REG - STM Group PLC - Final Results, Investor Presentation, Board Change
08/06/2022 07:00
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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 £22.4m £21.6m £24.0m £20.8m
Recurring revenue % 91% N/A 85% N/A
Profit before other items(*) £1.4m £1.5m £2.2m £2.4m
Statutory Profit Before Tax £1.2m N/A £2.0m 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) £16.8m N/A £14.8m 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
(https://urldefense.proofpoint.com/v2/url?u=https-3A__www.investormeetcompany.com_stm-2Dgroup-2Dplc_register-2Dinvestor&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=05PHl3GHdShYuaCii2fBRpoqaNr9B1d97X09daeosu0&m=_R4278x6I1MWW9CJ0oRZBNk9FSdmAMLQt2Sb47D8zFU&s=H2GNe8qPcN0oaN8MUSU-9c1mPxuLXEnTcOLM-j1yt2A&e=)
.
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
(mailto: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 (http://www.stmgroupplc.com)
finnCap www.finncap.com (http://www.finncap.com)
Matt Goode / Abigail Kelly - Corporate Finance Tel: +44 (0) 20 7220 0500
Tim Redfern / Richard Chambers - ECM
Walbrook www.walbrookpr.com (http://www.walbrookpr.com)
Tom Cooper / Nick Rome Tel: +44 (0) 20 7933 8780
Mob: +44 (http://www.abchurch-group.com) (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
(http://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
£21.4 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 £22.4 million (2020: £24.0 million) in
the year with profit before other items of £1.4 million (2020: £2.2
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 £1.2 million
(2020: £2.0 million) with adjusted PBT (defined on a consistent basis with
adjusted revenue and profit before other items) for the year of £1.5 million
(2020: £2.4 million).
The reported PBT is calculated after deducting net finance costs of £0.3
million (2020: £0.2 million) and various non-cash expenses totalling £0.1m
(2020: £0.1m) as well as gain on disposal of subsidiaries of £0.2m (2020:
nil). These non-cash items include the movement the fair value of the call
option of £0.4m 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 £0.8m was
recognised following management's annual impairment assessment across several
subsidiaries.
Reported profit after tax ("PAT") is £1.7m (2020: £1.6m). This increase is
largely due to a tax credit of £0.5m following a change in tax treatment in
Malta which resulted in a one off, £1m tax rebate being recognised in 2021.
Table 1
KPI Definition 2021 2020
22,355 23,982
Revenue (£'000s) Income derived from the provision of services.
21,581 20,815
Adjusted revenue (£'000) Revenue net of non-recurring costs and other exceptional items that do not
form part of the normal course of business as per Table 2 below.
20,427 20,334
Recurring revenue (£'000s) Revenue derived from annual management charges and/or contractual fixed fee
agreements.
1,373 2,207
Profit before other items (£'000s) Revenue less administrative expenses i.e. profit before finance income and
costs, gain on disposal of subsidiary bargain purchase gain, goodwill
impairment and gain on the call options and before taxation.
Adjusted Profit before other items (£'000s) Profit before other items and other exceptional non-recurring items that do 1,498 2,358
not form part of the normal course of business as per table 2 below
Profit before taxation (£'000s) Revenue less administrative expenses and other items 1,200 2,020
Adjusted Profit before taxation (£'000s) Revenue less administrative expenses, other items and other exceptional 1,168 2,112
non-recurring items that do not form part of the normal course of business as
per table 2 below
Profit after taxation (£'000s) Revenue less administrative expenses and other items less/add taxation 1,742 1,607
charge/credit
6% 9%
Profit margin before other items (%) Profit before other items divided by revenue.
Table 2
Revenue Profit before Profit before tax
other items
2021 2020 2021 2020 2021 2020
£'000s £'000s £'000s £'000s £'000s £'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 £0.5 million (2020: charge of £0.4 million).
This is due to a change in tax treatment in the Malta entity which resulted in
a one-off £1m 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 £18.2 million as at 31 December 2021
(2020: £16.4 million) with net cash outflow from operating activities of
£0.1 million for the year ended 31 December 2021 (2020: inflow £1.6
million).
During 2020 the Company signed a credit facility with Royal Bank of Scotland
(International) Ltd for £5.5 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 £1.5 million (2020: £1.6 million) of this facility.
As such, net cash, and cash equivalents as at 31 December 2021 were £16.8
million (2020: £14.8 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 £16.9 million (2020: £18.3 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
£1.3 million as at the year-end (2020: £1.3 million). Additionally, deferred
income (a liability in the statement of financial position) relating to annual
fees invoiced but not yet earned stood at £3.5 million (2020: £3.6 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 £17.6 million (2020:
£16.5 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 £9.7 million of revenue (2020: £10.1 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 £3.2 million (2020:
£3.5 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 £3.3
million (2020: £2.2 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 £0.3 million (2020: £0.1 million) in the
year with the Group Pension Plan generating revenue of £1.2 million (2020:
£0.6 million).
Life Assurance
The 2021 combined revenue figure was £3.4 million compared to £3.7 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
Note 31 December 2021 31 December 2020
£000's £000'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
Note 31 December 2021 31 December 2020
£000's Restated*
£000'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
Note 31 December 2021 31 December 2020
£000's £000'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
Note 31 December 2021 31 December 2020
£000's Restated
£000'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
Share Share Retained Treasury Foreign Currency Translation Shares Total Non-Controlling Interests Total Equity
Capital Premium Earnings Shares Reserve Based £000's £000's £000's
£000's £000's £000's £000's £000's Payments
Reserve
£000's
Balance at 59 22,372 12,536 (549) (59) 162 34,521 (275) 34,246
1 January 2020
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 Capital Share premium Retained earnings Total
£000's £000's £000's £000's
59 22,372 3,144 25,575
Balance at 1 January 2020
Loss for the year - - (38) (38)
Dividend paid - - (772) (772)
At 31 December 2020 and 59 22,372 2,334 24,765
1 January 2021
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 (£)
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 15 - 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 FVTPL These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised cost These assets are subsequently measured at amortised 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
£5,000, 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 of Financial Statements 1 January 2023
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:
£'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 £88,000 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:
£000'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 £530k there are a
number of additional potential adjustments to this amount. An initial deferred
consideration payment of £200k was made in November 2021 and further maximum
potential accrual of £170k 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 on acquisition Fair value adjustments Previous carrying value
£'000s £'000s £'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 £300,000 relating to the OSSAS portfolio and £1,200,000 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
£1,467,000 to £1,611,000.
Goodwill arising from the acquisition has been recognised as follows:
£'000s
2,147
Total acquisition cost
Fair value of identifiable net assets (1,301)
846
Goodwill
The total acquisition cost included a maximum potential deferred consideration
of £700k, however this has been reduced to a maximum potential deferred
consideration of approximately £530k. 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 £416,000 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 £881,000 (31
December 2020: £475,000).
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
£609,000 to £1,355,000.
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
£000's £000'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
£000's £000'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 £22,355,000 (2020: £23,982,000) there
is an amount of £3,402,000 (2020: £3,709,000) relating to revenues
attributable to the life assurance businesses.
9. Revenue
31 December 2021 31 December 2020
£000's £000's
22,355 23,982
Revenue from administration of assets
22,355 23,982
Total revenue
10. Administrative expenses
Included within administrative expenses are personnel costs as follows:
31 December 2021 31 December 2020
£000's £000'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
Group 31 December 2021 31 December 2020
Number Number
Average number of people employed (including executive directors) 286 287
Company 31 December 2021 31 December 2020
Number Number
Average number of people employed (including executive directors) 32 34
11. Profit before other items
Profit before other items of £1,373,000 (31 December 2020: £2,207,000), was
arrived at after charging the following to the income statement:
2021 2020
£000's £000'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
Revenue Profit before other items Profit before tax
2021 2020 2021 2020 2021 2020
£000's £000's £000's £000's £000's £000'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 2021 31 December 2020
£000's £000'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
Reconciliation of existing tax rate 2021 31 December 2020 31
2021 December 2020
£000's £000'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
£1,056,440 has been recognised in the current year.
14. Property and office equipment
Group Motor Office Leasehold Right-of-use Total
Vehicles Equipment Improvements Assets £000's
£000's £000's £000's £000'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 11 1,193 360 4,120 5,684
1 January 2021
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
Company Office
Equipment
£000's
Costs
As at 1 January 2020 734
Additions at cost 9
Disposals -
As at 31 December 2020 and 743
1 January 2021
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 494
1 January 2021
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
Group Goodwill Client Portfolio Product IT Total
£000's £000's Development Development £000's
£000's £000'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 14,109 5,742 623 1,288 21,762
1 January 2021
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 26 1,143 447 234 1,850
1 January 2021
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
£000 £000
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
£500,000 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 £250,000
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 £48,000 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 £.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
£.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 £300,000.
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 £000's £000'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.
Company Product Development IT Total
£000's Development £000's
£000's
Costs
Balance as at 1 January 2020 387 114 501
Additions 9 851 860
As at 31 December 2020 and 396 965 1,361
1 January 2021
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 240 24 264
1 January 2021
(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
Acquisitions of the Company 31 December 2021 31 December 2020
£000's £000'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 £3m 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
Group 31 December 31 December
2021 2020
£00's Restated
£000's
Trade receivables 3,921 3,450
Prepayments 508 634
Other receivables 3,270 1,389
Total 7,699 5,473
Company 31 December 2021 31 December 2020
£000's £000'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 2021 31 December 2020
£000's £000'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 2021 31 December 2020
£000 £000
Receivables from insurers Carey (Options) v Adams 21,400 3,600
Receivables from insurers other 2,730 -
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 £3.6m
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
£21.4m 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 £2,010,000 and £720,000
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
Group 31 December 2021 31 December 2020
£000's £000's
Bank balances 18,207 16,409
Company 31 December 2021 31 December 2020
£000's £000's
Bank balances 2,463 2,257
The Group has a bank loan liability of £1,450,000 (2020: £1,600,000) which
is included in note 24 and 25.
Within cash and cash equivalents held by the Group there is a balance of
£2,847,000 (2020: £2,566,000) 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
£000'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
1,154
Trade and other payables
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
Authorised, called up, issued and fully paid 31 December 2021 31 December 2020
£000's £000's
59,408,088 ordinary shares of £0.001 each 59 59
(2020: 59,408,088 ordinary shares of £0.001 each)
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 2021 31 December 2020
£000's £000'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 2021 31 December 2020
£000's £000'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 £nil. 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 £1,749,000 (2020: £1,777,000)
divided by the weighted average number of £0.001 ordinary shares outstanding
during the year of 59,408,088 basic (2020: 59,408,088) and £59,408,088
dilutive (2020: 59,408,088) in issue.
24.Trade and other payables
Group 31 December 31 December
2021 2020
£000's Restated
£000'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.
Company 31 December 31 December
2021 2020
£000's £000'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 £5.5 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
£1.5 million (2020: £1.6 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
Group 31 December 31 December
2021 2020
£000's £000's
Lease 637 1,070
Liabilities
28
Bank Loan 900 1,048
Other payables 91 166
1,628 2,284
Company 31 December 31 December
2021 2020
£000's £000'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 £15,500 after tax (2020: £16,000).
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 (€). 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 £28,000 after tax
(2020: £29,000) This is mitigated by the fact that clients are invoiced in
its and the Group's functional currency of sterling (£).
The Company has minimised exposure to foreign exchange rates, with the
majority of transactions being carried out in its functional currency of
Pounds Sterling (£).
f) Regulatory risk
The Group is subject to laws, regulations and specific solvency requirements
in the various jurisdictions in which it operates. The Group has established
policies and procedures aimed at compliance with local laws and regulations.
g) Capital management
The Board's policy is to maintain a strong capital base, which is defined as
share capital and retained earnings, so as to maintain investor, creditor and
market confidence and to sustain future development of the business.
Furthermore, certain of the Company's subsidiaries are licensed by the
respective jurisdictions regulators and as such all comply with the regulatory
capital requirements set by each respective regulatory body.
The Group manages its capital to ensure that the entities in the Group will be
able to continue as a going concern, while maximising the return to
stakeholders through optimisation of the debt and equity balance. The capital
structure of the Group consists of debt, which includes a bank loan as per
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 2021 31 December 2020
£000's £000'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
£000's £000'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 Impairment Total Gross Individual Impairment Total
receivables 31 Dec £000's receivables 31 Dec £000's
31 Dec 2021 2021 31 Dec 2020 2020
£000's £000's £000's £000'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
£000's £000'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.
31 December 2021 Carrying amounts Contractual cash flow 6 months or less 6-12 months 1-4 years
£000's £000's £000's £000's £000'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
31 December 2020 Carrying amounts Contractual cash flow 6 months or less 6-12 months 1-4 years
£000's £000's £000's £000's £000'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.
Financial assets - call options 31 December 2021 31 December 2020
£000's £000'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 £486,000 (2020: £584,000) of
depreciation charges and £83,000 (2020: £115,000) of interest expenses from
these leases during the year ended 31 December 2021. The Group recognised
£60,000 (2020: £56,000) of expenses relating to short-term leases or leases
that can be cancelled with no penalties and £2,000 (2020: £2,000) 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 2021 31 December 2020
£000's £000'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 2021 31 December 2020
£000's £000'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 £nil for the period to 31 December
2021 (2020: £4,139), of which £nil was outstanding at 31 December 2021
(2020: £nil).
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 £nil (2020: £22,000).
The Company received dividends of £2,218,470 (2020: £2,716,819) from STM
Malta Limited, £75,000 (2020: £1,330,000) from STM Fidecs Limited,
£1,800,000 (2020: £334,000) from London & Colonial Holdings Limited and
£nil from STM (Caribbean) Limited (2020: £101,959).
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 Activity
incorporation 2021 2020
STM Fidecs Life, Health and Pensions Limited Gibraltar 100% indirectly 100% indirectly Administration of clients' assets
STM Fidecs Central Services Limited Gibraltar 100% indirectly 100% indirectly Services and Administration
STM Nummos SL Spain 100% indirectly 100% indirectly Administration of clients' assets
STM Life Assurance PCC plc Gibraltar 100% indirectly 100% indirectly Life Assurance company
STM Nummos Life SL Spain 100% indirectly 100% indirectly Administration of client assets
STM Malta Pension Services Limited Malta 100% indirectly 100% indirectly Administration of client assets
London & Colonial Assurance PCC PLC Gibraltar 100% indirectly 100% indirectly Life Assurance Company
London & Colonial Services Limited England 100% indirectly 100% indirectly Administration of clients' assets
London & Colonial Central Services Limited England 100% indirectly 100% indirectly Administration of clients' assets
London & Colonial (Trustee Services) Limited Gibraltar 100% indirectly 100% indirectly Administration of clients' assets
Options Corporate Pensions UK Limited England 80% 80% Administration of clients' assets
indirectly indirectly
Options UK Personal Pensions LLP England 70% 70% Administration of clients' assets
indirectly indirectly
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 £21,400,000 with
an offsetting £21,400,000 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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