Gibraltar-based trust and corporate services provider STM Group knows that it has to rebuild investor confidence in its business after last year’s disappointments and the interim figures made a good start.
Revenues grew 13% to £4.66m and underlying profit improved from £182,000 to £569,000. Cost cutting and reduced losses from newer operations STM Life and STM Swiss helped the recovery in profit. Those newer businesses should reach breakeven by the end of 2010.
There was some benefit from CGT changes but there should be a more sustained flow of new business following the rise in the top rate of UK tax to 50%.
Costs would have been even lower if it were not for the April acquisition of Zenith in Jersey. This has been integrated with the rest of the Jersey business to make a much more substantial operation.
There is a strategy to widen the number of introducers of new business and reduce dependence on the UK. There are also plans to gain regulatory clearance for an operation in Malta.
Evolution forecasts a full year profit of £1.3m, while fellow joint broker FinnCap is more optimistic with a £1.6m target. The shares are trading on less than nine times prospective 2010 earnings.
There is £4.94m of cash in the balance sheet with around £2.7m of that cash required as regulatory capital for STM Life. There were short-term loans of £727,000 and there was £2.2m of loan stock issued in the first half. There is also £3.46m of deferred consideration payable. The interim dividend is maintained at 0.2p a share.
The acquisition of Luxembourg-based Citadel for up to €1.88m was announced in July 2009 but has still not been completed due to delays in gaining certain regulatory approvals. It is uncertain whether this deal will go ahead.
At 23p a share, STM is valued at £9.9m.
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