TIDMSTM
RNS Number : 3503D
STM Group PLC
09 October 2018
STM Group Plc
("STM", the "Company" or the "Group")
Acquisition of UK Pensions Business
STM Group Plc (AIM: STM), the cross border financial services
provider, is pleased to announce that it has entered into an
agreement to acquire Carey Administration Holdings Limited ("CAHL"
or "Carey"), from the existing shareholder for a maximum
consideration of GBP0.4 million (the "Acquisition").
The Acquisition will be funded from existing financial resources
and is subject to regulatory approval by the UK Financial Conduct
Authority, as well as requiring notification to The Pensions
Regulator ("TPR") in the UK. The approval process has
commenced.
CAHL owns 70% of Carey Pensions UK LLP, offering a number of
SIPP administration products to the UK market; and 80% of Carey
Corporate Pensions UK Limited, offering auto-enrolment workplace
pension solutions ("AE") to UK employers.
Highlights of the Acquisition:
-- STM will enter the UK auto-enrolment market via Carey's AE
business, offering quality service levels to intermediaries and
advisers that wish to offer a more personalised service to their
client companies.
-- Carey's AE business is one of the top 20 AE providers in UK
by size and currently has over 65,000 members. It is expected to
deliver revenue of approximately GBP1.5 million for the financial
year ending 31 December 2018 and has been growing consistently
year-on-year. Following completion of the Acquisition, the business
is expected to break even during 2019, based purely on organic
growth.
-- The UK AE market is undergoing considerable consolidation as
part of the upcoming TPR authorisation process - and presents an
opportunity for STM to accelerate its growth strategy by
acquisition.
-- Carey's UK SIPP business has over 4,000 members and is
expected to deliver revenue of approximately GBP1.8 million for the
year ending 31 December 2018. The assets under administration
within the Carey UK SIPP business amounted to GBP898 million as at
31 December 2017.
-- Carey's UK SIPP business offers complementary products to
those of STM's SIPP business, including offering Commercial
Property SIPPs and SSAS'.
-- The Carey UK SIPP business, and its UK introducers, will
benefit from STM's online application processes for ease and
efficiency of processing.
-- STM will benefit from significant savings across the two SIPP
businesses, estimated at GBP0.5 million per annum once fully
integrated.
-- The Carey businesses will be rebranded within six months of completion.
-- The Board believes that the Carey businesses have a good
quality management team that will complement the existing UK STM
management team. The enlarged UK business will employ in excess of
100 people and firmly underpins STM's stated intention of being
seen as an increasingly UK centric business.
-- STM notes that Carey Pensions is party to a high profile
Court case (the 'Adams' case). STM has secured indemnities and the
benefit of significant existing PI cover from the sellers and
considers any residual exposure to this and any other historic
industry issues, to be minimal.
Terms of the Acquisition:
-- The Company has conditionally agreed to acquire CAHL for a
maximum consideration of GBP0.4 million, of which GBP0.1 million is
payable on the first anniversary of completion.
-- The Acquisition is expected to be earnings enhancing in the
financial year to December 2019 and thereafter (before any
exceptional costs in relation to the Acquisition and
integration).
-- CAHL will have at the time of completion not less than GBP0.1
million of net assets. For the year ended 31 December 2017 it
delivered revenue of GBP2.9 million and a loss before tax of GBP1.2
million.
Commenting on the Acquisition, Alan Kentish, Chief Executive
Officer of STM, said:
"We are delighted to announce the acquisition of Carey
Administration Holdings Limited, and its subsidiaries.
"Carey pensions has been a self-starter in the UK pensions
market and has achieved a lot under Christine Hallett's leadership
during a relatively short time frame. The management team has ideas
and opportunities in abundance and I believe STM's resources,
financially and otherwise, will allow many of these to come to
fruition.
"The integration of the two similarly sized SIPP businesses will
give us some straight-forward integration savings and make the
enlarged SIPP group much more efficient. We have seen this
previously in both our London & Colonial and Harbour
acquisitions. In addition, it helps us to offer niche SIPP products
to the UK market with minimal financial outlay.
"The Carey auto enrolment business is particularly interesting,
given the changes that are occurring within the sector that will
almost certainly lead to consolidation amongst the providers. The
cost of entry is prohibitive to new entrants from a standing start
given that all staging dates have now passed; so that leaves only a
limited number of providers in an ever-expanding market. In a
similar manner to Carey, we must ensure we offer a more personal
service approach to advisers and employers, so as to be able to
differentiate ourselves from the larger providers in the
sector.
"The newly strengthened Board is fully supportive of the Carey
acquisition and sees this as a further step in delivering product
diversity and a robust profitable business going forward."
Acquisition Rationale:
The Board believes that the Acquisition is highly complementary
to STM's short-to-medium term strategy and its current existing
business. Strategically, STM has stated its intention to diversify
its product range to cater more for UK residents, as well as its
more traditional expatriate market.
The ability to enter the auto enrolment market at a time of
change and potential consolidation in this sector is both
opportunistic from an organic growth strategy as well as a
buy-and-build vision. The Carey AE business has benefited from
significant investment thus far. The audited accounts for 2017 show
a loss for the year of GBP1.0 million, which is a significant
reduction in loss compared to the previous year, and which reflects
the impact of the increasing membership.
In addition, the Carey SIPP business with over 4,000 members
offers a natural consolidation opportunity when combined with STM's
current UK SIPP operation which has circa 3,000 members. The Carey
SIPP business expands our UK introducer network and adds specialist
SIPP products and expertise that STM currently does not have, such
as their UK Commercial property team. As an enlarged SIPP group,
STM will be unique in offering SIPP products to both the UK and
expatriate market. The audited 2017 accounts of Carey SIPP showed a
loss of GBP0.2 million, which included exceptional legal and
professional fees.
The existing shareholder has taken the decision that their UK
pension businesses are not core to their ongoing operations and are
thus exiting the marketplace.
The remaining minority interests in the subsidiaries, being 30%
in the SIPP business and 20% in the AE business, are held by the
existing CEO of the businesses, Christine Hallett (a well-known and
respected player in the UK pensions industry) who has entered into
an option agreement with STM for them to acquire those minority
interests on a pre-agreed basis. The option agreement is valid for
three years and will allow STM to become the 100% owner of these
subsidiaries once triggered.
Christine Hallett, remaining CEO of Carey Pensions,
commented:
"I am really excited that we are going to be part of the STM
proposition given STM's focus on gaining further traction in the UK
market. Carey Pensions is ideally placed to help achieve that aim.
We are well known in the industry and we have a unique proposition
covering both personal and workplace pension solutions, which is an
important differentiator compared to many of our competitors. Our
extremely professional and experienced team will combine with STM's
team to provide a strong platform for growth."
Simon Cole, Chief Operating Officer of Carey Group, added:
"I am delighted that our UK pension investments are going to a
good home, in the form of STM. I have watched the impressive
progress made by STM in the international pensions market, and it
seems that we can now help them with their UK plans. This is a
tremendous opportunity for Carey Pensions and on behalf of Carey
Group, I wish STM and Christine Hallett and her team every success
for the future."
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
STM Group Plc
Alan Kentish, Chief Executive Officer Via Walbrook PR
alan.kentish@stmgroupplc.com www.stmgroupplc.com
Therese Neish, Chief Financial Officer
therese.neish@stmgroupplc.com
FinnCap www.finncap.com
Matt Goode / Emily Watts - Corporate Tel: +44 (0) 20 7220 0500
Finance
Tim Redfern / Richard Chambers -
ECM
Walbrook www.walbrookpr.com
Tom Cooper / Paul Vann Tel: +44 (0) 20 7933 8780
Mob: +44 (0) 797 122 1972
tom.cooper@walbrookpr.com
Notes to editors:
STM is a multi jurisdictional financial services group which is
listed on the AIM Market of the London Stock Exchange. The Group
specialises in the delivery of a wide range of financial service
products to professional intermediaries and the administration of
assets for international clients in relation to retirement, estate
and succession planning and wealth structuring.
STM has operations in the UK, Malta, Gibraltar, Jersey, and
Spain. The Group is looking to expand through the development of
additional products and services that its ever more sophisticated
clients demand. STM has developed a specialist international
pensions division which specialises in SIPPs, Qualifying Recognised
Overseas Pension Schemes (QROPS), and Qualifying Non UK Pension
Schemes (QNUPS). STM has a Gibraltar Life Insurance Company, STM
Life plc, which provides life insurance bonds - wrappers in which a
variety of investments, including investment funds, can be
held.
Further information on STM Group can be found at
www.stmgroupplc.com
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END
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