Interim Results & Interim Dividend

PERSONAL GROUP HOLDINGS PLC

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

Interim Results & Interim Dividend for the six months ended 30 June 2021

Personal Group Holdings Plc, a digitally enabled workforce benefits and services provider, announces its interim results for the six months ended 30 June 2021.

It has been a positive first half across all divisions with the Company trading in-line with management expectations notwithstanding the impact of the Covid-19 related restrictions during the period. Positive momentum has built incrementally across the six months as restrictions eased and this has accelerated further into the current trading period such that we look to the second half of the year with increased confidence.

Financial highlights

·      Group revenue rose 12.2% to £34.2m (2020: £30.4m), driven primarily by increased pass-through transactional spend via the Hapi platform of £13.4m (2020: £8.5m);

·      Adjusted EBITDA* declined 17.7% to £4.1m as anticipated (2020: £5.0m), reflecting the change in revenue mix driven by Covid-19 related restrictions on face-to-face insurance sales over the last 18 months;

·      Profit before tax decreased 22.6% to £3.2m (2020: £4.2m);

·      Basic EPS of 8.4p (2020: 11.0p), in line with Covid-related profit impact;

·      Balance sheet remains strong with cash and deposits of £22.1m and no debt; and

·      Interim dividend of 5.3p per share to be paid 5 November 2021.

Operational highlights

·      40 new client wins secured, including home goods retailer Homebase, University of York and The Royal Mint;

·      Accessible potential policyholder employee pool remains strong, underpinning future growth;

·      New insurance policyholder conversion rates equalling or exceeding pre-Covid levels where face-to-face meetings have recommenced, whilst retention rates for existing policyholders remain strong;

·      Claims ratio in insurance business remains stable at 22.5% (2020: 23.0%); and

·      Pleasing levels of trial Sage Employee Benefits users (SME employees) converting to the paid offering.

Current trading and Outlook

·      Positive first half performance alongside current trading gives increased confidence in full year trading;

·      Group well placed to capitalise on opportunities that are emerging from an increased awareness and focus on employee health and wellbeing;

·      Face-to-face sales meetings for insurance products booked until the end of FY21

·      New Benefit Management System technology 'HapiFlex' successfully launched with University of York;

·      Healthy pipeline of new business opportunities building across all divisions; and

·      As at 1 September 2021 Sage Employee Benefits was generating over £1.5m gross annualised recurring revenues, with c1,100 paying companies, up 50% vs 1 March 2021.

* Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation of intangible assets, goodwill impairment, share-based expense payment and corporate acquisition costs. This definition applies to all references to Adjusted EBITDA within these interim results. A reconciliation from PBT to this Adjusted EBITDA has been included in Note 3.

Deborah Frost, Chief Executive of Personal Group, commented:

"We have made good strategic progress across all divisions in the first half of the year. We have achieved a number of key contract wins, made good progress with our Sage partnership and developed our offering significantly. Towards the end of the period, we were able to recommence face-to-face insurance sales, and have recorded great results so far, with our teams booked for the remainder of the year. This represents an important inflection point for our Group as we begin to re-build our insurance book.

Alongside the progress made against our strategic initiatives, demand for our offering has never been stronger, as we have seen more and more people appreciating the risks of living without health and life insurance and wanting peace of mind in these uncertain times. Additionally, the impact of wage inflation and the competitive market for talent means employers need to consider what their holistic proposition offers to their workforces more carefully than they have previously.

As businesses from all sectors increasingly acknowledge their responsibility to support their employees and address their needs, we believe that our unique offering, combining insurance and other employee wellbeing support and benefits, will continue to resonate with the market and our clients' employees alike. Notwithstanding the ongoing impact of lower insurance sales last year, as in-person meetings were halted in line with pandemic restrictions, I am extremely encouraged by the progress we have made in the first half of 2021 and post-period end. I look to the future with confidence."

An overview of the interim results from Deborah Frost, Chief Executive, is available to watch here:

https://youtu.be/Hx60-Vptg_8

Personal Group Holdings will be hosting a webinar for private investors on Friday 24 September at 14.00. If you would like to register for the webinar, please follow this link: https://bit.ly/PGH_H121

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Notes to Editors

Personal Group Holdings Plc (AIM: PGH) is a digitally enabled workforce benefits and services provider. The Group enables employers across the UK to improve employee engagement and support their people's physical, mental, social, and financial wellbeing. Its vision is to create a brighter future for the UK workforce.

Personal Group provides health insurance services and a broad range of employee benefits, engagement, and wellbeing products. Many of these services are delivered through its proprietary app, Hapi.

The Group's growth strategy is centred around widening the footprint of the business into the SME, talent-led & Public Sectors, thereby expanding the addressable customer base. In addition, it aims to grow in its existing industrial heartlands, to re-invigorate growth in insurance policyholders and to drive the use of its SaaS offerings.

Group Clients include: Arsenal FC, Barchester Healthcare, DHL Supply Chain Limited, Merseyrail, Randstad, Royal Mail Group, the Sandwell & Birmingham NHS trust and Stagecoach Group plc. c.40% of clients are served by two or more Personal Group companies.

For further information, please see www.personalgroup.com

Interim Results Statement

I am pleased to report on a period where we have seen strategic progress across all the Group's divisions.

Whilst our top line financials reflect the impact of Covid-19 restrictions over the last 18 months, and will continue to do so into FY22, the underlying business is progressing well. We are profitable and in a strong financial position with an excellent team and quality technology. We are now also seeing many of our growth initiatives beginning to flourish.

The marketplace in which we operate is expanding with workforce benefits and services a substantial growth area for the UK. Employees are expecting more from their employers, and with wage inflation, increases to National Insurance costs and a shortage of talent, employers are having to be more flexible and imaginative in their provision of benefits. Supporting health and wellbeing is increasingly understood to be a vital offering, with health issues that may once have been considered a distant future possibility brought to the forefront of young adults' minds, with a realisation that such events could happen 'any day'.

Our proposition has never been more relevant, and we are seeing this reflected in our increasing new business pipeline.

Sales and Operational review

In our Insurance benefits business, whilst we remained unable to conduct face-to-face sales meeting with potential policyholders for the majority of the first half, retention rates for existing policyholders remained strong and pleasingly claims ratios (including COVID-19 related) were broadly in line with previous years. As in 2020, this reflected a slightly higher claims ratio for our death benefit plan offset by a lower claims ratio for our hospital plan, in comparison to pre-Covid levels. We anticipate seeing the balance on this start to swing back as the NHS starts to address its well-publicised waiting lists. Premium income declined to £12.5m, and the number of policies reduced to 236,000 as at 30 June 2021, as expected, primarily a result of the restrictions placed on face-to-face meetings. However, with the resumption of face-to-face, the Insurance benefits business has reached an inflection point and from July we have started to see growth in our policyholder numbers. We expect the re-building of our insurance book to continue into the second half and into 2022.

Our SaaS employee engagement and benefits products have been in demand during the period. Pass-through transactional spend through the Hapi platform on products such as e-vouchers and reloadable cards was particularly strong in H1, up 41.9% on the same period in 2020, reflecting increased usage of the platform by registered card users. Recurring revenue from platform subscriptions has remained stable. Sage Employee Benefits has also continued to generate revenues with growth particularly notable post-period end when the latest round of free trials converted to paid.

Innecto, our reward consultancy, delivered a strong H1 performance with retention rates of 92% on their digital products and several new clients signed in the period including Avanti West Coast, Newcastle University and Norfolk Care Association. This, together with an upward trend in consultancy income, supports our expectation that momentum will continue into the second half of the year.

Let's Connect, our salary sacrifice consumer technology benefits business, has also performed well, with revenue up significantly on the previous year helped by schemes deferred from 2020 and continued strong sales from Royal Mail Group's 'always on' scheme. The employee penetration rate of schemes at end of H1 was also ahead of H1 2020, although margin continues to be impacted by supply chain disruption, in particular the global computer chip shortage.

Financial summary

Our adjusted EBITDA performance in the period reflects the impact of our inability to conduct face-to-face sales of insurance products over the majority of the first half and most of the prior year, which has resulted in reduced premium income levels. This decline has been partly offset by continued insurance acquisition cost savings together with growth in adjusted EBITDA across the Group's other divisions.

We maintain a strong balance sheet with cash and deposits of £22.1m and no debt.

Dividend

In line with the Group's updated dividend payment profile announced on 5 November 2020, the Company announces that an interim dividend for 2021 of 5.3p will be paid on 5 November 2021 to members on the register as at 1 October 2021 (the record date). Shares will be marked ex-dividend on 30 September 2021. The last day for elections will be on 15 October 2020.

Performance against growth strategy

Our growth strategy is focused on widening our footprint across a broader range of industries as part of our vision to create a brighter future for the UK workforce.

We aim to ensure the insurance, employee benefits and wellbeing services we provide can be delivered in an appropriate, easy-to-access and cost effective medium. To this end we are pursuing the greater use of technology across the business, including through our proprietary platform and app, Hapi. This means that the Group will increasingly benefit from a growing level of recurring revenue and high margins. We also intend to accelerate cross-selling across the Group.

Driving insurance sales through existing and new channels

We have seen success in further increasing our pipeline of employees to sell to in future, with new contract wins in the period, including home goods retailer Homebase, and significant extensions of our reach with existing clients such as Cranswick.

In addition, since we have been able to restart our face-to-face activity towards the end of H1 2021, we have seen face-to-face conversion rates equalling or exceeding pre-COVID levels and a change in the mix of demand for our products with death benefit sales up from 22% to 31% as a proportion of total sales. We believe this is due to the pandemic having brought health risks into focus which will, in turn, drive incremental growth.

Our insurance sales team is now booked with face-to-face meetings until the end of FY21, and in some cases beyond. We have started to add new members to the team in the first half and anticipate hiring further in the second half to help satisfy the strong demand in the market. We continue to supplement our face-to-face meetings with virtual visits and telesales channels and also have digital insurance solution trials underway.

Scaling up the SME offer

Sage Employee Benefits ('SEB'), the Group's workforce engagement platform for SMEs created and sold in partnership with Sage, continued to gain traction in the period with top line contribution starting to increase as conversions became more significant at the end of H1. This has built further post-period end and as at 1 September 2021 SEB was generating over £1.5m gross annualised recurring revenues with c1,100 companies now paying, a c50% increase from six months earlier.

Given the success of this offering, the Sage client acquisition process is now in full operation with free trial client recruitment having re-started in March 2021. The Group anticipates revenue generated by the division will grow steadily across the second half.

Maximising return on Hapi through client and end-user monetisation

The Group's employee engagement app 'Hapi' is a core part of the product offering. It differs from competitors' products through the strength of the technology, in particular in relation to its mobile App, and the breadth of its capabilities.

We have been focused on improving the offering in the first half, building our new Benefit Management System, HapiFlex,  an enhanced proposition which will allow us to compete in a broader range of industries as well as providing services and products to employees with more disposable income. This has now been successfully launched with the University of York and we believe the Benefit Management System will open doors in key public-sector frameworks as well as private sector companies. Going forward, we will continue to invest in this offering.

New client acquisition activity increased with new clients onboarded including ATS Euromaster, Royal Mint, B Braun, Screwfix, B&Q, Homebase and  The Caravan Club. In addition, a new partnership with The Retail Trust has been signed, providing access to over half a million retail workers.

Activated employees across Hapi and SEB grew to 489,000 as at 30 June 2021 (31 Dec 2020: 488,000).

Current trading and Outlook

Trading post-period end has continued to build momentum and supports our confidence going forward.

Looking ahead, our focus will be on three key strategic priorities:

·      Maximising the opportunity for our insurance products;

·      Accelerating the digital transformation of our offering across all divisions; and

·      Driving growth of our enhanced SaaS offer across all sectors.

Whilst the financial impact of 18 months of Covid-restrictions will continue to flow through in H2 2021 and into 2022 our pipeline of new business, not only in insurance but across all the Group's divisions, is growing and underpins our positive medium-term outlook.

With our strong balance sheet, we are well-placed to invest for growth, whilst capitalising on market demand and the increased focus by employers on their employees' health and financial wellbeing. We are looking forward to executing on our strategy across the second half and beyond, building our business and creating a brighter future for the UK workforce.