TIDMSTM
RNS Number : 0707O
STM Group PLC
08 June 2022
STM Group plc
("STM", "the Company" or "the Group")
Final Results for the
12 months ended 31 December 2021,
Investor Presentation and Board change
STM Group plc (AIM: STM), the multi-jurisdictional financial
services group, is pleased to announce its audited final results
for the 12 months ended 31 December 2021.
Financial Highlights:
2021 (reported) 2021 2020 (reported) 2020
(adjusted)** (adjusted)**
Revenue GBP22.4m GBP21.6m GBP24.0m GBP20.8m
----------------- --------------- ----------------- ---------------
Recurring revenue % 91% N/A 85% N/A
----------------- --------------- ----------------- ---------------
Profit before other items(*) GBP1.4m GBP1.5m GBP2.2m GBP2.4m
----------------- --------------- ----------------- ---------------
Statutory Profit Before Tax GBP1.2m N/A GBP2.0m N/A
----------------- --------------- ----------------- ---------------
Margin 6% 7% 9% 11%
----------------- --------------- ----------------- ---------------
Basic and fully diluted earnings
per share 2.94p N/A 2.99p N/A
----------------- --------------- ----------------- ---------------
Cash at bank (net of borrowings) GBP16.8m N/A GBP14.8m N/A
----------------- --------------- ----------------- ---------------
Final dividend 0.90p N/A 0.85p N/A
----------------- --------------- ----------------- ---------------
Total dividend 1.50p N/A 1.40p N/A
----------------- --------------- ----------------- ---------------
(*) 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
Operational Highlights:
-- Recurring revenues remain predictable and a corner stone of
the business representing 91% of reported revenues
-- Strategic focus on core activities of pension administration
and life assurance leading to disposal of the CTS businesses
-- Growth in the UK proposition as now a key jurisdictional
focus following integration of UK acquisitions
-- Centralisation of the business development function to focus
on driving increased "top line" growth
-- Implementation of a harmonised IT operating platform largely
completed and a commitment to increased investment in Group-wide
systems to support central functions
-- Updated to a "hybrid" working environment to keep our
colleagues safe and to maximise flexibility and efficiencies
regardless of physical location
-- Q1 2022 Launch of Australian superannuation solution for expatriates
Commenting on the results and prospects for STM, Alan Kentish,
Chief Executive Officer, said:
"Whilst our existing recurring revenue has held up well, it has
been frustrating that the significant amount of work and change
occurring in the background has not yet resulted in the improved
margins or new business growth anticipated.
"The appointment of a centralised head of distribution in
October 2021, is a step change that is expected to bring about
several new partnership relationships which will expand our
existing product distribution.
"Operationally 2021 has been another very busy year, with the
completion of major IT migrations. STM now operates all its
personal pension businesses on one core in-house administration
system. There remains further development work required before we
expect to see the full benefits of this initiatives. Further we are
looking to optimise various functions across the business to avoid
duplication and to become a more agile and forward-looking
business.
"Whilst it was disappointing that the Supreme Court did not
grant leave to appeal on the Adam's vs Carey (Options) case, as
previously stated this will not have a financial impact on the
business as the Company benefits from significant professional
indemnity protection. The outcome of the case is very fact
specific, and there remains other areas of uncertainty around a
SIPP administrator's duties that would benefit from additional
clarity.
"It is with regret that I inform you that Nicole Coll has
decided to step down from her role as CFO. Since joining STM, she
has significantly contributed to the strategy and development of
our optimised operating model. However, she has decided to focus on
her non-executive opportunities at this time. Nicole is committed
to ensuring an orderly handover process to the new incumbent over
the coming months and I am grateful that she was fully engaged in
seeing the audit through to completion. The board wish her well in
her future endeavours and have commenced the search process for a
new CFO
"We believe that we are well positioned to take advantage of all
the hard work and initiatives that we have undertaken in the past
few years in addition, to a more efficient centralised operating
model. This is expected to increase our operating margins, so that
we will be more comparable to our peers but will potentially
require some additional resources in the short-term.
"There is significant energy and activity around realising new
business and bringing about further operating efficiencies. The
Board and I look forward to updating you in due course."
Investor Presentation - 4pm on Wednesday 8 June 2022
Chief Executive, Alan Kentish, and Chief Financial Officer,
Nicole Coll, will be hosting a remote presentation to review the
2021 Results and prospects at 4pm on Wednesday 8 June 2022.
The presentation will be hosted through the digital platform
Investor Meet Company. Investors can sign up to Investor Meet
Company and add to meet STM Group Plc via the following link
https://www.investormeetcompany.com/stm-group-plc/register-investor
.
For those investors who have already registered and added to
meet the Company, they will automatically be invited.
Questions can be submitted pre-event to STM@walbrookpr.com or in
real time during the presentation via the "Ask a Question"
function.
This announcement contains inside information for the purposes
of Article 7 of 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
Nicole Coll, Chief Financial Officer www.stmgroupplc.com
finnCap www.finncap.com
Matt Goode / Abigail Kelly - Corporate Finance Tel: +44 (0) 20 7220
Tim Redfern / Richard Chambers - ECM 0500
Walbrook www.walbrookpr.com
Tom Cooper / Nick Rome Tel: +44 (0) 20 7933
8780
Mob: +44 (0) 797 122
1972
tom.cooper@walbrookpr.com
Notes to editors:
STM is a multi-jurisdictional financial services group which is
listed on the AIM Market of the London Stock Exchange. The Group
specialises in the delivery of a wide range of financial service
products to professional intermediaries and the administration of
assets for international clients in relation to retirement, estate
and succession planning and wealth structuring.
Today, STM has operations in UK, Gibraltar, Malta, Jersey and
Spain. The Group is looking to expand through the development of
additional products and services that its ever more sophisticated
clients demand. STM has developed a specialist international
pensions division which specialises in SIPPs, Qualifying Recognised
Overseas Pension Schemes (QROPS), Qualifying non UK Pension Schemes
(QNUPS). STM has two Gibraltar life assurance companies which
provide life insurance bonds - wrappers in which a variety of
investments, including investment funds, can be held.
Further information on STM Group can be found at
www.stmgroupplc.com
CHAIRMAN'S STATEMENT
I am pleased to share with you the STM Group Plc ("STM") results
for the year ended 31 December 2021.It has been another challenging
year in several directions for STM, but we feel encouraged that the
working environment is at last starting to get back to normal, and
that we will manage to fulfil the true potential of the
business.
One of our biggest ambitions for 2021 was to accelerate our new
business initiatives. Whilst we had some success in cementing
relationships with strategic partners, the delays in implementation
meant that there was limited impact to our revenue line in 2021.
New business activity and income whilst driving efficiencies and
realising synergies across the Group remains the absolute priority
to deliver both enhanced margin and shareholder value.
Importantly the strategic decision to exit the CTS businesses
was completed in the first half of the year and has allowed the Plc
board and executive team to focus on the core activities of pension
administration and life assurance wrappers.
Several significant milestones were achieved in relation to the
completion of the IT migrations onto our own administration
platform, and whilst we are yet to realise the full efficiencies,
we can see these starting to materialise. In addition, the
implementation of Group-wide Finance and Risk systems in 2022 will
allow for further enhancements.
During the last quarter of the year, Pete Marr (COO) and Therese
Neish (CFO), stepped down from their roles and Nicole Coll joined
the Plc board as CFO. Nicole has also taken on much of what was
formerly part of the COO role. We believe the new structure is the
right one for the Company. As part of this restructuring, we are
looking to optimise various functions across the business to avoid
duplication and to become a more agile and forward-looking
business.
Since 2019, we have redefined our purpose and vision,
repositioning the Group as a UK centric Plc with more UK focussed
pensions and life products. We have embraced our new UK brand,
"Options for your tomorrow" which captures our mission to give our
customers freedom of choice by providing them with solutions for
their tomorrow. There is no doubt that over the last couple of
years we have built a much stronger foundation for the business,
and it is now up to us to ensure that during 2022 that we take
advantage of that infrastructure to deliver enhanced profitability
through better efficiencies and accelerated new business growth. As
I have said, these remain an absolute focus for the Plc Board.
Finally, I would like to take this opportunity to thank the
Group's Directors, executive and all our colleagues for all their
efforts during 2021, in another year dominated by the COVID-19
pandemic. The senior leadership team and staff across the Group
have continued to demonstrate their great resilience and commitment
through these last few challenging years. I would also like to
thank Robin Ellison who stepped down from the Plc board as a
non-executive director. It saddens me that Nicole Coll has decided
to step down from her role as CFO but I equally take this
opportunity to thank Nicole for her contributions to the Group's
strategy and development of our optimised operating model. The
Board wish her well in her future endeavours.
Duncan Crocker
Chairman
CHIEF EXECUTIVE'S STATEMENT
Introduction
Whilst our existing recurring revenue has held up well, it has
been frustrating that the significant amount of work and change
occurring in the background has not yet resulted in improved
margins or the new business growth anticipated.
Our trading subsidiaries performed as expected in relation to
the underlying business, recognising that these various
subsidiaries are at different stages of development.
However, our UK SIPP operation fell short on its new business
targets; although, some pleasing partnership relationships were
finalised that is anticipated to give our new business volumes a
boost in 2022 and beyond. The businesses acquired in 2020 had their
first full year as part of the STM Group and performed broadly as
expected, with the small shortfall in revenue resulting in a
reduced deferred consideration payment.
The Options Corporate Pension business continues to see solid
growth, with a year-on-year revenue uplift of almost 50%, moving it
into a healthy profit contributor for the Group. The business now
has in excess of 250,000 workplace pension members.
With the QROPs market static, our growth will come from our
international occupational pensions. Disappointingly, our Gibraltar
based life companies did not perform to their full potential in
relation to flexible annuity products as new business anticipated
has not yet materialised.
The first half of 2021 also saw us achieve the key strategic aim
of exiting the Company and Trustee services provider market,
selling both the Jersey and the Gibraltar businesses.
Operationally, 2021 has been yet another busy year, with the
completion of major IT migrations -STM now operates all its
personal pension businesses on one core in-house administration
system. Certain efficiencies did not materialise in 2021, as
originally planned but with work largely completed, we will now see
the benefits starting to materialise in 2022 and beyond.
The latter part of 2021 saw several personnel changes at
executive level with the CFO and COO stepping down and the
executive members of the Plc board reduced to a two-person
structure. Nicole Coll joined me as that other board member. I
would also like to thank Therese Neish and Pete Marr for all their
hard work in their time with STM.
These changes have allowed us to revisit our operating model,
recognising that our peers generally have a better operating margin
than STM. Whilst having three operating jurisdictions does
complicate our structure, the executives have taken the decision to
centralise many of the business functions.
From a work environment point of view, the year remained
challenging with the need keep our STM colleagues safe whilst still
having to deal with the inevitable staff absences and continued
remote working. I would like to extend my thanks to all of the STM
staff for their continued hard work and commitment.
The UK pension market remains in a position of uncertainty as to
the extent of the duties of SIPP providers. Disappointingly, in
April 2022 the Supreme Court refused Carey (Options) permission to
appeal on the Adams case bringing the long-standing case relating
to Mr Adams SIPP investment in 2012 to a close. This decision has
no direct impact on STM financially due to its ability to recover
under the professional indemnity insurance in place at the time,
but it has meant the business has made a provision for similar fact
cases. In consultation with its professional advisers, its auditors
and professional indemnity insurers, the business has agreed a
balance sheet provision of GBP21.4 million, with a corresponding
recovery from the professional indemnity insurers on the asset side
of the balance sheet. The Adams case is very specific to the
actions of what an unregulated introducer may or may not do. There
remains uncertainty in the industry, such uncertainty is unhealthy
for all stakeholders, including consumers, and has resulted in
increased costs such as professional indemnity insurance which are
invariably passed on to the pension member. Naturally, STM as well
as the pension industry, would welcome further clarity in this
area.
Finally, I would like to thank Robin Ellison for his
contribution to the Plc board and continued support in a
consultancy role.
Financial 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 has reported revenues of GBP22.4 million (2020:
GBP24.0 million) in the year with profit before other items of
GBP1.4 million (2020: GBP2.2 million). This reduction in revenue is
largely due to the sale of the Company and Trust business offset in
part by growth in the pensions business. Pleasingly, recurring
annual revenue, which is an important key performance indicator for
the Board, has continued to be a significant portion (91%) of the
result.
The Group shows both reported and adjusted financial key
performance indicators in Table 1 and 2 below as historically the
impact of non-recurring movements have not allowed for a clear
understanding of operating performance.
Reported profit before tax ("PBT") for the year amounted to
GBP1.2 million (2020: GBP2.0 million) with adjusted PBT (defined on
a consistent basis with adjusted revenue and profit before other
items) for the year of GBP1.5 million (2020: GBP2.4 million).
The reported PBT is calculated after deducting net finance costs
of GBP0.3 million (2020: GBP0.2 million) and various non-cash
expenses totalling GBP0.1m (2020: GBP0.1m) as well as gain on
disposal of subsidiaries of GBP0.2m (2020: nil). These non-cash
items include the movement the fair value of the call option of
GBP0.4m related to the acquisition of Carey (Options)
Administration Holdings Limited. This option is exercisable in 2022
based on the audited accounts for 31 December 2021. Additionally,
goodwill impairment of GBP0.8m was recognised following
management's annual impairment assessment across several
subsidiaries.
Reported profit after tax ("PAT") is GBP1.7m (2020: GBP1.6m).
This increase is largely due to a tax credit of GBP0.5m following a
change in tax treatment in Malta which resulted in a one off, GBP1m
tax rebate being recognised in 2021.
Table 1
KPI Definition 2021 2020
-------------------------------------- ------- -------
Income derived from the provision
Revenue (GBP'000s) of services. 22,355 23,982
-------------------------------------- ------- -------
Revenue net of non-recurring
costs and other exceptional
items that do not form part
Adjusted revenue of the normal course of business
(GBP'000) as per Table 2 below. 21,581 20,815
-------------------------------------- ------- -------
Revenue derived from annual
Recurring revenue management charges and/or
(GBP'000s) contractual fixed fee agreements. 20,427 20,334
-------------------------------------- ------- -------
Revenue less administrative
expenses i.e. profit before
finance income and costs,
gain on disposal of subsidiary
bargain purchase gain, goodwill
Profit before other impairment and gain on the
items (GBP'000s) call options and before taxation. 1,373 2,207
-------------------------------------- ------- -------
Profit before other items
and other exceptional non-recurring
Adjusted Profit items that do not form part
before other items of the normal course of business
(GBP'000s) as per table 2 below 1,498 2,358
-------------------------------------- ------- -------
Profit before taxation Revenue less administrative
(GBP'000s) expenses and other items 1,200 2,020
-------------------------------------- ------- -------
Revenue less administrative
expenses, other items and
other exceptional non-recurring
Adjusted Profit items that do not form part
before taxation of the normal course of business
(GBP'000s) as per table 2 below 1,168 2,112
-------------------------------------- ------- -------
Revenue less administrative
Profit after taxation expenses and other items less/add
(GBP'000s) taxation charge/credit 1,742 1,607
-------------------------------------- ------- -------
Profit margin before Profit before other items
other items (%) divided by revenue. 6% 9%
-------------------------------------- ------- -------
Table 2
Profit before
Revenue other items Profit before tax
2021 2020 2021 2020 2021 2020
--------- --------- --------- --------- --------- ---------
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------- --------- --------- --------- --------- ---------
Reported measure 22,355 23,982 1,373 2,207 1,200 2,020
--------- --------- --------- --------- --------- ---------
Less: effect
of companies
and trust services
disposal (774) (3,167) (54) (313) (54) (313)
--------- --------- --------- --------- --------- ---------
Less: bargain
purchase gain
on acquisition
and gain on call
options (406) (59)
--------- --------- --------- --------- --------- ---------
Less: gain on
disposal of companies
and trust management (219)
--------- --------- --------- --------- --------- ---------
Add: integration
and acquisition
costs 179 179
--------- --------- --------- --------- --------- ---------
Less: movement
in deferred consideration
related to prior
year acquisitions (330)
--------- --------- --------- --------- --------- ---------
Add: impairment
of goodwill 798
--------- --------- --------- --------- --------- ---------
Add: other non-recurring
costs 179 285 179 285
--------- --------- --------- --------- --------- ---------
Adjusted measure 21,581 20,815 1,498 2,358 1,168 2,112
--------- --------- --------- --------- --------- ---------
Tax Charge and Earnings per Share
The tax credit for the year was GBP0.5 million (2020: charge of
GBP0.4 million). This is due to a change in tax treatment in the
Malta entity which resulted in a one-off GBP1m tax rebate being
recognised in the current year
Earnings per share ("EPS") for 2021 is 2.94p compared to 2.99p
for 2020 There was no dilutive factor in 2021 or 2020.
Cashflows
Cash and cash equivalents amounted to GBP18.2 million as at 31
December 2021 (2020: GBP16.4 million) with net cash outflow from
operating activities of GBP0.1 million for the year ended 31
December 2021 (2020: inflow GBP1.6 million).
During 2020 the Company signed a credit facility with Royal Bank
of Scotland (International) Ltd for GBP5.5 million. The facility
has a 5-year term 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 Company has drawn down GBP1.5 million
(2020: GBP1.6 million) of this facility.
As such, net cash, and cash equivalents as at 31 December 2021
were GBP16.8 million (2020: GBP14.8 million).
As would be expected for a Group regulated in several
jurisdictions, a significant proportion of this cash balance forms
part of the regulatory and solvency requirements. The cash and cash
equivalents are required for solvency purposes varies as other
assets can be used to support the regulatory solvency requirement.
The total regulatory capital requirement across the Group as at 31
December 2021 was GBP16.9 million (2020: GBP18.3 million).
The balance sheet also gives visibility of future revenue and
cash generation and, in line with all administration services
businesses, the Group had accrued income in the form of work
performed for clients but not yet billed of GBP1.3 million as at
the year-end (2020: GBP1.3 million). Additionally, deferred income
(a liability in the statement of financial position) relating to
annual fees invoiced but not yet earned stood at GBP3.5 million
(2020: GBP3.6 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
I am pleased to advise that the Board is recommending the
payment of a final dividend of 0.90p per share (2020: 0.85p per
share), This together with the interim dividend paid of 0.60p in
November 2021 (2020: 0.55p) makes a proposed total dividend for the
year of 1.50p per share (2020: 1.40p).
Subject to approval at the Company's Annual General Meeting to
be held on 4 August 2022, the final dividend will be paid on 19
August 2022 to shareholders on the register at the close of
business on 1 July 2022. The ordinary shares will be marked
ex-dividend on 30 June 2022.
Operational Performance
Pensions
Our pension administration businesses continue to be the
lifeblood of our group, and the corner stone to our profitability.
The Options acquisition made in 2019 has shown significant revenue
growth and the integration savings expected from the SIPP business
have now started to come through.
Whilst new business levels were slower to come through than we
originally expected they were still higher volumes than in prior
year within the SIPP and auto-enrolment businesses.
Total revenue across our pensions businesses amounted to GBP17.6
million (2020: GBP16.5 million) and accounted for 79% of total
Group revenue (2020: 69%). In addition, recurring revenues for the
pension businesses remain high at 81% (2020: 75%).
The administration of our QROPS products continues to be our
largest revenue generator accounting for GBP9.7 million of revenue
(2020: GBP10.1 million). This administration is carried out in
Malta and Gibraltar with the revenue continuing to be split 75% and
25% respectively as was the case in 2020. As has been known for a
number of years, this product is no longer a growth driver as a
result of changes in the UK pension legislation in 2017. Whilst we
continue to receive a small number of new members from EEA
countries the attrition rate is modestly increasing as we see our
member profile age and take advantage of flexi access benefits in
Malta.
The SIPP businesses, both Options Personal Pensions and London
& Colonial Services Limited, have contributed total revenues of
GBP3.2 million (2020: GBP3.5 million). The administration for both
these businesses is now being carried out from the Milton Keynes
offices and the integration savings expected are now starting to
come through. The final aspect of this integration, being the IT
migration, was completed towards the end of the year and thus the
benefits will start to come through in 2022, albeit that further
development and enhancements are ongoing.
As mentioned above the auto-enrolment business saw a significant
increase in members and this has resulted in increased revenues for
the year of GBP3.3 million (2020: GBP2.2 million). This is likely
to remain a significant growth area.
The final revenue stream of the pensions divisions comes from
the acquired Berkeley Burke companies. This acquisition came with a
small SSAS business and a Group Pension Plan business providing
third party administration. The SSAS business contributed revenues
of GBP0.3 million (2020: GBP0.1 million) in the year with the Group
Pension Plan generating revenue of GBP1.2 million (2020: GBP0.6
million).
Life Assurance
The 2021 combined revenue figure was GBP3.4 million compared to
GBP3.7 million for 2020. Whilst the business saw some new business
materialise through the launch of the flexible annuity products
this growth has made up for the loss of fee income due to natural
attrition on the existing client portfolios.
Our flexible annuity products aimed at the UK market remain the
key focus for organic growth within our life businesses. As
previously reported our pipeline of potential new business remains
significant, albeit, as mentioned above the length of time for that
to convert into new business is longer than we originally
envisaged.
Corporate and Trustee Services (CTS)
In 2021 the Company has sold its CTS businesses. On 23 March
2021 we sold the Gibraltar business to the privately-owned group
which already has a significant presence in Gibraltar, and on 8 May
2021 we sold the Jersey business to the privately-owned group which
has its head office in Guernsey. Part of ensuring that we exited
the CTS sector in an orderly manner was ensuring that both our work
colleagues and our CTS clients would be well looked after going
forward. I am pleased to say that this has been the case.
Outlook
We are now well positioned to take advantage of all the hard
work and initiatives that we have undertaken in the past few years
and will look to further optimise our target operating model. We
are confident this will lead to an increase in our unadjusted
operating margins, so that we will be more comparable to our peers.
In the short term, this may result in increased costs as we
redeploy our resources.
In addition, there is significant energy and activity around
generating new business. We anticipate a solid steady flow of new
SIPP business from our key strategic platform partners, with a
further roll-out of additional products from our life companies
onto these platforms during 2022. During the last quarter of 2021
we increased our business development team in the UK.
I am also pleased to state that our Australian superannuation
solution for expatriates went live at the beginning of February
2022, and has already generated interest from new intermediaries,
over and above what we expected from our existing intermediary
base. We also continue to have significant interest in our
short-term annuity product, albeit conversion of such opportunity
is yet to come to fruition.
The ongoing Russian invasion of Ukraine has led to severe
economic sanctions against the Russian state, businesses, and
personnel. This has exacerbated inflationary pressures and has had
wide knock-on impacts on the global economy. We do not expect this
to have a material impact on the Group's operations in the
foreseeable future, but management continues to monitor the
situation.
Further to the above we remain committed to continued investment
in technology both as an enabler for revenue growth but equally to
improve operational efficiencies. We equally continue to build on a
people strategy that supports the Group's values supporting engaged
customer-focused colleagues who demonstrate business excellence
through their level of skills and experience.
The Board remains fully committed to our acquisition strategy
and see this as an important pillar of our overall growth
aspirations. Focus will be on UK based acquisition targets.
I would like to take this opportunity to thank all my STM
colleagues for their continued hard work and professionalism in
carrying out their duties, and I hope that the 2022 working
environment continues to revert to something more normal.
I look forward to updating the market during 2022 with our
progress.
Alan Kentish
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR FROM 1 JANUARY 2021 TO 31 DECEMBER 2021
31 December 31 December
2021 2020
Note GBP000's GBP000's
------------------------------------------ ----- ------------ ------------
Revenue 9 22,355 23,982
Administrative expenses 10 (20,982) (21,775)
Profit before other items 11 1,373 2,207
------------------------------------------ ----- ------------ ------------
OTHER ITEMS
Finance costs (330) (246)
Gain on disposals of subsidiaries 4 219 -
Gains on revaluation of financial
instruments 406 59
Movement on deferred consideration 5 330 -
Impairment of goodwill 15 (798) -
Profit before taxation 1,200 2,020
------------------------------------------ ----- ------------ ------------
Taxation 13 542 (413)
------------------------------------------ ----- ------------ ------------
Profit after taxation 1,742 1,607
------------------------------------------ ----- ------------ ------------
OTHER COMPREHENSIVE INCOME
Items that are or may be reclassified
to profit or loss
Foreign currency translation differences
for foreign operations (33) (1)
------------------------------------------ ----- ------------ ------------
Total other comprehensive loss (33) (1)
------------------------------------------ ----- ------------ ------------
Total comprehensive income for the
year 1,709 1,606
------------------------------------------ ----- ------------ ------------
Profit attributable to:
Owners of the Company 1,749 1,777
Non-Controlling Interests (7) (170)
------------------------------------------ ----- ------------ ------------
1,742 1,607
------------------------------------------ ----- ------------ ------------
Total comprehensive income attributable
to:
Owners of the Company 1,716 1,776
Non-Controlling Interests (7) (170)
------------------------------------------ ----- ------------ ------------
1,709 1,606
------------------------------------------ ----- ------------ ------------
Earnings per share basic (pence)* 23 2.94 2.99
Earnings per share diluted (pence)* 23 2.94 2.99
* Earnings per share disclosed in the prior year annual report
and accounts was 2.70p based on profit after taxation/weighted
average number of shares. This has been restated in the current
year and is based on profit attributable to owners of the
company/weighted average number of shares.
The results for 2021 relate to continuing activities. Disposed
of activities in 2021 are disclosed in note 4.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR FROM 1 JANUARY 2021 TO 31 DECEMBER 2021
31 December
31 December 2020
2021 Restated*
Note GBP000's GBP000's
-------------------------------------- ----- ------------ ------------
ASSETS
Non-current assets
Property and office equipment 14 1,663 1,970
Intangible assets 15 19,355 19,912
Other financial assets 881 475
Deferred tax asset 76 75
Total non-current assets 21,975 22,432
-------------------------------------- ----- ------------ ------------
Current assets
Accrued income 1,311 1,319
Trade and other receivables 17 7,699 5,473
Receivables due from insurers 18 24,130 3,600
Cash and cash equivalents 19 18,207 16,409
Assets held for sale - 5,978
-------------------------------------- ----- ------------ ------------
Total current assets 51,347 32,779
-------------------------------------- ----- ------------ ------------
Total assets 73,322 55,211
-------------------------------------- ----- ------------ ------------
EQUITY
Called up share capital 21 59 59
Share premium account 21 22,372 22,372
Retained earnings 14,429 13,541
Other reserves (480) (447)
-------------------------------------- ----- ------------ ------------
Equity attributable to owners of the
Company 36,380 35,525
Non-controlling interest (452) (445)
-------------------------------------- ----- ------------ ------------
Total equity 35,928 35,080
-------------------------------------- ----- ------------ ------------
LIABILITIES
Current liabilities
Liabilities for current tax 640 1,197
Trade and other payables 24 10,532 11,374
Provisions 18 24,130 3,600
Liabilities directly associated with
assets held for sale - 1,154
-------------------------------------- ----- ------------ ------------
Total current liabilities 35,302 17,325
-------------------------------------- ----- ------------ ------------
Non-current liabilities
Other payables 25 1,628 2,284
Deferred tax liabilities 464 522
Total non-current liabilities 2,092 2,806
-------------------------------------- ----- ------------ ------------
Total liabilities and equity 73,322 55,211
-------------------------------------- ----- ------------ ------------
*The restatement relates to the reclassification of provisions
as a separate line item on the balance sheet as well as an
associated insurance receivable as detailed in note 18.
These financial statements were approved by the Board of
Directors and authorised for issue on
7 June 2022 and were signed on its behalf by:
AR Kentish N Coll
Chief Executive Officer Chief Financial Officer
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31 December 31 December
2021 2020
Note GBP000's GBP000's
------------------------------------- ----- ------------ ------------
ASSETS
Non-current assets
Property and office equipment 14 239 249
Intangible assets 15 1,961 1,097
Financial assets 881 475
Investments 16 16,013 20,809
Total non-current assets 19,094 22,630
------------------------------------- ----- ------------ ------------
Current assets
Trade and other receivables 17 13,215 12,074
Cash and cash equivalents 19 2,463 2,257
------------------------------------- ----- ------------ ------------
Total current assets 15,678 14,331
------------------------------------- ----- ------------ ------------
Total assets 34,772 36,961
------------------------------------- ----- ------------ ------------
EQUITY
Called up share capital 21 59 59
Share premium account 21 22,372 22,372
Retained earnings (1,205) 2,172
Other reserves 162 162
------------------------------------- ----- ------------ ------------
Total equity attributable to equity
shareholders 21,388 24,765
------------------------------------- ----- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 24 12,484 11,148
Total current liabilities 12,484 11,148
------------------------------------- ----- ------------ ------------
Non-current liabilities
Other payables 25 900 1,048
------------------------------------- ----- ------------ ------------
Total non-current liabilities 900 1,048
------------------------------------- ----- ------------ ------------
Total liabilities and equity 34,772 36,961
------------------------------------- ----- ------------ ------------
These financial statements were approved by the Board of
Directors and authorised for issue on
7 June 2022 and were signed on its behalf by:
AR Kentish N Coll
Chief Executive Officer Chief Financial Officer
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR FROM 1 JANUARY 2021 TO 31 DECEMBER 2021
31 December 31 December 2020
2021 Restated
Note GBP000's GBP000's
------------------------------------- ----------- ------------ -----------------
OPERATING ACTIVITIES
Profit for the year before
tax 1,200 2,020
ADJUSTMENTS FOR:
Depreciation of property and
office equipment 14 659 793
Amortisation of intangible
assets 15 791 570
Taxation paid (14) (299)
Reclassification to assets
held for sale - (725)
Unrealised gains on financial
instruments at FVTPL 6 (406) (59)
Impairment of goodwill 15 798 -
(Increase)/decrease in trade
and other receivables 5,17,19 (2,226) 3,385
(Increase) in receivables due
from insurers 18 (20,530) (3,600)
Increase/(decrease) in accrued
income 8 (485)
Increase/(decrease) in trade
and other payables 5,20,24 (936) (3,612)
Increase in provisions 18 20,530 3,600
Net cash from operating activities (126) 1,588
------------------------------------- ----------- ------------ -----------------
INVESTING ACTIVITIES
Disposal of investments 4 4,821 -
Purchase of property and office
equipment 14 (352) (70)
Increase in intangible assets 15 (1,032) (875)
Consideration paid on acquisition
of subsidiary 5 - (1,447)
Cash acquired on acquisition
of subsidiary 5 - 27
Net cash used in investing
activities 3,437 (2,365)
------------------------------------- ----------- ------------ -----------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from bank loans 24,25 900 1,600
Bank loan repayment 24 (1,050) (1,200)
Lease liabilities paid (469) (843)
Dividends paid 21 (861) (772)
------------------------------------- ----------- ------------ -----------------
Net cash from financing activities (1,480) (1,215)
------------------------------------- ----------- ------------ -----------------
Increase/(decrease) in cash
and cash equivalents 1,831 (1,992)
------------------------------------- ----------- ------------ -----------------
Effect of movements in exchange
rates on cash and cash equivalents (33) (5)
------------------------------------- ----------- ------------ -----------------
Cash and cash equivalents at
the beginning of the year 16,409 18,406
Cash and cash equivalents
at the end of the year 19 18,207 16,409
------------------------------------- ----------- ------------ -----------------
*The restatement relates to the reclassification of provisions
as a separate line item on the balance sheet as well as an
associated insurance receivable as detailed in note 18.
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
FOR THE YEAR FROM 1 JANUARY 2021 TO 31 DECEMBER 2021
Foreign Shares
Currency Based
Share Share Retained Treasury Translation Payments Non-Controlling Total
Capital Premium Earnings Shares Reserve Reserve Total Interests Equity
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------- --------- --------- --------- --------- ------------ --------- --------- ---------------- ---------
Balance at
1 January
2020 59 22,372 12,536 (549) (59) 162 34,521 (275) 34,246
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for
the year - - 1,777 - - - 1,777 (170) 1,607
Other comprehensive income
Foreign
currency
translation
differences - - - - (1) - (1) - (1)
Transactions with owners, recorded directly in equity
Dividend
paid - - (772) - - - (772) - (772)
31 December 2020 and
1 January
2021 59 22,372 13,541 (549) (60) 162 35,525 (445) 35,080
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for
the year - - 1,749 - - - 1,749 (7) 1,742
Other comprehensive income
Foreign
currency
translation
differences - - - - (33) - (33) - (33)
Transactions with owners, recorded directly in equity
Dividend
paid - - (861) - - - (861) - (861)
Changes in ownership interest
31 December
2021 59 22,372 14,429 (549) (93) 162 36,380 (452) 35,928
------------- --------- --------- --------- --------- ------------ --------- --------- ---------------- ---------
STATEMENT OF COMPANY CHANGES IN EQUITY
FOR THE YEAR FROM 1 JANUARY 2021 TO 31 DECEMBER 2021
Share Share Retained
Capital premium earnings Total
GBP000's GBP000's GBP000's GBP000's
------------------------ ---------- ---------- ---------- ----------
Balance at 1 January
2020 59 22,372 3,144 25,575
Loss for the year - - (38) (38)
Dividend paid - - (772) (772)
------------------------ ---------- ---------- ---------- ----------
At 31 December 2020
and
1 January 2021 59 22,372 2,334 24,765
------------------------ ---------- ---------- ---------- ----------
Loss for the year - - (2,516) (2,516)
Dividend paid - - (861) (861)
------------------------ ---------- ---------- ---------- ----------
At 31 December 2021 59 22,372 (1,043) 21,388
------------------------ ---------- ---------- ---------- ----------
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
1. Reporting entity
STM Group Plc (the "Company") is a company incorporated and
domiciled in the Isle of Man and is traded on the Alternative
Investment Market (AIM), a market operated by the London Stock
Exchange. The address of the Company's registered office is 1(st)
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, 31 December 2021 comprise the Company and its
subsidiaries (see note 30) (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 has been prepared on the basis of the
accounting policies set out in
Note 3 .
(a) Statement of compliance
The consolidated financial statements 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.
(b) 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 the three-year business plan, three-year
budgets and rolling cashflow forecasts for the forthcoming 18-month
period and the level of professional indemnity insurance held by
the Group and the indemnity related to the Carey (Options) v Adams
case. 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 and Company have adequate
resources to continue in operational existence for the forthcoming
12 months. As such, the Board continues to adopt the going concern
basis in preparing the financial statements.
(c) Functional and presentation currency
These consolidated financial statements are presented in Pounds
Sterling (GBP) which is the Company'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
Note 3 (b)(ii).
(d) Use of judgments and estimates
The preparation of financial statements requires management to
make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income, and expenses. Actual results may
differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised.
(i) Judgements
Information about judgements made in applying accounting
policies that have the most significant effects on the carrying
values of the assets and liabilities is included in the following
notes:
- Note 3 (c) - Revenue recognition: the Group applies the 5-step
model under IFRS 15 revenue from contracts with customers to
recognise revenue as follows:
Step 1 - identify the contract(s) with a customer:
The Group's pension customers are deemed to be the underlying
SIPP, SSAS and QROPS
members
Step 2 - identify the performance obligations in the
contract
Performance obligations are understood to be the individual
components of SIPP, SSAS and
QROP administration as detailed in the Group's term and
conditions and fee schedules.
Establishment fees relate to onboarding of the client. Annual
fees have two component parts
namely (i) obligations and duties as trustees of the pension
funds which are provided on an
ongoing basis regardless of the invoice date and (ii)
administration of the pension which includes
annual valuations which are undertaken on the anniversary date
of the member.
Step 3 - determine the transaction price
The transaction price is deemed to be that shown in the Group's
products' terms and conditions
and fee schedules against each individual fee item which
includes interest turn on client funds.
Transaction prices for individual components of the annual
renewal fee are not separable as the
combined set of obligations represents a continuous service over
the same annual period.
Step 4 - allocate the transaction price to the performance
obligations in the contract
The result of judgements made in Step 2 and Step 3 mean that
transaction prices are allocated
in substance to fee items included in the Group's product's
terms and conditions and fee
schedules, as these also wholly reflect the individual
performance obligations.
Step 5 - recognise revenue when (or as) the Group satisfies a
performance obligation
Establishment fees and any other ad hoc fees are recognised as
the work is completed and the
performance obligation is satisfied.
Annual renewal fees are invoiced in advance and recognised in
part related to annual
administration services on the anniversary date and in part
related to services as a trustee with
recognition evenly over the year to which they relate, and held
as deferred income at the year-
end where the annual fee period spans multiple accounting
periods. This split is assessed
annually. The current revenue recognition assessment on the
pensions business - to recognise
50% of the annual management fee at the point of invoicing to
reflect the transfer of the
performance obligation and to defer the remaining 50% over the
year to reflect the provision
of trusteeship (2020: 50/50 split).
- Note 26 - Determination as to whether a provision is required or is a contingent liability;
- Note 15 - Determination of identifiable cash-generating units.
(ii) Assumptions and estimates
Assumptions and estimation uncertainties at 31 December 2021
that have a significant risk of resulting in a material adjustment
to the carrying values of assets and liabilities in the next
financial year are included in the following notes:
- Note 5 - Valuation of acquired client portfolio.
- Note 6 - Valuation of call options.
- Note 18 -Measurement of provisions: assumptions about the
likelihood and magnitude of an outflow of resources.
- Note 1 5 - Measurement of goodwill: the key assumptions used
in determining whether goodwill has been impaired at each annual
impairment review.
(e) Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis, except where investments and other financial
instruments are held at fair value.
(f) Employee benefit trusts
The Company contributes to an employee benefit trust. It is
deemed that this trust is controlled by the Company and is
therefore included within the consolidated financial statements of
the Group.
3. Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases. Specifically, the
results of subsidiaries acquired or disposed of during the year are
included in profit or loss from the date the Company gains control
until the date when the Company ceases to control the subsidiary.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies used into line
with the Group's accounting policies
(ii) Business combinations
The Group accounts for business combinations using the
acquisition method when the acquired set of activities and assets
meets the definition of a business and control is transferred to
the Group. Post 1 January 2020, in determining whether a particular
set of activities and assets is a business, the Group assesses
whether the set of assets and activities acquired includes, at a
minimum, an input and a substantive process that together
significantly contribute to the ability to create outputs.
The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the
acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the
acquiree and the equity interest issued by the Group in exchange
for control of the acquiree. Any goodwill that arises is tested
annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are
expensed as incurred, except if related to the issue of debt. Any
contingent consideration is measured at fair value at the date of
acquisition and re-measured at each reporting date. Subsequent
changes to the contingent consideration are adjusted against
goodwill where a change in the fair value of contingent
consideration is the result of additional information about facts
and circumstances that existed at the acquisition date. These
changes are accounted for as measurement period adjustments if they
arise during the measurement period. Changes resulting from events
after the acquisition date do not impact goodwill but are accounted
for separately. The subsequent accounting for changes in the fair
value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent
consideration is classified. Contingent consideration that is
classified as equity is not remeasured at subsequent reporting
dates and its subsequent settlement is accounted for within equity.
Other contingent consideration is remeasured to fair value at
subsequent reporting dates with changes in fair value recognised in
profit or loss.
(iii) Non-controlling interest (NCI)
NCI, in subsidiaries are identified separately from the group's
equity therein. Those interests of NCI that are present ownership
interest entitling their holders to a proportionate share of net
assets upon liquidation, are measured initially at their
proportionate share of the acquiree's identifiable net assets at
the date of acquisition. Subsequent to acquisition, the carrying
amount of the NCI is the amount of those interests at initial
recognition plus the NCI share of subsequent changes in equity NCI
will be allocated its share of profit or loss and its share of each
component of other comprehensive income in subsequent periods even
if this results in the NCI having a deficit balance. NCI in
subsidiaries are identified separately from the group's equity
therein. Those interests of NCI that are present ownership interest
entitling their holders to a proportionate share of net assets upon
liquidation are measured initially at their proportionate
acquisition.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions are eliminated
in preparing the consolidated financial statements.
(b) Foreign currency
(i) Foreign currency transactions
In preparing the financial statements of the group entities,
transactions in currencies other than the entity's functional
currency (foreign currencies) are translated to the functional
currency at the exchange rate prevailing at the date of the
transaction. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are not
retranslated. The resulting gain or loss is recognised in the
statement of comprehensive income.
(ii) Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated to sterling at exchange rates at the reporting date. For
the purposes of preparing the consolidated financial statements,
the assets and liabilities are translated to sterling at exchange
rates at the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless
exchange rates fluctuate significantly during that period, in which
case the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in a foreign exchange
translation reserve (attributed to non-controlling interests as
appropriate).
Foreign exchange gains and losses arising from monetary items
that in substance form part of the net investment in its foreign
operations are recognised in other comprehensive income and are
presented within equity in the foreign currency translation
reserve.
(c) Revenue
Revenue is derived from the provision of services as described
in note 9 and is recognised in the statement of comprehensive
income when the Group completes performance obligations and
transfers control over a good or service to a customer.
Revenue derived from pensions operating segment is split between
the establishment fee and the management fee. The establishment fee
is recognised in full at the time of processing the application so
as to reflect the completion of the performance obligation such as
processing their application and setting up the pension trust. The
management fees, which are invoiced annually, cover both the
provision of trustee services and the administration of the pension
funds. The current treatment of these fees, based on the existing
profile of the client portfolio, is to recognise 52% at the time of
invoicing and to defer the balance over the year of each policy as
each of the performance obligations are satisfied.
(d) Accrued income
Accrued income represents billable time spent on the provision
of services to clients which has not been invoiced at the reporting
date. Accrued income is recorded at the staff charge-out rates in
force at the reporting date, less any specific provisions against
the value of accrued income where recovery will not be made in
full. In terms of pension business, the accrued income is based on
the number of applications received but for which an invoice has
not been raised yet.
(e) Receivables from insurers
Where the Group has professional indemnity insurance that would
be receivable against a provision for an insurance claim payable an
asset is recognised when there is reasonable certainty as to the
recovery from the insurers.
(f) Property and office equipment
(i) Recognition and measurement
Items of property and office equipment are measured at cost less
accumulated depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of
the asset and bringing it into use. Gains and losses on disposal of
an item of property and office equipment are determined by
comparing the proceeds from disposal with the carrying amount of
property and office equipment and are recognised net within other
income in profit or loss.
(ii) Depreciation
Depreciation is recognised in the statement of comprehensive
income on a reducing balance basis over the estimated useful lives
of each part of an item of property and office equipment. Leased
assets are depreciated over the shorter of the lease term or the
estimated useful life. Depreciation commences once assets are in
use.
The rates in use are as follows:
Office equipment 10% - 25% on a reducing balance basis
Motor vehicles 25% on a reducing balance basis
Right of use assets Over the life of the leases
Depreciation methods, useful lives and residual values are
reassessed at the reporting date.
(g) Financial instruments
(i) Recognition and initial measurement
Financial assets and financial liabilities are initially
recognised when the Group becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) or financial liability is
initially measured at fair value plus, for an item not at fair
value through profit or loss ("FVTPL"), transaction costs that are
directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
Derivative financial instruments are measured at FVTPL and are
considered to fall within level 3 of the fair value hierarchy.
Fair value hierarchy levels 1 to 3 are based on the degree to
which the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
All other financial assets are measured at amortised cost.
(ii) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified at
amortised cost, fair value through other comprehensive income
("FVOCI") or FVTPL.
Call options on non-controlling interests are classified as
equity instruments if and only if an option contract is settled by
delivering a fixed number of equity instruments in exchange for a
fixed amount of cash or another financial asset (often referred to
as the 'fixed-for-fixed' criterion). Otherwise, a call option is
classified as a derivative financial instrument. The Group
classifies its call options as derivative financial
instruments.
Financial assets are not reclassified subsequent to their
initial recognition unless the Group changes its business model for
managing financial assets, in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the
following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling financial
assets; and
- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets not classified as measured at amortised
cost or FVOCI as described above are measured at FVTPL. On initial
recognition, the Group may irrevocably designate a financial asset
that otherwise meets the requirements to be measured at amortised
cost or at FVOCI as at FVTPL if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise
arise.
Financial assets - Business model assessment
The Group makes an assessment of the financial assets it holds
to best reflect the way in which the business is managed and
information is provided to management. The information may
include:
- the stated policies and objectives for the group of assets and
the operation of those policies in practice;
- how the performance of the assets is evaluated and reported to the Group's management;
- the risks that affect the performance of the business and
these assets and how those risks are managed.
Transfers of financial assets to third parties in transactions
that do not qualify for derecognition are not considered sales for
this purpose, consistent with the Group's continuing recognition of
the assets.
Financial assets that are held for trading or are managed and
whose performance is evaluated on a fair value basis are measured
at FVTPL.
Financial assets - Subsequent measurement and gains and
losses
Financial assets at These assets are subsequently measured at fair
FVTPL value. Net gains and losses, including any interest
or dividend income, are recognised in profit
or loss.
Financial assets at These assets are subsequently measured at amortised
amortised cost cost using the effective interest method. The
amortised cost is reduced by impairment losses.
Interest income, foreign exchange gains and losses
and impairment are recognised in profit or loss.
Any gain or loss on derecognition is recognised
in profit or loss.
-----------------------------------------------------
Financial liabilities - Classification, subsequent measurement
and gains and losses
The Group's financial liabilities are classified at amortised
cost. They are subsequently measured at amortised cost using the
effective interest method. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss
on derecognition is also recognised in profit or loss.
(iii) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a
transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the
Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the
financial asset.
The Group enters into transactions whereby it transfers assets
recognised in its statement of financial position but retains
either all or substantially all of the risks and rewards of the
transferred assets. In these cases, the transferred assets are not
derecognised.
Financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire. The
Group also derecognises a financial liability when its terms are
modified and the cash flows of the modified liability are
substantially different, in which case a new financial liability
based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference
between the carrying amount extinguished and the consideration paid
(including any non--cash assets transferred, or liabilities
assumed) is recognised in profit or loss.
(iv) Offsetting financial assets and liabilities
Financial assets and financial liabilities are offset, and the
net amount presented in the statement of financial position when,
and only when, the Group currently has a legally enforceable right
to set off the amounts and it intends either to settle them on a
net basis or to realise the asset and settle the liability
simultaneously.
(h) Share capital
Ordinary shares are classified as equity. Costs directly
attributable to the issue of the shares are recognised as a
deduction from share premium.
Treasury shares are those shares purchased by the STM Group
Employee Benefit Trust ("EBT") for distribution to executives and
senior management within the Group, which have yet to be allotted
to specific employees. The consideration paid, including any
attributable incremental costs (net of income taxes), is deducted
from the reserves attributable to the Group's equity holders until
the shares are cancelled or reissued via the Treasury Reserve.
(i) Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the
definition of a lease in IFRS 16.
At commencement or on modification of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease component on the basis of its relative
stand-alone prices.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or
to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of the
lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
re-measurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the Group's incremental borrowing rate.
The lease liability is measured at amortised cost using the
effective interest method. It is re-measured when there is a change
in future leases payments. When the lease liability is remeasured
in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in profit or loss
if the carrying amount of the right-of-use asset has been reduced
to zero.
Where a lease has a term of less than 12 months or is of a value
of less than GBP5,000, the Group applies the exemption not to
recognise right-of-use assets and liabilities for these leases. The
Group recognises the lease payments associated with these leases as
an expense on a straight-line basis over the lease term.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and
lease liabilities for leases of low-value assets and short-term
leases, including IT equipment. The Group recognises the lease
payments associated with these leases as an expense on a
straight-line basis over the lease term.
(j) Employee benefits
The Group operates a defined contribution pension plan.
Obligations for contributions to defined contribution pension plans
are recognised as an expense in the income statement when they are
due.
(k) Finance income and expenses
Finance income comprises interest income on funds invested and
dividend income. Interest income is recognised as it accrues using
the effective interest method. Dividend income in the holding
company is recognised when declared by the subsidiaries.
Finance expense comprises interest on borrowings. Interest
expense is charged to the income statement using the effective
interest method.
(l) Income tax expense
Income tax expense comprises current and deferred tax. Income
tax expense is recognised in the income statement.
Current tax is the expected tax payable on the taxable income
for the year using enacted tax rates, updated for previous period
adjustments. Taxable profit differs from net profit as reported in
profit or loss because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group's liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting
period.
Deferred tax is recognised using the balance sheet method,
providing for temporary differences between carrying amounts of
assets and liabilities for financial reporting purposes and for tax
purposes. Deferred tax is not provided in respect of goodwill.
Deferred tax is measured at the tax rates expected to be enacted
when they reverse.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit. In
addition, a deferred tax liability is not recognised if the
temporary difference arises from the initial recognition of
goodwill.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
(m) Intangible assets
(i) Goodwill
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. On disposal of a cash-generating unit, the
attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units (or groups of
cash-generating units) expected to benefit from the synergies of
the combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than the
carrying amount of the unit, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro-rata on the basis of
the carrying amount of each asset in the unit. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
(ii) Product development
Product development relates to internal development expenditure
incurred in the development of the Group's new products. When these
costs meet the recognition criteria of IAS 38 'Intangible Assets'
they are capitalised and amortised on a straight-line basis over a
three year period from product launch.
(iii) Client portfolio
Client portfolio acquired in a business combination are
recognised separately from goodwill and are recognised initially at
their fair value at the acquisition date (which is regarded as
their cost). Subsequent to initial recognition it is amortised on a
straight-line basis over the estimated useful life which is
assessed at ten years.
(iv) IT development
IT development relates to internal and external development
expenditure incurred in the development of the Group's IT systems.
When these costs meet the recognition criteria of IAS 38
'Intangible Assets' they are capitalised and amortised on a
straight-line basis over a five year period when a specific IT
module comes into use.
(n) Impairment
(i) Non derivative financial assets
Financial instruments and contract assets
The Group and Company measures loss allowances for Expected
Credit Losses ("ECL") on financial assets measured at amortised
cost and contract assets.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis based on the Group's historical experience and
informed credit assessment.
Lifetime ECLs are the ECLs that result from all possible default
events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default
events that are possible within the 12 months after the reporting
date (or a shorter period if the expected life of the instrument is
less than 12 months).
The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed to
credit risk.
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets and are
recognised in the statement of comprehensive income.
The Group measures loss allowances at an amount equal to
lifetime ECLs, except for bank balances for which credit risk has
not increased significantly since initial recognition, which are
measured at 12-month ECLs. The Group considers the following as
constituting an event of default for internal credit risk
management purposes as historical experience indicates that
financial assets that meet both of the following criteria are
generally not recoverable:
- when there is a breach of the contractual credit terms by the debtor; and
- there is insufficient liquidity within the debtor's pension assets.
Write-off
The gross carrying amount of a financial asset is written off
when the Group has no reasonable expectations of recovering a
financial asset in its entirety or a portion thereof. The Group
individually makes an assessment with respect to the timing and
amount of write-off based on whether there is a reasonable
expectation of recovery. The Group expects no significant recovery
from the amount written off. However, the Group may still follow
procedures for recovery of financial assets that have been written
off.
(ii) Non-financial assets
The carrying amounts of the Group's non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then the
asset's recoverable amount is estimated. For goodwill which has an
indefinite life, the recoverable amount being the higher of the
fair value less costs of disposal or value in use is estimated at
each reporting date.
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount. A
cash-generating unit is the smallest identifiable asset group that
generates cash flows that largely are independent from other assets
and groups. Impairment losses are recognised in the income
statement.
Impairment losses recognised in respect of cash-generating units
are allocated first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amount of
the other assets in the unit (group of units) on a pro-rata
basis.
(o) Earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for
the effects of all dilutive potential ordinary shares, which
comprise the effect of outstanding options. The effects of
potential ordinary shares are reflected in diluted EPS only when
their inclusion in the calculation would decrease EPS or increase
the loss per share.
(p) Deferred income
Deferred income relates to the element of fixed fee income that
has been billed in advance which has not been earned as at the year
end and is released over the period to which it relates. 100% of
the balance recorded as deferred income at 31 December 2021 is
expected to be included as revenue in the next financial year.
(q) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows (when the effect of
the time value of money is material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
(r) Dividend
Dividends are recognised in the accounting period in which they
are authorised and paid. The interim dividend is recognised when it
is paid and the final dividend is recognised when it has been
approved by shareholders at the Annual General Meeting. Payment of
a dividend is permissible in accordance with s57 of the Companies
Act 2006 (IOM) and the Articles of Association given that the
solvency test has been met.
(s) Share based payments
The grant-date fair value of equity settled share payment
arrangements granted to employees is recognised as an expense, with
a corresponding increase in equity, over the vesting period of the
awards. Where awards have a market-based performance condition
attached the accounting charge reflects the expected achievement
against targets and there is no true-up for differences between
expected and actual outcomes.
(t) Insurance products
The life assurance business account for insurance products as
investment contracts as no significant insurance risk is attached
to these contracts. The assets and liabilities of the contracts are
included in the Group's balance sheet only if it is deemed that
control exists over the investment decision (see Note 8).
(u) Disputes and potential legal matters
The Group may at times be involved in disputes arising in the
ordinary course of business. In accordance with applicable
accounting requirements, the Group provides for potential losses
that may arise out of these disputes when the potential losses are
probable and estimable. Disputes in respect of legal matters are
subject to many uncertainties and the outcome of individual matters
cannot be predicted with certainty. The amount of any such
provision is based on a best estimate of the expenditure required
to settle this. There may be occasions when either a potential loss
is probable but difficult to quantify or a potential loss can be
reliably quantified but is not probable. On both occasions a
contingent liability would be disclosed.
(v) New standards and interpretations
The Group has not applied any new accounting standards for the
first time for the financial year commencing 1 January 2021.
Standards, amendments, and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group.
The following standards, interpretations and amendments to
existing standards have been published by the IASB but are yet to
be endorsed by the EU or are not effective for the period presented
in the financial statements and the Group has decided not to early
adopt them.
Standard Effective date, annual period
beginning on or after
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IAS 1 - Presentation 1 January 2023
of Financial Statements
IFRS 17 establishes the principles for the recognition,
measurement, presentation and disclosure of insurance contracts and
supersedes IFRS 4 Insurance Contracts. It outlines a general model,
which is modified for insurance contracts with direct participation
features, described as the variable fee approach. STM Group
currently has two life assurance companies within its Group and
therefore this may have an impact on the consolidated financial
statements. At the time of signing the financial statements the
Group was still assessing the impact of these standards on the
consolidated financial statements and as such the extent of the
impact has not yet been fully determined.
(w) Cash and cash equivalents
Cash and cash equivalents include cash balances with banks and,
demand and short term deposits which are readily convertible to
known amounts of cash and are subject to an insignificant risk of
changes in their fair value. Short term deposits have a maturity of
three months or less from the date of acquisition
Cash and cash equivalents are carried at amortised cost in the
statement of financial position.
(x) Investment in subsidiaries
Investments in subsidiaries in the separate financial statements
of STM Group plc are accounted for at cost.
(y) Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for-sale if it is highly
probable that they will be recovered primarily through sale rather
than through continuing use.
Such assets, or disposal groups, are generally measured at the
lower of their carrying amount and fair value less costs to sell.
Any goodwill directly allocated to the group of assets to be
disposed of is also treated as held for sale. Any impairment loss
on a disposal group is allocated first to goodwill, and then to the
remaining assets and liabilities on a pro rata basis, except that
no loss is allocated to financial assets, deferred tax assets,
employee benefit assets, which continue to be measured in
accordance with the Group's other accounting policies. Impairment
losses on initial classification as held-for-sale or held-for
distribution and subsequent gains and losses on remeasurement are
recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property
and office equipment are no longer amortised or depreciated, and
any equity-accounted investee is no longer equity accounted.
4. Disposal of subsidiaries
On 23 March 2021 the Group disposed of its Gibraltar company and
trustee services ("CTS") and tax compliance business, STM Fidecs
Management Limited. On 8 May 2021 the Group disposed of its Jersey
based CTS business, STM Fiduciaire Limited. These businesses were
previously classified as held-for-sale and are now discontinued
operations.
There results for the discontinued operation included in the
year ended 31 December 2021 are shown below. There are no results
for disposed of operations included in the year ended 31 December
2020:
GBP'000
Revenue 774
Expenditure (736)
Results from operating activities 38
Income tax -
Results from operating activities,
net of tax 38
Gain on sale of discontinued operation 219
Profit from disposal of subsidiaries 257
---------------------------------------- --------
The profit from the discontinued operation is attributable
entirely to the owners of the Company.
5. Acquisition of subsidiary
There were no acquisitions in 2021.
On 13 August 2020, the Group acquired 100% of the share capital
of Options SSAS Limited ("OSSAS") formally named (Berkeley Burke
(Financial Services) Ltd ("BBFS")) and Options EBC Limited ("OEBC")
formally named (Berkeley Burke Employee Benefit Consultants Ltd
("EBC")), referred to jointly as the BB companies, from Berkeley
Burke Group Limited, which together provide administration and
consultancy services to Small Self-administered Pension schemes
("SSAS") in the UK and to large and medium sized UK and
international businesses, delivering pension solutions for their UK
and overseas employees.
The SSAS business will allow for efficiency gains when it is
integrated into the Group's existing UK operations, and the UK and
international group pension plan business will strengthen our
position in that sector. In addition, the acquisition allowed the
Group to enter a new market - the group pension plan business -
providing the growth opportunities in the UK.
The acquisition has been accounted for using the acquisition
method. Transaction costs incurred on the acquisition total
GBP88,000 and were expensed within administrative expenses in the
consolidated statement of comprehensive income for the year ended
31 December 2020.
Consideration for the acquisition is broken down as follows:
GBP000's
------------------------------------------------------ ---------
Initial cash payment 1,447
Deferred consideration - maximum potentially payable 700
------------------------------------------------------ ---------
Total consideration transferred 2,147
------------------------------------------------------ ---------
The initial cash payment was made at the date of signing the
Sale & Purchase Agreement. The deferred consideration was due
for payment within 10 days following the first-year anniversary
date of the completion accounts being 31 July 2021. The deferred
consideration was dependent on revenue generated from the acquired
clients. This revenue was below expectation and reduced the maximum
potentially payable to approximately GBP530k there are a number of
additional potential adjustments to this amount. An initial
deferred consideration payment of GBP200k was made in November 2021
and further maximum potential accrual of GBP170k is included in
trade payables (see note 24). The final deferred consideration
payable has not yet been agreed and negotiations are ongoing.
The following table summarises the fair value of the
identifiable assets and liabilities assumed of the acquired
companies as at the acquisition date:
FV recognised Fair value Previous
on acquisition adjustments carrying value
----------------------------- ---------------- ------------- ----------------
GBP'000s GBP'000s GBP'000s
Client portfolio 1,500 1,500 -
Accrued income 112 - 112
Debtors 157 - 157
Cash at bank 27 - 27
Liabilities (225) - (225)
Deferred tax liabilities on
Client portfolio (270) (270) -
----------------------------- ---------------- ------------- ----------------
Total identifiable assets 1,301 1,230 71
----------------------------- ---------------- ------------- ----------------
At acquisition the Group performed an exercise to identify the
fair value of intangible assets acquired. As a result of that
exercise, a client portfolio asset of GBP300,000 relating to the
OSSAS portfolio and GBP1,200,000 related to the OEBC portfolio were
recognised.
The client portfolios have been valued using an excess earnings
model which disregards future growth of the acquired portfolio but
takes into consideration cost synergies achieved following the
integration of the businesses.
The assumptions used for the valuation of the client portfolios
were as follows:
Attrition rate 7% - 12%
Discount factor 13%
---------
A movement of +/- 1% on the above assumptions results in a range
of values of GBP1,467,000 to GBP1,611,000.
Goodwill arising from the acquisition has been recognised as
follows:
GBP'000s
Total acquisition cost 2,147
Fair value of identifiable net assets (1,301)
--------------------------------------- ---------
Goodwill 846
--------------------------------------- ---------
The total acquisition cost included a maximum potential deferred
consideration of GBP700k, however this has been reduced to a
maximum potential deferred consideration of approximately GBP530k.
An annual assessment of goodwill is detailed in note 15.
6. Call options to acquire non-controlling interests
As part of the acquisition of Carey (Options) Administration
Holdings Limited, the Group entered into call option agreements to
acquire the non--controlling interests in Options Pensions UK LLP
and Options Corporate Pensions UK Limited from the current owner of
the NCIs. The call options are exercisable in 2022 and the prices
are based on the audited financial statements of these entities for
the year ended 31 December 2021. The fair value of the call options
as at acquisition date and as at 31 December 2019 was determined at
GBP416,000 using discounted cashflow techniques as no observable
market transactions are available. This is subject to revaluation
as at each reporting date.
As at 31 December 2021 these call options were valued at
GBP881,000 (31 December 2020: GBP475,000).
The assumptions used for the valuations of the call options as
at 31 December 2021 and 31 December 2020 were as follows:
Options Pensions UK LLP Options Corporate Pensions
UK
-------------------------- -----------------------------
2021 2020 2021 2020
Income growth rate 2% 2% 2% 2%
Cost growth rate 3% 2% 3% 3%
Discount factor 14% 14% 14% 14%
A movement of +/- 1% on the above assumptions results in a range
of values of GBP609,000 to GBP1,355,000.
7. Segmental Information
STM Group has four reportable segments: Pensions, Life
Assurance, Corporate Trustee Services and Other Services. Each
segment is defined as a set of business activities generating a
revenue stream and offering different services to other operating
segments. The Group's operating segments have been determined based
on the management information reviewed by the CEO and board of
directors.
The Board assesses the performance of the operating segments
based on turnover generated. The performance of the operating
segments is not measured using costs incurred as the costs of
certain segments within the Group are predominantly centrally
controlled and therefore the allocation of these is based on
utilisation of 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 2021 2020
GBP000's GBP000's
---------------------------- --------- ---------
Pensions 17,597 16,488
Life Assurance 3,402 3,709
Corporate Trustee Services 774 3,167
Other Services 582 618
22,355 23,982
---------------------------- --------- ---------
Analysis of the Group's turnover information by geographical
location is detailed below:
Turnover
Geographical segment 2021 2020
GBP000's GBP000's
---------------------- --------- ---------
Gibraltar 6,099 7,999
Malta 7,288 7,625
United Kingdom 7,952 6,379
Jersey 445 1,483
Other 571 496
---------------------- --------- ---------
22,355 23,982
---------------------- --------- ---------
8. 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. The Companies have a
licence under the Financial Services (Insurance Companies) Act by
the Gibraltar Financial Services Commission to carry on linked
long-term insurance business.
For the purposes of these consolidated financial statements,
only the shareholders' funds and surplus that emerges on the
long-term fund have been included. The assets invested by the Life
Assurance clients are determined by either the client or their
advisor and are segregated from the assets and liabilities of other
clients. Therefore, the Group considers that it does not control
the investment decision nor accept any financial risk in respect of
that decision and, therefore, the investment assets and associated
liability to the customer should not be presented on the balance
sheet.
Within total revenue of the Group of GBP22,355,000 (2020:
GBP23,982,000) there is an amount of GBP3,402,000 (2020:
GBP3,709,000) relating to revenues attributable to the life
assurance businesses.
9. Revenue
31 December 31 December
2021 2020
GBP000's GBP000's
----------------------------------------- ------------ ------------
Revenue from administration of assets 22,355 23,982
----------------------------------------- ------------ ------------
Total revenue 22,355 23,982
----------------------------------------- ------------ ------------
10. Administrative expenses
Included within administrative expenses are personnel costs as
follows:
31 December 31 December
2021 2020
GBP000's GBP000's
Wages and salaries 10,932 11,634
Social insurance costs 463 522
Pension contributions 128 156
Total personnel expenses 11,523 12,312
-------------------------- ------------ ------------
Average number of employees
31 December 31 December
2021 2020
Group Number Number
---------------------------------------------- ------------ ------------
Average number of people employed (including
executive directors) 286 287
---------------------------------------------- ------------ ------------
31 December 31 December
2021 2020
Company Number Number
---------------------------------------------- ------------ ------------
Average number of people employed (including
executive directors) 32 34
---------------------------------------------- ------------ ------------
11. Profit before other items
Profit before other items of GBP1,373,000 (31 December 2020:
GBP2,207,000), was arrived at after charging the following to the
income statement:
2021 2020
GBP000's GBP000's
----------------------------------------------- ---------- ----------
Depreciation and amortisation 1,450 1,363
Directors' remuneration 882 823
Auditors' remuneration for audit 392 394
Auditors' remuneration for non-audit services - 42
----------------------------------------------- ---------- ----------
The directors' remuneration report is included on page 18 of the
annual report and accounts
12. Reconciliation of reported to adjusted measures
Profit before Profit before
Revenue other items tax
---------------------------------- ---------------------- ---------------------- ----------------------
2021 2020 2021 2020 2021 2020
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
---------- ---------- ---------- ---------- ---------- ----------
Reported measure 22,355 23,982 1,373 2,207 1,200 2,020
Less: effect of companies
and trust services disposal (774) (3,167) (54) (313) (54) (313)
Less: bargain purchase gain
on acquisition and gain on
call options - - - - (406) (59)
Less: gain on disposal of
companies and trust management - - - - (219) -
Add: integration and acquisition
costs - - - 179 - 179
Less: movement in deferred
consideration related to - - - -
prior year acquisitions (330) -
Add: goodwill impairment - - - - 798 -
Add: non-recurring costs - - 179 285 179 285
Adjusted measure 21,581 20,815 1,498 2,358 1,168 2,112
---------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Adjusted measures are net of non-recurring costs and other
exceptional items including bargain purchase gains and technical
reserve releases that do not form part of the normal course of
business.
13. Taxation
31 December 31 December
2021 2020
GBP000's GBP000's
--------------------------------------------------- ------------ ------------
Current tax (benefit)/expense (502) 439
Release of deferred tax assets on leases as
per IFRS 16 19 17
Release of deferred tax liabilities on intangible
assets (59) (43)
--------------------------------------------------- ------------ ------------
Total tax (benefit)/expense (542) 413
--------------------------------------------------- ------------ ------------
31
31 December December
Reconciliation of existing tax 2021 2020
rate 2021 GBP000's 2020 GBP000's
-------------------------------------------- --------- ------------ -------- ----------
Profit before tax for the year 1,200 2,020
-------------------------------------------- --------- ------------ -------- ----------
Income tax using the Company's
domestic rate 0.00% 0.00% -
-------------------------------------------- --------- ------------ -------- ----------
Effect of tax rates in other jurisdictions (41.81%) (502) 21.73% 439
Release of deferred tax assets
on leases as per IFRS 16 1.59% 19 0.84% 17
Release of deferred tax liabilities
on intangible assets (4.94%) (59) (2.13%) (43)
Total tax expense (542) 413
-------------------------------------------- --------- ------------ -------- ----------
Effective tax rate (%) (45.17%) 20.45%
-------------------------------------------- --------- ------------ -------- ----------
The effective tax rate for Gibraltar has increased to 12.5% from
1 August 2021 and the effective tax rate in the UK will increase to
25% from 1 April 2023. The effective tax rate in Malta is 5%. Prior
to 2020 tax was paid based on a corporate tax rate of 35% and then
reclaimed with the receipt of the rebate being accounted for when
received. From 2021, following a change in legislation, the Malta
entities have formed a fiscal unit which as alleviated the need for
this reclaim process. As a result, a one-off tax credit of
GBP1,056,440 has been recognised in the current year.
14. Property and office equipment
Motor Office Leasehold Right-of-use
Vehicles Equipment Improvements Assets Total
Group GBP000's GBP000's GBP000's GBP000's GBP000's
---------------------------- ---------- ----------- -------------- ------------- ----------
Costs
As at 1 January 2020 15 2,099 641 5,722 8,477
Additions - 70 - - 70
Reclassification to assets
held for sale (Note 20 ) - (410) (164) (319) (893)
Disposals - - - - -
---------------------------- ---------- ----------- -------------- ------------- ----------
As at 31 December 2020 and
1 January 2021 15 1,759 477 5,403 7,654
---------------------------- ---------- ----------- -------------- ------------- ----------
Additions - 157 13 265 435
Disposals - - - (83) (83)
---------------------------- ---------- ----------- -------------- ------------- ----------
As at 31 December 2021 15 1,916 490 5,585 8,006
---------------------------- ---------- ----------- -------------- ------------- ----------
Depreciation
As at 1 January 2020 10 1,379 381 3,754 5,524
Charge for the year 1 171 37 584 793
Reclassification to assets
held for sale (Note 20 ) - (357) (58) (218) (633)
Disposals - - - - -
---------------------------- ---------- ----------- -------------- ------------- ----------
As at 31 December 2020
and
1 January 2021 11 1,193 360 4,120 5,684
---------------------------- ---------- ----------- -------------- ------------- ----------
Charge for the year 1 153 20 485 659
Disposals - - - - -
---------------------------- ---------- ----------- -------------- ------------- ----------
As at 31 December 2021 12 1,346 380 4,605 6,343
---------------------------- ---------- ----------- -------------- ------------- ----------
Net Book Value
As at 31 December 2020 4 566 117 1,283 1,970
---------------------------- ---------- ----------- -------------- ------------- ----------
As at 31 December 2021 3 570 110 980 1,663
---------------------------- ---------- ----------- -------------- ------------- ----------
Office
Equipment
Company GBP000's
---------------------------- -----------
Costs
As at 1 January 2020 734
Additions at cost 9
Disposals -
---------------------------- -----------
As at 31 December 2020 and
1 January 2021 743
---------------------------- -----------
Additions at cost 28
Disposals -
---------------------------- -----------
As at 31 December 2021 771
---------------------------- -----------
Depreciation
As at 1 January 2020 452
Charge for the year 42
Disposals -
As at 31 December 2020 and
1 January 2021 494
---------------------------- -----------
Charge for the year 38
Disposals -
As at 31 December 2021 532
---------------------------- -----------
Net book value
As at 31 December 2020 249
---------------------------- -----------
As at 31 December 2021 239
---------------------------- -----------
15. Intangible assets
Client Product IT
Goodwill Portfolio Development Development Total
Group GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------------ ---------- ----------- ------------- ------------- ----------
Costs
Balance as at 1 January 2020 16,490 4,242 613 423 21,768
Acquired through business
combination (Note 6) 846 1,500 - - 2,346
Additions - - 10 865 875
Reclassification to assets
held for sale (Note 20 ) (3,227) - - - (3,227)
Balance at 31 December 2020
and
1 January 2021 14,109 5,742 623 1,288 21,762
------------------------------ ---------- ----------- ------------- ------------- ----------
Additions - - 78 954 1,032
Balance at 31 December 2021 14,109 5,742 701 2,242 22,794
------------------------------ ---------- ----------- ------------- ------------- ----------
Amortisation and impairment
Balance as at 1 January 2020 26 674 430 150 1,280
Charge for the year - 469 17 84 570
Balance at 31 December 2020
and
1 January 2021 26 1,143 447 234 1,850
------------------------------ ---------- ----------- ------------- ------------- ----------
Charge for the year - 574 (2) 219 791
Impairment 798 - - - 798
Balance at 31 December 2021 824 1,717 445 453 3,439
------------------------------ ---------- ----------- ------------- ------------- ----------
Carrying amounts
At 31 December 2020 14,083 4,599 176 1,054 19,912
------------------------------ ---------- ----------- ------------- ------------- ----------
At 31 December 2021 13,285 4,025 256 1,789 19,355
------------------------------ ---------- ----------- ------------- ------------- ----------
Impairment testing for cash-generating units containing
goodwill
All goodwill relates to the acquisitions made during the period
from 28 March 2007 to 31 December 2020 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, add in 'On disposal of a
cash-generating unit, 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 five
identifiable CGU's, which are also operating and reportable
segments. CGU's are determined based on whether the entity is a
separate and distinct entity and/or whether that entity is
management as a stand alone business unit.
The carrying amount of goodwill allocated to each of the CGU's
is as follows:
2021 2020
------- -------
GBP000 GBP000
------- -------
1. STM Life 1,256 1,756
2. LCA 7,735 7,735
3. FLHP 3,698 3,698
4. Options - Berkeley Burke acquisition 596 846
5. Spain - 48
Total 13,285 14,083
----------------------------------------------- ------- -------
The Group tests goodwill annually for impairment or more
frequently if there is an indication that a CGU or Group of GCU's
maybe 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.
In addition, the Group considers the relationship between its
market capitalisation and its book value, among other factors, when
reviewing for indicators of impairment. As at 31 December 2021, the
market capitalisation of the Group was above the book value of its
recorded goodwill.
-- STM Life CGU
The recoverable amount of the STM Life CGU as at 31 December
2021 has been determined based on a value in use calculation using
cash flow projections from financial budgets approved by the Board
for the coming year. The following four years cashflows have been
calculated based on growth rates of 2% per annum. 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 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, management has
recognised an impairment charge of GBP500,000 in the current year
against goodwill. The impairment charge is recorded within the
statement of profit or loss.
-- LCA CGU
The recoverable amount of the LCA CGU as at 31 December 2021 has
been determined based on a value in use calculation using cash flow
projections from financial budgets approved by the Board for the
coming year. The following four years cashflows have been
calculated based on growth rates of 2% per annum. 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 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.
-- FLHP CGU
The recoverable amount of the FLHP CGU of as at 31 December 2021
has been determined based on a value in use calculation using cash
flow projections from financial budgets approved by the Board for
the coming year. The following four years cashflows have been
calculated based on growth rates of nil % per annum. 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 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.
-- Options Berkley Burke CGU
The Berkeley Businesses were acquired in August 2020. The
goodwill and the client portfolio are not considered to be separate
and distinct and have been assessed on a combined basis. The
recoverable amount of the Options Berkeley Burke CGU as at 31
December 2021 has been determined based on a value in use
calculation using cash flow projections from financial budgets
approved by the Board for the coming year. The following four years
cashflows have been calculated based on growth rates of 2% per
annum. 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 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, management has decided to recognise an impairment charge
equal to the carrying value in the current year against goodwill.
The impairment charge of GBP250,000 is recorded within the
statement of profit or loss.
-- Spain CGU
The recoverable amount of the Spain CGU as at 31 December 2021
has been determined based on a value in use calculation using cash
flow projections from financial budgets approved by the Board for
the coming year. The following four years cashflows have been
calculated based on growth rates of -1% per annum. 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 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. Management further took into consideration
performance of this CGU in recent years. As a result of this
analysis, management has decided to recognise an impairment charge
equal to the carrying value in the current year against goodwill.
The impairment charge of GBP48,000 is recorded within the statement
of profit or loss.
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 attrition
-- Expense increases and Inflation rates
-- Discount rates
Revenue growth rates and attrition - a decline revenue growth
rates and/or an increase in attrition rates would result in further
impairment. A 1% reduction in revenue growth rates would result in
a further potential impairment charge of approximately
GBP.360,000.
Expense increases and inflation rates - forecast increases in
personnel and other expenses have been based on known costs for the
coming year with an average growth of 3% per annum for the next
three years and then dropping back to a more modest 2%. Management
has considered the possibility of increased inflation resulting in
higher than anticipated costs. Should expense growth rates remain
at 3% or above per annuum beyond the next three years this could
result in additional impairment. A 1% increase in the expense
growth rates would result in a further potential impairment charge
of approximately GBP.515,000.
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 rates. A 1% increase in the WACC would result in an
additional potential impairment charge of approximately
GBP300,000.
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 portfolio portfolios acquired through
acquisitions are as follows:
31 December 31 December
2021 2020
Acquisition date GBP000's GBP000's
------------------------------------------------- ------------ ------------
London & Colonial Holding Ltd October 2016 483 583
------------------------------- ---------------- ------------ ------------
STM Nummos Life SL January 2018* 257 299
------------------------------- ---------------- ------------ ------------
Harbour Pensions Ltd February 2018 637 729
------------------------------- ---------------- ------------ ------------
Options Corporate Pensions
UK Limited February 2019 499 569
------------------------------- ---------------- ------------ ------------
Options UK Personal Pensions
LLP February 2019 855 975
------------------------------- ---------------- ------------ ------------
Options SSAS Limited August 2020 259 289
------------------------------- ---------------- ------------ ------------
Options EBC Limited August 2020 1,035 1,155
------------------------------- ---------------- ------------ ------------
Total 4,025 4,599
------------------------------------------------- ------------ ------------
*The client portfolio of STM Nummos Life SL was reclassified
from Goodwill in January 2018.
IT
Product Development Development Total
Company GBP000's GBP000's GBP000's
------------------------------------ -------------------- ------------- ----------
Costs
Balance as at 1 January 2020 387 114 501
Additions 9 851 860
------------------------------------ -------------------- ------------- ----------
As at 31 December 2020 and
1 January 2021 396 965 1,361
------------------------------------ -------------------- ------------- ----------
Additions 78 934 1,012
------------------------------------ -------------------- ------------- ----------
As at 31 December 2021 474 1,899 2,373
------------------------------------ -------------------- ------------- ----------
Amortisation and impairment
Balance as at 1 January 2020 227 14 241
Charges for the year 13 10 23
As at 31 December 2020 and
1 January 2021 240 24 264
------------------------------------ -------------------- ------------- ----------
(Adjustments)/Charges for the year (7) 155 148
As at 31 December 2021 233 179 412
------------------------------------ -------------------- ------------- ----------
Carrying amounts
As at 31 December 2020 156 941 1,097
------------------------------------ -------------------- ------------- ----------
As at 31 December 2021 241 1,720 1,961
------------------------------------ -------------------- ------------- ----------
16. Investments
Company - Investments in subsidiaries
31 December 31 December
2021 2020
Acquisitions of the Company GBP000's GBP000's
------------------------------ ------------ ------------
Shares in group undertakings
Balance at start of year 20,809 21,030
Dormant entities closure (1,746) (221)
Impairment of investment (3,050) -
------------------------------ ------------ ------------
Balance at end of year 16,013 20,809
------------------------------ ------------ ------------
An impairment in the investment in STM Fidecs Ltd of GBP3m has
been recognised in the current year as the net assets of the
subsidiary entities are below the carrying value of the
investment.
17.Trade and other receivables
31 December
31 December 2020
2021 Restated
Group GBP00's GBP000's
------------------- ------------ ------------
Trade receivables 3,921 3,450
Prepayments 508 634
Other receivables 3,270 1,389
------------------- ------------ ------------
Total 7,699 5,473
------------------- ------------ ------------
31 December 31 December
2021 2020
Company GBP000's GBP000's
Receivables due from related parties 9,817 11,097
Other receivables 3,398 977
-------------------------------------- ------------ ------------
Total 13,215 12,074
-------------------------------------- ------------ ------------
Amounts due from related parties 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 27 .
Trade and other receivables for the year ended 31 December 2020
have been restated because of the amended disclosure of receivables
from insurers which have now been separately disclosed in note 18
.
18.Reclassification - receivables from insurers and
provision
The balance sheet has been restated to reflect reclassification
of provisions as a separate line item on the balance sheet as well
as an associated insurance receivable in the current year given the
materiality and qualitative nature of this item. There was no
provision recorded for the year ended 31 December 2019 and hence no
amended disclosures are required in respect of the year then ended.
There is no impact to the income statement. The table below
reflects the impact of this change in presentation.
31 December 31 December
2021 2020
GBP000's GBP000's
----------------------------- ------------ ------------
ASSETS
Current assets
Trade and other receivables 31,829 9,073
----------------------------- ------------ ------------
Reclassification:
Trade and other receivables 7,699 5,473
Receivables from insurers 24,130 3,600
----------------------------- ------------ ------------
Total current assets 51,347 32,779
----------------------------- ------------ ------------
Total assets 73,364 55,211
----------------------------- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 34,662 14,974
--------------------------- ------- -------
Reclassification:
Trade and other payables 10,532 11,374
Provisions 24,130 3,600
--------------------------- ------- -------
Total current liabilities 35,302 17,325
--------------------------- ------- -------
As stated in note 3 (p) and 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. As stated in note 0 (i) 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.
The Group operates in a legal and regulatory environment that
exposes it to certain litigation risks and in particular the Group
recognises that the UK SIPP industry is becoming more litigious
over non-performing assets. Whilst the Group does not provide
financial or investment advice to its customers and therefore
believes it is not responsible for the performance of the
investments, the Group occasionally receives complaints in respect
to these matters as well as others relating to general services
provided. Each complaint is dealt with on its merits and remains a
contingent liability until an outflow of economic benefits is
assessed as probable and the quantum can be reliably estimated.
31 December 31 December
2021 2020
GBP000 GBP000
------------ ------------
Receivables from insurers
Carey (Options) v Adams 21,400 3,600
------------ ------------
Receivables from insurers 2,730 -
other
------------ ------------
24,130 3,600
----------------------------- ------------ ------------
Provision - Carey (Options)
v Adams 21,400 3,600
------------ ------------
Provision - other 2,730 -
------------ ------------
24,130 3,600
----------------------------- ------------ ------------
Carey (Options) v Adams:
Following the Court of Appeal judgment on 1 April 2021 the Group
has considered the potential impact this might have on the outcome
of other claims made by SIPP members in respect of non-performing
assets. Options sought permission to appeal to the Supreme Court,
however notice was received in April 2022 that this has been
refused.
It was recognised that the ruling made in Mr Adams case was fact
specific and included the exercise of discretion on the part of the
Court of Appeal, and which was exercised in the context of those
facts. The Court of Appeal had also at the time of its ruling did
not determine the appropriate relief payable to Mr Adams. It was
therefore difficult to assess the exact obligation that could arise
on other claims based on this one case. An estimate was arrived at
by considering a cohort of claims which may be deemed to have
similar characteristics to Mr Adams' claim resulted in a provision
of GBP3.6m being recognised in the annual accounts for the year
ended 31 December 2020.
Following receipt of notice that right to appeal to the Supreme
Court had been denied management in consultation with its legal
advisors and insurers, reviewed the potential i claims payable
applying a broader range of criteria given that there is no further
basis to appeal the judgement, and this may result in a wider
cohort of claimants. This has resulted in a provision of GBP21.4m
being recognised in the annual accounts for the year ended 31
December 2021. In the prior year with the possibility of appeal the
cohort of potential claims was limited to those with similar
characteristics as Mr Adams.
This is covered by professional indemnity insurance and thus has
also been reflected as a receivable due from insurers.
Other:
In respect of present information, amounts already recognised
and the availability of insurance coverage FLHP and STM Malta have
made estimates in the financial statements for the year ended 31
December 2021. The value of these estimates, which has been
reflected a provision for claims payable in the statement of
financial position, are GBP2,010,000 and GBP720,000 respectively.
This is covered by professional indemnity insurance net of
insurance excesses and thus has also been reflected as a receivable
due from insurers.
With reference to the prejudicial exemption allowed under IAS
37, the Company will not disclose any further information about the
assumptions for the provision, including any details about current
and potential claims as these claims are ongoing.
19.Cash and cash equivalents
31 December 31 December
2021 2020
Group GBP000's GBP000's
--------------- ------------ ------------
Bank balances 18,207 16,409
--------------- ------------ ------------
31 December 31 December
2021 2020
Company GBP000's GBP000's
Bank balances 2,463 2,257
--------------- ------------ ------------
The Group has a bank loan liability of GBP1,450,000 (2020:
GBP1,600,000) which is included in note 24 and 25.
Within cash and cash equivalents held by the Group there is a
balance of GBP2,847,000 (2020: GBP2,566,000) which is not available
for use by the Group as most of it is in a blocked account as part
of Options Corporate regulatory requirement.
20.Disposal group held for sale
At 31 December 2021 there is no disposal group held for
sale.
At 31 December 2020 management was committed to exit the
non-core element of the Group's activities and accordingly, net
assets together with the goodwill allocated to the Gibraltar and
Jersey CTS businesses were presented as a disposal group held for
sale. Efforts to sell the disposal group resulted in the completed
sales of the Gibraltar and Jersey CTS businesses during the current
year.
The impairment review for the goodwill of the assets held for
sale was carried out at the time by determining the recoverable
amount based on fair value less costs of disposal and the results
of the disposal are included in the current financial year.
Assets and liabilities of disposal group held for sale
At 31 December 2020, the disposal group was stated at fair value
less costs to sell and comprised the following assets and
liabilities.
31 December
2020
GBP000's
------------------------------- ------------
Property and office equipment 260
Goodwill 3,227
Accrued income 463
Trade and other receivables 1,303
Cash and cash equivalents 725
-------------------------------- ------------
Assets held for sale 5,978
-------------------------------- ------------
Trade and other payables 1,154
Liabilities held for sale 1,154
-------------------------------- ------------
Cumulative income or expenses included in OCI
There are no cumulative income or expenses included in OCI
relating to the disposal group.
21.Capital and reserves
31 December 31 December
2021 2020
Authorised, called up, issued and fully paid GBP000's GBP000's
------------------------------------------------ ------------ ------------
59,408,088 ordinary shares of GBP0.001 each
(2020: 59,408,088 ordinary shares of GBP0.001
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
Employee Benefit Trust
The trustees of the Employee Benefit Trust held 1,089,780 shares
at 31 December 2021 and 31 December 2020. 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.
Share premium
There were no new shares issued during the years ended 31
December 2021 and 31 December 2020.
Translation
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations.
Dividends
The following dividends were declared and paid by the Group
during the year:
31 December 31 December
2021 2020
GBP000's GBP000's
-------------------------------------------------- ------------ ------------
1.45p pence per qualifying ordinary share (2020:
1.3 pence) 861 772
-------------------------------------------------- ------------ ------------
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 31 December
2021 2020
GBP000's GBP000's
------------------------------------------------- ------------ ------------
0.90 pence per qualifying ordinary share (2020:
0.85 pence) 535 505
------------------------------------------------- ------------ ------------
22.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 GBPnil. It is anticipated that
this will be reinstated in 2022.
23.Earnings per share
Earnings per share for the year from 1 January 2021 to 31
December 2021 is based on the profit attributable to owners of
GBP1,749,000 (2020: GBP1,777,000) divided by the weighted average
number of GBP0.001 ordinary shares outstanding during the year of
59,408,088 basic (2020: 59,408,088) and GBP59,408,088 dilutive
(2020: 59,408,088) in issue.
24.Trade and other payables
31 December
31 December 2020
2021 Restated
Group GBP000's GBP000's
------------------------------ ------------ ------------
Deferred income 3,579 3,647
Trade payables 638 368
Bank loan 550 552
Deferred Consideration 170 700
Lease liabilities 747 783
Other creditors and accruals 4,848 5,324
10,532 11,374
------------------------------ ------------ ------------
Trade and other payables for the year ended 31 December 2020
have been restated because of the amended disclosure of provisions
which have now been separately disclosed in note 18 .
31 December 31 December
2021 2020
Company GBP000's GBP000's
------------------------- ------------ ------------
Owed to related parties 10,448 9,548
Bank loan 550 552
Accruals 596 731
Other creditors 890 317
------------------------- ------------ ------------
12,484 11,148
------------------------- ------------ ------------
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 maintains a credit facility with Royal Bank of
Scotland (International) Ltd for GBP5.5 million. The facility has a
5-year term with capital repayment's structured over ten years and
a final instalment to settle the outstanding balance in full at the
end of the 5 years. At the year-end GBP1.5 million (2020: GBP1.6
million) of this facility remains drawn down and was outstanding.
Interest on the drawn funds is charged at 3.5% per annum over the
Sterling Relevant Reference Rate, with the undrawn balance charged
at an interest rate of 1.75% per annum over the Sterling Relevant
Reference Rate.
The facility is subject to customary cashflow to debt service
liability ratios and EBITDA to debt service liability ratio
covenants tested quarterly and is secured by a capital guarantee
provided by a number of non-regulated holding subsidiary companies
within the Group and debenture over these companies.
The Group's exposure to liquidity risk related to trade and
other payables is described in note 26.
25.Other payables - amounts falling due in more than one
year
31 December 31 December
2021 2020
Group GBP000's GBP000's
---------------------- ------------ ------------
Lease Liabilities 28 637 1,070
Bank Loan 900 1,048
Other payables 91 166
---------------------- ------------ ------------
1,628 2,284
---------------------- ------------ ------------
31 December 31 December
2021 2020
Company GBP000's GBP000's
----------- ------------ ------------
Bank Loan 900 1,048
900 1,048
----------- ------------ ------------
26.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
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 Company only has one bank borrowing at the year end. A
change of 100 basis points in an interest rate would have increased
or decreased equity and profit or loss by GBP15,500 after tax
(2020: GBP16,000).
e) Currency risk
The Group has a small exposure to currency risk in relation to
the 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 (EUR). 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 increases
or decreases equity and profit or loss by GBP28,000 after tax
(2020: GBP29,000) This is mitigated by the fact that clients are
invoiced in its and the Group's functional currency of sterling
(GBP).
The Company has minimised exposure to foreign exchange rates,
with the majority of transactions being carried out in its
functional currency of Pounds Sterling (GBP).
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 Note 0, 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 of Directors 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. Adjusted equity
comprises all components of equity.
The Group's adjusted net debt to equity ratio at 31 December
2021 suggests that the Group has sufficient liquidity to meet its
obligations as they fall due. Net debt compared to equity at 31
December 2020 was as follows:
31 December 31 December
2021 2020
GBP000's GBP000's
-------------------------------------------- ------------ ------------
Total liabilities 37,394 20,131
Less: cash and cash equivalents (18,207) (16,409)
-------------------------------------------- ------------ ------------
Adjusted net debt 19,187 3,722
-------------------------------------------- ------------ ------------
Total equity and adjusted equity 36,380 35,525
-------------------------------------------- ------------ ------------
Adjusted net debt to adjusted equity ratio 0.53 0.10
-------------------------------------------- ------------ ------------
27.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
--------------------------
31 December 31 December
2021 2020
GBP000's GBP000's
---------------------------------------------- ------------ --------------
Trade and other receivables 7,699 5,473
Cash and cash equivalents 18,207 16,409
---------------------------------------------- ------------ --------------
25,906 21,882
---------------------------------------------- ------------ --------------
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 receivable amount as
at 31 December 2021 and 31 December 2020. Segmental disclosures are
included in note 8 reflecting the Group's operating segment and
geographic concentration.
All of the banks currently used by the Group have long-term
credit ratings of at least A (Fitch)
Impairment on trade and other receivables is determined applying
an ECL model as discussed in note 3 (m).
The ageing of the Group's trade receivables at the reporting
date was:
Gross Individual Individual
receivables Impairment Gross Impairment
31 Dec 31 Dec receivables 31 Dec
2021 2021 Total 31 Dec 2020 2020 Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Not past due 1,782 - 1,782 1,623 - 1,623
Past due 0-30 days 306 - 306 268 - 268
Past due 31-120
days 189 - 189 160 - 160
More than 120 days
past due 1,818 (174) 1,644 1,442 (43) 1,399
-------------------- ------------- ------------ ---------- ------------- ------------ ----------
4,095 (174) 3,921 3,493 (43) 3,450
-------------------- ------------- ------------ ---------- ------------- ------------ ----------
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:
31 December 2021 31 December 2020
GBP000's GBP000's
Balance at start of year 43 258
Movement in expected credit loss
allowance 131 81
Amounts written off - (126)
Amounts recovered - (27)
Reclassification to assets held for
sale - (143)
Balance at end of year 174 43
------------------------------------- ----------------- -------------------
Based on historic default rates and knowledge of the customers,
the Group believes that no impairment allowance is necessary in
respect of some 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.
Carrying Contractual 6 months 6-12 1-4
amounts cash flow or less months years
31 December 2021 GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------------ ---------- ------------ ---------- ---------- ----------
Non-derivative financial
liabilities
Trade payables 638 638 638 - -
Bank Loan 1,450 1,526 329 324 873
Deferred consideration 170 170 170 - -
Lease liabilities 1,384 1,360 361 363 636
Other creditors and accruals 4,848 4,848 4,848 - -
8,490 8,542 6,346 687 1,509
------------------------------ ---------- ------------ ---------- ---------- ----------
Carrying Contractual 6 months 6-12 1-4
amounts cash flow or less months years
31 December 2020 GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------------ ---------- ------------ ---------- ---------- ----------
Non-derivative financial
liabilities
Trade payables 368 368 368 - -
Bank Loan 1,600 1,734 332 327 1,075
Deferred consideration 700 700 700 - -
Other creditors and accruals 1,724 1,724 1,724 - -
Lease Liabilities 1,889 2,017 425 444 1,148
------------------------------ ---------- ------------ ---------- ---------- ----------
6,281 6,543 3,549 771 2,223
------------------------------ ---------- ------------ ---------- ---------- ----------
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.
31 December 31 December
2021 2020
Financial assets - call options GBP000's GBP000's
Balance as at 1 January 475 416
Additions - -
Total gains recognised in profit or loss 406 59
------------------------------------------ ------------ ------------
Balance as at 31 December 881 475
------------------------------------------ ------------ ------------
28.Leases
In relation to leases under IFRS 16, the Group has charged
depreciation and interest costs. The Group recognised GBP486,000
(2020: GBP584,000) of depreciation charges and GBP83,000 (2020:
GBP115,000) of interest expenses from these leases during the year
ended 31 December 2021. The Group recognised GBP60,000 (2020:
GBP56,000) of expenses relating to short-term leases or leases that
can be cancelled with no penalties and GBP2,000 (2020: GBP2,000) of
expenses for leases of low-value assets, excluding short-term
leases, for the year ended 31 December 2021.
Lease liabilities
Non-cancellable lease liabilities as per IFRS 16 are payable as
follows:
31 December 31 December
2021 2020
GBP000's GBP000's
Less than one year 724 869
Between one year and five years 637 1,148
More than five years - -
--------------------------------- ------------ ------------
1,361 2,017
--------------------------------- ------------ ------------
The maturity analysis of lease liabilities is disclosed in note
28. Right of use asset are disclosed in note 15.
The Group leases several offices from which they operate, the
largest of which is for Montagu Pavilion in Gibraltar which runs
for a further two years.
29.Related Parties
Transactions with key management personnel and Directors
Compensation
Key management compensation comprised:
31 December 31 December
2021 2020
GBP000's GBP000's
Short-term employee benefits 850 823
Share-based payments - -
850 823
------------------------------ ------------ ------------
Key management personnel and Director Transactions
Trusts and related parties connected to the Directors held 12%
of the voting shares of the Company as at 31 December 2021 (2020:
12%).
The Group provided administration services to Gold Management
Limited a company partly owned by Louise Kentish, spouse of Alan
Kentish, a Director of the Company. These services amounted to
GBPnil for the period to 31 December 2021 (2020: GBP4,139), of
which GBPnil was outstanding at 31 December 2021 (2020:
GBPnil).
All services relating to the above transactions were carried out
by the Group on an arm's length basis and are payable/receivable
under the standard credit terms.
As at 31 December 2021 the Group owed Fiander Properties Limited
a company related to the Group by virtue of common ownership GBPnil
(2020: GBP22,000).
The Company received dividends of GBP2,218,470 (2020:
GBP2,716,819) from STM Malta Limited, GBP75,000 (2020:
GBP1,330,000) from STM Fidecs Limited, GBP1,800,000 (2020:
GBP334,000) from London & Colonial Holdings Limited and GBPnil
from STM (Caribbean) Limited (2020: GBP101,959).
30.Group entities
Principal subsidiaries
As at 31 December 2021 the Company owned the following
subsidiaries which are regarded as the principal trading operations
of the Group.
Ownership interest
----------------------------------
Country of 31 December 31 December
incorporation 2021 2020 Activity
----------------------------------------- ---------------- ---------------- ----------------------------
STM Fidecs Life, Health Gibraltar 100% indirectly 100% indirectly Administration
and Pensions Limited of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
STM Fidecs Central Services Gibraltar 100% indirectly 100% indirectly Services and Administration
Limited
----------------------------- ---------- ---------------- ---------------- ----------------------------
STM Nummos SL Spain 100% indirectly 100% indirectly Administration
of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
STM Life Assurance PCC Gibraltar 100% indirectly 100% indirectly Life Assurance
plc company
----------------------------- ---------- ---------------- ---------------- ----------------------------
STM Nummos Life SL Spain 100% indirectly 100% indirectly Administration
of client assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
STM Malta Pension Services Malta 100% indirectly 100% indirectly Administration
Limited of client assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
London & Colonial Assurance Gibraltar 100% indirectly 100% indirectly Life Assurance
PCC PLC Company
----------------------------- ---------- ---------------- ---------------- ----------------------------
London & Colonial Services England 100% indirectly 100% indirectly Administration
Limited of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
London & Colonial Central England 100% indirectly 100% indirectly Administration
Services Limited of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
London & Colonial (Trustee Gibraltar 100% indirectly 100% indirectly Administration
Services) Limited of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
Options Corporate Pensions England 80% 80% Administration
UK Limited indirectly indirectly of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
Options UK Personal Pensions England 70% 70% Administration
LLP indirectly indirectly of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
Options SSAS Limited England 100% indirectly 100% indirectly Administration
of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
Options EBC Limited England 100% indirectly 100% indirectly Administration
of clients' assets
----------------------------- ---------- ---------------- ---------------- ----------------------------
31.Subsequent events
On the 1 April 2021 the Court of Appeal handed down their
judgment on the Adams v Carey (Options) (now renamed Options) case
which had been heard remotely by video-conferencing in early March
2021. Mr Adams had appealed primarily two causes of action as
follows:
1: that under the FCA's Conduct of Business Sourcebook rules
(COBS) 2.1.1, Carey (Options) had failed to act fairly, honestly
and in accordance with the best interests of its client; and
2: that, given the unregulated introducer 'advised' (for the
purposes of the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001 (RAO)) Mr Adams to purchase the investment,
transfer his pension and establish the SIPP, and the introducer
'arranged' (for the purposes of the RAO) the underlying investment,
without the necessary permissions and therefore in breach of the
general prohibition under s.19 of FSMA, that under section 27 of
the FSMA, Mr Adams' agreement with Carey (Options) should be
unwound, and Carey (Options) should provide relief to Mr Adams.
The judgment dismissed the first claim but upheld the second.
Permission to appeal this judgment had filed with the Supreme Court
on 29 April 2021 and on 31st March 2022 the Supreme Court declined
this request. As a result of the Supreme Court's announcement the
partners of Options UK Personal Pensions LLP have considered the
amount of provisioning held. The provision in the end of year
accounts has been increased because of the above to GBP21,400,000
with an offsetting GBP21,400,000 amount being reflected in trade
and other receivables as the liability is covered by professional
indemnity insurance. See note 18.
The Directors are not aware of any significant events occurring
after the reporting date.
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END
FR SSUFAWEESELM
(END) Dow Jones Newswires
June 08, 2022 02:01 ET (06:01 GMT)
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