Personal Group Holdings Plc ($PGH)

Good morning, and welcome to the Personal Group Holdings plc FY '25 Results Investor Presentation. [Operator Instructions] And I would now like to hand you over to our CEO, Paula Constant. Good morning to you.

Thank you very much. Good morning, everybody. Welcome to a slightly cold end of week Friday, but we've had a great week presenting our results to various investors and obviously, we're super happy with our results for 2020. Hopefully, you know us well by now. I've been in Personal Group for about 3 years, come out to years there slightly longer and it's been fantastic to have run this business with Sarah, and this is her last results with us. So a big thank to everything that you've done Sarah. Okay. So moving on to the business, a quick snapshot of last year. It was another fantastic year for us, particularly on insurance and other record insurance sales performance. Sales up 11%, API up 12%. All of our metrics really performing strongly across both what we sign up and sell, but the CPO quality that we deliver that I can come on to in a little bit. We've also put huge efforts into expanding our addressable employee base, winning new insurance customers and the employees that we need to land to achieve our 5-year ambitions to grow the business. This is year 1 of our 5-year plan. So it's been brilliant to get ahead with about 50,000 new employees that we've added to the base of people we can go into in insurance. We've had a strong year, extending the reach of our benefits platform, both across Sage, with our renewed contract. New partnerships signed but also good performance in our direct sales and a particularly strong best year ever in Innecto or consulting business. And we remain in a super strong position recurring revenues of 90%, so inching that number up a little bit more. I've said before, it's a complete privilege to run a business with so much kind of dependable revenue and our base and being able to look forward and solve for the growth plan. We continue to generate strong cash, and we're happy to have paid out the increased dividend and Sarah can talk a bit more about that later. And I think as we've said really now in several years, we have a huge market opportunity. Three years ago, when we looked at the size of the market, we were only playing in about 12% of addressable market that we can reach on insurance with actually relatively low levels of penetration as well. So great upside for us. And that market opportunity remains strong in insurance, stronger cost benefits and particularly strong and increasingly strengthening in the pay and reward consulting space. A quick reminder of what we do for anyone that's been on these presentations for a few years. We've switched the order now. So we go to market now with an insurance division and a benefits and reward division. We've simplified the business quite considerably over the last few years. Insurance is the bedrock of the company, kind of the inception of the company from the beginning. We have simple, affordable protection plans, our hospital recovery and our debt plan and they can continue to perform extremely strongly with very impressive conversion rates because they are straightforward accessible and they really pay out when it matters when people have long is in hospital or recovery, et cetera. We still predominantly deliver our insurance policies through face-to-face at 99.9% of what we do is face-to-face engagement by clients, into employees. And that model consistently proves that a really rounded structured conversation, talking about benefits and insurance is super impactful. So I'm very proud of our offering insurance and the USP that we deliver and the progress that we've made. On benefits and rewards, we've got our own SaaS product, an employee benefit software solution. 60% of our ARR comes from our white label relationship with Sage. We've got a really strong portfolio of direct clients, half of which are also suitable for our face-to-face insurance, and we continue to perform strongly across all dimensions of our portfolio. And then Innecto is our pay and reward consultancy, we have a mix of hands-on consultancy and a set of digital products. So we're probably about 2/3, 1/3 in terms of what we sell in that respect. And as I mentioned, a really super impressive areas as EU legislation and requirements around pay and reward strengthen across our customer base. As I mentioned, we still have a huge market opportunity to address, which positions us really well for growth. The conditions throughout '25, which probably build on a lot of the challenges of '24 really make what we do completely critical to HR directors and businesses in general. So broadly, the 3 trends that we see are absence and stress continue to rise, which obviously has an implication on available resources and businesses. lots of lots working days in the event that you're struggling to solve for financial challenges. Many of the people that we serve in the insurance space have probably got no more than about GBP 500 in savings. So in the event that you've got an insurance policy with us and you need to have a substantial time in hospital there's a cash payout for every day that you're in a hospital and every day that you're covering. So this makes a material difference to the people that we serve. 52% of employees saying that financial worries and perhaps performance. Secondly, employers are spending in the benefit space but are increasingly struggling to articulate what return they're getting for the benefits that they invest in. We've got a superb benefits platform, but also coupled with the opportunity to strengthen financial resilience through our insurance products, it's a very compelling message. We've got an exciting kind of set of developments around ROI in our road map going forward in terms of the data that we can deliver to our customers. And of course, the most compelling data point we have is that when we visit people face-to-face, we can improve engagement with all benefits on offer that we get to talk about quite considerably. We still see a huge opportunity in the SME market where there's at least 50% of small customers that don't have benefit platforms and are increasingly looking to invest in them. And then finally, as I've mentioned already, regulation of pay constraints or accelerating action. There's a requirement through the EU, transparency directive, the U.K. employment rights bill to increase compliance to demonstrate they're an equitable pay transparency. The tools and the consulting that we offer completely addressed those causes. So it's been fantastic to see the progress in the next last year. A bit of a deep dive into insurance and benefits from last year. So I'll talk about a few of these points now and then a few later when we focus on our strategy. Thinking about insurance first, again, as I mentioned, a fantastic year. We are forensic in our operational group. And after a really monumental year in '24 to improve sales by 18%. It's almost at impressive again, to sort of increase the new base by 11%. So the team are so focused on the rigor of performance by sector and by employee and having fantastic results. What we focused on last year, as you may remember, is our top 100 sites, can we really increase the penetration in those sites. They've got the biggest massive people, and they're right in the heartland of our asset transport logistics, manufacturing, et cetera. We increased the penetration in those segments by over 20% and the overall penetration of our customer base, up from 13% to 14.5%. What was as impressive is we have maintained superb customer service, claims delivery scores as well. Our Trustpilot score of 4.9% must be unrivaled in the industry. I've yet to find 1 that is kind of as good. I'm not sure if you can be better -- and that's really testament to the brilliant customer service, the very quick claims turnaround 98% of our claims settled within 40-day hours. We are very proud of history with some of our customer bases that we've been with for over 10, 15 years where we've got 95% of claims payout and really impressive amounts of claims, monies paid back to particularly our big customers with big bases. So they are all really strong messages. Our focus on consumer duty and being the top of that game as good as the big company continues, and we're very proud to have won an award for our focus as a small company. from the Institute of Customer service a couple of weeks ago. So to be a winner amongst the big names in insurance and kind of really shows you how serious we're taking our commitment to excellence on all fronts. So I can be proud of the team for the efforts there. And then equally, on our B2B sales side, which is a different team, we've worked really hard last year to win new clients in the insurance space, which we probably can't focused on for a number of years, whilst our focus was really on the penetration. So we've got some fantastic new client names, some really good customers in the heartland of the sectors that we want to operate in. We've got a mixture across transport logistics and some adit health care as well and some really good sizable customer bases in there, I think, 5,000 to 10,000 that new employee base or to be single customers as well as some smaller wins in there. So really happy that we've got this goal of 300,000 new employees that we need to add to our base by the and that on month 1 of our strategy, we could already see a plan ahead of 50,000 new employees. So more to talk about in terms of some exciting partnerships on insurance, but I'll leave that until after sarisection. Moving on to benefits. A few things to point out here, again, on adoption, we are really pleased with the progress that we've made now that we are through our big migration of our Hub platform. It's great to have seen an increase in the platform monetization critically, and I think this is a great complement both to our platform but also to a fantastic account management. Post-migration, our customer retention has improved year-on-year, up to nearly 94%. So that looks a combination of our retention and kind of upsell opportunities. The Innecto digital tools, which also count towards our ARR and the retention rate improved really impressively as well from 75% to 93%. So again, real rigor in the way that we are looking after customers, but also a testament to the brilliant products that we also have in the digital space. And then in terms of funding our base. We won 30 new benefit clients last year, which we're very happy with our direct sales rather than what we did in the stage in an environment which is increasingly competitive in the benefits space, but with many of our benefit provider competitors probably struggling with the reliance on the salary sacrifice, which is particularly challenged last year. So we find that we continue to have a strong offer in the SME kind of lower end of enterprise space, but we've got some notably big names there and some really good credentials -- and of course, the big thing which sounds like old news now, which is our announcement after last year's results is an expansion of Sage. So we signed a new contract last year, which takes us up to another 5 years. So pretty much to the end of our 2030 plan and gives us the potential to more than double the amount of business that they sign up and put on the platform which has really sharpened the focus on new territories, both within the U.K. but also anything outside of the U.K. It was great to sign that contract and then get very focused on going live in Ireland, which is a fantastic result for us being set up and running within a couple of months and over delivering against our plan and we've got some really good factors in the U.K., which is probably our preference because it's easier to mobilize, but also some really exciting new geographies and discussion as well. And again, some impressive clients 1 by next including that mixture of consulting and digital and both in combination. So really, really good year for benefits around. Okay, I will hand you over to Sarah to do a bit more for a deep dive on our financials.

Good morning, everyone. We're obviously really pleased to have announced a strong set of results this week, ahead of market expectations. We saw revenue growth up 11% to GBP 48.4 million, and that was reflective of growth across all areas of the business. It translated to a corresponding 22% increase in EBITDA to GBP 12.1 million and slightly more 24% increase in PBT. Our EPS increased 32% to 23.3%, Obviously, as a result of that increased PBT, but also as a result of a reduced tax rate that we saw as a result of our research and development claim that went in for the happy development that's taken place over the last couple of years. So obviously, with those strong results, we've maintained a really strong balance sheet. We're a highly cash-generative business, so GBP 9.9 million of cash generated from operations in 2025. Cash and deposits GBP 29 million at the end of the year, and we continue to have no debt. We've also announced a final dividend at 15.1p with these results taking the full year dividend up 41% year-on-year as a slightly enhanced by that reduced tax rate in respect of R&D. For those of you who been following us, you all know, we -- historically, we've always been a business that's paying out quite a high percentage of our profits as dividends in excess of -- but at the interim accounts, we announced a change in our dividend policy to pay out 100% over the period of the strategy. We continue to grow strongly, generate lots of cash, and we really wanted our shareholders to benefit with us as we go along that journey. We're still confident we can maintain a progressive dividend on that basis. Just looking at a bit of a breakdown in terms of the contributions from the different segments. We'll look at the insurance and benefits in a little bit more detail in a second, but you can see that broadly a 75, 25 percentage split between revenue and insurance and benefits and that 70-30 on EBIT, but as a reminder, Paul has already mentioned that the high levels of recurring revenues that we see within the business. So you can see in the table on the left-hand side there in terms of ARR, API up 12% year-on-year. Obviously, with benefits and rewards that straightforward SaaS products that we see coming in either on a sort of rolling month or annual basis but also in terms of our insurance products because they are basically rolling weekly or monthly policies that are aligned to an individual's pay cycle. They basically have the same characteristics as has. So GBP 48.6 million at the end of 2025, obviously, giving us really good visibility as we go into 2020. In terms of insurance, a little bit more detail. Paul has already mentioned, there's a record new insurance sales again, GBP 15.4 million in 2025. The vast majority coming from face-to-face insurance. We also continue to see really strong retention of our policyholder base, so year-on-year retention just under the 82%, broadly aligned with the previous year. We saw a slight decrease in our claims ratio. That was 27.1%, still probably where we're trying to make sure we're sort of keeping in the high 20s, knocking on 30%. So we're comfortable from a consumer duty perspective. And then obviously, we delivered 4% more field days in 2025, made some investments in some of the new offerings that Paul will talk about in terms of digital and our cash plans. But overall, we saw an 18% increase in EBITDA with contribution of GBP 14.6 million from the insurance business. In terms of benefits, you can see our combined ARR from the benefits platform. So that's from our happy direct sales and Sage benefits proposition up to GBP 7.3 million at the end of the year, year-on-year. On the right-hand side there, you can see the contribution of the various aspects of the business. So Paula has already mentioned, around 60% of the ARR coming from Sage is stands at the moment, but continuing to see growth across both HaiDirect and to EBITDA contribution here of GBP 5.1 million, up 19% year-on-year, and that's reflective of reduced platform costs where we've completed the happy development and role, both the happy direct and sales employee benefits into 1 instance of the platform but also some investment again in this area in terms of products and support of the platform. And although the impact at the bottom line was a call out here the benefit the employees using the platform get from having it in place. So you can see that GBP 53 million of spend through the platform that people buying discounted shopping vouchers or Argos, carries and the like. resulting in GBP 2.2 million of savings to those individuals. And then finally, on Pay & Reward, Paula has already touched on a really strong year for them. up 10% year-on-year. And again, that's really despite from a really good win in 2024 for British Airways and EBITDA, they're up 19% and some significant project wins that they saw in the second half of the year in particular. And then just a little bit on our balance sheet. Obviously, we have the GBP 29 million in play at the end of December with the dividend that we've announced just under GBP 5 million of that will also be paid out to shareholders in the last couple of weeks -- last first week of May. And you can see there that, that will result in 16 -- over GBP 16 million will have been paid out in the last 3 years, return to shareholders as part of our dividend policy. In terms of the cash that remains on the balance sheet, obviously, we do underwrite our own insurances. So there's a requirement for us to hold regulatory capital. The absolute minimum at the end of December was GBP 6 million. We always look to hold at least several that's around about GBP 12 million is allocated to that capital requirement. And obviously, as we grow over the period of the strategy, that require more growth fairly linearly alongside it. But obviously, it still gives us the opportunity to invest organically in the business to help improve and develop some of the insurance support and platform that we need to scale as we grow. And obviously, it will enable us to continue to do that regular return to shareholders, and that increased dividend that we've already spoken about. And if something does come along in terms of M&A, we've obviously also got the opportunity to do something on that front. Just before I hand back to Paula, just really reminded here of the growth that we've seen over the last 3 years in terms of revenue, EBITDA and significant cash generation. And the forecast that we're at now for 2027 will represent a 50% increase in revenue and doubling of our EBITDA from 2023. So I'll hand back to Paula to talk through our route to 2030. Sorry, Paula, you need there, sorry, which is a go ahead.

Thank you. So a reminder of our strategic ambition, which we shared in detail last year. we have an ambition to get to GBP 30 million EBITDA, over GBP 100 million of revenues and solving for over GBP 20 million in SAAR by 2030. So this is month 3, year 1 of our plan, and we remain laser-focused on underpinning the key metrics to deliver. And the plan is great because on the back of a 90% base of recurring revenue -- we have a few really significant levers that we plan to pull to get to this plan. But also there's opportunity beyond that either to derisk the plan should that happen or hopefully to make the routes even more straightforward and easy. So the key measures for us are obviously, continuing to do all the brilliant stuff that we're doing in insurance and inching that penetration forward. Broadly, that's probably about half of the plan at the end. So continuing to find opportunities to sell better, more efficiently and effectively, but retaining our excellent customer service as we scale. Access to the 300,000 new employees, a key metric on everyone's mind in the organization. So winning new insurance clients as a second kind of key priority and putting that number of addressable employees into the engine in the field sales team. And then the other really big 1 is our SaaS partnership. So the 8,000 leads that we need to be generating per annum at the end of this plan. probably 2/3 from the Sage relationship and then the rest ideally from fewer strong partnerships that probably be of less substantial level than Sage. We also have 10% of EBITDA in our plan, which comes to new products and services. So that would include anything that we sell with group cash plan our digital products, which I know we've had a question on, and anything else that we might look to develop and grow ourselves because we certainly believe we've got the capability to do that. So just touching on probably a bit of the partnering and innovation, and I'll cover the digital piece first. I mean we're in a strong position at the beginning of this year. We've developed 2 variants of a group cash plan as part of the tender that we the contract we signed last year with an employee benefits competitor, to be their insurance partners to provide a group cash plan, digital insurance and, of course, our face-to-face model. So has been fantastic to be recognized in that vein as a key insurance delivery partner to supplement and a service for a substantial employee benefits competitor. And I think our group cost plan and probably our digital products, we might not have planned to have ready for year 1 and of our plan. We've obviously got other things to focus on, but it's great that we've now got all of those things kind of tested ready to scale up. So last year was very much about kind of building and testing -- and on the digital insurance front, we've developed 3 different products that we sell digitally there obviously different to what we do in face to face, but they are along the lines of hospital plan and death plan. We have successfully rolled out in about 15 of our clients that don't take face-to-face so that will be more appropriate for digital, but probably not appropriate for face to face. And it's been very pleasing to see that every purchase journey has been fulfilled. We've sold multiple products to single people. We've sold the same product for individuals and family members. So the buying journey has been thoroughly tested. So our challenge this year is to look at how we kind of scale across our broader partner base and also our Sage base as well as our own internal customer base to see what the opportunity looks like there. So it will be a great addition to kind of driving that additional EBITDA that we said we want to get from new products and services. And then on the partnering front, as I said, last year was really mobilizing that group cash plan options. So we're now in a position with the employee benefits partner to start testing the waters with both group cash plan and our face-to-face model. We're looking at working with a couple of clients there at the moment. And then we'll bring our digital products into place soon after -- and then significantly, we announced on Monday ahead of our results that we have gone into partnership with Simply Health, which is a fantastic opportunity for us to provide our insurance face-to-face and digital products across their client base, whilst in parallel talking to their clients as we go in face-to-face about the opportunities with the group cash plans was simply help. So very excited about that partnership, very excited the delivery arm to support their customer base. And I think, really, the combination of that employee benefits customer base and they simply health base could be anything up to about GBP 7 million of employees. So we are very focused on achieving that 300,000 new employees through direct conversations and direct client relationships. But we've also got this huge opportunity that we're hoping can accelerate our route again to 300,000 over the course of the 5 years. So that's a little bit more on insurance. And then if I just touch on benefits, obviously, we talked about the Sage partnership. We are very proud to have signed up our new additional partnership with an additional provider last year. We have supplemented our team this year. We have a new Partnership Director. We've got a brilliant new Marketing Director from an insurance play. We've also recruited a new CTO. So we've really got our senior leadership team in place with super strong experience across the portfolio, but particularly in Benefits and Rewards. And we'll be looking now at which significant partnerships we can sign up in the next year. So obviously, trying to land a couple more this year will help us accelerate into our journey, though, of course, as I've mentioned, there's just this huge opportunity in the contracts to expand within the U.K. and other territories and Sage. And then on innovation, it's been great to launch a new product in our consulting space, probably the first product in the last couple of years. We've launched a great new product called Roll sense. We've got some of our kind of first sales opportunities there. And again, opportunity to sell that direct but also to bundle a lot of our digital products and an ecto for partnership opportunities as well. So really excited to see where we can take that opportunity in our business as well. So to summarize, and then I think we'll cover any questions that we haven't managed to answer yet. It's a great business. It's an absolute privilege to run a business with 90% recurring revenues and retention rates above 80% in our insurance space and significantly above 90% in our benefits and pay rewards space. We continue to generate cash and on that cash position of GBP 29 million leaves us with absolutely enough money to continue to honor our new dividend commitment through the course of our strategic ambitions. I think that was 1 of our questions.

And again, the market conditions can be better for our set of products. We are absolutely relevant across all dimensions of insurance benefits and pay and reward with a huge market opportunity to address and a sizable opportunity within our own base. We remain committed to our strategic aspirations. We're very excited to be kind of ahead of some of our growth targets coming into year on -- we remain confident in our aspirations and laser focused on the end aspirations for 2030. So I think we will quickly move to questions. I have -- if we go back to the cash one first, I think I probably you -- for your second question, Andre you concerned that paying out 100% of dividends leave nothing in the war chest in part, well, I've committed that we will pay the dividend now. I think we've mentioned before that we hold almost double the amount of cash for regulatory purposes to cover the insurance base -- so we have plenty left a good kind of 10 million plus at the moment to cover anything else and we continue to generate a strong cash flow every month or probably solar your Sarah, so...

Anything can I add in terms of that follows is obviously -- remember that last year, we sold let's connect the pet business in horecacrifice business that we had. Obviously, recognized up GBP 2 million in terms of selling that business, but also released just over GBP 3 million of working capital. So we had a big boost to cash balance last year. When we consider the Board our options, we did think about special dividend but decided that actually we'd rather almost return to shareholders over the period of strategy rather than on Health suite. So yes, Paula, we've got sufficient in there. We definitely got more than we need in terms of read cap at the moment, although that will sort of continue over the period. And the second -- there's a second question in as well. So saying is it fair to assume dividend growth will broadly track the earnings trajectory of the business and yes, the answer to that is yes.

Okay. And just on all things kind of cash expenditure related. There's a question on M&A. What are we looking for? Do we have targets in mind? We have spent some time really over the last 18 months actually looking at options -- we're clearly not interested in paying extensive multiples in the benefit space, although we'd be interested to see how that kind of tracks down. We're very happy to have sold a salary sacrifice business and not to be at the mercy of any kind of government and budgetary considerations there. And actually, most of the things that we've looked at, which are interesting might not be for sale, but they're good partnership opportunities to surface on our platform, which we've been in the process of doing. Similarly, I think in the insurance space, anything that kind of sits in that blue-collar worker, supporting people through financial resilience would be interested probably the same conclusions there. There's some good partnership opportunities. There are some interesting elements of cash plans that we would probably be more than capable of building out ourselves. So we'll probably watch the market on some of those. But I think everyone would agree, we've got plenty to be getting on with to achieve steady progress against the 5-year aspirations. And for a small business, M&A is extremely distracting when the growth opportunity ahead of you is so strong. So that's probably where we are at the moment. Right. There are some threads of customer service, digital AI. Let me kind of add to those. So I think on digital, and it is a question we're being asked how transformative could it be. I think, again, we're trying to kind of take one step at a time on this. We've got a great face-to-face product and a huge market opportunity in an environment where the base that we serve do value the explanation and the time to talk in person. We provide a service that is really hard to find almost anywhere else and certainly to replicate. And from an employee benefits engagement perspective, it's demonstrable in terms of raising awareness and adoption of a broader base of benefits because, of course, that's the first part of the conversation. But this year -- I mean, this year is definitely about proving out the opportunity. And as Tenter calls into our customer base that isn't appropriate for face-to-face and our broader partnerships and beyond, it could present a really attractive upside. So that's probably where we are with that at the moment. There's a lovely comment from Anthony with your tremendous customer service, have you considered taking over the service management of NS&I. No. We're quite focused on what we have to do today. But I mean, in all seriousness, I think our customer service is fantastic now, and we work really hard on it. And we've got some scaling to do with the partnership opportunity and the 7 million employees to find the addressable opportunity there. So we have a great plan to kind of push into claims automation. We've got some kind of single customer policy work to do on our very robust insurance infrastructure. So there's plenty in the plan for us to maintain the excellent levels that we deliver today. But beyond that, we'll probably think about customer service world domination. But for now, our scale-up plan is the focus. And I think kind of threading into Callum's comment on AI, it's probably more automation and AI that we need to focus on in the business over the next few years. So we've got a superbly accessible customer service model, and you can talk to anyone. And there's a decent set of automation now evolving to support that but keeping that personal access for someone to talk to someone on the phone is going to be important for us. But again, there's opportunity to accelerate some of the training and onboarding. There's an awful amount to absorb as a new trainee in the field. What can we do with kind of AI in training? What can we do prompt through all of our customer journeys. So they're kind of the things that we're thinking about at the moment. I think just to reinsure investors, we do not have a benefit and digital road map based on AI propelling sales growth. So our road map and our progression is straightforward with some kind of refocused AI and automation but it doesn't provide any risk in terms of our sales and revenue and ARR trajectory. Right. I think that's all the questions. I don't know if we...

Correct.

Yes, that's great. Paula, Sarah, thank you for addressing those questions and updating investors today. And Paula, before we direct investors to provide you with their feedback, which is particularly important to yourself and the company, could I just please ask you for a few closing comments?

Yes. I think as I've said, it's an absolute privilege to run this business, and it's been fantastic to run it alongside Sarah. We're very excited about Matt joining, but hugely grateful for all the goodness that Sarah has sprinkled on the business and her support to me, especially. We're very proud of our progress, super committed to the plan and excited to see what this year delivers.

Fantastic. Paula, Sarah, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to all.