STM Group profits fall amid newly extended takeover talks

STM Group has reported a pre-tax profit of £100,000 for the six months ended 30 June, down from £500,000 in 2022, alongside takeover talks with Pension Superfund Capital that have been extended multiple times to the latest deadline of 11 October.

Alan Kentish, STM Group chief executive said in his review: "To say it has been a busy period would be an understatement, firstly with the strategic review and more recently in dealing with the possible offer by Pension SuperFund Capital for the entire issued and to be issued share capital of the Company, as first announced on 11 July 2023.

"During the recent months, the management has been heavily focused on facilitating Pension SuperFund Capital's due diligence workstreams. Despite the exceptional circumstances, all colleagues and teams have worked hard to ensure continued delivery of service to customers and value to shareholders.  

"In this respect, and as previously announced, certain changes to the policy on interest income were put into effect on 1 July 2023. This allowed for better rate negotiations on client cash balances with banks, and changes were made to how this was shared with customers."

He continued: "Whilst the first half of the year has seen the benefits of increased market interest rates and the income that can be generated from funds held on behalf of clients, the second half of the financial year is particularly expected to see the significant benefits from the change in policy, as well as from the materially rising interest rate environment which the Company has benefited from during 2023.

"This increased interest income compensated for income from new business generation across the Group being slower than anticipated. With recurring operating revenue continuing to hold up well when compared to the first half of 2022, the overall revenue for the period was 17% higher than the prior period.

"Operational expenses for the period were £11.7 million (2022: £10.0 million), broadly in line with management expectations, with overruns in certain expense categories, mainly legal and professional costs, being compensated for by savings in personnel costs.

"Non-operational expenses, classified as "other items" on the income statement, increased in comparison with the prior period, particularly in relation to finance costs (£302,000, 2022: £99,000) and the non-cash item of amortisation of the client portfolios (£672,000, 2022: £445,000).

"The increases were expected following the acquisition of the additional SIPP and SSAS portfolios from Mercer Ltd."

Kentish also covered "the latest update on the possible offer was announced on 27 September 2023, when the Company updated that it had received a revised proposal, being an offer price of up to 67 pence per share, comprising 60 pence per share payable in cash upon completion of the possible offer and a further 7 pence per share by way of an unsecured loan note, repayable 12 months following the date on which a firm intention to make an offer is announced in accordance with Rule 2.7 of the Code, with repayment contingent on certain conditions that being discussed between Pension SuperFund Capital and the Company.

"It also announced discussions with Alan Kentish (a director and shareholder of the Company) with respect to the acquisition of certain parts of the Group had been revised such that it is now proposed that Mr Kentish will only acquire the Group's UK SIPP businesses.

"The Company has also announced in accordance with Rule 2.6(a) of the Code, that a further extension to the date by which Pension SuperFund Capital is required either to announce a firm intention to make an offer in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer for the Company had been granted by the Takeover Panel, in order to allow further time for these discussions to be completed.

"Consequently, Pension SuperFund Capital is required either to announce a firm intention to make an offer in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer for the Company by not later than 5.00pm on 11 October 2023.  The Board also notes that there can be no certainty that any offer will ultimately be made for the Company."