The cash earned from from last year’s acquisition of London & Colonial (L&C) also helped boost revenues.
The company posted its financial results for the six months ending 30 June 2017 on Tuesday, showing profit before tax for the period amounted to £2.4m, double the £1.2m recorded in the previous year.
The firm also posted a 35.4% increase in turnover to £10.7m ($14.1m, €11.9m), from £7.9m in the first half of 2016.
This was largely due to the £2.4m contribution it got from London & Colonial (L&C), which STM acquired in October 2016.
Excluding the impact of the L&C acquisition, the firm reported revenue growth of 5% and like-for-like profits of £1.5m – up 25% on 2016.
The group said it achieved this “despite the unprecedented UK Spring budget announcement that effectively curtailed new Qrops business by 80%” by replacing that lost new business stream with the international Sipp.
“It is the new Sipp business, along with the solid predictable underlying recurring revenue stream and the release of part of the expense reserve within L&C that has allowed the group to post a record half-year profit before tax,” the firm said in a statement.
Growth strategy
The firm announced it intends to expand its pension product range with the launch of an Australian Superannuation solution which is HMRC compliant, as well as building on the life assurance wrapper distribution and product range.
Group chairman Martin Riddell also confirmed acquisition plans to be implemented “through opportunistic purchases of books of Qrops business in Malta and Gibraltar, as circumstances allow”.
Changing environment
In March 2017, the UK Government rocked pension providers with the introduction of a 25% charge on transfers to foreign pension schemes, which some industry experts said could go as far as to “shut down” the Qualifying Recognised Overseas Pension Schemes (Qrops) market.
However, STM announced the reduction in expected new Qrops business has not dented its profits, as it has started to be offset by an uplift in the firm’s international Sipp offering.
“The pensions business revenue has, therefore, remained stable when compared to the same period in 2016, but with the added benefit of the additional revenue contribution from the UK Sipp acquisition,” the firm said.
Revenue for 1H17 was £5.1m compared to £4.4m in 2016, thus accounting for 48% of the group’s overall turnover.
The total income for the period is split between the different jurisdictions as follows: Malta – £3.2m (2016: £3.3m); Gibraltar – £1.3m (2016: £1.2m); with UK being £0.6m (2016: £nil).
“STM’s decision to enter the UK Sipp market in 2016 has enabled the Group to adapt its UK expatriate pension products offering in response to the changing legislation, thus protecting its new business revenue stream generated from its network of intermediaries,” group chairman Michael Riddell said.
Background
Earlier in July, STM had announced the launch of STM International Pension Plan, a UK-based Sipp designed for international clients with UK pensions, aimed at taking advantage of the recent changes impacting the Qrops market.
“The international Sipp catering for the UK expatriate market is a healthy replacement for the expected reduced new business volumes in our Qrops marketplace,” STM Group chief executive Alan Kentish commented.
“The fact that the product is more straightforward to understand as compared to a Qrops, supported by the fact that it is administered by a UK regulated firm, has attracted the interest of the UK expat,” Kentish added.
London & Colonial
The Sipp is operated and administered by London & Colonial (L&C), which STM acquired in October 2016.
The cost base of the L&C life assurance business continues to be reduced as part of this integration, the firm explained.
“This restructuring has led to direct cost savings, as well as a further release of the actuarially calculated expense reserve held in the L&C life business during the first six months of the year,” Riddell said.
“It is anticipated that we will see additional releases in the foreseeable future as we move to the next phase of the integration of the life businesses.”
