INVESTOR RELATIONS

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STM Group PLC Annual Report 2013

KEY POINTS

Commenting on the results and prospects for STM, Colin Porter, CEO, said:

"These results demonstrate the continued delivery of a new look STM, with more focus on supporting the IFA markets with product initiatives in the expatriate pensions and life assurance arena that meet their specific needs. As predicted, this has allowed us to differentiate ourselves from the traditional corporate and trustee service provider industry, where the market remains challenging, and places STM in an enviable position for continued growth and profitability for the coming years."

 

KEY POINTS

2014 2013 Change
Revenue £7.4m £6.6m +12.1%
Earnings before interest, taxation, depreciation and amortisation ("EBITDA") £1.3m £0.8m +63%
Profit before taxation £1.0m £0.3m +313%
Earnings per share 1.17p 0.85p +38%
Cash at bank £5.5m £4.4m +25%

Commenting on the results and prospects for STM, Colin Porter, CEO, said:

"These results demonstrate the continued delivery of a new look STM, with more focus on supporting the IFA markets with product initiatives in the expatriate pensions and life assurance arena that meet their specific needs. As predicted, this has allowed us to differentiate ourselves from the traditional corporate and trustee service provider industry, where the market remains challenging, and places STM in an enviable position for continued growth and profitability for the coming years."

 
 

The growth in turnover experienced in 2013 continues to be delivered during 2014. Pleasingly, profitability, which was previously lagging turnover, has also increased during the first half of 2014 as the Group has been able to take on this revenue with little further investment in resources being needed.

CHIEF EXECUTIVE'S REVIEW

OVERVIEW

I am pleased to present the interim results for the six months ended 30 June 2014, which show the Group performing in line with management expectation.

The growth in turnover experienced in 2013 continues to be delivered during 2014. Pleasingly, profitability, which was previously lagging turnover, has also increased during the first half of 2014 as the Group has been able to take on this revenue with little further investment in resources being needed.

The Business and Product Development team, newly structured earlier in the year, has been working tirelessly to deliver further specialised financial services products which cater for the specific needs of our clients. They have also made inroads into tailoring our products to meet the requirements in new jurisdictions, again with a focus on the pensions and life assurance markets. This focus has been primarily aimed at the International IFA market, rather than the traditional routes to market of accountancy and law firms for the Corporate and Trustee Service ("CTS") Provider sector.

This has resulted in solid and steady continued growth in our Pensions division. I am also pleased to note that STM Life is now gaining traction and becoming a Group profit contributor with turnover and profitability increasing month on month.

Whilst, as previously reported, the CTS sector remains challenging given the economic climate, the Board believes that there remain opportunities in emerging and less developed markets.

 

FINANCIAL RESULTS

The Group recorded turnover of £7.42 million for the six months to 30 June 2014 (2013: £6.65 million) and operating profit of £1.30 million (2013: £0.84 million).

In line with all services businesses, the Group had accrued income in the form of work performed for clients but not yet billed of £2.43 million as at the period end (2013: £3.46 million). Deferred income relating to annual fees invoiced but not yet earned stood at £1.81 million (2013: £1.26 million). In line with the Group's accounting policy, first year fees on pension business are recognised in full at the time of receiving the application whereas a proportion of the second year fees are deferred over the year in which the fee relates. Invoicing second year fees for our pensions products, which are billed annually, has now commenced, resulting in higher deferred income in 2014. Both the accrued and deferred income will be invoiced or earned in the second half of 2014 (and early 2015), providing excellent visibility over revenues.

During the period the Group has decreased the level of external borrowing by £1 million. This decrease is largely as a result of having successfully settled the 2010 Convertible Loan Notes ("2010 Loan Notes") of £3.45 million and having issued £2.55 million of new Convertible Loan Notes in May 2014 ("2014 Loan Notes"). The 2014 Loan Notes carry similar terms and conditions as the 2010 Loan Notes and can be converted into new ordinary shares in March 2015 or repaid in cash in March 2016. The Board also has the option to repay some or all of the 2014 Loan Notes on the first anniversary, being March 2015. In addition, the Group has fully repaid its remaining bank borrowings of £0.10 million.

Notwithstanding the above external debt repayments, the Group's cash has increased in the six month period by £1.38 million due to strong cash generated by operations, resulting in a cash balance of £5.47 million at 30 June 2014 (31 December 2013: £4.09 million).

The Board continues to review the dividend policy and at this stage proposes that no interim dividend be paid (2013 interim: nil). The Board will review this position again at the year end.