Personal Group Holdings (LSE:PGH) — Interim Results

0:01 Good afternoon, and welcome to the PERSONAL GROUP HOLDINGS PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to select the following poll. I'd now like to hand you over to Deborah

0:32 Frost, see Yeah. Good good afternoon. Hi there, and thank you very much. Good afternoon, everybody. My name is Deborah Frost. I'm the chief executive of PERSONAL GROUP, and, I have with me my colleague, Sarah Mace, who is the CFO of the group as well. I'm just going to kick off a brief introduction, and then I'm going to hand over to Sarah who will be able to give us an insight into the financials. So here's a quick overview of our business. I appreciate some of you know the business very, well. But for any new investors or or people that have not been, following us for a while, here's a recap. So we're essentially an employee benefits business. We provide employee business to over one and a quarter million employees in The UK. We provide a number of different services through our platform, which includes our insurance.

1:23 Our insurance is slightly unusual, but it's in this it's an employee paid insurance, and that really was the start of the business. So we own that benefit ourselves, and employees are met by our field sales team in their place of work. They're introduced to the benefits platform. So for example, if you work for DHL, you'll recognize our platform as DHL advantages. Our colleague will sit down with you, show you how to use the benefit platform, and also talk to you about insurances. The second, area of benefits that we own is our owned salary sacrifice technology benefit. What this means is that employees can choose some technology. It might be a laptop, might be a mobile phone, or even more widely now, they might choose PlayStations or other other, gaming devices, and they can pay for that through their payroll. They save National Insurance contributions, and they can pay for it through their payroll with no interest charges, and that and and that's paid for usually over twenty four months. So it's a very cost effective way of accessing, technology and things that people tend to to want in their homes, TVs, and so on.

2:30 We also have a pay and reward consultancy. We we're called Inecto, and that helps businesses look at pay and reward issues. That might be anything from bonuses through to thinking about job evaluation or pay benchmarking. And at the end of the period, at the start of the second half, we actually added to that division by an acquisition of a business called QCG, which I will talk a little bit more about as we go forward. So we're very focused in our business on supporting people in their workplace to thrive in life and at work, and that's really our our main purpose is to make sure that our the the employees that we support are connected to their website, to to their benefits websites and and app, and also we protect people through our insurances. So I'm just gonna give you a very brief update now on how the first half has gone. So in terms of, where we are, we set ourselves some targets at the beginning of the year.

3:26 Coming out of COVID, I think there was a sense that we really needed to refocus the business. We'd obviously been through quite a tough couple of years. We sell our insurances mainly through face to face, and, obviously, we weren't able to do that through COVID. And, typically, our key audience is HR directors and their direct reports, and they were extremely busy and distracted, obviously, as you can imagine through COVID, making sure their workforce was safe, coping with people on furlough, all of those sorts of things. So we really entered '22 with a new sense of purpose, and recognizing that the market that we're working in, is actually, if anything, extremely buoyant because with very high employment levels, managers are and and employers are having to do everything they can to attract and retain employees. So the employee benefits market generally is quite buoyant. So if we set ourselves some we set ourselves some targets at the beginning of the year, and I think we've hit them for the first half.

4:19 No business can be successful without, strong new wins, and we won 52 new clients across the group in the first half, which I was quite pleased with the results last year, but actually we were 30% up on last year. We've restarted our insurance business. So in 2019, we had £30,000,000 worth of annualized premium. That dropped back to just under 24,500,000 at the end of last year, but we've got 7% growth on that already in the first half continuing post period with some strong growth. Very pleased with the pay and reward. And remember, this is without QCG. This is just the organic growth from Inecto, up 73% admittedly against a a fairly weak half half one last year, but that business has come back very strongly. And the benefit platform revenue has increased again by a very high double digit growth here, 55% growth, primarily fueled by the Sage partnership. So most of you will recall that we signed a five year deal with Sage back in February, where we sell a benefits platform to their SME customers.

5:22 The relationship works by Sage providing us with warm leads, and then essentially our account management team takes them onto a three free a free three month trial to try out the platform and then go from there. And, again, I'll give you more detail of that later. And finally, we've started investing in redeveloping the platform. It's not really had a major update since the launch in 2016, and we're utilizing the opportunity to replatform, which will save us some money on platform costs and also will save us some development time costs because we won't be duplicating the the the development over two platforms. So that will pay back very quickly. So I'm gonna hand over to Sarah now who will go through the, go through the financials, and then we'll come back to some operational updates.

6:05 Great. Thank you very much, Deborah. So I think in terms of the, result for the first half, our key message is really that even though profit was down year on year, we are in line with with with where we expected to be. The overall result was was sort of driven primarily by the reduced contribution from the insurance business, but equally growth in the contribution from employee benefits and services, both of which we're expecting. We'll come on and talk about the four sort of core segments that Deborah just spoke about in a second, but probably just a couple of other bits to highlight in the sort of summary results. The first of which is voucher income. So voucher income, for those of you that followed us previously, you'll know it's where where the end users buy discounted shopping vouchers, you know, Tesco vouchers and the like through the platform.

6:54 We pass on all the discounts that we get in the main, so it doesn't affect our bottom line. But it does know, it's still really important to us because it reinforces the the usage of the platform, you know, and the value to both the employers and the and their employees that are using it. In addition, we we made a small equity investment at the start of January this year, which has has generated a small investment loss in the period. But I think overall, you know, we remain confident in our full year outlook As I come on to talk through the individual segments, you'll see why we've got an expectation of profit weighting in the second half. We've also announced an interim dividend with the results, so 5.3 p, which we've maintained in line with 2021. This obviously means a very high payout ratio for the first half. But as a board, we considered the the level in the context of the full year results, continued confidence in our business model and the growth that we expect to see as we move into 2023.

7:50 And we're also obviously very cognizant that that quite a few of our investors hold us as an income stock and for that dividend. And then just a reminder really, again, for those those well, those people that are new, but also have been before that, you know, we are in a very strong financial position. We're cash generative. We hold cash and deposits of just under 22,000,000, and that was post the acquisition of QCG at the start of the second half. We have no debts, and, we remain very well positioned for future growth. Just moving on to the, segmental overview. So on the right hand side here, you can see the breakdown before between the four core segments that Deborah spoke about. So you can see the, the reduced profit contribution from insurance offset by increases by benefits platform and pay and reward.

8:37 But probably the area to focus on on this slide is just on the left hand side and the column, you know, annualized recurring revenue and annualized premium income. And you can see there all all of those numbers have improved since the end of the year, and basically, you know, the foundations for our underlying growth, as we move into the second half. So I'll just come on to talk about each of the areas individually. So in terms of pay and reward, which in the first half was Inecto on its own, as Deborah just said, you know, really strong organic growth in that business. We saw the consultancy fee income side of the business up 93% against the same period last year, but also the Inecto digital products, so digital subscriptions that they have within that business up 24% year on year. We've seen strong retention rates with clients that have those products, and we've also seen some additional sales as we move into the second half of the year.

9:29 What I've done for each of these areas, which might certainly might be helpful for those of you who are sort of coming to to look at this for the first time, is it for each of the areas, there's a little diagram that sort of shows our performance both before COVID, what happened during COVID, and and as we start to come out the other side. So for pay and rewards, we only purchased Inecto in, March 2019. So there's only four months in that very first sort of bar bar, that's on that graph. But it was one of the areas of of our business that was impacted by COVID predominantly because Inecto tends to deal with HRDs and the relevant organizations who are very busy, obviously, dealing with their own sort of COVID issues at the time. So the business dropped off there. But what you can see is as we've we started to come out of COVID, that that business has built itself back up very strongly, back up towards the levels or and to the levels that we saw pre COVID.

10:17 We're expecting that organic growth to continue into the second half, and it will also be supplemented by the acquisition of QCG, that we've brought on board from the July 1. Just moving on to benefits platform. So this is where the expansion into the SME market via Sage comes into play. So we saw revenue and EBITDA both up year on year. We've continued to see a substantial increase in the contribution from that SME channel, Sage employee benefits. And you can see there the ARR at the end of June was 2,100,000 against the 1,600,000 we had at December. Happy platform subscriptions, so that's the ones for the enterprise clients also continuing to grow. And we've got some some new contracts coming into play from the start of the second half there as well. So overall, ARR up to 3,800,000 against 3.2 in December.

11:09 This is one of the areas of our business that was least impacted by COVID. We don't want to leak as most of our enterprise clients tend to, you know, have three year contracts with us in terms of their benefits platform. You can see there's some growth in 2020 against 2019, but really the growth has started to accelerate since our SME proposition has started to bear fruit. And, again, we're expecting that to and it has continued into the second half, and we're expecting that to continue, as we go into 2023 as well. Just moving on to insurance. So Deborah's already mentioned, you know, the rebuilding of the insurance book, has continued into the first half of this year. Premiums were down slightly on the same period last year, which might seem slightly contradictory, but that's purely because the sort of revenue that comes through the accounts lag slightly behind the size of the book. You can see there's a little graph there on the the left hand side that sort of shows, you know, during COVID, that was actually to our benefit as the book, started to reduce the sort of revenue followed a bit slower. But as we build back up the other side, the API increases that the revenue should follow.

12:13 But in terms of new insurance sales, you can see there first half, we wrote 4,300,000 of annualized premium in comparison to naught 600,000 last year. And then just for a bit of context, 4,600,000 in the first half of twenty twenty nine sorry, 2019 pre pandemic. We didn't have a full sales team in place for the whole of the first half, but that that sort of new business level is clearly starting to rebuild back to the kind of levels we saw previously. And the majority of it has come from our face to face activity. In terms of existing policyholders, retention rates have remained strong, and that's both both year on year and first year retention levels, and a combination of being able to be, you know, back out writing new business and those strong retention rates of of what's driven our API up to over the 26,000,000 mark.

13:00 A little bit on claims. So historically, our loss ratio has probably hovered around the 25% mark. It dropped off a little bit during COVID, but but mainly a sort of slight change in mix between death benefit and hospital plan, and particularly the hospital plan loss ratio reducing because the level of activity within NHS reduced in terms of, you know, outpatient appointments and the like, also within COVID. We're expecting our claims ratio to increase in the sort of short to medium term as the NHS start to catch up with the waiting lists and the like. So as a result, our loss ratio in the first half, was 30%. It did happen slightly earlier than we were anticipating, but we've what we've seen as we've gone into the second quarter and beyond is it it's reducing down to the kind of levels that we were anticipating. Just in terms of EBITDA contribution, obviously, impacted in part by the underwriting profits. That's a premium less claims for the first half.

13:54 But I'm just gonna move to the next slide just to talk a little bit more about the EBITDA contribution from insurance. So pre COVID twenty nineteen, you know, we had a fairly stable book, as Deborah said, around about the £30,000,000 mark. We were writing sort of similar levels of new business each half, and it was generating a fairly consistent EBITDA profit for us. As we moved into COVID and we were unable to go out and write face to face, obviously, our insurance premium started to reduce. But perhaps counterintuitively, our EBITDA actually increased

14:25 in the short term, and that was because we were saving the acquisition costs associated with writing our new business. Majority of our policies are on weekly or monthly rolling contracts, which means we have to expense those acquisitions upfront. But what you can then see is obviously the EBITDA starting to sort of tail down in line with the reduced premiums. But then as we've got to the first half of this year, we've essentially got our sort of worst point scenario, if you like, of having a slightly smaller insurance book, but also a sort of fully loaded acquisition cost coming into play. But as we move into the second half of this year and into 2023, the profit should now start to sort of trend upwards in line with those increased premiums. Sarah, I wonder if I might just come in for a moment and just say, that that we we we did have a discussion, an extensive discussion as a board as to whether we really should, sort of fully put our foot to the floor with regard to the field sales force.

15:20 As you can see, the the cost of that is is fairly extensive, and Sarah's already mentioned that we have to take that cost in year. But bearing in mind that our average life cycle for an insurance policyholder is between four or five years, the the value of those policyholders comes through will come through in 2023, 2024, and so on. And so we made the decision to really make the most of the opportunity that we had with some major clients like Royal Mail and so on. And the fact we haven't been out for two years meant that we weren't, really serving our clients as as well as we should be. So there may be some questions, and I think, know, it's it's been common with our institutional investors as well about the the extent to which we've decided to really go for sales. But I think the board deliberately made that decision, and we'll see the the strong benefit of that coming through in the next couple of years. Thanks, Sarah. Okay. Thanks, Deborah. Yep. And then finally, just moving on to Let's Connect. So this is the salary sacrifice business.

16:11 And, again, for those of you that haven't listened to us before, essentially, Let's Connect do a retail sale to the employer, and then the employer arranges a salary sacrifice agreement with their own employees. So so, yeah, it's a retail sale that comes through Let's Connect. It's a very second half dominated business, particularly in the last quarter in the run up for Christmas. You can see their revenue was down slightly on previous year, although the the first half last year did benefit from some schemes that were deferred from the previous year end of 2020. The gross margin we've worked at sort of getting that up through a combination of the product mix that we have on offer and the pricing, making sure we've got things up to RRP wherever we can. But you'll see that, yeah, whilst order numbers are up on the on previous year, the average order value remains below historic levels, and that's essentially because we we are still seeing the performance restricted by stock availability in some areas, particularly large TVs and the like.

17:09 We're obviously doing whatever we can to try and increase our stock levels ahead of our our peak trading period.

17:15 And we've got, you know, the items that we know that we can get hold of that will be popular. We've we've increased stock levels there. And we're also trying to make further improvements to gross margin through the introduction of carriage charges through that peak period as well. But I think overall, you know, Let's Connect remains a popular benefit and, you know, stop permitting, it it should have a good second half. So I think that's probably all for me other than, you know, overall, I guess, back to the key messages. We are where we thought we were going to be at the end of the first half. And, hopefully, you can see by going through each of the areas that the sort of underlying drivers of growth, so that's the ARR and the API, are all moving on the right in the right direction to enable us to have confidence in the in the second half and beyond. So I'll hand over to Deborah. Lovely. Thank you very much, Sarah. So just going through the operational, group.

18:00 For those of you who've seen before, you'll know that we as I mentioned at the at the start, we set ourselves a strategic outlook for the medium term, which really allows us to grow over a period of time. And that involves us being a great place to work, a great company to do business with, and making sure that we're reaching as many employees in The UK as we can. So we've set ourselves a target of working with 1,500,000 employees. As I mentioned at the start, we're working with one and a quarter million at the moment, so we've still got some way to go. But also driving insurance premium, up and above where we were in 2019 at 20 sorry, at 30,000,000 over to 35. And we and we basically realized that there were three key pillars of our growth. So driving insurance, transforming reward and benefits for clients, and also accelerating our SME offer. And I'm gonna talk about each of these in a bit more detail.

18:51 But within the insurance space, we've been really looking at how can we improve retention, making sure that our policyholder journey, is as clear as possible and that we're really, reinforcing the the decision that someone's made to to to to ensure their life or ensure themselves if they go into hospital. We've also been improving penetration. So, we when I joined the business in 2019, we had give or take 400,000 employees that we could go and see and talk to about insurance. And, subsequently, we've actually added to that. So we have now in the region of 600,000 employees that we can talk to. So the penetration has levels have dropped, but that's because we've got a much bigger book of available employees to talk to, and we're improving penetration to that group through the work we're doing with our face to face teams.

19:40 Transforming reward and benefits. So we've essentially been really looking at how we can make sure that our employers are offering all the benefits they can to employees. I'll come on to talk a bit more about this in the in the the in the next phase, of the presentation. But, essentially, the the the by widening the offer that employers are making, that gives us the chance to either sell our own products or alternatively work with third party suppliers to to deliver a wider, range of rather menu of benefits to employees. And finally, we've been really looking at how we improve, the SME offer. So you'll recall that we signed a five year deal with Sage back in February. And back in January so we we previously had a relationship with Sage. So back in January 2021, we had about 30 companies who were using the platform. We're now at over 2,100, and that was at the half year. We've continued to grow since then, and we're serving 35,000 employees. So we've seen some really fast growth in that area, and we now feel that we're ready to look for other partners. And, I'll talk a little bit about that when we get to that slide. So, hopefully, that gives you an update of where our focus has been, so insurance, the the platform, and SME.

20:50 If I talk a little bit first about, pay and rewards, I'm gonna talk primarily about our acquisition QCG here. So Inexo, as we've already mentioned, had a very good first half. We added QCG at the beginning of the second half, so that acquisition activity was going on through the first half. Essentially, there's a very nice lack of overlap between the client bases of these two companies. So Inecto have a big practice in sports, in tech, in the legal services, publishing and media, and they supply pay pay benchmarking information. They help companies look at job evaluation or bonuses, all sorts of things to do with pay and reward. QCG, by contrast, have a practice in rail, so they work with Siemens. They work with Hitachi and Bombardier.

21:36 They have a practice in construction, so for example, clients like KIA and Morgan Sindel. And then they have a regulatory and government, practice, so that would be organizations like the information, commissioner's office or the charity commission, the Bar Standards Council, all of those sorts of, regulatory bodies. They also have a practice there. And then finally, they have quite a large practice in the museum and leisure sector. So for example, the national I can't speak. The Natural History Museum, the VNA, and, Imperial War Museum are all clients in that sector. So you can see there's a nice opportunity there for us to cross sell some of our products. So for example, Inecto digital pay benchmarking, we can cross sell those into QCG.

22:23 But also QCG brings some salary survey expertise, which can help Inecto's clients. So they run what's called club surveys. So they're very specific surveys in in in quite niche areas, and that helps to provide key data and insights to their clients. And we look to extend that into the Inecto client base and also, to be honest, into the PG client base, particularly in sectors like transport and warehousing and logistics where really that sector has been really pushed on wages and salaries, and it's key information for HR directors and reward directors to be able to make decisions on. So we're really pleased with the acquisition, and we think it will, be very successful. And, certainly, the acquisition of QCG in the first couple of months, they've exceeded our expectations in terms of their numbers. So that's really positive.

23:11 So let me give you an update now on where we are with the benefits platform. So in terms of where we are, revenue growth is up 57% year on year. Really pleased with how that has developed. As I mentioned already, the Sage relationship is really going from strength to strength. I can see there's a question in. I'm gonna partially answer the question now, Tom, for you. So one of the challenges for all businesses serving SMEs is that the market is vast, but it's very, very fragmented, and it's very difficult to get to work with SMEs at scale. So Tom asked a question saying, how does PERCBox and other businesses, how do they fit into the market? And, essentially, the challenge for everybody in this space is how do you find companies to work with? And you can spend an awful lot of money on advertising through Facebook and LinkedIn and those sorts of social media platforms.

23:58 So the advantage to us is that the relationship with Sage, they provide us with warm leads every month, and those warm leads we then take on through the welcome call and the free trial in order to lead to conversion at the end of that period. So the number and the speed that we can grow this business is really quite extraordinary in comparison to if we're doing it directly through advertising. And the other big advantage for us is that Sage provide us with clients who are established businesses. They've done all the checks, so they've made sure they've done the money laundering checks. They they're making sure they're paying their taxes to HMRC and all of those things. And therefore, we know that they're good quality business when they come through to us. So we're very we're very happy with that relationship and and so are Sage. And as I already mentioned, I think we've moved past the start up phase. So really working with Sage over the period of the the latter part of 2020, putting clients onto free trials, and then them starting to pay from 2021, the start of 2021. We've really established the team and developed a much more scalable model, which now leads us into being able to offer a partnership with other firms. And we're in active discussions with other organizations about extending that partnership into other businesses. So we're really happy with how that's going, and we think that that's very strong position for next year and and and forthcoming years.

25:19 The retention numbers are are also very strong. Again, in answer to to to Tom's question, in terms of the opportunity there, we are retaining high numbers of companies through the three month trial. So sort of 75% of companies exit the three month trial still with us. And then a year later, we're looking at around 50% retention. So really high numbers. Really pleased with how that's going. So just moving on to the platform for our enterprise clients. So this group have their own account management team. And what we're seeing with our enterprise clients is that they're investing in their staff. They're going beyond just providing a discounts platform. They're looking to provide well-being services, whether it's an online GP. You know how hard it is to get to see a GP at the moment. They're offering counseling services. They're offering tax free benefits like cycle to work. So we've just established cycle to work schemes with KALINA, with Voyage Care, which is a a care care home sector, as well as universities and and that some of the banks are working with. And that really gives us a sense of where companies are trying to support their employees in these really tricky times.

26:28 So we're able to monetize the platform through a mixture of our own products and third party products, and that's really helping to develop relationships with our enterprise clients. And then finally, as I already mentioned, we're we're working on the delivery of a a happy version two. So we had happy version one in 2016. We've upped the look and feel of it and also the functionality, but, but also some there are some elements of cost saving for us in the in the medium term around platform savings and also our development cost savings. So we're pretty happy with that being a good investment for the business. And then finally, we sometimes get asked why why do we win work? So how do we win work in comparison with our, competitors? So I thought it'd be quite interesting just to show you some of the reasons why these organizations have signed contracts with us over the over the last, few months. So a retail bank, basically, they were very pleased with the flexibility that we're able to offer. We can build a bespoke platform for their employees, which is exactly what they want. It looks like them. It's called the name that they want it to be called. It's all branded as the bank. They're really pleased with that.

27:32 University, we we sold our first Happy Flex product last year to the University of York. This is a new contract with another university, and they were, again, really pleased with the flexibility and the scope and and functionality of the platform. And then finally, the Care Home Group, quite an interesting one. They've just moved to a new payroll provider, and we we were able to put a link into the payroll provider to provide payslips directly to staff, which means they can look at their overtime. They can make sure their hours are right really quickly and easily, and that was one of the key reasons they chose us. What I'm gonna show you now is just a a video from one of our, one of our clients, KALINA. So KALINA are a transport distribution logistics company. They have worked with us for a number of years, and, essentially, they're clients of all four parts of the business. So they work with Inecto.

28:20 They take insurance. They have the platform, which they call Reward Plus, and, also, they take Let's Connect. So they're a real client who who we work very closely with. But it's quite interesting. This is filmed in their one of their sites in Nottingham. It gives you a feel for not just the the way the platform works, but also how their employees feel about the insurances. So if you could play the video now, please. My name is Jenny Dafford. I'm currently an operations controller at Great Bear at Nottingham. So I'm Dan Carter. I'm the ops manager at Great Bear Nottingham. Our number one priority is health and safety for all the staff.

29:03 I think all warehouses are a dangerous environment. We always think nothing is gonna happen to you. But we never know what's around the corner. I am Richard Berry. I'm chief human resources officer for CALINGS PERC. I think a healthy, well cared for workforce is a very productive workforce as well. So with our advisers from a personal group, we'd really try and bring to people's attention about future planning and making sure that they've got enough cover to make sure they feel comforted in the event of any problems that may arise in their lives moving forward for them or their family. Pete, can you meet me at three, please? I'm diabetic. I'm getting older. I just wanted that little bit of extra peace of mind that if anything does happen and I do end up in hospital or whatever, the wage will come in. I'm covered.

29:49 My family don't have to worry about it. The personal group plan, is via reward plus, is available to all employees within the group. I've got health plan and death plan. I have a hospital plan in place for my husband, and I have a death plan in place for myself. I was set up within ten minutes. I have got previous conditions and it didn't affect the policy whatsoever and the plan still went ahead. The money comes straight at my wage so I don't even have to worry about direct debits or anything like that. It just gives them the peace of mind that, you know, if they suffer some kind of individual circumstance like an accident or a hospital stay, then they haven't got to worry so much about the financial impacts of it. It was reassuring to know that we've got some extra help if anything wants to happen.

30:37 If we was in any financial difficulty, that would help save a lot of costs. It's affordable, and I'm happy with what I get out of it. You can opt out of it it at any time, but to be honest with me I don't even notice that it's going out. Every month I sit on my wage slip and I forget what it's there for. Our employees are extremely important to us. They're the ones who keep the business running. So being able to offer plans via the personal group means that we're only just to help to attract and retain our employees, but it also shows how much they mean to us. What's particularly pleasing about our relationship with the personal group is that they've genuinely listened to us, and they've listened to what our employees want and need, and we've been able to build that comprehensive portfolio of services and benefits over the years. All it takes is a small distraction for an accident to happen, and having the plan in place gives us that reassurance and that safety net. 100% peace of mind.

31:31 It's one less worry for myself, my family, and my children.

31:45 Okay. So, hopefully, you can see from that in terms of the way that our clients think about us and just really recognize the the environment that, that our our our policyholders in particular work in. I think it's just worth a mention here. I think, KALINA do pay sick pay, but they pay it on base pay. And a lot of our policyholders, not just those in Kalina, but in bus companies, lorry drivers, their base pay is only part of their pay because on top of that, they get shift pay, they get overtime, and often those things aren't covered. And the hospital plan helps to top up their wages if they, if they go into hospital or or indeed are off work after a hospital appoint hospital operation or something like that. So it helps really the family manage their finances, and that's, I think, one of the reasons why retention is so high. So just to talk a bit on on our goals. So we're really focusing on driving insurance, not not drive not insurance for cars. That's what somebody asked us, but including in in really focusing on driving the the the take up of insurance and the sales of insurance.

32:49 So we're rebuilding the book as we've mentioned. June 22 actually saw the highest new business month since October 18, so we're really pleased with that. And we're also particularly pleased that our our attention has gone up so much. So from a measure that we use is from handshake. So when, one of our field sales colleagues has agreed an insurance sale to when the, policyholder's been paying twelve months, that's a that's a key measure that we look at. And that stood at about 50%. So we're retaining about 50% of policyholders in 2019. That's now gone up to 63.2. I suspect it will soften slightly in the second half just because we're writing so much business. But even so, I think it really shows the value, that employer employees place on the insurance. And then once they've been with us twelve months, then as Sarah said, the retention is over 80%, over the course of the the the the following years. So the life the life's length is usually somewhere between four and five years for a policyholder.

33:48 I think we're looking to continue to think about can we expand the range of insurance products, particularly where we work into environments where they're salaried workers, so not not the hourly paid workers with shift and so on, but salaried workers. It may be that we look at other products like a cancer product or indeed, something simple that covers heart attack and stroke. So those are some of the things that we've been looking at with insurance, but we're really positive about how insurance is going and really looking ahead into next year, very pleased with the way the book's rebuilding. And I'm not gonna talk too much about the, the the other benefits. Let's connect because I think Sarah's gone through that in a lot of detail. In normal times, a World Cup in November will be brilliant because people will buy new televisions and, obviously, it needs Christmas as a time to people often think, oh, we're gonna splash out and and treat the family to some new new, audio or TV.

34:35 At the moment, obviously, it's about supply chain delivery, but we're working hard with our suppliers to make sure we get as much delivery as we can. And although at the moment, you can imagine that people are really worried about cost of living, at the same time, if you do need to buy something new, a Curry's credit card is at the moment 24 and a half percent and likely to go up from that. And a lot of people that work for our employees might not even be able to get that sort of credit rating. So it is a way that employees can, buy products through their wages, at a slight discount because of national insurance savings, and they're not paying having to pay heavy check credit charges on it. So it is a very cost effective and and, good way for employees to be able to access those those benefits. Just a quick update for you before we finish on our ESG progress.

35:21 We've set these targets last year, so part of a three year plan of which we're about halfway through. We've put solar panels on the top of the main head office building here in Milton Keynes. Those are now working. Obviously, we're very effective over the summer. We replaced our fleet, and we looked very serious here at replacing the fleet with electric vehicles, but we decided that the infrastructure is just not available. You can imagine that our field sales team may be arriving at Berner Matthews, for example, in in Norfolk at 5AM

35:49 in the morning. It's just very difficult to reliably be able to charge the car outside of the motorways at the moment. So our account managers, whether regularly going up and down motorways, can use electric vehicles or hybrids, but we've stuck with, the best petrol cars that we can for our field sales team. I'm not gonna linger too long on the on the social and the governance because you can read those there. I think what I would draw attention to is that we've supported a charity in Kenya. We've been supporting the building of a school in Kenya for about the last five or six years. The school's up and running now. They we've just put put put money towards another classroom. We support the teachers with salaries, and we go out. We have a program of events where we send volunteers out usually twice a year. But, obviously, with COVID, we've not been out for two years, two and a half years now. I'm So delighted that our first group of employees are going back out for the first time in November, and they're very excited about that. So that's great for us.

36:41 And then we're up for an award of the at the AIM Awards. And this this, October, we're a finalist for being diversity champion. So we might not win, but even if we don't, it's nice to be shortlisted. So I think I normally end with a slide just reminding you of the business. We're a very strong business. We've been around for nearly forty years now. As Sarah said, we we pay dividend. We have cash. We're cash generative. We're in a very strong position. Although as as one of our questions has said is the challenge with the the share price at the moment is difficult, but it's not something that's unique to our business. And if there are three things to really remember about the businesses, we're seeing strong annual recurring revenue and annual premium income growth across all divisions year on year, and we're making strategic progress really on the goals we set ourselves.

37:28 Insurance in particular is building back to a core part of the business, and we're very pleased with how that's working. The SME opportunity is a new new chance really for us to move into a different sector and sort of eighteen months into that, which is working really well. And then finally, as we've mentioned, the dividend. I think it not only shows loyalty to our shareholders who've stuck with us, but it also shows the confidence that the board have in the rest of the year and also going into next year. So I think we can go into questions now. Yeah. Deborah and Sarah, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just using the q and a tab situated in the right hand corner of your screen. Deborah said we received a number of pre submitted questions and we've received a number of live questions from investors. And I want to start off the Q and A session with this one here, which reads as follows.

38:14 The share price has halved in the past years, likewise with the dividends. Why should shareholders continue to stick with this poor return on investment?

38:23 That's a painful question, isn't it? I mean, certainly, I can tell you that nobody's more aware of that than us. I mean, the obvious answer is that through COVID, we were affected because we couldn't go out and do field sales. And as Sarah's already demonstrated to you, revenues on insurance fell, and that just means that we make less profit. So inevitably, that means that dividends fall, the share price has fallen. But what I would say is that we have kept the dividend going. The impact of the market fluctuations, I think, has been harsh. We are a very well established business and that we know where we're going. And we are in a position now where the business is rebuilding as I've just shown you those numbers. The business is rebuilding post COVID, and we're looking at positive second half and and into 2023 and beyond. So I feel like the the return on investment is coming back into the group.

39:14 And, and I and I also feel, obviously, it's very challenging times at the moment. We Sarah and I have been in the city this week, and, certainly, it was very, very, busy and quite, you know, confused place on Monday, Tuesday, and Wednesday when we'll be there. But I think what we will see is if interest rates go up a bit, there will definitely be a swing back of interest into organizations that do have a strong balance sheet, are making profit, are cash generative. Because if you've got to borrow money and pay interest on it, suddenly, the very cheap money that we've had investing in pre, pre revenue sorry, pre profit businesses will probably

39:47 start to tighten up, and more money will flow into businesses like ours that are really successful, well established, and have a clear way of identifying how we can reach, reach revenue and profit and continue to deliver it. So I think in some ways, we we will see some positive results in in in the in the near term. Is there anything you want to add to that, Sarah?

40:08 You're on mute. No. I would I would have just highlighted the dividend as well. You know, obviously, we have tried to maintain that as much as we possibly can, cognizant of the fact the share price has gone down, but also that peep a lot of people hold us as a dividend stock. Okay. But thank you everybody for being so loyal. I appreciate it's been a been a rocky road. Okay. Next question. Thank you very much. The next question here are switch parts of the business do you think offer the most growth potential with affordable insurance always will affordable insurance always be the largest part of the company?

40:44 Okay. Again, that's a really interesting question. I think it might be worth if you could put up for a slide number 28. That might give some insight into the the size of the market. So we'll just whiz through these. So if we look at the opportunity within SME, you can see that potentially there is significant growth in that opportunity. So on the left hand side, you can see the size of the market. So we're working with Sage who have 7,000,000 employees that they pay through their payroll systems. We've got tiny penetration at this stage. Actually, these these are the numbers at the end of last year, so at the end of December. So, obviously, that will have moved since then. We've got quite significant opportunity. So if you look at the size of the market and the opportunity we have even at relatively low levels of penetration, you can see there are some really significant opportunities for us to drive quite a large EBITDA contribution.

41:37 But if you flick on to slide 29, which is the next slide, we've done the same work on insurance. And you can see there that equally insurance is a very strong part of the business. So I think insurance and our SME proposition, insurance is is a very well established part of the business. I can't see necessarily it's gonna take several years for us to overtake that. But at the same time, I think there's no reason why we wouldn't see a more balanced approach in the future where some of the other products start to come up and make a very significant contribution alongside the insurances. Thanks very much. The next question here asks, what's gives you the confidence that you're going to retain your insurance book during these difficult times? Even value insurance presumably can be considered a luxury. How easy is it for your customers just to opt out?

42:32 I think that's a really good question. There's two parts to my answer, really. The insurances that we provide are relatively low cost. So if you imagine an an down this side with value, so low cost here at the bottom, high cost at the top. So the things that will really make the biggest difference are at the top here if you decided to stop paying them. And then across the bottom of our axis would be would be something around how valuable is it to you. So at this end, we've got something like Sky subscription where it's probably costing you 60 or £70 a month. You can live without it. It might be that gets chopped first. And I think our insurance is our death benefit starts at £1.61 a week for £10,000 worth of cover. And I think you'd have to go quite a long way to cut in before you started to reduce those. And the retention figures that we've seen would suggest that policy holders really value the product. And if anything, we're seeing higher retention rather than retention dropping away. We are scrutinizing it. We're looking at our lead, KPIs around early cancellation. But at the moment, we're not seeing any anything in there that's worrying us or startling us.

43:41 So I think overall, we're as confident as we can be. And certainly, you can see from the video, the people in Kallina really understand the product that they've got and the value that they get from it. And I think that would be mirrored across lots of our sites across The UK. Thank you very much for that, Deborah. The final presubmitted question we have is how far do you see the relationship with Sage going, and how else can you target the SME market? So in terms of the, relationship with Sage, you know, we've signed a five year deal. The we have a a service level agreement in place with them now about the leads that they're giving to us, and they're they're hitting those targets and, in fact, exceeding them through through the months of this year. Apart from January and February, they've exceeded quite significantly those targets on every month this year. So we can see that really developing. As we've mentioned, they have said they pay through their PERSONAL system 7,000,000 employees in The UK.

44:31 So, over 35,000 employees paying at the end of the half year, we've still got quite a long way to go before we've got them all. So I'm very positive about that, but we are also taking the opportunity to look at other partners, and we're actively talking to other partners at the moment. Now that we've got a much more established team and an established processes, we can offer partnership deals where we do a very similar arrangement where their SME clients come to us for a branded platform. So, obviously, we wouldn't be selling Sage employee benefits, but we might sell another business's employee benefits in the same model that we've been using with Sage. So we see that as a very positive relationship, and certainly Sage are very pleased with how it's going as well. Thank you very much. Next question here asks, is the cash balance all free cash, or is it restricted in any way? Maybe one for you, Sarah. Yep. Thank you. Yeah. I'll take that one. Yeah. So, obviously, we we do underwrite our own insurance. So we've got a couple of insurance subsidiaries within the group and some other regulated entities. So we have to hold regulatory capital of around five well, regulatory capital is around 5,000,000. Reduced slightly with the size of the book reducing slightly.

45:38 As a board, we take the collective view to basically keep, you know, 200% of our requirement set aside for that insurance business. So around 10,000,000 of our cash is set aside for our regulatory capital. The rest of it is essentially free cash. I'm actually gonna answer well, just on this one, another question that's been asked around the the net cash of 20,000,000. How much will you benefit from higher interest rates? Again, the majority of that cash is held in short term deposits, you know, sort of maximum probably of around three months. So, obviously, any you know, for every 1% increase in the interest rate, that's obviously beneficial to us to the tune of around 200,000. So one of the benefits of what's going on at the moment. Thank you very much. And maybe one final question here. Is there likely to be a goodwill impairment charge for Let's Connect?

46:28 Yep. Again, that's that's a really good question. Probably the answer is we can't, you know, we can't tell yet. Obviously, Let's Connect has its peak period towards the end of the year, so we'll have to see the the performance in that last quarter. But equally, if if you recall when we looked at the slide, you know, let's connect is still a really popular benefit. The order levels are still up. People are still wanting to buy their products through the scheme. And and potentially with the cost of living crisis as well, you know, it becomes an even more attractive route for people to buy the the the equipment that they need. I guess the the question that we will have to weigh up is is what what our view is on long term stock availability for certain items. But, you know, as it stands at the moment, we know that if we can get the stock stock in, you know, certainly ahead of the World Cup, as Deborah's mentioned earlier, we know it's a popular benefit, and and it's a good, you know, it's good area of the business for us. So I'm slightly because I'm clearly not gonna be able answer it at this point, but, yeah, we we will assess that one once we've gone through our peak trading period.

47:29 Thank you very much for that, Deborah and Sarah. I think you've actually managed to address all those questions from investors. And, of course, the company will review all questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, Deborah, could I just ask you for a few closing comments? Yeah. Thank you very much. So from our perspective, suppose, it's important to really restate that we've hit the targets that we set ourselves, at the beginning of the year, Our view of the second half, and remember, we're now nearly at the end of quarter three, is that we're continuing to deliver what we expected to. We we've got numbers out in the market, and our expectation is that we'll be there or thereabouts for those numbers. And we certainly see next year as being continued development and growth. The numbers out there are are growth on where we are at the moment, and we we are very confident about that.

48:22 Notwithstanding what's going on, and I think having spent a few days in the city as I earlier mentioned, it's clear to see the concern that's happening. But there's an awful lot of people who work in warehouses in Nottingham and all over the rest of the country who have secured jobs, reasonably well paid for for the type of work that they do, and they value the services that we're able to offer them, and they take full advantage of them. So I think that's what I would leave on really is that, you know, the space that we work in, I don't see any particular concerns at the moment around where people I don't think we're going to be seeing people losing their jobs in those sorts of environments, and I think they continue to, earn reasonable amounts of money, particularly when you take into account shift payments and overtime and all of those sorts of things. So we're feeling fairly confident and, and and comfortable really with the numbers that we've got out there. I hope that helps everybody, and thank you very much for coming in to listen to us today.

49:15 Thank you very much, everyone. Deborah, Sarah, thanks once again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of PERSONAL GROUP HOLDINGS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.