Trust and corporate services provider STM Group reported a slump in interim profits.
Management was surprised by the poor trading conditions in the first half. They previously considered the business would be relatively resilient in a recession but economic conditions were tougher then they expected. That is because half of the fees are fixed and the rest are based on time spent on the business. The business is highly operationally geared so the loss of time based work hit profits. On top of that, newer ventures are taking longer than expected to build up.
Revenues dipped from £4.26m to £4.13m in the six months to June 2009. Lower interest rates meant that STM lost treasury management fees of £450,000 in the first half. This was pretty much pure profit and contributed to the slump in pre-tax profit from £1.43m to £180,000.
The insurance-related activities is cutting costs and the life business is trying to win work. The new Jersey businesses was disappointing but should do much better in the second half. The Swiss business should gain regulatory approvals in the near future.
Two business development directors have been appointed to the core business and this is helping to win additional business.
Net cash, excluding loans from related parties and deferred consideration, was £1.72m at the end of June 2009. The interim dividend is being maintained at 0.2p a share.
At 32p a share, STM is valued at £13.7m.
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