REG - Anexo Group PLC - Final Results
10/05/2023 07:00
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RNS Number : 8633Y Anexo Group PLC 10 May 2023
10 May 2023
Anexo Group plc
('Anexo' or the 'Group')
Final Results
"Continuing revenue growth laying the groundwork for a drive towards cash"
Anexo Group plc (AIM: ANX), the specialist integrated credit hire and legal
services provider, announces its final results for the year ended 31 December
2022 (the 'period' or 'FY2022).
Financial Highlights 2022 2021 % movement
Total revenues (£'000s) 138,329 118,237 +17.0%
Operating profit (£'000s) 30,416 27,350 +11.2%
Adjusted(1) operating profit before exceptional items (£'000s) 30,241 27,728 +9.0%
Adjusted(1) operating profit margin (%) 21.9 23.5 -6.8%
Profit before tax (£'000s) 24,093 23,746 1.5%
Adjusted(1) profit before tax and exceptional items (£'000s) 23,918 24,124 -0.8%
Adjusted(2) basic EPS (pence) 16.5 16.8 -1.8%
Total dividend for the year (pence) 1.5 1.5 -
Equity attributable to the owners of the Company (£'000s) 146,347 128,224 +14.1%
Net cash used in operating activities (£'000s) -3,132 -7,307 +57.1%
Net debt balance (£'000s) 73,124 62,014 +17.9%
Note: The basis of preparation of the consolidated financial statements for
the current and previous year is set out in the Financial Review below.
1. Adjusted operating profit and profit before tax: excludes share‑based
payment charges in 2021 and 2022. A reconciliation to reported (IFRS) results
is included in the Financial Review below.
2. Adjusted EPS: adjusted PBT less tax at statutory rate divided by the
weighted number of shares in issue during the year.
Financial and Operational KPIs
· During 2022, we saw the continued improvement in a number
of key performance measures (detailed below). Financial performance has been
strong, despite continued delays in the court system. Opportunities within the
Credit Hire division remain strong, following the introduction of the Civil
Liabilities Act 2021 (which has caused a number of competitors to withdraw
from the market), but the Group has been careful to manage its fleet size
prudently, especially in the light of the lower than expected vehicle
contributions from the major insurance contract announced in November 2021.
Consequently, although the average number of vehicles on hire rose year on
year, the fleet numbers at the end of the year declined 26.9% to 1,730 (2021:
2,366). The number of new cases funded during the year also declined slightly,
falling 2.7% to 9,986 (2021: 10,265).
· Our ability to fund growth in our hire business has been
supported by ongoing investment in legal staff. In 2022, the number of senior
fee earners grew by 6.8% to reach 253 at the year end. This investment has
driven increased cash collections in the year despite the challenges of the
reduced operation of the court system. Much of the investment will start to
impact during 2023 and beyond, reflecting both the shorter life cycle of a
typical housing disrepair claim and the time a new credit hire starter takes
to reach settlement maturity.
KPI's 2022 2021 % movement
Total revenues (£'000s) 138,329 118,237 +17.0%
Gross profit (£'000s) 105,776 91,481 +15.6%
Adjusted operating profit (£000's) 30,241 27,728 +9.1%
Adjusted operating profit margin (%) 21.9% 23.5% -6.8%
Vehicles on hire at the year-end (no) 1,730 2,366 -26.9%
Average vehicles on hire for the year (no) 1,892 1,834 +3.2%
Number of hire cases settled 7,922 6,187 +28.0%
Cash collections from settled cases (£'000s) 146,090 119,007 +22.8%
New cases funded (no) 9,986 10,265 -2.7%
Legal staff at the period end (no) 678 634 +6.9%
Average number of legal staff (no) 646 590 +9.5%
Total senior fee earners at period end (no) 253 237 +6.8%
Average senior fee earners (no) 240 201 +19.4%
Commenting on the Final Results, Alan Sellers, Executive Chairman of Anexo
Group plc, said:
"I am pleased to report a solid performance for FY2022. Revenues for the Group
have continued to grow across all divisions. As always, we have managed our
vehicle numbers carefully and funded those cases which we feel offer the best
opportunities for utilising working capital most efficiently. The success of
this strategy is reflected in the growth in cash collections driven by the
continued investment in high quality staff across our three legal services
offices.
We continue to be excited by the opportunities within Housing Disrepair, which
has more than doubled its case portfolio during the year, as well as fresh
activity on emissions claims. A focus on prudent case management will enable
the Group to concentrate on cash generation and a reduction in overall debt
during FY2023."
Analyst Briefing
A conference call for analysts will be held at 9.00am today, 10 May 2023. A
copy of the Final Results presentation is available at the Group's
website: https://www.anexo-group.com/ (https://www.anexo-group.com/)
For further enquiries:
Anexo Group plc +44 (0) 151 227 3008
www.anexo-group.com (http://www.anexo-group.com)
Alan Sellers, Executive Chairman
Gary Carrington, Interim Chief Financial Officer
Nick Dashwood Brown, Head of Investor Relations
WH Ireland Limited
(Nominated Adviser & Joint Broker)
Chris Hardie / Hugh Morgan/ Darshan Patel / Enzo Aliaj (Corporate) +44 (0) 20 7220 1666
Fraser Marshall / Harry Ansell (Broking) www.whirelandplc.com/capital-markets
(https://url.avanan.click/v2/___https:/eu-west
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Zeus
(Joint Broker) +44 (0) 20 3829 5000
David Foreman / Louisa Waddell (Investment Banking) www.zeuscapital.co.uk (http://www.arden-partners.co.uk)
Simon Johnson (Corporate Broking)
Notes to Editors:
Anexo is a specialist integrated credit hire and legal services provider. The
Group has created a unique business model by combining a direct capture Credit
Hire business with a wholly owned Legal Services firm. The integrated business
targets the impecunious not at fault motorist, referring to those who do not
have the financial means or access to a replacement vehicle.
Through its dedicated Credit Hire sales team and network of 1,100 plus active
introducers around the UK, Anexo provides customers with an end-to-end service
including the provision of Credit Hire vehicles, assistance with repair and
recovery, and claims management services. The Group's Legal Services division,
Bond Turner, provides the legal support to maximise the recovery of costs
through settlement or court action as well as the processing of any associated
personal injury claim.
The Group was admitted to trading on AIM in June 2018 with the ticker ANX. For
additional information please visit: www.anexo-group.com
(http://www.anexo-group.com/)
Chairman's Statement
On behalf of the Board, I am pleased to report a year of solid growth by the
Group in the face of ongoing nationwide challenges and delays. These results
reflect our continued focus on increasing cash settlements through the
expansion of our Legal Services division, while using our working capital to
maximum effect to ensure prudent management of our Credit Hire division. This
emphasis on balancing growth in cash collections against commitment of capital
on new cases has ensured significant increases in cash collections while
managing a decrease in the number of vehicles on the road during the course of
the year. We have continued to invest in our advocacy practice, particularly
through our Housing Disrepair Division, and we believe the division will
continue its growth to become a significant contributor to future revenues.
The Board continues its close monitoring of progress in our core divisions
while seeking to take advantage of the significant growth opportunities which
are presenting themselves and believes that the Group is well positioned for
further strong performance in 2023 and beyond.
Group Performance
Anexo Group plc has shown solid performance during 2022. Trading across all
our divisions has been resilient and we have managed the core business
prudently. As a result, Group revenues in 2022 increased by 17.0% to £138.3
million (2021: £118.2 million), gross profits increased by 15.6% from £91.5
million in 2021 to £105.8 million in 2022. Adjusted operating profit
increased by 9.1% to £30.2 million in 2022 at a margin of 21.9% (2021: £27.7
million at a margin of 23.5%). Adjusted profit before tax was broadly in line
year on year, reducing by 0.8% to £23.9 million (2021: £24.1 million),
reflecting the ongoing investment in staff and marketing costs within Bond
Turner. To provide a better guide to underlying business performance, adjusted
profit before tax excludes share-based payments credited/charged to profit and
loss.
During 2022, the Group continued to take advantage of the opportunities
offered by the withdrawal of a number of competitors from the market following
the introduction of the Civil Liabilities Act, which severely curtails the
ability of personal injury solicitors to recover substantial legal costs. This
has enabled the Group to attract new high quality staff and expand its
infrastructure to facilitate increased case settlements in the future, and as
a result cash collections for the Group increased by 22.8% to £146.1 million
in 2022 (2021: £119.0 million).
Credit Hire division
The Group's Credit Hire division, EDGE, saw prudent management during the year
to maximise efficient use of the existing fleet and to manage overall fleet
numbers to reflect revised expectations. Vehicle numbers in the first half of
the year remained very high, finishing H1 on a total of 1,947. The number of
vehicles on the road during the course of the year rose as a consequence by
3.2% to 1,892 (2021: 1,834). Due to the insolvency of Green Realisations 123
Limited (the underwriting subsidiary of MCE Insurance) and its resulting
impact on our major motorcycle insurance contract with MCE, the decision was
taken to reduce vehicle numbers substantially during the second half of the
year. Consequently, the year ended with a total of 1,730 vehicles on the road,
a decrease of 26.9% on the previous year (2021: 2,366), new cases funded fell
from 10,265 in 2021 to 9,986 in 2022, whilst the number of hire cases settled
increased by 28.0% from 6,187 in 2021 to 7,922 in 2022, supporting the
increase in cash collections noted above.
Revenues within the Credit Hire division grew by 4.8% % to £74.7 million
(2021: £71.3 million). The Group maintains its claims acceptance strategy of
deploying its resources into the most valuable claims, thereby growing claims
while preserving working capital. The Group monitors its fleet size
constantly, enabling it to respond quickly to changes in demand and strategic
priorities by deploying its vehicles appropriately with focus remaining firmly
on McAMS, the motorcycle division.
Legal Services division
Within the Group's Legal Services division, Bond Turner, has continued its
focus on cash collections and corresponding investment in staff to drive
increased case settlements. This strategy has had a significant positive
impact on financial performance. Revenues within the Legal Services division,
which strongly correlates to cash, increased by 35.6% to £63.6 million (2021:
£46.9 million). The continued growth of the Bolton office, which has now been
operational for four years, the opening of the Leeds office and the expansion
of the core office in Liverpool into new ancillary premises have provided
considerable opportunities for recruitment. During the pandemic, and following
the implementation of the Civil Liabilities Act 2021, the Group has seen a
number of personal injury solicitors withdrawing from the market and embarking
on a run-off strategy. Taking advantage of these recruitment opportunities has
resulted in staff numbers rising at all levels, with the ability to retrain
solicitors in the fields of credit hire and housing disrepair for suitable
placement within Bond Turner. At the end of December staff numbers within Bond
Turner stood at 678, a 6.9% increase on the 2021 figure of 634. Of these, a
total of 253 were senior fee earners, up 6.8% (2021: 237).
The average number of staff rose from 590 in 2021 (of which 201 were senior
fee earners) to 646 in 2022 (including 240 senior fee earners).
Mercedes Benz Emissions Case
Having undertaken our own internal research, which has been subsequently
corroborated by counsel, the Group has begun actively sourcing claims against
Mercedes Benz.
In total the Group invested £4.0 million in 2022 (2021: £0.9 million) in
both staffing and emission claims lead generation fees.
Housing Disrepair
The Housing Disrepair team has continued its rapid expansion during 2022.
During the year we successfully settled c.2,000 claims. At the end of the year
we had a portfolio of over c3,000 ongoing claims. Some £3.0 million was
invested in marketing costs in 2022, all of which was expensed as incurred,
and with further investment planned into 2023, the Housing Disrepair team has
proven its potential to be a significant contributor to Group earnings. We
look forward to further growth in this sector.
Dividends
The Board is pleased to propose a final dividend of 1.5p per share, which if
approved at the Annual General Meeting to be held on 15 June 2023 will be paid
on 23 June 2023 to those shareholders on the register at the close of business
on 26 May 2023. The shares will become ex-dividend on 25 May 2023 (2021: total
dividend 1.5p per share).
Corporate Governance
Anexo values corporate governance highly and the Board believes that effective
corporate governance is integral to the delivery of the Group's corporate
strategy, the generation of shareholder value and the safeguarding of our
shareholders' long-term interests.
As Chairman, I am responsible for the leadership of the Board and for ensuring
its effectiveness in all aspects of its role. The Board is responsible for
the Group's strategic development, monitoring and achievement of its business
objectives, oversight of risk and maintaining a system of effective corporate
governance. I will continue to draw upon my experience to help ensure that
the Board delivers maximum shareholder value.
Our employees and stakeholders
The strong performance of the Group reflects the dedication and quality of the
Group's employees. We rely on the skills, experience and commitment of our
team to drive the business forward. Their enthusiasm, innovation and
performance remain key assets of the Group and are vital to its future
success. On behalf of the Board, I would like to thank all of our employees,
customers, suppliers, business partners and shareholders for their continued
support over the last year.
Current Trading and Outlook
As our financial performance and KPI's have demonstrated, the Group has
continued to invest in its people, particularly within the Legal Services
division, supporting the growth we have reported in both the number of claims
settled and the underlying level of cash receipts for the Group. Whilst this
investment impacted our reported financial performance in 2022, the continued
growth in headcount supporting ever increasing case settlements will continue
to contribute to growth in 2023 and beyond.
Since year end the Board has conducted a Strategic Review and has concluded
that the interests of the Group and its shareholders will be best served by
concentrating on cash generation. To this end, the Group has continued its
targeted approach to claim acquisition, being highly focussed on costs and
ultimately cash flow and headroom within our facilities as well as continuing
to expand the number of claims accepted within Housing Disrepair division.
This approach has led to a reduction in the number of vehicles on the road
since the beginning of 2023 to a level which best facilitates management of
the Group's working capital requirements. As at 30 April 2023, the total
number of vehicles on the road stood at 1,431. The Group remains focussed on
quality claims, high service standards and high success rates.
The implementation of the Strategic Review means that profit growth for FY2023
is likely to be constrained but there will be an increased return on capital
employed. If appropriate, the Group intends to emphasise the progressive
dividend policy adopted at flotation. I continue to have great confidence in
the Group's strategy and look to the future with continued optimism.
Subsequent Events
On 8 March 2023, the High Court handed down a judgment granting a Group
Litigation Order. The application, brought by Leigh Day and Pogust Goodhead,
sought permission to launch a class action lawsuit against Mercedes Benz for
alleged subversion of key air pollution tests by using special software to
reduce emissions of nitrous oxides under test conditions.
Following the success of this application, on 14 April 2023 the Board
confirmed that the Group intends to pursue litigation against Mercedes and has
already secured over 12,000 claims through internal resources and via social
media. Proceedings have been issued against Mercedes and its affiliates in the
High Court, alongside more than 12,000 other claimants. The claim will be
formally served on the Defendants in early summer 2023.
The Judge at the hearing set out a timetable for the progress of the claim.
The Order setting out these measures needs to be confirmed by the President of
the High Court King's Bench Division, an event expected in spring 2023. A
steering committee has now been formed to represent the best interests of all
Claimants and Bond Turner is a member of the Claimant Solicitors' Committee.
The Board remains confident that these cases have the potential to be of
significant value to both the Claimants and the Group.
The claim we are litigating against VW is ongoing and we will provide further
updates in due course. On 14 April 2023, Mark Fryer resigned with immediate
effect as Chief Financial Officer and as a Director and left the Group. Gary
Carrington was appointed to the position of Interim Chief Financial Officer on
the same day and on 18 April 2023 was appointed a Director of the Group.
Annual General Meeting
The Group's Annual General Meeting will be held on 15 June 2023. The notice of
the Meeting accompanies this Annual Report and Accounts.
Alan Sellers
Executive Chairman
9 May 2023
Financial Review
Basis of Preparation
As previously reported, Anexo Group Plc was incorporated on 27 March 2018,
acquired its subsidiaries on 15 June 2018, and was admitted to AIM on 20 June
2018 (the 'IPO'). Further details are included within the accounting
policies.
To provide comparability across reporting periods, the results within this
Financial Review are presented on an "underlying" basis, adjusting for the
£0.4 million charge recorded for share-based payments in 2021 and the £0.2m
credit arising on vesting of the senior management incentive scheme for
share-based payments in 2022.
A reconciliation between adjusted and reported results is provided at the end
of this Financial Review. This Financial Review forms part of the Strategic
Report of the Group.
New Accounting Standards and Amendments
There have been a number of amendments to new UK IFRS accounting standards
applicable from 1 January 2022, none of which have resulted in adjustment to
the way in with the Group accounts or presents its financial information.
Revenue
In 2022 Anexo successfully increased revenues across both its divisions,
Credit Hire and Legal Services. Group revenues rose to £138.3 million, a
17.0% increase over the prior year (2022: £118.2 million). This growth is
particularly pleasing given the fact that the Group continued to face delays
in the court system during 2022 as a result of the COVID-19 pandemic.
During 2022 EDGE, the Credit Hire division, provided vehicles to 9,986
individuals (2021: 10,265), maintaining similar activity levels to those of
the prior year. Our strategy, as previously reported, remains to concentrate
investment within McAMS, the part of the business which supplies motorcycles.
With the number of claims remaining broadly consistent in 2022 with the prior
year, the strategy of deploying capital into the most valuable claims to the
Group resulted in revenues for the Credit Hire division increasing to £74.7
million in 2022, an increase of 4.8% over 2021 (£71.3 million).
With investment in staff continuing into 2022 following a significant level of
recruitment during COVID when other firms made redundancies and furloughed
staff, the Legal Services division reported significant revenue growth of
35.6%, with revenues rising from £46.9 million in 2021 to £63.6 million in
2022.
Expansion of headcount in Bond Turner across all its three offices has been
critical to increasing both revenues and cash settlements within the Group and
has provided a crucial platform for growth in both factors. During 2022, the
Group continued its recruitment campaign, targeting high-quality experienced
staff across all aspects of our business, credit hire, large loss, housing
disrepair and class action litigation.
By the end of December 2022, we employed 678 staff in Bond Turner (December
2021: 634), of which 253 (December 2021: 237) were senior fee earners, an
increase of 6.8%.
The Group has benefitted from continued investment in the Housing Disrepair
team during 2022, following the implementation of the Extension of the Homes
(Fitness for Human Habitation) Act 2019. Revenue increased significantly
(82%), rising from £5.1 million in 2021 to £9.3 million in 2022. This
revenue is reported within the data noted above for the Legal Services
Division.
Recruitment is scheduled to continue throughout 2023 across all our three
legal services office locations, particularly within the Housing Disrepair
Team.
Gross Profits
Gross profits are reported at £105.8 million (at a margin of 76.5%) in 2022,
increasing from £91.5 million in 2021 (at a margin of 77.4%). It should be
noted, that staffing costs within Bond Turner are reported within
Administrative Expenses. Consequently, gross profit within Bond Turner is in
effect being reported at 100%.
Operating Costs
Administrative expenses before exceptional items increased year-on-year,
reaching £65.0 million in 2022 (2021: £55.1 million), an increase of £9.9
million (18.0%). This reflects the continued investment in staffing costs
within Bond Turner to drive settlement of cases and cash collections. Staffing
costs for Bond Turner increased to £23.1 million (2021: £20.5 million), an
increase of £2.6 million (12.7%) which, together with significant investment
in staff within the Credit Hire division (2022: £15.0 million, 2021: £12.4
million) to ensure we maintained our high standards of service to an
increasing number of clients, accounted for a total increase of £5.2million.
Following the establishment of our Housing Disrepair team in late 2020, some
£3.0 million was invested in marketing costs in 2022 (2021: £1.8 million),
all of which has been expensed as incurred.
Profit Before Tax
Adjusted profit before tax reached £23.9 million in 2022, remaining broadly
in line with 2021, when it was reported at £24.1 million. This reflects the
investment in staff and marketing costs noted above. To provide a better guide
to underlying business performance, adjusted profit before tax excludes
share-based payments charged to profit and loss.
The GAAP measure of the profit before tax was £24.1 million in 2022 (2021:
£23.7 million), reflecting the non-cash share-based payment credit of £0.2
million in that year (2021: charge of £0.4 million). Where we have provided
adjusted figures, they are after the add-back of this item and a
reconciliation of the adjusted and reported results is included on page 18 of
the Annual Report.
Finance Costs
Finance costs reached £6.3 million in 2022, increasing from £3.6 million in
2021 (75.0%), reflecting the additional facilities secured in the year from
Blazehill Capital Finance Limited (£15.0 million) to support the continued
investment into the Housing Disrepair Team and our investment in the VW and
Mercedes Benz emissions claims.
EPS and Dividend
Statutory basic EPS is 16.9 pence (2021: 16.5 pence). Statutory diluted EPS is
16.9 pence (2021: 16.2 pence). The adjusted EPS is 16.8 pence (2021: 16.8
pence). The adjusted diluted EPS is 16.8 pence (2021: 16.5 pence). The
adjusted figures exclude the effect of share-based payments. The detailed
calculation in support of the EPS data provided above is included within Note
12 of the financial statements of the annual report.
The Board is pleased to propose a final dividend of 1.5p per share, which if
approved at the Annual General Meeting to be held on 15 June 2023 will be paid
on 23 June 2023 to those shareholders on the register at the close of business
on 26 May 2023. The shares will become ex-dividend on 25 May 2023 (2021: total
dividend 1.5p per share).
Group Statement of Financial Position
The Group's net assets position is dominated by the balances held within trade
and other receivables. These balances include credit hire and credit repair
debtors, together with disbursements paid in advance which support the
portfolio of ongoing claims. The gross claim value of trade receivables
totalled £393.6 million in 2022, rising from £325.3 million in 2021. In
accordance with our income recognition policies, a provision is made to reduce
the carrying value to recoverable amounts, the net balance increasing to
£165.4 million (2021: £146.4 million). This increase reflects the recent
trading activity and strategy of the Group and is in line with management
expectations given that the Group continued to be impacted during 2022 by
delays in capacity within the court system, albeit this continues to improve.
The increase has been primarily funded from the significant rise in cash
collections seen year on year as well as additional facilities secured from
Blazehill Capital Finance Limited.
In addition, the Group has a total of £54.7 million reported as accrued
income (2021: £39.4 million) which represents the value attributed to those
ongoing hires and claims at the year end, alongside growth in the number of
ongoing claims within the Housing Disrepair Team.
The increases in both trade receivables and accrued income reflect an increase
in the volume of claims that remain ongoing together with an increase in the
number of claims ongoing where we have identified and secured an admission of
liability.
During 2021 and into the early part of 2022, significant investment was made
into the motorcycle fleet to support the current and expected volumes
generated from the insurance contract with MCE announced in November 2021. In
an unexpected development, MCE's underwriter, Green Realisations 123 Ltd, went
into administration and all outstanding Green Realisation 123 Ltd policies
were disclaimed from 1 February 2022. As a consequence, the number of claims
generated reduced significantly, resulting in a period in which utilisation
and hence profitability of the Group was impacted. Total fixed asset additions
totalled £7.7 million in 2022 (2021: £13.1 million). The fleet continues to
be largely externally financed.
Trade and other payables, including tax and social security increased to
£13.1 million compared to £12.6 million at 31 December 2021.
Net assets at 31 December 2022 reached £146.3 million (2021: £128.2
million).
Net Debt, Cash and Financing
Net debt increased to £73.1 million at 31 December 2022 (31 December 2021:
£62.0 million) and comprised cash balances at 31 December 2021 of £9.0
million (2021: £7.6 million), plus borrowings which increased during the year
to fund additional working capital investment in the Group's portfolio of
claims, support the investment by the Group in the VW and Mercedes Benz
emissions claims and facilitate expansion of the vehicle fleet.
The total debt balance rose from £69.6 million in 2021 to £82.2 million at
the end of 2022; these balances include lease liabilities recognised in line
with IFRS16. The Group has a number of funding relationships and facilities to
support its working capital and investment requirements, including an invoice
discounting facility within Direct Accident Management Limited (secured on the
credit hire and repair receivables), lease facilities to support the
acquisition of the fleet and a revolving credit facility within Bond Turner
Limited.
In addition, the Group secured a loan of £15.0 million from Blazehill Capital
Finance Limited during 2022. The loan is non amortising and committed for a
three year period.
Having considered the Group's current trading performance, cash flows and
headroom within our current debt facilities, maturity of those facilities, the
Directors have concluded that it is appropriate to prepare the Group and the
Company's financial statements on a going concern basis.
Cash Flow
Notwithstanding the continued impact of COVID-19 on the court system and the
Business (further details provided earlier), we have continued to invest in
talent and grow our settlement capacity throughout Bond Turner. The number of
senior fee earners increased from 237 to 253 during 2022 (an increase of 6.8%)
and continues to rise across each of our three offices. More recently this
investment has sought to diversity the activities of the Group and headcount
with the Housing Disrepair Team, the number of senior fee earners increasing
in number from 30 at 31 December 2021 to 44 at 31 December 2022 (an increase
of 46.7%).
Cash collections for the Group (and excluding settlements for our clients), a
key metric for the Group, increased from £119.0 million in 2021 to £146.1
million in 2022, an increase of 22.8%, underlining the Group's successful
evolution in the post pandemic period.
Having secured the contract from MCE to secure their non fault road traffic
accident opportunities in late 2021, investment was made in the fleet and
infrastructure to support this significant increase in demand, which led to
record vehicle numbers at the end of 2021, reaching 2,366. However, the
situation with Green Realisations Ltd described above resulted in the number
of opportunities reducing sharply and hence the Group operated with a
suboptimal cost base in the first part of 2022. Because activity levels did
not increase from MCE as expected, management implemented actions to maintain
headroom and reduce costs to reflect a revised level of forecast activity.
Despite this, and reflecting the number of claims generated from MCE in the
early part of 2022, we have actually seen the average number of vehicles on
the road rise in 2022, reaching 1,892 (2021: 1,834). This contributed to the
strong revenue performance of the Credit Hire division. Notwithstanding this,
as we have previously reported, growth in the Credit Hire Division results in
an absorption of cash. During the year, management worked to manage
expenditure and consequent absorption of cash and actively reduced the number
of claims accepted. Vehicle numbers fell accordingly to 1,730 at 31 December
2022.
Having anticipated continued growth from MCE, the Board secured an increase in
availability from Secure Trust Bank plc (£1.3 million) and Blazehill Capital
Finance Limited (£15.0 million) in 2022, to take advantage of these
opportunities, whilst ensuring the relationship between the number of new
claims taken on within EDGE is balanced with the settlement capacity of Bond
Turner. In addition to this, the Group has continued to draw funds from
approved hire purchase facilities to support reinvestment of the motorcycle
fleet as well as other facilities as necessary to support group headroom. The
total amount of new borrowings in the year reached £24.4 million.
Whilst the Group operated for a period at suboptimal levels, the significant
improvement in cash collections resulted in the Group reporting a reduction in
the level of cash outflows from operating activities of £3.1 million (2021:
cash outflow of £7.3 million).
With a net cash inflow of £4.2 million resulting from financing activities,
having secured additional facilities from both Secure Trust Bank Plc and
Blazehill Capital Finance Limited (2021: net cash inflow of £7.2 million),
the Group reported a net cash inflow in 2022 of £1.5 million (2021: net cash
outflow of £0.7 million).
Reconciliation of Adjusted and Reported IFRS Results
In establishing the adjusted operating profit, the costs adjusted include a
credit of £0.2 million related to share-based payments (2021: costs of £0.4
million).
A reconciliation between adjusted and reported results is provided below:
Year to December 2022
Adjusted Share-based payment £'000s Reported
£'000s £'000s
Revenue 138,329 - 138,329
Gross profit 105,776 - 105,776
Other operating costs (net) (75,535) 175 (75,360)
Operating profit 30,241 175 30,416
Finance costs (net) (6,323) - (6,323)
Profit before tax 23,918 175 24,093
Year to December 2021
Adjusted Share-based payment £'000s Reported
£'000s £'000s
Revenue 118,237 - 118,237
Gross profit 91,481 - 91,481
Other operating costs (net) (63,753) (378) (64,131)
Operating profit 27,728 (378) 27,350
Finance costs (net) (3,604) - (3,604)
Profit before tax 24,124 (378) 23,746
By order of the Board
Gary Carrington
Interim Chief Financial Officer
9 May 2023
Consolidated Statement of Total Comprehensive Income
for year ended 31 December 2022
2022
2021
Note £'000s £'000s
Revenue 138,329 118,237
Cost of sales (32,553) (26,756)
Gross profit 105,776 91,481
Depreciation & profit / loss on disposal 4 (10,436) (8,504)
Amortisation 4 (117) (137)
Administrative expenses before share based payments 4 (64,982) (55,112)
Operating profit before share based payments 4 30,241 27,728
Share based payment credit / (charge) 4 175 (378)
Operating profit 4 30,416 27,350
Finance costs (6,323) (3,604)
Profit before tax 24,093 23,746
Taxation (4,616) (4,598)
Profit and total comprehensive income for the year attributable to the owners 19,477 19,148
of the company
Earnings per share
Basic earnings per share (pence) 5 16.6 16.5
Diluted earnings per share (pence) 5 16.6 16.2
The above results were derived from continuing operations.
Consolidated Statement of Financial Position
as at 31 December 2022
2022
2021
Assets Note £'000s £'000s
Non-current assets
Property, plant and equipment 6 2,072 2,071
Right of use assets 6 12,657 16,896
Intangible assets 7 71 188
Deferred tax assets 112 112
14,912 19,267
Current assets
Trade and other receivables 8 222,272 188,134
Corporation tax receivable 606 -
Cash and cash equivalents 9,049 7,562
231,927 195,696
Total assets 246,839 214,963
Equity and liabilities
Equity
Share capital 59 58
Share premium 16,161 16,161
Share based payments reserve - 2,077
Retained earnings 130,127 109,928
Equity attributable to the owners of the Company 146,347 128,224
Non-current liabilities
Other interest-bearing loans and borrowings 9 25,000 13,814
Lease liabilities 9 7,176 8,430
Deferred tax liabilities 32 32
32,208 22,276
Current liabilities
Other interest-bearing loans and borrowings 9 43,594 38,499
Lease liabilities 9 6,403 8,833
Trade and other payables 13,225 12,635
Corporation tax liability 5,062 4,496
68,284 64,463
Total liabilities 100,492 86,739
Total equity and liabilities 246,839 214,963
The financial statements were approved by the Board of Directors and
authorised for issue on 9 May 2023. They were signed on its behalf by:
Gary Carrington
Interim Chief Financial Officer
9 May 2023
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
Share Capital Share Based Payments Reserve Retained Earnings Total
Share Premium Merger Reserve
£'000s £'000s £'000s £'000s £'000s £'000s
At 1 January 2021 58 16,161 - 1,699 92,520 110,438
Profit for the year and total comprehensive income - - - - 19,148 19,148
Share based payment charge - - - 378 - 378
Dividends - - - - (1,740) (1,740)
At 31 December 2021 58 16,161 - 2,077 109,928 128,224
Profit for the year and total comprehensive income - - - - 19,477 19,477
Issue of share capital 1 - - - - 1
Share based payment credit - - - (175) - (175)
Transfer of share based payment reserve - - - (1,902) 1,902 -
Dividends - - - - (1,180) (1,180)
At 31 December 2022 59 16,161 - - 130,127 146,347
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
2022
2021
Note £'000s £'000s
Cash flows from operating activities
Profit for the year 4 19,477 19,148
Adjustments for:
Depreciation and profit / loss on disposal 4 10,436 8,504
Amortisation 4 117 137
Financial expense 6,323 3,604
Share based payment (credit) / charge 4 (175) 378
Taxation 4,616 4,598
40,794 36,369
Working capital adjustments
Increase in trade and other receivables (34,138) (40,224)
Increase in trade and other payables 590 3,131
Cash generated from / (used in) operations 7,246 (724)
Interest paid (5,722) (3,364)
Tax paid (4,656) (3,219)
Net cash used in operating activities (3,132) (7,307)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 1,579 941
Acquisition of property, plant and equipment (1,186) (1,439)
Investment in intangible fixed assets - (91)
Net cash from / (used in) investing activities 393 (589)
Cash flows from financing activities
Net proceeds from the issue of share capital - -
Proceeds from new loans 24,430 25,039
Repayment of borrowings (8,749) (7,951)
Lease payments (10,275) (8,110)
Dividends paid (1,180) (1,740)
Net cash from financing activities 4,226 7,238
Net increase/(decrease) in cash and cash equivalents 1,487 (658)
Cash and cash equivalents at 1 January 7,562 8,220
Cash and cash equivalents at 31 December 9,049 7,562
Notes to the Consolidated Financial Statements
for the year ended 31 December 2022
1. Basis of Preparation and Principal Activities
Whilst the financial information included in this preliminary announcement has
been prepared on the basis of the requirements of International Accounting
Standards in conformity with the requirements of the Companies Act 2006 and
effective as at 31 December 2022, this announcement does not itself contain
sufficient information to comply with International Accounting Standards.
The financial information set out in this preliminary announcement does not
constitute the group's statutory financial statements for the years ended 31
December 2022 or 2021 but is derived from those financial statements.
Statutory financial statements for 2021 have been delivered to the registrar
of companies and those for 2022 will be delivered in due course. The auditors
have reported on those financial statements; their reports were (i)
unqualified and (ii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The financial statements are presented in Pounds Sterling, being the
presentation currency of the Group, generally rounded to the nearest thousand.
Pounds Sterling is also the functional currency for each of the Group
entities.
The annual financial statements have been prepared on the historical cost
basis.
The principal activities of the Group are the provision of credit hire and
associated legal services.
The Company is a public company limited by shares, which is listed on the
Alternative Investment Market of the London Stock Exchange and incorporated
and domiciled in the UK. The address of its registered address office is 5th
Floor, The Plaza, 100 Old Hall Street, Liverpool, L3 9QJ.
Going concern
As previously noted, the Group ended 2021 with record numbers of vehicles on
the road, driven both by an increase in activity following the general lifting
of Covid-19 restrictions and also investment in both fleet and infrastructure
in response to the major contract with MCE Insurance announced in November
2021. Vehicle numbers at the end of 2021 stood at 2,366. As a consequence of
the insolvency of MCE's underwriter, Green Realisations 123 Limited, the
anticipated activity levels deriving from the MCE contract were not sustained
and the Group undertook a series of measures to reduce the size of the fleet
and associated infrastructure costs to reflect a revised level of forecast
activity, the Group therefore operated in a sub-optional manner for periods in
2022 reflecting the fixed nature of certain costs.
Despite this, healthy general demand and a positive contribution from MCE in
the early part of the year has ensured that the average number of vehicles on
the road during 2022 actually rose marginally from 1,834 to 1,892. This
underlines the robust health of the core credit hire business and the
continued demand for non-fault claims.
Focus remains on motorcycle claims and the Housing Disrepair division, an area
with significant capacity for growth during 2023 and beyond, the Directors
actively managing the Group's activities to ensure the efficient use of
working capital. In addition, the Directors implemented a strategy to actively
limit the number of credit hire claims accepted during 2022 thereby reducing
the overall level of spend whilst cash collections have reached record levels,
returning the Group to a cash positive position in the latter part of that
year, this process continues, the target to drive a reduction in net debt from
an improvement in cash flows of the Group into 2023.
The Group has secured funding from a number of funders, the most significant
being Secure Trust Bank plc, HSBC Bank Plc and Blazehill Capital Finance
Limited. Following receipt of additional funding of £15.0 million from
Blazehill Capital Limited in 2022, the Group has a strong balance sheet with a
conservative gearing level and good liquidity with headroom within its funding
facilities and associated covenants.
The Group's current facilities include a revolving credit facility of £10.0
million with HSBC Bank plc (due for repayment in October 2024), an invoice
discounting facility of £40.0 million with Secure Trust Bank plc (due for
renewal in December 2024) and a loan facility of £15.0 million from Blazehill
Capital Finance Limited.
Each of the Group's banking arrangements are subject to monitoring through
financial performance measures or covenants. During the year, certain of these
measures and covenants within the Secure Trust facility came under pressure
and required action by the Group which included a regular dialogue between all
parties to ensure that the reasons behind the breaches were fully understood,
agreed and ultimately waived. All the required waivers were fully in place
post year end. The performance measures incorporated within the Secure Trust
facility are there for monitoring purposes and aid as a guide for the Group to
engage on a regular basis around general financial performance and headroom,
both from a cash and operational perspective, certain of which are measured
monthly and can be prone to breach due to seasonality, outlying transactions
from the norm or other isolated incidents. In each case the breach was
discussed with Secure Trust and in each instance, formal waiver provided and
if the expectation was for future instances, the performance measure varied to
provide further headroom and reduce the risk of future incident. Those most
important, surround the relationship of overall cash collections against funds
drawn, no such breaches were reported during 2022. Whilst we have reported a
number of breaches to Secure Trust during 2022, they have both increased
facility limits (rising from £30.0 million to £40.0 million during the year)
as well as increasing the overall funding rate provided, supporting the growth
of the Group and continued investment, both highlighting the positive
relationship between the parties and their view of our strength. All covenants
were met during 2022 and to date in 2023 within both the Blazehill Capital and
HSBC facilities. Further details are included in note 20.
Measures implemented to maintain a stable relationship between EDGE and Bond
Turner, alongside the additional headroom created from the recent refinancing,
means that the Board remains confident that the Group is in a strong financial
position and is well placed to trade into 2023.
The Directors have prepared trading and cash flow forecasts for the period
ended December 2024, against which the impact of various sensitivities have
been considered covering the level of cash receipts (we have sensitised cash
collections by 5% and 10% with and without management intervention which
included a reduction in the volume of work taken on). We note earlier that
here is no certainty that a settlement in favour of Bond Turner's clients will
be reached, nor is there any guarantee that such a settlement would include
financial compensation. The timeline for progress towards conclusion of the
litigation is also unclear and no assumptions as to revenue have been included
in the Board's internal forecasts for 2023.
Working capital management is considered to be the most critical aspect of the
Group's assessment. The Group has the ability to improve cash flow and
headroom from a number of factors that are within the direct control of
management, examples of which could be by limiting the level of new business
within EDGE, managing the level of investment in people and property within
Bond Turner or by limiting the investment in the Mercedes Benz emissions case.
These factors allow management to balance any potential shortfall in cash
receipts and headroom against forecast levels, something the Directors have
been doing for many years, such that the Group maintains adequate headroom
within its facilities. It is in that context that the Directors have a
reasonable expectation that the Group will have adequate cash headroom.
The Group continues to trade profitably and early indications for growth in
the current year are positive. Accordingly, the directors continue to adopt
the going concern basis in preparing the consolidated and the company
financial statements.
2. Critical Accounting Judgements and Key Sources of
Estimation Uncertainty
In the application of the Group's accounting policies, management is required
to make judgements, estimates and assumptions about the carrying value of
assets and liabilities that are not readily apparent from other sources. The
estimates and underlying assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of revision and prior periods if the revision affects both current and prior
periods.
The key sources of estimation uncertainty that have a significant effect on
the amounts recognised in the financial statements are described below.
Credit Hire
Due to the nature of the business, there are high levels of trade receivables
and accrued income at the year end, and therefore a risk that some of these
balances may be impaired or irrecoverable. The Group applies its policy for
accounting for impairment of these trade receivables as well as expected
credit losses whereby debts are assessed and provided against when the
recoverability of these balances is considered to be uncertain. This requires
the use of estimates based on historical claim and settlement information.
Revenue is accrued on a daily basis, after adjustment on a portfolio basis for
an estimation of the recovery of credit hire charges based on historical
settlement rates. While historical settlement rates form the basis, these are
then considered in light of expected settlement activity. It has been assumed
that there will be continued improvement in settlement rates as courts
increasingly return to normal business. The assumption of improved settlement
rate is a significant judgment. This policy also assumes that claims which
have settled historically are representative of the trade receivables and
accrued income in the balance sheet. This assumption represents a significant
judgement. The overall settlement adjustment is made to ensure that revenue is
only recognised to the extent that it is highly probable that a significant
reversal of revenue will not occur upon settlement of a customer's claim.
Revenue recognised is updated on settlement once the amount of the claim
recovered is known.
Due the factors described above, determining the settlement adjustment to
revenue, accrued income and trade receivables involves a high degree of
estimation uncertainty which could result in a range of values of adjustment
which vary by multiples of materiality. The settlement percentages are
sensitive to these estimates. If the settlement percentages applied in
calculating revenue were reduced by 1% it would reduce credit hire revenue and
trade receivables and accrued income (£74.7 million and £144.1 million
respectively) by £2.7 million. (2021: by £2.3 million, credit hire revenue
being £71.3 million and trade receivables and accrued income £127.2
million). The Board consider that these estimates are subject to variation
which may vary from between 1% and 6% (at 6% credit hire revenue and trade
receivables and accrued income would reduce by £16.2 million). A 6% reduction
is an approximation that is consistent with the period over the pandemic where
settlements were lower due to courts being closed. This is considered to be a
cautious downside based on more recent settlement experience and operational
changes to the business to facilitate improvements in settlement rates and
period.
Legal Services
The Group carries an element of accrued income for legal costs, the valuation
of which reflects the estimated level of recovery on successful settlement by
reference to the lowest level of fees payable by reference to the stage of
completion of those credit hire cases. Where we have not had an admission of
liability no value is attributed to those case files.
Accrued income is also recognised in respect of serious injury and housing
disrepair claims, only where we have an admission of liability and by
reference to the work undertaken in pursuing a settlement for our clients,
taking into account the risk associated with the individual claim and expected
future value of fees from those claims on a claim by claim basis.
For both credit hire and legal services, the historical settlement rates used
in determining the carrying value may differ from the rates at which claims
ultimately settle. This represents an area of key estimation uncertainty for
the Group.
3. Segmental Reporting
The Group's reportable segments are as follows:
· the provision of credit hire vehicles to individuals who have
had a non-fault accident, and
· associated legal services in the support of the individual
provided with a vehicle by the Group and other legal service activities.
Management monitors the operating results of business segments separately for
the purpose of making decisions about resources to be allocated and of
assessing performance.
Year ended 31 December 2022
Credit Hire Other Legal Services * Consolidated
Housing Disrepair * Group & Central Costs
£'000s £'000s £'000s £'000s £'000s
Revenues
Third party 74,681 54,311 9,337 - 138,329
Total revenues 74,681 54,311 9,337 - 138,329
Profit before taxation 8,887 15,400 4,694 (4,888) 24,093
Net cash (used in) / from operations (2,310) 3,390 258 (4,470) (3,132)
Depreciation, amortisation and gain on disposal of property, plant and 9,271 1,282 - - 10,553
equipment
Segment assets 174,503 58,562 8,084 5,690 246,839
Capital expenditure 980 206 - - 1,186
Segment liabilities 66,507 33,985 - - 100,492
* Other Legal Services and Housing Disrepair, are subsets of Legal Services.
We have however, distinguished the performance of Housing Disrepair from
within Legal Services as this division of the Legal Services segment is an
area where the Group is investing heavily, is a focus for the Group at present
and into the future and allows readers of the financial statements to
understand the contribution Housing Disrepair has to the overall Group
performance. The Housing Disrepair division continues to grow and as the
results become more significant to the overall Group performance this division
may well become a segment in its own right, this could be reported in the 2023
financial statements.
In the financial statements for the year ended 31 December 2021, we separated
the results for the VW Class Action case; this now forms part of the analysis
presented for Other Legal Services and the analysis for 2021 below has been
restated. The operating segments are identified based on the way in which
financial information is organised and reported to the Board. Those currently
reported are based on the nature of the business activities and the revenue
streams; the costs associated with the VW Class Action case are hence now
reported within Other Legal Services.
Year ended 31 December 2021 (as restated)
Credit Hire Other Legal Services * Group & Central Costs Consolidated
Housing Disrepair *
£'000s £'000s £'000s £'000s £'000s
Revenues
Third party 71,338 41,823 5,076 - 118,237
Total revenues 71,338 41,823 5,076 - 118,237
Profit before taxation 19,811 3,604 2,592 (2,261) 23,746
Net cash from operations (10,654) 4,818 (568) (903) (7,307)
Depreciation, amortisation and gain on disposal of property, plant and 7,205 1,436 - - 8,641
equipment
Segment assets 161,578 49,545 3,648 192 214,963
Capital expenditure 998 441 - - 1,439
Segment liabilities 55,415 31,324 - - 86,739
Interest income/expense and income tax are not measured on a segment basis
4. Operating Profit
Operating profit is arrived at after charging:
2022 2021
£'000s £'000s
Depreciation on owned assets 750 653
Depreciation on right of use assets 9,981 8,039
Amortisation 117 137
Share based payment (credit) / charge (175) 378
Gain on disposal of property, plant and equipment (295) (188)
There were no non-recurring costs in the year ended 31 December 2022 or 2021.
Included in the above are the costs associated with the following services
provided by the Company's auditor:
2022 2021
£'000s £'000s
Audit services
Audit of the Company and the consolidated financial statements 70 50
Audit of the Company's subsidiaries 170 120
Total audit fees 240 170
All other services - -
Total fees payable to the Company's auditor 240 170
5. Earnings Per Share
2022 2021
Number of shares: No. No.
Weighted number of ordinary shares outstanding 117,492,721 116,000,000
Effect of dilutive options - 2,200,000
Weighted number of ordinary shares outstanding - diluted 117,492,721 118,200,000
Earnings: £'000s £'000s
Profit basic and diluted 19,477 19,148
Profit adjusted and diluted 19,302 19,526
Earnings per share: Pence Pence
Basic earnings per share 16.6 16.5
Adjusted earnings per share 16.5 16.8
Diluted earnings per share 16.6 16.2
Adjusted diluted earnings per share 16.5 16.5
The adjusted profit after tax for 2022 and adjusted earnings per share are
shown before share‑based payment credit of £0.2 million (2021: Charge of
£0.4 million). The Directors believe that the adjusted profit after tax and
the adjusted earnings per share measures provide additional useful information
for shareholders on the underlying performance of the business. These measures
are consistent with how underlying business performance is measured
internally. The adjusted profit after tax measure is not a recognised profit
measure under IFRS and may not be directly comparable with adjusted profit
measures used by other companies.
6. Property, Plant and Equipment
Fixtures,
Right of Property fittings & Office
use assets improvements Equipment equipment Total
£'000s £'000s £'000s £'000s £'000s
Cost
At 1 January 2021 24,693 492 2,675 878 28,738
Additions 12,607 2 450 85 13,144
Disposals (7,656) - - (334) (7,990)
At 31 December 2021 29,644 494 3,125 629 33,892
Additions 7,026 143 319 289 7,777
Disposals (8,684) - - - (8,684)
At 31 December 2022 27,986 637 3,444 918 32,985
Depreciation
At 1 January 2021 11,612 297 859 702 13,470
Charge for year 8,039 25 559 69 8,692
Eliminated on disposal (6,903) - - (334) (7,237)
At 31 December 2021 12,748 322 1,418 437 14,925
Charge for the year 9,981 35 596 119 10,731
Eliminated on disposal (7,400) - - - (7,400)
At 31 December 2022 15,329 357 2,014 556 18,256
Carrying amount
At 31 December 2022 12,657 280 1,430 362 14,729
At 31 December 2021 16,896 172 1,707 192 18,967
Motor Vehicles are all financed and as such are included in the right of use
assets column above.
Property, plant and equipment includes right-of-use assets with carrying
amounts as follows:
Land and Motor Total
Buildings vehicles
£000 £000 £000
Right-of-use assets
At 1 January 2021 5,100 7,981 13,081
Depreciation charge for the year (950) (7,089) (8,039)
Additions to right-of use assets - 12,607 12,607
Disposals of right-of-use assets - (753) (753)
At 31 December 2021 4,150 12,746 16,896
Depreciation charge for the year (820) (9,161) (9,981)
Additions to right-of-use assets - 7,026 7,026
Disposals of right-of-use assets - (1,284) (1,284)
At 31 December 2022 3,330 9,327 12,657
7. Intangibles
Intangible Assets
Software licences
£'000s
Cost
At 1 January 2021 361
Additions 91
At 31 December 2021 452
Additions -
At 31 December 2022 452
Amortisation
At 1 January 2021 127
Charge for year 137
At 31 December 2021 264
Charge for the year 117
At 31 December 2022 381
Carrying amount
At 31 December 2022 71
At 31 December 2021 188
Software licence assets relate to investments made in third-party software
packages, and directly attributable external personnel costs in implementing
those platforms.
The amortisation charge is recognised in administration costs in the income
statement.
8. Trade and Other Receivables
2022 2021
£'000s £'000s
Gross claim value 393,560 325,260
Settlement adjustment on initial recognition (203,518) (151,507)
Trade receivables before impairment provision 190,042 173,753
Provision for impairment of trade receivables (24,674) (27,360)
Net trade receivables 165,368 146,393
Accrued income 54,778 39,431
Prepayments 1,603 1,849
Other debtors 523 461
222,272 188,134
The Group's exposure to credit and market risks, including impairments and
allowances for credit losses, relating to trade and other receivables is
disclosed in the financial risk management and impairment of financial assets
note. Whilst credit risk is considered to be low, the market risks inherent in
the business pertaining to the nature of legal and court cases and ageing
thereof is a significant factor in the valuation of trade receivables.
Average gross debtor days calculated on a count back basis were 464 at 31
December 2022 and 432 at 31 December 2021.
Age of net trade receivables
2022 2021
£'000s £'000s
Within 1 year 92,497 83,166
1to 2 years 39,606 34,931
2to 3 years 18,259 19,716
3to 4 years 12,251 7,524
Over 4 years 2,755 1,056
165,368 146,393
Average age (days) 464 432
The provision for impairment of trade receivables is the difference between
the carrying value and the present value of the expected proceeds. The
Directors consider that the fair value of trade and other receivables is not
materially different from the carrying value.
Movement in provision for impairment of trade receivables
2022 2021
£'000s £'000s
Opening balance 27,360 21,016
Increase in provision 5,422 10,635
Utilised in the year (8,108) (4,291)
24,674 27,360
The Group's exposure to credit and market risks, including impairments and
allowances for credit losses, relating to trade and other receivables is
disclosed in the financial risk management and impairment of financial assets
note. Whilst credit risk is considered to be low, the market risks inherent in
the business pertaining to the nature of legal and court cases and ageing
thereof is a significant factor in the valuation of trade receivables.
Average gross debtor days calculated on a count back basis were 464 at 31
December 2022 and 432 at 31 December 2021.
Age of net trade receivables
2022 2021
£'000s £'000s
Within 1 year 92,497 83,166
1 to 2 years 39,606 34,931
2 to 3 years 18,259 19,716
3 to 4 years 12,251 7,524
Over 4 years 2,755 1,056
165,368 146,393
Average age (days) 464 432
The provision for impairment of trade receivables is the difference between
the carrying value and the present value of the expected proceeds. The
Directors consider that the fair value of trade and other receivables is not
materially different from the carrying value.
Movement in provision for impairment of trade receivables
2022 2021
£'000s £'000s
Opening balance 27,360 21,016
Increase in provision 5,422 10,635
Utilised in the year (8,108) (4,291)
24,674 27,360
9. Borrowings
2022
2021
£'000s £'000s
Non-current loans and borrowings
Lease liabilities 7,176 8,430
Revolving credit facility 10,000 10,000
Other borrowings 15,000 3,814
32,176 22,244
Current loans and borrowings
Lease liabilities 6,403 8,833
Invoice discounting facility 30,562 29,258
Other borrowings 13,032 9,241
49,997 47,332
Direct Accident Management Limited uses an invoice discounting facility which
is secured on the trade receivables of that company. Security held in relation
to the facility includes a debenture over all assets of Direct Accident
Management Limited dated 11 October 2016, extended to cover the assets of
Anexo Group Plc and Edge Vehicles Rentals Group Limited from 20 June 2018 and
28 June 2018 respectively, as well as a cross corporate guarantee with
Professional and Legal Services Limited dated 21 February 2018. At the end of
December 2022, Direct Accident Management Limited has availability within the
invoice discounting facility of £0.9 million (2021: £1.3 million).
In July 2020 Direct Accident Management Limited secured a £5.0 million loan
facility from Secure Trust Bank Plc, under the Government's CLBILS scheme. The
loan was secured on a repayment basis over the three year period, with a three
month capital repayment holiday.
Direct Accident Management Limited is also party to a number of leases which
are secured over the respective assets funded.
The revolving credit facility is secured by way of a fixed charge dated 26
September 2019, over all present and future property, assets and rights
(including uncalled capital) of Bond Turner Limited, with a cross company
guarantee provided by Anexo Group Plc. The loan is structured as a revolving
credit facility which is committed for a three-year period, until 13 October
2024, with no associated repayments due before that date. Interest is charged
at 3.25% over the Respective Rate. The facility was fully drawn down as at 31
December 2022 and 2021.
In July 2020 Anexo Group Plc secured a loan of £2.1 million from a specialist
litigation funder to support the investment in marketing costs associated with
the VW Emissions Class Action. The terms of the loan are that interest accrues
at the rate of 10% per annum, with maturity three years from the date of
receipt of funding with an option to repay early without charge. In addition
to the interest charges the loan attracts a share of the proceeds to be
determined by reference to the level of fees generated for the Group.
In November 2021 a further £3.0 million loan was sourced from certain of the
principal shareholders and directors of the Group to support the investment in
2022 of the Mercedes Benz emissions claim. The terms of the loan are that
interest accrues at the rate of 10% per annum, with maturity two years from
the date of receipt of funding with an option to repay early without charge.
In addition to the interest charges the loan attracts a share of the proceeds
to be determined by reference to the level of fees generated for the Group.
There has been no adjustment to increase the liability for either of these
loans for the share of proceeds as no settlement has yet been reached.
In March 2022 the group secured a loan of £7.5 million from Blazehill Capital
Finance Limited, with an additional £7.5 million drawn in September 2022, the
total balance drawn at 31 December 2022 was £15.0 million. The loan is non
amortising and committed for a three year period. Interest is charged and paid
monthly at 13% above the central bank rate. The facility is secured by way of
a fixed charge dated 29 March 2022, over all present and future property,
assets and rights (including uncalled capital) of Direct Accident Management
Limited, with a cross company guarantee provided by Anexo Group Plc.
In October 2022, the Group secured a loan of £4.7 million from Premium
Credit, the loan is unsecured and amortising over a 12 month period.
The loans and borrowings are classified as financial instruments and are
disclosed in the financial instruments note.
The Group's exposure to market and liquidity risk; including maturity
analysis, in respect of loans and borrowings is disclosed in the financial
risk management and impairment of financial assets note.
The Group's banking arrangements provided by Secure Trust Bank Plc, HSBC Bank
Plc and Blazehill Capital Limited are subject to monitoring through financial
performance measures or covenants.
The Secure Trust facility include the following covenants, all of which are
tested monthly:
· A number of individual measures focussed on the relationship between
cash collections and funding levels
· Settlement rates
· Hire periods
· Disbursement spending
· Vehicle numbers and utilisation
The Blazehill facility includes the following covenants, all of which are
tested monthly:
· Group EBITDA to be not less than 80% of forecast
· Cash collections to be not less than 80% of forecast
· Investment in group capex to not exceed 120% of forecast (testing
over a rolling three months)
· Minimum group liquidity to exceed £2.8 million at any time
The HSBC facility includes the following covenants, which are tested quarterly
for a rolling 12 month period on the results for Bond Turner Limited:
· Interest cover (the relationship between EBITDA and finance charges)
to exceed 4 times
· Leverage (being the relationship between EBITDA and net debt) to
exceed 2 times
During the year, certain of the measures and covenants within the Secure Trust
facility came under pressure and required action by the Group which included a
regular dialogue between all parties to ensure that the reasons behind the
breaches were fully understood, agreed and ultimately waived, certain of which
varied during the year based on our discussions with Secure Trust. All the
required waivers were fully in place post year end. A facility from Secure
Trust of £40.0 million at 31 December 2022 (£29.3 million as at 31 December
2021) was already classified as repayable on demand so was not impacted.
There we no such breaches within either of the Blazehill or HSBC facilities,
all such covenants being met during the year.
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