STM Group Plc (AIM: STM), the cross border financial services provider, announces a trading update on expected performance for the full year ending 31 December 2018, demonstrating year on year growth in underlying profit before tax.
As detailed in the Group’s interim results to 30 June 2018, profit before tax for the first six months of the year amounted to £2.1 million, being consistent with the Board’s expectations for the year to 31 December 2018, despite having absorbed £0.3 million of professional fees incurred as part of the Skilled Person’s review on the Group’s business in Gibraltar completed by Deloitte in June 2018 and the implementation of the recommendations from the report.
It is anticipated that in the last quarter of 2018 there will be a significant release from the London & Colonial Assurance plc technical long term insurance fund which the Directors currently anticipate will be at least £0.5 million, which will contribute to the Group’s anticipated profit before tax for the year. The exact amount to be released is currently being calculated by the Group’s appointed actuary. For the year ended 31 December 2017 an equivalent technical reserve release amounted to £1.3 million and therefore contributed £1.3m to the overall profit before tax result of £4.0 million for the year.
During the second half of 2018, the Group’s other life company, STM Life Assurance PCC plc, has incurred a number of one-off costs in relation to uncollectable policy fees amounting to £0.2 million, as well as a policy cancellation and closure exercise for uneconomical policies amounting to £0.1 million. Additionally, there has been a reduction in the forecasted new business pipeline to the year end by £0.2 million, reflecting a timing delay in some policies not likely to incept until 2019.
The anticipated release of the technical reserve provides a significant positive contribution to earnings, as it has done in previous years. Including this anticipated contribution, the Board remains confident that the Group will report overall profit before tax for 2018 in line with its previous expectations, with underlying profit before tax (excluding the impact of profits from reserve releases and one off costs) expected to increase year on year. Trading across all other Group divisions has been in line with management’s expectations.
The Board looks forward to providing a further update once the technical reserve release from London & Colonial Assurance plc has been finalised, as part of its pre-close trading statement in January 2019.
Alan Kentish, Chief Executive Officer of the Company, commented:
“We are pleased with the underlying trading of the Group for the year to date, which demonstrates steady growth against our previous year. The year so far has seen significant change, and it is apparent that we have experienced a number of material one-off costs as well as ongoing costs as part of our enhanced governance, both of which will impact our profitability but make our businesses more robust. Despite these headwinds, the growth in our underlying business and the anticipated release of the technical reserve mean we remain confident of being in line with management’s expectations of overall profit before tax for the full year.”