STM focus on Pensions and Life Products as core Trust and Company business comes under pressure

STM Group, the AIM-listed fiduciary services business head-quartered in Gibraltar, has seen a sharp increase in losses in 2012 despite revenue growing by 18%, after it took a one-off amortisation hit of £3.8m.

The £3.8m charge resulted from the amortisation of the Zenith business acquired by the company.  EBITDA rose from £700,000 to £1,000,000.

However, apart from the headline figures, the most interesting aspect of the accounts is to look at the big changes that have occurred in from where STM derives its revenues, as it is one of only a handful of fiduciary businesses to publicly release trading figures. 

Its traditional trust and corporate services business (based principally in Gibraltar and Jersey) has declined (down from £7.5 million in 2011 to £6.5 million in 2012) and is expected to decline further for the foreseeable future, given the continuing difficult economic climate and the public debate about the morality of tax avoidance.  Whereas in 2011 the CTS business represented 77% of the group income, this has declined sharply to 55%.  The CTS sector performance was further hampered in 2012 by problems that the company had with the Jersey regulator, resolution of which required both management changes and a considerable focus on bringing the business up to the expected standards. 

STM is seeking to shore up its CTS revenues for the future by shifting its traditional focus away from the UK non-dom market and launching specific products designed for the Japanese, South African and Belgian markets.  It has also opened an office in Cyprus, which is aiming to funnel business from Eastern and Central Europe to the Jersey office.

By contrast to the CTS business, pensions were a star performer in 2012, with revenues from that division rising from £600,000 in 2011 to £3.6 million in 2012, largely thanks to the Maltese QROPs product.  STM was a pioneer in the development of QROPS and Malta has benefited from having many products remaining on HMRC’s approved list (unlike Guernsey, where approved status was removed from most QROPS last year).

STM Life, the division of the company which provides life insurance bond investment 'wrappers' has yet to deliver material revenue contributions to the Group, but STM chairman Julian Telling has high hopes for the future of that business, and released a bullish statement saying that he was confident that the company would return to profitability “in the near term”.

Despite his bullish statements, STM shares fell by 1p or 3.33% to 29p following release of the figures,  putting them 20% below their 52-week high of 36.25p, reached in May of last year, and a long way from the 73.5p high point achieved in mid-November 2007.