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Summary
- As per the UK's Finance Ministry data, the Banks have lent close to £50.0 billion to the businesses under the Covid-19 support scheme and £33.8 billion to support the furloughed
- The UK government's job retention scheme has supported close to 9.6 million workers.
- Personal Group paid a dividend of 1.5 pence per share in Q2 FY2020.
- Personal Group expects lower premiums due to subdued product sales in H1 FY2020.
- Helios Underwriting suspended the final dividend payment for FY2019.
- Helios Underwriting acquired four Limited Liability Vehicle (LLV) in 2019 and one LLV in 2020.
Given the above-market conditions, we would review two stocks - Personal Group Holdings PLC (LON:PGH) & Helios Underwriting PLC (LON:HUW). Both PGH and HUW are financial stocks. Based on 1-year performance, PGH and HUW were down by about 25.20 percent and 15.74 percent, respectively (as on 4 August 2020 before the market close at 9:50 AM GMT+1). Let' review the financial and operational updates of two companies.
Personal Group Holdings PLC (LON:PGH) - Debt-free balance sheet at the end of FY2019
Personal Group Holdings PLC is a UK based company that provides employee-related services. Personal Group provides insurance products for employees, third-party services to employees and provides e-payslips and salary-related consulting through its subsidiary Innecto. The Company also has a digital SaaS product Hapi. Personal Group is included in the FTSE AIM All-Share index.
H1 FY2020 Trading Update (ended 30 June 2020) as reported on 23 July 2020
The Company reported revenue of close to £30.0 million for H1 FY20 that was same as compared to H1 FY19. The Company generated recurring revenue from SaaS product. The EBITDA was around £5.0 million in H1 FY20 that was above the expectation. The Company outlined that it had a strong start for FY20 that was later impacted due to the pandemic. The pandemic affected the sales of the new insurance products; however, the renewal of the existing policy supported the business up to some extent. The current economic situation did not have any material impact on the financial position in H1 FY20, and there was no surge in insurance claims. The Company paid a dividend of 1.5 pence per share in Q2 FY20 and expected to pay 5.9 pence per share in Q3 FY20. The Company did not provide any guidance for dividend payment for Q4 FY20. On 4 June 2020, the Company announced that Mike Dugdale the current CFO, would retire from his post in September 2020. Sarah Mace has been appointed as the interim CFO and would resume office from September 2020.
FY2019 Annual results (ended 31 December 2019) as reported on 21 April 2020
The Company reported revenue of £70.9 million in FY19, which increased by 28 percent year on year from £55.3 million in FY18. The adjusted EBITDA and profit before tax for the reported period were £11.0 million and £10.5 million, respectively. The Insurance segment reported revenue of £30.2 million, whereas IT salary sacrifice and SaaS generated revenue of £18.7 million and £21.4 million, respectively. As on 31 December 2019, Personal Group had cash of £17.0 million and the balance sheet remained debt-free.
Segmental Performance Analysis in FY2019
(Source: Company Website)
Share Price Performance Analysis
1-Year Chart as on August-4-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Personal Group Holdings PLC's shares were trading at GBX 297.70 up by about 0.24 percent from the previous closing price (as on 4 August 2020 before the market close at 9:50 AM GMT+1). Stock 52-week High and Low were GBX 407.20 and GBX 207.53, respectively. The Company had a market capitalization of £92.72 million.
Business Outlook
The lower new insurance sales in H1 FY20 would impact the premiums in H2 FY20 and FY21. The Company was unable to generate new sales during the lockdown, and thus it is adopting a flexible business model to continue sales through different channels in the event of a future lockdown. The new client sales for the SaaS product halted during the lockdown, although they have started to resume recently with active discussion with a few potential clients.
Helios Underwriting PLC (LON:HUW) – A capacity portfolio of £69.1 million at the end of FY2019
Helios Underwriting PLC is a UK domiciled investment company that has exposure to Lloyd's of London. Lloyd's is an insurance market of London and the members operate as syndicates. The Company's strategy is to acquire the syndicates on the Lloyd's, and it has acquired close to 36 companies. Helios Underwriting is listed on the FTSE AIM All-Share index.
FY2019 Annual results (ended 31 December 2019) as reported on 29 May 2020
In FY19, the Company generated an underwriting profit of £3.2 million, that was £0.7 million a year ago. The total other income was £2.5 million, whereas the total costs were £3.3 million for the reported period. Helios earned a profit before tax of £4.0 million that translated to basic earnings per share of 25.64 pence. The adjusted net asset value was £36.0 million, and an adjusted net asset value per share was £2.06. Helios's capacity portfolio at the end of FY19 was £69.1 million, including post balance sheet acquisition of subsidiaries, and the value of the capacity fund was £26.4 million. In FY19, the capacity portfolio and the value of the capacity increased by 31 percent and 28 percent year on year, respectively. In FY19, in order to fulfil the economic capital requirement, the Company had an underwriting capital of £42.0 million that included reinsurance panel of £26.7 million, Helios own funds of £13.5 million and Group letter of credit of £1.8 million. The Company also had a revolving loan facility of £4.0 million. The Company suspended the final dividend payout for FY19 although the Company paid a dividend of 3 pence per share during FY19. Helios acquired four Limited Liability Vehicle (LLV) in 2019 at a total cost of £10.0 million and has acquired one LLV in 2020. The Company bought a stop-loss contract to provide resistance to the losses.
FY2019 Performance Indicators
(Source: Company Website)
Share Price Performance Analysis
1-Year Chart as on August-4-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Helios Underwriting PLC's shares last trading price was GBX 99.00 (as on 4 August 2020 before the market close at 9:50 AM GMT+1). Stock 52-week High and Low were GBX 139.84 and GBX 70.00, respectively. The Company had a market capitalization of £17.80 million.
Business Outlook
The Company is confident about the diverse business portfolio, and it is poised to sustain the current pandemic. However, the current economic situation would weigh down on the insurance and reinsurance sector, and it could benefit from the higher premiums. The Company is focused on acquiring LLVs with quality syndicates, and it divests the weaker syndicates in the acquired portfolio. The Company highlighted that it was too early to assess the economic impact of the Covid-19 on Lloyd's market.
