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Press Release
|
27th
June 2024
|
STM Group
plc
("STM",
"the Company" or "the Group")
Final Results for
the
12 months ended
31st December 2023
STM Group plc (AIM: STM), the
cross-border provider of retirement solutions, life assurance
products and related administrative services, is pleased to
announce its audited final results for the 12 months ended
31st December 2023.
Financial Highlights:
|
2023
(reported)
|
2023
(adjusted)**
|
2022
(reported)
|
2022
(adjusted)**
|
Revenue
|
£28.1m
|
£28.1m
|
£24.1m
|
£24.6m
|
Profit before other
items*
|
£3.2m
|
£5.8m
|
£3.3m
|
£4.7m
|
Profit before taxation
|
£0.4m
|
£3.1m
|
£1.6m
|
£2.8m
|
Operating margin before other
items
|
11%
|
21%
|
14%
|
19%
|
Earnings per share^
|
0.70p
|
5.12p
|
1.42p
|
3.44p
|
Cash at bank (net of
borrowings)
|
£13.6m
|
£13.6m
|
£13.9m
|
£13.9m
|
* Profit before other items is defined as revenue less
operating expenses i.e. profit before taxation, finance income and
costs, bargain purchase gain, goodwill impairment and gain on the
call options
** Adjusted statistics are net of
certain transactions which do not form part of the regular
operations of the business as further detailed in Table 2
below
· Group's revenue and profit before tax in line with the
Board's expectations;
· Reported revenue up 17 % as a result of the interest sharing
policy and full year contribution of Mercer portfolio
acquisition.
· High
percentage of annual recurring revenue - amounting to 81% of total
revenues - provides a base for the Group's ongoing
profitability;
· Adjusted profit before other items increased by 24% to £5.8m
(2022: £4.7m);
· Adjusted profit before taxation increased by 10% to £3.1m
(2022: £2.8m); and
· Profit before taxation decreased by 72% to £0.4m (2022:
£1.6m) due to £1.2m professional costs incurred and expensed in
relation to the proposed acquisition by Jambo;
· No
dividends declared for 2023 in line with the terms announced for
the proposed acquisition of STM by Jambo SRC Limited (see below)
(2022: 1.2 pence per ordinary share).
Operational Highlights:
· Agreement reached between STM Independent Directors and the
board of Jambo SRC Limited ("Jambo"), regarding the terms of the
acquisition ("Acquisition") of the entire issued and to be issued
ordinary shares of STM by way of a Scheme of Arrangement (the
"Scheme").
o Scheme approved on 6th December 2023 by 99.9% of
independent Scheme Shares voted and by 89.5% of independent Scheme
Shareholders who voted;
o Shareholders entitled to receive 60 pence per ordinary share
in cash at completion of the Acquisition as well as a Deferred
Consideration Unit which may deliver up to 7 pence per ordinary
share in cash; and
o Acquisition subject to change of control approvals by
Gibraltar and Malta; regulatory assessment processes continue in
both jurisdictions but approvals yet to be received.
· Acquisition also conditional on STM board selling the UK SIPP
Companies by way of an MBO to Pathlines Holdings Limited (a company
in which STM CEO, Alan Kentish, and his family hold a significant
minority interest) for a total cash consideration of £4.5 million;
and
· Integration of Mercer SIPP & SSAS portfolios acquired in
September 2022 was completed during the year - businesses performed
in line with expectations.
Post Period Highlights:
· After careful consideration of its options for its Options
Workplace Pensions Master Trust ("Options Master Trust"), STM
signed a commercial contract with Smart Pension Limited ("Smart")
on 14th June 2024;
· Subject to approval by the trustees of the Options Master
Trust, Smart will become default provider, and members of the
Options Master Trust will transfer over time to Smart's own Master
Trust. STM will receive an estimated £4.7 million consideration for
such transfers over the next two years;
· An
introducer agreement was also signed with Smart offering STM
introductory commission to new business relationships introduced to
Smart. Additional introducer income from this agreement is
estimated at between £1 million and £5 million over the next three
years; and
· Since 31st December 2023 the Group has continued
to trade in line with the Board's expectations.
Commenting, Alan Kentish, Chief Executive Officer, said:
"The Group continued to perform in
line with the Board's expectations during 2023, with the increase
in interest income from the revised interest sharing policies
introduced during the second half of the year offsetting the
continued shortfall in new business across the Group, pending
decisions re future technology strategy that have been deferred as
a result of the Jambo acquisition process, and increased costs
arising from that process and from other factors."
Annual Report & Accounts - the Annual Report & Accounts will be available at the
Company's website -
https://www.stmgroupplc.com/investor/annual_report
This announcement contains inside information for the
purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of
MAR.
For further information, please contact:
STM Group PLC
|
|
Alan Kentish, Chief Executive
Officer
|
Via
Walbrook PR
www.stmgroupplc.com
|
|
|
Cavendish Capital Markets Limited (Nominated Adviser and
Broker to STM)
|
|
Matt Goode / Emily Watts / Abigail
Kelly - Corporate Finance
Tim Redfern - ECM
|
Tel: +44
(0) 20 7220 0500
|
|
|
Walbrook
|
www.walbrookpr.com
|
Tom Cooper / Nick Rome / Joseph
Walker
|
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 traded on AIM, a market operated by the
London Stock Exchange. The Group specialises in the provision of
retirement and life assurance solutions and related administration
of client assets.
The Group has operations in the
UK, Gibraltar, Malta, Australia 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 to you the
STM Group PLC ("STM") results for the year ended 31st
December 2023 - the first full year that the newly constituted
Board has been in situ.
Given the embedded value within
the Group's businesses and the backdrop of predictable recurring
revenue and ongoing profitability, my role as Chair and that of my
fellow directors has been to set a strategic course which would
deliver enhanced shareholder value. This could come about by the
introduction of new products and the achievement of greater
efficiencies or by the orderly break-up or sale of the
Group.
As announced in January 2023, the
Board commissioned an independent strategic review from a
third-party consultancy company to assess the Group's operating
businesses, identify those with the most potential for future
profitability and recommend alternative strategies for those and
the remaining businesses within the Group. The results of the
review were presented to the Board in March 2023 and concluded that
the success of the Group would ultimately be dependent on its
technology capabilities. The review did highlight that the
anticipated externally realisable value of the various businesses
within the Group was significantly more that the market
capitalisation of the Group at the time. As a result of the
strategic review, the Board initiated a technology review as the
final input required for the Board to determine the strategy going
forward.
However, as well documented in the
various market announcements from July 2023 onwards, the Group
received an initial approach and expression of interest in the
Group, which culminated in the announcement of an offer for the
whole of the issued and to be issued share capital of the Company,
issued in accordance with Rule 2.7 of the Takeover Code, on
10th October 2023. The offer was to be effected via a
Scheme of Arrangement, and the Scheme document was issued to
shareholders on 9th November 2023.
Full details of the offer are set
out in the CEO's Review within the Annual Report, but in summary
the offeror, Jambo SRC Limited ("Jambo'), would acquire the whole
STM Group, with the exception of the two SIPP businesses which
would exit by way of a management buyout to be completed
immediately prior to the overall transaction. The acquisition, once
completed, will deliver an up-front 60 pence per share in cash to
STM shareholders, with up to a further 7 pence per share in
deferred contingent consideration at the one-year anniversary,
dependant on certain criteria.
The Scheme was approved by 99.99%
of all independent Scheme Shares voted and by 89.5% of independent
Scheme Shareholders who voted on 6th December 2023. The
transaction remains subject to regulatory approval of the proposed
change in control of the Group by the Gibraltar and Malta
regulators.
Given the anticipated acquisition
by Jambo, and the fact that any dividend declared would be deducted
from the final consideration under the terms of the Scheme, the
Board has taken the decision not to declare a final dividend for
2023 (2022: 0.60 pence).
Turning to the performance of the
business, I am pleased to confirm that the reported 2023 revenue
and underlying profit before tax were in line with management's
expectations, although reported profitability was significantly
reduced as a result of expensing £1.2 million of non-recurring
professional advisory costs relating to the potential acquisition
by Jambo.
The Group's recurring revenue
continues to provide a predictable base for the Group's ongoing
profitability, and this has been bolstered by the additional
revenue generated from the new interest sharing policy that was
implemented for the UK SIPP businesses in July 2023. Similar
policies are in the process of being rolled out for the other areas
of the business.
I noted in my previous Chairman's
statement that STM was at a cross-roads in its evolution, and that
certain parts of the business would be difficult to grow or to
achieve a full valuation. In this regard, I am delighted to confirm
that, on 14th June 2024, the Group announced it had
signed a commercial agreement with Smart Pension Limited ("Smart"),
and related agreements under which, subject to trustee approval,
the members in the Group's Options master trust will transfer to
Smart's master trust. This is likely to generate a consideration of
£4.7m payable over the next couple of years. In addition, the Group
has also signed an introducers agreement with Smart, which will
allow for the Group to receive introductory fees for new business
introduced by STM to Smart.
Importantly, the agreement allows
STM to exit the UK workplace pension market, which is becoming more
competitive and starting to be dominated by the larger players. The
transaction was undertaken with Jambo's consent.
Finally, my thanks go to all of my
STM colleagues for their hard work and commitment during the course
of 2023 and into 2024.
I would like to extend my
particular thanks to Therese Neish, who left the Group on
31st May 2024, for her considerable contribution and
dedication to the Group over many years.
I look forward to updating the
market in due course in relation to the change of control approvals
from the Malta and Gibraltar regulators which, once received, will
allow the acquisition by Jambo to conclude and the initial
consideration of 60 pence per ordinary share to be paid to
shareholders.
Nigel Birrell
Chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
The 2023 financial year has been
dominated by strategic projects, with the focus in the second half
of the year being on the initial approach and expression of
interest by Jambo SRC Limited ("Jambo") in June 2023, which
culminated in an offer by Jambo for the whole of the issued and to
be issued share capital of the Company on 10th October
2023, subject to regulatory approval of the change of control in
Gibraltar and Malta. The offer was also conditional on the UK SIPP
businesses completing a management buy-out immediately prior to the
Court approval of the Scheme of Arrangement (the "Scheme") by which
the acquisition was to be effected, subject to change of control
approval in the UK.
The Scheme was approved at an EGM
held on 6th December 2023 with 99.9% of Scheme shares
voting to accept the Scheme offer. As at the date of these
financial statements, the FCA in the UK has approved the
prospective change of control of the companies subject to the
management buyout, but the approval processes in Gibraltar and
Malta have yet to be concluded.
2023 commenced with the
appointment of third-party consultants to undertake a strategic
review of the Group's operation, the results of which were reported
to the Board in late March 2023. Further details of the results of
the review and the impact of the approach and subsequent offer by
Jambo on the Board's conclusions and further actions are set out in
the Chairman's Statement.
Notwithstanding the significant
distractions arising from the approach by Jambo, the Group has
continued to trade in line with management expectations.
The continuing high percentage of
annual recurring revenue for 2023, amounting to 81% of total
revenues, underpinned the day-to-day performance of the various
trading divisions, and for the latter part of 2023 this was
supplemented by the new interest sharing policy implemented in the
UK SIPP businesses.
The integration of the Mercer SIPP
and SSAS portfolios acquired in September 2022 was successfully
completed during the course of 2023, and the books of business
acquired performed in line with expectations.
New business volumes remained
generally disappointing across the Group, but this needs to be
viewed in conjunction with the fact that certain areas of the
business would only see better volumes upon an improved
technology-based service offering, and that potential strategic
developments of the Group's technology platforms have been paused
pending the outcome of the Jambo transaction. All strategic
projects remain on hold whilst the Group awaits the change of
control regulatory approvals previously referred to,
Finance review
Financial performance in
the year
The principal key performance
indicators used by the Board to assess the financial performance of
the Group are as per Table 1 below.
The Group reports both basic and
adjusted financial key performance indicators in Table 1 and 2
below, as the impact of non-recurring movements does not allow for
a clear understanding of operating performance without highlighting
key non-recurring elements.
The Group reported revenues of
£28.1 million for 2023 (2022: £24.1 million). The 17% uplift in
revenues over 2022 is largely attributable to a full year's revenue
contribution from the 2022 acquisition of the SIPP and SSAS books
from Mercer, which contributed £2.3 million in additional revenues,
and the additional £3.2 million interest income earned as a result
of the new SIPP interest sharing policy. This offset the shortfalls
in new business revenues across the Group.
Profit before other items on both
a reported and adjusted basis for 2023, was £3.2 million and £5.8
million respectively (£3.3 million and £4.7 million respectively),
and the latter represented a healthy uplift compared to
2022.
The uplift in adjusted profit
before other items over 2022 was principally due to the impact of
the client interest sharing policy incepted in the SIPP businesses
in July 2023 which flowed through to the bottom line.
On a like-for-like basis, adjusted
profit before tax was similar to the previous year, with 2023
showing £3.1 million (2022 £2.8 million), although on a statutory
basis the pre-tax result for 2023 was significantly lower at £0.4
million (2022 £1.6 million). This reduction was primarily driven by
the one-off, non-recurring professional advisory and legal fees of
£1.2 million incurred in relation to the proposed acquisition of
the Company by Jambo.
In addition, as set out below in
Table 2, there were a number of non-recurring income and expense
items that are added back to the reported measure for Profit Before
Tax so as to give a better picture of the operating performance of
the business. For 2023, this included £0.6 million (2022: £Nil) of
deferred consideration and old debtors previously recognised in the
sale of the Company Management and Trustee Services businesses in
2021, £0.2 million of deferred consideration previously recognised
on the Berkeley Burke and Mercer acquisitions in 2020 and 2022
respectively that were ultimately not deemed to be recoverable
(2022: £Nil), £0.5 million (2022: £0.5 million) of one-off costs in
relation to management restructuring and legal costs and £0.1
million (2022: £Nil) advisory fees paid for the independent
strategic review undertaken in the first part of the
year.
Table 12022
KPI
|
Definition
|
2023 (reported) |
2022 (reported) |
2023 (adjusted)
|
2022 (adjusted)
|
Revenue (£'000s)
|
Income derived from the provision
of services.
|
28,078
|
24,094
|
28,078
|
24,599
|
Recurring revenue
(£'000s)
|
Revenue derived from annual
management charges and/or contractual fixed fee
agreements.
|
22,686
|
22,219
|
22,686
|
22,219
|
Interest income
(£'000s)
|
Interest earned from the Group's
and customer cash balances
|
3,740
|
531
|
3,740
|
531
|
Profit before other items
(£'000s)
|
Revenue less administrative
expenses i.e. profit before finance income and costs, gain on
disposal of subsidiary bargain purchase gain, goodwill impairment
and gain on the call options and before taxation.
|
3,200
|
3,321
|
5,824
|
4,686
|
Profit before taxation
(£'000s)
|
Revenue less administrative
expenses and other items
|
442
|
1,578
|
3,066
|
2,778
|
Profit after taxation
(£'000s)
|
Revenue less administrative
expenses and other items less/add taxation charge/credit
|
417
|
854
|
3,041
|
2,054
|
Earnings per share
(pence)
|
Profit after taxation attributable
to shareholder of the Company divided by weighted average number of
ordinary shares outstanding
|
0.70
|
1.42
|
5.12
|
3.44
|
Profit margin before other items
(%)
|
Profit before other items divided
by revenue.
|
11%
|
14%
|
21%
|
19%
|
Adjusted measures are net of
non-recurring costs and other exceptional items that do not form
part of the normal course of business.
Table 2
|
Revenue
|
Profit before other
items
|
Profit before tax
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
£'000s
|
£'000s
|
£'000s
|
£'000s
|
£'000s
|
£'000s
|
Reported measure
|
28,078
|
24,094
|
3,200
|
3,321
|
442
|
1,578
|
Add: adjustment due to revenue
recognition policy change on acquisition
|
-
|
505
|
-
|
505
|
-
|
505
|
Add: integration and acquisition
cost
|
-
|
-
|
-
|
390
|
-
|
390
|
Add: Project Atlantic professional
costs
|
|
|
1,202
|
-
|
1,202
|
-
|
Less: bargain purchase gain on
acquisition and gain on call options
|
-
|
-
|
-
|
-
|
-
|
(327)
|
Less: loss on disposal of
companies and trust management
|
-
|
-
|
-
|
-
|
-
|
162
|
Less: movement in deferred
consideration related to prior year acquisitions
|
-
|
-
|
761
|
-
|
761
|
-
|
Add: costs of strategic
review
|
-
|
-
|
135
|
-
|
135
|
-
|
Add: other non-recurring
costs
|
-
|
-
|
526
|
470
|
526
|
470
|
Adjusted measure
|
28,078
|
24,599
|
5,824
|
4,686
|
3,066
|
2,778
|
Tax Charge and Earnings per
Share
The tax charge for the year was
£0.03 million (2022: £0.7 million). This was an effective tax rate
of 6% (2022: 46%), which was lower than the rates noted in prior
years due to the writeback of tax over
provided for in prior years. In the year ended 31st
December 2022, the Group's effective tax rate was higher than the
jurisdictional effective tax rate, as tax losses brought forward or
incurred in that year in some jurisdictions could not be utilised
by the profitable subsidiaries in other jurisdictions and dividends
remitted to the holding company by overseas jurisdictions were
higher than in prior years, thus resulting in a higher overall tax
charge.
Earnings per share ("EPS") for
2023 was 0.7 pence per ordinary share compared to 1.42 pence per
ordinary share in 2022. The decrease was a direct result of the
lower profits before tax as explained above. There were no dilutive
factors in either 2023 or 2022.
Cashflows and Balance
Sheet
Cash and cash equivalents amounted
to £18.4 million as at 31st December 2023 (2022: £19.2
million), with net cash inflow from operating activities of £2.5
million for the year ended 31st December 2023
(2022: £5.3m).
The bank loan from RBSI, drawn
down in 2021 and 2022 to finance the acquisition of the SIPP and
SSAS books from Mercer, remained in place as at 31st
December 2023. As at the year end the outstanding balance on the
facility was £4.8 million (2022: £5.4 million).
Cash and cash equivalents, net of
the above mentioned outstanding bank loan, as at
31st December 2023 amounted to £13.6 million
(2022: £13.9 million).
As would be expected for a Group
regulated in several jurisdictions, a significant proportion of the
gross cash balance is required to underpin the regulatory capital
and solvency requirements.
The cash and cash equivalents
required for solvency purposes varies as other, non-cash, assets
can be used to support the regulatory solvency requirement. The
total regulatory capital requirement across the Group as at
31st December 2023 was £17.3 million (2022:
£17.3 million).
As further disclosed in the notes
to the financial statements, the Carey ("Options") v Adams case
came to a conclusion in 2022 and was settled during the course of
that year. During the course of 2023 it was therefore possible to
quantify the likely exposure to similar cases with the same
profile. In a similar manner, but in an unrelated case, Options was
unsuccessful in the Judicial review hearing of a previously
determined case by the Financial Ombudsman Scheme.
As a result, this case has been
settled by the professional indemnity insurers, and cases with
similar characteristics have now been provided for as at
31st December 2023. Whilst a provision has been
established for the estimated likely amounts payable in relation to
such claims, the Group has recognised an asset equal to an
equivalent recovery of such exposure from the Group's professional
indemnity insurers, such that the net assets indicated in the
consolidated statement of financial position are not affected.
Further details in relation to the provisions held are set out in
note 26 to the financial statements.
Within the consolidated statement
of financial position, the Group recognised accrued income in the
form of work performed for clients but not yet billed, as well as
accrued interest income, of £3.1 million as at 31st
December 2023 (2022: £0.9 million). Additionally, deferred income
(included within current liabilities in the statement of financial
position), relating to annual fees invoiced but not yet earned,
amounted to £3.7 million (2022: £3.8 million). Both these figures
give good visibility of cash collections and, in the case of
deferred income, revenue still to be earned through the Income
Statement in the coming months.
Dividend
The Board is not proposing a final
dividend (2022: 0.60 pence per ordinary share), as, under the terms
of the Scheme offer, any dividend declared would be deducted from
the overall consideration payable by Jambo in respect of the
potential acquisition, with potential adverse tax consequences for
shareholders. As a result, the total proposed dividend for 2023
amounted to Nil pence per ordinary share (2022: 1.20 pence per
ordinary share).
Operational Performance
Pensions
The Group's pension administration
businesses continue to be the largest revenue generating stream,
accounting for 84% of total Group revenues (2021: 77%), excluding
interest earned on client interest sharing policy.
Total revenue, excluding interest
on client funds, across the Group's pension businesses amounted to
£20.4 million (2022: £18.5 million). The full year of the Mercer
SIPP and SSAS acquisition during 2022 contributed £2.8 million of
revenue in 2023 (2022: £0.5 million in 4 months).
In addition to the above pension
administration revenue, the Pensions division also benefited from
the increase in market interest rates and the implementation of its
interest sharing policy within the Group's SIPP businesses, which
was incepted in July 2023 to bring the Group's policy in line with
market norms. Across the whole of the pension division, interest
income for 2023 amounted to £3.0 million (2022: £0.3 million). 68%
of this amount (2022: 86%) was attributable to the SIPP
businesses.
The administration of the Group's
QROPS products continues to be the largest revenue generator within
the pensions division, accounting for £9.0 million of revenue
(2022: £9.4 million) and remains a robust and predictable revenue
stream. Since the UK pension legislation changes in 2017, these
products are no longer a growth driver. There remains a small net
attrition rate on the QROPS book which is expected to continue as
the member age profile gradually increases and members look to take
advantage of flexi-access benefits. The administration of such
schemes is undertaken in Malta and Gibraltar.
The SIPP businesses, both Options
Personal Pensions and London & Colonial Services Limited,
contributed total pension administration revenues of £4.7 million
in 2023 (2022: £4.1 million). As noted above, the increase is down
to the full year benefit of the Mercer SIPP book of business
acquired in September 2022.
The Group's Options Corporate
pension auto-enrolment business generated revenue of £4.1 million
in 2023 (2022: £3.4 million) and has performed as expected in a
relatively mature marketplace.
The final revenue stream of the
pensions divisions comes from the SSAS and EBC third-party
administration businesses. These contributed revenues of £2.7
million in 2023 (2022: £1.6 million), with the uplift again being
down to a full year contribution from the Mercer SSAS book acquired
in September 2022.
Life
Assurance
The combined revenues of the two
life assurances businesses in Gibraltar was £4.0 million in 2023
(2022: £5.0 million). Those businesses did not generate any new
business revenues from the Group's short term annuity product,
which had contributed circa £0.8 million of revenue in
2022.
The main products for the life
companies remain the flexible annuity products for both private
wealth and pension solutions. Whilst there has been a small
increase in illustrations requested and provided during 2023,
disappointingly we have not seen conversions increase, and the
Group has struggled to broaden the range of IFAs that utilise the
products.
During the latter part of the
year, the life companies revisited the pricing of the flexible
annuity products and capped the establishment fee. Whilst this
potentially reduces any upfront fees, it is anticipated that this
will make the product more compelling and attractive to the larger
potential policyholders.
The Group retains its intention to
broaden the range of products that will be available through the
two life companies, and it is expected that over time this should
allow stronger organic growth. However, part of that strategy will
be reliant on the finalisation of the technology review instigated
as part of the strategic review but subsequently deferred in the
light of the proposed acquisition of the Company by Jambo which
would determine what systems could and should be used as the main
administration platform for the Group.
Regulatory developments - Consumer Duty
The Consumer Duty rules introduced
by the Financial Conduct Authority in the UK came into effect on
31st July 2023.
These rules require regulated firms
to act to deliver good outcomes for retail customers.
These outcomes relate
to:
· Products and services;
· Price and value;
· Consumer understanding; and
· Consumer support.
The new rules require firms to
consider the needs, characteristics and objectives of their
customers - including those with characteristics of vulnerability -
and how they behave, at every stage of the customer journey. As
well as acting to deliver good customer outcomes, firms will need
to understand and evidence whether those outcomes are being met.
They apply to all UK retail
customers, whether serviced by firms based in the UK or in other
jurisdictions such as Gibraltar.
The Group recognised the importance
of the new rules and established a project group to identify the
key factors to be considered in assessing the rules, develop new or
amended rules and processes (including data gathering) to enable
the Group to comply with its Consumer Duty obligations and to
oversee such compliance.
The 31st July 2023
deadline was met in all material aspects, with some minor
additional processes and procedures being identified for future
development.
The process is ongoing and the
Group continues to prioritise the delivery of good outcomes for its
retail customers.
Outlook
The future direction of the STM
Group is currently awaiting the outcome of the applications by
Jambo to the Gibraltar and Maltese regulatory authorities for
change of control approvals pursuant to the proposed acquisition by
Jambo of the whole of the issued share capital of the Company, and
to sanction the completion of the transaction that was approved by
99.99 % of Scheme shares voted on 6th December
2023.
In the meantime, other than the
potential exit strategy of the Options master trust from the UK
workplace pensions marketplace, which had been agreed by both the
PLC board and the potential acquirer as set out in the Scheme document, there is minimal
ability to make strategic decisions on the business.
On 14th June 2024, the
Board announced that the Group had signed a commercial agreement
with Smart Pensions Limited in which, subject to approval by the
trustees and regulator, members transferring from Options Master
trust to Smart would result in Smart paying a consideration to the
Group. It is anticipated that, over a two-year period, this
consideration is likely to amount to circa £4.7million. In
addition, the Group also entered into an introducers agreement with
Smart at the same time, whereby any new members introduced to Smart
by the Group's existing or new intermediary contacts would lead to
introductory commission income for the Group. The agreement is in
place for a maximum period of three years, and management estimates
that the quantum of such additional introductory commission could
lie in the range of £1.0 million to £5.0 million over the
three-year period.
Notwithstanding the above, the
Group's businesses continue to perform in line with expectations,
and underlying performance for 2024 will continue to benefit from
the interest sharing policies for the SIPP businesses that were
implemented in the second half of 2023.
Interest sharing policies for the
other parts of the Group have now been agreed, and these are in the
process of being rolled out. It is anticipated that this will
provide additional contribution for 2024, although, given the
ongoing uncertainty around market interest rates, it is not
possible to forecast any incremental contribution over market
expectations with any material degree of accuracy
Whilst the technology review
referred to above remains on hold as a result of the offer by
Jambo, that process will need to be recommenced once the potential
acquisition has been approved by the regulators in Malta and
Gibraltar.
As noted in my 2022 report, the
outcome of any technology reviews will no doubt determine the
strategy that the Plc board will take going forward. The UK and
expatriate pension space remains buoyant and exciting, with
opportunities to differentiate the business from industry peers,
but only if the technology can support a self-serve administration
process.
I would like to take this
opportunity to thank all my STM colleagues, and particularly
Therese Neish, who returned as interim CFO on a fixed-term contract
which was expected to see the conclusion of the acquisition, for
their continued hard work and professionalism in carrying out their
duties.
The Board looks forward to
updating you on the progress of the proposed acquisition of the
Company by Jambo in due course.
Alan Kentish
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Notes
|
Year ended
31 December
2023
£000
|
Year
ended
31
December 2022
£000
|
Revenue
|
8
|
28,078
|
24,094
|
Administrative expenses
|
9
|
(24,878)
|
(20,773)
|
Profit before other items
|
10
|
3,200
|
3,321
|
OTHER ITEMS
|
|
|
|
|
|
|
|
Bargain purchase gain
|
4
|
-
|
327
|
Gains on revaluation of financial
instruments
|
|
-
|
11
|
Loss on disposals of
subsidiaries
|
3
|
-
|
(162)
|
Loss on disposal of fixed
assets
|
|
(96)
|
-
|
Finance costs
|
|
(689)
|
(322)
|
Depreciation and
amortisation
|
13,14
|
(1,973)
|
(1,597)
|
Profit before taxation
|
|
442
|
1,578
|
Taxation
|
12
|
(25)
|
(724)
|
Profit after taxation
|
|
417
|
854
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
Items that are or may be reclassified to profit or
loss
|
|
|
|
Foreign currency translation
differences for foreign operations
|
|
32
|
12
|
Total other comprehensive income
|
|
32
|
12
|
Total comprehensive income for the year
|
|
449
|
866
|
Profit attributable to:
|
|
|
|
Owners of the Company
|
|
417
|
844
|
Non-controlling
Interests
|
|
-
|
10
|
|
|
417
|
854
|
Total comprehensive income
attributable to:
|
|
|
|
Owners of the Company
|
|
449
|
856
|
Non-controlling
Interests
|
|
-
|
10
|
|
|
449
|
866
|
Earnings per share basic (pence)
|
20
|
0.70
|
1.42
|
Earnings per share diluted (pence)
|
20
|
0.70
|
1.42
|
The results for 2023 and 2022
relate to continuing activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS
AT 31 DECEMBER 2023
|
Notes
|
31 December
2023
£000
|
31
December 2022
£000
|
ASSETS
|
|
|
|
Non-current assets
|
|
|
|
Property and office
equipment
|
13
|
1,304
|
1,161
|
Intangible assets
|
14
|
21,444
|
22,125
|
Financial assets
|
15
|
1,839
|
1,762
|
Deferred tax asset
|
12
|
39
|
58
|
Total non-current assets
|
|
24,626
|
25,106
|
Current assets
|
|
|
|
Accrued income
|
|
3,078
|
860
|
Trade and other
receivables
|
16
|
7,349
|
8,461
|
Receivables due from
insurers
|
26
|
27,441
|
488
|
Cash and cash
equivalents
|
17
|
18,365
|
19,234
|
Total current assets
|
|
56,233
|
29,043
|
Total assets
|
|
80,859
|
54,149
|
EQUITY
|
|
|
|
Called up share capital
|
18
|
59
|
59
|
Share premium account
|
18
|
22,372
|
22,372
|
Retained earnings
|
|
14,443
|
14,382
|
Other reserves
|
18
|
(2,279)
|
(1,843)
|
Equity attributable to owners of the
Company
|
|
34,595
|
34,970
|
Non-controlling interests
|
|
-
|
(68)
|
Total equity
|
|
34,595
|
34,902
|
LIABILITIES
|
|
|
|
Current liabilities
|
|
|
|
Liabilities for current
tax
|
|
425
|
788
|
Trade and other
payables
|
21
|
13,271
|
12,517
|
Provisions
|
26
|
27,441
|
488
|
Total current liabilities
|
|
41,137
|
13,793
|
Non-current liabilities
|
|
|
|
Other payables
|
22
|
4,808
|
5,050
|
Deferred tax
liabilities
|
12
|
319
|
404
|
Total non-current liabilities
|
|
5,127
|
5,454
|
Total liabilities and equity
|
|
80,859
|
54,149
|
|
|
|
|
|
|
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER
2023
1. Reporting entity
STM Group PLC (the "Company") is a
company incorporated and domiciled in the Isle of Man and is traded
on AIM, a market operated by the London Stock Exchange. The address
of the Company's registered office is 1st Floor Viking
House, St Paul's Square, Ramsey, Isle of Man, IM8 1GB. The
consolidated financial statements of the Group as at, and for the
year ended, 31st December 2023 comprise the Company and
its subsidiaries (together referred to as the "Group" and
individually as "Group entities"). The Group is primarily involved
in financial services.
2. Basis of preparation
The financial information, which
comprises the consolidated statement of comprehensive income,
consolidated statement of financial position, the statement of
consolidated changes in equity, the consolidated statement of cash
flows and the related notes, is derived from the full Group
consolidated financial statements for the year ended
31st December 2023, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and
interpretations adopted by the International Accounting Standards
Board ("IASB") and in accordance with Isle of Man law. The
accounting policies applied in preparing the financial information
are consistent with those used in preparing the consolidated
financial statements for the year ended 31st December
2023.
Going concern basis of accounting
The Directors have prepared the
financial statements on a going concern basis, as in their opinion
the Group is able to meet its obligations as they fall due for a
period of at least 12 months from the date of this report. In
considering this requirement, the Directors have considered
budgets and rolling cashflow forecasts for the
forthcoming 18-month period and the level of professional indemnity
insurance held by the Group. In addition, the risks included on the
Group's risk register that could impact on the Group's liquidity
and solvency over the next 12 months. These show that the Group
should continue to be cash generative, and have sufficient
resources to meet its business objectives, both in the short-term
and in relation to its strategic priorities.
Having due regard to these matters,
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for at
least 12 months from the date of approval and signing of the
financial statements. As such, the Board continues to adopt the
going concern basis in preparing the financial
statements.
Functional and presentation currency
These consolidated financial
statements are presented in Pounds Sterling (£), rounded to the
nearest £'000, which is the Group's functional currency as this is
the main currency in which it transacts business. Foreign
operations are included in accordance with the policies set out in
the financial statements.
3. Disposal of
subsidiaries
There were no disposals of
subsidiaries in the two years ended 31st December 2023
and 31st December 2022. The loss on disposal reported in
2022 comprised a reduction in the final consideration received in
that year in respect of the disposal of the Group's Gibraltar
company and trustee services ("CTS") and tax compliance business,
STM Fidecs Management Limited, and the Jersey based CTS business,
STM Fiduciaire Limited, in 2021. The reduction arose from audited
revenues for those businesses being lower than originally
estimated.
4. Acquisition of
portfolios
There were no acquisitions in
2023.
On 31st August 2022,
the Group acquired the portfolios, net assets and trustee companies
of the SIPP and SSAS businesses from Mercer Ltd ("the Portfolio").
The acquisition of the Portfolios was complementary to the Group's
existing product offerings in the UK SIPP and SSAS markets and
provided a solid platform for scalability, particularly for the
Group's SSAS operations, and efficiencies going
forward. In addition, it provided the Group with access
to an expanded network of intermediaries who previously introduced
clients to Mercer Ltd.
The Group paid a gross cash
consideration of £3,340,000 to acquire the Portfolios. Such
consideration included the purchase of the net assets of the
business which primarily related to fees yet to be collected from
clients.
The acquisition was accounted for
using the acquisition method. Transaction costs incurred on the
acquisition totalled £150,000 and were expensed within
administrative expenses in the Consolidated Statement of
Comprehensive Income for the year ended 31st December
2022.
Details of the fair value of the
client portfolio, assets and liabilities acquired are set out as
follows:
|
Fair
value recognised on acquisition
|
Fair
value adjustments
|
Previous
carrying value
|
|
£'000
|
£'000
|
£'000
|
Client portfolios
|
2,757
|
2,757
|
-
|
Fixed assets
|
10
|
-
|
10
|
Accrued income
|
107
|
-
|
107
|
Debtors(1)
|
831
|
-
|
831
|
Prepaid assets
|
28
|
-
|
28
|
Liabilities
|
(66)
|
-
|
(66)
|
Total identifiable net assets
acquired
|
3,667
|
2,757
|
910
|
Note 1: The fair value of debtors
was approximately the gross contractual amount at the acquisition
date.
At acquisition the Group performed
a valuation on the client portfolios acquired using the market
approach. As a result, client portfolio assets of £1,543,000
relating to the SIPP portfolio and £1,214,000 related to the SSAS
portfolio were recognised.
A bargain purchase gain arose as a
result of negotiations due to the previous revenue recognition
policy being more aggressive than, and an adjustment being
necessary to align that policy with, the Group's more conservative
policy. This has resulted in the fair value of the identifiable net
assets being higher than the cash consideration paid as noted
below:
|
£'000
|
Total consideration
transferred
|
3,340
|
Fair value of identifiable net
assets
|
(3,667)
|
Bargain purchase gain
|
(327)
|
The bargain purchase gain was
attributable to the Portfolio acquired and was recognised in the
consolidated statement of comprehensive income for the year ended
31 December 2022.
From the effective date of
acquisition to 31st December 2022, the SIPP and SSAS
portfolios generated revenue of £821,000 and incurred a loss of
£145,000. If the acquisition had occurred on 1st January
2022, management estimates that the impact on the consolidated
revenue and profit before tax for the year ended 31st
December 2022 would have been £2,243,000 and a loss of £99,000
respectively.
In addition, the Group paid
deferred cash consideration of £217,000 during the year (2022:
£114,000) relating to the final payment for the acquisition of the
Berkeley Burke companies completed in 2020. The consideration
paid in 2023 was £161,000 higher than the amount provided as at
31st December 2022 due to the collection and onward
remittance of trade receivables due to the seller under the
relevant share purchase agreements but not previously
provided.
The Group also paid additional net
consideration in 2023 of £11,000 in respect of the companies and
SIPP and SSAS portfolios acquired from Mercer Limited in
2022.
As these acquisitions were
completed more than twelve months prior to the dates of payment in
the current reporting period, the aggregate amount of £172,000, net
of the amount provided at 31st December 2022, has been
written off to administrative expenses in 2023.
5. Acquisition of non-controlling
interests
As part of the acquisition of
Carey Administration Holdings Limited ("Options") in 2019, the
Group entered into call option agreements to acquire the
non‑controlling interests ("NCIs") in Options Corporate Pensions UK
Limited ("OCPUK") and Options UK Personal Pensions LLP ("OSUK")
from the current owner of the NCIs. The call options were
exercisable in 2022 with the exercise prices based on the audited
financial statements of these entities for the year ended
31st December 2021.
On 9th November 2022,
the Group issued the Exercise Notices to the current owner of the
NCIs for acquiring the additional interests in OCPUK and
OSUK.
Options Corporate Pensions UK Limited
On 30th November 2022,
the Group completed the transaction to acquire an additional 20%
interest in OCPUK, increasing its ownership from 80% to 100%. The
carrying amount of OCPUK's net liabilities in the Group's
consolidated financial statement on the date of acquisition was
£1,870,000.
|
£'000
|
Carrying amount of NCIs acquired
(£1,870,000 x 20%)
|
374
|
Exercise of OCPUK's call
option
|
881
|
Cash consideration paid to
NCIs
|
120
|
A decrease in equity attributable
to owners of the Company
|
1,375
|
The decrease in equity
attributable to owners of the Company was recognised in the other
reserve for the year ended 31st December
2022.
Options Pensions UK LLP
On 12th January 2023,
the Group completed the transaction to acquire an additional 30%
interest in OSUK, increasing its ownership from 70% to 100%. The
carrying amount of OSUK's net liabilities in the Group's
consolidated financial statement on the date of acquisition was
£227,000.
|
£'000
|
Carrying amount of NCIs acquired
(£227,000 x 30%)
|
68
|
Exercise of OSUK's call
option
|
-
|
Cash consideration paid to
NCIs
|
400
|
A decrease in equity attributable
to owners of the Company
|
468
|
The decrease in equity
attributable to owners of the Company has been recognised in the
other reserve for the year ended 31st December
2023.
6. Segmental Information
STM Group has three reportable
segments: Pensions, Life Assurance 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").
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 internally calculated proportions.
Management believes 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:
|
Turnover
|
Operating segment
|
2023
|
2022
|
|
£000
|
£000
|
Pensions
|
23,474
|
18,421
|
Life Assurance
|
4,039
|
5,001
|
Other services
|
565
|
672
|
Total
|
28,078
|
24,094
|
Analysis of the Group's turnover
information by geographical location is detailed below:
|
Turnover
|
Geographical segment
|
2023
|
2022
|
|
£000
|
£000
|
Gibraltar
|
6,112
|
7,324
|
Malta
|
7,146
|
7,178
|
United Kingdom
|
14,358
|
9,110
|
Other
|
462
|
482
|
Total
|
28,078
|
24,094
|
7. Life Assurance Operating
Segment
These consolidated financial
statements include the results for STM Life Assurance PCC PLC and
London & Colonial Assurance PLC, two 100% owned subsidiaries
whose principal activities are that of the provision of life
assurance services. These companies are licenced to carry on linked
long-term insurance business under the Financial Services
(Insurance Companies) Act by the Gibraltar Financial Services
Commission.
For the purposes of these
consolidated financial statements, only the shareholders' funds and
surpluses that emerges on the long-term funds have been included.
The assets invested by the Life Assurance clients are determined by
either the clients or their advisers and are segregated from the
assets and liabilities of other clients. Therefore, the Group
considers that it does not control the investment decision nor does
it bear any financial risk in respect of that decision and,
therefore, the investment assets and associated liabilities to the
customers should not be presented within the consolidated statement
of financial position. The total revenue of the Group of
£28,078,000 (2022: £24,094,000) included £4,039,000 (2022:
£5,001,000) relating to revenues attributable to the life assurance
businesses.
8. Revenue
|
31 December
2023
£000
|
31
December 2022
£000
|
Revenue from provision of
retirement and life assurance solutions and related administrative
services
|
24,338
|
23,563
|
Interest and investment
income
|
3,740
|
531
|
Total revenue
|
28,078
|
24,094
|
9. Administrative
expenses
Included within administrative
expenses are personnel costs as follows:
|
31 December
2023
£000
|
31
December 2022
£000
|
Wages and salaries
|
12,263
|
11,633
|
Social insurance costs
|
1,045
|
484
|
Pension contributions
|
398
|
104
|
Total personnel expenses
|
13,706
|
12,221
|
Average number of employees
Group
|
31 December
2023
Number
|
31
December 2022
Number
|
Average number of people
employed
(including executive
directors)
|
293
|
285
|
10. Profit before other items
Profit before other items of
£3,200,000 (2022: £3,321,000), was arrived at after charging the
following to the income statement:
|
31 December
2023
£000
|
31
December 2022
£000
|
(Loss)/profit on disposal of
property and office equipment
|
(96)
|
4
|
Directors' remuneration
|
588
|
663
|
Auditors' remuneration for audit
services
|
450
|
472
|
11. Reconciliation of reported to adjusted
measures
|
Revenue
|
Profit before other
items
|
Profit before
tax
|
|
2023
£000
|
2022
£000
|
2023
£000
|
2022
£000
|
2023
£000
|
2022
£000
|
Reported measure
|
28,078
|
24,094
|
3,200
|
3,321
|
442
|
1,578
|
Add: adjustment due to revenue
recognition policy change on acquisition
|
-
|
505
|
-
|
505
|
-
|
505
|
Add: integration and acquisition
cost
|
-
|
-
|
-
|
390
|
-
|
390
|
Add: Professional advisory costs
incurred in relation to the proposed acquisition of the
Company
|
-
|
-
|
1,202
|
-
|
1,202
|
-
|
Add: write-off of debtors related to
prior year disposals
|
-
|
-
|
761
|
-
|
761
|
-
|
Less: bargain purchase gain on
acquisition
|
-
|
-
|
-
|
-
|
-
|
(327)
|
Less: loss on disposal of companies
and trust management
|
-
|
-
|
-
|
-
|
|
162
|
Add: costs of strategic
reviews
|
-
|
-
|
135
|
-
|
135
|
-
|
Add: senior management exit costs,
non-recurring professional costs and other non-recurring
costs
|
-
|
-
|
526
|
470
|
526
|
470
|
Adjusted measure
|
28,078
|
24,599
|
5,824
|
4,686
|
3,066
|
2,778
|
Adjusted measures exclude
non-recurring costs and other exceptional items including bargain
purchase gains that do not form part of the normal course of
business.
12. Taxation
|
31 December
2023
£000
|
31
December 2022
£000
|
Current tax expense
|
91
|
766
|
Deferred tax
expenses/(income)
|
|
|
Release of deferred tax assets on
leases as per IFRS 16
|
19
|
18
|
Release of deferred tax liabilities
on intangible assets
|
(85)
|
(60)
|
Total tax expense
|
25
|
724
|
Reconciliation of existing tax rate
|
2023
%
|
31
December
2023
£000
|
2022
%
|
31
December
2022
£000
|
Profit before tax for the year
|
-
|
442
|
-
|
1,578
|
Income tax using the Company's
domestic rate
|
0.00%
|
-
|
0.00%
|
-
|
Effect of tax rates in other
jurisdictions
|
20.59%
|
91
|
48.54%
|
766
|
Release of deferred tax assets on
leases as per IFRS 16
|
4.30%
|
19
|
1.14%
|
18
|
Release of deferred tax liabilities
on intangible assets
|
(19.23%)
|
(85)
|
(3.80%)
|
(60)
|
Total tax expense
|
-
|
25
|
-
|
724
|
Effective tax rate (%)
|
-
|
5.66%
|
-
|
45.88%
|
The effective tax rate for UK
increased to 25% from 1 April 2023. The
effective tax rates in Malta and Gibraltar are 5% and 12.5%
respectively. The Group effective tax rate is lower in the year
ended 31st December 2023 than the jurisdictional effective tax rate
due to the writeback of tax over provided for in prior years.
However, in the year ended 31st December 2022, the Group effective
tax rate was higher than the jurisdictional effective tax rate
because tax losses brought forward or incurred in that year in some
jurisdictions could not be utilised by the profitable subsidiaries
in other jurisdictions and dividends remitted to the holding
company by overseas jurisdictions were higher than in the prior
year thus resulting in a higher tax charge on these.
13. Property and office
equipment
Group
|
Note
|
Motor
Vehicles
£000
|
Office
Equipment
£000
|
Leasehold
Improvements
£000
|
Right-of-use
Assets
£000
|
Total
£000
|
Costs
|
|
|
|
|
|
|
At 1st January
2022
|
|
15
|
1,916
|
490
|
5,585
|
8,006
|
Additions
|
|
-
|
163
|
2
|
-
|
165
|
Acquired through business
combination
|
4
|
-
|
10
|
-
|
-
|
10
|
Disposals
|
|
-
|
(6)
|
-
|
-
|
(6)
|
At 31st December 2022
and
1st January 2023
|
|
15
|
2,083
|
492
|
5,585
|
8,175
|
Additions
|
|
-
|
170
|
-
|
689
|
859
|
Disposals
|
|
(15)
|
(1,189)
|
(15)
|
(4,705)
|
(5,924)
|
At 31st December 2023
|
|
-
|
1,064
|
477
|
1,569
|
3,110
|
Depreciation
|
|
|
|
|
|
|
At 1st January
2022
|
|
12
|
1,346
|
380
|
4,605
|
6,343
|
Charge for the year
|
|
1
|
165
|
20
|
487
|
673
|
Disposals
|
|
-
|
(2)
|
-
|
-
|
(2)
|
At 31st December 2022
and
1st January 2023
|
|
13
|
1,509
|
400
|
5,092
|
7,014
|
Charge for the year
|
|
2
|
143
|
20
|
455
|
620
|
Disposals
|
|
(15)
|
(1,104)
|
(4)
|
(4,705)
|
(5,828)
|
At 31st December 2023
|
|
-
|
548
|
416
|
842
|
1,806
|
Net Book Value
|
|
|
|
|
|
|
At 31st December
2022
|
|
2
|
574
|
92
|
493
|
1,161
|
At 31st December 2023
|
|
-
|
516
|
61
|
727
|
1,304
|
14. Intangible assets
Group
|
Note
|
Goodwill
£000
|
Client
Portfolio
£000
|
Product
Development
£000
|
IT
Development
£000
|
Total
£000
|
Costs
|
|
|
|
|
|
|
At 1st January
2022
|
|
14,109
|
5,742
|
701
|
2,242
|
22,794
|
Additions
|
|
-
|
-
|
30
|
907
|
937
|
Acquired through business
combination
|
4
|
-
|
2,757
|
-
|
-
|
2,757
|
At 31st December 2022
and
1st January 2023
|
|
14,109
|
8,499
|
731
|
3,149
|
26,488
|
Additions
|
|
-
|
-
|
-
|
672
|
672
|
At
31st December 2023
|
|
14,109
|
8,499
|
731
|
3,821
|
27,160
|
Amortisation and impairment
|
|
|
|
|
|
|
At 1st January
2022
|
|
824
|
1,717
|
445
|
453
|
3,439
|
Charge for the year
|
|
-
|
574
|
30
|
320
|
924
|
At 31st December 2022
and 1st January 2023
|
|
824
|
2,291
|
475
|
773
|
4,363
|
Charge for the year
|
|
-
|
850
|
57
|
446
|
1,353
|
At
31st December 2023
|
|
824
|
3,141
|
532
|
1,219
|
5,716
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
|
|
At 31st December
2022
|
|
13,285
|
6,208
|
256
|
2,376
|
22,125
|
At
31st December 2023
|
|
13,285
|
5,358
|
199
|
2,602
|
21,444
|
Impairment testing for cash-generating units containing
goodwill
All goodwill relates to
acquisitions made and reflects the difference between the fair
value of the identifiable net asset value of those acquisitions and
the fair value of the consideration paid for those
acquisitions.
Goodwill represents the excess of
the cost of the acquisition, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
Group's interest in the net fair value of the identifiable assets
and liabilities of the acquire. Goodwill is not amortised but is
measured at cost less accumulated impairment losses.
Additionally, on disposal of a cash-generating unit ("CGU"), the
attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
Goodwill is allocated to the
smallest identifiable group of assets that generate largely
independent inflows. Management have assessed the number of CGUs
and determined that there are four identifiable CGUs, which are
also operating and reportable segments. CGUs are determined based
on whether the entity is a separate and distinct entity and/or
whether that entity is management as a standalone business
unit.
Impairment testing for cash-generating units containing
goodwill (continued)
The carrying amount of goodwill
allocated to each of the CGUs is as follows:
|
2023
|
2022
|
|
£000
|
£000
|
|
|
|
STM Life
|
1,256
|
1,256
|
LCA
|
7,735
|
7,735
|
FLHP
|
3,698
|
3,698
|
Options - Berkeley Burke
acquisition
|
596
|
596
|
Total
|
13,285
|
13,285
|
The Group tests goodwill annually
for impairment or more frequently if there is an indication that a
CGU or group of CGUs may be impaired. The annual impairment
assessment is made by comparing the carrying amount of the CGU or
group of CGUs to which goodwill has been allocated with the
recoverable amount of the CGU or group of CGUs.
The recoverable amount of each CGU
or group of CGUs as at 31st December 2023 has been
determined based on a value in use calculation using cash flow
projections from financial budgets prepared for the subsequent
three years and which have been approved by the Board. The
subsequent two years' cashflows have been calculated based on the
following assumptions thereby providing a five-year estimate of
prospective net cashflows:
|
2023
|
2022
|
Percentage ranged from:
|
%
|
%
|
|
|
|
Revenue growth rates and
attrition
|
-1.5% - 2%
|
-1.5% -
4%
|
Expense increases and inflation
rates
|
-2% - 3%
|
-3% -
4%
|
The range of revenue growth and
attrition rates, and those for expense increases and inflation, has
narrowed in comparison with 2022,to bring the assumptions for
certain business units in line with those used elsewhere in the
Group. As goodwill is considered to have an indefinite life the
year 5 net cashflow has been extrapolated to perpetuity. A post-
tax discount rate of 13.5% (2022: 14%) has been used in discounting
the projected cashflows. It was concluded that the fair value
less costs of disposal did not exceed the value in use.
As a result of this analysis, no
impairment charge has been recognised in either of the two years
ended 31st December 2023 or 31st
December 2022.
Key assumptions used in value in use calculations and
sensitivity to changes in assumptions
The calculation of the value in
use for the CGUs is most sensitive to the following
assumptions:
· Revenue growth rates and customer attrition rates
· Expense increases and inflation rates
· Discount rates
Revenue growth rates and attrition
- a higher decline in revenue growth rates and/or an increase in
attrition rates would result in a further impairment charge being
required. A 1% reduction in both revenue growth and attrition rates
would result in a potential impairment charge of approximately
£199,000 (2022: £185,000).
Key assumptions used in value in use calculations and
sensitivity to changes in assumptions (continued)
Expense increases and inflation
rates - management has considered the possibility of increased
inflation resulting in higher than anticipated costs and an
increase in expenses growth rates would result in potential
impairment. A 1% increase in the expense growth rates would result
in a potential impairment charge being required of £50k (2022:
£nil).
Discount rates - discount rates represent the
current market assessment of the risks specific to each CGU, taking
into consideration the time value of money and individual risks of
the underlying assets that have not been incorporated in the cash
flow estimates. The discount rate calculation is based on the
specific circumstances of the Group and its operating segments and
is derived from its weighted average cost of capital ("WACC"). The
WACC considers both debt and equity. The cost of equity is derived
from the expected return on investment by the Group's investors.
The cost of debt is based on the interest-bearing borrowings the
Group is obliged to service. Segment-specific risk is incorporated
by applying individual beta factors. The beta factors are evaluated
annually based on publicly available market data. Adjustments to
the discount rate is made to factor in the specific amount and
timing of the future tax flows in order to reflect a pre-tax
discount rate. A 1% increase in the WACC would result in a
potential impairment charge of approximately £173,000 (2022:
£229,000).
Management also considered the
potential impact of a scenario that combines adverse changes in all
three key metrics, namely where the revenue growth rate reduces by
1%, expenses increase by 1% and the WACC increases by 1%. This
would result in a potential impairment charge of approximately
£510,000 (2022: £1,194,000).
Client portfolio
Client portfolio assets acquired
in a business combination are recognised separately from goodwill
and are recognised initially at fair value at the acquisition date
and subsequently assessed annually for impairment. The Group's
client portfolios are amortised over the useful lives which have
been determined to be ten years. Client portfolios acquired through
acquisitions are as follows:
Acquisition
date
|
31
December
2023
£000
|
31
December
2022
£000
|
London & Colonial Services
Ltd
|
October
2016
|
283
|
383
|
STM Nummos Life SL
|
January 2018
|
173
|
215
|
Harbour Pensions Ltd
|
February 2018
|
453
|
545
|
Options Corporate Pensions UK
Limited
|
February 2019
|
359
|
429
|
Options UK Personal Pensions
LLP
|
February 2019
|
615
|
735
|
Options SSAS Limited
|
August 2020
|
199
|
229
|
Options EBC Limited
|
August 2020
|
795
|
915
|
SIPP portfolio acquired from
Mercer Ltd
|
August
2022
|
1,389
|
1,543
|
SSAS portfolio acquired from
Mercer Ltd
|
August
2022
|
1,092
|
1,214
|
Total
|
|
5,358
|
6,208
|
15. Financial assets
Group
|
31
December
2023
£000
|
31
December
2022
£000
|
Financial instrument designated at
FVTPL
|
1,839
|
1,762
|
Total
|
1,839
|
1,762
|
The financial instrument
designated at FVTPL represents UK sovereign debt instrument with a
stated interest rate of 2% and is held for trading.
This investment has been
classified as Level 1 as its value is derived from quoted prices in
active market.
16. Trade and other receivables
Group
|
31
December
2023
£000
|
31
December
2022
£000
|
Trade receivables
|
3,915
|
4,266
|
Prepayments
|
1,691
|
999
|
Other receivables
|
1,743
|
3,196
|
Total
|
7,349
|
8,461
|
Amounts due from related parties
comprise intercompany balances which are unsecured, interest free
and repayable on demand.
The Group's exposure to credit
risks and impairment losses related to trade and other receivables
(excluding accrued income) are described in Note
24.
17. Cash and cash equivalents
Group
|
31 December
2023
£000
|
31
December 2022
£000
|
Bank balances
|
18,365
|
19,234
|
The Group has a secured bank loan
liability of £4,813,000 (2022: £5,363,000) which is included within
Trade and Other Payables in Notes 21 and 22. Details of the
security held is set out in Note 21.
Within cash and cash equivalents
held by the Group there is a balance of £4,209,000 (2022:
£2,903,000) which is not available for use by the Group. This
mainly represented the blocked accounts that form part of Options
Corporate and Options SIPP regulatory requirements and the funds
collected on behalf of clients but yet to be paid across to the
respective clients or relevant authority bodies.
18. Capital and reserves
Authorised, called up, issued and fully paid
|
31 December
2023
£000
|
31
December 2022
£000
|
59,408,088 ordinary shares of
£0.001 each
(2022: 59,408,088 ordinary shares
of £0.001 each)
|
59
|
59
|
Ordinary Shares
Ordinary shares carry full voting
rights; full dividend rights; full rights as respects capital, to
participate in a distribution (including on winding up); no
redemption rights.
Share premium
There were no new shares issued
during either of the two years ended 31st December 2023
and 31st December 2022. The balance of the share premium
account as at 31st December 2023 amounted to £22,372,000
(2022: £22,372,000).
Other reserves
Other reserves are made up
of:
|
Note
|
31 December
2023
£000
|
31
December 2022
£000
|
Treasury reserves
|
|
549
|
549
|
Foreign Currency translation
reserve
|
|
49
|
81
|
Share based payments
reserve
|
19
|
(162)
|
(162)
|
Other reserve
|
5
|
1,843
|
1,375
|
Total other reserves
|
|
2,279
|
1,843
|
Treasury shares
The treasury shares relate to
those shares purchased by the STM Group Employee Benefit Trust
(EBT) for allocation to executives. The trustees of the Employee
Benefit Trust held 1,089,780 ordinary shares of £0.001 each in the
Company at 31st December 2023 and at 31st December 2022. The
shares held may be used to satisfy awards made to employees and/or
senior executives, such as conditional share awards granted under a
long-term incentive plan. The balance held on the treasury shares
account as at 31st December 2023 amounted to £549,000
(2022: £549,000).
Translation reserve
The translation reserve comprises
all cumulative foreign currency differences arising from the
translation of the financial statements of foreign operations. The
balance at 31st December 2023 amounted to a negative
£49,000 (2022: negative £81,000), with the movement of £32,000 in
2023 (2022: £12,000) representing the foreign currency differences
arising from the translation of the financial statements of foreign
operations during the year.
Dividends
The following dividends were
declared and paid by the Group during the year:
|
31 December
2023
£000
|
31
December 2022
£000
|
Nil pence per qualifying ordinary
share (2022: 1.50 pence per qualifying ordinary share)
|
-
|
891
|
After the respective reporting
dates the following dividends were proposed by the Directors. The
dividends have not been provided for and there are no income tax
consequences.
|
31 December
2023
£000
|
31
December 2022
£000
|
Nil pence per qualifying ordinary
share (2022: 0.60 pence per qualifying ordinary share)
|
-
|
356
|
19. Share based payments
There was no Long-Term Incentive
Plan in place during the year. As such the charge for the year
which has been recognised within the share-based payment reserve is
£Nil (2022: £Nil). The share-based payments reserve at
31st December 2023 amounted to £162,000 (2022:
£162,000).
20. Earnings per share
Earnings per share for the year
from 1st January 2023 to 31st December 2023
is based on the profit attributable to owners of £417,000 (2022:
£844,000) divided by the weighted average number of £0.001 ordinary
shares outstanding during the year of 59,408,088 basic (2022:
59,408,088) and £59,408,088 dilutive (2022: 59,408,088) in
issue.
21. Trade and other payables
Group
|
31 December
2023
£000
|
31
December 2022
£000
|
Deferred income
|
3,664
|
3,842
|
Trade payables
|
1,970
|
882
|
Bank loan (secured)
|
550
|
552
|
Deferred consideration
|
-
|
56
|
Lease liabilities
|
304
|
570
|
Other creditors and
accruals
|
6,783
|
6,615
|
Total
|
13,271
|
12,517
|
Amounts owed to related parties
comprise intercompany balances which are unsecured, interest free
and repayable on demand.
Deferred income consists of fixed
fee revenues billed in advance to clients which have not yet been
earned as at the year end.
The Company signed a credit
facility with Royal Bank of Scotland (International) Ltd for £5.5
million in 2020, with drawn down being completed in September in
2022 to fund the acquisition of the Mercer portfolios (Note 4). The
facility has a 5-year term from November 2020, with capital
repayments structured over ten years and a final instalment to
settle the outstanding balance in full at the end of the 5 years.
The balance outstanding on this facility as at 31st
December 2023 was £4.8 million (2022: £5.4 million). Interest on
the loan is charged at 3.5% per annum over the Sterling Relevant
Reference Rate on the outstanding balance. Prior to fully drawing
down the loan interest was paid on the undrawn balance at a 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
debentures over these companies.
The Group's exposure to liquidity
risk related to trade and other payables is described in Note
23.
22. Other payables - amounts falling due in more
than one year
Group
|
31 December
2023
£000
|
31
December 2022
£000
|
Lease
liabilities
|
546
|
143
|
Bank loan (secured)
|
4,262
|
4,811
|
Other payables
|
-
|
96
|
Total
|
4,808
|
5,050
|
23. Financial risk management
The Group has exposure to the
following risks from its use of financial instruments:
• Credit
risk
• Liquidity
risk
• Market
risk
• Interest rate
risk
• Currency
risk
• Regulatory
risk
• Capital
management
This note presents information
about the Group's exposure to each of the above risks, the Group's
objectives, policies and processes for measuring and managing risk,
and the Group's management of capital. Further quantitative
disclosures are included throughout these consolidated financial
statements.
The Board of Directors has overall
responsibility for the establishment and oversight of the Group's
risk management framework. The Board has an Audit and Risk
Committee, which is responsible for developing and monitoring the
Group's risk management policies.
The Group's risk management
policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls, and to
monitor risks and adherence to limits. Risk management
policies and systems are reviewed regularly to reflect changes in
market condition and the Group's activities. The Group, through its
training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all
employees understand their roles and obligations.
(a) Credit risk
Credit risk is the risk of
financial loss to the Group if a customer or counterparty to a
financial instrument fails to meet its contractual obligations and
arises principally from the Group's receivables from
clients.
Trade and other
receivables
The Group's exposure to credit risk is
influenced mainly by the individual characteristics of each
client. The demographics of the Group's client base,
including the default risk of the country in which the clients
operate, has less of an influence on credit risk. There is no one
client to which a significant percentage of the Group's revenue can
be attributed. The level of liquidity of customer investments
determines the level of credit risk associated with each customer.
The liquidity of customers is monitored at each anniversary
date.
(b) Liquidity risk
Liquidity risk is the risk that the Group will
not be able to meet its financial obligations as they fall
due. The Group's approach to managing liquidity is to ensure,
as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed
conditions. The Group believes its exposure to liquidity risk
is minimal given its current cash balances and existing financial
obligations.
(c) Market risk
Market risk is the risk that
changes in market prices, such as foreign exchange rates, interest
rates and equity prices will affect the Group's income or the value
of its holdings of financial instruments. The object of market risk
management is to manage and control market risk expenses within
acceptable parameters, while optimising the return. The Group does
not have a significant exposure to market risk.
(d) Interest rate risk
The Group has one bank borrowing at
the year end, as detailed in Note 21. A change of 100 basis points
in the relevant underlying interest rate would have increased or
decreased equity and profit or loss by £51,000 before tax
(2022: £34,000).
(e) Currency risk
The Group has a small exposure to
currency risk in relation to its investment in STM Nummos. This is
mitigated by the fact that the assets and liabilities held by STM
Nummos are in its functional currency of Euros (€). It has a
further currency risk in relation to the expenses incurred in Malta
as these are in Euros. A change of 100 basis points in the Euro to
Sterling exchange rate would have increased or decreased equity and
profit or loss by £27,000 after tax (2022: £28,000) This is
mitigated by the fact that clients are invoiced in its and the
Group's functional currency of Sterling (£).
The Company has minimised exposure
to foreign exchange rates, with the majority of transactions being
carried out in its functional currency of Pounds Sterling
(£).
(f) Regulatory risk
The Group is subject to laws,
regulations, and specific solvency requirements in the various
jurisdictions in which it operates. The Group has established
policies and procedures aimed at compliance with local laws and
regulations.
(g) Capital management
The Board's policy is to maintain
a strong capital base, which is defined as share capital and
retained earnings, so as to maintain investor, creditor and market
confidence and to sustain future development of the
business.
Furthermore, certain of the
Company's subsidiaries are licensed by the respective jurisdictions
regulators and as such all comply with the regulatory capital
requirements set by each respective regulatory body.
The Group manages its capital to
ensure that the entities in the Group will be able to continue as a
going concern, while maximising the return to stakeholders through
optimisation of the debt and equity balance. The capital structure
of the Group consists of debt, which includes a bank loan as per
Notes 21 and 22, and equity attributable to shareholders,
comprising share capital, reserves and retained earnings as
disclosed. The Board reviews the capital structure and as part of
this review, considers the cost of capital and the risks associated
with each class of capital. In addition, the Board considers the
liquidity and solvency of the Group on an ongoing basis.
The Group monitors capital using a
ratio of "adjusted net debt" to "adjusted equity". For this
purpose, adjusted net debt is defined as total liabilities,
comprising interest-bearing loans and borrowings less cash and cash
equivalents net of the balances which are not available for use by
the Group (Note 17). Adjusted equity comprises all components of
equity.
The Group's adjusted net debt to
equity ratio at 31st December 2023 suggests that the
Group has sufficient liquidity to meet its obligations as they fall
due. Net debt compared to equity at 31st December
2022 was as follows:
|
31st December
2023
£000
|
31st
December 2022 (restated)
£000
|
Total liabilities
|
18,823
|
18,759
|
Less: net cash and cash equivalents
available
|
(14,156)
|
(16,331)
|
Adjusted net debt
|
4,667
|
2,428
|
Total equity attributable to owners of the
Company
|
34,595
|
34,970
|
Adjusted net debt to equity ratio
|
13%
|
7%
|
Total liabilities above are stated
after excluding provisions for customer redress of £27,441,000
(2022: £488,000) as these are exactly matched buy amounts
recoverable from the Group's insurers. The comparative for total
liabilities has been adjusted accordingly as such provisions were
not excluded in the financial statements of the Group for the year
ended 31st December 2022, as the amount involved was not
material.
The net cash and cash equivalents
available excludes the balances not available for use by the Group
of £4,209,000 (2022: £2,903,000) as more fully explained in Note
17.
24. Financial Instruments
Credit risk
Exposure to credit risk
The carrying amount of financial
assets represents the maximum credit exposure. The Group's maximum
exposure to credit risk at the reporting date was:
|
Carrying
amount
|
|
31st December
2023
£000
|
31st
December 2022
£000
|
Financial instrument designated as
FVTPL
|
1,839
|
1,762
|
Trade and other
receivables
|
7,349
|
8,461
|
Cash and cash
equivalents
|
18,365
|
19,234
|
Total
|
27,553
|
29,457
|
The Group's maximum exposure to
credit risk on trade and other receivables relating to one entity
or group of related entities amounts to less than 10% of the
overall trade receivables amount as at
31st December 2023 and 31st December
2022. Segmental disclosures are included in Note 6 reflecting the
Group's operating segment and geographic
concentration.
The Group limits its exposure to
credit risk by investing only in liquid debt securities issued by
the UK government. The financial instrument designated at FVTPL
held by the Group is rated as investment grade.
Impairment on trade and other
receivables is determined applying an ECL model as discussed in the
financial statements.
The ageing of the Group's trade
receivables at the reporting date was:
|
Gross
receivables
31st December
2023
£000
|
Individual
Impairment
31st
December
2023
£000
|
Total
£000
|
Gross
receivables
31st
December 2022
£000
|
Individual Impairment
31st
December
2022
£000
|
Total
£000
|
Not past
due
|
1,398
|
-
|
1,398
|
933
|
-
|
933
|
Past due 0-30
days
|
350
|
-
|
350
|
464
|
-
|
464
|
Past due 31-120
days
|
198
|
-
|
198
|
333
|
-
|
333
|
More than 120 days past
due
|
2,570
|
(601)
|
1,969
|
3,060
|
(524)
|
2,536
|
Total
|
4,516
|
(601)
|
3,915
|
4,790
|
(524)
|
4,266
|
Standard credit terms are 30 days
from the date of issuing the fee note.
The movement in the allowance for
impairment in respect of trade receivables during the period
was:
|
31st December
2023
£000
|
31st
December 2022
£000
|
Balance at start of year
|
524
|
174
|
Movement in expected credit loss
allowance
|
77
|
350
|
Balance at end of year
|
601
|
524
|
Based on historic default rates and
knowledge of the customers, the Group believes that no impairment
allowance is necessary in respect of the trade
receivables.
Liquidity Risk
The Group holds sufficient liquid
assets, including cash at bank, to enable it to meet its
liabilities as they fall due. The following are the Group's
contractual maturity liabilities. The amounts are gross and
undiscounted and include contractual interest payments and exclude
the impact of netting arrangements.
31st December 2023
|
Carrying
amounts
£000
|
Contractual cash
flow
£000
|
6 months or
less
£000
|
6-12
months
£000
|
1-4 years
£000
|
Non-derivative financial liabilities
|
|
|
|
|
|
Trade payables
|
1,970
|
1,970
|
1,970
|
-
|
-
|
Bank loan (secured)
|
4,812
|
5,013
|
330
|
327
|
4,356
|
Lease liabilities
|
850
|
844
|
194
|
110
|
540
|
Other creditors and
accruals
|
6,783
|
6,783
|
6,783
|
-
|
-
|
Total
|
14,415
|
14,610
|
9,277
|
437
|
4,896
|
31st December 2022
|
Carrying
amounts
£000
|
Contractual cash flow
£000
|
6 months
or less
£000
|
6-12
months
£000
|
1-4
years
£000
|
Non-derivative financial liabilities
|
|
|
|
|
|
Trade payables
|
882
|
882
|
882
|
-
|
-
|
Bank loan (secured)
|
5,363
|
5,682
|
336
|
333
|
5,013
|
Deferred consideration
|
56
|
56
|
56
|
-
|
-
|
Lease liabilities
|
713
|
736
|
363
|
226
|
147
|
Other creditors and
accruals
|
6,615
|
6,615
|
6,615
|
-
|
-
|
Total
|
13,629
|
13,971
|
8,252
|
559
|
5,160
|
Fair value hierarchy
The following table shows a
reconciliation from the beginning balances to the ending balances
for fair value measurements in Level 3 of the fair value
hierarchy.
Financial assets - call options
|
31st December
2023
£000
|
31st
December 2022
£000
|
Balance at 1st January
|
-
|
881
|
Settlement (Note 5)
|
-
|
(881)
|
Balance at 31st December
|
-
|
-
|
25. Leases
In relation to leases under IFRS
16, the Group has charged depreciation and interest expenses. The
Group recognised £455,000 (2022: £487,000) of depreciation charges
and £41,000 (2021: £53,000) of interest expenses from these leases
during the year ended 31st December 2023. The Group
recognised £72,000 (2022: £61,000) of expenses relating to
short-term leases or leases that can be cancelled with no penalties
and £6,000 (2022: £6,000) of expenses for leases of low-value
assets, excluding short-term leases, for the year ended
31st December 2023.
The total cash outflow for leases
for the year ended 31st December 2023 was £660,000,
including short-term lease cash outflows of £78,000 (2022:
£791,000, including short-term lease cash outflows of
£67,000).
Lease liabilities
Non-cancellable lease liabilities
as per IFRS 16 are payable as follows:
|
31st December
2023
£000
|
31st
December 2022
£000
|
Less than one year
|
304
|
589
|
Between one year and five
years
|
540
|
147
|
More than five years
|
-
|
-
|
Total
|
844
|
736
|
The maturity analysis of lease
liabilities is disclosed in Note 24. Right-of-use assets are
disclosed in Note 13.
The Group leases a number of
offices from which they operate, the largest of which are the
offices in Gibraltar, Cardiff and Milton Keynes with the leases
terminating in 2028, 2025 and 2024 respectively.
26. Provisions, receivables due from insurers and
contingent liability
As required by IFRS, provisions
are recorded when there is a present legal or constructive
obligation as a result of a past event, for which it is probable
that an outflow of economic benefits will be required to settle the
obligation, and where a reliable estimate can be made of the amount
of the obligation. This requires judgement and the use of
assumptions about the likelihood and magnitude of any cash
outflow. The Group analyses its exposure based on available
information, including consultation with professional indemnity
insurers and external legal advisors where appropriate, to assess
any potential liability.
Provisions and receivables due from insurers
|
31st
December
2023
£000
|
31st
December
2022
£000
|
Customer redress in relation to UK
SIPP claims
|
27,441
|
-
|
Other claims
|
-
|
488
|
Total
|
27,441
|
488
|
Customer redress in relation to UK SIPP
claims
During the year ended
31st December 2023, numerous claims from clients arising
across various policy years and investments were settled and the
cost covered in full by the professional indemnity insurance in
place for the relevant policy years based on the relevant reserving
held. In addition, a Judicial Review heard on 16 and 17 April 2024
that affected a further cohort of cases rejected the Group's appeal
against the previous determination by the Financial Ombudsman
Service and upheld the original ruling. These events have enabled a
reasonably materially accurate assessment to be done of the
potential liability relating to the remaining open cases and legal
claims in similar circumstances. In accordance with IAS 37, a
provision of £27,441,000 (2022: £nil) has been made in the
financial statements for the year ended 31st December
2023 with a corresponding receivable from insurers as these are
fully covered by professional indemnity insurance.
With reference to the prejudicial
exemption allowed under IAS 37, the Group will not disclose any
further information about the contingent liability, including any
details about current and potential claims as these claims are
ongoing.
On the basis of present
information, amounts already recognised and the availability of
insurance coverage, it is the opinion of the Group that the
ultimate determination of complaints received to date will not have
a material adverse effect on the consolidated financial position of
the Group. However, it is possible that future results of
operations or cash flows for any annual period could be materially
affected by an unfavourable resolution of these matters.
Other claims
As at 31st December
2022 there were potential claims in respect of the historic trading
of STM Malta Pensions Services Limited. These claims were estimated
based on present information available at the time and a provision
made. This was covered by professional indemnity insurance net of
relevant insurance case excesses and thus was also reflected as a
receivable due from insurers. Following progress made on these
claims during the year ended 31st December 2023, the
provision (and corresponding receivable from insurers) has reduced
to £Nil (2022: £488,000).
General
With reference to the prejudicial
exemption allowed under IAS 37, the Group will not disclose any
further information about the contingent liability, including any
details about current and potential claims as these claims are
ongoing.
27. Non-adjusting subsequent
events
On 14th June 2024, the
Company announced that the Group had signed a commercial agreement
with Smart Pension Limited ("Smart") under which members
transferring from of the Group's Options Workplace Master Trust
would, subject to approval by the Trustees and the Pensions
Regulator, transfer to Smart's Master Trust with Smart paying a
consideration for such transfers to the Group. It is anticipated
that, over a two-year period, this consideration is likely to
amount to circa £4.7million. In addition, the Group also entered
into an introducer's agreement with Smart at the same time, whereby
any new members introduced to Smart by the Group's existing or new
intermediary contacts would lead to introductory commission income
for the Group. The agreement is in place for a maximum period of
three years, and management estimates that the quantum of such
additional introductory commission could lie in the range of £1.0
million to £5.0 million over the
three-year period.
On 12th January 2023, the Group
completed the acquisition of the remaining external 30% interest in
Options UK Personal Pensions LLP, increasing its ownership from 70%
to 100% (Note 5). A decrease in equity attributable to owners of
the Company has been recognised in the other reserve amounted to
£468,000. Subsequent to this acquisition, all subsidiaries are
wholly owned.