Personal Group Regulatory News (PGH)

PERSONAL GROUP HOLDINGS PLC

("Personal Group", "Company" or "Group")

Interim Results for the Six Months ended 30 June 2018

Solid progress across all three business segments

Personal Group Holdings Plc, a leading provider of employee services in the UK, announces its interim results for the six months ended 30 June 2018. The Company has continued to make solid progress, performing in-line with management's expectations and ahead of last year across all three business segments.

Highlights

Financial

· Group revenue of £21.1m (2017: £19.6m), an increase of 7.3%

· EBITDA* from continuing operations of £4.7m (2017: £3.7m), an increase of 27.0%

· Profit before tax from continuing operations of £3.9m (2017: £3.0m), an increase of 27.7%

· Basic EPS from continuing operations of 10.5p (2017: 8.2p), an increase of 28.0%

· Balance sheet remains strong with cash and deposits of £18.4m and no debt

· Dividends per share paid in the period up 1.3% to 11.50p (2017: 11.35p), maintaining progressive dividend policy

Operational

· Strong trading across all three business segments and all market sectors

· Solid performances from both Insurance and PG Let's Connect (salary sacrifice)

· Strong increase in SaaS revenue to £2.0m (2017: £0.9m)

· Successful launch of the next generation Hapi platform app

· Continued focus on the rollout of the Company's offer, with further investment in sales planned

· Further expansion into the Public Sector through the Crown Commercial Services Framework

· Company also today announces Mark Scanlon's (CEO) intention to step down from the board, having led the business through a successful period of growth and diversification (see separate RNS).

* Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation of intangible assets, goodwill impairment, share-based expense payments, corporate acquisition costs, restructuring costs, write back of contingent consideration and release of tax provision. This definition applies to all references to EBITDA within these interim results. A reconciliation from PBT to this adjusted EBITDA has been included in note 3.

Mark Scanlon, Chief Executive of Personal Group, commented:

"It has been an encouraging start to the year, with all three business segments ahead of this time last year. SaaS sales continue to increase as expected; core insurance performance remains robust and growing; PG Let's Connect is rebounding and we are well positioned to provide our range of employee services to companies of all sizes and within all sectors.

"The momentum we've seen in the first half of the year has continued into the second half and the Board remains confident that the Group continues to trade in-line with expectations for the full year.

"Having led the business for almost seven years and taken it through a period of growth and diversification I feel that now is an opportune time to handover to a successor. Personal Group is in great shape, underpinned by the strength and depth of the team, and well positioned for the next phase of growth."

- ENDS -

For more information please contact:

Notes to editors

Personal Group Holdings Plc (AIM: PGH) is a technology enabled employee services business, working with employers to drive productivity though better employee engagement and a more motivated workforce. With over 30 years' experience, the Company provides employee benefits and services to over 2 million employees across the UK.

Personal Group's offer comprises 8,000 in-house and third-party products and services, from c.60 supply lines. In-house services include employee insurance products (hospital plans, convalescence plans and death benefit plans) and the provision of technology via salary sacrifice (iPads, computers, laptops, smart phones and smart TVs). Third party services include retail discounts, employee assistance programmes, wellbeing programmes and salary sacrifice cars and bikes.

The offer is provided via the Company's proprietary technology platform, Hapi. The platform is intuitive, designed primarily for app deployment and is also accessible via the web on PC and tablet, driving better engagement, communication and value recognition. Hapi is flexible and can quickly integrate additional services, such as existing employee services and partner platforms. Hapi is a SaaS product.

Through technology and select acquisitions, the Company has grown its addressable market from 6m to 32m UK employees; including 15.6m SME employees targeted via its partnership with Sage, the UK's largest software company.

Personal Group's innovative approach to using technology to deliver its programmes, combined with its face-to-face method of communicating with employees, makes its offer compelling to blue chip clients across the UK as a way of attracting, retaining and motivating employees. 

Personal Group has a strong client base across a range of sectors including passenger transport, healthcare, logistics and food manufacturing. Clients include: Stagecoach, Four Seasons Health Care, Priory Group, Spire Healthcare, Bibby, 2 Sisters Food Group and Young's Seafood.

For further information, please see www.personalgroup.com

Interim Results Statement

Introduction

The Group has made a solid start to the year with trading during the six-month period in-line with management's expectations and up on last year across all three business segments. The performance of the Company's core insurance business and PG Let's Connect, its salary sacrifice business, was encouraging, while income from SaaS saw a further strong increase in revenues.

The Company continues to deliver on its strategy and remains well positioned to take advantage of the significant and growing employee services market, with the focus having shifted from developing and expanding the offer to growing sales. The market remains strong, with continued increased competition for employees in a tight labour market and wider recognition among employers of the productivity value and cost advantage to their business of attracting and retaining employees.

Financial Performance

Group revenue for the six months to 30 June 2018 increased by 7.3% to £21.1m (2017: £19.6m). This increase was driven by a strong performance in the SaaS business, which saw revenues increase 120.2% over this time last year, alongside a solid performance across the rest of the business.

During the period, EBITDA from continuing operations increased by 27.0% to £4.7m (2017: £3.7m). This again was driven by the strong performance in SaaS and solid performances from the other business segments, combined with a continued focus on costs control.

Profit before tax was up 27.7% to £3.9m (2017: £3.0m), while earnings per share increased 28.0% to 10.5p (2017: 8.2p). During the period the Company maintained its progressive dividend policy, with dividends per share paid up 1.3% to 11.50p (2017: 11.35p). As previously announced, the Company's third dividend for 2018 of 5.75p per share will be paid on 21 September 2018 to members on the register on 10 August 2018.

The Company's balance sheet remained strong with total cash and deposits increasing to £18.4m and no debt. The increase in cash balances was down to a combination of good trading, along with the planned sale of the Company's equity portfolio.

Business Review

The core insurance division again produced a solid performance with revenue slightly ahead of last year and new insurance sales up 6% on the prior year. The insurance business saw momentum continuing into the first half of this year, post the investments made in expanding and developing the sales team in 2017.

PG Let's Connect, the Company's salary sacrifice business, had an encouraging start to the year, with trading marginally ahead of this time last year and in line with management's expectations. The business benefitted from Royal Mail's decision to run its salary sacrifice offer to its employees on a continuous basis from March of this year.

PG Let's Connect also benefitted from the changes made to that business in 2017, including improving and simplifying the customer experience and a revised cost base, to place it in the best possible position to grow as it entered 2018. PG Let's Connect has the most extensive pipeline the Company has ever had which further underlines how the product offering has increased demand, particularly as the surrounding legislation is now clear and much easier to operate within.

PG Let's Connect remains a Q4 weighted business due to the natural heightened interest in its offer in the run up to Christmas but improved visibility provides cautious optimism for the overall year. With the appointment to the Crown Commercial Service Framework, management remain optimistic that PG Let's Connect is well placed to make additional inroads into the wider public sector.

The Company's SaaS business saw a strong first half, with revenues increasing by 120% over the corresponding period last year. This was driven primarily by revenues generated from Sage licences and an increase in direct sales from clients using the Hapi platform. Additional revenue was also generated via the platform from the increasing provision of products directly to clients, such as the newly developed Hapi Cinema offer. The SaaS business saw several significant new-client wins during the period, including Randstad and St John Ambulance.

As stated in the Company's July trading update, the rationalisation of its supply chain and the increasing provision of some products provided directly to clients, rather than through a third party, is not only providing commercial benefits in terms of additional revenue and margin but is also reducing the Company's external exposure to supply chain risk. This allows the Company to have closer and tighter control of the data flows associated with its business further improving its resilience to potential cyber attacks.

The launch of the new and improved App for the Hapi platform has gone well and is gaining traction with existing and potential clients. The new App is more easily accessible, being available within the Apple App store, and has significantly improved functionality.

The relationship with Sage continues to make progress, with Sage's commitment to the product offer having strengthened this year. The next product version of the Sage Employee Benefits proposition extends the offer to their wider client base. To date the focus has been in Sage's payroll clients, which accounts for only a small portion of their total client base.

Market

The employee services market continues to grow and develop. This is being driven by continued wage pressures in an increasingly competitive labour market, which is increasingly leading employers to compete for labour using non-wage benefits.

The market is also being driven by a continued growing recognition among employers of the commercial benefit to investing in and retaining key staff. High staff turnover creates a direct replacement cost and impacts productivity, due to time to replace and time to develop competency in the new employee. As such, Personal Group's offer has appeal to both employers and their employees alike, improving real income benefits for employees and cost saving and commercial advantage for their employers.

Outlook

Personal Group's trading was strong during the first half of the year and that momentum has continued into the second half of the year. As part of maintaining that momentum for the longer term and in-line with the Company's strategy, there will again be an increased focus and investment in developing sales opportunities as we progress through the second half of this year and into 2019.

Personal Group remains well placed to benefit from the continued growth and development of the employee services market, with the strength of its proprietary technology platform, Hapi, offering a flexible means of distributing owned and third-party products and services to an established, sizeable and growing client base and their employees. The Board has confidence that the Group continues to trade in-line with expectations for the full year.

Consolidated Statement of Comprehensive Income

The total comprehensive income for the period is attributable to equity holders of Personal Group Holding Plc.

Some reclassifications have been made to the June 17 comparatives to align them with the classifications used from December 2017.

Full details can be seen on p59 of the 2017 Annual Report and Accounts, but these reclassifications have been made without any effect on the profit and loss or net assets.

Consolidated Balance Sheet

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity for the six months ended 30 June 2018

* All Employee Share Option Plan (AESOP)

** Long Term Incentive Plan (LTIP)

Consolidated Statement of Changes in Equity for the year ended 31 December 2017 

* All Employee Share Option Plan (AESOP)

** Long Term Incentive Plan (LTIP)

Consolidated Statement of Changes in Equity for the six months ended 30 June 2017

* All Employee Share Option Plan (AESOP)

** Long Term Incentive Plan (LTIP)

Consolidated Statement of Cash Flows 

Consolidated Statement of Cash Flows 

Notes to the Consolidated Financial Statements

1 General information

The principal activities of Personal Group Holdings Plc ('the Company') and subsidiaries (together 'the Group') include transacting short-term accident and health insurance and providing employee services in the UK.

The Company is a limited liability company incorporated and domiciled in England. The address of its registered office is John Ormond House, 899 Silbury Boulevard, Milton Keynes, MK9 3XL.

The Company is listed on the Alternative Investment Market of the London Stock Exchange.

The condensed consolidated financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2017.

The financial information for the year ended 31 December 2017 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory financial statements for the year ended 31 December 2017 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

These interim financial statements are unaudited and have not been reviewed by the auditors under International Standard on Review Engagements (UK and Ireland) 2410.

These consolidated interim financial statements have been approved for issue by the board of directors on 17 September 2018.

2 Accounting policies

These June 2018 interim consolidated financial statements of Personal Group Holdings Plc are for the six months ended 30 June 2018. These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.

They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2017.

These financial statements have been prepared in accordance with IFRS standards and IFRIC interpretations as adopted by the EU, issued and effective as at 30 June 2018.

The principal accounting policies remain unchanged from the year ended 31 December 2017 with the exception of the adoption of new or amended standards as set out below.

The following standards have become applicable for accounting periods commencing on or after 1st January 2018 and the appropriate adjustments have been made:

· IFRS 9 - Financial Instruments

· IFRS 15 - Revenue from Contracts with Customers

In addition, the group has elected to early adopt the implementation of the following:

· IFRS 16 - Leases

The impact of the adoption of these standards and the new accounting policies are disclosed in note 13 of these financial statements. 

3 Segment analysis

The Group operates the following four continuing operating segments:

1) Core Insurance

Personal Assurance Plc (PA), a subsidiary within the Group, is a PRA regulated general insurance Company and is authorised to transact accident and sickness insurance. It was established in 1984 and has been underwriting business since 1985. In 1997 Personal Group Holdings Plc (PGH) was created and became the ultimate parent undertaking of the Group.

Personal Assurance (Guernsey) Limited (PAGL), a subsidiary within the Group, is regulated by the Guernsey Financial Services Commission and has been underwriting death benefit policies since March 2015.

This operating segment derives the majority of its revenue from the underwriting by PA and PAGL of insurance policies that have been bought by employees of host companies via bespoke benefit programmes.

2) IT Salary Sacrifice

IT salary sacrifice refers to the trade of PG Let's Connect, a salary sacrifice technology company purchased in 2014.

3) SaaS

Revenue in this segment relates to the annual subscription income and other related income arising from the licensing of Hapi, the Group's employee benefit platform. This includes sales to both the large corporate and SME sectors.

4) Other

The other operating segment consists exclusively of revenue generated by Berkeley Morgan Group (BMG) and its subsidiary undertakings along with any investment and rental income obtained by the Group.

The discontinued segment is:

Mobile

Mobile refers to the trade of Personal Group Mobile a mobile phone salary sacrifice Company set up from the trade and assets of Shebang Technologies purchased in 2015, which ceased trading in December 2016. 

The revenue and net result generated by each of the Group's operating segments are summarised as follows,

All income is derived from customers that are based in the UK.

The implementation of IFRS 16 has resulted in EBITDA being increased by £72,000 of interest costs and £169,000 of depreciation which would previously have been included within operating profit as lease costs. 

All income is derived from customers that are based in the UK. 

All income is derived from customers that are based in the UK. 

4 Taxation

The tax expense recognised is based on the weighted average annual tax rate expected for the full financial year multiplied by management's best estimate of the taxable profit of the interim reporting period.

The Group's consolidated effective tax rate in respect of continuing operations for the six month period ended 30 June 2018 was 16.8% (six month period ended 30 June 2017: 17.0%).

5 Earnings per share and dividends

The weighted average numbers of outstanding shares used for basic and diluted earnings per share are as follows:

During the first six months of 2018, Personal Group Holdings Plc paid dividends of £3,541,000 to its equity shareholders (2017: £3,490,000). This represents a payment of 11.50p per share (2017: 11.35p).

6 Goodwill

7 Intangible assets