Personal Group Regulatory News (PGH)

PERSONAL GROUP HOLDINGS PLC

("Personal Group" or "the Group")

Interim Results

Personal Group Holdings Plc (AIM: PGH), a leading provider of employee benefits and employee related insurance products in the UK, is pleased to report its results for the six months ended 30 June 2016:

Highlights

· Revenue increased by 10.2% to £21.0m (2015: £19.0m)

· New insurance business generation increased 12.5% to £6.3m (2015: £5.6m)

· Major contract wins secured including Samworth Brothers, Pendragon, Euro Car Parts and multiple health care sector companies

· Investment has commenced in developing the Sage employee benefits product

· EBITDA* decreased by 29.9% to £3.2m (2015: £4.5m)

· Profit before tax decreased by 33.5% to £1.9m (2015: £2.9m)

· Basic EPS decreased by 38.1% to 4.8p (2015: 7.8p)

· Dividends per share paid in the period up 5.3% to 11.0 pence per share (2015: 10.45 pence)

· Group balance sheet remains strong with total equity (shareholders' funds) of £30.3m (31 December 2015: £31.9m) and no debt

· Decision made post period end not to progress with MVNO PG Mobile, full closure by December 2016

* EBITDA is defined as earnings before interest, tax, depreciation, amortisation of intangible assets, goodwill impairment, share-based payment expenses, 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:

"Our core business, which now includes the Lets Connect business, continues to perform consistently well with continued growth in new sales and top line revenue.

2016 is an investment year for the Group with this year's performance affected by investment in the Sage program particularly. This new and innovative product is planned to go live before the end of the year and we believe that the market opportunity here is large. Other investments have also been made in our brand and hapi platform, further strengthening our market proposition.

The Group has taken the decision that the Mobile Virtual Network Operator ("MVNO") named Personal Group Mobile ("PG Mobile"), which provides smartphones and airtime on a salary sacrifice basis is no longer viable in the current market and so the decision has been taken to run down this activity by the end of 2016. Though this is disappointing the Group feels it is important to act quickly in these situations which I believe we have done.

We remain optimistic about the Group's future prospects. "

- ENDS -

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Notes to Editors

With over 30 years' experience, Personal Group Holdings Plc (AIM: PGH) is a leading provider of employee services, benefits and employee related insurance products, covering an employee base of over two million across the UK.

Personal Group has a unique approach to delivering employee engagement, by combining technology with its face-to-face method of communicating with employees. This approach assists clients with the attraction, retention and motivation of their employees. Included in this approach is the delivery of a range of insurance products and services including hospital and convalescence plans, death benefit and income protection, in addition to lifestyle benefits including High Street savings and discounts, retail offers, travel and holiday promotions and health and wellbeing services.

Hapi, Personal Group's leading edge Employee Services platform allows clients to build bespoke engagement, benefit and communications programmes, which are made available to employees through both websites and mobile apps. This platform allows for a broader range of services, including holiday booking, electronic payslips, reward and recognition and Employee Assistance programmes to be accessed by employees in a simple and effective interface.

The Group also supplies clients with home technology and smartphone handsets via salary reduction schemes, offering the latest computers, laptops, tablets, smartphones and other home technology products through Lets Connect.

Personal Group has a strong client base across a wide range of sectors, with particular expertise in transport, logistics, domiciliary care, motor, retail, food production and manufacturing. Over 520 clients, including Network Rail, DHL, JCT600, Four Seasons, Two Sisters and Stagecoach, work with Personal Group in delivering effective benefits, engagement and communications programmes.

For further information, go to www.personalgroup.com.

Chairman's Statement

Summary

Personal Group has demonstrated robust and innovative responses to the challenges and opportunities in 2016. In our core markets, the Group continued to perform well in the first half of 2016 with revenue up 10% on the equivalent period in 2015 and record new business generation. EBITDA, excluding PG Mobile, decreased by 17% which reflects the increased investment we have made in the wider business; highlights include an overdue Group rebrand and significant additions to our infrastructure and people in the core business to develop a new Sage employee benefits platform. It is expected that the Sage product, for a new market to Personal Group, will be launched before the end of this year.

It should be noted that shortly after the half year, we concluded that the PG Mobile business should cease active trading and fully wind down by the end of 2016. Also in February, we announced the changing customer relationship with Royal Mail Group (RMG) as our insurance relationship changes and the Lets Connect opportunity develops. Both of these will feature in our full-year results.

Financial Performance

Total Group revenue for the six months ended 30 June 2016 increased by 10% to £21.0m (2015: £19.0m). This reflects a 13% increase in earned premiums net of reinsurance, a full 6 months trading of PG Mobile and increased revenue contribution from Let's Connect.

Annualised new business premiums written during the period from the Group's core employee benefits and insurance activities were once again a half-year record, at £6.3m, 13% ahead of 2015 (£5.6m). This was despite the cessation of new insurance business with RMG from March 2016.

Underlying EBITDA was £3.2m (2015: £4.5m) which represents a 30% reduction on the equivalent period in 2015. The Group's performance excluding the impact of setting up and running PG Mobile, our own MVNO, was a decrease of 17% due to the impact of increased investment in the infrastructure and rebranding of the Group.

Group Profit before tax was £1.9m (2015: £2.9m). This includes £0.3m of reorganisation costs for PG Mobile incurred in 2016. There were £0.9m of reorganisation and acquisition costs associated with the establishment of PG Mobile in the six months to June 2015.

Total equity at 30 June 2016 was £30.3m (31 December 2015: £31.9m).

Business Review

Our core business continues to operate in a consistent manner, with a steady increase in sales and topline performance. The business continues to improve its core profitability but this has been masked, in the six-month period under review, by significant expenditure in rebranding and infrastructure to prepare the Group for the expected increase in business following the launch of the Sage platform.

Our core products continue to be attractive to employers, evidenced by the high proportion of sales in the first half from entirely new host company clients: more than 21.5% of total new sales were to employees of companies which were new to the Group.

Our like-for-like sales in Lets Connect were up 14% on the equivalent period last year. The turnover of Lets Connect is, as always, very strongly weighted to the fourth quarter of the year.

The establishment of PG Mobile was intended to develop further our strategy by broadening the Group's offering to include additional mobile airtime products. It has become apparent during the first half of 2016 that the potential market has changed and is no longer receptive to the product offering of PG Mobile. Consequently, we decided on 7th July 2016 to close the PG Mobile business by the end of 2016.

The hapi platform, which was completed in 2015, continues to be rolled out to our existing customer base to very positive reviews. This has led to increased product penetration into our existing clients. Moreover, this technology is at the heart of the proposed Sage employee benefits platform which is being built for the extensive SME market. This is a market that our current distribution model does not, in the first instance, suit and both Sage and we are confident that the proposition will prove popular with SME's when the product is launched.

We have seen Insurance Premium Tax ("IPT") increase twice in the last year, from 6% to 9.5% in November 2015 and, following the budget this year, a further increase to 10% effective in October 2016. Our premium collection method through payroll deduction makes it difficult to adjust premiums retrospectively and so to date we have adjusted our pricing for new insurance business only.

HMRC recently launched a consultation on Salary Sacrifice and associated Benefits in Kind (BIKs) which proposes to limit the range of BIKs that will attract Income Tax and NIC advantages. We welcome this consultation which seeks to clarify the currently ad hoc treatment of such arrangements. However, the uncertainty caused by the consultation, at one of the busiest times for our Lets Connect business, may impact our full year results. The possible effect for our clients is that they could lose any employer National Insurance savings and their employees lose any income tax savings, they currently experience; the schemes would remain efficient for employee National Insurance savings. Whatever the outcome of the consultation, which is due to be announced at the end of November, we are confident our Lets Connect offering remains attractive to employees, not just for tax savings, but also for access it provides to credit, credit costs and our comprehensive insurance cover.

Dividends

The first two dividends of 2016, each of 5.5p per share, were paid in March and June, with the third dividend of the same amount being paid on 23rd September 2016. The Directors expect that the fourth and final dividend for 2016 of the same amount will be paid in December. This would give a total for the year of 22.0p per share (2015: 20.9p per share), an increase of 5%.

The Board

As announced earlier in the year, Chris Curling retired from his Non-executive position as Chairman of the Board in May 2016 and I took over as Chairman. The Board is pleased to welcome Bob Head as a new Non-Executive director. Bob has a wide experience in financial services including knowledge of their digital delivery. He has also worked as an advisor to the tax authorities in South Africa. All-in-all a very useful addition to the Board.

Outlook

The Group's core business continues to perform strongly and grow steadily. We are relentless in seeking to improve the business we have and to seek out new opportunities.

The year on year expansion of Lets Connect and the forthcoming partnership with Sage reflect the Group's intention to widen the range of our employee benefits offering and to make available to a wider base of host company clients, products and services which complement our core insurance products. The PG Mobile initiative was not successful and the board took speedy action when that became apparent. Nevertheless, we continue to look for other opportunities, including acquisitions if appropriate.

We have a much broader and stronger foundation on which to deliver profitable business and to withstand challenges thrown our way. We remain confident about the value which this strategy will continue to generate for the benefit of our shareholders.

M Winlow

Non-Executive Chairman

19 September 2016

Consolidated income statement

As at 30 June 2016 all operations are considered to be continuing.

Consolidated statement of comprehensive income

Consolidated balance sheet at 30 June 2016

Consolidated balance sheet at 30 June 2016

Consolidated statement of changes in equity for the six months ended 30 June 2016

* All Employee Share Option Plan (AESOP)

** Long Term Incentive Plan (LTIP)

Consolidated statement of changes in equity for the year ended 31 December 2015

Consolidated statement of changes in equity for the six months ended 30 June 2015

Consolidated cash flow statement

Consolidated cash flow statement

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 benefits related business 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 as at and for the year ended 31 December 2015.

The financial information for the year ended 31 December 2015 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 2015 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 19 September 2016.

2 Accounting policies

These June 2016 interim consolidated financial statements of Personal Group Holdings Plc are for the six months ended 30 June 2016. 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 2015.

Notes to the consolidated financial statements

These financial statements have been prepared on the basis of the recognition and measurement requirements of those IFRS standards and IFRIC interpretations as adopted by the EU, issued and effective or issued and early adopted in respect of periods beginning on or after 1 January 2014.

The principal accounting policies have remained unchanged from the year ended 31 December 2015.

3 Segment analysis

The Group operates the following four 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.

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

Up until March 2015 insurance related income represented commission receivable for death benefit policies underwritten by 3rd parties. From March 2015 these policies have been underwritten by the Group's subsidiary Personal Assurance Guernsey Limited (PAGL) and, as such, their income now falls within earned premium.

2) IT Salary Sacrifice

IT salary sacrifice refers to the trade of Lets Connect, a salary sacrifice technology company purchased in 2014.

3) 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.

4) Other

The other operating segment consists exclusively of revenue generated by Berkeley Morgan Group (BMG) and its subsidiary undertakings and Personal Management Solutions (PMS).

BMG was acquired by PGH in January 2005 and generates income via financial services and private medical insurance. On 9 February 2016 the Group signed an agreement with AXA PPP healthcare to transfer the PMI business over to them in a phased approach between July 2016 and June 2017. The group will continue to underwrite policies until each policy's renewal date, from which date AXA PPP healthcare will provide continuous cover.

PMS is an employee benefit company that offers a variety of employee incentive schemes.

Notes to the consolidated financial statements

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

Notes to the consolidated financial statements

Notes to the consolidated financial statements

Income is derived from the UK and Guernsey

4 Taxation

Tax expense is recognised based on the weighted-average annual income 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 months ended 30 June 2016 was 24.3% (six months ended 30 June 2015: 19.4%).

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 2016, Personal Group Holdings Plc paid dividends of £3,338,000 to its equity shareholders (six months to 30 June 2015: £3,160,000, twelve months to 31 December 2015: £6,343,000). This represents a payment of 11.00p per share (six months to 30 June 2015: 10.45p, twelve months to 31 December 2015: 20.90p).

In the statement of changes in equity and the cash flow statement dividends are stated net of amounts paid on treasury shares and unallocated shares held by Personal Group Trustees Limited as follows:

Notes to the consolidated financial statements

6 Property, plant and equipment

For the six months ended 30 June 2016

Notes to the consolidated financial statements

7 Financial assets