REG - NAHL Group PLC - Final Results
29/03/2022 07:00
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RNS Number : 3149G NAHL Group PLC 29 March 2022
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29 March 2022
NAHL Group plc
("NAHL" or the "Group")
Final Results
Building a valuable bank of sustainable profits and cash
NAHL, the leading UK marketing and services business focused on
the UK consumer legal market, announces its Final Results for the year ended
31 December 2021.
Financial Highlights
· Revenue decreased by 4.7% to £38.9m (2020: £40.9m), reflecting
the impact from COVID-19 restrictions on accident numbers
· Cash received from settled claims in National Accident Law (NAL)
increased by 62% to £2.1m (2020: £1.3m)
· Underlying(1) operating profit decreased to £4.2m (2020: £5.7m)
reflecting continued strategic investment in Consumer Legal Services and
Critical Care
· Profit before tax increased to £0.2m (2020: loss before tax of
£0.2m)
· Underlying EPS of 0.3p (2020: 1.9p)
· Net debt at 31 December 2021 £15.5m (2020: £16.3m)
Operational Highlights
· Continued to build our fully integrated law firm, NAL, and
reduced reliance on joint venture partnerships, for higher returns in the
medium and long term
o Increased enquiries placed into NAL by 130%; and grown ongoing claims at
year-end by 166% to 7,918 claims
o NAL processed 26% of all enquiries generated in 2021 compared to 10% in
2020
o Reduced enquiries placed into joint-venture partnerships by 73%
o Maintained proportion of enquiries placed with our panel of third-party
laws firms
· Ongoing claims in NAL expected to convert into £8.4m of future
cash
· National Accident Helpline continues to be the Most Trusted
Brand2 contributing to organic search performance improvement year on year
despite an increasingly competitive market
· 32,132 new enquiries generated in the year (2020: 36,214),
reflecting a full year of the impact of the COVID 19 pandemic
· Critical Care increased the number of Expert Witness reports it
issued by 21%, Initial Needs Assessment (INA) reports by 26% and ongoing case
management clients it supported by 1%
· Critical Care recruited 34 new associates to grow market share
and competencies
Outlook
· Strategic progress in 2021 has continued into 2022
· Personal Injury enquiry volumes in the first two months of the
year were 42% ahead of the same period last year
· Average daily enquiry run rate has improved each month since
December 2021
· 31% of enquiries in the first two months of the year have been
placed into NAL compared to 23% for the same period in 2021, reflecting the
continued scaling of NAL
· In Critical Care, Expert Witness and INA reports issued in the
first two months of the year were 8% and 7% ahead of the same period last year
respectively
· For the same period, Expert Witness and INA report instructions
were ahead by 7% and 28% respectively
· Now that the last of the COVID-19 restrictions have been lifted,
we expect to see mobility across the UK continue to improve and therefore
result in a gradual increase in the number of accidents in our markets
1 Underlying measures adjust for exceptional items, net of tax where
applicable
2 Based on independent research produced by The Nursery Research &
Planning Ltd, September 2021
James Saralis, CEO of NAHL, commented:
"2021 was a year of strategic progress for the Group despite the continued
difficulties presented by the COVID-19 pandemic. We progressed on our key
objectives, increasing enquiries placed into NAL, reducing our reliance on
joint-venture partnerships and growing our ongoing claims in NAL at year-end
by 166%. In Critical Care, we increased revenues by 9% largely due to
successful new business development initiatives, with Expert Witness volumes
up 21% year on year. The Group achieved this while reducing net debt and
remaining profitable.
At year-end we had 7,918 ongoing claims in NAL, up from 2,975 claims at the
end of 2020 which we expect to convert into £8.4m of future cash.
With the last of the COVID-19 restrictions now having been lifted, we expect
to see mobility levels across the UK improve and for this to result in a
gradual increase in the number of accidents in our markets.
Finally, I would like to thank our employees for their hard work, support and
commitment. They faced many challenges during 2021, including having to adjust
to the changing COVID-19 restrictions, and demonstrated their resilience and
dedication to supporting our customers and each other."
The Annual Report and notice of Annual General Meeting will be posted to
shareholders by the end of April 2022 and will then be available on
www.nahlgroupplc.co.uk (http://www.nahlgroupplc.co.uk) .
Enquiries:
NAHL Group plc via FTI Consulting
James Saralis (CEO) Tel: +44 (0) 20 3727 1000
Chris Higham (CFO)
Allenby Capital (Nomad & Broker) Tel: +44 (0) 20 3328 5656
Jeremy Porter/Liz Kirchner/Vivek Bhardwaj (Corporate Finance)
Amrit Nahal (Sales & Corporate Broking)
FTI Consulting (Financial PR) Tel: +44 (0) 20 3727 1000
Alex Beagley NAHL@fticonsulting.com
Sam Macpherson
Notes to Editors
NAHL Group plc (AIM: NAH) is a leader in the Consumer Legal Services ("CLS")
market. The Group provides services and products to individuals and businesses
in the CLS market through its two divisions:
· Consumer Legal Services provides outsourced marketing services
to law firms through National Accident Helpline and Homeward Legal; and claims
processing and conveyancing services to individuals through Your Law, Law
Together and National Accident Law. In addition, it also provides property
searches through Searches UK.
· Critical Care provides a range of specialist services in the
catastrophic and serious injury market to both claimants and defendants
through Bush & Co.
More information is available at www.nahlgroupplc.co.uk
(http://www.nahlgroupplc.co.uk) , www.national-accident-helpline.co.uk
(http://www.national-accident-helpline.co.uk) ,
www.national-accident-law.co.uk (http://www.national-accident-law.co.uk) and
www.bushco.co.uk (http://www.bushco.co.uk)
Chair's Report
Like many other businesses, the COVID-19 global pandemic continued to affect
our trading in 2021. Notwithstanding this, we completed the year with a profit
before tax of £0.2m (2020: loss of £0.2m) and a reduction in net debt to
£15.5m (2020: £16.3m) as we focused on investing in the growth of National
Accident Law (NAL) and the continued recovery of our Critical Care division.
2021 results
Our Personal Injury business saw enquiry levels decrease compared with the
previous year. This was a direct consequence of fewer accidents (both Road
Traffic Accident (RTA) and non-RTA) due to a decrease in population mobility
as a result of COVID-19 restrictions. As planned, in 2021 we placed more of
the enquires we generated into NAL, which continues to grow in size. NAL
processed 26% of our enquiries in 2021 and had 7,918 cases underway at the end
of the year. Although a relatively small part of our portfolio, our
residential property business benefitted from a hot market and we continue to
explore our options for this business.
Critical Care revenues increased by 9%, driven in large part, by 21% more
Expert Witness instructions. These were generated from successful business
development initiatives but this was offset by increased operating costs due
to our investment in people, systems and marketing.
Strategic progress
The Group made good progress in implementing its strategy. Most notably, NAL
is now processing all RTA enquiries and an increasing number of non-RTA
enquiries. Consequently, significantly less work is being placed into our
joint venture law firms. Notwithstanding this, we will continue to place
enquiries with our panel to generate short term cash and profit that will be
reinvested, where possible, in NAL. NAL is central to the Group's future
success and its creation and development were essential in anticipation of the
regulatory changes introduced in May 2021. Having our own modern,
technologically-enabled law firm is expected, in time, to generate higher
margins for our personal injury work, as well as significantly reducing our
non-controlling interest payments. In the short-term, however, the strategic
focus on growing NAL will continue to depress profits until the level of
admissions and settlements increases to compensate for the investment in new
claims.
During the year, Critical Care enhanced its business development capabilities
to drive further growth in its core markets. It has also invested in new
services to move into adjacent markets. This has enhanced Critical Care's
reputation and created a strong pipeline of work for the future, as case
management projects can last several years.
Good governance
We remain committed to engaging positively with our investors and being
transparent about the challenges and opportunities ahead. In addition to
regular meetings with our largest shareholders during the year we also met
with retail shareholders using the InvestorMeetCompany platform for the first
time. This enabled the Group to host a live Q&A session and engage with a
wider audience.
In August 2021, James Saralis was appointed CEO and Chris Higham replaced him
as acting CFO. The Board unanimously supported these internal appointments
and are delighted with their contributions to date. We also appointed Allenby
Capital as our new Nominated Adviser and Sole Broker in February 2022 and look
forward to working with them to increase shareholder value.
Summary
I would like to thank all our employees for their continued commitment and
hard work over the last year. Our people adapted to home working arrangements
and then hybrid working effectively. We will continue to operate a hybrid
model as the COVID-19 pandemic ends. Our people and our culture are essential
to our future success.
In summary, I believe we are making good progress with the development of our
Personal Injury business and the growth of our Critical Care division, but the
COVID-19 pandemic has made it more difficult, reducing the number of accidents
to well below 2019 levels. We expect to see accident numbers increase
gradually in 2022 as mobility levels increase and people return to work.
Pleasingly, early indications are supportive. Our Personal Injury business
will continue to place an increasing number of enquiries into NAL in order to
maximise future profit, and our Critical Care division already has a strong
pipeline of work as it starts 2022. In the short-term our strategy means
profits will remain depressed, as we continue our investment in NAL, but I
remain optimistic about the future, particularly now that the COVID-19
restrictions have come to an end.
Tim Aspinall
Chair
CEO Report
I am pleased to report our results for the year ended 31 December 2021.
Overview
2021 saw the Group make progress with the implementation of its strategy, but
the COVID-19 pandemic continued to have an impact on our markets throughout
the year. Government restrictions and cautious consumer behaviour supressed
accident numbers and resulted in less work for our Personal Injury and
Critical Care businesses. Nevertheless, we continued to make progress with our
strategy, manage our debt and secure debt funding to the end of 2024, whilst
remaining profitable.
We have repositioned our Consumer Legal Services division and created a fully
integrated law firm, capable of generating its own leads and focused on
processing higher margin personal injury claims, while reducing our reliance
on joint venture partnerships. In our Critical Care division, we have
invested in business development initiatives to grow instruction volumes and
are seeing encouraging results. While these investments will take time to
translate into profits, we expect them to produce greater returns for
shareholders in the medium and long term.
Meanwhile, in the short-term, as the UK adjusts to living with COVID-19 and
mobility levels across the UK recover, we expect to see accident numbers
gradually increase in our markets. This is expected to provide the Group with
more opportunities to support customers with their personal injury claim or
rehabilitation needs.
COVID-19
In 2020, the Group, and indeed the whole country, had to quickly adapt and
respond to the rapidly evolving threat of COVID-19. As a Group, we
prioritised our staff and supporting our customers through that initial period
and adapted our ways of working to enable homeworking and remote access to
clients. We prioritised liquidity, slowed investment and protected jobs.
2021 started with the third of the Government lockdowns. In many ways, the
third lockdown was the most challenging as it was both unanticipated and also
the longest and therefore stifled our ability to recover at the pace we would
have liked to. However, operational adaptations that we implemented in 2020
stood us in good stead and we were able to deliver a good service to our
customers and generate cash flow. This gave us the confidence to increase
the level of our investment in our Personal Injury and Critical Care
businesses, despite slow growth in these markets.
We completed the year with the threat of a new wave of restrictions in
response to the Omicron variant. Thankfully, this turned out to be less
serious than the Government first thought, but it did result in another
reduction in mobility levels across the country in December 2021, and
consequently fewer accidents.
Overall, I'm pleased with the Group's response to the COVID-19 crisis and by
applying the learnings from successive lockdowns we are well placed to grow
back stronger.
2021 results and net debt
The Group finished the year with results that were in line with the Board's
expectations.
Revenue fell by 5% to £38.9m (2020: £40.9m), in the first full year to be
affected by the COVID-19 pandemic.
This was primarily due to a 10% reduction in revenues in our Consumer Legal
Services division, caused by a reduction in the number of personal injury
accidents in the market and our decision to place more enquiries into National
Accident Law (NAL) for higher future profits. Revenues in our Critical Care
division grew by 9% to £12.3m (2020: £11.3m).
As a consequence, the Group's underlying operating profit(1) reduced by 27% in
the year to £4.2m (2020: £5.7m). As expected, underlying operating profit
margins decreased from 13.8% to 10.7%. In the Consumer Legal Services
division, underlying operating profit reduced by 31% to £3.7m (2020: £5.4m)
and in Critical Care, underlying operating profit reduced by 8% from £3.6m in
2020 to £3.3m.
Our decision to grow case processing in NAL required investment in the year,
however this is expected to generate higher margins in the medium and long
term. In our Critical Care division, our investments in people, systems and
marketing activity, as well as changes to the commercial agreements we have
with our case management and Expert Witness associates intended to secure
resource, will help us to grow our market share and increase future
revenues.
We reduced costs in our Group shared services functions by 16% in the year to
£1.6m (2020: £1.9m) and other items, which comprise share-based payment
charges and amortisation charges on intangible assets recognised as part of
business combinations, were 12% lower at £1.2m (2020: £1.4m).
There were no exceptional costs incurred in the year. In 2020 we recognised
£1.4m of exceptional costs, largely related to the transformation and
restructure of the Group's Consumer Legal Services division. This work is
now complete.
The profit attributable to members' non-controlling interests in our joint
venture LLPs reduced by 16% to £3.5m (2020: £4.1m) and we reduced the number
of new enquiries placed with joint venture partners by 73% in the year.
Profit before tax increased to £0.2m, from a loss before tax of £0.2m in
2020. Basic earnings per share (EPS) were 0.3p (2020: loss per share of
0.5p) and diluted EPS were 0.3p (2020: a loss per share of 0.5p). Underlying
basic EPS, the calculation of which is explained in note 1, were 0.3p (2020:
1.9p).
The Group has continued to carefully manage its cash flows while investing in
its two divisions for future growth. Free cash flow (FCF) was £0.8m for the
year. This compares to £6.1m in 2020, but our focus then was on increasing
liquidity in response to the initial wave of the pandemic. Net debt reduced
in the year to £15.5m at 31 December 2021, down from £16.3m at the end of
2020.
We extended the term of our Revolving Credit Facility with Yorkshire Bank by
two years to the end of 2024 and felt confident to reduce the size of the
facility from £25.0m to £20.0m, consistent with our objective to reduce net
debt. At year-end we had headroom in the facility of £2.0m in addition to
£2.5m of cash in the bank.
The Board does not believe that it is appropriate to reinstate dividends at
this time and the Directors have recommended that no final dividend be paid in
respect of 2021.
Consumer Legal Services
In our Consumer Legal Services division, revenue contracted by 10% from
£29.6m in 2020 to £26.6m in 2021, and underlying operating profit fell by
31% to £3.7m (2020: £5.4m).
Our strategy to succeed in the personal injury market is to create a higher
margin, integrated law firm underpinned by our flexible business model. We
will achieve this by continuing to generate our own work, using our National
Accident Helpline brand and by processing an increasing number of those
enquiries through our own consumer-focused law firm, National Accident Law.
Over time, we will process an increasing number of higher-margin, non-RTA
claims and our small claims proposition will allow us to maximise the return
from lower value RTA claims. Finally, our agile and scalable placement model
is designed to balance the work we place with our panel, and joint venture
partners, for in-year profit and cash with the work we process ourselves for
greater, but deferred profit and cash.
Despite the challenges of operating in the pandemic, I'm pleased to report
that we made progress with this strategy in 2021.
Claim volumes in the personal injury market remained depressed throughout 2021
with registered claim numbers in the market running at c.60% of pre-COVID
levels throughout much of the second half of 2021. This was due to two
reasons.
1) Firstly, the Government restrictions that were put in place
in response to the COVID-19 pandemic resulted in reduced mobility levels
across the UK. This was evidenced in mobility data provided by Google, which
started 2021 mobility levels at c. 30% of the baseline(2) before COVID-19 and
grew to around 75% of baseline by November 2021. December 2021 then saw a
further significant reduction, falling to around 40% before partially
recovering in the new year.
2) The second factor that caused claim numbers to be depressed
was the impact of the regulatory changes to low value RTA claims from 31 May
2021. On this date, the Government implemented its planned changes to reduce
compensation tariffs and eliminate cost awards for most RTA claims worth
£5,000 or less. This removed the majority of value for firms processing RTA
cases. If the intention was to encourage the majority of claimants to manage
their own claim using the Government's online portal, then the reality is very
different. Since launch, fewer than 10% of claimants have processed their
own claim and the vast majority still chose to rely on a law firm to represent
them. The significant reduction in compensation available to injured
claimants combined with the complexity of the process has resulted in a lower
appetite to claim, leading to fewer RTA claims since implementation.
The Government continues to pursue reform to the personal injury market. In
2021, the Government confirmed that the small claim limit for non-RTA claims
will increase from £1,000 to £1,500 from 6 April 2022. Then in January
2022, the Department of Health launched a consultation on fixing costs in
clinical negligence claims worth up to £25,000. The proposals are designed
to reduce claimant's legal costs, saving the NHS an estimated £500m over 10
years. We were anticipating both of these proposals, and we do not expect
them to have a significant impact on our business.
The National Accident Helpline brand continues to be the most trusted in the
industry(3) and independent research found it to be associated with being
helpful, experienced and professional. Our marketing activity produced
32,132 new enquiries in the year, which was fewer than the prior year (2020:
36,214) but that reflects a full year of COVID-19 impact. Pleasingly, 10% more
enquiries were delivered in the period April to December 2021 then the
equivalent COVID-19 affected period in the prior year. Furthermore, this
period delivered 18% more enquiries from organic channels in 2021 than the
previous year, which helped us to manage our marketing cost in a highly
competitive environment.
We increased our placement of enquiries into NAL by 130% in the year, which
included 569 non-RTA enquiries and 3,529 small claims. Overall, 26% of our
total enquiries were placed into NAL for processing, which was a significant
increase on the 10% placed in 2020. As a result, at the end of the year, NAL
was processing 7,918 ongoing claims, which was an increase of 166% on the
previous year. These claims represent a store of value for the business that
will deliver future revenues and cash at an enhanced margin over what we could
achieve through placing the claims into our panel. Based on our current
assumptions on claim success and value, we estimate that these claims will
generate c.£6.7m (2020: £3.8m) of future revenue and future cash receipts of
£8.4m (2020: £4.7m). We maintained the proportion of enquiries placed with
our panel of third-party laws firms and reduced the proportion of enquiries in
our joint venture law firms by 73%.
Also within our Consumer Legal Services division is our Residential Property
business, comprising Homeward Legal and Searches UK. This business had a
strong year, buoyed by the stimulus of the Stamp Duty Land Tax holiday and
very strong levels of business development success in our search business.
These businesses generated revenue and contribution to operating profit before
shared costs of £5.6m (2020: £6.3m) and £0.8m (2020: £0.3m) respectively
and were a net contributor to the Group's free cash flow in 2021.
Critical Care
Revenues in our Critical Care business, Bush & Co, grew by 9% to £12.3m
(2020: £11.3m) and underlying operating profit reduced by 8% to £3.3m (2020:
£3.6m).
Our strategy in Bush & Co is to grow share in our market by appealing to a
broader customer base, extending our competencies and specialisms and to be
more efficient at what we do through the use of technology. I am pleased
with the progress we made with these objectives in 2021.
Bush & Co operates in the catastrophic injury market, which suffered a
similar impact from COVID-19 as in Personal Injury, although it is unaffected
by the small claims' reforms. The majority of work stems from RTA injuries
and medical negligence, both of which have seen reduced volumes over the past
couple of years. Case management work is required soon after an accident and
so the impact on our business was clear in 2020 and throughout 2021. Expert
Witness services, conversely, are not required until the legal claim is well
underway and average times from accident to instruction are around three
years. Therefore, the full effect of the pandemic may not be seen for some
time.
We invested in marketing and business development in the year and our focus on
building strong, enduring customer relationships was rewarded with a 23%
increase in instructions for Expert Witness work and a 5% increase for
instructions for case management INAs.
We continued our innovative "Happy Post" marketing campaign, delivering treats
and wellbeing packs to solicitors and insurers, which attracted praise from
across the industry and won us the accolade of Marketing Campaign of the Year
at the 2021 PI Awards.
Since the team relaunched the brand in 2019, Bush & Co has enhanced its
reputation as an award winning, independent market leader, known for
delivering a premium service with expertise, integrity and
professionalism.
The business increased the number of Expert Witness reports it issued by 21%,
INA reports by 26% and ongoing case management clients it supported by 1%.
This was an excellent result delivered by our operations teams and
associates. We recruited 34 new associates and proudly work with 93 case
managers and 96 expert witnesses across the UK, across a range of specialisms.
We launched Bush Care Solutions in August 2021, which is our expanded care
proposition to support clients who require nurse-led care in their homes.
This has been accredited by the Care Quality Commission and, along with our
case management service, provides for a fully managed solution. We also
launched our differentiated case management proposition, which is targeted at
serious claims valued between £100,000 and £500,000. The division employed
three new case managers in the year to deliver this proposition and the team
have already started securing relationships with insurer customers.
We have continued to invest in technology in Bush & Co, which will drive
efficiency savings and be a growth enabler. In April 2021, we launched our
proprietary medico-legal report writing tool for Expert Witness reports and
this was utilised on 26% of reports in 2021. We also continued to roll out
improvements to our case management system.
Our people, culture and communities
At NAHL, we aim to build a sustainable business for the long-term gain of all
our stakeholders. While an important part of that is the development of our
business models in our two divisions, we are committed to doing business in a
way that is beneficial to our people, our communities and the environment.
We employed 258 people as at 31 December 2021, a decrease of 1% from the end
of 2020 and our team is split in the ratio 30:70 male to female staff. We
have an experienced and capable leadership team that was restructured in the
year, following my appointment as CEO. Chris Higham was appointed to the
role of acting CFO and Will Herbertson to the role of Managing Director of the
Consumer Legal Services division. In October 2021, we were pleased to
welcome John Kushnick to the Group to take on the role of Legal Operations
Director, responsible for growing NAL. John is well known and respected in
the industry, and we are already benefiting greatly from his experience.
My team and I have always believed that for a business to be sustainable, it
requires an inclusive and supportive culture, with clear leadership and a
strong focus on employee engagement. The Group's values of Driven, Curious,
Passionate and Unified guide us in our short and long-term decision making and
our culture has helped to sustain the business through the challenges of
COVID-19 and our business transformation.
In 2021, we continued our focus on clear and regular staff communication, with
regular meetings and weekly updates. As the conditions evolved, so too did
our communications, with an increased focus on connecting with people working
remotely and on staff wellbeing. This was enhanced with the addition on our
Group-wide employee engagement platform, called Totem, during the year. This
mobile app helped our people to connect and award each other recognition, post
videos and share encouragement.
Our annual engagement survey proved once again that our people appreciate our
focus on culture and communication. Our engagement score of 75% is
significantly higher than the UK average of 11%(4). We have also received
external validation of our culture, with our Personal Injury and Critical Care
businesses holding the prestigious Gold status from Investors In People and
our Residential Property business being awarded Silver.
Finally, we were thrilled that Bush & Co was placed at number 43 on Best
Companies' 'The UK's 100 Best Small Companies to Work for 2021', building on a
similar award achieved by National Accident Helpline in 2019.
We were pleased to support a number of community initiatives during the year,
including supporting local food banks through monetary donations, collections
and donations of Christmas lunches. As at 31 December, the Group had also
funded the planting of 172 trees in Madagascar, one for each Consumer Legal
Service employee. This will be extended to include Critical Care in 2022 and
we will continue adding trees each time we recruit someone new.
Potential sale of Homeward Legal
We announced last year that we intended to explore a potential sale of our
repositioned and streamlined Residential Property business, Homeward Legal.
While this initially attracted encouraging levels of interest from the focused
group of potential buyers we engaged with, it proved very difficult to
complete a deal due to external factors beyond our control. While we are not
in negotiations with a buyer at present, we will look to explore a sale and
consider our strategic options for this business in 2022.
Conclusion and outlook
In 2021, we increased the number of claims being processed in NAL and launched
several new initiatives across both divisions. We carefully managed our
investment levels to remain profitable and showed a reduction in net debt.
This progress has continued into 2022 as we look to grow the number of
enquiries we generate, increase the number of claims we are processing in NAL,
and develop our pipeline of work in Bush & Co.
In our Personal Injury business, enquiry numbers for the first two months of
2022 were up 42% compared to the same period in 2021 and we have experienced
an improvement in the average daily enquiry run rate each month since December
2021. We allocated 31% of these enquiries to NAL, compared to 23% for the
same period in 2021. In Critical Care, despite a relatively slow start in
January caused by concerns around the Omicron variant of COVID-19, the number
of Expert Witness and INA reports issued in the first two months of 2022
increased by 8% and 7% respectively on the same period in 2021. Instruction
numbers for the same period were also robust, with Expert Witness ahead by 7%
and INA instructions by 28%.
Now that the last of the COVID-19 restrictions have been lifted, we expect to
see mobility levels across the UK continue to improve and for this to result
in a gradual increase in the number of accidents in our markets. The Board
have undertaken an impact assessment considering the recent developments in
the Ukraine crisis and do not consider that this will have a significant
impact on the Group's operations.
Thank you to our employees
I would like to end by putting on record my thanks to our employees for their
hard work, support and commitment. They faced many challenges during 2021,
including having to adjust to the changing COVID-19 restrictions, and
demonstrated their resilience and dedication to supporting our customers and
each other.
James Saralis
Chief Executive Officer
1. Underlying operating profit excludes certain exceptional items as
detailed in note 1. Refer to note 1 for a reconciliation of this measure to
IFRS operating profit.
2. COVID-19 Community Mobility Reports, google.com
3. Independent research produced by The Nursery Research &
Planning Ltd, September 2021
4. Gallup state of the global workplace report 2021
CFO report
Overview
The year began with the UK in its third and most protracted lockdown as the
Group continued to feel the effects of COVID-19 disrupting volumes in our
markets as consumer behaviour changed and accident numbers were supressed. The
year also saw the long anticipated small claims reforms come into effect at
the end of May. Despite this, the Group remained profitable, generated cash
and reduced net debt.
In 2020, we focused on generating immediate cash and profit through placement
of enquiries into our panel law firms. Having created our wholly-owned law
firm, National Accident Law (NAL), this year we turned attention to scaling
the business to realise higher returns and higher profit in the future.
We also invested in new initiatives and technology in the Critical Care
division to underpin future growth.
From an operational perspective, revenue fell 5% from £40.9m to £38.9m. This
was largely due to the full year impact of the COVID-19 pandemic effecting
accident numbers, and reducing demand for our services, along with our
strategic decision to grow the number of enquiries we placed with our law
firm, NAL.
Underlying operating profit decreased by 27% from £5.7m to £4.2m at an
underlying margin of 10.7% (2020: 13.8%), operating profit fell £0.1m to
£4.2m and profit before tax was £0.2m (2020: loss of £0.2m).
Review of income statement
2021 2020 Change Change
£m £m £m %
Consumer Legal Services 26.6 29.6 (3.0) (10.0)
Critical Care 12.3 11.3 1.0 (9.1)
Revenue 38.9 40.9 (2.0) (4.7)
Consumer Legal Services 3.7 5.4 (1.7) (31.1)
Critical Care 3.3 3.6 (0.3) (8.4)
Shared Services (1.6) (1.9) 0.3 16.0
Other items (1.2) (1.4) 0.2 12.1
Underlying operating profit 4.2 5.7 (1.5) (26.6)
Exceptional items 0.0 (1.4) 1.4 (100.0)
Operating profit 4.2 4.3 (0.1) (3.5)
Profit attributable to members' non-controlling interests in LLPs (3.5) (4.1) 0.6 16.1
Financial income 0.1 0.2 (0.1) (49.4)
Financial expense (0.6) (0.6) 0.0 5.1
Profit/(Loss) before tax 0.2 (0.2) 0.5 205.0
Taxation (0.0) (0.0) (0.0) -295.0
Profit/(Loss) and total comprehensive income for the year 0.2 (0.2) 0.4 163.9
Consumer Legal Services
The Consumer Legal Services division generated £26.6m of revenue, a decline
of 10% from £29.6m while underlying operating profit fell by 31% from £5.4m
to £3.7m. The national lockdown at the start of the year once again supressed
accident numbers with enquiry volumes 18% lower than the second half of 2020.
Across the full year, the National Accident Helpline brand generated 32,132
enquiries, 11% lower than last year (2020: 36,214) albeit 2020 was largely
unaffected by COVID-19 in the first quarter. Enquiries grew 27% in the second
half of the year compared to the first half.
We increased the number of enquiries placed into our wholly-owned law firm,
NAL and following the introduction of the new rules around low value Road
Traffic Accident (RTA) claims at the end of May, all volume from RTA in
England and Wales has been placed with NAL. This has contributed to a 130%
year-on-year increase in the number of enquiries processed by NAL. At the end
of 2021, NAL was processing 7,918 ongoing claims, an increase of 166% on the
previous year. These ongoing cases are expected to contribute c£6.7m (2020:
£3.8m) in future revenue and c£8.4m of future cash receipts (2020: £4.7m).
Enquiry volumes placed with joint venture law firms decreased by 73% in the
year.
The enquiries processed by NAL have a longer revenue cycle that can run to a
number of years compared to that of our panel arrangements, due to NAL
recognising income only once an admission of liability has been received from
the defendant. As we anticipated, the reforms have also resulted in a material
reduction in revenue from a large proportion of our RTA claims.
The Residential Property business generated a positive contribution to profit
of £0.8m (2020: £0.3m) before allocation of shared costs. The business
benefitted from an extension to the market stimulus in the form of the Stamp
Duty Land Tax holiday on properties valued up to £500,000 alongside business
development successes and a full year impact of cost savings delivered in the
previous year.
Critical Care
The Critical Care division grew revenue by 9% from £11.3m to £12.3m (2020: a
reduction of 16%) with Underlying Operating Profit reducing by 8% from £3.6m
to £3.3m.
The division has continued to invest in business development activity
contributing to a 23% increase to Expert Witness instructions and a 6%
increase in INA instructions. Expert Witness reports delivered grew by 21%.
The number of ongoing case management cases has also marginally increased
although revenue from these cases is broadly flat as appointments have been
carried out remotely during COVID-19 as opposed to face-to-face.
Operating costs increased in the year due to investments in people, marketing
activity and systems to grow the business including new initiatives, Hubs and
Bush Care Solutions (see CEO report) as well as changes to commercial
agreements to secure associate resource which also further strengthened our
IR35 position with associates.
Shared Services
The costs for the Group's Shared Services functions fell by £0.3m to £1.6m
(2020: £1.9m).
Government Support
The Group made use of £0.01m of Government support in the form of the
Coronavirus Job Retention Scheme (2020: £0.4m). This income is shown in the
financial statements in underlying operating profit as netted off
administration expenses within the divisional results. We repaid £0.4m of VAT
deferred from 2020 in the year with no further deferral in 2021.
Exceptional and non-underlying items
The Group did not incur any exceptional costs in the year (2020: £1.4m).
Costs relating to the exploration of disposing of the Residential Property
business have been expensed within underlying operating profit.
Taxation
The Group's tax charge of £79,000 (2020: £2,000) represents an effective tax
charge of 33.6% (2020: -0.9%). The tax charge is higher than the standard
corporation tax rate of 19% for the reasons set out in note 9. The deferred
tax credit originates from temporary differences in intangible assets acquired
on business combinations.
Earnings per share (EPS) and dividend
Underlying EPS for the year were 0.3p (2020: 1.9p). Underlying EPS provide a
better comparison year on year as earnings have been adjusted to exclude
certain exceptional items (net of the standard rate of corporation tax). This
is explained in note 1.
Basic EPS for the year were 0.3p (2020: -0.5p) and the diluted EPS were 0.3p
(2020: -0.5p), reflecting the impact of share options due to vest in future
years.
The growth in basic EPS is due to the exceptional costs totalling £1.4m
(comprising costs for the strategic transformation of the Personal Injury
division, restructure of Residential Property and Personal Injury into a new
Consumer Legal Services division and due diligence costs relating to a
potential offer for the Group) not repeated in 2021, partially offset by a
full year impact of COVID-19 and continuing investment in the Personal Injury
and Critical Care businesses.
The Board does not believe it is appropriate to re-instate dividends at this
time and the Directors have recommended that no final dividend be paid in
respect of 2021 (2020: nil).
Review of the statement of financial position
In reviewing the statement of financial position, I consider the significant
items to be working capital, defined as trade and other receivables less trade
and other payables, and net debt.
Working Capital
Trade and other receivables less trade and other payables totalled £17.2m at
year end (2020: £16.7m).
Trade receivables and accrued income balances related to the processing of
personal injury claims decreased to £6.9m (2020: £7.3m). These claims are
yet to reach the settlement stage but have received an admission of liability
from the defendant. This is in line with the Group's accounting policy for
legal services revenue. Accrued income included £1.7m (2020: £0.9m) relating
to liability admissions received on open cases within National Accident Law.
There is a significant element of uncertainty in estimating this accrued
income. The Directors believe that the assumptions adopted are appropriate and
based on historical experience of claims processed in our law firms and by our
panel. These assumptions are updated with actual results as claims settle.
Disbursement receivables increased from £6.7m to £8.3m as we scaled NAL.
Receivables not relating to the law firms decreased from £20.3m to £18.2m.
This is a result of the maturity of historic deferred debt from our panel
debtors including having received £1.5m of the settlement relating to the
termination of National Law Partners, agreed in 2019. The remaining amount of
£1.4m is due to be settled by the end of Q2 2022.
Payables reduced from £17.5m on 31 December 2020 to £16.2m at the balance
sheet date. This was due to the unwinding of product commissions settled in
advance and a £0.4m payment for VAT deferred from 2020, offset by an increase
in disbursement payables in our law firms. The latter increased, as expected,
from £6.0m to £7.2m.
Net debt and bank facilities
We carefully managed our cash resources during the year to balance an
investment in processing personal injury cases with a desire to reduce net
debt. As a result, net debt fell from £16.3m as at 31 December 2020 to
£15.5m at year-end. Net debt is defined in note 9 and is comprised of £2.5m
of cash (2020: £3.6m) offset by borrowings of £17.9m (2020: £19.9m).
The borrowings represent a balance on the Group's Revolving Credit Facility
with its lender, Yorkshire Bank. We successfully renegotiated the facility
with Yorkshire Bank extending the facility term for a further 24 months
through to 31 December 2024. As part of the agreement with Yorkshire Bank, new
covenants have been agreed aligning with our latest internal forecasts and the
overall facility has reduced from £25m to £20m to appropriately reflect our
medium-term requirements.
Review of the cash flow statement
2021 2020 Change Change
£m £m £m %
Net cash generated from operating activities 5.1 11.0 (5.9) (53.4)
Net cash used in investing activities (excl. disposal of subsidiaries) (0.6) (1.1) 0.5 (42.7)
Principal element of lease payments (0.2) (0.5) 0.3 (70.3)
Drawings paid to LLP members (3.4) (3.2) (0.2) (6.8)
Facility arrangement fees (0.1) (0.1) 0.0 (25.6)
Net cash used in financing activities (before borrowings) (3.7) (3.8) 0.1 5.3
Free cash flow 0.8 6.1 (5.3) (86.0)
Disposal of subsidiaries 0.0 (1.3) 1.3 (100.0)
Repayment of borrowings (2.0) (3.8) 1.8 (46.7)
Net (decrease)/increase in cash and cash equivalents (1.2) 1.0 (2.2) (210.1)
The Group's cash and cash equivalents reduced by £1.2m in the year (2020:
increase of £1.0m). This was primarily due to repaying borrowings and
increased investment. The significant items in the consolidated cash flow
statement are net cash from operating activities, drawings paid to LLP members
and the repayment of borrowings.
Net cash from operating activities reduced from £11.0m to £5.1m as we
switched focus back to growing the number of cases processed in NAL in line
with our strategy. We temporarily changed focus to increase liquidity in
2020, in the immediate aftermath of the onset of the COVID-19 pandemic. Net
cash generated from operating activities included £2.1m in relation to claims
settlements received by National Accident Law (2020: £1.3m).
The Group paid £3.4m (2020: £3.2m) of drawings to its partners in the
joint-venture law firms during the year, under the terms of our agreements.
This reflects the growth in claims won and settled during the year. The
Group also acquired £0.3m (2020: £0.8m) of intangible assets in the year as
it sought to improve its technological offering in Critical Care.
The Group repaid £2.0m (2020: £3.8m) of borrowings in the year on its
Revolving Credit Facility.
Free Cash Flow (FCF) is the Group's KPI with regards to cash flow. FCF in 2021
was £0.8m compared to £6.1m in 2020. The primary reason for this decrease is
the change of focus to processing more cases in NAL as outlined above.
The Group also monitors underlying cash conversion. This fell to 150.2% in the
year (2020: 228.9%), a direct result of the fall in operating cash as
explained above.
Conclusion
In conclusion, despite the continued disruption caused by the COVID-19
pandemic, we have made progress with our strategy, investing in both the
Consumer Legal Services and Critical Care divisions, positioning them well to
maximise future returns whilst continuing to manage debt.
Chris Higham
Acting Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Note £000 £000
Revenue 1,2 38,947 40,875
Cost of sales (21,352) (21,602)
Gross profit 17,595 19,273
Administrative expenses (13,439) (14,964)
Underlying operating profit 1 4,156 5,659
Exceptional items 3 - (1,350)
Operating profit 2 4,156 4,309
Profit attributable to members' non-controlling interests in LLPs (3,451) (4,115)
Financial income 85 168
Financial expense (555) (585)
Profit/(Loss) before tax 235 (223)
Taxation 4 (79) (2)
Profit/(Loss) and total comprehensive income for the year 156 (225)
All profits and losses and total comprehensive income are attributable to the
owners of the Company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2021
2021 2020
Note £000 £000
Non-current assets
Goodwill 55,489 55,489
Other intangible assets 3,701 4,557
Property, plant and equipment 477 367
Right of use assets 2,315 2,761
Deferred tax asset 23 14
62,005 63,188
Current assets
Trade and other receivables (including £3,718,000 (2020: £7,828,000) due in
more than one
year) 5 33,404 34,285
Cash and cash equivalents 2,458 3,609
35,862 37,894
Total assets 97,867 101,082
Current liabilities
Trade and other payables 6 (16,211) (17,547)
Lease liabilities (242) (248)
Member capital accounts (4,210) (4,177)
Current tax liability (97) (126)
(20,760) (22,098)
Non-current liabilities
Lease liabilities (1,953) (2,195)
Other interest-bearing loans and borrowings (17,910) (19,901)
Deferred tax liability (625) (826)
(20,488) (22,922)
Total liabilities (41,248) (45,020)
Net assets 56,619 56,062
Equity
Share capital 116 115
Share option reserve 4,312 3,912
Share premium 14595 14,595
Merger reserve (66,928) (66,928)
Retained earnings 104,524 104,368
Capital and reserves attributable to the owners of NAHL Group plc 56,619 56,062
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Capital and
reserves
Share attributable to
Share option Share Merger Retained the owners of
capital reserve premium reserve earnings NAHL Group plc
Note £000 £000 £000 £000 £000 £000
Balance at 1 January 2020 115 3,389 14,595 (66,928) 104,593 55,764
Total comprehensive income for the year
Loss for the year - - - - - (225)
Total comprehensive income - - - - - (225)
Transactions with owners,
recorded directly in equity
Issue of new Ordinary Shares - - - - - -
Share-based payments - 523 - - - 523
Total transactions with owners, recorded
directly in equity - 523 - - - 523
Balance at 31 December 2020 115 3,912 14,595 (66,928) 104,368 56,062
Total comprehensive income for the year
Profit for the year - - - - 156 156
Total comprehensive income - - - - 156 156
Transactions with owners,
recorded directly in equity
Issue of new Ordinary Shares 1 - - - - 1
Share-based payments - 400 - - - 400
Total transactions with owners, recorded
directly in equity 1 400 - - - 401
Balance at 31 December 2021 116 4,312 14,595 (66,928) 104,524 56,619
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
£000 £000
Cash flows from operating activities
Profit for the year 156 (225)
Adjustments for:
Profit attributable to members' non-controlling interests in LLPs 3,451 4,115
Property, plant and equipment Depreciation 171 169
Right of use asset depreciation 306 430
Amortisation of intangible assets 1,195 1,345
Financial income (85) (168)
Financial expense 555 585
Share-based payments 400 523
Taxation 79 2
6,228 6,776
Increase in trade and other receivables 1,012 2,223
Increase in trade and other payables (1,337) 2,945
5,903 11,944
Interest paid (398) (469)
Tax paid (365) (450)
Net cash generated from operating activities 5,140 11,025
Cash flows from investing activities
Acquisition of property, plant and equipment (281) (269)
Acquisition of intangible assets (339) (820)
Disposal of subsidiary net of cash disposed of(1) - (1,273)(1)
Interest received 2 10
Net cash used in investing activities (618) (2,352)
Cash flows from financing activities
Repayment of borrowings (2,000) (3,750)
Issue of share capital 1 -
Facility arrangement fees (90) (121)
Principal element of lease payments (166) (558)
Drawings paid to LLP members (3,418) (3,199)
Net cash generated from/(used in) financing activities (5,673) (7,628)
Net (decrease)/increase in cash and cash equivalents (1,151) 1,045
Cash and cash equivalents at 1 January 3,609 2,564
Cash and cash equivalents at 31 December 2,458 3,609
1. The Group disposed of its interest in National Law Associates LLP
on 2 January 2020 and de-consolidated its results from this point.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Consolidated Financial Statements
The preliminary financial statements do not constitute statutory accounts for
NAHL Group plc within the meaning of section 434 of the Companies Act 2006 but
do represent extracts from those accounts.
The statutory accounts will be delivered to the Registrar of Companies in due
course. The auditors' have reported on those accounts. Their report was
unqualified. The auditors' report does not contain a statement under either
section 498(2) of Companies Act 2006 (accounting records or returns inadequate
or accounts not agreeing with records and returns), or section 498(3) of
Companies Act 2006 (failure to obtain necessary information and explanations).
The Group's financial statements have been prepared in accordance with
International Accounting Standards in conformity with the Companies Act 2006,
IFRIC interpretations and under the historical cost convention.
Going Concern
In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Company and
Group can continue in operational existence for the foreseeable future.
The Audit and Risk Committee has reviewed the Going Concern assessment
prepared by management. The assessment includes detailed financial forecasts
covering the Group's adopted strategy and considers a range of sensitivities.
The period considered by the forecasts is to the end of June 2023, being
approximately 12 months from the date of signing of the 2021 annual report and
financial statements. The key assumptions in the forecasts are a) number of PI
enquiries generated and b) placement of these enquiries (into our panel, our
joint venture law firms or NAL). The going concern assessment focuses on two
key areas, being the ability of the Group to meet its debts as they fall due
and being able to operate within its banking facility.
The Group has access to a £20.0m revolving credit facility (RCF) with its
bankers.. In all of the sensitivities the Group has modelled it would have
sufficient liquidity within its current RCF to meet its liabilities as they
fall due and would not need to access additional funding.
The Group's RCF is subject to quarterly covenant testing. The Group has
modelled a worst-case scenario, assuming that volumes remain at 2021 levels,
and has then considered the options it would have available to mitigate
against any shortfall in profits and cash. Under this
scenario, the Group would be able to implement sufficient mitigating actions
in order to operate within its covenants. The likelihood of this scenario
occurring is considered to be remote and therefore the directors consider the
Going Concern basis of accounting to be appropriate.
Considering the above, the Directors have a reasonable expectation that the
Company and Group have adequate resources to continue in existence for the
foreseeable future and have concluded it is appropriate to adopt the going
concern basis of accounting in the preparation of the financial statements.
New standards and amendments adopted by the Group
There are no new or amended standards applicable for the current reporting
period.
New standards, interpretations and amendments not yet effective
There are no new standards, interpretations and amendments that are not yet
effective and that would be expected to have a material impact on the Group in
the current or future reporting periods and on foreseeable future
transactions.
Statutory and non-statutory measures
The financial statements contain all the statutory measures and disclosures
required under IFRS, which is the financial reporting
framework adopted by the Group. In addition to these measures, management
monitors a number of non-statutory, alternative
performance measures (APMs) as part of its internal performance monitoring and
when assessing the future impact of operating
decisions. The APMs allow a year-on-year comparison of the underlying
performance of the business by removing the impact of items
occurring either outside the normal course of operations or as a result of
intermittent activities, such as acquisitions or strategic projects.
The Directors have presented these APMs in the Strategic Report because they
believe they provide additional useful information for
shareholders on underlying business trends and performance. As these APMs are
not defined by IFRS, they may not be directly
comparable to other companies' APMs. They are not intended to be a substitute
for, or superior to, IFRS measurements and the Directors
recommend that the IFRS measures should also be used when users of this
document assess the performance of the Group.
The APMs used in the Strategic Report are defined in the table below and the
principles to identify adjusting items have been applied on a
basis consistent with previous years The key adjusting items in arriving at
the APMs are as follows:
· Exceptional items are non-recurring items that are material by
nature and separately identified to allow for greater comparability of
underlying Group operating results year-on-year. Examples of exceptional items
in the current and/or previous years include reorganisation and restructuring
costs; revaluation of liability associated with legacy ATE products; and
acquisition related costs. Exceptional costs are separately identified to
allow for greater comparability of underlying Group operating results
year-on-year.
Nature of Related IFRS Related IFRS
measure measure source Definition Use/relevance
Underlying Operating Consolidated Based on the related IFRS measure
operating profit income but excluding exceptional items, IFRS
profit statement 2 share-based payment charges and
amortisation of intangible assets
acquired on business combinations.
Allows management and users of the financial statements to assess the
underlying trading results after removing material, non-recurring items that
are not reflective of the core trading activities and allows comparability of
core trading performance year on year.
Underlying Cash flow Consolidated Based on the related IFRS measure
operating from cash flow but excluding cash flows in respect of
cash flow operating statement the items excluded from underlying
activities operating profit as described above.
Underlying Not defined n/a Calculated as underlying operating
cash by IFRS cash flow divided by underlying
conversion operating profit.
Free Cash Flow Not defined by IFRS n/a Calculated as net cash generated from operating activities less net cash used
in investing activities (excluding any disposals of subsidiaries) less
payments made to partner LLP members and less principal element of lease
payments
Provides management with an indication of the amount of cash available for
discretionary investing or financing after removing material non-recurring
expenditure that does not reflect the underlying trading operations and allows
management to monitor the conversion of underlying profit into cash.
Underlying Basic EPS Consolidated income statement Based on the related IFRS measure but calculated using underlying profit for
the year attributable to shareholders.
Basic
EPS (before NAL Start-up losses)
Allows management and users of the financial statements to assess the
underlying trading results after removing material, non-recurring items that
are not reflective of the core trading activities and allows comparability of
core trading performance year-on-year
Movement in Consolidated
Working
Working capital is not defined by
capital receivables statement of IFRS. This is defined by management
and cash flows as being the movement in trade
movement receivables less the movement in
in payables trade payables.
Allows management to assess the short-term cash flows from movements in the
more liquid assets.
Net debt Not defined Consolidated Net debt is defined as cash and cash
by IFRS cash flow equivalents less interest bearing
statement borrowings net of loan arrangement
fees.
Allows management to monitor the overall level of debt in the business. As
stated in the strategic report, loan funding is key to the Group's future
strategy as an increasing proportion of profits and cash flows are deferred
until case settlement.
A reconciliation of each measure is provided as follows:
Underlying operating profit: 2021 2020
£000 £000
IFRS measure - operating profit 4,156 4,309
Exceptional items - 1,350
Underlying operating profit 4,156 5,659
Underlying operating cash flow and underlying cash conversion:
2021 2021 2020 2020
Underlying Exceptional 2021 Underlying Exceptional 2020
operations items Total operations items Total
£000 £000 £000 £000 £000 £000
Operating profit 4,156 - 4,156 5,659 (1,350) 4,309
Share-based payments 400 - 400 523 - 523
Depreciation and amortisation 1,672 - 1,672 1,944 - 1,944
Increase in trade/other receivables 1,012 - 1,012 2,223 - 2,223
Increase in trade/other payables (999) (338) (1,337) 2,607 338 2,945
Operating cash flow 6,241 (338) 5,903 12,956 (1,012) 11,944
Underlying Operating cash conversion 150.2% 228.9%
Interest paid (398) (469)
Tax paid (365) (450)
Net cash generated from operating activities 5,140 11,025
Net cash used in investing activities (excluding disposals of subsidiaries) (618) (1,079)
Lease payments (166) (558)
Issue of share capital 1 -
Facility arrangement fees (90) (121)
Payments to/from partner LLP members (3,418) (3,199)
Free cash flow 849 6,068
2021 2020
Underlying basic EPS:
£000 £000
IFRS measure - loss for the year attributable to shareholders 156 (225)
Exceptional items - 1,350
Tax effect of the above - (257)
Underlying profit for the year attributable to shareholders 156 868
Weighted average number of shares 46,245,345 46,238,878
Underlying basic EPS (before NAL start-up losses) 0.3 1.9
Working capital: 2021 2020
£000 £000
Movement in trade and other receivables 1,012 2,223
Movement in trade and other payables (1,337) 2,945
Working capital (325) 5,168
Movement in interest accruals (84) (158)
Corporation tax debtor (47) 15
Movement in financing accruals - 110
IFRS measure - movement in trade and other receivables less movement in trade (456) 5,135
and other payables
Net debt is defined in Note 9.
2 Operating segments
Consumer Critical Other Underlying Exceptional
Legal Services Care shared Services items operations items Eliminations(2) Total
£000 £000 £000 £000 £000 £000 £000 £000
Year ended 31 December 2021
Revenue 26,583 12,364 - - 38,947 - - 38,947
Depreciation and amortisation (272) (166) (363) (871) (1,672) - - (1,672)
Operating profit/(loss) 3,726 3,293 (1,592) (1,271) 4,156 - - 4,156
Profit attributable to non-controlling interest members in LLPs (3,451) - - (3,451) (3,451)
Financial income 85 - - - 85 - - 85
Financial expenses - (10) (545) - (555) - - (555)
Profit/(Loss) before tax 360 3,283 (2,137) (1,271) 235 - - 235
Trade receivables 2,999 4,896 - - 7,895 - - 7,895
Total assets(1) 29,625 6,335 79,413 - 115,373 - (17,506) 97,867
Segment liabilities(1) (17,754) (1,306) (3,556) - (22,616) - - (22,616)
Capital expenditure (including intangibles) 60 326 234 - 620 - - 620
Year ended 31 December 2020
Revenue 29,537 11,338 - - 40,875 - - 40,875
Depreciation and amortisation (636) (137) (247) (924) (1,944) - - (1,944)
Operating profit/(loss) 5,407(1) 3,594(1) (1,895) (1,447) 5,659 (1,350) - 4,309
Profit attributable to non-controlling interest members in LLPs (4,115) - - - (4,115) - - (4,115)
Financial income 161 6 1 - 168 - - 168
Financial expenses (1) (8) (576) - (585) - - (585)
Profit/(Loss) before tax 1,452 3,592 (2,470) (1,447) 1,127 (1,350) - (223)
Trade receivables 3,422 4,870 - - 8,292 - - 8,292
Total assets(1) 32,859 5,990 79,739 - 118,588 - (17,506) 101,082
Segment liabilities(1) (19,001) (1,232) (3,934) - (24,167) - - (24,167)
Capital expenditure (including intangibles) 540 244 305 - 1,089 - - 1,089
1. Total assets and segment liabilities exclude intercompany loan balances
as these do not form part of the operating activities of the segment.
2. Eliminations represents the difference between the
cost of subsidiary investments included in the total assets figure for each
segment and the value of goodwill arising on consolidation.
Significant customers
No customers account for greater than 10% of the total Group revenue (2020: no
customers).
Geographic information
All revenue and assets of the Group are based in the UK.
Operating segments
The activities of the Group are managed by the Board, which is deemed to be
the chief operating decision maker (CODM). The CODM has
identified the following segments for the purpose of performance assessment
and resource allocation decisions. These segments are split along product
lines and are consistent with those reported last year.
Consumer Legal services - Revenue is split along 3 separate streams being: a)
Panel - revenue from the provision of personal injury and conveyancing
enquiries to the Panel Law Firms, based on a cost plus margin model b)
Products - consisting of commissions received from providers for the sale of
additional products by them to the Panel Law Firms, surveys and the provision
of conveyancing searches and c) Processing - in the case of our ABSs and self-
processing operations, revenue receivable from clients for the provision of
legal services.
Critical Care - Revenue from the provision of expert witness reports and case
management support within the medico-legal framework for
multi-track cases.
Shared Services - Costs that are incurred in managing Group activities or not
specifically related to a product.
Other items - Other items represent share-based payment charges and
amortisation charges on intangible assets recognised as part of business
combinations.
Exceptional items - items that are non-recurring and that are material by
nature and separately identified to allow for greater comparability of
underlying Group operating results year-on-year. Examples of exceptional items
in the current and/or previous years include reorganisation
and restructuring costs; revaluation of liability associated with legacy ATE
products; and acquisition related costs. Exceptional costs are separately
identified to allow for greater comparability of underlying Group operating
results year-on-year.
3 Exceptional items
Exceptional items included in the income statement are summarised below:
2021 2020
£000 £000
Group strategic and reorganisation costs(1) - 613
Group restructure(2) - 399
Due Diligence costs(3) - 338
- 1,350
1. Group strategic and reorganisation costs relate to project costs to
implement fundamental strategic plans that fall outside of the core trading
operations of the business.
2. Group restructure costs largely relate to redundancy costs and
other one-off costs associated with the closure of the Chancery Lane office
and merger of the residential property and personal injury businesses into a
new Consumer Legal Services division.
3. Due diligence costs consisting of legal and advisory costs in
respect of a potential offer made for the Group during the year.
4 Taxation
Recognised in the consolidated statement of comprehensive income
2021 2020
£000 £000
Current tax expense
Current tax on income for the year 276 202
Adjustments in respect of prior years 13 26
Total current tax 289 228
Deferred tax credit
Origination and reversal of timing differences (210) (226)
Total deferred tax (210) (226)
Tax expense in statement of comprehensive income 79 2
Total tax charge 79 2
Reconciliation of effective tax rate
2020 2020
£000 £000
Profit for the year 156 (225)
Total tax expense 79 2
Profit before taxation 235 (223)
Tax using the UK corporation tax rate of 19.00% (2018: 19.00%) 45 (42)
Non-deductible expenses 97 100
Adjustments in respect of prior years 13 26
Share scheme deductions (8) (11)
Short-term timing differences for which no deferred tax is recognised (68) (71)
Total tax charge 79 2
Changes in tax rates and factors affecting the future tax charge
The UK Government announced in the 2021 budget that from 1 April 2023, the
rate of corporation tax in the United Kingdom will increase from 19% to 25%.
This was substantively enacted at the reporting date and so the effects are
included within these financial statements.
5 Trade and other receivables
2021 2020
£000 £000
Trade receivables: receivable in less than one year 7,056 7,493
Trade receivables: receivable in more than one year 839 799
Accrued income: receivable in less than one year 12,414 11,398
Accrued income: receivable in more than one year 3,718 7,029
Other receivables 21 14
Prepayments 913 703
Corporation tax 136 88
Recoverable disbursements 8,307 6,761
33,404 34,285
A provision against trade receivables and accrued income of £740,000 (2020:
£673,000) is included in the figures above. Trade receivables and accrued
income receivable in greater than one year are classified as current assets as
the Group's working capital cycle is considered to be up to 36 months as
extended credit terms are offered as part of commercial agreements.
6 Trade and other payables
Amounts due within one year: 2021 2020
£000 £000
Trade payables 1,452 3,201
Disbursements payable 7,222 6,001
Other taxation and social security 1,216 1,791
Other payables, accruals and deferred revenue 5,864 5,849
Customer deposits 457 705
Total trade and other payables 16,211 17,547
7 Earnings per share
The calculation of basic earnings per share at 31 December 2021 is based on
the profit attributable to ordinary shareholders of the parent company of
£156,000 (2020: loss of £225,000) and a weighted average number of Ordinary
Shares outstanding of 46,245,345 (2020: 46,238,878).
Profit/(Loss) attributable to ordinary shareholders
£000 2021 2020
Profit/(Loss) for the year attributable to the shareholders 156 (225)
Weighted average number of ordinary shares
Number 2021 2020
Issued Ordinary Shares at 1 January 46,240,222 46,178,716
Weighted average number of Ordinary Shares at 31 December 46,245,345 46,238,878
Basic Earnings per share (p)
2021 2020
Group 0.3 (0.5)
The Group has in place share-based payment schemes to reward employees. As at
31 December 2021 there were potentially dilutive share options under the
Group's share option schemes. The total number of options available for these
schemes included in the diluted earnings per share calculation is 1,315,881
(2020: in line with IAS 33, as the group has a negative earnings per share, it
is assumed there are no dilutive shares). There are no other diluting items.
Diluted Earnings per share (p)
2021 2020
Group 0.3 (0.5)
8 Dividends
No dividends were paid in 2021 or 2020.
9 Net debt and changes in liabilities arising from financing activities
Net debt includes cash and cash equivalents and other interest-bearing loans
and borrowings.
2021 2020
£000 £000
Cash and cash equivalents 2,458 3,609
Other interest-bearing loans and borrowings (17,910) (19,901)
Net debt (15,452) (16,292)
Lease liabilities (2,195) (2,443)
Set out below is a reconciliation of movements in net debt during the period.
2021 2020
£000 £000
Net (decrease)/increase in cash and cash equivalents (1,151) 1,045
Net inflow from decrease in debt and debt financing 2,000 3,750
Movement in net borrowings resulting from cash flows 849 4,795
Non-cash movements - net release of prepaid loan arrangement fees (9) (57)
Net debt at beginning of period (16,292) (21,030)
Net debt at end of period (15,452) (16,292)
Set out below is a reconciliation of movements in lease liabilities arising
from financing activities:
2021 2020
£000 £000
Net outflow from decrease in lease liabilities 166 558
Movement in lease liabilities resulting from cash flows 166 558
Non-cash movements arising from initial recognition of new lease liabilities, 82 (2,754)
revisions and interest charges
Lease liabilities at beginning of period (2,443) (247)
Lease liabilities at end of period (2,195) (2,443)
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