Employee services platform Personal Group (PGH:AIM) releases figures for 2016 which despite being down on 2015, exceed analysts’ expectations.
The company provides a range of employee benefit, insurance and financial services.
The firm’s chief executive officer Mark Scanlon put the firm’s 7.6% dip in revenues to £53.6m down to a HMRC consultation on changing salary sacrifice tax rules last August, which ‘couldn’t have come at a worse time’ according to Scanlon.
This is because the firm’s busiest period is from September to December and its clients were hesitant to engage Personal Group’s services until the issue was resolved.
The market seems pleased by the latest results as its share price has today increased by more than 8% to 296p.
The firm has now fully integrated its technology platform ‘Hapi’, which brings together Personal Group and third party employee benefit products using a single platform.
This project has been a long time in the making but is hoped to drive through efficiency in the firm and benefit the profit line.
Take the bait
Given Personal Group’s share price nose dive (down nearly 50% in a year), investors may wish to reappraise the stock following the latest results.
Its book of business in its insurance division is equal to the firm’s £83.8m market capitalisation according to Scanlon. For this reason, he says the firm is undervalued.
James Fletcher, analyst at Cenkos, agrees. He says ‘weakness in the share price appears overdone given the insurance book’s underlying resilience and high quality of earnings’.
He believes the stock should appeal to value and income investors.
Personal Group is forecast by Cenkos to pay 22.6p in dividends for the 2017 financial year. That equates to a 7.7% prospective dividend yield based on the current share price.
The tax rules that impacted the firm last year have now been addressed in the Finance Bill so clients now know where they stand so it’s unlikely the firm will get stung again by the taxman.
