CEO STATEMENT

I have a great deal of satisfaction on looking back on a pivotal year for Personal Group. In 2022, we came out of the pandemic and built on 2021's work in the restarting of the engine of the business. We have delivered a strong year of new business development, insurance book growth and expansion in our key market focus of Small and Medium Business.

In a year when many businesses have issued profit warnings, political turbulence has spilled over into financial markets and inflation has deeply affected many people in the UK, I am very proud of how my team have been rebuilding the business with double digit growth in many key areas of our book of recurring revenue. Annualised Premium Income ends the year 15% ahead of last year's close, new client numbers are up 17% and we have hit our Sage channel target of 50,000 paying employees from 2,800 companies.

Sales and Operational Review

Affordable insurance

2022 was always going to be a year of lower profit, primarily because our historical normal investment in our field sales insurance team has been set against lower premium values, as a result of the pandemic. Slightly higher claims ratios this year were expected against previous years of low NHS activity but have remained stable. However, this has been a year of bests: best annual individual performance ever by a field sales colleague, best ever month in November 2022, and best ever December in 2022. Our new insurance sales of £9.5m were up 157% on 2021 and at the highest level seen since 2018. These achievements are set against a backdrop of industrial action and staff shortages in our clients, which means our site visits have to be professional and credible in building employee engagement for our clients, as well as offering key insurances for our policyholders. Over 50% of client employees that we present our insurance policies to choose to buy our insurances on the day we meet them which emphasises the value perceived in our products. The majority of our policyholders elect to pay through their payroll on a weekly or monthly basis, these policies typically have a lifetime value of around five years - so business written in 2022 builds momentum for the future.

Benefits platform

Our new business and account management teams for Enterprise clients have also had success this year. Our overall client retention rate remains extremely high for the benefits business where we retained 164 clients in year (95% retention) and added 22 new ones.

The five-year deal signed with Sage in February highlights the value that both partners place on the relationship, with us hitting our target of 50,000 paying employees by the end of 2022. This shows growth of +87% from £1.6m ARR end 2021 to £3.0m ARR end 2022. We are now actively seeking other external partners, to widen our reach, and build further ARR streams.

Pay and reward

Since the acquisition of QCG in July 2022, the Pay and Reward division has continued to develop, with cross selling of Innecto Digital and Hapi platforms, and bringing on of new clients. The division now serves 174 active clients, although as is the nature of consultancy, these clients cyclically move on, as projects are completed. We have been pleased with the retention of Innecto Digital products, covering Job Evaluation, Pay Benchmarking and Pay Review software. Our blended retention rate is 87% against a target of 75%, with 12 new clients added.

Other owned benefits: Let's Connect

Let's Connect has experienced a challenging year: the backdrop of industrial unrest in their biggest client affected our marketing campaigns as well as the ability of striking workers to afford new technology items.   We have recognised that this will impact this area of the business going forwards and accordingly have determined to take a prudent approach and fully impaired the value of goodwill associated with it as a result of its acquisition in 2014. Notwithstanding this, other Let's Connect clients have performed well, emphasising the cost-of-living benefit for employees in being able to spread the cost of technology purchases, without the direct interest charges and credit checks that they face on the High Street. Some stock shortages have affected sales in the year, but this has significantly improved in comparison to the last couple of years.

Future outlook

Our business is now significantly stronger and more diversified than 2019, our last year of trading pre-pandemic. Previously the business mainly operated in our heartlands of lower wage, hourly-paid employees; food production, transport, care homes, warehousing and distribution. Whilst our core business plays a very important role in our future, as we set out in our strategic roadmap in 2019, we have expanded our reach to different sectors of the economy - SMEs, the public and ex-public sectors, and salaried employees in the private sector. This widens the Group's platform and market opportunity for growth in the future, and our investment in sales and marketing and technology is now bearing fruit in the number of new clients we are engaging with and delivering for. Underlying organic growth in 2022 will lead to increased EBITDA in 2023 and beyond, as our business model is mainly based on recurring contracts, whether with SMEs, insurance policyholders or our major Enterprise clients.

We also continue to search for acquisitive growth that will increase shareholder value.  Alongside the small acquisition made in-year, we have continued to review selected acquisition opportunities against a clearly defined criteria of identifying businesses that would be capable of adding complementary, earnings-accretive non-organic growth.

Whilst we have planned for 2023 to be another difficult year for the economy, trading in 2023 has started positively and we are confident our offer resonates with our target markets, and we will continue to see growth over the forthcoming years.

Deborah Frost

Group Chief Executive

27 March 2023

CFO STATEMENT

Group revenue

Group revenue for the year increased 16% to £86.7m (2021: £74.5m) reflecting growth across all areas of the business, with the exception of the Other Owned Benefits division (Let's Connect).

With COVID-19 lockdowns, which impacted our ability to carry out our traditional face-to-face selling of insurance, firmly behind us, our insurance segment returned to growth as anticipated and as at 31 December 2022 we have an insurance book of £28.0m Annualised Premium Income (API) (31 December 2021 £24.4m), the majority of which is renewable on weekly or monthly rolling contracts.

External income from our internally developed Benefits Platform increased by over 45% year on year, following on from the 40% growth seen in the previous year. This growth is a result of our continued expansion into the SME sector through our partnership with Sage and growth in our own HAPI platform sales. Growth in our pay and reward segment reflected the acquisition of Quintige Consulting Group (QCG) at the start of the second half of the year but also growth in consultancy income and digital subscription income in Innecto. Annualised Recurring Revenue (ARR) across all the Group's digital platforms now stands at £5.6m (2021: £3.6m).

Sales of technology and other products to employers as part of their employee benefit provision through the Group's subsidiary, Let's Connect, fell short of 2021, primarily as a result of industrial action in its key client impacting its peak trading period in Q4.

Income from voucher resale through the benefits platform also grew significantly in the year and, whilst this predominantly represents pass-through revenue, it does continue to demonstrate the value that our Benefits Platform provision can bring to our clients and their employees.

Adjusted EBITDA*

Adjusted EBITDA* for the year was £6.0m (2021: £6.1m).  Adjusted EBITDA remained in line with last year but reflected a changing mix in contribution from the various business areas.

As anticipated, we saw a reduced contribution from the insurance business, as we invested heavily in the acquisition costs of the field sales team as it re-established itself to pre-Covid levels. Offsetting this we saw increased contribution from both our Pay & Reward and Benefits Platform businesses in line with their increased revenues, with the contribution from Other Owned Benefits remaining broadly flat year on year. Outside of the core segments, group administration and central costs reduced in line with a return to more normalised levels of sales and marketing spend.

We believe adjusted EBITDA* remains the most appropriate measure of performance for our business, reflecting the underlying profitability of the business and removing the impact of one-off items arising from past acquisitions on the Group's reported profit before tax. The definition remains unchanged from previous years.

Loss before and after tax

Statutory loss before tax for the year was £6.8m (2021: profit of £4.3m). This reflects an operating profit of £3.8m together with a £10.6m impairment charge relating to the goodwill balance associated with Lets Connect. Despite the profitability of Lets Connect being maintained at a similar level to 2021, the operating landscape at its key client has changed and the current salary sacrifice technology scheme they run is no longer appropriate for them in its current format. As a result the future revenue stream for this area of the business has significantly changed and an impairment charge has been registered. The tax charge for the year was £0.5m (2021: £0.7m), and loss after tax for the year £7.3m (2021: profit of £3.6m).

Excluding the non-cash impairment charge the profit before tax is £3.8m.

EPS

Resulting earnings per share was (23.1p) (2021: 11.5p); excluding the non-cash impairment charge this would have been 10.6p.

Dividend

The Board has recommended a final ordinary dividend of 5.3 pence per share, making a total ordinary dividend for 2022 of 10.6 pence per share. The final ordinary dividend will be paid on 18 May 2023 to members on the register as at 11 April 2023 (the record date). Shares will be marked ex-dividend on 6 April 2023. The last day for elections will be on 25 April 2023. The Board has considered the level of dividend in the context of the non-cash impairment of goodwill, alongside the underlying growth seen during the year and the continued confidence in the Group's business model and prospects.

Balance sheet

As at 31 December 2022 the Group's balance sheet remained strong, with cash and deposits of £18.7m (2021: £22.9m) and no debt. This reduction reflects both the c£1m purchase of QCG and a £1.5m equity investment (valued at £1.3m within Financial Investments) alongside investment of c£1m in our proprietary software. The Group's main underwriting subsidiary, Personal Assurance Plc (PA), continues to maintain a conservative solvency ratio of 333% (unaudited), with a £8.1m surplus over its Solvency Capital Requirement of £3.5m. The Company has consistently maintained a prudent position in relation to its Solvency II requirement. Personal Assurance (Guernsey) Limited, the Group's subsidiary which underwrites the death benefit policy, also maintained a healthy solvency ratio of 312% (unaudited), under its own regime.

Segmental Results (see note 1)

The Group reports across four core segments as detailed in the table below.

For each of the segments, the adjusted EBITDA* contribution comprises the gross profit of that segment together with any costs associated directly with the operation of that segment. Sales and marketing costs and other central costs that are not directly attributable to a segment, such as Finance, HR, depreciation, amortisation and Group Board expenses are not allocated to a segment and are shown separately as 'Group Admin & Central Costs'.

We believe this presentation provides transparency to enable the impact of top line growth on adjusted EBITDA* contribution for each area of the business to be better understood.

Pay & Reward: Innecto

Innecto's strong performance in 2021 continued into 2022, with consultancy income up 34% as the battle for talent continued and demand from HRDs looking to retain and attract their employees increased. Digital subscription income from its proprietary HR solutions also increased by 19% on the previous year. Annualised Recurring Revenue on these products stood at £0.5m as at 31 December 2022 (2021: £0.4m).

The acquisition of QCG in July 2022 also added to the Group's Pay & Reward offering with the expectations set out at acquisition achieved in the second half of the year. Whilst operating in a similar market to Innecto, QCG operates in different market sectors, has a strong presence in pay surveys and provides opportunities to cross sell across both client bases.

Collectively this division achieved revenue of £2.0m (2021: £1.2m) and EBITDA of £0.5m (2021: £0.3m) of which QCG contributed £0.4m of revenue and £0.1m of EBITDA post acquisition.

Benefits Platform

Revenue from digital platform subscriptions and commissions from third party benefit suppliers which sit on the benefits platform rose to £4.8m in 2022 (2021: £3.3m).

Subscriptions for our enterprise platform, Hapi, gained momentum in 2022 with ARR on the platform increasing by 29% to £2.0m (2021: £1.6m) during the course of the year and are expected to benefit further in 2023 with the refined and refreshed Hapi 2.0.

Our expansion into the SME market also continued to grow at pace, with Sage Employee Benefits, the Group's SME proposition being taken to market through its partner Sage. Having signed a new five-year contract in February 2022 and with an updated version of the platform to be launched in 2023, we are anticipating further growth in its ARR which stood at £3.0m at the end of the year (2021: £1.6m).

As at 31 December 2022 the ARR from Benefits Platform subscriptions across all channels stood at £5.0m (2021: £3.2m).

Adjusted EBITDA contribution of £2.9m (2021: £2.1m) increased in line with increased revenue but also demonstrates the increased margins available as this area of the business scales up.

Affordable Insurance

Premium income from the Group's core insurance business increased by £0.6m to £25.3m (2021: £24.7m).

The strong opportunity for our face-to-face sales activity, driven by employers wishing to re-engage with their workforce post COVID-19, has given opportunity to rebuild the sales team and grow the insurance book back towards levels seen pre-COVID. £9.5m of new insurance sales were written during the year (2021: £3.7m) which together with continued strong retention rates for existing policyholders meant that as at 31 December 2022 we have £28.0m (2021: £24.4m) of Annualised Premium Income, the majority of which are renewable on weekly or monthly rolling contracts.

Claims ratios for the year increased to 27.3% (2021: 24.5%) higher than historic norms as hospital admittances and visits increased post COVID-19 lockdowns. As the NHS starts to address their long waiting lists, we anticipate this continuing in the short to medium term.

Adjusted EBITDA contribution of £9.0m for the year (2021: £11.0m), reflects the increased premiums and claims costs but also the increased acquisition costs of the field sales team as we invested heavily to re-establish it at pre-Covid levels. The benefit of the related new insurance sales will be seen in future years.

Other Owned Benefits: Let's Connect

Let's Connect, which provides technology and other products to employers as part of their employee benefit provision, saw revenues decrease to £16.8m (2021: £18.2m), although margin improvements helped mitigate the impact on its EBITDA contribution of £0.7m (2021: £0.7m). The industrial action which took place at its key client in the second half of the year impacted its peak trading period in Q4 and has led to full impairment of the £10.6m goodwill balance associated with its acquisition at group level.

Group Administration Expenses and Central Costs

Group administration and central costs of £7.1m (2021: £8.2m) reflected a return to a more normalised level of sales and marketing spend post the additional investment made in 2021 alongside a reduced level of bonus costs.

Sarah Mace

Chief Financial Officer
27 March 2023