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1
Annual Report
& Accounts
2011
STM Group Plc strives to
be the provider of choice
for cross-border investors,
entrepreneurs and expatriates
by offering clear, innovative
and impartial financial and
commercial solutions which
help clients protect and grow
their investments.
01 Highlights
03 Our Offices
04 Chairman’s Statement
06 Chief Executive Officer’s Review
10 Directors’ Report
11 Board of Directors
12 Statement of Directors’ Responsibilities
13 Directors’ Remuneration Report
14 Corporate Governance
15 Independent Auditors’ Report
16 Consolidated Statement of Comprehensive Income
17 Consolidated Statement of Financial Position
18 Company Statement of Financial Position
19 Consolidated Statement of Cash Flows
20 Statement of Consolidated Changes in Equity
21 Statement of Company Changes in Equity
22 Notes to the Financial Statements
39 Notice of Annual General Meeting
40 Company Information
STM Group Plc Revenue of £9.7 million
2010: £10.5 million
Earnings before interest,
taxation, depreciation and
amortisation (“EBITDA”)
£0.6 million
2010: £1.7 million
Strong balance sheet with
cash of £3.3 million at year end
2010: £3.7 million
Market leading products
The life and pensions business have developed a number of products which will
provide a significant contribution to revenue and profits in 2012.
Distribution
The group has made distribution a priority, resulting in a number of agreements
reached with established intermediary networks and IFAs resulting in enhanced
distribution within the EU and rest of the world.
New subsidiary companies performing well
Our new Jersey business unit acquired in 2010 performed strongly and our
recently opened Malta office has grown considerably to become a cornerstone
for structuring of a number of our pensions products.
1
Annual Report & Accounts 2011 Offering solutions to complex
post-crisis needs
The financial crisis contributed to a global
decline in developed economies, a downturn
in international trade, a tightening of credit,
and ultimately a decline in consumer wealth.
National governments responded with
measures to restore growth, but concerns
remain amongst clients regarding the effect
of the economy on their own financial goals,
potential rises in tax, consequent reductions
of income and net portfolio returns, and
possibly inefficient and costly transfers of
assets across jurisdictions. Addressing these
concerns, and structuring wealth sensitively
is STM Group Plc’s priority.
Major Concerns of High Net Worth Clients
CRITICAL
HIGH
Impact of Economy on Goals
Possible Tax Increases
Next Generation Not Adequately
Managing Inheritance
Ensuring Assets Last Their Lifetime
Income Lagging Inflation
Real Estate Market
MEDIUM
LOW
Retirement Lifestyle Affordability
Rising Healthcare Costs
Rising Education Costs
1 Somewhat Agree
2 Agree
3 Strongly Agree
Data taken from the Capgemini-Merrill Lynch World Wealth Report 2011, pages 27 and 28
Note: Percentages may not add up to totals due to rounding.
2
STM Group Plc
Gibraltar
Jersey
Malta
Spain
Corporate and trustee
service providers,
insurance management,
retirement benefits, life
bonds
Corporate and trustee
service providers
Wealth protection using
tax treaties, corporate
and trustee services,
pension trustee,
insurance management
Legal and tax services for
expatriates
STM Group is international with a spread of offices strategically located around Europe
According to the Capgemini-Merrill Lynch World Wealth Report 2011, nearly all HNWIs (97%) say capital preservation
is important to them and a large number (42%) say it is extremely important. Similarly, effective portfolio management
is deemed important by 94% of HNWIs and extremely important by 30%. The crisis has not only made these needs
more acute, it has raised or created the priority for newer issues, including specialised advice (important to 93%) and
transparency on statements and fees (93%).
Top Six Priorities of HNW Clients
Capital Preservation
8%
46%
Effective Portfolio Management
Specialised Advice
Transparency on Statements and Fees
Global Asset Allocation of Portfolios
Independent Investment Advice
15%
19%
16%
26%
24%
49%
48%
42%
43%
42%
42%
30%
25%
34%
19%
21%
97%
94%
93%
93%
88%
88%
Somewhat important
Important
Extremely Important
Data taken from the Capgemini-Merrill Lynch World Wealth Report 2011, pages 27 and 28
Note: Percentages may not add up to totals due to rounding.
3
Annual Report & Accounts 2011 Chairman’s Statement
“Whilst the outlook for 2012
remains challenging, the
business is well positioned
to improve upon the 2011
results.”
Preserving wealth in changing times
We continue to develop new financial products and services to keep
pace with ever-changing financial and fiscal environments. Our
independence allows us to remain impartial, offer the best advice
and recommend or work closely with the most suitable advisers
and service providers to implement tailor-made solutions which will
help preserve and protect our clients’ wealth.
STM Group Plc The Group’s life and pensions businesses have developed a
number of market leading products which are now
beginning to gain the traction required to meet revenue
and in turn profit expectations.
Julian Telling
Chairman
It is disappointing that in my first year as
Chairman, the Group has experienced such
a reduction in profitability compared with
2010. Issues in the Eurozone have been a
major contributor to the fall in productivity,
particularly in the later part of 2011.
I am pleased to report that our Jersey
business, acquired in 2010, remains robust
and fully aligned with the Board’s
expectations.
However, our Gibraltar Corporate and
Trustee Services business (CTS) has seen a
significant increase in provisions against
collectibles. These charges have arisen as
a result of a combination of factors all of
which have been addressed and therefore
should not be repeated in coming years.
In addition, the significant non-cash
amortisation cost of the Group’s
investments in its subsidiaries under IAS
38 has further masked the underlying
profitability of the Group.
Historically STM Group Plc has focused
on bespoke solutions primarily in the CTS
business but the Board recognises that
market dynamics have changed dramatically
over recent times. To that end the Board
has implemented a number of significant
changes to its business model. The
Group’s life and pensions businesses have
developed a number of market leading
products which are now beginning to gain
the traction required to meet revenue and
in turn profit expectations.
The Group has placed its strategic
emphasis on distribution which is
beginning to bear fruit, although the rate
at which we see significant increases in
revenue and therefore profits remains
hard to predict albeit that initial
indications are good.
On behalf of the Board I would like to thank
my predecessor Bernard Gallagher and
former non executive director Matthew
Wood for all their efforts over the years.
STM Group Plc is a people business and its
strength comes from the quality, dedication
and professionalism of its management
team and staff to whom I offer my sincere
thanks on behalf of the Board.
Whilst the outlook for 2012 remains
challenging, with a tidier balance sheet
together with a significant, already
implemented reduction in overhead, the
business is well positioned to improve
upon the 2011 results.
I look forward to updating the market
during 2012 on the progress made in
building our distribution channels,
increasing revenues and the associated
increase in profitability.
Julian Telling
Chairman
10 April 2012
5
Annual Report & Accounts 2011
Chief Executive Officer’s Review
“We are seeing encouraging
trends which support our view
that the diversification of the
STM business will ultimately be
very rewarding.”
Preserving wealth in changing times
We understand how important personal service is to our clients
from those administering what is often a significant proportion of
their assets or business. A dedicated team of professionals will work
with each of our clients to understand their needs and objectives
and provide a high level of service.
STM Group Plc STM Life has started the year reasonably well with uplift in
business compared to the latter part of 2011. Pensions,
particularly, with the QROPS products and its slowly increasing
distribution network, has seen more applications in the last two
months than in the whole of 2011.
Colin Porter
Chief Executive Officer
2011 has been a difficult year for STM.
Expectations for 2011 were that we would
continue to build on the success of 2010
in pursuit of our strategy of creating a
product and distribution driven business
to complement our traditional professional
fees based operation. That was the case for
the first half of 2011, however the second
half has seen a deterioration of profitability
in certain areas and our pensions and life
businesses are yet to reach critical mass. In
addition, we have taken steps to strengthen
our provisions against potentially
unrecoverable debtors and work-in-
progress as a result of concerns over the
economic climate. A further £0.1 million
provision was made between our preliminary
results announcement and the audited
financial statements against accrued
income in relation to a specific project in
our Spanish office. As a result of the above
STM has turned in a disappointing result
for the year.
The year has seen revenues of £9.7 million,
which is slightly down on the 2010 figure
of £10.5 million, however EBITDA before
adjustments to carrying value of investments
has fallen from £1.7 million in 2010 to £0.6
million in 2011.
It is pleasing to note that the 2010 acquisition
of Zenith Trust Company Limited (“Zenith”)
has performed in line with expectations
and has been a solid and predictable
contributor to profitability. Additionally,
we are seeing encouraging trends in the
global product sales and distribution
market which support our view that the
diversification of the STM business will
ultimately be very rewarding.
STM’s business model – a changing
environment
Currently, the Group’s income continues
to be mainly derived from fixed and time-
based administration fees in relation to
the administration services for trusts and
companies under management.
Management believes that the significant
future growth area for the Group is in
its pensions and life assurance (“life
wrappers”) business, and a key part to
this development will be increasing its
distribution networks both within the EU
and the rest of the world. These product
lines are in themselves a differentiating
factor as most Corporate and Trustee
Service Providers (“CTS”) businesses do
not have any similar product offerings.
Both STM’s pension and life wrapper products
are licensed from within EU jurisdictions
and this will become a significant benefit
in gaining the credibility required to grow
these businesses through established
intermediary networks.
Operational Overview
Core CTS division
CTS income currently accounts for 75% of
the Group’s revenue amounting to £7.5
million in 2011 (2010: £7.6 million) and is
split evenly between Jersey and Gibraltar.
STM Jersey’s revenue amounted to £3.7
million (2010: £3.3 million) and is typically
derived from non-domiciled individuals
investing into the UK market. This revenue
stream has held up well during the year
and performed in line with management’s
expectations. The Board is confident that
the Jersey operation, headed by a strong
management team, will continue to
perform as predicted going into 2012.
Gibraltar’s CTS revenue stream has seen a
decline in income for 2011 down to £3.8
million, from £4.3 million in 2010. This
company’s customer base is significantly
7
Annual Report & Accounts 2011 Chief Executive Officer’s Review
“The cross border and pensions transfer
market is in its infancy, with STM being
seen as a market leader and innovator.”
more focussed on the UK expatriate that has
moved or invested into the European
marketplace, and management has seen a
significant downturn in transactional business as
a result of the Eurozone crisis. The financial crisis
has also resulted in a number of customers
challenging the need for their structures
given the reduced profitability of their
portfolios and business operations. This has
had a double impact on the Gibraltar CTS
business with both a reduction of chargeable
time and a number of clients closing their
structures in the second half of 2011.
As a result of the changes in some of our
clients’ circumstances, management has taken
a more conservative approach to the Group’s
recognition of work-in-progress and decided to
significantly increase the provision against bad
debts, resulting in a further reduction of £0.2
million in profitability. Management does not
expect these charges to be repeated in future
years. Additionally, management has taken,
and is continuing to take, measures to reduce
costs in this area, so as to restore a healthier
profit margin in the business.
It remains management’s intention over time
to reduce reliance on the UK market for
generating new clients for its CTS business.
Since its incorporation in 2009, despite various
initiatives by management, STM Swiss has
struggled to attract new business and has
therefore suffered from lack of critical mass.
The decision was taken in the latter part of
2011 to retrench STM Swiss to an
8
out-sourced office in Zurich. This will save
the Group some £0.4 million in 2012.
STM Pensions
The Board has previously noted the difficulty
in forecasting the revenue streams for this
business. Frustratingly, the anticipated
increase in revenue is yet to be seen however
the business has the hallmarks of being a
substantial revenue and profit contributor to
the Group going forward.
The cross border and pensions transfer
market is in its infancy, with STM being seen
as a market leader and innovator in this area.
This, coupled with the fact that Malta, in
which STM has a presence and a number of
HMRC-approved pension schemes, is
increasingly becoming the jurisdiction of
choice for the exporting of a UK, or indeed
EU, pension scheme, has resulted in STM
starting to build business relationships with
some very significant worldwide
distribution networks.
STM’s pension division has yet to benefit, in
revenue terms, from this business development,
with the division contributing only £0.6
million of revenue for 2011 across Malta
and Gibraltar. However, given the scalability
of the traditional Qualifying Recognised
Overseas Pension Scheme (QROPS) product,
and the recent launch of some new pensions
products in Malta and Gibraltar, it is anticipated
that 2012 will be the year that STM’s pension
division changes the revenue mix of the STM
Group.
STM Life
Generation of linked long term policies (Life
Bonds) from the UK market remains slow, and
further initiatives to strengthen IFA
distribution have been undertaken in the
latter part of 2011 and into 2012. In addition,
STM Life recently started offering the UK
market an alternative pension product aimed
at the High Net Worth Individual, which, it is
believed, will derive an alternative revenue
stream for STM Life from the UK market.
On the positive side, STM Life is now
receiving regular business from Sweden and
Norway, and is dealing with a number of
enquiries from other EU member states. Whilst
it is very early days, it does demonstrate the
pan-European nature of STM Life’s products.
Other trading divisions and new initiatives
Trading in the other divisions, being
insurance management, advisory and the
Spanish office remain broadly in line with
management’s expectations, and contributed
circa £1.5 million during 2011 (2010: £1.5
million). A further £0.1 million provision
was made between our preliminary results
announcement and the audited financial
statements against accrued income in
relation to a specific project in our Spanish
office. Management is confident that these
divisions will make a comparable contribution
to next year’s performance.
Financial position
The second half performance in 2011,
coupled with the increase in the provisions
STM Group Plc has had an unprecedented detrimental
impact on the 2011 underlying profit.
For the year to 31 December 2011, the Group
recorded turnover of £9.7 million (2010:
£10.5 million) and an EBITDA before
adjustments to carrying value of investments
of £0.6 million (2010: £1.7 million).
As noted above, the Gibraltar CTS business
saw a reduction of some £0.5 million of
revenue, and administrative expense costs
have increased by £0.2 million due to
management’s decision to increase one-off
provisions against debtors and work-in-progress.
These are the primary differentiators in the
overall Group’s EBITDA result between the
two years.
The depreciation and amortisation charge, a
non cash expense to the income statement,
has increased from £0.2 million in 2010 to
£0.8 million for 2011. The increase relates to
the adoption of IAS 38 which requires the
identification and valuation of intangible
assets as part of an acquisition to be written
off over their deemed useful economic life,
rather than performing an impairment
review. Such amortisation costs have
resulted in an additional charge of £0.5
million. This non-cash charge will continue to
occur on acquisitions post 1 January 2010 for
the remainder of their deemed economic life.
Interest and financing costs have increased
to £0.4 million (2010: £0.2 million) as a result
of the full year costs of the convertible loan
note.
STM’s taxation charge for the year was on
budget at £0.1 million (2010: £0.2 million).
In line with all CTS businesses, the Group
had accrued income, in the form of work
performed for clients but not yet billed at the
balance sheet date of £2.9 million (2010: £3.1
million). This also provides some
immediate visibility of billable fees in the
early part of 2012.
2011 has seen a number of initiatives in
relation to reducing the Group’s debtor days
and overall trade debt; these initiatives will
continue during 2012. Trade receivables as
at 31 December 2011 amounted to £3.4
million, down from £4.0 million as at 31
December 2010. Deferred income, representing
fees billed in advance, yet to be credited to
the statement of total comprehensive
income were more or less comparable year
on year at £0.7 million (2010: £0.9 million)
reflecting the loss of a small number of clients
during the course of the year. STM Jersey’s
fixed fees are billed annually in advance in
January which will result in a significant cash
influx during early 2012. The Group ended
the year with cash of £3.3 million (2010: £3.7
million), having paid out further consider-
ation on acquisitions amounting to £0.7
million and bank loan repayments of £0.6
million. In addition, dividends relating to the
final 2010 declaration of £0.18 million were
paid during 2011.
Group financing
At 31 December 2011, the Group had bank
borrowings of £1.97 million (2010: £2.6
million), being loans from RBS International
Limited (“RBSI”) to provide part of the
solvency capital required for STM Life, as well
as funding the first payment of the Zenith
acquisition. The term of the original loan for
STM Life is for five years from March 2008.
Two further loans were taken out in 2010,
one for £0.4 million and one for £1.5 million;
both are repayable over a three year term
but being amortised over five years.
In addition to bank financing, there remains
Convertible Loan Notes (“CLN”) to the value
of £3.5 million. There was an option for 50%
of the CLN to be converted into new ordinary
shares in STM at the holders’ discretion at a
price of 33 pence per share in March 2012.
No loan notes were converted to equity, nor
redeemed at that date and therefore the CLN
will run to term and be repayable in March
2014.
Board changes during the year
During the year, Julian Telling was appointed
Chairman of the Board of STM, replacing Ber-
nard Gallagher who retired after four years.
Julian’s connections in the Financial Services
industry are starting to bring benefits to the
Group, and our expectations are that this will
continue to build our distribution both in the
UK and elsewhere around the world. In
addition, during 2011, Matthew Wood
resigned as a non-executive director to
follow other business opportunities.
Dividends
In recognition of the difficult 2011 year for
the Group, the Board recommends that no
final dividend be paid for the year ended 31
December 2011 (2010: 0.4 pence per share).
It is the Board’s intention to review the policy
of dividend payments during 2012 and,
dependent on the Group’s performance, will
seek to return to a progressive and formulated
dividend policy as soon as it is prudent to
do so.
Executive long term incentive plan
The Board has agreed a long term incentive
plan for 2012 and 2013 with the executive
directors based on certain targets being
achieved in the next two financial years.
Target hurdles relate to a fully diluted
earnings per share target of 4 pence per
share for 2012, and 8 pence for 2013, and an
average three month share price target of
between 40 pence to 80 pence. The
maximum share allocation to the two
executive directors is 1.3 million shares per
director.
Current trading and outlook
Measures have been taken during the latter
part of 2011 to reduce headcount, particularly
in Gibraltar which has seen a reduced level
of chargeable time in its CTS business, which
will in turn increase profitability in this
business unit. Whilst the Eurozone crisis and
potential double-dip recession remain such
a concern for our client base, we can expect
the level of transactional activities to be
suppressed, and this has been factored into
2012 management expectations for the CTS
business. In this regard, 2012 CTS activity
has started in a similar manner to the close
of 2011 but with fewer costs associated with
servicing this business. The Group believes
that the 2011 increase in provisions across
debtors and work-in-progress was a one-off
and will not be repeated in 2012.
On the positive side, both our pensions
division and STM Life have started the year
reasonably well with uplift in business
compared to the latter part of 2011.
Pensions, particularly, with the Qualifying
Recognised Overseas Pensions Scheme
products and its slowly increasing distribution
network, has seen more applications in the
last two months than in the whole of 2011. In
addition, the scaling down of STM Swiss will
be complete by March 2012, further saving
Group resources and management time. The
successful cash generation in the period and
the subsequent reduction in debt is a credit
to the management team and a trend which
we expect to continue. This achievement
is particularly notable given the broader
economic environment.
Enhanced profitability in 2012 will only come
about as a result of STM continuing to grow
its distribution network across the various
intermediary introducers. This is a key area of
focus for management, with the additional
financial resources intended to accelerate
distribution sign-up.
The Board is aware that 2012 will be a very
important year in delivering a new look STM,
in which both STM Life and the STM Pensions
divisions start to fulfill the revenue potential
of which management know their product
range is capable. We look forward to updating
the market on the Group’s progress.
Colin Porter
Chief Executive Officer
10 April 2012
9
Annual Report & Accounts 2011 Director’s Report
The Directors of STM Group plc present their
Report for the year to 31 December 2011
together with the accounts of the Group and
the independent auditors’ report for the
period. These will be laid before the
shareholders at the Annual General Meeting
to be held on 17 May 2012.
Principal activities and business review
The principal activity of the Group during the
year was the structuring and administration of
clients’ assets.
Result and dividends
The loss for the year of £429,000 (31
December 2010: Profit after dividends
£1,047,000) has been transferred to reserves.
The Board recommends that no dividends be
paid for the year ended 31 December 2011
(31 December 2010: 0.6p).
Directors
Details of the Directors of the Company who
served during the period and to date, and
their interests in the shares of the Company
were: Bernard Gallagher (Resigned 9 May
2011), Alan Roy Kentish, Colin Douglas Porter
Michael Ross Riddell, Julian Philip Telling
(Appointed 9 May 2011), Matthew Graham
Wood (Resigned 26 September 2011).
Alan Kentish has an interest in 2,877,500
ordinary shares – 2,850,000 of these shares
are held in the name of Clifton Participations
10
Inc and form part of the assets of the Perros
Trust of which Alan Kentish is a potential
beneficiary.
Colin Porter has an interest in 537,613
ordinary shares.
Julian Telling has an interest in 85,000
ordinary shares.
more of the issued ordinary share capital
of the Company as at 29 March 2012 or any
persons who, directly or indirectly, jointly or
separately, exercise or could exercise control
over the Company.
Issued ordinary share capital of the Company
At 29 March 2012
%
Julian Philip Telling has been appointed as a
Director since the last Annual General Meeting
and a resolution to confirm his appointment
will be tabled at the Annual General Meeting.
All remaining directors offer themselves for
re-election.
Political and charitable donations
The Group’s charitable donations for the
period amounted to £5,101 (31 December
2010:Nil). There were no political
contributions in either period.
International Financial Reporting
Standards (“IFRS”)
These financial statements were prepared
under IFRS and interpretations adopted by
the International Accounting Standards
Board (“IASB”).
17.65
Hearth Investments Limited
Southern Rock Insurance Company
Limited, Rock Holdings Limited, Arron
Banks and Paul Chase-Gardener
SBS Nominees Limited
Nightingale Equities Inc
Clifton Participation Inc
KAS Bank NV
Bernard Nominees Limited
Quest Traders Limited
13.31
7.96
6.77
6.68
6.03
4.45
3.19
Independent auditors
KPMG Audit LLC were appointed as auditors
to the company during the year and being
eligible, have expressed their willingness to
continue in office. A resolution to re-appoint
KPMG Audit LLC as independent auditors of
the Company will be proposed at the Annual
General Meeting.
Substantial interests
Save as disclosed in the table below, the
Directors are not aware of any person who
directly or indirectly is interested in 3% or
Annual General Meeting
The Notice of the Annual General Meeting
to be held on 17 May 2012 is set out on
page 39.
By order of the Board
Elizabeth A Plummer
Company Secretary
18 Athol Street
Douglas
Isle of Man IM1 1JA
10 April 2012
STM Group Plc
Board of Directors
Clockwise from top left:
Colin Douglas Porter
Alan Roy Kentish
Michael Ross Riddell
Julian Philip Telling
Executive Directors
Colin Douglas Porter
Chief Executive Officer
Alan Roy Kentish ACA ACII AIRM
Chief Financial Officer
Colin is a Barrister and Solicitor of the High Court of New
Zealand and was admitted to the bar in 2000 and also holds
a double major business degree in Finance and International
Business. Colin joined STM as CEO of the Gibraltar and Jersey
offices in June 2008, and brings with him a wealth of
experience in the company and trust management field,
having previously held senior positions with other
international trust companies.
Alan qualified as a Chartered Accountant in 1989 with Ernst
& Whinney, specialising in the financial services industry. In
1993 he moved to Ernst & Young, Gibraltar and shortly
afterwards qualified as an Associate of the Chartered
Insurance Institute. In 1997, Alan joined Fidecs and set up its
insurance management division, FIM. Alan acts as Managing
and Technical Director of FIM, which is recognised as one of
the largest insurance managers in Gibraltar.
Non-Executive Directors
Julian Philip Telling
Non-Executive Chairman
Following a brief spell in the Fleet Air Arm of the Royal Navy,
Julian trained for a career in retail financial services. In 1983
he established Falcon Group, which grew into one of the
largest independent financial services groups in the UK. After
being admitted to AIM in 2005 under the name Sumus plc,
the business merged with Lighthouse plc in 2008 and Julian
chose to leave to pursue other ventures. He now holds various
directorships in both public and private companies, as well
as a variety of pro bono positions. He is this year’s president
of the Grateful Society, one of Bristol’s oldest charities.
Julian also has a professional pilot’s licence and flies part-
time for a small airline as well as acting as a CAA examiner.
Michael Ross Riddell CA
Non-Executive Director
Michael is an experienced company director having qualified
as a Chartered Accountant in Canada in 1986. Michael has
worked in trust and corporate services and financial services
since 1988 and is managing director of GreystoneTrust
Company Limited, the trust and corporate services arm of
Greystone LLC based in the Isle of Man. Michael is currently a
director of Hearth Investments Limited which holds a
significant shareholding in STM.
11
Annual Report & Accounts 2011 Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities
in Respect of the Directors’ Report and
the Financial Statements
The Directors are responsible for preparing
the Directors’ Report and the financial
statements in accordance with applicable
law and regulations. In addition, the Directors
have elected to prepare the financial
statements in accordance with International
Financial Reporting Standards.
The financial statements are required to
give a true and fair view of the state of
affairs of the Group and Parent Company
and of the profit or loss of the Company for
that period.
In preparing these financial statements,
the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether they have been prepared
in accordance with International Financial
Reporting Standards; and
• prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the Group and Parent
Company will continue in business.
The Directors are responsible for keeping
proper accounting records that are
sufficient to show and explain the Parent
Company’s transactions and disclose with
reasonable accuracy at any time its financial
position. They have general responsibility
for taking such steps as are reasonably
open to them to safeguard the assets of
the Group and to prevent and detect fraud
and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation governing
the preparation and dissemination of
financial statements may differ from one
jurisdiction to another.
12
STM Group Plc
Director’s Remuneration Report
Directors’ Remuneration Report
Director
Remuneration
Notes
Executive Directors
Alan Kentish
Colin Porter
Non-Executive Directors
Bernard Gallagher
Julian Telling
Matthew Wood
Michael Riddell
£130,000
£130,000
£10,000
£25,853
£40,000
£12,000
a,b
a,b
c
b,d
b,e
Notes
a.
b.
c.
d.
e.
The Executive Directors are also each entitled to a bonus of £nil as at 31 December 2011.
No Directors received any benefits in the form of either pension contributions or share based incentives.
Bernard Gallagher opted to take the majority of his remuneration in the form of new shares in STM.
ABT Associates Consulting Limited invoices the Company for the Director services provided by Matthew Wood.
Greystone Trust Company Limited invoices the Company for the Director services provided by Michael Riddell.
13
Annual Report & Accounts 2011
Corporate Governance
The Board is responsible for establishing
the strategic direction of the Company,
monitoring the Group’s trading performance
and appraising and executing development
and acquisition opportunities. During
the year the Company held regular Board
meetings in the Isle of Man at which financial
and other reports, including reports on
acquisition opportunities, were considered
and, where appropriate, voted on.
Details of the Directors’ beneficial interests
in Ordinary Shares is set out in the Directors
Report. The Directors intend to comply
with Rule 21 of the AIM Rules relating to
directors’ dealings and will take all
reasonable steps to ensure compliance
by any employees of the Company to
whom Rule 21 applies. The Company has,
in addition, adopted the Share Dealing
Code for dealings in its Ordinary Shares by
directors and senior employees.
The Directors recognise the importance of
sound corporate governance. The Company
intends to comply with the QCA Guidelines
so far as is practicable and appropriate for
a public company of its size and nature.
The Board has established an audit
committee and a remuneration committee
both with formally delegated duties and
responsibilities. The audit committee
comprises Michael Riddell, as the Chairman,
and Julian Telling, and the remuneration
committee comprises Julian Telling, as the
Chairman, and Michael Riddell.
The terms of reference for the audit
committee provide that it will receive
and review reports from the Company’s
management and the Company’s auditors
relating to the annual and interim accounts
and the accounting and internal control
systems in use throughout the Group.
The terms of reference for the remuneration
committee provide that it will review the
scale and structure of the Executive
Directors’ remuneration and the terms of
their service contracts. The remuneration
and terms and conditions of appointment
of the non-executive directors will be set
by the Board. No director may participate
in any meeting at which discussion or
decision regarding his own remuneration
takes place. The remuneration committee
will also administer the long term incentive
plan (‘LTIP’) awards and set any performance
criteria thereunder.
The Directors have set up a Risk Management
Committee comprising the CEO, CFO and
the STM Group Risk Management Officer
(‘RMO’). The Committee has delegated the
review of the risks applicable to the business
and the actions required to reduce those
risks to the RMO and his team. Regular
reports of the status of this review have
been provided to the Board.
The Directors do not consider that, given
the size of the Board, it is appropriate at
this stage to have a nomination committee.
14
STM Group Plc Report of the Independent Auditors, KPMG Audit LLC,
to the members of STM Group PLC
We have audited the financial statements
of STM Group PLC for the year ended 31
December 2011 which comprise the Group
Statement of Comprehensive Income, the
Group and Company Statements of
Financial Position, the Group Statement
of Cash Flows and the Group Statement of
Changes in Equity and the related notes.
The financial reporting framework that
has been applied in their preparation is
applicable law and International Financial
Reporting Standards (IFRSs).
This report is made solely to the Company’s
members, as a body. Our audit work has
been undertaken so that we might state to
the Company’s members those matters we
are required to state to them in an auditor’s
report and for no other purpose. To the fullest
extent permitted by law, we do not accept or
assume responsibility to anyone other than
the Company and the Company’s members
as a body, for our audit work, for this report, or
for the opinions we have formed.
Respective responsibilities of Directors and
Auditor
As explained more fully in the Directors’
Responsibilities Statement set out on page
12, the Directors are responsible for the
preparation of financial statements that
give a true and fair view. Our responsibility
is to audit, and express an opinion on, the
financial statements in accordance with ap-
plicable law and International Standards on
Auditing (UK and Ireland). Those standards
require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards
for Auditors.
circumstances and have been consistently
applied and adequately disclosed; the
reasonableness of significant accounting
estimates made by the Directors; and the
overall presentation of the financial
statements.
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the
Group’s and Parent Company’s affairs as at
31 December 2011 and of the Group’s loss
for the year then ended; and
• have been properly prepared in accordance
with IFRSs.
Scope of the audit of the financial statements
An audit involves obtaining evidence about
the amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the Group’s
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
10 April 2012
15
Annual Report & Accounts 2011 Consolidated Statement of Comprehensive Income
For the year from 1 January 2011 to 31 December 2011
Revenue
Administrative expenses
Profit before other items
Other items
Finance Costs
Depreciation and amortisation
Adjustments to carrying value of investments
(Loss)/profit before taxation
Taxation
(Loss)/profit after taxation
Other comprehensive income
Foreign currency translation differences for foreign operations
Total comprehensive (loss)/profit for the year
Earnings per share basic (pence)
Earnings per share diluted (pence)
Year ended
31 December 2011
£000
Year ended
31 December 2010
£000
9,729
(9,101)
628
(361)
(765)
88
(410)
10
(400)
(29)
(429)
(0.93)
(0.93)
10,454
(8,778)
1,676
(211)
(157)
131
1,439
(192)
1,247
57
1,304
2.90
2.59
Notes
8
10
12
18
18
There have been no discontinued activities in the year. Accordingly, the above results relate solely to continuing activities.
16
STM Group Plc
Consolidated Statement of Financial Position
As at 31 December 2011
Notes
31 December 2011
£000
31 December 2010
£000
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Other investments
Total non-current assets
Current assets
Accrued income
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Called up share capital
Share premium account
Reserves
Total equity attributable to equity shareholders
LIABILITIES
Current liabilities
Liabilities for current tax
Trade and other payables
Total current liabilities
Non current liabilities
Other payables
Total non-current liabilities
Total liabilities and equity
CD Porter
Chief Executive Officer
AR Kentish
Chief Financial Officer
10 April 2012
13
14
15
16
17
17
19
20
1,480
21,109
64
22,653
2,918
4,924
3,307
11,149
33,802
43
19,051
4,842
23,936
338
5,273
5,611
4,255
4,255
33,802
1,460
21,812
54
23,326
3,052
5,688
3,696
12,436
35,762
43
19,043
5,471
24,557
494
5,559
6,053
5,152
5,152
35,762
17
Annual Report & Accounts 2011
Company Statement of Financial Position
As at 31 December 2011
Notes
31 December 2011
£000
31 December 2010
£000
13
7
14
15
16
17
17
19
20
1,093
16,052
4,382
21,527
25
6,571
2
6,598
28,125
43
19,051
(910)
18,184
5,581
5,581
4,360
4,360
28,125
1,003
20,956
—
21,959
25
8,371
101
8,497
30,456
43
19,043
249
19,335
6,328
6,328
4,793
4,793
30,456
ASSETS
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Intangible assets
Total non-current assets
Current assets
Accrued income
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Called up share capital
Share premium account
Reserves
Total equity attributable to equity shareholders
LIABILITIES
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Other payables
Total non-current liabilities
Total liabilities and equity
CD Porter
Chief Executive Officer
AR Kentish
Chief Financial Officer
10 April 2012
18
STM Group Plc
Consolidated Statement of Cash Flows
For the year from 1 January 2011 to 31 December 2011
Year ended
31 December 2011
£000
Year ended
31 December 2010
£000
Reconciliation of profit to net cash flow from operating activities
(Loss)/profit for the year before tax
Adjustments for:
Loss on sale of assets
Depreciation and amortisation
Shares issued for services performed
Adjustments to investments
Taxation paid
Decrease/(increase) in trade and other receivables
Decrease/(increase) in accrued income
Increase/(decrease) in trade and other payables
Net cash from operating activities
Investing activities
Acquisition of property, plant and equipment
Acquisition of investments – cash consideration
Cash acquired as part of acquisitions
Net cash used in investing activities
Cash flows from financing activities
Bank loan (repayments) / advance
Cash consideration from convertible bond issued
Dividend paid
Net cash from financing activities
Decrease in cash and cash equivalents
Reconciliation of net cash flow to movement in net funds
Analysis of cash and cash equivalents during the year
Decrease in cash and cash equivalents
Translation of foreign operations
Balance at start of year
Balance at end of year
(410)
—
765
8
(88)
(148)
764
134
358
1,383
(240)
(656)
—
(896)
(647)
—
(172)
(819)
(332)
(332)
(57)
3,696
3,307
1,439
3
157
40
(439)
(19)
(103)
(375)
(590)
113
(282)
(3,759)
587
(3,454)
1,326
2,200
(257)
3,269
(72)
(72)
–
3,768
3,696
19
Annual Report & Accounts 2011
Statement of Consolidated Changes in Equity
For the year from 1 January 2011 to 31 December 2011
Balance at 1 January 2010
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for the year
Other comprehensive income
Foreign currency translation differences
Transactions with owners, recorded directly in equity
Shares issued in the year
Dividend paid
Exchange loss on equity
At 31 December 2010
Balance at 1 January 2011
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Loss for the year
Other comprehensive income
Foreign currency translation differences
Transactions with owners, recorded directly in equity
Shares issued in the year
Dividend paid
Exchange loss on equity
At 31 December 2011
Share
Capital
£000
43
—
—
—
—
—
43
43
—
—
—
—
—
43
Share
premium
£000
19,011
Retained
earnings
£000
4,620
Treasury
Shares
£000
(144)
—
—
32
—
—
19,043
19,043
—
—
8
—
—
19,051
1,247
57
—
(257)
—
5,667
5,667
(400)
(29)
—
(172)
—
5,066
—
—
—
—
—
(144)
(144)
—
—
—
—
—
(144)
Translation
reserve
£000
(7)
—
—
—
—
(45)
(52)
(52)
—
—
—
—
(28)
(80)
Total
£000
23,523
1,247
57
32
(257)
(45)
24,557
24,557
(400)
(29)
8
(172)
(28)
23,936
20
STM Group Plc
Statement of Company Changes in Equity
For the year from 1 January 2011 to 31 December 2011
Balance at 1 January 2010
Profit for the year
Shares issued in year
Dividend paid
31 December 2010
Balance at 1 January 2011
Loss for the year
Shares issued in year
Dividend paid
31 December 2011
Share
Capital
£000
43
—
—
—
43
43
—
—
—
43
Share
premium
£000
19,011
—
32
—
19,043
19,043
—
8
—
19,051
Retained
earnings
£000
471
35
—
(257)
249
249
(987)
—
(172)
(910)
Total
£000
19,525
35
32
(257)
19,335
19,335
(987)
8
(172)
18,184
During the year the Company paid a dividend of 0.4 pence per share proposed at last year’s annual general meeting.
21
Annual Report & Accounts 2011
Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
1.
REPORTING ENTITY
STM Group Plc (the “Company”) is a company incorporated and domiciled in the Isle of Man and was admitted to trading on the London
Stock Exchange AIM on 28 March 2007. The address of the Company’s registered office is 18 Athol Street, Douglas, Isle of Man, IM1 1JA.
The consolidated financial statements of the Group as at, and for the year ended, 31 December 2011 comprise the Company and its
subsidiaries (see note 25) (together referred to as the “Group” and individually as ”Group entities”) and the Group’s interest in associates
and jointly controlled 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)
Functional and presentation currency
These consolidated financial statements are presented in Pounds Sterling (£) which is the Company’s functional currency.
(c)
Use of estimates and judgments
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 and in any future periods affected.
The estimates and assumptions which have a significant risk of resulting in a material adjustment to the carrying value of assets and
liabilities are included in the following notes:
-
-
-
-
Note 13 – Depreciation of property, plant and equipment
Note 14 – Measurement of goodwill
Note 21 – Provisions for impairment
Note 22 – Lease classification
(d)
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.
(e)
3.
(a)
(b)
Employee benefit trusts
The Company contributes to two employee benefit trusts. It is deemed that these trusts are controlled by the Company and are
therefore included within the consolidated financial statements of the Group.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
Basis of consolidation
Subsidiaries
(i)
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that
presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
(ii)
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.
Foreign currency
(i)
Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Group at the exchange rate at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated at the
exchange rate at that date. The resulting gain or loss is recognised in the income statement of comprehensive income.
(ii)
22
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.
STM Group Plc
3.
(c)
(d)
(e)
SIGNIFICANT ACCOUNTING POLICIES continued
Revenue
Revenue is derived from the provision of services and is recognised in the statement of comprehensive income in proportion to the
stage of completion of the services at the reporting date on an accruals basis.
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.
Property, plant and 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, plant and 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 on a reducing balance basis are as follows:
Office equipment
Motor vehicles
Leasehold improvements Over the life of the leases
10% / 25%
25%
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
(f )
Financial instruments
Financial assets and liabilities are recognised on the Group’s Balance Sheet when the Group becomes party to the contractual provisions
of the instrument.
(i)
(ii)
(iii)
(iv)
(v)
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans
and receivables comprise trade and other receivables and are recognised initially at fair value and subsequently at amortised
cost. Generally, this results in their recognition at nominal value less any allowance for any doubtful debts.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received. After initial recognition, interest
bearing loans and borrowings are subsequently measured at amortised cost.
The Group’s convertible loan has been recorded as a liability as the option to redeem or convert to equity was not taken up and
therefore those will run to term.
Investments
Investments are carried at fair value, subject to provisions for impairment where the current value of the investment is
considered to be less than cost. Impairment losses are recognised in the statement of comprehensive income. Investments are
reviewed for impairment at each year end.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand with an original maturity of three months or less.
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
under the Long Term Incentive Plan arrangements, which have yet to be allotted to specific employees.
(g)
Operating leases
Payments under operating leases are charged directly to the statement of comprehensive income on a straight line basis over the term
of the lease.
23
Annual Report & Accounts 2011
Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
3.
(h)
SIGNIFICANT ACCOUNTING POLICIES continued
Finance Leases
Assets held under finance leases are capitalised at their initial cost. Rentals are set against accounts payable on a straight line basis.
(i)
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.
Certain executives, on achieving their performance and services criteria, will be awarded with shares in STM Group Plc which are held
within an employee benefit trust. The expense is released to the income statement over a period of three years on a straight line basis.
(j)
Finance income
Finance income comprises interest income on funds invested and dividend income. Interest income is recognised as it accrues using the
effective interest method.
Finance expense comprises interest on borrowings. Interest expense is charged to the income statement using the effective interest method.
(k)
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.
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.
(l)
Intangible assets
(i)
Goodwill
Goodwill that arises on the acquisitions of subsidiaries is included in intangible assets. Goodwill represents the excess of the
cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets and liabilities of the acquiree.
Goodwill is measured at cost less accumulated impairment losses. An annual impairment review is undertaken.
(ii)
Client Portfolio
Client Portfolio acquired in a business combination is carried at cost less accumulated amortisation and any accumulated
impairment losses. This is amortised on a straight-line basis over an estimated useful life which is assessed to be nine years.
(m)
Impairment
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have
had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Losses are recognised
in the income statement.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics.
Any impairment losses would be recognised in the statement of comprehensive income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
The decrease in impairment loss is reversed through the statement of comprehensive income.
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 and intangible
assets that have indefinite lives, the recoverable amount 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.
24
STM Group Plc
3.
(n)
(o)
SIGNIFICANT ACCOUNTING POLICIES continued
Interest Rate Swap
The Group has an interest rate swap in order to manage the interest rate associated with one of the Group’s bank loans. Whilst this is a
derivative liability the cost of this is not significant and consequently it is included within other financial liabilities. In accordance with its
treasury policy the Group does not enter into derivatives for speculative purposes.
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 shares relating to deferred
consideration, and 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 balance
sheet date and is released over the period to which it relates.
(q)
Borrowing costs
Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost;
any difference between proceeds net of transactions costs and the redemption value is recognised in the income statement over the
period of the borrowing using effective interest method.
(r)
(s)
Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of a past event, for which it is probable that an out-
flow of economic benefits will be required to settle the obligation, and where a reliable estimate can be made of the amount of the obligation.
New standards and interpretations
The following new standards and interpretations are mandatory for the first time this year; however, following consideration and review
they are believed to either not be relevant to the Group or do not have a significant impact on the Group’s financial statements apart
from additional disclosures:
•
•
•
•
•
IFRS 1
IFRS 7
IAS 1
IAS 24
IAS 34
“First-time adoption of International Financial Reporting Standards”
“Financial Instruments: Disclosures”
“Presentation of Financial Statements”
“Related party Disclosures”
“Interim Financial Reporting”
In addition a number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31
December 2011, and have not been applied in preparing these consolidated financial statements. None of these are expected to have
an effect on the consolidated financial statements of the Group.
4.
DETERMINATION OF FAIR VALUES
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets
and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When appli-
cable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(a)
Intangible assets
The fair value of Goodwill acquired in a business combination is based on the excess of the fair value of the consideration over the fair
value of the underlying assets and liabilities acquired less any impairment considered necessary.
The fair value of the client portfolio acquired is based on the carrying value less any impairment considered necessary.
(b)
Investments
The fair value of investments is based on the carrying value of those investments less any impairment considered necessary.
(c)
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is based on carrying values. The
carrying value of items of plant and equipment has been assessed as equal to its fair value.
25
Annual Report & Accounts 2011 Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
5.
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
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 established the Risk Management 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.
(i)
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 Group establishes a provision for impairment that represents its estimate of incurred losses in respect of trade and other
receivables. Further detail in respect of credit risk is provided in note 21 to these financial statements.
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. A further detail in respect of liquidity risk is provided in note 21 to these financial statements.
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 objective of market risk management is to manage and control market
risk expenses within acceptable parameters, while optimising the return.
(b)
(c)
The market place is robust in that the target market is the “mid-tier millionaires” who are more resilient to adverse changes in the
economy. The Board of Directors believe that this mitigates a significant element of the Group’s market risk.
(d)
Interest rate risk
The Company has bank borrowings that incur interest and significant exposure to interest rate movements have been covered by
interest rate hedging arrangements required by the bank.
(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 assets
and liabilities held by STM Nummos are in its functional currency of euros (€).
The Company has minimised exposure to foreign exchange rates, with the majority of all transactions being carried out in its functional
currency of Pounds Sterling (£).
(f )
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. This also allows the Group to continue on its stated
“buy and build” strategy. The Group has complied with all Regulatory capital requirements.
26
STM Group Plc
6.
SEGMENTAL INFORMATION
STM Group has five reportable segments: Corporate Trustee Services (“CTS”) in Gibraltar, CTS in Jersey, Insurance Management, Start-up
operations 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 assess the performance of the operating segments based on turnover generated. The costs of certain segments within the
Group are predominantly centrally controlled and therefore the allocation of these are based on utilisation of arbitrary proportions.
Management believe that this information and consequently profitability could potentially be misleading and would not enhance the
disclosure above.
Segment information includes revenue directly attributable to a segment. Other items such as treasury management and revenue
accrued to the Group are not included in the measure of segment turnover as they are not considered part of the core operations of any
segment.
The following table presents the turnover information regarding the Group’s operating segments:
Operating Segment
CTS – Gibraltar
CTS – Jersey
Insurance Management
Start-up operations
Other Services
Total segment information
Unallocated income
Analysis of the Group’s turnover information by geographical location is detailed below:
Operating Segment
Gibraltar
International
Total segment information
7.
INVESTMENTS IN SUBSIDIARIES
Acquisitions by the Company
Shares in group undertakings
Balance at start of year
Reallocations and adjustments to goodwill
Acquisitions
Balance at end of year
Turnover
Turnover
2010
£000
4,576
3,271
799
249
1,542
10,437
17
10,454
2010
£000
6,070
4,367
10,437
2011
£000
3,770
3,705
649
—
1,653
9,777
(48)
9,729
2011
£000
4,910
4,867
9,777
31 December 2011
£000
31 December 2010
£000
20,956
(4,949)
45
16,052
15,231
—
5,725
20,956
During the year the prior years acquisitions were reassessed resulting in the reallocation of intangible assets of £4,927,000 (note 14) and
adjustments to the cost of investments and goodwill of £22,000.
STM Malta Insurance Management Limited
During the year, this company was incorporated and was successfully awarded its insurance management licence by the Malta Financial
Services Authority. It has an ordinary share equity of £45,000.
Subsequent performance of acquisitions
As a result of the fact that the Group has materially changed the composition of the acquired companies’ cost structure by fully
integrating them into the existing major trading operations of the Group, the Board of Directors consider it to be impractical to disclose
the underlying profitability of the acquired companies after the date of acquisition.
27
Annual Report & Accounts 2011
Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
8.
REVENUE
Revenue from administration of assets
Total revenues
31 December 2011
£000
31 December 2010
£000
9,729
9,729
10,454
10,454
9.
STM LIFE ASSURANCE PCC PLC
These consolidated financial statements include the results for STM Life Assurance PCC Plc (“STM Life”), a 100% owned subsidiary. STM
Life’s principal activity is that of the provision of life assurance services. The Company has a licence under the Insurance Companies Act
by the Gibraltar Financial Services Commission to carry on linked long term insurance business.
The financial statements for STM Life include the financial performance of both the long term fund and shareholders funds. For the
purposes of these consolidated financial statements, however, only the shareholders funds and surplus on the long term fund have been
included as reflecting the movement and balances in the long term fund would distort the Group’s results.
Within total revenue of the Group of £9,829,000 there is an amount of £121,000 relating to revenue attributable to STM Life. The financial
performance and balance on the long term fund is as follows:
Technical Account – Long term business
Gross premiums written
Policy withdrawals
Net operating expenses
Increase in linked long term reserves
Surplus on long term fund
Assets held to cover linked liabilities
Open Market Value
Cost
Technical provision for linked liabilities
Balance at start of year
Change in technical provision for linked liabilities
Balance at end of year
10.
ADMINISTRATIVE EXPENSES
Included within administrative expenses are personnel costs as follows:
Wages and salaries
Social insurance costs
Pension contributions
Equity settled share based payments
Total personnel expenses
28
Year ended
31 December 2011
£000
Year ended
31 December 2010
£000
15,653
(964)
(126)
(14,403)
160
5,920
(107)
(53)
(5,730)
30
31 December 2011
£000
31 December 2010
£000
20,142
20,879
5,739
5,933
31 December 2011
£000
31 December 2010
£000
5,739
14,403
20,142
9
5,730
5,739
31 December 2011
£000
31 December 2010
£000
5,148
302
85
8
5,543
4,281
338
87
40
4,746
STM Group Plc
10.
ADMINISTRATIVE EXPENSES continued
Average number of employees
GROUP
31 December 2011
£000
31 December 2010
£000
Average number of people employed (including executive directors)
129
125
Company
The average number of staff employed by the company during the year including directors was 15 (2010:- 12)
11.
PROFIT BEFORE OTHER ITEMS
Profit before other terms of £628,000 (31 December 2010 £1,676,000), was arrived at after charging the following to the income statement:
Directors’ remuneration
Auditors’ remuneration
Loss on sale of assets
Shares issued for services rendered
Operating lease rentals
12.
TAXATION
Current tax expense
Release from prior years
Total tax expense
Reconciliation of existing tax rate
(Loss)/profit for the year
Total income tax expense
(Loss)/profit excluding income tax
Income tax using the company’s domestic rate
Effect of tax rates in other jurisdictions
Effect of tax rates in other jurisdictions
Total tax expense
31 December 2011
£000
31 December 2010
£000
348
113
—
8
514
390
103
3
40
514
31 December 2011
£000
31 December 2010
£000
159
(169)
(10)
192
—
192
Tax rate
31 December 2011
£000
Tax rate
31 December 2011
£000
0%
10%
22%
(410)
(10)
(400)
—
138
21
159
0%
10%
22%
During the year the Group has released the provision for taxation on subsidiaries which were previously tax exempt.
1,247
192
1,439
—
106
86
192
29
Annual Report & Accounts 2011 Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
13.
PROPERTY, PLANT AND EQUIPMENT
Motor
Vehicles
£000
Office
Equipment
£000
Leasehold
Improvements
£000
12
—
—
—
12
12
—
12
5
2
—
7
7
2
9
3
5
795
280
20
(4)
1,091
1,091
228
1,319
205
109
(1)
313
313
104
417
902
778
853
4
—
—
857
857
12
869
134
46
—
180
180
114
294
575
677
Office
Equipment
£000
Leasehold
Improvements
£000
300
148
448
448
191
639
—
—
—
—
32
32
607
448
551
4
555
555
12
567
—
—
—
—
81
81
486
555
Total
£000
1,660
284
20
(4)
1,960
1,960
240
2,200
344
157
(1)
500
500
220
720
1,480
1,460
Total
£000
851
152
1,003
1,003
203
1,206
—
—
—
—
113
113
1,093
1,003
Group
Costs
As at 1 January 2010
Additions at cost
Acquisition of subsidiary
Disposals
As at 31 December 2010
As at 1 January 2011
Additions at cost
As at 31 December 2011
Depreciation
As at 1 January 2010
Charge for the year
Disposals
As at 31 December 2010
As at 1 January 2011
Charge for the year
As at 31 December 2011
Net Book Value
As at 31 December 2011
As at 31 December 2010
Company
Costs
As at 1 January 2010
Additions at cost
As at 31 December 2010
As at 1 January 2011
Additions at cost
As at 31 December 2011
Depreciation
As at 1 January 2010
Charge for the year
As at 31 December 2010
As at 1 January 2011
Charge for the year
As at 31 December 2011
Net book value
As at 31 December 2011
As at 31 December 2010
30
STM Group Plc 14.
INTANGIBLE ASSETS
Group
Costs
Balance as at 1 January 2010
Acquisitions through business combinations
Balance at 31 December 2010
Balance as at 1 January 2011
Reallocations
Adjustment to carrying value of investments
Balance at 31 December 2011
Amortisation and impairment
Balance as at 1 January 2010
Charge for the year
Balance at 31 December 2010
Balance as at 1 January 2011
Charge for the year
Balance at 31 December 2011
Carrying amounts
At 1 January 2010
At 31 December 2010
At 1 January 2011
At 31 December 2011
Goodwill
£000
16,886
4,926
21,812
21,812
(4,927)
(158)
16,727
—
—
—
—
—
—
16,886
21,812
21,812
16,727
Client
Portfolio
£000
—
—
—
—
4,927
—
4,927
—
—
—
—
545
545
—
—
—
4,382
Total
£000
16,886
4,926
21,812
21,812
—
(158)
21,654
—
—
—
—
545
545
16,886
21,812
21,812
21,109
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 2011, and reflects the difference
between identifiable net asset value of those acquisitions and total consideration incurred for those acquisitions.
Goodwill is allocated to the Group’s operating entities and consequently to the generating units comprising these acquired businesses.
However, as subsequent to the acquisitions the acquired businesses have been integrated and are managed on a unified basis it is more
appropriate to allocate goodwill to three cash-generating units (“CGU”) for the purposes of impairment testing, being the Fidecs Group
with a carrying value of £15,380,000; the Nummos Group with a carrying value of £470,000 and the Fiduciaire Group with a carrying
value of £980,000.
The Group tests goodwill annually for impairment with the recoverable amount being determined from value in use calculations which
are based on board approved cash flow projections. A pre-tax discount rate of 6% has been used in discounting the projected cash flows.
The valuations indicate sufficient headroom such that a reasonable potential change to key assumptions is unlikely to result in an
impairment of the related goodwill.
Based on the operating performance of the respective CGUs, no impairment loss was deemed necessary in the current financial year.
31
Annual Report & Accounts 2011
Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
14.
INTANGIBLE ASSETS continued
Company
Costs
Balance as at 1 January 2011
Reallocations
Adjustment to carrying value of investments
Balance at 31 December 2011
Amortisation and impairment
Balance as at 1 January 2011
Charge for the year
Balance at 31 December 2011
Carrying amounts
At 1 January 2011
At 31 December 2011
Client
Portfolio
£000
—
4,927
—
4,927
—
545
545
—
4,382
Client portfolio represents the value assigned to the individual client portfolio acquired through the acquisition of Zenith Trust Company
Limited and is amortised on a straight line basis over an estimated useful life of 9 years. This was previously classified as goodwill.
15.
TRADE AND OTHER RECEIVABLES
Group
Trade receivables
Other receivables
Total
Company
Trade receivables due from related parties
Other receivables
Total
31 December 2011
£000
31 December 2010
£000
3,320
1,604
4,924
4,049
1,639
5,688
31 December 2011
£000
31 December 2010
£000
6,360
211
6,571
8,042
329
8,371
Within the Group’s other receivables is a balance of £447,000 which has been personally guaranteed by Alan Kentish.
Amounts due from related parties are unsecured, interest free and repayable on demand, except for receivables from STM Swiss AG
amounting to £1,057,000 which is subordinated in favour of other creditors.
The Group’s exposure to credit risks and impairment losses related to trade and other receivables (excluding accrued income) are
described in note 21.
16.
CASH AND CASH EQUIVALENTS
Group
Bank balances
Cash and cash equivalents in the statement of cash flow
Company
Bank balances
Cash and cash equivalents in the statement of cash flow
32
31 December 2011
£000
31 December 2010
£000
3,307
3,307
3,696
3,696
31 December 2011
£000
31 December 2010
£000
2
2
101
101
STM Group Plc
17.
CAPITAL AND RESERVES
Authorised, called up, issued and fully paid
43,061,649 ordinary shares of £0.001 each (1 January 2011:
43,026,602 ordinary shares of £0.001 each)
31 December 2011
£000
31 December 2010
£000
43
43
Treasury shares
The treasury shares relate to those shares purchased by the STM Group EBT for allocation to executives under the terms of the Long Term
Incentive Plan. The trustees held 323,555 shares (1 January 2011: 323,555) at 31 December 2011, amounting to £205,000 (1 January 2011:
£205,000).
Share premium
During the year 35,047 (2010:- 133,981) shares were issued for a total share premium of £7,465 (2010:- £32,366). During 2011, transaction
costs of £nil (2010:- £nil) have been deducted from the share premium account.
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:
0.4 pence per qualifying ordinary share (2010: 0.6 pence)
31 December 2011
£000
31 December 2010
£000
172
257
18.
EARNINGS PER SHARE
Earnings per share for the year from 1 January 2011 to 31 December 2011 is based on the loss after taxation of £400,000 (2010:- profit
£1,247,000) divided by the weighted average number of £0.001 ordinary shares during the year of 43,060,977 basic (2010:- 42,976,168)
and 48,288,250 dilutive (2010:- 48,203,441) in issue.
A reconciliation of the basic and diluted number of shares used in the year ended 31 December 2011 is:
Weighted average number of shares
Dilutive share incentive plan, options and contingent consideration shares
Diluted
43,060,977
5,227,273
48,288,250
The dilutive shares have not been used to calculate the diluted earnings per share as they were anti-dilutive.
33
Annual Report & Accounts 2011 Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
19.
TRADE AND OTHER PAYABLES
Group
Bank loans (see note 20)
Bank overdraft
Loans from related parties
Deferred income
Trade payables
Deferred and contingent consideration
Other creditors and accruals
Company
Bank loans
Bank overdraft
Owed to related parties
Deferred Consideration
Other creditors and accruals
31 December 2011
£000
31 December 2010
£000
912
250
94
667
490
700
2,160
5,273
912
—
105
866
358
1,553
1,765
5,559
31 December 2011
£000
31 December 2010
£000
438
250
3,483
608
802
5,581
438
—
4,053
1,462
375
6,328
Loans from related parties amount to £94,000 and relate to a loan by the founding shareholders of Fidecs, the loan is unsecured and
interest bearing at 7% per annum.
Deferred income consists of fixed fee revenues billed in advance to clients which have not yet been earned as at the balance sheet date.
These amounted to £667,000 as at 31 December 2011 (31 December 2010: £866,000).
As at 31 December 2011 the Company had a bank overdraft with NatWest Bank Plc of £250,000 at interest of 4% per annum and is
secured by capital guarantees supplied by subsidiary companies.
Deferred and contingent consideration
Under the terms of the acquisition of STM Nummos SL a further £76,000 may be payable to the vendors depending on certain targets
being achieved.
Under the terms of the acquisition of Zenith Trust Company Limited a further £624,000 is payable during 2012.
The Group’s exposure to liquidity risk related to trade and other payables is described in note 21.
20.
OTHER PAYABLES - AMOUNTS FALLING DUE IN MORE THAN ONE YEAR
Group
Bank loan – repayable between year 2 and year 5
Convertible loan notes
Company
Bank loan – repayable between year 2 and year 5
Convertible loan notes
31 December 2011
£000
31 December 2010
£000
805
3,450
4,255
1,702
3,450
5,152
31 December 2011
£000
31 December 2010
£000
910
3,450
4,360
1,343
3,450
4,793
34
STM Group Plc 20.
OTHER PAYABLES - AMOUNTS FALLING DUE IN MORE THAN ONE YEAR continued
As at 31 December 2011 the Group had three bank loans from NatWest Bank Plc amounting to £1.7 million. The bank loans are repayable
in monthly and quarterly instalments at variable rates of interest currently ranging from 2% to 4.25% and are secured by capital
guarantees supplied by subsidiary companies.
As requested by Natwest Bank plc the Group is managing the interest rate risk of one of the bank loans with an interest rate swap. This
swap is fixed at an interest rate of 1.78% per annum and is attached to a bank loan with a balance at 31 December 2011 of £1.2 million.
The floating rate is currently in the region of 1% per annum and therefore whilst the swap is a derivative liability the cost is not
significant and therefore not disclosed separately.
In addition the Company has £3.5 million of convertible loan notes (“loan notes”). The Loan Notes have a fixed term of 4 years and carry an
annual coupon of 7%, payable half yearly. Up to 50% of each Loan Note can be converted into new ordinary shares of £0.001 each in the
Company (“Ordinary Shares”) at a price of 33p at the option of the holder in the month following the release of the Company’s preliminary
results for the year ending 31 December 2011 (“Convertible Notes”). Subsequent to year end, no loan notes were converted to equity, nor
redeemed at that date, and therefore the loan notes will run to term. The Loan Notes are secured against all the assets of the Group.
21.
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
Trade and other receivables
Cash and cash equivalents
31 December2011
£000
31 December 2010
£000
4,924
3,307
8,231
5,688
3,696
9,384
The Group’s maximum exposure to credit risks relating to one entity or group of related entities amounts to less than 10% of the overall
trade receivable amount as at 31 December 2011 and 31 December 2010.
The credit risk of monies at bank is the net carrying amount of all the Group’s deposits, the majority of which are held at NatWest Bank Plc.
Impairment losses on trade receivables
The ageing of the Group’s trade receivables at the reporting date was:
Not past due
past due 0–30 days
past due 31–120 days
More than 120 days past due
Gross receivables
31 December 2011
£000
Impairment
31 December 2011
£000
Gross receivables
31 December 2010
£000
Impairment
31 December 2010
£000
462
317
104
2,956
3,839
—
—
—
(519)
(519)
1,384
294
237
2,673
4,588
—
—
—
(539)
(539)
Standard credit terms vary between presentation of the fee note and 30 days from the date of the fee note.
The movement in the allowance for impairment in respect of trade receivables during the period was
31 December 2011
£000
31 December 2010
£000
Balance at start of period
Impairment loss (released) / recognised
Balance at end of period
539
(20)
519
212
327
539
35
Annual Report & Accounts 2011
Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
21.
FINANCIAL INSTRUMENTS continued
Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables that are not
more than one year old. This is because, invariably, the Group are administering clients’ assets and therefore have further recourses for
the recoverability of any debts outstanding.
Liquidity Risk
The following are the Group’s contractual maturity liabilities, including estimated interest payments where applicable, and excluding the
impact of netting arrangements.
31 December 2011
Non-derivative financial liabilities
Bank loans
Bank overdraft
Trade payables
Deferred consideration on acquisitions
Loans from related parties
Other creditors and accruals
Corporation tax payable
31 December 2010
Non-derivative financial liabilities
Bank loans
Trade payables
Deferred consideration on acquisitions
Loans from related parties
Other creditors and accruals
Corporation tax payable
Carrying
amounts
£000
Conditional
cash flow
£000
6 months
or less
£000
6-12 months
£000
1-2 years
£000
1,717
250
490
700
94
2,160
338
5,749
1,717
250
490
700
94
2,160
338
5,749
456
250
490
—
94
2,160
338
3,788
456
—
—
700
—
—
—
1,156
805
—
—
—
—
—
—
805
Carrying
amounts
£000
Conditional
cash flow
£000
6 months
or less
£000
6-12 months
£000
1-2 years
£000
2,614
326
1,553
105
1,765
494
6,857
2,614
326
1,553
105
1,765
494
6,857
456
326
1,362
105
1,765
494
4,508
456
—
—
—
—
—
456
1,702
—
191
—
—
—
1,893
Currency risk
The Group has a small exposure to currency risk in its investment in STM Nummos. However, as all assets and liabilities are in the com-
pany’s functional currency of Euros (€) this risk is minimal.
Interest rate risk and market risk
The company has minimal exposure to market risk. The net impact to the results on interest bearing assets and
liabilities is also considered to be minimal.
22.
LEASES
Operating Leases
Non-cancellable operating leases are payable as follows:
Less than one year
Between one year and five years
More than five years
31 December 2011
£000
31 December 2010
£000
514
1,893
2,144
4,551
514
1,974
2,577
5,065
The Group leases a number of offices from which they operate, the largest of which is for Montagu Pavilion which runs for a further 12
years.
36
STM Group Plc 22. LEASES continued
Finance Leases
Non-cancellable finance leases are payable as follows:
Less than one year
Between one year and five years
More than five years
23.
RELATED PARTIES
Transactions with key management personnel and Directors
Compensation
Key management compensation comprised:
Short-term employee benefits
Post-employment benefits
Share-based payments
31 December 2011
£000
31 December 2010
£000
6
18
—
24
6
24
—
30
31 December 2011
£000
31 December 2010
£000
348
—
—
348
390
—
—
390
Key management personnel and Director Transactions
Trusts and related parties connected to the Directors held 24.29% of the voting shares of the Company as at 31 December 2011.
Other related party transactions
As more fully explained in note 19, a loan of £94,000 has been provided to the Group by the founding shareholders of Fidecs
(the Company’s first acquisition) who are also shareholders.
The Group also leases its main premises from Fiander Properties Limited that is owned by three shareholders and a Director of the
Company. Rental costs of such premises are £285,000 per annum of which £nil was outstanding at 31 December 2011. The rental cost is
at normal market rates.
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 £5,400 for the period to 31 December 2011, of which £nil was
outstanding at 31 December 2011.
The Group provides services to subsidiaries of Rock Holdings Limited, a shareholder of the Company. These services amounted to
£150,000 during the period, of which £12,500 was outstanding at 31 December 2011.
Greystone Trust Company Limited, of which Michael Riddell is a director, charged the Company £21,500 for services rendered during
2011, of which £13,600 was outstanding at 31 December 2011.
ABT Associates Consulting Limited, of which Matthew Wood is a shareholder, charged the Company £40,000 for services rendered during
2011, of which £10.000 was outstanding at 31 December 2011.
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.
Ready Finance Ltd and Bespoke Finance Ltd, companies related to the Group by virtue of the fact that Alan Kentish is a director of both
owe the Group a combined balance of £474,356 at 31 December 2011.
37
Annual Report & Accounts 2011 Notes to the Financial Statements
For the year from 1 January 2011 to 31 December 2011
24.
SHARE BASED PAYMENTS
The Long Term Incentive Plan (“LTIP”) provides incentives for certain executives. The plan is administered by the trustees of the STM
Group Employee Benefit Trust. The nominated executive is entitled to receive fully paid shares in STM (“STM shares”) providing they
achieve certain predetermined performance targets and also satisfy a two year employment condition.
The executive will receive the shares on the first day of dealing after the end of the two year employment condition. For 2011, relating to
the 2011 performance, no shares (2010: nil) were appointed to specific individuals.
25.
GROUP ENTITIES
Principal subsidiaries
As at 31 December 2011 the Company owned the following subsidiaries which are regarded as the principal trading operations of the
Group.
Country of incorporation
31 December 2011
31 December 2010
Activity
Ownership interest
Group
STM Fidecs Limited
STM Fidecs Management Limited
STM Fidecs Insurance Management Limited
STM Fiscalis Limited
STM Fidecs Life, Health and Pensions Limited
STM Fidecs Trust Company Limited
STM Fidecs Central Services Limited
STM Fidecs Pension Trustees Limited
STM Fidecs Management (Gibraltar) Limited
Atlas Trust Company Limited
Parliament Corporate Services Limited
STM Fidecs Consumer Services Limited
STM Fiduciaire Trustees Limited
STM Fiduciaire Limited
STM Nummos SL
STM (Caribbean) Limited
Venture Media (Gibraltar) Limited
STM Life Assurance PCC plc
STM Swiss AG
Zenith Trust Company Limited
STM Nummos Limited
STM Nummos Life SL
STM Malta Limited
STM Malta Trust and Company Management Limited
STM Malta Insurance Management Limited
Isle of Man
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Jersey
Jersey
Jersey
Spain
BVI
Gibraltar
Gibraltar
100% directly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% indirectly
100% directly
Holding company
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Services and Administration
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
Administration of clients’ assets
100% indirectly
100% indirectly
Administration of clients’ assets
100% indirectly
100% indirectly
Administration of clients’ assets
100% directly
100% indirectly
100% indirectly
100% directly
Intellectual property holding company
100% indirectly
100% indirectly
Media agency
Insurance company
Switzerland
100% directly
100% indirectly
Administration of clients’ assets
Jersey
England
Spain
Malta
Malta
Malta
100% indirectly
100% indirectly
Administration of clients’ assets
100% directly
100% directly
Holding company
100% indirectly
100% indirectly
Administration of client assets
100% directly
100% indirectly
100% indirectly
100% directly
Holding company
100% indirectly
Administration of client assets
–
Administration of client assets
26.
SUBSEQUENT EVENTS
On 4 April 2012 the Company issued 8,960,000 new ordinary shares of 0.1 pence each based on a value of 17.5 pence per ordinary share
giving a total consideration of £1,568,000.
38
STM Group Plc Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held on 17 May 2012 at 11am at 18 Athol Street, Douglas,
Isle of Man IM1 1JA for the purpose of considering and, if thought fit, passing the following resolutions:
Ordinary Resolutions
1. THAT the accounts for the year ended 31 December 2011 and the reports of the Directors and auditors thereon be received.
2. As Julian Philip Telling has been appointed during the period since the last AGM, to confirm his appointment as a Director of the Company.
3. THAT Colin Douglas Porter, who has retired from office by rotation in accordance with article 88 of the Company’s Articles of Association,
be reappointed as a Director of the Company.
4. THAT Alan Roy Kentish and Michael Ross Riddell be reappointed as Directors of the Company.
5. As KPMG Audit LLC have been appointed as auditors of the Company during the period, to confirm their appointment and to reappoint
them as auditors of the Company to hold office from the conclusion of the Annual General Meeting until the conclusion of the Annual
General Meeting held in 2013.
6. THAT the authority granted to the Directors pursuant to article 7.5 of the Company’s Articles of Association, to allot and issue for cash
Ordinary Shares with an aggregate nominal value of not more than 25 per cent of the aggregate nominal value of the share capital of
the Company in issue as at 7 May 2010, be renewed and continue until the end of the annual general meeting of the Company in 2013.
By order of the Board
…………………………………………
Elizabeth A Plummer
Company Secretary
18 Athol Street
Douglas
Isle of Man IM1 1JA
10 April 2012
Notes:
A member entitled to attend and vote is entitled to appoint a proxy or proxies to attend and, on a poll, vote instead of that member. A proxy need not be a
member of the Company. A form of proxy is enclosed. Proxy forms must be returned by post or by hand to the office of the agent of the Company’s registrars,
Computershare Investor Services PLC, The Pavilions, Bridgwater Rd, Bristol BS99 6ZY not less than 48 hours before the time of holding of the meeting. The
Company specifies, pursuant to Regulation 22 of the Uncertificated Securities Regulations 2006 (SD No. 743/06), that only those members entered on the
register of members as at 10:00 am on 15 May 2012 (or in the event that the meeting is adjourned, on the register of members 48 hours before the time of any
adjourned meeting) shall be entitled to attend or vote at the meeting in respect of the number of ordinary shares registered in their name at the time. Changes
to the register of members after 10:00am on 15 May 2012 (or, in the event that the meeting is adjourned, on the register of members less than 48 hours before
the time of any adjourned meeting) shall be disregarded in determining the rights of any person to attend or vote at the meeting.
39
Annual Report & Accounts 2011 Company Information
CORPORATE
Directors
Registered Office
Advisers
Julian P. Telling
Non-Executive Chairman
Colin D. Porter
Chief Executive Officer
18 Athol Street
Douglas
Isle of Man IM1 1JA
T +44 (0)1624 626 242
Alan Roy Kentish ACA ACII AIRM
Chief Financial Officer
Company Number
005398V
Michael Ross Riddell CA
Non-Executive Director
Company Secretary
Elizabeth Anne Plummer
FCA TEP CTA
Auditors
KPMG Audit LLC
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
Registrars and CREST
Service Provider
Computershare Investor
Services (Jersey) Limited
Queensway House Hil-
grove Street St Helier
Jersey JE1 1ES
Registered Agent
Greystone Trust
Company Limited
18 Athol Street Douglas
Isle of Man IM1 1JA
Nominated Adviser
and Broker
FinnCap
60 New Broad Street
London EC2M 1JJ
Solicitors to the Company
as to English law
Memery Crystal LLP
44 Southampton Buildings
London WC2A 1AP
Solicitors to the Company as
to Isle of Man law
Appleby’s
– Advocates & Notaries 33
Athol Street, Douglas, Isle of
Man IM1 1LB
OFFICES
Gibraltar
Malta
Jersey
Spain
STM Fidecs
Montagu Pavilion
8 – 10 Queensway
Gibraltar
T (+350) 200 42686
F (+350) 200 42701
www.stmfidecs.gi
info@stmfidecs.gi
STM Malta
62 Regent House
Bisazza Street Sliema
SLM 1641 Malta
T (+356) 213 33210
F (+356) 213 33220
www.stmmalta.com
info@malta.com
STM Fiduciaire 3rd floor
Windward House
La Route de la Liberation
St Helier
JE2 3BQ
STM Nummos S.L.
Edif. Sotovila, Plaza Mayor
P.N. de Guadiaro
Sotogrande
Cádiz (Spain)
T (+44) (0)1534 837600
F (+44) (0)1534 837601
T (+34) 956 794 781
F (+34) 956 795 853
www.stmfiduciaire.je info@
stmfiduciaire.je
www.stmnummos.com
info@stmnummos.es
STM Group Plc
online
www.stmgroupplc.com/html/
investor/annual_report.asp
Annual Report & Accounts 2011 STM Group Plc 18 Athol
Street Douglas
Isle of Man IM1 1JA
T +44 (0)1624 626 242
www.stmgroupplc.com