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STM Group issues profit warning after “incredibly frustrating” period

Full-year 2019 group revenue is now expected to be £23mln, with pre-tax and underlying profits should come in at £3.8mln and £2.5mln respectively

STM Group Plc - STM Group issues profit warning after “incredibly frustrating” period
STM expects returns from 2021

STM Group Plc (LON:STM) shares tumbled after the financial services provider rang the alarm on profits for both this and next year.

Full-year 2019 group revenue is now expected to be £23mln, as opposed to last year's £21mln, while pre-tax and underlying profits should come in at £3.8mln and £2.5mln respectively, down from £4mln and £3.7mln respectively a year earlier.

STM, which supplies independent fiduciary services and asset structuring to high-net-worth individuals and corporates, said slower new product revenue and extra costs will drag through 2020, although returns from new investments are expected to prop up the following year.

The past six months have been “incredibly frustrating”, said chief executive Alan Kentish said, as the AIM-listed company dealt with issues in new and old business.

Frustrations included delays in rebranding pensions administration specialist Carey, acquired in February, while the regulatory application for the Carey Master Trust took longer than anticipated, pushing back new business flows and increasing one-off costs.

These charges, as well as expenses to improve IT facilities plus higher insurance costs, are expected to come in at £300,000.

Due to uncertainty in the UK pension sector, new business applications within the related division were lower than originally budgeted, while non-core companies also saw weak sales.

“We continue to invest in our future as part of our new target operating model, key to this is a building of our governance platform as part of protecting our business and delivering on our IT efficiencies to step-change our operating margins,” Kentish said in a release.

“Whilst it is disappointing to start on a rebased 2020 profit before tax, I feel confident that we have the right tools in place and growth opportunities available to us to deliver enhanced underlying profitability,” he added.

Shares dropped 26% to 31.82p on Wednesday at noon.

Quick facts: STM Group Plc

Price: 31.2 GBX

Market: AIM
Market Cap: £18.54 m

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