13th Jul 2016 07:52
LONDON (Alliance News) - STM Group PLC said it now expects to report a decline in pretax profit for the first half of 2016, as it suffered from expatriates delaying decisions over their pensions due to uncertainty surrounding the Brexit vote.
The financial services provider said its Qualifying Recognised Overseas Pension Scheme product, or QROPS, has been a key growth driver over the past two years.
As part of efforts to support a drive into new markets and strengthen its relationships with existing introducer advisers, STM in April opted to significantly change the pricing structure for new business by waiving the QROPS establishment fee for an initial six months.
However, it noted that the extent to which this change in pricing would be seen in its 2016 revenue depended in an uplift in new QROPS policies.
Whilst it had seen a "reasonable uplift" in new QROPS applications since April, revenue generated in its first half has not matched management's expectations, due to aggressive pricing by competitors and the Brexit referendum.
Although the decision to leave the EU is not expected to hit the QROPS product in itself, STM said, it believes uncertainty around the result has led to expatriates delaying decisions on whether or not to export their pension out of the UK into a QROPS.
Now that the outcome of the referendum is known, there is a potential for an increase in QROPS applications from expatriates wishing to have more certainty on their pension benefits, STM said.
However, given the time lag for applications to materialise, STM said this uplift would only be seen towards the end of 2016 and into 2017.
STM expects its pretax profit for the first half of 2016 to June 30 to be around GBP1.2 million, down from GBP1.4 million in the previous year, on revenue of GBP7.9 million, down from GBP8.3 million, after restructuring costs and other one of costs of around GBP200,000. It expects its pretax profit for 2016 as a whole to be comparable with 2015.
The company noted that new QROPS applications in 2015 had been particularly strong in the run up to UK pension reforms.
Shares in STM were down 13% at 31.75 pence Wednesday morning, the second biggest faller on AIM in London.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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