GROUP CHIEF EXECUTIVE'S STATEMENT

I am pleased to report on this positive set of results delivering strong growth across the core Affordable Insurance and Benefits Platform offerings. The financial performance speaks to the quality of both the offerings and the team, whose efforts have driven a record year of insurance sales, and an increased proportion of recurring revenue, despite a testing trading environment.

Since assuming the role of Chief Executive, I have focused on invigorating the energy of the organisation, our customer focus, and the pace at which we deliver our services, preparing the business to build upon its solid foundations. As part of this process, I initiated an external review of the Group's product offering, market position and market opportunity to inform the strategic direction of the business and position Personal Group to drive sustainable long-term growth.

The first phase of this review, which concluded in December 2023, included market mapping and insight into the size and segmentation of the UK employee benefits landscape applicable to our core insurance offering. This confirmed the ongoing relevance of our insurance products and emphasised the industries which present the largest opportunities to the Group. The market mapping also confirmed that Personal Group has a clear competitive advantage through being the only 'face to face' sales-led offering in its area of the market and that there remains a large addressable market opportunity. Informed by the research, we have developed a targeted marketing strategy aimed at specific customer types and the most appropriate market segments for our insurance offerings being, in the first instance, construction, transport and production.

The second phase of the review is nearing completion and aims to determine the Group's opportunity in benefits platform provision and assess success factors across various market segments.

The initial results of the review have highlighted that the Group has a strong, repeatable business and currently operates in the right segments with clear options for strategic growth available. As the detailed outputs of the review are digested and assessed, they will serve to inform and provide focus to our detailed Group strategy update later in the year, which will also consider the most effective way to optimise performance in the Pay and Reward and Let's Connect segments.

Sales and Operational Review

We made good progress in the year under each of our three strategic areas of focus: driving our Affordable Insurance sales, transforming reward & benefits offerings, and accelerating our SME offering.

Affordable Insurance

Key achievements in 2023 were the improved delivery and productivity of the face-to-face sales team, helping to deliver a record year for new annualised insurance sales of £11.8m, up 24% from 2022. We continued to reduce the time spent working away from home for the sales team, to improve their wellbeing, and implemented new tools and operational enhancements to support FCA Customer Duty and ensure better outcomes for customers. £6.8m of claims payments were made to support policyholders in 2023 (2022: £6.4m) and customer retention rates remained high, demonstrating the value employees place on the Group's product offering. As a result of all the above, the insurance book increased from £28.0m in 2022 to £31.6m in Annualised Premium Income at the end of 2023, setting us up for further success in 2024.

In 2024 we will increase our focus on specific sectors identified as offering the largest opportunities for growth, continue to review our insurance product offering, progress opportunities to partner with other benefits providers to promote their benefits platforms alongside the sale of insurance and explore opportunities to partner with third party providers to offer alternative products that would benefit our growing client base.

Transforming Reward & Benefits

The internal launch of the next generation of our benefits platform, Hapi 2.0, and subsequent launch with our first new client in January 2024 marks a key highlight for the year. The new and enhanced platform, now with improved Reward and Recognition functionality, navigation, search capabilities, onboarding processes, and modularisation for tiered and self-serve offers, sets the service up well for sustained success. We won 31 new Benefits clients in 2023 (2022: 22) which helped to drive growth in Hapi related annual recurring revenue up 29% to £2.5m (2022: £2.0m). We also secured a place on the Crown Commercial Framework, providing a new avenue for customer acquisition in 2024.

Our focus for 2024 will be the external launch of the full functionality of Hapi 2.0 alongside existing client migration. In addition, we anticipate that the development of a new 'career pathways' product, for the Pay & Reward segment, will provide an opportunity for upsell to our customer base and increase the attractiveness of our offering.

Contribution from Pay & Reward, comprising Innecto and QCG, remained steady in the year with ARR of £0.6m, despite market demand being affected by wider economic challenges. The combination of the Innecto and QCG consultancies was completed in the year, aiming to create operational efficiencies.

As previously announced, Other Owned Benefits (Let's Connect) had a challenging period with the cessation of a long-term scheme with a major client in March 2023. Notwithstanding, the business performed resiliently and performance was in line with management's expectations.

SME Offering

We have an SME version of Hapi pre-populated, with key benefits, taken to market through our partnership with Sage as Sage Employee Benefits (SEB) which now serves around 4,100 clients and 60,000 employees. Areas of focus in 2023 were the improved onboarding journey for both account managed and digitally onboarded clients, the improvement of the end-to-end customer journey to improve lifetime value of clients going onto the platform, and the preparation for launch of SEB 2.0 in 2024. SEB 2.0 is based on Hapi 2.0 and aims to increase the attractiveness of the offering and accelerate uptake, with a new look and feel. We saw steady growth in SEB annual recurring revenues in the year, to £3.7m (2022: £3.0m).

In early 2024, we began working alongside Sage to migrate all clients onto SEB 2.0 with this expected to conclude in the coming months. We are continuing to develop a premium version of SEB with a wider range of benefits to attract businesses at the larger end of the SME market and progress conversations with prospective partners in different markets to increase the number of routes to the SME market.

Organisational change

In addition to the Group's market review, we conducted a review of our internal operations with a view to enhancing visibility across the organisation on delivery against our strategy and to drive profitability. We are in the process of implementing more granular operational KPIs, particularly across our sales processes and pipeline, giving greater visibility into the effectiveness of our lead conversions and opportunities for process improvements.

As part of our preparation for growth at pace, we have streamlined the operations of the business, creating a new senior leadership structure. This has included the hiring, post-period end, of a new Chief Operations Officer, with our current Chief Operations Officer moving into a tech transformation role, and a new interim Chief People Officer, to ensure the success of this vital piece of our strategy.  

Future outlook

I am confident that Personal Group has solid foundations from which we can deliver an accelerated rate of growth. Increasing recurring revenues, a compelling offering, powerful partnerships, and a well-run and expert sales team that delivers strong results, combine to create an exciting opportunity for future growth.

Through completion of the market review, we have validated the strength of our insurance offering and benefits platform while gaining a fuller understanding of the large market opportunity that exists for Personal Group.  Equipped with the insight gleaned from the market review and the strengthened team, I am excited by the fantastic opportunities that lie ahead for Personal Group.

Paula Constant

Group Chief Executive

19 March 2024

CHIEF FINANCIAL OFFICER'S STATEMENT

Group revenue

Group revenue remained stable at £49.7m (2022: £49.8m). With the exception of the Other Owned Benefits division (Let's Connect), growth was seen across all areas of the business.

Our insurance segment continues to grow as anticipated and as at 31 December 2023 we had an insurance book of £31.6m Annualised Premium Income (API) (2022 £28.0m), the majority of which is renewable on weekly or monthly rolling contracts.

External income from our internally developed Benefits Platform increased by 28% year on year, following on from the 45% 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 was moderate as economic challenges continued to impact the market demand. ARR across all the Group's digital platforms now stands at £6.1m (2022: £5.6m).

Sales of technology and other products to employers as part of their employee benefit provision through the Group's subsidiary, Let's Connect, fell 34% year on year, in line with expectation, reflecting the loss of its largest customer in Q1.

Other income increased to £1.0m (2022: £0.4m) as a result of increased rates on the cash deposits held by the insurance subsidiaries.

The Group continues to benefit from an increasing proportion of recurring revenues, providing high levels of visibility for 2024.

Adjusted EBITDA*

Adjusted EBITDA* for the year increased to £8.1m (2022: £6.0m) reflecting the growth in contribution from the higher margin insurance segment, in particular where underwriting profit continued to grow in line with the size of the insurance book.

The increased EBITDA in the period has been driven by continued contribution growth (up 33% to £3.8m) from the Benefits Platform, both through new Hapi platform sales and the growth in size of the white labelled Sage Employee Benefits. We saw a stable contribution from our Pay & Reward businesses, however, the contribution from Other Owned Benefits fell in line with the loss in top line revenue (down 56% to 0.4m). Outside of the core segments, Group administration and central costs increased year on year reflecting the investment in the Group's sales and marketing function alongside inflationary staff and operating expenses.

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.

Accounting changes

IFRS 17

During the year the Group adopted IFRS 17 which has had a significant impact on the accounting for insurance contracts but mainly from a presentation perspective as can be seen in Note 5.

Restated Revenue

Furthermore, the Group reviewed the application of its accounting policy and now treats all vouchers as agency, showing only the voucher margin and not income as previously stated, this is discussed further in Note 5.

Profit before and after tax

Statutory profit before tax for the year was £5.3m (2022: loss of £6.8m), which includes £0.6m of costs associated with restructuring the organisation following the change of Chief Executive. The 2022 loss before tax reflected a £10.6m impairment charge relating to the goodwill balance associated with Let's Connect, excluding the non-cash impairment charge the profit before tax for 2022 was £3.8m. The tax charge for the year was £1.0m (2022: £0.5m), and profit after tax for the year £4.3m (2022: loss of £7.3m).

EPS

Resulting earnings per share were 13.8p (2022: loss of 23.2p), excluding the non-cash impairment charge, earnings per share would have been 10.6p in 2022. The calculation is detailed in Note 3.

Dividend

The Board has recommended a final ordinary dividend of 5.85 pence per share, making a total ordinary dividend for 2023 of 11.7 pence per share. This will be paid on 8 May 2024 to members on the register as at 2 April 2024 (the record date). Shares will be marked ex-dividend on 28 March 2024. The Board has considered the level of dividend in the context of 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 2023 the Group's balance sheet remained strong, with cash and deposits of £20.1m (2022: £18.7m) and no debt. The Group's main underwriting subsidiary, Personal Assurance Plc (PA), continues to maintain a conservative solvency ratio of 272% (unaudited), with a £6.8m surplus over its Solvency Capital Requirement of £4.0m. 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 484% (unaudited), under its own regime.

Segmental results

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

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 and 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.

Affordable insurance

Insurance revenue from the Group's core insurance business increased by £3.3m to £28.7m (2022: £25.4m).

The continued opportunity for our face-to-face sales activity, driven by employers wishing to engage more effectively with their workforce, has provided the opportunity to continue to expand the sales team and grow the insurance book back to levels seen pre-COVID. A record £11.8m of new insurance sales were written during the year (2022: £9.5m) which, together with continued strong retention rates for existing policyholders, meant that as at 31 December 2023 we have £31.6m (2022: £28.0m) of Annualised Premium Income, the majority of which is renewable on weekly or monthly rolling contracts.

Claims ratios remained stable at 27.0% (2022: 27.7%), as the NHS continued to address long waiting lists.

Adjusted EBITDA contribution of £11.2m for the year (2022: £9.0m), reflects the increased underlying profit arising from increased revenue alongside the stabilisation of acquisition costs.

Benefits platform

Revenue from digital platform subscriptions and commissions from third party benefit suppliers which sit on the benefits platform rose 28% to £6.7m in 2023 (2022: £5.2m).

Subscriptions for our enterprise platform, Hapi, continued to grow throughout 2023 with ARR on the platform increasing to £2.5m (2022: £2.0m) during the course of the year with 31 new clients onboarded.

Our expansion into the SME market also continued to grow, with Sage Employee Benefits, the Group's SME proposition being taken to market through its partner Sage. ARR increased to £3.7m at the end of the year (2022: £3.0m).

As at 31 December 2023 the ARR from Benefits Platform subscriptions across all channels stood at £6.1m (2022: £5.0m).

Adjusted EBITDA contribution of £3.8m (2022: £2.9m) increased in line with increased revenue but also demonstrates the increased margins available as this area of the business scales up.

Pay & Reward

Whilst economic challenges impacted market demand, revenue from consultancy income and digital subscription income from proprietary HR solutions increased to £2.2m (2022: £2.0m). This reflected a full year's contribution from Innecto and QCG. ARR from digital products remained stable and stood at £0.6m on 31 December (2022: £0.5m)

Towards the end of the year, the operational capabilities of the two entities were merged which is anticipated to lead to efficiencies and improved productivity in 2024.

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 £11.1m (2022: £16.8m) following the loss of a key client in March 2023. Increased average order values, alongside margin improvements and operational downsizing helped mitigate the impact on its EBITDA contribution of £0.4m (2022: £0.7m).

Group administration expenses and central costs

Group administration and central costs of £8.7m (2022: £7.1m) reflects an investment in the year building the sales and marketing function to accommodate for future growth alongside inflationary cost increases associated with utilities, Group insurances and other services. Expenses for the year also reflect additional costs in relation to the change of Chief Executive during the year.

Sarah Mace

Chief Financial Officer
19 March 2024