It gives me great pleasure to present the annual results for the year ended 31 December 2014, which pleasingly not only reflect continued growth in turnover, but a significant increase in profitability.
As advised this time last year, profitability lagged turnover as a result of having to build on resources required to sustain the expected increases in turnover. I am pleased to note that this is no longer the case and the investments made in resources over recent years, together with the creation of the Business and Product Development team earlier this year, have resulted in this year’s significant increase in profitability.
As expected by management, the growth continues to come from the Pensions and Life Assurance businesses. Part of the work carried out by the Business and Product Development team was to increase the distribution network mainly through the international IFA market. This has resulted in STM generating business on a much more global basis thereby reducing reliance on the UK market.
Over the last few years STM has found the Corporate and Trustee Services (“CTS”) markets challenging and regrettably this has continued throughout 2014.
CTS turnover currently accounts for 35% of the Group’s revenue compared to 44% in 2013. Whilst, in part, this is as a result of the decrease in actual CTS revenue, it is also largely due to the increase in the Group’s overall revenue given the growth in Pensions and Life.
Total turnover for this business for the year was £5.5 million (2013: £5.8 million), generated predominantly in Jersey and Gibraltar. Jersey revenue accounted for circa 57% (2013: 58%) of the CTS business at £3.1 million (2013: £3.4 million), with Gibraltar having generated £2.4 million (43%) in 2014, directly comparable to the £2.4 million (42%) generated in the previous year.
As noted at the half-year stage, the decrease in revenues can be seen across both jurisdictions demonstrating the overall downward cycle being experienced in this area of our business. That said, these two jurisdictions typically have a different market focus which gives STM a better product spread.
2014 has seen STM Life become a Group contributor both in terms of revenue and profitability, with turnover for the year of £1.4 million compared to £0.6 million in 2013.
New business is being generated from a range of intermediaries and across a wide spread of products. Not only does this suggest diversification within the division but pleasingly it also indicates that the efforts put in by management over the last few years to develop these products and build on these relationships is finally coming to fruition. New business continues to grow in this area which, together with annual management fees, provides solid and steady revenue for 2015 and beyond.
Trading in other divisions which are mainly insurance management, advisory and the Spanish office was broadly in line with management expectations. These are expected to continue at similar levels going forward having generated revenue of £1.0 million in the year (2013: £1.1 million).
During the year the Group has decreased the level of external borrowing by £1.0 million. This decrease is largely as a result of having repaid the convertible loan notes (“Loan Notes”) issued in 2010 to the value of £3.5 million and having issued new ones to certain holders of the 2010 Loan Notes to the value £2.6 million. The new Loan Notes have a fixed term of 2 years and carry an annual coupon of 7%, payable half-yearly. They also carry an option to convert into new ordinary shares at a price of 26p per share after the first year with STM having the option to repay those that do not convert. Those Loan Notes not converted or redeemed will run to term.