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Personal Group braced for salary sacrifice reform

Insurance revenues rose to a record high, but a possible limit on tax breaks could affect allowances on salary sacrifice schemes.
September 21, 2016

A record first half for the core insurance business at Personal Group (PGH), where premium income from the various employee benefit plans rose 12.5 per cent to £6.3m, was masked by a sharp increase in reorganisation and acquisition costs, which left cash profits down by nearly a third at £3.2m.

IC TIP: Hold at 457.5p

Work continued on building its new technology platform, called hapi, in conjunction with the Sage employee benefits platform. This will allow penetration into the small- and medium-sized enterprise sector, which the current distribution model does not. The 2014 acquisition of Let's Connect, which allows employees to buy computers and smart televisions, saw like-for-like sales up 14 per cent. However, plans have been pulled to proceed with PG Mobile, a facility designed to offer additional mobile airtime products, and the operation is being wound down by the end of 2016.

Further headwinds were reflected in a rise in insurance premium tax, the cost of which can only be recouped on new insurance business. And proposals to limit tax advantages associated with salary sacrifice-delivered benefits in kind, while still at the consultation stage, are expected to have an impact on the Lets Connect full-year performance, as some clients may await the outcome of any decision.

Analysts at Cenkos are keeping their full-year estimates for adjusted pre-tax profits of £9m and EPS of 21.9p (from £11.1m and 27.2p in 2015).

 

PERSONAL GROUP (PGH)
ORD PRICE:457.5pMARKET VALUE:£140m
TOUCH:450-465p12-MONTH HIGH:620pLOW: 448p
DIVIDEND YIELD:4.7%PE RATIO:16
NET ASSET VALUE:99p**NET CASH:£7.6m

Half-year to 30 JunGross premiums (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p*)
201513.92.97.810.45
201615.71.94.811
% change+13-33-38+5

Ex-div:-

Payment:-

Interim dividends paid quarterly; third interim dividend paid 23 September

**Includes intangible assets of £11.9m, or 39p a share