20th Jun 2019 13:26
(Alliance News) - STM Group PLC on Thursday said its February acquisition of Carey Administration Holdings Ltd has resulted in a bargain purchase gain.
Shares in STM were down 9.9% at 42.97 pence in early afternoon trade.
STM's GBP400,000 acquisition of Carey Administration, which owns 70% of Carey Pensions UK LLP, completed in February after being announced in October 2018.
The financial services provider said bargain purchase gain results from "negative goodwill as a result of the consideration paid plus the amount of the non-controlling interest being lower than the fair value of the net assets acquired".
The value of the bargain purchase gain has been calculated to be GBP2.7 million, recognised immediately in STM's profit and loss account. STM noted that its goodwill can be adjusted for up to a year following an acquisition.
STM forecasts for Carey Administration to "remain loss making for 2019" at GBP600,000 but to break even from early 2020. One-off costs of GBP500,000 are expected to be absorbed in 2019 relating to Carey but timings mean that the GBP700,000 of annualised cost savings from the deal won't be realised before 2020.
"It is always pleasing to announce a bargain purchase, but more importantly the Carey acquisition has opened the door to product offerings and market sectors that were previously inaccessible to us. The bargain purchase gain does however generate a benefit in the first half of the year which is not reflected in the second half or in future comparative periods," said STM Chief Executive Alan Kentish.
Kentish noted that the company is "keen to acquire" portfolios and auto-enrolment master trusts.
"The additional investment in infrastructure and resources under the new target operating model will allow us to acquire, and integrate quickly and efficiently, without impinging on our ability to run the business day to day. All of the above makes for an exciting 12 to 18 months ahead where we expect to see solid revenue and profit growth," Kentish added.
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