STM's UK SIPP and Gibraltar life new business revenues 'slower to materialise than expected'

The second half of the year to date was "a frustrating period" with sales revenues in its UK SIPP business and Gibraltar life business "slower to materialise than anticipated", STM Group said in a trading update today (18 November) for the 12 months to 31 December 2021.

This had translated into contributing around £0.4m less to 2021 revenue and EBITDA expectations, it said.

The cross border financial services group added that there were "a number of large pieces of business currently under negotiation, particularly around the London & Colonial annuity product, that would generate a material uplift in revenue and profitability for 2021".

"As uncertainty remains as to whether these policies will be incepted prior to year-end, the Board has taken the prudent view that these should not be reflected in revised forecasts", it said.

STM's EBITDA position had been further impacted by around £0.1m by a slower than anticipated reduction in its cost base following the migrations onto new IT platforms for the UK and Gibraltar businesses.

There was also an additional delay for the migration of the Malta business until mid-December 2021.

"Whilst the majority of the savings on software fees have come to fruition, the staff resource savings have yet to substantially materialise but are expected to do so moving into 2022.

"As a consequence of the above, the Board now anticipates that the Group will report revenue of £22.5 million, EBITDA of £3.4 million and statutory profit before tax of £1.5 million for 2021."

STM further stated it had taken significant steps during the third quarter of 2021 to move to a more efficient target operating model which, in turn, will see the business return to better operating margins.

In addition, Christine Hallett, formerly Managing Director of STM's UK businesses, was appointed as Director of Group Distribution as of 1 November 2021 and it expected to go live with two platforms with a white-label SIPP product prior to the year end.

"We therefore anticipate profitable growth next year, targeting profit before tax of at least £2 million, excluding any contribution from the London & Colonial annuity product referred to above, given the small volume of policies and uncertainty on timing. Furthermore, the business continues to look for acquisition opportunities that would give more scale to its UK businesses."