XPS Pensions Group plc Revenue for H1 2019 of £52.2m, up 113%

Ben Bramhall, co-CEO of XPS Pensions Group plc, commented:

“This is the first reporting period that includes the Punter Southall acquisition for the duration of the period. The combined business has done well following the merger, with several large new clients and project wins occurring during H1 2019, as well as the continued rollout of our market-leading technology offering ‘Radar’. The successful integration of the two businesses has been underpinned by the fantastic attitude of the XPS employees, and I am delighted to announce that a recent survey revealed 85% of staff agreed the Company is ‘a good company to work for’. We continue to be encouraged as a management team by the seamless combination of the two businesses, and we are excited by the potential that XPS is already showing as an integrated Company.”

Paul Cuff, co-CEO of XPS Pensions Group plc, commented:

“The last six months has been a very important period for the Company with the team working extremely hard to lay down the necessary groundwork from which the integrated business can prosper. We continue to work hard towards our clear strategy of building the pre-eminent pensions consultancy in the industry, and the rebrand to ‘XPS Pensions Group’ during H1 2019 was a significant step in that direction. We are seeing significant growth opportunities in the pensions industry driven by an increasingly positive regulatory background around issues such as GMP Equalisation and the ongoing CMA review into investment consulting. Against the backdrop of these difficult and complex issues, our clients continue to rely on us for expert advice. We are delighted to see that the enhanced capabilities of the integrated company have already resulted in a number of impressive new client wins, and we remain confident as we move into H2 2019 of the exciting new business opportunities available in this current regulatory environment.”

XPS Pensions Group plc (LON:XPS), the pensions actuarial, consulting and administration business, today announced its interim results for the six months ended 30 September 2018.

Financial Highlights:

· Revenue for H1 2019 of £52.2m (H1 2018: £24.5m), up 113%

· Increase driven by the combination of the Punter Southall businesses of £26.7m (H1 2018: £Nil) and underlying growth in the combined business, on a pro-forma basis, of 3.3%

· Operating profit reduced to £0.1m (H1 2018: £4.2m) driven by charges arising from the amortisation of intangible assets relating to the integration of the Punter Southall business

o Adjusted operating profit increased to £11.4m (H1 2018: £7.0m)

· Strong cash conversion in H1 2019 of 76% (H1 2018: 75%)

· Basic earnings per share (EPS) of 0.2p (H1 2018: 2.9p)

o Adjusted diluted EPS3 of 4.2p (H1 2018: 3.9p)

· Interim dividend of 2.3p (H1 2018: 2.1p) per share

1 H1 2018 comparatives adjusted for the exclusion of the Healthcare business (Revenue £0.8m), the sale of which completed on 30 September 2018. They also exclude the HRT business which was sold on 11 January 2018 (Revenue: £1.3m).

2 Adjusted numbers exclude exceptional items relating to the integration of the Punter Southall business of £0.8m, exceptional deal-related fees of £0.2m, acquisition amortisation of £8.0m and share based payment charges of £2.6m (H1 2018 adjusted numbers exclude exceptional items £0.4m, share based payment costs £0.7m, acquisition amortisation £1.7m).

3 Adjusted diluted earnings per share from continuing operations.

Operational Highlights:

The Group had a successful first half of the year from an operational perspective.
The Group launched a new brand to the market, developed a large range of new collateral to support it, ran high profile campaigns to establish the brand, and ran a successful client conference.
Internally the Group launched new reward and bonus arrangements across the group, put in place new reporting lines and implemented a new grading structure across staff. The Group developed corporate values which are now fully worked up and ready to be released.
The Group implemented a new account planning program, and made strong progress on the implementation of Radar across its client base.
The Group also made some key hires, both client facing and management, as it makes good progress to exiting the Transitional Services Agreement (TSA) with Punter Southall Group next year.
The Group achieved strong success on cultural alignment – no leavers among key staff, and staff survey in September 2018 showed 85% of staff agreed that ‘XPS is a good company to work for’.
The Group has experienced good client retention, and positive new business experience, with 10 new annuity wins against 5 losses in the period to 30 September 2018, and has been successful in cross-selling of projects into Punter Southall client base, including a large trivial commutation exercise.
The acquisition of the Kier Pensions Administration business, announced on 18 September 2018, completed on 31 October 2018. This was an accretive acquisition that opens up wider strategic opportunities in the public sector.
The sale of the Healthcare business, announced on 18 September 2018 has also completed, enabling a continued focus on our core market of pensions.
The industry is undergoing increasing regulatory change that clients will need support with: for example the CMA review into investment consulting and Guaranteed Minimum Pensions equalisation (“GMP Equalisation”).

Outlook:

During H1 2018 a significant amount of time was spent on valuable integration activities relating to the Punter Southall acquisition which have left the Group well positioned for the future, but which suppressed revenue growth in H1. With new business wins coming on stream in H2 2018, integration well progressed, and with a favourable market backdrop, the Board looks forward to H2 with confidence that revenue growth rates will increase towards long term expectations and is confident that full year profit figures will be broadly in line with expectations.