the increase in as a result of lower new business than the prior year, thus lower establishment fees.

Our flexible annuity products aimed at the UK market remain the key focus for sustainable organic growth within our life businesses. Conversion times for new business remain slow and unpredictable, and continued effort to expand our intermediary base is an important part of improving our new business numbers.

In addition, we have relaunched our short term annuity product during the second half of 2021, and we believe that this will deliver additional revenue and profit going into 2022.

Corporate and Trust Services ("CTS")

Revenue from the Corporate and Trustee Services divisions are included up to the date of disposal. In the case of the Gibraltar business this is for the period from 1 January to 23 March 2021 contributing GBP0.3 million of revenue (2020: GBP0.8 million). The Jersey business contributed GBP0.4 million in the period from 1 January to 8 May 2021 (2020: GBP0.8 million).

Outlook

The Board has built an infrastructure that will allow for scalability and accelerated organic growth going forward, and the focus of the management team must be to deliver on that proposition. Investment in the revenue generating part of the business is a commitment of the Plc board. As part of this drive, the newly created role of Group Director of Business Development Strategy will initially be taken by Christine Hallett on a secondment basis. Christine, who was previously managing director of our Options SIPP and Options Corporate businesses, has a proven track record in delivering organic growth. The non-board role will ensure that a stronger emphasis on new business and product initiatives are implemented across the Group, as well as capitalizing on cross selling opportunities.

In addition, the more streamlined Group post the disposal of the CTS businesses, and the stronger and deeper infrastructure that we have created has allowed the Plc board to revise its operating model. Part of this review has seen the decision to move down to a two person executive team at Plc board level. Pete Marr has agreed to step down as COO during the latter part of the year having made a significant contribution to the reshaping of the Group operating model, handing over his reporting lines to the two remaining executives. Nicole Coll, the incoming CFO from 1 October, will receive an orderly handover from Therese Neish during the last quarter of the year.

There continues to be a strong appetite for further acquisitions as a key pillar for revenue and profit growth, to sit alongside the organic growth opportunities.

We look forward to updating shareholders with our progress in the near future.

Alan Kentish

Chief Executive Officer

CONSOLIDATED INCOME STATEMENT

For the period from 1 January 2021 to 30 June 2021

 
                                           Unaudited   Unaudited 
                                            6 months    6 months        Audited 
                                                  to          to        Year to 
                                             30 June     30 June    31 December 
                                                2021        2020           2020 
                                   Notes     GBP'000     GBP'000        GBP'000 
  Revenue                            4        11,386      11,810         23,982 
  Administrative expenses                    (9,869)    (10,002)       (20,412) 
 -------------------------------  ------  ----------  ----------  ------------- 
  Profit before other items                    1,517       1,808          3,570 
 -------------------------------  ------  ----------  ----------  ------------- 
 
  OTHER ITEMS 
   Bargain purchase gain                         120           -              - 
  Gains on revaluation of 
   financial instruments                         222           -             59 
  Finance costs                                (152)       (126)          (246) 
  Depreciation and amortisation                (760)       (669)        (1,363) 
 -------------------------------  ------  ----------  ----------  ------------- 
  Profit before taxation                         947       1,013          2,020 
 -------------------------------  ------  ----------  ----------  ------------- 
  Taxation                                     (187)       (224)          (413) 
 -------------------------------  ------  ----------  ----------  ------------- 
   Profit after taxation                         760         789          1,607 
 
 OTHER COMPREHENSIVE INCOME 
  Items that are or may 
  be reclassified to profit 
  and loss 
  Foreign currency translation 
  differences for foreign 
  operations                                    (37)          16            (1) 
--------------------------------  ------  ----------  ----------  ------------- 
 Total other comprehensive 
  income/(loss)                                 (37)          16            (1) 
--------------------------------  ------  ----------  ----------  ------------- 
  Total comprehensive income 
   for the period/year                           723         805          1,606 
 -------------------------------  ------  ----------  ----------  ------------- 
  Profit attributable to: 
   Owners of the Company                         800         861          1,777 
  Non-Controlling interests                     (40)        (72)          (170) 
 -------------------------------  ------  ----------  ----------  ------------- 
                                                 760         789          1,607 
 -------------------------------  ------  ----------  ----------  ------------- 
  Total comprehensive income 
   attributable to: 
   Owners of the Company                         763         877          1,776 
  Non-Controlling interests                     (40)        (72)          (170) 
 -------------------------------  ------  ----------  ----------  ------------- 
                                                 723         805          1,606 
 -------------------------------  ------  ----------  ----------  ------------- 
  Earnings per share basic 
   (pence)                           5          1.28        1.33           2.70 
  Earnings per share diluted 
   (pence)                           5          1.28        1.33           2.70 
 -------------------------------  ------  ----------  ----------  ------------- 
 

The results for the period from 1 January 2021 to 30 June 2021 include both continuing and discontinued activities. The results for the period from 1 January 2020 to 31 December 2020 relate to continuing activities (see Note 6).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

 
                                            Unaudited   Unaudited        Audited 
                                              30 June     30 June    31 December 
                                                 2021        2020           2020 
                                    Notes     GBP'000     GBP'000        GBP'000 
 ASSETS 
 Non-current assets 
 Property, plant and equipment                  1,692       2,596          1,970 
 Intangible assets                             20,066      20,634         19,912 
 Financial assets                                 697         416            475 
 Deferred tax asset                                85          84             75 
 Total non-current assets                      22,540      23,730         22,432 
---------------------------------  ------  ----------  ----------  ------------- 
 
 Current assets 
 Accrued income                                 1,447       1,692          1,319 
 Trade and other receivables          9         7,619       5,062          9,073 
 Cash and cash equivalents            8        18,574      18,279         16,409 
 Assets held for sale                               -           -          5,988 
---------------------------------  ------  ----------  ----------  ------------- 
 Total current assets                          27,640      25,033         32,779 
---------------------------------  ------  ----------  ----------  ------------- 
 Total assets                                  50,180      48,763         55,211 
---------------------------------  ------  ----------  ----------  ------------- 
 
 EQUITY 
 Called up share capital             12            59          59             59 
 Share premium account                         22,372      22,372         22,372 
 Retained earnings                             13,836      12,951         13,541 
 Other Reserves                                 (482)       (430)          (447) 
---------------------------------  ------  ----------  ----------  ------------- 
 Equity attributable to owners 
  of the Company                               35,785      34,952         35,525 
 Non-controlling interests                      (485)       (347)          (445) 
---------------------------------  ------  ----------  ----------  ------------- 
 Total equity                                  35,300      34,605         35,080 
---------------------------------  ------  ----------  ----------  ------------- 
 
   LIABILITIES 
 Current liabilities 
 Liabilities for current tax                      890       1,216          1,197 
 Trade and other payables            10        11,681      10,944         14,974 
 Liabilities directly associated 
  with assets held for sale                         -           -          1,154 
---------------------------------  ------  ----------  ----------  ------------- 
 Total current liabilities                     12,571      12,160         17,325 
---------------------------------  ------  ----------  ----------  ------------- 
 Non-current liabilities 
 Other payables                      11         2,309       1,998          2,806 
---------------------------------  ------  ----------  ----------  ------------- 
 Total non-current liabilities                  2,309       1,998          2,806 
---------------------------------  ------  ----------  ----------  ------------- 
 Total liabilities and equity                  50,180      48,763         55,211 
---------------------------------  ------  ----------  ----------  ------------- 
 

CONSOLIDATED CASH FLOW STATEMENT

For the period from 1 January 2021 to 30 June 2021

 
                                                   Unaudited   Unaudited        Audited 
                                                     30 June     30 June    31 December 
                                                        2021        2020           2020 
                                           Notes     GBP'000     GBP'000        GBP'000 
 Operating Activities 
 Profit for the period/year before 
  tax                                                    947       1,013          2,020 
 Adjustments for: 
 Depreciation of property, plant 
  and equipment                                          369         398            793 
 Amortisation of intangible assets                       391         271            570 
 Write-off of intangible assets                            -           -              - 
 Loss on sale of fixed asset                               -           -              - 
 Taxation paid                                         (447)       (100)          (299) 
 Bargain purchase gain                                     -           -              - 
 Unrealised gains on financial 
  instruments at FVTPL                                 (222)           -           (59) 
 Share based payments                                      -           -              - 
 (Increase)/decrease in trade and 
  other receivables                                    (996)         703          (215) 
 Decrease/(increase) in accrued 
  income                                                 291       (506)          (485) 
 Increase/(decrease) in trade and 
  other payables                                         817        (96)           (12) 
 Net cash from operating activities                    1,150       1,683          2,313 
----------------------------------------  ------  ----------  ----------  ------------- 
 
   Investing activities 
 Disposal of investments                               2,369           -              - 
 Cash disposed of as part of investment 
  disposal                                              (39) 
  Purchase of property, plant and 
   equipment                                           (193)        (40)           (70) 
 Increase in intangible assets                         (546)       (417)          (875) 
 Consideration paid on acquisition 
  of subsidiary                                            -           -        (1,447) 
 Cash acquired on acquisition of 
  Subsidiary                                               -           -             27 
 Reclassification to assets held 
  for sale                                                 -           -          (725) 
 Net cash used in investing activities                 1,591       (457)        (3,090) 
----------------------------------------  ------  ----------  ----------  ------------- 
 Cash flows from financing activities 
----------------------------------------  ------  ----------  ----------  ------------- 
 Proceeds from Bank loans                                500           -          1,600 
 Bank loan repayment                                   (138)       (500)        (1,200) 
 Lease liabilities paid                                (437)       (444)          (843) 
 Treasury shares purchased                                 -           -              - 
 Dividends paid                              7         (505)       (446)          (772) 
 Net cash from financing activities                    (580)     (1,390)        (1,215) 
----------------------------------------  ------  ----------  ----------  ------------- 
 Increase/(decrease) in cash and 
  cash 
  equivalents                                          2,161       (164)        (1,992) 
----------------------------------------  ------  ----------  ----------  ------------- 
 Reconciliation of net cash flow 
  to movement in net funds 
 Analysis of cash and cash equivalents 
  during the period/year 
 Increase/(decrease) in cash and 
  cash equivalents                                     2,161       (164)        (1,992) 
 Effect of movements in exchange 
  rates on cash and cash equivalents                       4          37            (5) 
----------------------------------------  ------  ----------  ----------  ------------- 
 Balance at start of period/year                      16,409      18,406         18,406 
 Balance at end of period/year                        18,574      18,279         16,409 
----------------------------------------  ------  ----------  ----------  ------------- 
 

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY

For the period from 1 January 2021 to 30 June 2021

 
                                                              Foreign      Shares 
                                                             Currency      Based 
                 Share      Share     Retained   Treasury   Translation   Payments              Non-Controlling    Total 
                Capital    Premium    Earnings    Shares      Reserve     Reserve     Total        Interests       Equity 
                GBP000's   GBP000's   GBP000's   GBP000's    GBP000's     GBP000's   GBP000's       GBP000's      GBP000's 
-------------  ---------  ---------  ---------  ---------  ------------  ---------  ---------  ----------------  --------- 
 Balance at 
 1 January 
  2020                59     22,372     12,536      (549)          (59)        162     34,521             (275)     34,246 
 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 
 Profit for 
  the year             -          -      1,777          -             -          -      1,777             (170)      1,607 
 Other comprehensive income 
 Foreign 
  currency 
  translation 
  differences          -          -          -          -           (1)          -        (1)                 -        (1) 
 Transactions with owners, recorded directly in equity 
 Dividend 
  paid                 -          -      (772)          -             -          -      (772)                 -      (772) 
 Treasury 
 shares 
 purchased             -          -          -          -             -          -          -                 -          - 
 Share based 
  payments             -          -          -          -             -          -          -                 -          - 
 Changes in ownership interest 
 31 December 2020 and 
 1 January 
  2021                59     22,372     13,541      (549)          (60)        162     35,525             (445)     35,080 
 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 
 Profit for 
  the year             -          -        800          -             -          -        800              (40)        760 
 Other comprehensive income 
 Foreign 
  currency 
  translation 
  differences          -          -          -          -          (35)          -       (35)                 -       (35) 
 Transactions with owners, recorded directly in equity 
 Dividend 
  paid                 -          -      (505)          -             -          -      (505)                 -      (505) 
 Treasury 
 shares 
 purchased             -          -          -          -             -          -          -                 -          - 
 Share based 
  payments             -          -          -          -             -          -          -                 -          - 
 Changes in ownership interest 
 At 30 June 
  2021                59     22,372     13,836      (549)          (95)        162     35,785             (485)   (35,300) 
-------------  ---------  ---------  ---------  ---------  ------------  ---------  ---------  ----------------  --------- 
 

NOTES TO THE CONSOLIDATED RESULTS

For the period from 1 January 2021 to 30 June 2021

1. Reporting entity

STM Group Plc (the "Company") is a company incorporated and domiciled in the Isle of Man and was admitted to trading on the London Stock Exchange AIM Market on 28 March 2007. The address of the Company's registered office is 18 Athol Street, Douglas, Isle of Man, IM1 1JA. The Group is primarily involved in financial services.

2. Basis of preparation

Results for the period from 1 January 2021 to 30 June 2021 have not been audited.

The consolidated results have been prepared in accordance with International Financial Reporting Standards ("IFRS"), interpretations adopted by the International Accounting Standards Board ("IASB") and in accordance with Isle of Man law and IAS 34, Interim Financial Reporting.

3. Significant accounting policies

The accounting policies in these consolidated results are the same as those applied in the Group's consolidated financial statements for the year ended 31 December 2020. No changes in accounting policies are expected to be reflected in the Group's consolidated financial statements for the year ended 31 December 2021.

4. Segmental Information

STM Group has four reportable segments: Pensions, Life Assurance, Corporate Trustee Services and Other Services. Each segment is defined as a set of business activities generating a revenue stream and offering different services to other operating segments. The Group's operating segments have been determined based on the management information reviewed by the CEO and Board of Directors.

The Board assesses the performance of the operating segments based on turnover generated. The performance of the operating segments is not measured using costs incurred as the costs of certain segments within the Group are predominantly centrally controlled and therefore the allocation of these is based on utilisation of arbitrary proportions. Management believe that this information and consequently profitability could potentially be misleading and would not enhance the disclosure above.

The following table presents the turnover information regarding the Group's operating segments:

 
 Operating Segment             Unaudited   Unaudited    Audited 
                                 6m 2021     6m 2020       2020 
                                 GBP'000     GBP'000    GBP'000 
 Pensions                          8,690       7,930     16,488 
 Life Assurance                    1,638       1,945      3,709 
 Corporate Trustee Services          774       1,613      3,167 
 Other Services                      284         322        618 
----------------------------  ----------  ----------  --------- 
                                  11,386      11,810     23,982 
----------------------------  ----------  ----------  --------- 
 

Analysis of the Group's turnover information by geographical location is detailed below:

 
 Geographical Segment    Unaudited   Unaudited    Audited 
                           6m 2021     6m 2020       2020 
                           GBP'000     GBP'000    GBP'000 
 Gibraltar                   3,172       4,080      7,999 
 Malta                         445       3,855      7,625 
 United Kingdom              3.670       2,828      6,379 
 Jersey                      3,822         773      1,483 
 Other                         277         274        496 
----------------------  ----------  ----------  --------- 
                            11,386      11,810     23,982 
----------------------  ----------  ----------  --------- 
 

5. Earnings per Share

Earnings per share for the period from 1 January 2021 to 30 June 2021 is based on the profit after taxation of GBP760,000 divided by the weighted average number of GBP0.001 ordinary shares during the period of 59,408,088 basic.

A reconciliation of the basic and diluted number of shares used in the period ended 30 June 2021 and 30 June 2020 is as follows:

 
                                            2021         2020 
 Weighted average number of shares    59,408,088   59,408,088 
 Share incentive plan                          -            - 
 Diluted                              59,408,088   59,408,088 
===================================  ===========  =========== 
 

6. Discontinued operation

On 23 March 2021 the Group disposed of its Gibraltar company and trustee services ("CTS") and tax compliance businesses. On 8 May 2021 the Group disposed of its Jersey based CTS businesses. These businesses were previously classified as held-for-sale and are now discontinued operations.

There results for the discontinued operation included in the six month period ended 30 June 2021 are shown below. There are no results for discontinued operations included in the six month ended 30 June 2020 and the year ended 31 December 2020:

 
                                           GBP'000 
 Revenue                                       785 
 Expenditure                                 (720) 
 Results from operating activities              65 
 Income tax                                      _ 
 Results from operating activities, 
  net of tax                                    65 
 Gain on sale of discontinued operation        120 
 Profit from discontinued operation            185 
----------------------------------------  -------- 
 

The profit from the discontinued operation is attributable entirely to the owners of the Company.

7. Dividends

The following dividends were declared and paid by the Group during the period:

 
                                                 Unaudited   Unaudited        Audited 
                                                   30 June     30 June    31 December 
                                                      2021        2020           2020 
                                                   GBP'000     GBP'000        GBP'000 
 
 0.85 pence (2020: 0.75 pence) per qualifying 
  ordinary share                                       505         446            772 
                                                ----------  ----------  ------------- 
 
 

8. Cash and cash equivalents

Cash at bank earns interest at floating rates based on prevailing rates. The fair value of cash and cash equivalents in the Group is GBP18,574,000.

9. Trade and other receivables

 
                                  Unaudited   Unaudited        Audited 
                                    30 June     30 June    31 December 
                                       2021        2020           2020 
                                    GBP'000     GBP'000        GBP'000 
 Trade receivables                    3,077       3,236          3,450 
 Receivables due from insurers            -           -          3,600 
 Prepayments                            581         879            634 
 Other receivables                    3,962         947          1,389 
------------------------------- 
 Total                                7,620       5,062          9,073 
-------------------------------  ----------  ----------  ------------- 
 
   10.        Trade and other payables 
 
                                 Unaudited   Unaudited        Audited 
                                   30 June     30 June    31 December 
                                      2021        2020           2020 
                                   GBP'000     GBP'000        GBP'000 
 
 Deferred income                     4,014       4,369          3,647 
 Provision                               -           -          3,600 
 Trade payables                        549         659            368 
 Bank loan                             552         700            552 
 Lease liabilities                     651         788            783 
 Contingent consideration              700           -            700 
 Other creditors and accruals        5,215       4,428          5,324 
                                ----------  ---------- 
                                    11,681      10,944         14,974 
                                ----------  ----------  ------------- 
 

In November 2020 the Company signed a credit facility with Royal Bank of Scotland (International) Ltd for GBP5.50 million. The facility has a 5-year term with capital repayments structure over ten years and a final instalment to settle the outstanding balance in full at the end of the 5 years. At the period-end GBP1.6 million of this facility had been drawn down with GBP1.3 million outstanding. Interest on the drawn funds is charged at 3.5% per annum over the Sterling Relevant Reference Rate, with the undrawn balance charged at an interest rate of 1.75% per annum over the Sterling Relevant Reference Rate.

The facility is subject to customary cashflow to debt service liability ratios and EBITDA to debt service liability ratio covenants tested quarterly and is secured by a capital guarantee provided by a number of non-regulated holding subsidiary companies within the Group and debenture over these companies.

   11.        Other payables - amounts falling due in more than a year 
 
                                      Unaudited   Unaudited        Audited 
                                        30 June     30 June    31 December 
                                           2021        2020           2020 
                                        GBP'000     GBP'000        GBP'000 
 Lease liabilities                          831       1,508          1,070 
 Bank loan                                  773           -          1,048 
 Deferred tax liabilities                   535         279            522 
 Provisions for dilapidation costs          170         211            166 
                                          2,309       1,998          2,806 
                                     ----------  ----------  ------------- 
 

12. Called up share capital

 
                                            Unaudited   Unaudited        Audited 
                                              30 June     30 June    31 December 
                                                 2021        2020           2020 
                                              GBP'000     GBP'000        GBP'000 
 Authorised 
 100,000,000 ordinary shares of GBP0.001 
  each                                            100         100            100 
 Called up, issued and fully paid 
 59,408,088 ordinary shares of GBP0.001 
  each                                             59          59             59 
                                           ----------  ----------  ------------- 
 

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