ANNUAL REPORT AND ACCOUNTS 2023
Page
Contents
02
04
11
17
19
20
20
21
28
29
30
31
32
33
34
Chairman’s Statement
Chief Executive Officer’s Review
Corporate Governance Report
Directors’ Report
Board of Directors
Statement of Director’s Responsibilities
Directors’ Remuneration Report
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Statement of Consolidated Cash Flow
Statement of Consolidated Changes in Equity
Statement of Company Changes in Equity
Notes to the Financial Statements
1
CHAIRMAN’S STATEMENT
I am pleased to present to you the STM Group PLC (“STM”) results for the year ended 31st December 2023 - the first
full year that the newly constituted Board has been in situ.
Given the embedded value within the Group’s businesses and the backdrop of predictable recurring revenue and
ongoing profitability, my role as Chair and that of my fellow directors has been to set a strategic course which would
deliver enhanced shareholder value. This could come about by the introduction of new products and the achievement
of greater efficiencies or by the orderly break-up or sale of the Group.
As announced in January 2023, the Board commissioned an independent strategic review from a third-party
consultancy company to assess the Group’s operating businesses, identify those with the most potential for future
profitability and recommend alternative strategies for those and the remaining businesses within the Group. The
results of the review were presented to the Board in March 2023 and concluded that the success of the Group would
ultimately be dependent on its technology capabilities. The review did highlight that the anticipated externally
realisable value of the various businesses within the Group was significantly more that the market capitalisation of
the Group at the time. As a result of the strategic review, the Board initiated a technology review as the final input
required for the Board to determine the strategy going forward.
However, as well documented in the various market announcements from July 2023 onwards, the Group received
an initial approach and expression of interest in the Group, which culminated in the announcement of an offer for the
whole of the issued and to be issued share capital of the Company, issued in accordance with Rule 2.7 of the
Takeover Code, on 10th October 2023. The offer was to be effected via a Scheme of Arrangement, and the Scheme
document was issued to shareholders on 9th November 2023.
Full details of the offer are set out in the CEO’s Review within the Annual Report, but in summary the offeror, Jambo
SRC Limited (“Jambo’) would acquire the whole STM Group, with the exception of the two SIPP businesses which
would exit by way of a management buyout to be completed immediately prior to the overall transaction. The
acquisition, once completed, will deliver an up-front 60 pence per share in cash to STM shareholders, with up to a
further 7 pence per share in deferred contingent consideration at the one-year anniversary, dependant on certain
criteria.
The Scheme was approved by 99.99% of all independent Scheme Shares voted and by 89.5% of independent
Scheme Shareholders who voted at an EGM held on 6th December 2023. The transaction remains subject to
regulatory approval of the proposed change in control of the Group by the Gibraltar and Malta regulators.
Given the anticipated acquisition by Jambo, and the fact that any dividend declared would be deducted from the final
consideration under the terms of the Scheme, the Board has taken the decision not to declare a final dividend for
2023 (2022: 0.60 pence).
Turning to the performance of the business, I am pleased to confirm that the reported 2023 revenue and underlying
profit before tax were in line with management’s expectations, although reported profitability was significantly reduced
as a result of expensing £1.2 million of non-recurring professional advisory costs relating to the potential acquisition
by Jambo.
The Group’s recurring revenue continues to provide a predictable base for the Group’s ongoing profitability, and this
has been bolstered by the additional revenue generated from the new interest sharing policy that was implemented
for the UK SIPP businesses in July 2023. Similar policies are in the process of being rolled out for the other areas of
the business.
I noted in my previous Chairman’s statement that STM was at a cross-roads in its evolution, and that certain parts of
the business would be difficult to grow or to achieve a full valuation. In this regard, I am delighted to confirm that, on
14th June 2024, the Group announced it had signed a commercial agreement with Smart Pension Limited (“Smart”),
and related agreements under which, subject to trustee approval, the members in the Group’s Options master trust
will transfer to Smart’s master trust. This is likely to generate a consideration of £4.7m payable over the next couple
of years. In addition, the Group has also signed an introducers agreement with Smart, which will allow for the Group
to receive introductory fees for new business introduced by STM to Smart.
2
Importantly, the agreement allows STM to exit the UK workplace pension market, which is becoming more
competitive and starting to be dominated by the larger players. The transaction was undertaken with Jambo’s
consent.
Finally, my thanks go to all of my STM colleagues for their hard work and commitment during the course of 2023 and
into 2024.
I would like to extend my particular thanks to Therese Neish, who left the Group on 31st May 2024, for her
considerable contribution and dedication to the Group over many years.
I look forward to updating the market in due course in relation to the change of control approvals from the Malta and
Gibraltar regulators which, once received, will allow the acquisition by Jambo to conclude and the initial consideration
of 60 pence per ordinary share to be paid to shareholders.
Nigel Birrell
Chairman
26th June 2024
3
CHIEF EXECUTIVE OFFICER’S REVIEW
Introduction
The 2023 financial year has been dominated by strategic projects, with the focus in the second half of the year being
on the initial approach and expression of interest by Jambo SRC Limited (‘Jambo”) in June 2023, which culminated
in an offer by Jambo for the whole of the issued and to be issued share capital of the Company on 10th October
2023, subject to regulatory approval of the change of control in Gibraltar and Malta. The offer was also conditional
on the UK SIPP businesses completing a management buy-out immediately prior to the Court approval of the Scheme
of Arrangement (the “Scheme”) by which the acquisition was to be effected, subject to change of control approval in
the UK.
The Scheme was approved in an EGM on 6th December 2023 with 99.9% of Scheme shares voting to accept the
Scheme offer. As at the date of these financial statements, the FCA in the UK has approved the prospective change
of control of the companies subject to the management buyout, but the approval processes in Gibraltar and Malta
have yet to be concluded.
2023 commenced with the appointment of third-party consultants to undertake a strategic review of the Group’s
operation, the results of which were reported to the Board in late March 2023. Further details of the results of the
review and the impact of the approach and subsequent offer by Jambo on the Board’s conclusions and further actions
are set out in the Chairman’s Statement.
Notwithstanding the significant distractions arising from the approach by Jambo, the Group has continued to trade in
line with management expectations.
The continuing high percentage of annual recurring revenue for 2023, amounting to 81% of total revenues,
underpinned the day-to-day performance of the various trading divisions, and for the latter part of 2023 this was
supplemented by the new interest sharing policy implemented in the UK SIPP businesses.
The integration of the Mercer SIPP and SSAS portfolios acquired in September 2022 was successfully completed
during the course of 2023, and the books of business acquired performed in line with expectations.
New business volumes remained generally disappointing across the Group, but this needs to be viewed in
conjunction with the fact that certain areas of the business would only see better volumes upon an improved
technology-based service offering, and that potential strategic developments of the Group’s technology platforms
have been paused pending the outcome of the Jambo transaction. All strategic projects remain on hold whilst the
Group awaits the change of control regulatory approvals previously referred to,
Finance review
Financial performance in the year
The principal key performance indicators used by the Board to assess the financial performance of the Group are as
per Table 1 below.
The Group reports both basic and adjusted financial key performance indicators in Table 1 and 2 below, as the impact
of non-recurring movements does not allow for a clear understanding of operating performance without highlighting
key non-recurring elements.
The Group reported revenues of £28.1 million for 2023 (2022: £24.1 million). The 17% uplift in revenues over 2022
is largely attributable to a full year’s revenue contribution from the 2022 acquisition of the SIPP and SSAS books
from Mercer, which contributed £2.3 million in additional revenues, and the additional £3.2 million interest income
earned as a result of the new SIPP interest sharing policy. This offset the shortfalls in new business revenues across
the Group.
Profit before other items on both a reported and adjusted basis for 2023, was £3.2 million and £5.8 million respectively
(£3.3 million and £4.7 million respectively), and the latter represented a healthy uplift compared to 2022.
4
The uplift in adjusted profit before other items over 2022 was principally due to the impact of the client interest sharing
policy incepted in the SIPP businesses in July 2023 which flowed through to the bottom line.
On a like-for-like basis, adjusted profit before tax was similar to the previous year, with 2023 showing £3.1 million
(2022 £2.8 million), although on a statutory basis the pre-tax result for 2023 was significantly lower at £0.4 million
(2022 £1.6 million). This reduction was primarily driven by the one-off, non-recurring professional advisory and legal
fees of £1.2 million incurred in relation to the proposed acquisition of the Company by Jambo.
In addition, as set out below in Table 2, there were a number of non-recurring income and expense items that are
added back to the reported measure for Profit Before Tax so as to give a better picture of the operating performance
of the business. For 2023, this included £0.6 million (2022: £Nil) of deferred consideration and old debtors previously
recognised in the sale of the Company Management and Trustee Services businesses in 2021, £0.2 million of
deferred consideration previously recognised on the Berkeley Burke and Mercer acquisitions in 2020 and 2022
respectively that were ultimately not deemed to be recoverable (2022: £Nil), £0.5 million (2022: £0.5 million) of one-
off costs in relation to management restructuring and legal costs and £0.1 million (2022: £Nil) advisory fees paid for
the independent strategic review undertaken in the first part of the year.
5
Table 1
KPI
Revenue
(£’000s)
Recurring
revenue
(£’000s)
Definition
Income derived from the
provision of services.
Revenue derived from annual
management charges and/or
contractual
fee
agreements.
fixed
2023
(reported)
28,078
2022
(reported)
24,094
2023
(adjusted)
28,078
2022
(adjusted)
24,599
22,686
22,219
22,686
22,219
Interest income
(£’000s)
Interest earned
the
Group’s and customer cash
balances
from
3,740
531
3,740
531
Profit before
other items
(£’000s)
Profit before
taxation
(£’000s)
Profit after
taxation
(£’000s)
Earnings per
share (pence)
Profit margin
before other
items (%)
less administrative
Revenue
expenses
i.e. profit before
finance income and costs, gain
on disposal of subsidiary
bargain purchase gain, goodwill
impairment and gain on the call
options and before taxation.
Revenue
expenses and other items
less administrative
less administrative
Revenue
expenses and other
items
less/add taxation charge/credit
Profit after taxation attributable
to shareholder of the Company
divided by weighted average
number of ordinary shares
outstanding
Profit before other items
divided by revenue.
3,200
3,321
5,824
4,686
442
1,578
3,066
2,778
417
854
3,041
2,054
0.70
1.42
5.12
3.44
11%
14%
21%
19%
Adjusted measures are net of non-recurring costs and other exceptional items that do not form part of the normal
course of business.
6
Table 2
Revenue
Profit before
other items
Profit before tax
2023
2022
2023
2022
2023
2022
£'000s
£'000s
£'000s
£'000s
£'000s
£'000s
Reported measure
28,078
24,094
3,200
3,321
442
1,578
Add: adjustment due to revenue
recognition policy change on
acquisition
Add: integration and acquisition
cost
Add: Project Atlantic professional
costs
Less: bargain purchase gain on
acquisition and gain on call
options
Less: loss on disposal of
companies and trust
management
Less: movement in deferred
consideration related to prior
year acquisitions
Add: costs of strategic review
Add: other non-recurring costs
–
–
–
–
–
–
–
Adjusted measure
28,078
24,599
Tax Charge and Earnings per Share
505
–
–
–
505
390
–
–
1,202
–
1,202
–
–
–
–
–
–
761
135
–
–
–
–
–
–
–
761
135
526
5,824
470
526
4,686
3,066
470
2,778
505
390
–
(327)
162
–
–
The tax charge for the year was £0.03 million (2022: £0.7 million). This was an effective tax rate of 6% (2022: 46%),
which was lower than the rates noted in prior years due to the writeback of tax over provided for in prior years. In the
year ended 31st December 2022, the Group’s effective tax rate was higher than the jurisdictional effective tax rate,
as tax losses brought forward or incurred in that year in some jurisdictions could not be utilised by the profitable
subsidiaries in other jurisdictions and dividends remitted to the holding company by overseas jurisdictions were higher
than in prior years, thus resulting in a higher overall tax charge.
Earnings per share (“EPS”) for 2023 were 0.7 pence per ordinary share compared to 1.42 pence per ordinary share
in 2022. The decrease was a direct result of the lower profit before tax as explained above. There were no dilutive
factors in either 2023 or 2022.
Cashflows and Balance Sheet
Cash and cash equivalents amounted to £18.4 million as at 31st December 2023 (2022: £19.2 million), with net cash
inflow from operating activities of £2.5 million for the year ended 31st December 2023 (2022: £5.3m).
The bank loan from RBSI, drawn down in 2021 and 2022 to finance the acquisition of the SIPP and SSAS books
from Mercer, remained in place as at 31st December 2023. As at the year end the outstanding balance on the facility
was £4.8 million (2022: £5.4 million).
Cash and cash equivalents, net of the above mentioned outstanding bank loan, as at 31st December 2023 amounted
to £13.6 million (2022: £13.9 million).
7
As would be expected for a Group regulated in several jurisdictions, a significant proportion of the gross cash balance
is required to underpin the regulatory capital and solvency requirements.
The cash and cash equivalents required for solvency purposes varies as other, non-cash, assets can be used to
support the regulatory solvency requirement. The total regulatory capital requirement across the Group as at
31st December 2023 was £17.3 million (2022: £17.3 million).
As further disclosed in the notes to the financial statements, the Carey (“Options”) v Adams case came to a conclusion
in 2022 and was settled during the course of that year. During the course of 2023 it was therefore possible to quantify
the likely exposure to similar cases with the same profile. In a similar manner, but in an unrelated case, Options was
unsuccessful in the Judicial review hearing of a previously determined case by the Financial Ombudsman Scheme.
As a result, this case has been settled by the professional indemnity insurers, and cases with similar characteristics
have now been provided for as at 31st December 2023. Whilst a provision has been established for the estimated
likely amounts payable in relation to such claims, the Group has recognised an asset equal to an equivalent recovery
of such exposure from the Group’s professional indemnity insurers, such that the net assets indicated in the
consolidated statement of financial position are not affected. Further details in relation to the provisions held are set
out in note 28 to the financial statements.
Within the consolidated statement of financial position, the Group recognised accrued income in the form of work
performed for clients but not yet billed, as well as accrued interest income, of £3.1 million as at 31st December 2023
(2022: £0.9 million). Additionally, deferred income (included within current liabilities in the statement of financial
position), relating to annual fees invoiced but not yet earned, amounted to £3.7 million (2022: £3.8 million). Both
these figures give good visibility of cash collections and, in the case of deferred income, revenue still to be earned
through the Income Statement in the coming months.
Dividend
The Board is not proposing a final dividend (2022: 0.60 pence per ordinary share), as, under the terms of the Scheme
offer, any dividend declared would be deducted from the overall consideration payable by Jambo in respect of the
potential acquisition, with potential adverse tax consequences for shareholders. As a result, the total proposed
dividend for 2023 amounted to Nil pence per ordinary share (2022: 1.20 pence per ordinary share).
Operational Performance
Pensions
The Group’s pension administration businesses continue to be the largest revenue generating stream, accounting
for 84% of total Group revenues (2021: 77%), excluding interest earned on client interest sharing policy.
Total revenue, excluding interest on client funds, across the Group’s pension businesses amounted to £20.4 million
(2022: £18.5 million). The full year of the Mercer SIPP and SSAS acquisition during 2022 contributed £2.8 million of
revenue in 2023 (2022: £0.5 million in 4 months).
In addition to the above pension administration revenue, the Pensions division also benefited from the increase in
market interest rates and the implementation of its interest sharing policy within the Group’s SIPP businesses, which
was incepted in July 2023 to bring the Group’s policy in line with market norms. Across the whole of the pension
division, interest income for 2023 amounted to £3.0 million (2022: £0.3 million). 68% of this amount (2022: 86%) was
attributable to the SIPP businesses.
The administration of the Group’s QROPS products continues to be the largest revenue generator within the pensions
division, accounting for £9.0 million of revenue (2022: £9.4 million) and remains a robust and predictable revenue
stream. Since the UK pension legislation changes in 2017, these products are no longer a growth driver. There
remains a small net attrition rate on the QROPS book which is expected to continue as the member age profile
gradually increases and members look to take advantage of flexi-access benefits. The administration of such
schemes is undertaken in Malta and Gibraltar.
8
The SIPP businesses, both Options Personal Pensions and London & Colonial Services Limited, contributed total
pension administration revenues of £4.7 million in 2023 (2022: £4.1 million). As noted above, the increase is down
to the full year benefit of the Mercer SIPP book of business acquired in September 2022.
The Group’s Options Corporate pension auto-enrolment business generated revenue of £4.1 million in 2023 (2022:
£3.4 million) and has performed as expected in a relatively mature marketplace.
The final revenue stream of the pensions divisions comes from the SSAS and EBC third-party administration
businesses. These contributed revenues of £2.7 million in 2023 (2022: £1.6 million), with the uplift again being down
to a full year contribution from the Mercer SSAS book acquired in September 2022.
Life Assurance
The combined revenues of the two life assurances businesses in Gibraltar was £4.0 million in 2023 (2022: £5.0
million). Those businesses did not generate any new business revenues from the Group’s short term annuity product,
which had contributed circa £0.8 million of revenue in 2022.
The main products for the life companies remain the flexible annuity products for both private wealth and pension
solutions. Whilst there has been a small increase in illustrations requested and provided during 2023, disappointingly
we have not seen conversions increase, and the Group has struggled to broaden the range of IFAs that utilise the
products.
During the latter part of the year, the life companies revisited the pricing of the flexible annuity products and capped
the establishment fee. Whilst this potentially reduces any upfront fees, it is anticipated that this will make the product
more compelling and attractive to the larger potential policyholders.
The Group retains its intention to broaden the range of products that will be available through the two life companies,
and it is expected that over time this should allow stronger organic growth. However, part of that strategy will be
reliant on the finalisation of the technology review instigated as part of the strategic review but subsequently deferred
in the light of the proposed acquisition of the Company by Jambo which would determine what systems could and
should be used as the main administration platform for the Group.
Regulatory developments – Consumer Duty
The Consumer Duty rules introduced by the Financial Conduct Authority in the UK came into effect on 31st July
2023.
These rules require regulated firms to act to deliver good outcomes for retail customers.
These outcomes relate to:
• Products and services;
• Price and value;
• Consumer understanding; and
• Consumer support.
The new rules require firms to consider the needs, characteristics and objectives of their customers – including
those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well
as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes
are being met.
They apply to all UK retail customers, whether serviced by firms based in the UK or in other jurisdictions such as
Gibraltar.
The Group recognised the importance of the new rules and established a project group to identify the key factors to
be considered in assessing the rules, develop new or amended rules and processes (including data gathering) to
enable the Group to comply with its Consumer Duty obligations and to oversee such compliance.
The 31st July 2023 deadline was met in all material aspects, with some minor additional processes and procedures
being identified for future development.
The process is ongoing and the Group continues to prioritise the delivery of good outcomes for its retail customers.
9
Outlook
The future direction of the STM Group is currently awaiting the outcome of the applications by Jambo to the Gibraltar
and Maltese regulatory authorities for change of control approvals pursuant to the proposed acquisition by Jambo of
the whole of the issued share capital of the Company, and to sanction the completion of the transaction that was
approved by 99.99 % of Scheme shares voted on 6th December 2023.
In the meantime, other than the potential exit strategy of the Options master trust from the UK workplace pensions
marketplace, which had been agreed by both the PLC Board and the potential acquirer as set out in the Scheme
document, there is minimal ability to make strategic decisions on the business.
On 14th June 2024, the Board announced that the Group had signed a commercial agreement with Smart Pension
Limited in which, subject to approval by the trustees and regulator, members transferring from Options Master trust
to Smart would result in Smart paying a consideration to the Group. It is anticipated that, over a two-year period, this
consideration is likely to amount to circa £4.7million. In addition, the Group also entered into an introducers
agreement with Smart at the same time, whereby any new members introduced to Smart by the Group’s existing or
new intermediary contacts would lead to introductory commission income for the Group. The agreement is in place
for a maximum period of three years, and management estimates that the quantum of such additional introductory
commission could lie in the range of £1.0 million to £5.0 million over the three-year period.
Notwithstanding the above, the Group’s businesses continue to perform in line with expectations, and underlying
performance for 2024 will continue to benefit from the interest sharing policies for the SIPP businesses that were
implemented in the second half of 2023.
Interest sharing policies for the other parts of the Group have now been agreed, and these are in the process of
being rolled out. It is anticipated that this will provide additional contribution for 2024, although, given the ongoing
uncertainty around market interest rates, it is not possible to forecast any incremental contribution over market
expectations with any material degree of accuracy
Whilst the technology review referred to above remains on hold as a result of the offer by Jambo, that process will
need to be recommenced once the potential acquisition has been approved by the regulators in Malta and Gibraltar.
As noted in my 2022 report, the outcome of any technology reviews will no doubt determine the strategy that the Plc
board will take going forward. The UK and expatriate pension space remains buoyant and exciting, with opportunities
to differentiate the business from industry peers, but only if the technology can support a self-serve administration
process.
I would like to take this opportunity to thank all my STM colleagues, and particularly Therese Neish, who returned as
interim CFO on a fixed-term contract which was expected to see the conclusion of the acquisition, for their continued
hard work and professionalism in carrying out their duties.
The Board looks forward to updating you on the progress of the proposed acquisition of the Company by Jambo in
due course.
Alan Kentish
Chief Executive Officer
26th June 2024
10
CORPORATE GOVERNANCE REPORT
The Board is responsible for establishing and monitoring the strategic direction and performance of the Group, within
a framework of prudent controls.
STM has formally adopted the Quoted Companies Alliance Corporate Governance Code (the “Code”) and remained
compliant with the Code throughout 2023 except that the Company did not have a quorate Audit & Risk Committee
from 1st May 2023, as there were only two non-executive directors from that date whereas the quorate number for
that Committee is three. During the period from 1st May 2023 on, the work of the Group’s Audit & Risk Committee
was overseen and, where appropriate, undertaken by the full Board of Directors. This report sets out below how the
Directors have applied the principles, and the spirit, of the Code.
STRATEGY
STM’s overarching strategy is to be the pensions and life assurance provider of choice in our chosen markets, being
UK citizens who have or had a UK company pension scheme and have either moved overseas or remain in the UK.
Through organic growth, product development and targeted acquisitions, the Group has continued to leverage our
reputation for product innovation and service to build sustainable, recurring revenues within a framework of sound
governance and risk management.
The Group’s business model has been to:
•
•
•
•
•
•
•
•
provide a range of innovative pension solutions to customers across our target markets.
promote the Group’s Pensions Administration service and associated Life Assurance products to internationally
mobile individuals with a focus on those that have previously worked in the UK.
focus on high growth, well-regulated markets.
operate the highest levels of service to both our customers and financial intermediaries in all jurisdictions.
to embed a culture of customer service, compliance and sound internal controls to build a sustainable, ethical
business.
differentiate from UK competitors by being able to effectively operate within the more complex requirements of
the UK expatriate market.
differentiate
product/jurisdictional offering.
to identify and promote products, through the Group’s intermediary partners, to UK residents.
levels, and a more comprehensive
international competitors
through service
from
During the first half of 2023 the Board recognised that, whist it has a wide range of products and services, it is
important to focus on the areas that have the potential to deliver step-change in profitability. As such it started the
process of reviewing and challenging the strategy for the next three to five years by engaging with external advisors
who carried out an independent review to identify areas to focus on. The Board assessed these recommendations
and started the process of refining the strategy.
The strategic review process required a review of the areas of the business that were not likely to materially grow in
revenue and profitability in the short to medium term, with a view to conducting a staged realisation programme
where appropriate. As such the Board had already commenced the process of examining options for the Options
Workplace Pension Master Trust, the auto-enrolment vehicle which is administered by the Group’s wholly owned
subsidiary, Options Corporate Pensions UK Limited.
The strategic review was put on hold during the summer following an approach by Jambo SRC Limited (“Jambo”) to
acquire the entire issued and to be issued ordinary share capital of STM. On 10th October 2023, the boards of
directors of both STM and Jambo announced that they had agreed the terms and conditions of a recommended cash
acquisition by Jambo of STM (the "Acquisition"). It is intended that the Acquisition will be effected by means of a
scheme of arrangement under Part X of the Isle of Man Companies Act 2006 (the "Scheme").
The Board recognised that, whilst there were significant growth and value realisation opportunities for the Group in
the short to medium term, there were also uncertainties and risks which may impact the Group’s ability to both
optimise growth as a standalone quoted entity, and to execute a realisation strategy of certain parts of the business.
The Board further acknowledged that there were additional commercial benefits which could be obtained as part of
a larger group with a clear vision to deliver a complete solution to pension savers and members. As such it
recommended the acquisition to STM’s shareholders.
Further details of the strategic review and the proposed Acquisition of STM by Jambo are set out in the Chairman’s
Statement and the CEO’s Review within the Annual Report.
11
RISK MANAGEMENT
The Board is ultimately responsible for the Group’s risk management framework. Setting strategy includes
determining the extent of exposure to the identified risks that the Group is able to bear and willing to take.
The Group operates a formal risk management framework which has been embedded across the Group and is
overseen and monitored by the Board. In addition, the Board has adopted a formal risk appetite statement against
which our strategy, business model and capital projects are tested and assessed.
The risk management function oversees the risk management framework day to day and is responsible for the
implementation of risk management policies and processes throughout the Group. The compliance function in each
jurisdiction provides assurance to the Group Audit & Risk Committee on regulatory and reputational risk through the
completion of an annual compliance monitoring plan.
The Audit and Risk Committee generally meets not less than four times a year and reports to the Board on risk across
the Group. As noted above, in the particular circumstances of the proposed acquisition of the Group by Jambo SRC,
risk matters have been considered by the full Board during 2023.
Further assurance that risk management processes are embedded and operating effectively is achieved via the
internal audit function, which is itself supported by specialist co-sourced audit consultants and overseen by the Audit
and Risk Committee.
The Board has carried out an assessment of the principal risks facing the Group and have concluded that these
remain materially as applied in prior years, namely:
Area
Description of risk
Examples of mitigating activities and
factors
Change
year
from prior
Distribution
and market
demographics
Our markets are serviced by a
limited number of
intermediaries and product
providers thus creating a
competitive environment.
Reputational
risk
A circumstance could arise
which would adversely impact
on the Group’s reputation,
including adverse publicity
from the activities of
legislators, pressure groups
and the media.
• Appointment of Group Business
No change
Development Director in March 2023 and
further expansion of this team in Q4 of
2023.
• Strong focus on intermediary liaison and
customer experience
Innovative product development
Loyal intermediary base
•
•
• Board review of regulatory and business
changes
• High level of compliance in product and
service delivery
• Putting the customer at the heart of
decision-making processes
• Retained financial PR and media
relations consultancy to provide ongoing
support and media contact.
No change
12
Area
Description of risk
Examples of mitigating activities and
factors
Change
year
from prior
Regulatory
Risk
Loss arising from regulatory
changes in the markets within
which the Group operates or
breach of existing laws and
regulation.
Key personnel The Group could be adversely
affected if there was a loss of
key personnel or an inability to
recruit individual with the
appropriate skills set.
Geopolitical
risks
Non-
performing
investments
The Group could be adversely
affected by changes in existing
legislation, fiscal policy or
political factors.
The Group recognises that the
UK SIPP industry is becoming
more litigious over non-
performing assets and that
STM also has an exposure to
QROPS’ non-performing
assets. The Group could
therefore be adversely affected
by this. The market for
professional indemnity
insurance continues to
contract.
No change but
regulatory environment
in the UK continues to
tighten with increased
scrutiny from the
Financial Services
Ombudsman and the
Financial Conduct
Authority (“FCA”)
(including the
Consumer Duty
obligations introduced
by the FCA becoming
effective from 31st July
2023 – see further
comments in CEO’s
Review)
No change – the Board
recognises that whilst
there is currently no
CFO in place there are
measures in place to
ensure the finance
function remains
effective with
appropriate oversight at
Board level.
No material change.
No material changes in
quantum of non-
performing assets.
Legal and regulatory
environment continues
to tighten.
• Subsidiary Boards with experience in
regulated businesses
• Dedicated Compliance function,
supported by specialist external
consultants in the UK and Gibraltar
• Completion of an annual compliance
monitoring plan
• Risk Management monitors legislative
changes and supports jurisdictional
compliance functions as required
• Expert third-party legal and / or
compliance advice is sought where
necessary
• All companies comply with the respective
jurisdiction’s solvency capital
requirements
• Action plan developed and implemented
to enable the Group to fulfil its
obligations under the Consumer Duty
rules introduced by the Financial
Conduct Authority in the UK, which
became effective from 31st July 2023
•
The Group offers competitive
remuneration packages
• Succession planning
•
The Group provides appropriate training
for staff and management
The Group promotes a favourable work
environment to retain and attract staff
•
•
The Group is diversified in both its
product range and the jurisdictions from
which it administers them
• No material exposure to sanctioned
•
markets or individuals
The Group does not provide financial or
investment advice to its customers
• Adherence to regulatory requirements
and appropriate due diligence
procedures expected of a trustee for
onboarding intermediaries and
customers.
• Professional indemnity insurance in
place.
13
Area
Description of risk
Examples of mitigating activities and
factors
Change
year
from prior
Technology
disruption
The Group could suffer
operational disruption in the
event of technology disruption
such as a cyber-attack or
hardware failure.
Climate risk
Climate risk is the risk of
adverse impacts on the
Group’s business caused by
climate change
• Significant and ongoing investment in IT
systems
• Cyber Essentials accreditation
• Migration of key business applications
into the Cloud as well as flexible
provisioning allowing STM to scale
up/down when needed
• Ongoing management of deployment
and maintenance of Microsoft
applications to enable the Group to
continue to function effectively
notwithstanding local or wider disruption.
• Periodic testing to identify vulnerabilities
and deliver improvements
• Detailed disaster recovery and business
•
continuity plans in place.
Increased awareness of climate related
risks, policies, business impact and
disclosure requirements.
Cyber threat has
intensified. Steps taken
to mitigate risk,
particularly around
remote working
practices.
No material change.
Financial risks The Group has exposure to
the following financial risks:
These risks are addressed within Note 25 of
the financial statements
No material change.
Liquidity risk
• Credit risk
•
• Market risk
•
• Currency risk
Interest rate risk
LEADERSHIP
The Board is responsible to shareholders for the proper management and governance of the Group. It is responsible
for strategic planning, business acquisitions and disposals, risk management, authorisation of major capital
expenditure and material contractual arrangements, setting policies for the conduct of business and approval of
budgets and financial statements.
The Chairman is responsible for over-seeing the development and implementation of the Company’s strategy, its
governance framework and Board effectiveness. The Chief Executive is responsible for delivery of the strategy and
the day-to-day management of the Group by the senior executive team. The Board is committed to continually
developing the corporate governance and management structures of the Group to ensure they adapt to the changing
needs of the business. The non-executive directors are considered by the Board to be independent of management
and free from any relationship which might materially interfere with the exercise of independent judgment.
The non-executive directors provide independent oversight and challenge to the Board and bring experience at a
senior level of business operations and strategy. During the year the Company Secretary was responsible for
ensuring that Board procedures were observed and the Company’s obligations as an AIM listed entity on the London
Stock Exchange were met. Whilst the Board acknowledges that the Company Secretary left the business on 31 st
December 2023, it remains confident that there are measures and resources in place to ensure that the obligations
of the Company continue to be met.
The profiles of the individual board members can be viewed on page 20.
The Board comprises an appropriate balance of industry, finance and public market skills and experience, as well as
an appropriate balance of personal qualities and capabilities to successfully oversee and challenge the Group’s
strategy. The Group fully supports and funds any training, formal or otherwise, that is required by any individual Board
member so as to ensure that their knowledge and experience remains relevant and effective.
14
BOARD EFFECTIVENESS
An internal review of Board effectiveness, led by the then Chairman, was carried out in February 2021 by means of
a questionnaire and one-to-one sessions. The findings were considered and implemented. Given the number of
Board changes in 2022 and 2023, as well as the pending acquisition, no review exercise was undertaken during the
year or to date.
CULTURE
The Board promotes a culture that is based on sound ethical values, standards and behaviours. This culture is visible
in the Board’s actions and decisions, as well as those of the executives and senior management team. These
corporate values guide the objectives and strategy of the business and form the backbone of our Code of Conduct
policy. Our long-term growth expectations are underpinned by the principles within this Code of Conduct.
The Group promotes a ‘customer first’ ethos which is at the heart of decision-making processes, aligned to a positive
and proactive relationship with our stakeholders.
This culture has been communicated to all employees and is reinforced by the training program which all staff
participate in. This starts with the Code of Conduct forming part of any new member of staff’s induction program, and
the application of the Code of Conduct is considered as part of all STM employees’ annual appraisal process.
GOVERNANCE
During the year the Board comprised two executive and, since the resignation of Graham Kettleborough as a non-
executive director in April 2023, two independent non-executive directors (including the Chairman). The Board
acknowledges that there is now no Chief Financial Officer in place since Therese Neish stepped down on 31st May
2024. However, it remains confident that it has the resources in place to ensure the business and the finance function
continue being run effectively during the current period until the acquisition completes.
The independence of directors is assessed periodically as part of the Board evaluation process. All non-executive
directors have been appointed from outside the Group and are considered independent as defined by the Code.
The Board meets bi-monthly throughout the year, or more frequently if appropriate. To enable the Board to discharge
its duties, all directors receive appropriate and timely information. Briefing papers are distributed to all directors in
advance of the Board meetings. There is a formal agenda followed at all Board meetings which ensures discussions
and decisions to be made on all strategic, financial and operational matters affecting the business.
The Board has established an Audit & Risk Committee and a Remuneration Committee, both with formally delegated
duties and responsibilities. The Directors do not consider that, given the size of the Board, it is necessary at this
stage to have a Nomination Committee. Succession planning is carried out by the Board. In the absence of a fully
quorate Audit & Risk Committee, the full Board continues to meet and discharge its duties on such matters. The
Remuneration Committee comprises both the non-executive directors, with Nigel Birrell acting as Chairman.
The Board had commenced recruitment processes for an additional independent Non-Executive Director and a
new Chief Finance Officer during the first half of 2023, following Graham Kettleborough’s notification of his intention
to resign as a director on 28th April 2023 and Therese Neish’s confirmation that she would not seek to extend her
then fixed term contract beyond 2nd October 2023 (subsequently extended to 31st May 2024).
The processes were suspended following the approach and subsequent offer by Jambo. Should the proposed
acquisition by Jambo not take place, the Board would recommence the recruitment processes in order to recruit a
new Chief Finance Officer and an additional independent Non-Executive Director as soon as possible. Once
completed, the Audit & Risk and Remuneration Committee would again become quorate.
AUDIT & RISK COMMITTEE
The Audit & Risk Committee reviews the integrity of the financial statements of the Group, announcements relating
to financial performance, accounting policies, the application of critical accounting judgments and practices, the
operation of internal controls and the effectiveness of the financial reporting policies and systems. It is responsible
each year for satisfying itself on the independence and objectivity of external auditor, agreeing the audit plan and the
level of audit fee. The Audit & Risk Committee ordinarily meets at least four times a year and at such other times as
the Chairman of the Committee sees fit. The Chairman of the Committee is appointed by the Board.
During 2023, the Audit & Risk Committee met on two occasions, with ongoing risk monitoring being undertaken in
conjunction with the full Board as noted above.
15
The Committee and the Board continued to monitor the Group’s risk appetite and risk framework, its policies,
methodologies, systems, processes and procedures, through a three-lines of defence model. The first line being the
business systems and controls in place to prevent and detect errors, the second provided by compliance monitoring
and the third by internal audit review. The Group’s risk and compliance capabilities continue to evolve, providing
local-level management and Group level oversight.
The Audit & Risk Committee has primary responsibility for the Group’s Risk Appetite Statement which sets out the
Group’s attitude to risk and the limits of acceptable risk taking. The Committee has established the high-level
qualitative Risk Appetite Statement for the Group and requires the Subsidiaries to link their own Risk Appetite to the
Group. The subsidiaries are required to identify and manage Key Risk Indicators. The statement is subject to annual
review by the Audit & Risk Committee and the Group Board. The Committee makes recommendations to the Board
in respect of any risks faced by the Group outside of its declared risk appetite.
As noted above, as the Audit & Risk Committee has not been quorate since 30th April 2023, the Board acknowledged
the position and has overseen and, where appropriate, discharged these responsibilities on behalf of the Committee.
The Audit & Risk Committee is responsible for the Risk Framework with all risks identified being recorded in the
Corporate Risk Register and reviewed by the Committee on a biannual basis.
REMUNERATION COMMITTEE
The duties of the Committee are to:
•
•
•
•
•
determine and agree with the Board the policy for the remuneration of the Chairman, Executive Directors and
other members of the Group Executive team.
determine individual remuneration packages including bonuses, incentive payments, share options and any
other benefits.
determine the contractual terms on termination and individual termination payment.
be informed of and advise on changes in benefit structures in the Group; and
agree the policy for approving expense claims of the Chief Executive and the Chairman of the Board.
The Committee ordinarily meets at least twice in each year and at such other times as the Chairman of the Committee
sees fit. The Chairman of the Committee is appointed by the Board.
The Committee met twice in 2023. Key areas of focus included the extension of the CFO’s fixed term contract and
the retention arrangements for the proposed acquisition of the Company.
Directors’ attendance at scheduled meetings of the Board and its Committees that they were eligible to attend during
2023 is shown below:
Nigel Birrell
Alan Kentish
Therese Neish
Peter Smith[1]
Graham Kettleborough [2]
Board
Audit & Risk
Remuneration
14/14
14/14
13/14
13/13
5/5
2/2
-
-
2/2
2/2
2/2
-
-
2/2
2/2
[1] Peter Smith was appointed on 26th January 2023
[2] Graham Kettleborough resigned with effect from 30th April 2023
Peter Smith
Non-Executive Director
26th June 2024
16
DIRECTORS’ REPORT
The Directors of STM Group PLC present their Annual Report together with the financial statements of the Group
and the Company and the independent auditors’ report for the year ended 31st December 2023. These will be laid
before the shareholders at the Annual General Meeting, details of which will be sent to shareholders in due course.
Principal activities and business review
The principal activity of the Group during the year was the provision of UK and international retirement solutions and
life assurance products. A review of the business performance during the year ended 31st December 2023 is
contained in the CEO’s Review within the Annual Report.
Result and dividends
The retained profit for the financial year of £417,000 (2022: £854,000) has been transferred to reserves.
The final dividend for the year ended 31st December 2022 of 0.60 pence per ordinary share (£356,000 in aggregate)
was paid during the year. No interim dividend was declared or paid in respect of the year ended 31st December 2023
(2022: 0.60 pence per ordinary share) and the Directors do not recommend any dividend for the year (2022: 0.60
pence per ordinary share). This is consistent with the terms of the offer, via a Scheme of Arrangement, by Jambo
SRC Limited for the whole of the issued and to be issued share capital of the Company announced on 10th October
2023 and approved by the Company’s shareholders on 6th December 2023.
Going Concern
The Directors have prepared the financial statements on a going concern basis, as in their opinion the Group is able
to meet its obligations as they fall due for a period of at least 12 months from the date of this report. In considering
this requirement, the Directors have considered the three-year business plan, three-year budgets and rolling cashflow
forecasts for the forthcoming 18-month period and the level of professional indemnity insurance held by the Group
and the indemnity related to the UK SIPP claims. These show that the Group should continue to be cash generative,
and have sufficient resources to meet its business objectives, both in the short-term and in relation to its strategic
priorities.
Having due regard to these matters, the Directors have a reasonable expectation that the Group and Company have
adequate resources to continue in operational existence for at least 12 months from the date on which the financial
statements were approved and signed. As such, the Board continues to adopt the going concern basis in preparing
the financial statements.
The ongoing Russian invasion of Ukraine has led to the imposition of economic and other sanctions against the
Russian state, businesses, and certain personnel. But for the impact on monetary policy, most notably interest rates,
we do not expect this to have a significant impact on the Group’s operations in the foreseeable future, but
management continues to monitor the situation.
Directors
Details of the Directors of the Company who served during the year and to date are:
Alan Kentish
Nigel Birrell
Therese Neish (resigned 31 May 2024)
Peter Smith (appointed 19 January 2023)
Graham Kettleborough (resigned 28 April 2023)
Alan Kentish has an interest in 6,418,817 ordinary shares in the Company (10.8% of the issued share capital). These
shares are held in the name of Clifton Participations Inc and form part of the assets of the Perros Trust of which Alan
Kentish is a potential beneficiary. Therese Neish has an interest in 492,756 ordinary shares of the Company (0.8%
of the issued share capital).
None of the other Directors had any interest in the issued share capital of the Company, either at the year-end or as
at the date of this Report.
International Financial Reporting Standards (“IFRS”)
These financial statements were prepared under IFRS, and interpretations adopted by the International Accounting
Standards Board (“IASB”).
17
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 more of the issued ordinary share capital of the Company as at 25th June 2024 or any persons who, directly
or indirectly, jointly or separately, exercise or could exercise control over the Company.
Premier Miton Group
Septer Limited
Clifton Participations Inc and A R Kentish
Peter Gyllenhammar AG
Eastmount Capital Partners LLP
Aeternitas Imperium Privatstiftung
At 25th June 2024
%
16.14
10.85
10.80
9.93
4.70
3.59
Independent auditor
Grant Thornton, being eligible, have expressed their willingness to continue in office as auditor. A resolution to re-
appoint Grant Thornton will be proposed at the Annual General Meeting.
Annual General Meeting
The date of the Annual General Meeting for 2024 has yet to be determined, pending the outcome of the offer by
Jambo SRC Limited to acquire the whole of the issued and to be issued share capital of the Company, and will be
communicated to shareholders in due course.
By order of the Board
Alan Kentish
Director
Viking House
St Paul’s Square
Isle of Man IM8 1GB
26th June 2024
18
BOARD OF DIRECTORS
NIGEL BIRRELL NON-EXECUTIVE CHAIRMAN (appointed September 2022)
Nigel has served as the Chief Executive Officer of Lottoland Group since May 2014. Lottoland is an online gaming
operator based in Gibraltar, which operates across multiple territories and has 17 million customers. Prior to this,
Nigel was a group director on the executive board of bwin.party digital entertainment plc (now Entain plc), then the
world’s leading on-line gaming business. Prior to bwin.party, Nigel was a main board director of the FTSE 250
media group HIT Entertainment PLC (“HIT”). In his early career, Nigel worked as an investment banker with both
Dresdner Kleinwort Benson and later Donaldson, Lufkin & Jenrette (subsequently, Credit Suisse). Nigel is the non-
executive Chairman of Duke Royalty Limited (AIM listed) and also holds a number of other private company non-
executive positions. He holds a Bachelor of Laws (LLB) from the University of London (Queen Mary College) and is
a Solicitor of the Senior Courts of England and Wales. Nigel is Chair of the Remuneration Committee.
ALAN KENTISH, ACA ACII AIRM CHIEF EXECUTIVE OFFICER (appointed CEO April 2016)
Alan trained with a Big 4 accountancy firm in the UK and specialised in financial services audits, qualifying as a
Chartered Accountant over 25 years ago. He moved to Gibraltar in 1993 and joined the BDO firm as the founder of
their insurance management division. Alan was at the forefront of developing the hugely successful Gibraltar
insurance sector and qualified as an Associate of the Chartered Insurance Institute as well as becoming a qualified
Associate of the Institute of Risk Management along the way. The BDO member firm evolved into STM as part
of the AIM listing in 2007, with Alan holding the office of Chief Financial Officer at that time, as well as navigating
STM through the difficult financial crisis of 2008 and 2009. Alan became the director of business development in
2012 as STM moved into its growth phase, particularly in relation to its pension product offering, and took
over as CEO in April 2016 as part of continuing to build the infrastructure of the business. Alan has served on
numerous company boards, both regulated and non-regulated, but primarily in the financial services and insurance
sector, including a main subsidiary board of a FTSE 100 company
PETER SMITH NON-EXECUTIVE DIRECTOR (appointed January 2023)
Peter is a Fellow of the Institute of Chartered Accountants in England and Wales and has extensive experience in
the financial services sector and in helping businesses to develop and implement their strategic goals. Peter was
previously Chief Financial Officer of two AIM quoted financial advisory businesses between 2005 and 2019,
including Lighthouse Group plc (“Lighthouse”) from 2008 until 2019 when that business was acquired by Quilter
plc. Most recently, Peter has been a consultant to Quilter in respect of its integration of Lighthouse. Prior to this,
Peter held a number of senior finance roles, including as a corporate finance partner at KPMG. Peter holds a BSc
Econ (Hons) degree from Cardiff University and is Chair of the Audit & Risk Committee and a member of the
Remuneration Committee.
19
Statement of Directors' Responsibilities in Respect of the Directors' Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Isle of Man Company law requires the Directors to prepare financial statements for each financial year. Under that
law the Directors have elected to prepare the financial statements in accordance with International Financial
Reporting Standards (IFRSs and interpretations adopted by the International Accounting Standards Board (“IASB”).
Under company law the Directors must not approve the financial statements unless they are satisfied that they 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 Group for
that period.
In preparing these financial statements, the Directors are required to:
• properly select and apply accounting policies.
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information.
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the entity's
financial position and financial performance; and
• make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping reliable accounting records that are sufficient to show and correctly explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the Isle of Man Companies Act 2006. They are
also responsible for the system of internal control, for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of 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 in the Isle of Man governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ Remuneration Report
Executive Directors
Alan Kentish
Therese Neish
Nicole Coll
Sub-total
Non-Executive Directors
Nigel Birrell
Duncan Crocker
Robin Ellison
Malcolm Berryman
Graham Kettleborough
Peter Smith
Sub-total
Total
2023
2022
Notes
210,331
210,061
-
420,392
210,331
48,750
180,625
439,706
60,000
-
-
-
56,667
50,481
167,148
587,539
20,000
70,231
4,333
60,374
68,000
-
222,939
662,644
a
a,b
c
d
e,i
f,i
g,i
a,h
a. Therese Neish was appointed
as a director on 14th October
2022 and resigned on 31st
May 2024. She received a
benefit of 5% of her salary by
way of a pension contribution.
Peter Smith (and Nicole Coll
in 2022) received pension
benefits by way of pension
contributions in line with auto-
enrolment requirements. No
other directors receive any
form of
in
benefits
pension
or
contributions
share based incentives.
the
b. Nicole Coll resigned as a director on 14th October 2022
c. Nigel Birrell was appointed as a director on 1st September 2022
d. Duncan Crocker resigned as a director on 31st August 2022
e. Robin Ellison resigned as a director on 31st January 2022
f. Malcolm Berryman resigned from the PLC Board on 4th August 2022
g. Graham Kettleborough resigned as a director on 28th April 2023
h. Peter Smith was appointed as a director on 19th January 2023
i. Robin Ellison and Malcolm Berryman (in 2022) and Graham Kettleborough (in 2022 and in 2023) received
remuneration for their NED roles on the PLC Board as well as for their roles on various subsidiary boards.
20
Independent auditor’s report to the members of STM
Group Plc
Report on the audit of the financial statements
Opinion
We have audited the financial statements of STM Group Plc (“the Parent Company”) and its subsidiaries
(the “Group’’), which comprise the consolidated statement of comprehensive income, the consolidated
statement of financial position, the company statement of financial position, the statement of consolidated
cash flow, the statement of consolidated changes in equity, the statement of company changes in equity for
the year ended 31 December 2023, and the related notes to the financial statements, including a summary
of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards (“IFRS”) as adopted by the International
Accounting Standards Board (“IASB”).
In our opinion,
•
•
•
the consolidated financial statements of the Group give a true and fair view in accordance with
IFRS as adopted by the IASB of the assets, liabilities and financial position of the Group at 31
December 2023 and of the Group’s financial performance and cash flows for the year then ended;
the Parent Company’s statement of financial position and statement of company changes in equity
have been properly prepared in accordance with IFRSs as issued by the IASB and as applied in
accordance with provisions of the Isle of Man Companies Act 2006; and
the financial statements have been properly prepared in accordance with the requirements of the
Isle of Man Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and
applicable law. Our responsibilities under those standards are further described in the ‘Responsibilities of
the auditor for the audit of the financial statements’ section of our report. We are independent of the Group
and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the United Kingdom, including the FRC’s Ethical Standard and the ethical
pronouncements established by Chartered Accountants Ireland, applied as determined to be appropriate in
the circumstances for the entity. We have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independent auditor’s report to the members of STM
Group Plc
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of
accounting included:
• Evaluating management’s future cash flow forecasts, understanding the process by which they were
prepared, and assessed the calculations are mathematically accurate.
• Challenging the underlying key assumptions such as expected cash inflow from technology and
development sales and cash outflow from project costs and other operating expenses.
• Making inquiries on the status of the projects and understanding on how the Group and Parent
Company’s future plans for each of the projects will be funded and assessing whether this can
support the future developments and cost projections.
• Making inquiries with management and reviewing the board minutes and available written
communication with commercial partners in order to understand the future plans and to identify
potential contradictory information.
• Assessing the adequacy of the disclosures with respects to the going concern assertion.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the Group and Parent
Company’s ability to continue as a going concern for a period of at least twelve months from the date when
the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current financial period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit, and the directing of
efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and therefore we do not provide a separate
opinion on these matters.
Overall audit strategy
We designed our audit by determining materiality and assessing the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for
example, in respect of significant accounting estimates that involved making assumptions and considering
future events that are inherently uncertain. We also addressed the risk of management override of internal
controls, including evaluating whether there was any evidence of potential bias that could result in a risk of
material misstatement due to fraud.
Based on the considerations set out below, our area of focus included impairment of goodwill relating to
the cash generating units (CGUs).
Independent auditor’s report to the members of STM
Group Plc
Key audit matters (cont’d)
How we tailored the audit scope
We tailored the scope of our audit by obtaining an understanding of the Group and the Parent Company
and its environment, including assessing the risks of material misstatements, to be able to give an opinion
on the consolidated and company financial statements as a whole, taking into account the operational
structure of the Group and the Parent Company, the accounting processes and controls, the involvement
of third parties and the industry in which the Group and the Parent Company operates. Audit work on the
Group and Parent Company was performed by the same audit team.
We have also identified the reporting components across the regulated and trading entities within the
jurisdictions in which the group operates. The regulated and trading entities in Gibraltar, Malta and the UK
are considered of individual financial significance to the reported results of the Group. These components
were subjected to either full scope audits or audits of specified account balances for group reporting
purposes.
Materiality and audit approach
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, such as our understanding of the
entity and its environment and the complexity of the Group and Parent Company and the reliability of the
control environment, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of misstatements, both individually and on the financial
statements as a whole.
Materiality is defined as the magnitude of an omission or misstatement that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of the users of the financial
statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
Based on our professional judgement, we determined materiality for the Group to be £281,000, which is
1% of the revenue and the Parent Company to be £211,000, which is 1% of the net assets. We believe that
a percentage of revenue is the appropriate benchmark as it reflects the interests of the investors and stability
of the benchmark in recent years for the Group and a percentage of net assets as the Parent Company has
limited transactions as a holding company.
Performance materiality is defined as the application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group and the Parent Company’s
overall control environment, our judgement was that performance materiality was 75% of materiality. We
have set performance materiality at this percentage having taken account of there being minimal
uncorrected misstatements in the prior year.
Reporting threshold is defined as the amount below which identified misstatements are considered to be
clearly trivial.
We agreed with the Board of Directors that we would report to them misstatements identified during our
audit above 5% of materiality, as well as misstatements below that amount that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed
above and in light of other relevant qualitative considerations in forming our opinion.
Independent auditor’s report to the members of STM
Group Plc
Key audit matters (cont’d)
Significant matters identified
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our
resources and effort, are set out below as significant matters together with an explanation of how we tailored
our audit to address these specific areas in order to provide an opinion on the financial statements as a
whole. This is not a complete list of all risks identified by our audit.
Description of significant matter
Our audit response
Impairment of goodwill relating to the cash
generating units (CGUs)
Management are required by IAS 36 –
Impairment of Assets, to perform an annual
impairment review of goodwill where there
are indicators of impairment.
We consider there to be a risk of material
misstatement due to fraud or error in
respect of the impairment of goodwill,
specific to certain assumptions within the
assessment, including the cash flows
assumed within the discounted cash flow
model and the assumptions applied to
these, including growth rates and discount
rates.
As a result, a significant portion of the audit
effort was directed towards the audit of the
impairment assessment of goodwill.
Refer to accounting policy in Note 3 and
disclosures in Note 15 of the financial
statements.
Our response to address these risks include:
• Obtained an understanding and evaluated the design
and implementation of key controls relevant to the
impairment process and key controls over the
impairment review performed by management.
• Evaluated the cash flow forecast used in the model
against the historical trading of the cash generating
units (CGUs) and challenged the assumptions
underpinning
the
retrospective review of the estimates, growth rate
and discount rate used.
including
forecast,
the
• Assessed factors behind the growth and financial
performance forecast for each CGU.
• Compared the forecast used in the impairment test
in the going concern
to the forecasts used
assessment for consistency.
• Reviewed the disclosures in relation to goodwill in
the financial statements to ensure compliance with
accounting standards.
We completed our planned audit procedures, with no
exceptions noted.
Independent auditor’s report to the members of STM
Group Plc
Other information
Other information comprises information included in the annual report, other than the financial statements
and our auditor’s report thereon, including the Corporate Governance and Directors’ Report. The directors
are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we
identify such material inconsistencies in the financial statements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financial
statements
As explained more fully in the Directors' responsibilities statement, management is responsible for the
preparation of the financial statements which give a true and fair view in accordance with IFRS as adopted
by the IASB, and for such internal control as directors determine necessary to enable the preparation of
financial statements are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Group and Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the Group
or Parent Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group and Parent Company’s financial
reporting process.
Responsibilities of the auditor for the audit of the financial statements
A further description of an auditor’s responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk
that material misstatement in the financial statements may not be detected, even though the audit is properly
planned and performed in accordance with the ISAs (UK). The extent to which our procedures are capable
of detecting irregularities, including fraud is detailed below.
Independent auditor’s report to the members of STM
Group Plc
Responsibilities of the auditor for the audit of the financial statements (cont’d)
Explanation as to what extent the audit was considered capable of detecting irregularities, including
fraud (continued)
Based on our understanding of the Group and industry, we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the preparation of the financial statements such as the Isle of Man Companies Act
2006 and the Group’s obligations in AIM, a market operated by the London Stock Exchange. The Audit
engagement partner considered the experience and expertise of the engagement team to ensure that the
team had appropriate competence and capabilities to identify or recognise non-compliance with the laws
and regulation. We evaluated management’s incentives and opportunities for fraudulent manipulation of
the financial statements (including the risk of override controls), and determined that the principal risks
were related to posting inappropriate journal entries to manipulate financial performance and management
bias through judgements and assumptions in significant accounting estimates. We apply professional
scepticism through the audit to consider potential deliberate omission or concealment of significant
transactions, or incomplete/inaccurate disclosures in the financial statements.
In response to these principal risks, our audit procedures included but not limited to:
•
•
•
•
enquiries of management on the policies and procedures in place regarding compliance with laws
and regulations, including consideration of known or suspected instances of non-compliance and
whether they have knowledge of any actual, suspected or alleged fraud;
as the Group operates in the financial services industry, the Audit Engagement Partner considered
the experience and expertise of the engagement team to ensure that the team had the appropriate
competence and capabilities;
gaining an understanding of the entity’s current activities and the scope of its authorisation;
inspection of the Group’s regulatory and legal correspondence and review of minutes during the
year to corroborate inquiries made;
• obtaining an understanding of internal controls established to mitigate risk related to fraud;
• discussion amongst the engagement team in relation to the identified laws and regulations and
regarding the risk of fraud, and remaining alert to any indications of non-compliance or
opportunities for fraudulent manipulation of financial statements throughout the audit;
identifying and testing journal entries to address the risk of inappropriate journals and management
override of controls;
•
• designing audit procedures to incorporate unpredictability around the nature, timing and extent of
•
•
our testing;
challenging assumptions and judgements made by management in their significant accounting
estimates (i.e. valuation of acquired client portfolio, measurement of goodwill and measurement
of provisions); and
evaluating the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves a true and fair view.
The primary responsibility for the prevention and detection of irregularities including fraud rests with those
charged with governance and management. As with any audit, there remains a risk of non-detection or
irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or override
of internal controls.
Independent auditor’s report to the members of STM
Group Plc
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the company’s members, as a body, in accordance with the terms of our
engagement letter. 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.
Report on other legal and regulatory requirements
We were appointed by the Board of Directors on 4 November 2022 to audit the financial statements for
the year ended 31 December 2022 and subsequent financial periods. This is the second year we have been
engaged to audit the financial statements of the Group.
We have not provided non-audit services prohibited by the FRC’s Ethical Standard and have remained
independent of the entity in conducting the audit.
The audit opinion is consistent with the additional report to the Audit & Risk Committee.
Christopher Rogers
For and on behalf of
Grant Thornton
Chartered Accountants & Statutory Auditors
Dublin, Ireland
26 June 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
Revenue
Administrative expenses
Profit before other items
OTHER ITEMS
Bargain purchase gain
Gains on
instruments
Loss on disposals of subsidiaries
revaluation of
financial
Notes
9
10
11
5
4
Loss on disposal of fixed assets
Finance costs
Depreciation and amortisation
14,15
13
Profit before taxation
Taxation
Profit after taxation
OTHER COMPREHENSIVE INCOME
Items that are or may be reclassified
to profit or loss
Foreign currency translation differences
for foreign operations
Total other comprehensive income
Total comprehensive income for the
year
Profit attributable to:
Owners of the Company
Non-controlling Interests
Total comprehensive income
attributable to:
Owners of the Company
Non-controlling Interests
Earnings per share basic (pence)
Earnings per share diluted (pence)
22
22
Year ended
31 December 2023
£000
28,078
(24,878)
3,200
-
-
-
(96)
(689)
(1,973)
442
(25)
417
32
32
449
417
-
417
449
-
449
0.70
0.70
Year ended
31 December
2022
£000
24,094
(20,773)
3,321
327
11
(162)
-
(322)
(1,597)
1,578
(724)
854
12
12
866
844
10
854
856
10
866
1.42
1.42
The results for 2023 and 2022 relate to continuing activities.
The notes on pages 34 to 69 form an integral part of these financial statements.
28
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
31 December
2023
£000
31 December
2022
£000
Notes
ASSETS
Non-current assets
Property and office equipment
Intangible assets
Financial assets
Deferred tax asset
Total non-current assets
Current assets
Accrued income
Trade and other receivables
Receivables due from insurers
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Called up share capital
Share premium account
Retained earnings
Other reserves
Equity attributable to owners of the Company
Non-controlling interests
Total equity
LIABILITIES
Current liabilities
Liabilities for current tax
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Other payables
Deferred tax liabilities
Total non-current liabilities
Total liabilities and equity
14
15
16
13
18
28
19
20
20
20
23
28
24
13
1,304
21,444
1,839
39
24,626
3,078
7,349
27,441
18,365
56,233
80,859
59
22,372
14,443
(2,279)
34,595
-
34,595
425
13,271
27,441
41,137
4,808
319
5,127
80,859
1,161
22,125
1,762
58
25,106
860
8,461
488
19,234
29,043
54,149
59
22,372
14,382
(1,843)
34,970
(68)
34,902
788
12,517
488
13,793
5,050
404
5,454
54,149
The notes on page 34 to 69 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors and authorised for issue on 26th June 2024
and were signed on its behalf by:
AR Kentish
Chief Executive Officer
26 June 2024
Peter Smith
Non-Executive Director
29
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
ASSETS
Non-current assets
Property and office equipment
Intangible assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Called up share capital
Share premium account
Retained earnings
Other 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
Notes
31 December
2023
£000
31 December
2022
£000
14
15
17
18
19
20
20
21
196
2,581
17,413
20,190
15,295
2,324
17,619
37,809
59
22,372
(1,490)
162
21,103
214
2,586
17,013
19,813
15,923
2,425
18,348
38,161
59
22,372
(1,754)
162
20,839
23
12,444
12,511
24
12,444
12,511
4,262
4,262
37,809
4,811
4,811
38,161
The notes on pages 34 to 69 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors and authorised for issue on 26th June 2024
and were signed on its behalf by:
AR Kentish
Chief Executive Officer
26 June 2024
Peter Smith
Non-Executive Director
30
STATEMENT OF CONSOLIDATED CASH FLOW
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
Year ended
31 December
2023
£000
Year ended
31 December
2022
(restated)
£000
Notes
442
1,578
OPERATING ACTIVITIES
Profit for the year before tax
ADJUSTMENTS FOR:
Depreciation of property and office equipment
Amortisation of intangible assets
Loss on disposal of property and office equipment
Unrealised gains on financial instruments
Bargain purchase gain
Taxation paid
(Increase)/decrease in trade and other receivables including insurers
(Increase)/decrease in accrued income
Increase in trade and other payables including insurers
Net cash generated from operating activities
INVESTING ACTIVITIES
Purchase of property and office equipment
Increase in intangible assets
Purchase of financial instruments
Acquisition of non-controlling interests
Additional consideration paid on prior acquisitions
Consideration paid on acquisition of portfolio
Net cash absorbed by from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan
Repayments of bank loan
Interest paid on bank loan
Lease liabilities paid
Dividends paid
14
15
5
14
15
6
5
23,24
23,24
20
Net cash (absorbed by)/generated from financing activities
(Decrease)/increase in cash and cash equivalents
Effect of movements in exchange rates on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
19
620
1,353
96
(77)
-
(454)
(25,841)
(2,218)
28,541
2,462
(170)
(672)
-
(400)
(228)
-
(1,470)
-
(551)
(405)
(581)
(356)
(1,893)
(901)
32
19,234
18,365
673
924
4
(11)
(327)
(619)
22,246
558
(19,737)
5,289
(165)
(937)
(1,734)
(120)
-
(3,454)
(6,410)
4,463
(550)
(162)
(724)
(891)
2,136
1,015
12
18,207
19,234
The comparative cash flow movements for the year ended 31st December 2022 have been restated to aggregate
and reclassify certain flows in order to be consistent with the presentation adopted in the year ended 31st December
2023.
31
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
Share
capital
£000
Share
premium
£000
Retained
earnings
£000
Treasury
shares
£000
Foreign
currency
translation
reserve
£000
Share
based
payments
reserve
£000
Other
reserve
£000
Balance at 1 January 2022
59
22,372
14,429
(549)
(93)
162
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for the year
Other comprehensive income
Foreign currency translation
differences
-
-
Transactions with owners, recorded directly in equity
Acquisition of non-controlling
interests
Dividends paid
-
-
-
-
-
-
844
-
-
(891)
-
-
-
-
-
12
-
-
-
-
-
-
Non-
controlling
Interests
£000
Total
Equity
£000
(452)
35,928
Total
£000
36,380
844
10
854
12
-
12
-
-
-
(1,375)
(1,375)
374
(1,001)
-
(891)
-
(891)
At 31 December 2022 and
1 January 2023
59
22,372
14,382
(549)
(81)
162
(1,375)
34,970
(68)
34,902
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Profit for the year
Other comprehensive income
Foreign currency translation
differences
-
-
Transactions with owners, recorded directly in equity
Acquisition of non-controlling
interests
Dividends paid
-
-
-
-
-
-
417
-
-
(356)
-
-
-
-
-
32
-
-
-
-
-
-
-
-
417
32
(468)
-
(468)
(356)
At 31 December 2023
59
22,372
14,443
(549)
(49)
162
(1,843)
34,595
-
-
68
-
-
417
32
(400)
(356)
34,595
32
STATEMENT OF COMPANY CHANGES IN EQUITY
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
Share
Capital
£000
Share
premium
£000
Retained
earnings
£000
Share
based
payments
reserve
£000
Total
£000
Balance at 1 January 2022
59
22,372
(1,205)
162
21,388
Profit for the year
Dividends paid
-
-
-
-
342
(891)
-
-
342
(891)
At 31 December 2022 and 1 January 2023
59
22,372
(1,754)
162
20,839
Profit for the year
Dividends paid
-
-
-
-
620
(356)
-
-
620
(356)
At 31 December 2023
59
22,372
(1,490)
162
21,103
33
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
1. Reporting entity
STM Group PLC (the “Company”) is a company incorporated and domiciled in the Isle of Man and is traded on AIM,
a market operated by the London Stock Exchange. The address of the Company’s registered office is 1st Floor Viking
House, St Paul’s Square, Ramsey, Isle of Man, IM8 1GB. The consolidated financial statements of the Group as at,
and for the year ended, 31st December 2023 comprise the Company and its subsidiaries (see Note 30) (together
referred to as the “Group” and individually as “Group entities”). The Group is primarily involved in financial services.
2. Basis of preparation
The financial information has been prepared on the basis of the accounting policies set out in Note 3.
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) and interpretations adopted by the International Accounting Standards Board (“IASB”) and in
accordance with Isle of Man law.
(b) Going concern basis of accounting
The Directors have prepared the financial statements on a going concern basis, as in their opinion the Group is able
to meet its obligations as they fall due for a period of at least 12 months from the date of this report. In considering
this requirement, the Directors have considered budgets and rolling cashflow forecasts for the forthcoming 18-month
period and the level of professional indemnity insurance held by the Group. In addition, the risks included on the
Group’s risk register that could impact on the Group’s liquidity and solvency over the next 12 months. These show
that the Group should continue to be cash generative, and have sufficient resources to meet its business objectives,
both in the short-term and in relation to its strategic priorities.
Having due regard to these matters, the Directors have a reasonable expectation that the Group and Company have
adequate resources to continue in operational existence for at least 12 months from the date of approval and signing
of the financial statements. As such, the Board continues to adopt the going concern basis in preparing the financial
statements.
(c) Functional and presentation currency
These consolidated financial statements are presented in Pounds Sterling (£), rounded to the nearest £’000, which
is the Company’s functional currency as this is the main currency in which it transacts business. Foreign operations
are included in accordance with the policies set out in Note 3 (b)(ii).
(d) Use of judgments and estimates
The preparation of financial statements requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised.
(i) Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the
carrying values of the assets and liabilities is included in the following notes:
–
–
–
Note 3(c) – Revenue recognition: timing of the satisfaction of performance obligations and recognition of revenue
either over time or at a point in time;
Note 15 – Determination of identifiable cash-generating units; and
Note 28 – Determination as to whether a provision for potential customer detriment is required or should be
disclosed as a contingent liability.
34
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
2. Basis of preparation (continued)
(d) Use of judgments and estimates (continued)
(ii) Assumptions and estimates
Assumptions and estimation uncertainties at 31st December 2023 that have a significant risk of resulting in a material
adjustment to the carrying values of assets and liabilities in the next financial year are included in the following notes:
–
–
Note 15 – Measurement of goodwill: the key assumptions used in determining whether goodwill has been
impaired at each annual impairment review; and
Note 28 – Measurement of provisions: assumptions about the likelihood and magnitude of an outflow of resource
in respect of customer claims for detriment.
(e) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except where investments
and other financial instruments are held at fair value.
(f) Employee benefit trusts
The Company contributes to an employee benefit trust. It is deemed that this trust is controlled by the Company and
is therefore included within the consolidated financial statements of the Group.
3. Material accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements.
In addition, the Group adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement
2) from 1st January 2023. The amendments require the disclosure of ‘material’, rather than ‘significant’, accounting
policies. Although the amendments did not result in any changes to the accounting policies themselves, they
impacted the accounting policy information disclosed below.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from
the date on which control commences until the date on which control ceases. Specifically, the results of subsidiaries
acquired or disposed of during the year are included in profit or loss from the date the Company gains effective
control until the date when the Company ceases to control the subsidiary. Where necessary, adjustments are made
to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting
policies.
(ii) Business combinations
The Group accounts for business combinations using the acquisition method when the acquired set of activities and
assets meets the definition of a business and control is transferred to the Group. In determining whether a particular
set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired
includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create
outputs.
35
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(a)
Basis of consolidation (continued)
(ii) Business combinations (continued)
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of
the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former
owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Any
goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except if related to the issue of debt. Any contingent
consideration is measured at fair value at the date of acquisition and re-measured at each reporting date. Subsequent
changes to the contingent consideration are adjusted against goodwill where a change in the fair value of contingent
consideration is the result of additional information about facts and circumstances that existed at the acquisition date.
These changes are accounted for as measurement period adjustments if they arise during the measurement period.
Changes resulting from events after the acquisition date do not impact goodwill but are accounted for separately.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent
consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Other contingent consideration is remeasured to fair value at subsequent
reporting dates with changes in fair value recognised in profit or loss.
(iii) Non-controlling interests (NCI)
NCI, in subsidiaries are identified separately from the Group's equity therein. Those interests of NCI that are present
ownership interest entitling their holders to a proportionate share of net assets upon liquidation, are measured initially
at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Subsequent to
acquisition, the carrying amount of the NCI is the amount of those interests at initial recognition plus the NCI share
of subsequent changes in equity. NCI will be allocated its share of profit or loss and its share of each component of
other comprehensive income in subsequent periods even if this results in the NCI having a deficit balance. NCI in
subsidiaries are identified separately from the group's equity therein. Those interests of NCI that are present
ownership interest entitling their holders to a proportionate share of net assets upon liquidation are measured initially
at their proportionate acquisition.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions are eliminated in preparing the consolidated financial statements.
(b)
Foreign currency
(i) Foreign currency transactions
In preparing the financial statements of the group entities, transactions in currencies other than the entity's functional
currency (foreign currencies) are translated to the functional currency at the exchange rate prevailing at the date of
the transaction. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency
are not retranslated. The resulting gain or loss is recognised in the statement of comprehensive income.
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition,
are translated to sterling at exchange rates at the reporting date. For the purposes of preparing the consolidated
financial statements, the assets and liabilities are translated to sterling at exchange rates at the reporting date.
Income and expense items are translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a foreign
exchange translation reserve (attributed to non-controlling interests as appropriate).
36
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(b) Foreign currency (continued)
(ii) Foreign operations (continued)
Foreign exchange gains and losses arising from monetary items that in substance form part of the net investment in
its foreign operations are recognised in other comprehensive income and are presented within equity in the foreign
currency translation reserve.
(c) Revenue
Revenue is derived from the provision of services as described in Note 9 and is recognised in the statement of
comprehensive income when the Group completes performance obligations and transfers control over a good or
service to a customer.
Revenue derived from pensions operating segment is split between the establishment fee and the management fee.
The establishment fee is recognised in full at the time of processing the application so as to reflect the completion of
the performance obligation such as processing their application and setting up the pension trust. The management
fees, which are invoiced annually, cover both the provision of trustee services and the administration of the pension
funds. The current treatment of these fees, based on the existing profile of the client portfolio, is to recognise 50% at
the time of invoicing and to defer the balance over the year of each policy as each of the performance obligations
are satisfied.
(d) Accrued income
Accrued income represents billable time spent on the provision of services to clients which has not been invoiced at
the reporting date. The accrued income is based on the number of applications received but for which an invoice has
not been raised yet.
(e) Receivables from insurers
Where the Group has professional indemnity insurance that would be receivable against a provision for an insurance
claim payable an asset is recognised within receivables in the statement of financial position when there is reasonable
certainty as to the recovery from the insurers.
(f) Property and office equipment
(i) Recognition and measurement
Items of property and office equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset and bringing it into use. Gains
and losses on disposal of an item of property and office equipment are determined by comparing the proceeds from
disposal with the carrying amount of property and office equipment and are recognised net within other income in
profit or loss.
(ii) Depreciation
Depreciation is recognised in the statement of comprehensive income on a reducing balance basis over the estimated
useful economic lives of each part of an item of property and office equipment. Leased assets are depreciated over
the shorter of the lease term or the estimated useful economic life. Depreciation commences once assets are in use.
The rates in use are as follows:
Office equipment
Motor vehicles
Right-of-use assets
10% - 25% on a reducing balance basis
25% on a reducing balance basis
Over the life of the leases
Depreciation methods, useful economic lives and residual values are reassessed at the reporting date.
37
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(g) Financial instruments
(i)
Recognition and initial measurement
Financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is
initially measured at fair value plus, for an item not at fair value through profit or loss (“FVTPL”), transaction costs
that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is
initially measured at the transaction price.
Derivative financial instruments are measured at FVTPL and are considered to fall within level 3 of the fair value
hierarchy.
Fair value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable:
•
•
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset
or liability that are not based on observable market data (unobservable inputs).
All other financial assets are measured at amortised cost.
(i) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified at amortised cost, fair value through other comprehensive income
(“FVOCI”) or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business
model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the
first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as
FVTPL:
–
–
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at
FVTPL:
–
–
it is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at
FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
38
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(g) Financial instruments (continued)
(ii) Classification and subsequent measurement (continued)
Financial assets – Business model assessment
The Group makes an assessment of the financial assets it holds to best reflect the way in which the business is
managed and information is provided to management. The information may include:
–
–
–
the stated policies and objectives for the group of assets and the operation of those policies in practice;
how the performance of the assets is evaluated and reported to the Group’s management; and
the risks that affect the performance of the business and these assets and how those risks are managed.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered
sales for this purpose, consistent with the Group’s continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis
are measured at FVTPL.
Financial assets – Subsequent measurement and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised
cost
These assets are subsequently measured at amortised cost using the
effective interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and impairment
are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
Financial liabilities – Classification, subsequent measurement and gains and losses
The Group’s financial liabilities are classified at amortised cost. They are subsequently measured at amortised cost
using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit
or loss. Any gain or loss on derecognition is also recognised in profit or loss.
(ii) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor
retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Group enters into transactions whereby it transfers assets recognised in its statement of financial position but
retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred
assets are not derecognised.
39
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(g) Financial instruments (continued)
(iii) Derecognition (continued)
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified
liability are substantially different, in which case a new financial liability based on the modified terms is recognised at
fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the
consideration paid (including any non-cash assets transferred, or liabilities assumed) is recognised in profit or loss.
(iv) Offsetting financial assets and liabilities
Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position
when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either
to settle them on a net basis or to realise the asset and settle the liability simultaneously.
(h) Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of the shares are recognised as a
deduction from share premium.
Treasury shares are those shares purchased by the STM Group Employee Benefit Trust (“EBT”) for distribution to
executives and senior management within the Group, which have yet to be allotted to specific employees. The
consideration paid, including any attributable incremental costs (net of income taxes), is deducted from the reserves
attributable to the Group’s equity holders until the shares are cancelled or reissued via the Treasury Reserve.
(i) Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group
uses the definition of a lease in IFRS 16.
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand-alone prices.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less
any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the Group’s incremental borrowing rate.
The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is
a change in future leases payments. When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the
right-of-use asset has been reduced to zero.
40
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(i) Leases (continued)
Where a lease has a term of less than 12 months or is of a value of less than £5,000, the Group applies the exemption
not to recognise right-of-use assets and liabilities for these leases. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
(j) Employee benefits
The Group operates a defined contribution pension plan. Obligations for contributions to defined contribution pension
plans are recognised as an expense in the income statement when they are due.
(k) Finance income and expenses
Finance income comprises interest income on funds invested and dividend income. Interest income is recognised as
it accrues using the effective interest method. Dividend income in the holding company is recognised when declared
by the subsidiaries.
Finance expense comprises interest on borrowings. Interest expense is charged to the income statement using the
effective interest method.
(l)
Income tax expense
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement.
Current tax is the expected tax payable on the taxable income for the year using enacted tax rates, updated for
previous period adjustments. Taxable profit differs from net profit as reported in profit or loss because it excludes
items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between carrying
amounts of assets and liabilities for financial reporting purposes and for tax purposes. Deferred tax is not provided
in respect of goodwill. Deferred tax is measured at the tax rates expected to be enacted when they reverse.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the
initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax
liability is not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.
41
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(l)
Income tax expense (continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
(m) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of the acquisition, the amount of any non-controlling interests in the
acquiree and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the Group's
interest in the net fair value of the identifiable assets and liabilities of the acquire. Goodwill is not amortised but is
measured at cost less accumulated impairment losses. On disposal of a cash-generating unit, the attributable amount
of goodwill is included in the determination of the profit or loss on disposal.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups
of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of
the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a subsequent period.
(ii) Product development
Product development relates to internal development expenditure incurred in the development of the Group’s new
products. When these costs meet the recognition criteria of IAS 38 ‘Intangible Assets’ they are capitalised and
amortised on a straight-line basis over a three-year period from product launch.
(iii) Client portfolio
Client portfolios acquired in a business combination are recognised separately from goodwill and are recognised
initially at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition it
is amortised on a straight-line basis over the estimated useful life which is assessed at ten years.
(iv) IT development
IT development relates to internal and external development expenditure incurred in the development of the Group’s
IT systems. When these costs meet the recognition criteria of IAS 38 ‘Intangible Assets’ they are capitalised and
amortised on a straight-line basis over a five-year period when a specific IT module comes into use.
(n)
Impairment
(i) Non derivative financial assets
Financial instruments and contract assets
The Group and Company measures loss allowances for Expected Credit Losses (“ECL”) on financial assets
measured at amortised cost and contract assets.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and
when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the
Group’s historical experience and informed credit assessment.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
42
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(n)
Impairment (continued)
(i) Non derivative financial assets (continued)
Financial instruments and contract assets (continued)
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after
the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is
exposed to credit risk. Loss allowances for financial assets measured at amortised cost are deducted from the gross
carrying amount of the assets and are recognised in the statement of comprehensive income.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for bank balances for which credit
risk has not increased significantly since initial recognition, which are measured at 12-month ECLs. The Group
considers the following as constituting an event of default for internal credit risk management purposes as historical
experience indicates that financial assets that meet both of the following criteria are generally not recoverable:
–
–
when there is a breach of the contractual credit terms by the debtor; and
there is insufficient liquidity within the debtor’s pension assets.
Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of
recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with
respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The
Group expects no significant recovery from the amount written off. However, the Group may still follow procedures
for recovery of financial assets that have been written off.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
For goodwill which has an indefinite life, the recoverable amount being the higher of the fair value less costs of
disposal or value in use is estimated at each reporting date.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that
largely are independent from other assets and groups. Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of
units) on a pro-rata basis.
(o) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, which comprise the effect of outstanding options. The effects of potential
ordinary shares are reflected in diluted EPS only when their inclusion in the calculation would decrease EPS or
increase the loss per share.
43
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(p) Deferred income
Deferred income relates to the element of fixed fee income that has been billed in advance which has not been
earned as at the year end and is released over the period to which it relates. 100% of the balance recorded as
deferred income at 31st December 2023 is expected to be included as revenue in the next financial year.
(q) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the
amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
(r) Dividend
Dividends are recognised in the accounting period in which they are authorised and paid. The interim dividend is
recognised when it is paid and the final dividend is recognised when it has been approved by shareholders at the
Annual General Meeting. Payment of a dividend is permissible in accordance with s57 of the Companies Act 2006
(IOM) and the Articles of Association given that the solvency test has been met.
(s) Share based payments
The grant-date fair value of equity settled share payment arrangements granted to employees is recognised as an
expense, with a corresponding increase in equity, over the vesting period of the awards. Where awards have a
market-based performance condition attached the accounting charge reflects the expected achievement against
targets and there is no true-up for differences between expected and actual outcomes.
(t)
Insurance products
The life assurance business account for insurance products as investment contracts as no significant insurance risk
is attached to these contracts. The assets and liabilities of the contracts are included in the Group’s balance sheet
only if it is deemed that control exists over the investment decision (see Note 8).
(u) Disputes and potential legal matters
The Group may at times be involved in disputes arising in the ordinary course of business. In accordance with
applicable accounting requirements, the Group provides for potential losses that may arise out of these disputes
when the potential losses are probable and estimable. Disputes in respect of legal matters are subject to many
uncertainties and the outcome of individual matters cannot be predicted with certainty. The amount of any such
provision is based on a best estimate of the expenditure required to settle this. There may be occasions when either
a potential loss is probable but difficult to quantify or a potential loss can be reliably quantified but is not probable.
On both occasions a contingent liability would be disclosed.
44
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
3. Material accounting policies (continued)
(v) New standards and interpretations
The Group has adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
for the first time for the financial year commencing 1 January 2023. Standards, amendments, and interpretations to
existing standards that are not yet effective and have not been early adopted by the Group.
The following standards, interpretations and amendments to existing standards have been published by the IASB
but are not effective for the period presented in the financial statements and the Group has decided not to early adopt
them.
Standard
Amendments to IAS 1, Classification of Liabilities as Current or Non-
Current
Amendments to IAS 1, Non-current Liabilities with Covenants
Amendments to IAS 7 and IFRS 7, Supplier Finance Arrangements
Amendments to IFRS 16, Lease Liability in a Sale and Leaseback
Amendments to IAS 21, Lack of Exchangeability
Effective date, annual period
beginning on or after
1st January 2024
1st January 2024
1st January 2024
1st January 2024
1st January 2025
None of the proposed amendments to IAS or IFRS noted above are expected to have any material impact on the
Group.
(w) Cash and cash equivalents
Cash and cash equivalents include cash balances with banks and, demand and short-term deposits which are readily
convertible to known amounts of cash and are subject to an insignificant risk of changes in their fair value. Short term
deposits have a maturity of three months or less from the date of acquisition. Cash and cash equivalents are carried
at amortised cost in the statement of financial position.
(x) Investment in subsidiaries
Investments in subsidiaries in the separate financial statements of STM Group PLC are accounted for at cost.
4. Disposal of subsidiaries
There were no disposals of subsidiaries in the two years ended 31st December 2023 and 31st December 2022. The
loss on disposal reported in 2022 comprised a reduction in the final consideration received in that year in respect of
the disposal of the Group’s Gibraltar company and trustee services (“CTS”) and tax compliance business, STM
Fidecs Management Limited, and the Jersey based CTS business, STM Fiduciaire Limited, in 2021. The reduction
arose from audited revenues for those businesses being lower than originally estimated.
45
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
5. Acquisition of portfolios
There were no acquisitions in 2023.
On 31st August 2022, the Group acquired the portfolios, net assets and trustee companies of the SIPP and SSAS
businesses from Mercer Ltd (“the Portfolio”). The acquisition of the Portfolios was complementary to the Group's
existing product offerings in the UK SIPP and SSAS markets and provided a solid platform for scalability, particularly
for the Group’s SSAS operations, and efficiencies going forward. In addition, it provided the Group with access to
an expanded network of intermediaries who previously introduced clients to Mercer Ltd.
The Group paid a gross cash consideration of £3,340,000 to acquire the Portfolios. Such consideration included the
purchase of the net assets of the business which primarily related to fees yet to be collected from clients.
The acquisition was accounted for using the acquisition method. Transaction costs incurred on the acquisition totalled
£150,000 and were expensed within administrative expenses in the Consolidated Statement of Comprehensive
Income for the year ended 31st December 2022.
Details of the fair value of the client portfolio, assets and liabilities acquired are set out as follows:
Client portfolios
Fixed assets
Accrued income
Debtors(1)
Prepaid assets
Liabilities
Total identifiable net assets acquired
Fair value
recognised on
acquisition
£’000
2,757
10
107
831
28
(66)
3,667
Fair value
adjustments
£’000
2,757
-
-
-
-
-
2,757
Previous carrying
value
£’000
-
10
107
831
28
(66)
910
Note 1: The fair value of debtors was approximately the gross contractual amount at the acquisition date.
At acquisition the Group performed a valuation on the client portfolios acquired using the market approach. As a
result, client portfolio assets of £1,543,000 relating to the SIPP portfolio and £1,214,000 related to the SSAS portfolio
were recognised.
A bargain purchase gain arose as a result of negotiations due to the previous revenue recognition policy being more
aggressive than, and an adjustment being necessary to align that policy with, the Group’s more conservative policy.
This has resulted in the fair value of the identifiable net assets being higher than the cash consideration paid as noted
below:
Total consideration transferred
Fair value of identifiable net assets
Bargain purchase gain
£’000
3,340
(3,667)
(327)
The bargain purchase gain was attributable to the Portfolio acquired and was recognised in the consolidated
statement of comprehensive income for the year ended 31 December 2022.
From the effective date of acquisition to 31st December 2022, the SIPP and SSAS portfolios generated revenue of
£821,000 and incurred a loss of £145,000. If the acquisition had occurred on 1st January 2022, management
estimates that the impact on the consolidated revenue and profit before tax for the year ended 31st December 2022
would have been £2,243,000 and a loss of £99,000 respectively.
In addition, the Group paid deferred cash consideration of £217,000 during the year (2022: £114,000) relating to the
final payment for the acquisition of the Berkeley Burke companies completed in 2020. The consideration paid in 2023
was £161,000 higher than the amount provided as at 31st December 2022 due to the collection and onward remittance
of trade receivables due to the seller under the relevant share purchase agreements but not previously provided.
46
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
5. Acquisition of portfolios (continued)
The Group also paid additional net consideration in 2023 of £11,000 in respect of the companies and SIPP and SSAS
portfolios acquired from Mercer Limited in 2022.
As these acquisitions were completed more than twelve months prior to the dates of payment in the current reporting
period, the aggregate amount of £172,000, net of the amount provided at 31st December 2022, has been written off
to administrative expenses in 2023.
6. Acquisition of non-controlling interests
As part of the acquisition of Carey Administration Holdings Limited (“Options”) in 2019, the Group entered into call
option agreements to acquire the non-controlling interests (“NCIs”) in Options Corporate Pensions UK Limited
(“OCPUK”) and Options UK Personal Pensions LLP (“OSUK”) from the current owner of the NCIs. The call options
were exercisable in 2022 with the exercise prices based on the audited financial statements of these entities for the
year ended 31st December 2021.
On 9th November 2022, the Group issued the Exercise Notices to the current owner of the NCIs for acquiring the
additional interests in OCPUK and OSUK.
Options Corporate Pensions UK Limited
On 30th November 2022, the Group completed the transaction to acquire an additional 20% interest in OCPUK,
increasing its ownership from 80% to 100%. The carrying amount of OCPUK’s net liabilities in the Group’s
consolidated financial statement on the date of acquisition was £1,870,000.
Carrying amount of NCIs acquired (£1,870,000 x 20%)
Exercise of OCPUK’s call option
Cash consideration paid to NCIs
A decrease in equity attributable to owners of the Company
£’000
374
881
120
1,375
The decrease in equity attributable to owners of the Company was recognised in the other reserve for the year ended
31st December 2022.
Options Pensions UK LLP
On 12th January 2023, the Group completed the transaction to acquire an additional 30% interest in OSUK, increasing
its ownership from 70% to 100%. The carrying amount of OSUK’s net liabilities in the Group’s consolidated financial
statement on the date of acquisition was £227,000.
Carrying amount of NCIs acquired (£227,000 x 30%)
Exercise of OSUK’s call option
Cash consideration paid to NCIs
A decrease in equity attributable to owners of the Company
£’000
68
-
400
468
The decrease in equity attributable to owners of the Company has been recognised in the other reserve for the year
ended 31st December 2023.
47
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
7. Segmental Information
STM Group has three reportable segments: Pensions, Life Assurance 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”).
The Board assesses the performance of the operating segments based on turnover generated. The performance of
the operating segments is not measured using costs incurred as the costs of certain segments within the Group are
predominantly centrally controlled and therefore the allocation of these is based on utilisation of internally calculated
proportions. Management believes that this information and consequently profitability could potentially be misleading
and would not enhance the disclosure above.
The following table presents the turnover information regarding the Group’s operating segments:
Operating segment
Pensions
Life Assurance
Other services
Total
Turnover
2023
£000
23,474
4,039
565
28,078
Analysis of the Group’s turnover information by geographical location is detailed below:
Geographical segment
Gibraltar
Malta
United Kingdom
Other
Total
Turnover
2023
£000
6,112
7,146
14,358
462
28,078
2022
£000
18,421
5,001
672
24,094
2022
£000
7,324
7,178
9,110
482
24,094
8. Life Assurance Operating Segment
These consolidated financial statements include the results for STM Life Assurance PCC PLC and London & Colonial
Assurance PLC, two 100% owned subsidiaries whose principal activities are that of the provision of life assurance
services. These companies are licenced to carry on linked long-term insurance business under the Financial Services
(Insurance Companies) Act by the Gibraltar Financial Services Commission.
For the purposes of these consolidated financial statements, only the shareholders’ funds and surpluses that
emerges on the long-term funds have been included. The assets invested by the Life Assurance clients are
determined by either the clients or their advisers and are segregated from the assets and liabilities of other
clients. Therefore, the Group considers that it does not control the investment decision nor does it bear any financial
risk in respect of that decision and, therefore, the investment assets and associated liabilities to the customers should
not be presented within the consolidated statement of financial position. The total revenue of the Group of
£28,078,000 (2022: £24,094,000) included £4,039,000 (2022: £5,001,000) relating to revenues attributable to the life
assurance businesses.
48
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
9. Revenue
Revenue from provision of retirement and life assurance
solutions and related administrative services
Interest and investment income
Total revenue
31 December 2023
£000
31 December 2022
£000
24,338
3,740
28,078
23,563
531
24,094
10. Administrative expenses
Included within administrative expenses are personnel costs as follows:
Wages and salaries
Social insurance costs
Pension contributions
Total personnel expenses
Average number of employees
Group
Average number of people employed
(including executive directors)
Company
Average number of people employed
(including executive directors)
11. Profit before other items
31 December 2023
£000
12,263
1,045
398
13,706
31 December 2022
£000
11,633
484
104
12,221
31 December 2023
Number
31 December 2022
Number
293
285
31 December 2023
Number
31 December 2022
Number
33
32
Profit before other items of £3,200,000 (2022: £3,321,000), was arrived at after charging the following to the income
statement:
(Loss)/profit on disposal of property and office equipment
Directors’ remuneration
Auditors’ remuneration for audit services
The directors’ remuneration report is included on page 20.
31 December 2023
£000
(96)
588
450
31 December 2022
£000
4
663
472
49
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
12. Reconciliation of reported to adjusted measures
Reported measure
Add: adjustment due to revenue
recognition policy change on
acquisition
Add: integration and acquisition cost
Add: Professional advisory costs
incurred in relation to the proposed
acquisition of the Company
Add: write-off of debtors related to prior
year disposals
Less: bargain purchase gain on
acquisition
Less: loss on disposal of companies
and trust management
Add: costs of strategic reviews
Add: senior management exit costs,
non-recurring professional costs and
other non-recurring costs
Revenue
2023
£000
2022
£000
28,078
24,094
Profit before other
items
2023
£000
3,200
2022
£000
3,321
Profit before tax
2023
£000
442
2022
£000
1,578
-
-
-
-
-
-
-
-
505
-
-
-
-
-
-
-
505
390
-
-
-
-
505
390
-
-
1,202
761
-
-
135
-
-
-
-
-
1,202
761
-
(327)
135
162
-
526
470
526
470
Adjusted measure
28,078
24,599
5,824
4,686
3,066
2,778
Adjusted measures exclude non-recurring costs and other exceptional items including bargain purchase gains that do
not form part of the normal course of business.
13. Taxation
Current tax expense
Deferred tax expenses/(income)
Release of deferred tax assets on leases as per IFRS 16
Release of deferred tax liabilities on intangible assets
Total tax expense
31 December 2023
£000
31 December 2022
£000
91
19
(85)
25
766
18
(60)
724
50
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
13. Taxation (continued)
Reconciliation of existing tax rate
Profit before tax for the year
Income tax using the Company’s domestic rate
Effect of tax rates in other jurisdictions
Release of deferred tax assets on leases as per
IFRS 16
Release of deferred tax liabilities on intangible
assets
Total tax expense
2023
%
-
0.00%
20.59%
4.30%
(19.23%)
-
31 December
2023
£000
442
-
91
19
2022
%
-
0.00%
48.54%
1.14%
(85)
25
(3.80%)
-
31 December
2022
£000
1,578
-
766
18
(60)
724
Effective tax rate (%)
-
5.66%
-
45.88%
The effective tax rate for UK increased to 25% from 1 April 2023. The effective tax rates in Malta and Gibraltar are 5%
and 12.5% respectively. The Group effective tax rate is lower in the year ended 31st December 2023 than the
jurisdictional effective tax rate due to the writeback of tax over provided for in prior years. However, in the year ended
31st December 2022, the Group effective tax rate was higher than the jurisdictional effective tax rate because tax
losses brought forward or incurred in that year in some jurisdictions could not be utilised by the profitable subsidiaries
in other jurisdictions and dividends remitted to the holding company by overseas jurisdictions were higher than in the
prior year thus resulting in a higher tax charge on these.
51
Total
£000
8,006
165
10
(6)
8,175
859
(5,924)
3,110
6,343
673
(2)
7,014
620
(5,828)
1,806
-
-
-
5,585
689
(4,705)
1,569
4,605
487
-
5,092
455
(4,705)
842
2
-
-
492
-
(15)
477
380
20
-
400
20
(4)
416
92
61
493
727
1,161
1,304
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
14. Property and office equipment
Motor
Vehicles
£000
Office
Equipment
£000
Leasehold
Improvements
£000
Right-of-use
Assets
£000
Note
490
5,585
Group
Costs
At 1st January 2022
Additions
Acquired through business
combination
Disposals
At 31st December 2022 and
1st January 2023
Additions
5
Disposals
At 31st December 2023
Depreciation
At 1st January 2022
Charge for the year
Disposals
At 31st December 2022 and
1st January 2023
Charge for the year
Disposals
At 31st December 2023
Net Book Value
At 31st December 2022
At 31st December 2023
15
-
-
-
15
-
(15)
-
12
1
-
13
2
1,916
163
10
(6)
2,083
170
(1,189)
1,064
1,346
165
(2)
1,509
143
(15)
(1,104)
-
2
-
548
574
516
52
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
14. Property and office equipment (continued)
Company
Costs
At 1st January 2022
Additions
At 31st December 2022 and 1st January 2023
Additions
Disposal
At 31st December 2023
Depreciation
At 1st January 2022
Charge for the year
At 31st December 2022 and 1st January 2023
Charge for the year
At 31st December 2023
Net book value
At 31st December 2022
At 31st December 2023
Office
Equipment
£000
771
10
781
14
-
795
532
35
567
32
599
214
196
53
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
15. Intangible assets
Group
Costs
Note
Goodwill
£000
Client
Portfolio
£000
Product
Development
£000
IT
Development
£000
Total
£000
At 1st January 2022
14,109
5,742
Additions
Acquired through business
combination
At 31st December 2022 and
1st January 2023
Additions
5
At 31st December 2023
Amortisation and impairment
At 1st January 2022
Charge for the year
At 31st December 2022 and 1st
January 2023
Charge for the year
At 31st December 2023
-
-
14,109
-
14,109
824
-
824
-
824
-
2,757
8,499
-
8,499
1,717
574
2,291
850
3,141
Carrying amounts
At 31st December 2022
At 31st December 2023
13,285
13,285
6,208
5,358
Impairment testing for cash-generating units containing goodwill
701
30
-
731
-
731
445
30
475
57
532
256
199
2,242 22,794
907
937
-
2,757
3,149 26,488
672
672
3,821 27,160
453
320
3,439
924
773
446
4,363
1,353
1,219
5,716
2,376 22,125
2,602 21,444
All goodwill relates to acquisitions made and reflects the difference between the fair value of the identifiable net asset
value of those acquisitions and the fair value of the consideration paid for those acquisitions.
Goodwill represents the excess of the cost of the acquisition, the amount of any non-controlling interests in the acquiree
and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the Group's interest in the
net fair value of the identifiable assets and liabilities of the acquire. Goodwill is not amortised but is measured at cost
less accumulated impairment losses. Additionally, on disposal of a cash-generating unit (“CGU”), the attributable
amount of goodwill is included in the determination of the profit or loss on disposal.
Goodwill is allocated to the smallest identifiable group of assets that generate largely independent inflows. Management
have assessed the number of CGUs and determined that there are four identifiable CGUs, which are also operating and
reportable segments. CGUs are determined based on whether the entity is a separate and distinct entity and/or whether
that entity is management as a standalone business unit.
54
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
15. Intangible assets (continued)
Impairment testing for cash-generating units containing goodwill (continued)
The carrying amount of goodwill allocated to each of the CGUs is as follows:
STM Life
LCA
FLHP
Options - Berkeley Burke acquisition
Total
2023
£000
1,256
7,735
3,698
596
13,285
2022
£000
1,256
7,735
3,698
596
13,285
The Group tests goodwill annually for impairment or more frequently if there is an indication that a CGU or group of
CGUs may be impaired. The annual impairment assessment is made by comparing the carrying amount of the CGU
or group of CGUs to which goodwill has been allocated with the recoverable amount of the CGU or group of CGUs.
The recoverable amount of each CGU or group of CGUs as at 31st December 2023 has been determined based on
a value in use calculation using cash flow projections from financial budgets prepared for the subsequent three years
and which have been approved by the Board. The subsequent two years’ cashflows have been calculated based on
the following assumptions thereby providing a five-year estimate of prospective net cashflows:
Percentage ranged from:
Revenue growth rates and attrition
Expense increases and inflation rates
2023
%
2022
%
-1.5% - 2%
-1.5% - 4%
-2% - 3%
-3% - 4%
The range of revenue growth and attrition rates, and those for expense increases and inflation, has narrowed in
comparison with 2022,to bring the assumptions for certain business units in line with those used elsewhere in the
Group. As goodwill is considered to have an indefinite life the year 5 net cashflow has been extrapolated to perpetuity.
A post- tax discount rate of 13.5% (2022: 14%) has been used in discounting the projected cashflows. It was
concluded that the fair value less costs of disposal did not exceed the value in use.
As a result of this analysis, no impairment charge has been recognised in either of the two years ended
31st December 2023 or 31st December 2022.
Key assumptions used in value in use calculations and sensitivity to changes in assumptions
The calculation of the value in use for the CGUs is most sensitive to the following assumptions:
• Revenue growth rates and customer attrition rates
•
• Discount rates
Expense increases and inflation rates
Revenue growth rates and attrition – a higher decline in revenue growth rates and/or an increase in attrition rates
would result in a further impairment charge being required. A 1% reduction in both revenue growth and attrition rates
would result in a potential impairment charge of approximately £199,000 (2022: £185,000).
55
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
15. Intangible assets (continued)
Key assumptions used in value in use calculations and sensitivity to changes in assumptions (continued)
Expense increases and inflation rates – management has considered the possibility of increased inflation resulting
in higher than anticipated costs and an increase in expenses growth rates would result in potential impairment. A 1%
increase in the expense growth rates would result in a potential impairment charge being required of approximately
£50,000 (2022: £nil).
Discount rates – discount rates represent the current market assessment of the risks specific to each CGU, taking
into consideration the time value of money and individual risks of the underlying assets that have not been
incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the
Group and its operating segments and is derived from its weighted average cost of capital (“WACC”). The WACC
considers both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s
investors. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service. Segment-
specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on
publicly available market data. Adjustments to the discount rate is made to factor in the specific amount and timing
of the future tax flows in order to reflect a pre-tax discount rate. A 1% increase in the WACC would result in a potential
impairment charge of approximately £173,000 (2022: £229,000).
Management also considered the potential impact of a scenario that combines adverse changes in all three key
metrics, namely where the revenue growth rate reduces by 1%, expenses increase by 1% and the WACC increases
by 1%. This would result in a potential impairment charge of approximately £510,000 (2022: £1,194,000).
Client portfolio
Client portfolio assets acquired in a business combination are recognised separately from goodwill and are
recognised initially at fair value at the acquisition date and subsequently assessed annually for impairment. The
Group’s client portfolios are amortised over the useful lives which have been determined to be ten years. Client
portfolios acquired through acquisitions are as follows:
London & Colonial Services Ltd
STM Nummos Life SL
Harbour Pensions Ltd
Options Corporate Pensions UK Limited
Options UK Personal Pensions LLP
Options SSAS Limited
Options EBC Limited
SIPP portfolio acquired from Mercer Ltd
SSAS portfolio acquired from Mercer Ltd
Total
Acquisition date
October 2016
January 2018
February 2018
February 2019
February 2019
August 2020
August 2020
August 2022
August 2022
31 December
2023
£000
283
31 December
2022
£000
383
173
453
359
615
199
795
1,389
1,092
5,358
215
545
429
735
229
915
1,543
1,214
6,208
56
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
15. Intangible assets (continued)
Company
Costs
At 1st January 2022
Additions
At 31st December 2022 and 1st January 2023
Additions
At 31st December 2023
Amortisation and impairment
At 1st January 2022
Charges for the year
At 31st December 2022 and 1st January 2023
Charges for the year
At 31st December 2023
Carrying amounts
At 31st December 2022
At 31st December 2023
16. Financial assets
Group
Financial instrument designated at FVTPL
Total
Product
Development
£000
IT
Development
£000
474
30
504
-
504
233
30
263
57
320
241
184
1,899
888
2,787
445
3,232
179
263
442
393
835
2,345
2,397
Total
£000
2,373
918
3,291
445
3,736
412
293
705
450
1,155
2,586
2,581
31 December
2023
£000
1,839
1,839
31 December
2022
£000
1,762
1,762
The financial instrument designated at FVTPL represents UK sovereign debt instrument with a stated interest rate of
2% and is held for trading.
This investment has been classified as Level 1 as its value is derived from quoted prices in active market.
17. Investments
Company – Investments in subsidiaries
Acquisitions of the Company
Shares in group undertakings
Balance at start of year
Acquisition of non-controlling interests (Note 6)
Dormant entities closure
Balance at end of year
57
31 December
2023
£000
31 December
2022
£000
17,013
400
-
17,413
16,013
1,001
(1)
17,013
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
18. Trade and other receivables
Group
Trade receivables
Prepayments
Other receivables
Total
Company
Receivables due from related parties
Other receivables
Total
31 December
2023
£000
3,915
1,691
1,743
7,349
31 December
2023
£000
13,930
1,365
15,295
31 December
2022
£000
4,266
999
3,196
8,461
31 December
2022
£000
13,708
2,215
15,923
Amounts due from related parties comprise intercompany balances which are unsecured, interest free and repayable
on demand.
The Group’s exposure to credit risks and impairment losses related to trade and other receivables (excluding accrued
income) are described in Note 26.
19. Cash and cash equivalents
Group
Bank balances
Company
Bank balances
31 December
2023
£000
18,365
31 December
2023
£000
2,324
31 December
2022
£000
19,234
31 December
2022
£000
2,425
The Group has a secured bank loan liability of £4,813,000 (2022: £5,363,000) which is included within Trade and
Other Payables in Notes 23 and 24. Details of the security held is set out in Note 23.
Within cash and cash equivalents held by the Group there is a balance of £4,209,000 (2022: £2,903,000) which is
not available for use by the Group. This mainly represented the blocked accounts that form part of Options Corporate
and Options SIPP regulatory requirements and the funds collected on behalf of clients but yet to be paid across to
the respective clients or relevant authority bodies.
20. Capital and reserves
Authorised, called up, issued and fully paid
59,408,088 ordinary shares of £0.001 each
(2022: 59,408,088 ordinary shares of £0.001 each)
31 December
2023
£000
31 December
2022
£000
59
59
58
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
20. Capital and reserves (continued)
Ordinary Shares
Ordinary shares carry full voting rights; full dividend rights; full rights as respects capital, to participate in a distribution
(including on winding up); no redemption rights.
Share premium
There were no new shares issued during either of the two years ended 31st December 2023 and 31st December
2022. The balance of the share premium account as at 31st December 2023 amounted to £22,372,000 (2022:
£22,372,000).
Other reserves
Other reserves are made up of:
Treasury reserves
Foreign Currency translation reserve
Share based payments reserve
Other reserve
Total other reserves
Treasury shares
Note
21
6
31 December
2023
£000
549
49
(162)
1,843
2,279
31 December
2022
£000
549
81
(162)
1,375
1,843
The treasury shares relate to those shares purchased by the STM Group Employee Benefit Trust (EBT) for
allocation to executives. The trustees of the Employee Benefit Trust held 1,089,780 ordinary shares of £0.001 each
in the Company at 31st December 2023 and at 31st December 2022. The shares held may be used to satisfy
awards made to employees and/or senior executives, such as conditional share awards granted under a long-term
incentive plan. The balance held on the treasury shares account as at 31st December 2023 amounted to £549,000
(2022: £549,000).
Translation reserve
The translation reserve comprises all cumulative foreign currency differences arising from the translation of the
financial statements of foreign operations. The balance at 31st December 2023 amounted to a negative £49,000
(2022: negative £81,000), with the movement of £32,000 in 2023 (2022: £12,000) representing the foreign currency
differences arising from the translation of the financial statements of foreign operations during the year.
Dividends
The following dividends were declared and paid by the Group during the year:
Nil pence per qualifying ordinary share (2022: 1.50 pence per qualifying
ordinary share)
31 December
2023
£000
31 December
2022
£000
-
891
After the respective reporting dates the following dividends were proposed by the Directors. The dividends have not
been provided for and there are no income tax consequences.
Nil pence per qualifying ordinary share (2022: 0.60 pence per qualifying
ordinary share)
59
31 December
2023
£000
31 December
2022
£000
-
356
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
21. Share based payments
There was no Long-Term Incentive Plan in place during the year. As such the charge for the year which has been
recognised within the share-based payment reserve is £Nil (2022: £Nil). The share-based payments reserve at 31st
December 2023 amounted to £162,000 (2022: £162,000).
22. Earnings per share
Earnings per share for the year from 1st January 2023 to 31st December 2023 is based on the profit attributable to
owners of £417,000 (2022: £844,000) divided by the weighted average number of £0.001 ordinary shares outstanding
during the year of 59,408,088 basic (2022: 59,408,088) and £59,408,088 dilutive (2022: 59,408,088) in issue.
23. Trade and other payables
Group
Deferred income
Trade payables
Bank loan (secured)
Deferred consideration
Lease liabilities
Other creditors and accruals
Total
Company
Owed to related parties
Bank loan (secured)
Accruals
Other creditors
Total
31 December
2023
£000
3,664
1,970
550
-
304
6,783
13,271
31 December
2023
£000
8,980
550
302
2,612
12,444
31 December
2022
£000
3,842
882
552
56
570
6,615
12,517
31 December
2022
£000
10,131
552
731
1,097
12,511
Amounts owed to related parties comprise intercompany balances which are unsecured, interest free and repayable
on demand.
Deferred income consists of fixed fee revenues billed in advance to clients which have not yet been earned as at the
year end.
The Company signed a credit facility with Royal Bank of Scotland (International) Ltd for £5.5 million in 2020, with
drawn down being completed in September in 2022 to fund the acquisition of the Mercer portfolios (Note 5). The
facility has a 5-year term from November 2020, with capital repayments structured over ten years and a final
instalment to settle the outstanding balance in full at the end of the 5 years. The balance outstanding on this facility
as at 31st December 2023 was £4.8 million (2022: £5.4 million). Interest on the loan is charged at 3.5% per annum
over the Sterling Relevant Reference Rate on the outstanding balance. Prior to fully drawing down the loan interest
was paid on the undrawn balance at a rate of 1.75% per annum over the Sterling Relevant Reference Rate.
The facility is subject to customary cashflow to debt service liability ratios and EBITDA to debt service liability ratio
covenants tested quarterly and is secured by a capital guarantee provided by a number of non-regulated holding
subsidiary companies within the Group and debentures over these companies.
The Group’s exposure to liquidity risk related to trade and other payables is described in Note 26.
60
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
24. Other payables – amounts falling due in more than one year
Group
Lease liabilities
Bank loan (secured)
Other payables
Total
Company
Bank loan (secured)
25. Financial risk management
31 December
2023
£000
546
4,262
-
4,808
31 December
2022
£000
143
4,811
96
5,050
31 December
2023
£000
4,262
31 December
2022
£000
4,811
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
•
• Currency risk
• Regulatory risk
• Capital management
Interest rate risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies
and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative
disclosures are included throughout these consolidated financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board has an Audit and Risk Committee, which is responsible for developing and monitoring the
Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market condition and the Group’s activities. The Group, through
its training and management standards and procedures, aims to develop a disciplined and constructive control
environment in which all employees understand their roles and obligations.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group’s receivables from clients.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each client. The
demographics of the Group’s client base, including the default risk of the country in which the clients operate, has
less of an influence on credit risk. There is no one client to which a significant percentage of the Group’s revenue
can be attributed. The level of liquidity of customer investments determines the level of credit risk associated with
each customer. The liquidity of customers is monitored at each anniversary date.
61
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
25. Financial risk management (continued)
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions. The Group believes its exposure to liquidity risk is
minimal given its current cash balances and existing financial obligations.
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices
will affect the Group’s income or the value of its holdings of financial instruments. The object of market risk
management is to manage and control market risk expenses within acceptable parameters, while optimising the
return. The Group does not have a significant exposure to market risk.
(d)
Interest rate risk
The Group has one bank borrowing at the year end, as detailed in Note 23. A change of 100 basis points in the
relevant underlying interest rate would have increased or decreased equity and profit or loss by £51,000 before tax
(2022: £34,000).
(e) Currency risk
The Group has a small exposure to currency risk in relation to its investment in STM Nummos. This is mitigated by
the fact that the assets and liabilities held by STM Nummos are in its functional currency of Euros (€). It has a further
currency risk in relation to the expenses incurred in Malta as these are in Euros. A change of 100 basis points in the
Euro to Sterling exchange rate would have increased or decreased equity and profit or loss by £27,000 after tax
(2022: £28,000) This is mitigated by the fact that clients are invoiced in its and the Group’s functional currency of
Sterling (£).
The Company has minimised exposure to foreign exchange rates, with the majority of transactions being carried out
in its functional currency of Pounds Sterling (£).
(f) Regulatory risk
The Group is subject to laws, regulations, and specific solvency requirements in the various jurisdictions in which it
operates. The Group has established policies and procedures aimed at compliance with local laws and regulations.
(g) Capital management
The Board’s policy is to maintain a strong capital base, which is defined as share capital and retained earnings, so
as to maintain investor, creditor and market confidence and to sustain future development of the business.
Furthermore, certain of the Company’s subsidiaries are licensed by the respective jurisdictions regulators and as
such all comply with the regulatory capital requirements set by each respective regulatory body.
The Group manages its capital to ensure that the entities in the Group will be able to continue as a going concern,
while maximising the return to stakeholders through optimisation of the debt and equity balance. The capital structure
of the Group consists of debt, which includes a bank loan as per Notes 23 and 24, and equity attributable to
shareholders, comprising share capital, reserves and retained earnings as disclosed. The Board reviews the capital
structure and as part of this review, considers the cost of capital and the risks associated with each class of capital.
In addition, the Board considers the liquidity and solvency of the Group on an ongoing basis.
The Group monitors capital using a ratio of “adjusted net debt” to “adjusted equity”. For this purpose, adjusted net
debt is defined as total liabilities, comprising interest-bearing loans and borrowings less cash and cash equivalents
net of the balances which are not available for use by the Group (Note 19). Adjusted equity comprises all components
of equity.
62
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
25. Financial risk management (continued)
(g) Capital management (continued)
The Group’s adjusted net debt to equity ratio at 31st December 2023 suggests that the Group has sufficient liquidity
to meet its obligations as they fall due. Net debt compared to equity at 31st December 2022 was as follows:
Total liabilities
Less: net cash and cash equivalents available
Adjusted net debt
Total equity attributable to owners of the Company
Adjusted net debt to equity ratio
31st December
2023
£000
18,823
(14,156)
4,667
34,595
13%
31st December
2022 (restated)
£000
18,759
(16,331)
2,428
34,970
7%
Total liabilities above are stated after excluding provisions for customer redress of £27,441,000 (2022: £488,000) as
these are exactly matched buy amounts recoverable from the Group’s insurers. The comparative for total liabilities
has been adjusted accordingly as such provisions were not excluded in the financial statements of the Group for the
year ended 31st December 2022, as the amount involved was not material.
The net cash and cash equivalents available excludes the balances not available for use by the Group of £4,209,000
(2022: £2,903,000) as more fully explained in Note 19.
26. 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:
Financial instrument designated as FVTPL
Trade and other receivables
Cash and cash equivalents
Total
Carrying amount
31st December
2023
£000
1,839
7,349
18,365
27,553
31st December
2022
£000
1,762
8,461
19,234
29,457
The Group’s maximum exposure to credit risk on trade and other receivables relating to one entity or group of related
entities amounts to less than 10% of the overall trade receivables amount as at 31st December 2023 and 31st
December 2022. Segmental disclosures are included in Note 7 reflecting the Group’s operating segment and
geographic concentration.
The Group limits its exposure to credit risk by investing only in liquid debt securities issued by the UK government.
The financial instrument designated at FVTPL held by the Group is rated as investment grade.
Impairment on trade and other receivables is determined applying an ECL model as discussed in Note 3(n).
63
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
26. Financial Instruments (continued)
Credit risk (continued)
The ageing of the Group’s trade receivables at the reporting date was:
Gross
receivables
31st
December
2023
£000
1,398
350
198
Individual
Impairment
31st
December
2023
£000
-
-
-
2,570
4,516
(601)
(601)
Total
£000
1,398
350
198
1,969
3,915
Gross
receivables
31st
December
2022
£000
933
464
333
Individual
Impairment
31st December
2022
£000
-
-
-
Total
£000
933
464
333
3,060
4,790
(524)
(524)
2,536
4,266
Not past due
Past due 0–30 days
Past due 31–120 days
More than 120 days
past due
Total
Standard credit terms are 30 days from the date of issuing the fee note.
The movement in the allowance for impairment in respect of trade receivables during the period was:
Balance at start of year
Movement in expected credit loss allowance
Balance at end of year
31st December
2023
£000
524
77
601
31st December
2022
£000
174
350
524
Based on historic default rates and knowledge of the customers, the Group believes that no impairment allowance is
necessary in respect of the trade receivables.
Liquidity Risk
The Group holds sufficient liquid assets, including cash at bank, to enable it to meet its liabilities as they fall due. The
following are the Group’s contractual maturity liabilities. The amounts are gross and undiscounted and include
contractual interest payments and exclude the impact of netting arrangements.
31st December 2023
Non-derivative financial liabilities
Trade payables
Bank loan (secured)
Lease liabilities
Other creditors and accruals
Total
Carrying
amounts
£000
Contractual
cash flow
£000
6 months
or less
£000
6-12
months
£000
1-4 years
£000
1,970
4,812
850
6,783
14,415
1,970
5,013
844
6,783
14,610
1,970
330
194
6,783
9,277
-
327
110
-
437
-
4,356
540
-
4,896
64
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
26. Financial Instruments (continued)
Liquidity Risk (continued)
31st December 2022
Non-derivative financial liabilities
Trade payables
Bank loan (secured)
Deferred consideration
Lease liabilities
Other creditors and accruals
Total
Fair value hierarchy
Carrying
amounts
£000
Contractual
cash flow
£000
6 months or
less
£000
6-12 months
£000
1-4 years
£000
882
5,363
56
713
6,615
13,629
882
5,682
56
736
6,615
13,971
882
336
56
363
6,615
8,252
-
333
-
226
-
559
-
5,013
-
147
-
5,160
The following table shows a reconciliation from the beginning balances to the ending balances for fair value
measurements in Level 3 of the fair value hierarchy.
Financial assets - call options
Balance at 1st January
Settlement (Note 6)
Balance at 31st December
27. Leases
31st December
2023
£000
-
-
-
31st December
2022
£000
881
(881)
-
In relation to leases under IFRS 16, the Group has charged depreciation and interest expenses. The Group
recognised £455,000 (2022: £487,000) of depreciation charges and £41,000 (2021: £53,000) of interest expenses
from these leases during the year ended 31st December 2023. The Group recognised £72,000 (2022: £61,000) of
expenses relating to short-term leases or leases that can be cancelled with no penalties and £6,000 (2022: £6,000)
of expenses for leases of low-value assets, excluding short-term leases, for the year ended 31st December 2023.
The total cash outflow for leases for the year ended 31st December 2023 was £660,000, including short-term lease
cash outflows of £78,000 (2022: £791,000, including short-term lease cash outflows of £67,000).
Lease liabilities
Non-cancellable lease liabilities as per IFRS 16 are payable as follows:
Less than one year
Between one year and five years
More than five years
Total
31st December
2023
£000
304
540
-
844
31st December
2022
£000
589
147
-
736
The maturity analysis of lease liabilities is disclosed in Note 26. Right-of-use assets are disclosed in Note 14.
The Group leases a number of offices from which they operate, the largest of which are the offices in Gibraltar, Cardiff
and Milton Keynes with the leases terminating in 2028, 2025 and 2024 respectively.
65
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
28. Provisions, receivables due from insurers and contingent liability
As stated in Note 3(q) and as required by IFRS, provisions are recorded when there is a present legal or constructive
obligation as a result of a past event, for which it is probable that an outflow of economic benefits will be required to
settle the obligation, and where a reliable estimate can be made of the amount of the obligation. As stated in Note 2
this requires judgement and the use of assumptions about the likelihood and magnitude of any cash outflow. The
Group analyses its exposure based on available information, including consultation with professional indemnity
insurers and external legal advisors where appropriate, to assess any potential liability.
Provisions and receivables due from insurers
Customer redress in relation to UK SIPP claims
Other claims
Total
Customer redress in relation to UK SIPP claims
31st December
2023
£000
27,441
-
27,441
31st December
2022
£000
-
488
488
During the year ended 31st December 2023, numerous claims from clients arising across various policy years and
investments were settled and the cost covered in full by the professional indemnity insurance in place for the relevant
policy years based on the relevant reserving held. In addition, a Judicial Review heard on 16 and 17 April 2024 that
affected a further cohort of cases rejected the Group’s appeal against the previous determination by the Financial
Ombudsman Service and upheld the original ruling. These events have enabled a reasonably materially accurate
assessment to be done of the potential liability relating to the remaining open cases and legal claims in similar
circumstances. In accordance with IAS 37, a provision of £27,441,000 (2022: £nil) has been made in the financial
statements for the year ended 31st December 2023 with a corresponding receivable from insurers as these are fully
covered by professional indemnity insurance.
With reference to the prejudicial exemption allowed under IAS 37, the Group will not disclose any further information
about the contingent liability, including any details about current and potential claims as these claims are ongoing.
On the basis of present information, amounts already recognised and the availability of insurance coverage, it is the
opinion of the Group that the ultimate determination of complaints received to date will not have a material adverse
effect on the consolidated financial position of the Group. However, it is possible that future results of operations or
cash flows for any annual period could be materially affected by an unfavourable resolution of these matters.
Other claims
As at 31st December 2022 there were potential claims in respect of the historic trading of STM Malta Pensions
Services Limited. These claims were estimated based on present information available at the time and a provision
made. This was covered by professional indemnity insurance net of relevant insurance case excesses and thus was
also reflected as a receivable due from insurers. Following progress made on these claims during the year ended
31st December 2023, the provision (and corresponding receivable from insurers) has reduced to £Nil (2022:
£488,000).
General
With reference to the prejudicial exemption allowed under IAS 37, the Group will not disclose any further information
about the contingent liability, including any details about current and potential claims as these claims are ongoing.
66
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
29. Related Parties
Transactions with Key Management Personnel and Directors’ compensation
There were no Key Management Personnel other than the Board of the Company. Key Management Personnel and
Directors’ compensation comprised:
Directors’ remuneration
Share-based payments
Total
31st December
2023
£000
588
31st December
2022
£000
663
-
588
-
663
Key Management Personnel and Director transactions
Trusts and related parties connected to Key Management Personnel and the Directors held 12% of the voting shares
of the Company as at 31st December 2023 (2022: 12%).
The Company received dividends of £4,093,236 (2022: £4,716,863) from STM Malta Limited, £836,847 (2022:
£100,000) from STM Fidecs Limited and £1,894,302 from London & Colonial Holdings Limited (2022: £Nil).
67
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
30. Group Entities
Principal subsidiaries
At 31st December 2023 the Company owned the following subsidiaries which are regarded as the principal trading
operations of the Group.
Country of
incorporation
STM Fidecs Life, Health and
Pensions Limited
Gibraltar
STM Fidecs Central Services Limited
Gibraltar
STM Nummos SL
Spain
STM Life Assurance PCC plc
Gibraltar
STM Nummos Life SL
Spain
STM Malta Pension Services Limited
Malta
London & Colonial Assurance PCC
PLC
Gibraltar
London & Colonial Services Limited
England
London & Colonial Central Services
Limited
London & Colonial (Trustee Services)
Limited
Options Corporate Pensions UK
Limited
England
Gibraltar
England
Options UK Personal Pensions LLP
England
Options SSAS Limited
Options EBC Limited
England
England
Ownership interest
31st
31st
December
December
2022
2023
100%
100%
indirectly
indirectly
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%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
100%
indirectly
70%
indirectly
100%
indirectly
100%
indirectly
Activity
Administration of clients’
assets
Services and
Administration
Administration of clients’
assets
Life Assurance company
Administration of client
assets
Administration of client
assets
Life Assurance Company
Administration of clients’
assets
Administration of clients’
assets
Administration of clients’
assets
Administration of clients’
assets
Administration of clients’
assets
Administration of clients’
assets
Administration of clients’
assets
31. Non-adjusting subsequent events
On 14th June 2024, the Company announced that the Group had signed a commercial agreement with Smart Pension
Limited (“Smart”) under which members transferring from of the Group’s Options Workplace Master Trust would,
subject to approval by the Trustees and the Pensions Regulator, transfer to Smart’s Master Trust with Smart paying
a consideration for such transfers to the Group. It is anticipated that, over a two-year period, this consideration is
likely to amount to circa £4.7million. In addition, the Group also entered into an introducer’s agreement with Smart at
the same time, whereby any new members introduced to Smart by the Group’s existing or new intermediary contacts
would lead to introductory commission income for the Group. The agreement is in place for a maximum period of
three years, and management estimates that the quantum of such additional introductory commission could lie in the
range of £1.0 million to £5.0 million over the three-year period.
68
STM GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023
31. Non-adjusting subsequent events (continued)
On 12th January 2023, the Group completed the acquisition of the remaining external 30% interest in Options UK
Personal Pensions LLP, increasing its ownership from 70% to 100% (Note 6). A decrease in equity attributable to
owners of the Company has been recognised in the other reserve amounted to £468,000. Subsequent to this
acquisition, all subsidiaries are wholly owned.
69