REG - NAHL Group PLC - Final Results
22/03/2023 07:15
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RNS Number : 7839T NAHL Group PLC 22 March 2023
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22 March 2023
NAHL Group plc
("NAHL", the "Company" or the "Group")
Final Results
Realising returns on strategic investments and building solid foundations for
future growth
NAHL, a leading UK marketing and services business focused on the consumer
legal services market, announces its Final Results for the year ended 31
December 2022.
Financial Highlights
Year ended 31 December FY2022 FY2021 Change
Group Revenue £41.4m £38.9m 6.4%
Operating Profit £4.8m £4.2m 14.4%
Profit Before Tax £0.6m £0.2m 142.1%
Net Debt £13.3m £15.5m -14.0%
● Group Revenue increased by 6.4% to £41.4m (2021: £38.9m), reflecting good
progress made across the Group
● Cash received from settled claims in National Accident Law (NAL) increased by
67% to £3.5m (2021: £2.1m)
● Significant reduction in net debt at 31 December 2022 to £13.3m (2021:
£15.5m)
● Strong levels of cash generation resulting in free cash flow increasing from
£0.8m in 2021 to £2.2m
● Operating profit increased to £4.8m (2021: £4.2m) in line with recently
upgraded market expectations
● Profit before tax increased to £0.6m (2021: £0.2m) due to
lower-than-expected profit attributable to non-controlling interests in our
LLPs, offset by an increase in borrowing costs due to higher UK interest rates
● Basic EPS of 0.8p (2021: 0.3p)
Operational Highlights
● Both the Consumer Legal Services and Critical Care divisions advanced their
respective growth strategies in the year
● Continued to rapidly scale NAL and grew headcount to 147 people (2021: 129
people)
o NAL won 1,894 claims, 60% more than the prior year (2021: 1,187)
o At 31 December 2022, NAL had grown its book of ongoing claims by 37% to
10,860 (2021: 7,918)
o These claims have an estimated future cash value to NAL (before processing
costs) of £11.2m, and an estimated future revenue of £8.2m
● National Accident Helpline (NAH), generated 34,905 personal injury enquiries
in the year, an increase of 9% over 2021 despite the wider market remaining
subdued, further evidence of its strong brand and effective marketing strategy
● NAH also successfully returned to TV advertising in June 2022 and exited the
year with its highest share of the non-RTA market since early 2020
● Critical Care increased the number of Expert Witness reports it issued by 10%,
whilst investments in marketing and business development resulted in a 14%
increase in the number of new instructions for Initial Needs Assessments (INA)
● Further encouraging results in Bush Care Solutions, which was launched in 2021
and delivered revenue growth of 24% to £0.4m in 2022
● Critical Care recruited 61 new associates in 2022 to support its growth and
enhance its proposition
Outlook
● The Group entered 2023 with momentum and the Board are cautiously optimistic
that the Group is well placed to continue its growth and strong cash
generation
● In Personal Injury, following a successful return to TV advertising in 2022,
the Board plan on increasing advertising investment in 2023 to gain further
market share
● In the first two months of 2023:
o enquiry numbers are 3% higher than the equivalent period in 2022, after
excluding tariff-only RTA enquiries which are no longer targeted
o NAL has collected £0.6m cash from settlements, 89% more than the same
period last year
o Critical Care Expert Witness and INA reports issued were 27% and 9% ahead
of the same period last year respectively
o Expert Witness instructions were 21% higher and INA instructions were flat
compared to the same period last year, due to a slow start in January
● Given the persistently high levels of inflation in the UK, the Board expects
UK interest rates to remain at higher levels in 2023 leading to higher
borrowing costs for the Group
● In response, the Group plans to accelerate cash collection and further reduce
net debt by utilising its flexible placement model, its maturing book of
claims in NAL and the strong levels of cash originating from its joint
ventures and Critical Care division
James Saralis, CEO of NAHL, commented:
"I am pleased with the financial performance of the Group in 2022. To deliver
a significant reduction in net debt, return our Personal Injury business to
profit and continue our growth in Critical Care, despite the wide-ranging
macroeconomic factors working against both our sector and the economy is
testament to our people and the investments we have made over the last few
years.
"In line with our strategy, we continued to grow our book of claims in NAL,
which now stand at 10,860, 37% ahead of the same time last year. The Group
also collected £3.5m of cash from settlements during the year, up from £2.1m
in 2021, illustrating the growing maturity of our claims book. These maturing
claims along with the flexibility of our placement model were instrumental in
the Group being able to reduce its net debt during the year.
"Simultaneously, Critical Care recruited 61 new associates in 2022 to support
its growth and further enhance its offering whilst also investing in its new
proposition Bush Care Solutions which will access adjacent markets and be a
key growth enabler for the future.
"Finally, I would like to reiterate my gratitude to our employees for their
hard work, support and commitment throughout the year. Without their
unwavering dedication, we would not have had the successes we did in 2022 and
I very much look forward to 2023 as we continue to build on the strong
foundations we have set for future growth."
The Annual Report and notice of Annual General Meeting will be available by
the end of April 2023.
Enquiries:
NAHL Group plc via FTI Consulting
James Saralis (CEO) Tel: +44 (0) 20 3727 1000
Chris Higham (CFO)
Allenby Capital (AIM Nominated Adviser & Broker) Tel: +44 (0) 20 3328 5656
Jeremy Porter / 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
Amy Goldup
Notes to Editors
NAHL Group plc (AIM: NAH) is a leader in the UK 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 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/) and www.bushco.co.uk
(http://www.bushco.co.uk)
Throughout this document, references to 'joint venture' law firm relate to our
law firms Your Law LLP and Law Together LLP which we operate in partnership
with a minority member. The term 'joint venture' does not relate to the
UK-adopted International Accounting Standards (IFRS) definition. These law
firms are accounted for as subsidiary undertakings.
Chair's Report
The Group returned to growth in 2022 and delivered results in line with
recently upgraded market expectations, despite a challenging macro-economic
environment. We saw good progress across the Group with increased revenues and
profit and a further reduction in debt in 2022. Significantly our Personal
Injury business started repaying the investment we have made in its
transformation, and not only returned to growth but was cash positive and grew
market share.
We completed the year with revenues of £41.4m (2021: £38.9m), a profit
before tax of £0.6m (2021: £0.2m), and a further reduction in debt to
£13.3m (31 December 2021: £15.5m).
Consumer Legal Services
Overall, revenues in the Consumer Legal Services division grew by 6% to
£28.3m and operating profit by 12% to £4.2m.
These results were driven by a strong performance in our Personal Injury
business which was profitable and cash positive again following several years
of investment into our own law firm National Accident Law (NAL). NAL now
employs 147 people (2021: 129 people) and remains central to the Group's
future success by enabling us to process claims ourselves and keep more of the
profit from those claims. It is beginning to pay back on the investment we
have made in it and for the first time we were able to fund the working
capital cost of NAL from cash generated in the Personal Injury business
itself.
Settlements and the resulting cash receipts in NAL increased in 2022 as
claims, started in earlier years, matured. NAL collected £3.5m in cash from
settlements made during the year, compared with £2.1m in 2021, representing a
67% increase.
NAL has not yet reached maturity, when the number of cases starting broadly
equals the number of cases concluding in any year, and we continue to invest
in it. During 2022, 8,760 new enquiries went into NAL which was an increase of
6% compared with 2021.
These new enquiries represent a future pipeline of value for NAL. By the end
of 2022, NAL had increased the volume of ongoing claims by over 37% to 10,860.
These claims have an estimated future cash value to NAL (before processing
costs) of £11.2m, and an estimated future revenue of £8.2m. Putting more
enquiries into NAL also has the effect of reducing future payments to our
Joint Venture partners.
Most of the enquiries that did not go to NAL went to our panel firms who pay
for them. This placement model enables us to manage our cash requirements
flexibly as evidenced by our strong reduction in net debt during the period.
Overall, the Personal Injury business increased the number of enquiries it
generated by around 9% to 34,905 despite the number of Personal Injury claims
in the market remaining flat. This was achieved through our strong brand and
effective marketing, and our return to television advertising in 2022 after an
absence of over two years due to COVID-19. Our market share in non-RTA
enquiries (the majority of our book) rose to 16.8%, its highest level since
2020, and although our share of RTA enquiries remained relatively flat at
1.3%, we saw an increasing proportion of higher value claims in that mix.
Our Residential Property business was impacted by the widely reported slowdown
in the property market due to higher interest rates, but still contributed a
small profit for the year.
Critical Care
Bush & Co (Bush) has continued to invest in its back office and
technology. This investment cycle is coming to an end and these enhancements
should see efficiency gains and margin improvements in the future as well as
providing a more resilient platform for growth. Bush has also strengthened its
marketing and business development offering.
Case management remains the largest revenue stream in Critical Care providing
support to individuals who have suffered catastrophic personal injuries. The
number of ongoing cases grew by 11% during 2022 and Bush increased the number
of employed case managers to help drive margin improvement. Expert witness
services also saw strong revenue growth in 2022 and now accounts for 36% of
our total revenue compared to 32% in 2019.
Bush Care Solutions was created in 2021 to offer nurse-led care management
services. This is an adjacent market to case management and enables us to
offer a fully managed solution. Revenues grew by 24% in 2022 to £0.4m.
Although still relatively small, Bush Care Solutions offers significant
opportunity for further growth in this adjacent market.
Overall revenues in Bush grew by 6% to £13.1m and its operating profit by 4%
to £3.4m.
Summary
I would like to thank all our employees for their continued commitment and
hard work over the last year. Our people and our culture are essential to our
future success. I would also like to congratulate Chris Higham who was
appointed as a director of the Company and Group Chief Financial Officer (CFO)
during the year, having previously been acting CFO since August 2021.
I believe we are making good progress across the Group with an increase in
revenue and profit and a further reduction in debt. The Personal Injury
business has returned to growth, is cash positive and winning more market
share. NAL is beginning to pay back on the investment we have made and at the
end of 2022 had nearly 11,000 cases underway that represent a strong pipeline
of future value. Critical Care continues to grow revenues and profit and has
invested to drive future margin improvement. Bush Care Solutions is not yet
two years old but is already showing its potential, offering the opportunity
for growth in an adjacent market.
The Group has created a platform for success and is on track to build a
sustainable and profitable business in the medium term.
Tim Aspinall
Chair
CEO Report
2022 was an important year for NAHL and I'm proud to report on the progress
that our team has delivered.
Overview
Despite the well-documented headwinds across the economy and specific
challenges within our own markets, NAHL achieved its financial goals in 2022
and returned to growth. The Group increased revenues by 6% and operating
profit by 14%, and we continued to invest for the future. We have strengthened
our financial position, reducing our debt which ended the year at £13.3m.
This was a priority given the challenging and unpredictable macro-economic
environment in the UK.
Both our Consumer Legal Services and Critical Care divisions advanced their
strategies in the year. Our Personal Injury business returned to profit and
was cash generative in 2022 - an important milestone in our plans. We continue
to grow market share in Personal Injury and our law firm, National Accident
Law, is demonstrating signs of growing maturity. In our Critical Care
division, we have developed our services in the year, added new specialisms
and experienced encouraging early growth in our new care proposition, Bush
Care Solutions.
Whilst these successes demonstrate good progress made in 2022, there is more
to do and we must stay on track if we are to deliver on our ambitions and
build a more sustainable and profitable business over the next few years. Our
strategy for each of our divisions remains on track and unchanged and we will
continue to invest for future growth.
Financial performance
Group revenue increased by 6% in the year to £41.4m (2021: £38.9m) following
growth in both of our trading divisions. Operating profit grew 14% during the
year to £4.8m (2021: £4.2m) and was in line with recently upgraded market
expectations. Our Consumer Legal Services division grew operating profit by
12% and our Critical Care division by 4%. As we started to realise the benefit
of past investments in our Personal Injury business, the Group's operating
profit margin increased by 0.8 ppts from 10.7% in 2021 to 11.5% during the
period.
Profit before tax was £0.6m (2021: £0.2m), which was in line with recently
upgraded market expectations, albeit from a low base. This was due to
lower-than-expected profit attributable to non-controlling interests in LLPs
but offset by an increase in borrowing costs due to the higher UK interest
rates.
Pleasingly, the Group generated strong levels of cash flow throughout the year
with free cash flow increasing from £0.8m in 2021 to £2.2m in the year. As a
result, the Group has reduced net debt from £15.5m at 31 December 2021 to
£13.3m at 31 December 2022, which was in line with recently upgraded market
expectations.
The Board does not believe that it is appropriate to reinstate dividends at
this time and the Directors have recommended that no final dividend payment be
made in respect of 2022.
Consumer Legal Services
Financial performance
Our Consumer Legal Services division performed well during the year,
delivering a 6% increase in revenues to £28.3m (2021: £26.6m) and operating
profit increased by 12% to £4.2m (2021: £3.7m). This result was driven by a
strong performance in our Personal Injury business, which grew its revenues by
14% to £24.0m (2021: £21.0m) and operating profit by 17% to £3.9m (2021:
£3.4m).
Whilst not a statutory measure, it was particularly pleasing to see the
Personal Injury business return a profit after deducting members'
non-controlling interests in LLPs, which was £0.4m in 2022 compared to a loss
of £0.1m in the prior year. I believe that this clearly demonstrates the
sustainability of this business and the positive progress that the team have
made over the past 18 months.
Market conditions
The UK personal injury market was subdued through the COVID-19 pandemic and
this continued into 2022.
According to industry data from the Claims Recovery Unit of the Ministry of
Justice (CRU) and the Official Injury Claim portal for small claims (OIC), the
number of claims registered in 2022 for road traffic accidents (RTAs) was down
7% compared to the prior year at c. 371,000 claims, and down 43% compared to
the last full year prior to the pandemic (2019). Our internal analysis
estimates the claimant-side personal injury market to be worth £1.1bn in
2021/22 compared with an estimated value of £1.6bn in 2019/20(1).
This reduction contrasts with traffic volumes on the roads, which moved closer
to pre-pandemic levels in 2022. Government estimates(2) show motor vehicles
travelled 318.6bn vehicle miles in Great Britain for the year ended March
2022, which was 30% more than that in the year ended March 2021, but still 6%
lower than pre-pandemic levels (year ended December 2019). Whilst the
equivalent data for the remainder of 2022 is yet to be released, it is likely
that traffic levels had gone on to exceed pre-pandemic levels by the end of
the year. For non-RTA claims, such as employers' liability, public liability,
and occupiers' liability, claim volumes registered with the CRU in 2022 were
broadly flat compared to that in 2021 at c.95,000 claims (-2%), which was 42%
lower than 2019.
We believe that the cause of this trend of lower claim numbers is due to the
following three factors, which have fundamentally reset the size of the market
during the past 24 months:
1) Firstly, the COVID-19 pandemic resulted in significant behavioural
changes amongst the UK population. This included changes to working practices
and transport usage, including many more people choosing to work remotely or
on a hybrid basis for part of the week. This has contributed to fewer
accidents occurring during travel time, in workplaces, surrounding shops and
urban areas.
2) Secondly, the implementation of the Civil Liability Act 2018 (Whiplash
Reforms) significantly reduced compensation tariffs for most RTA claims worth
£5,000 or less and eliminated cost awards for successful claims. Rather than
encouraging victims to manage their own claims through the OIC portal, the
overly complex and burdensome portal resulted in fewer than 10% of litigants
pursuing a claim themselves and for those relying on a solicitor to support
them, the legislation removed most of the value for the firm, resulting in
many firms withdrawing from the market. We believe that the significant
reduction in compensation combined with the difficulty of the process has
resulted in a lower appetite from accident victims to make such a claim.
3) Thirdly, research that we commissioned in December indicated that at
least £1.4bn(3) of potential personal injury settlements were unclaimed in
2022 because of people's reluctance to make a claim. An independent
organisation spoke to 2,500 members of the public, of which 500 people had
suffered an accident in the last three years, and the results were very
insightful:
While 11% of people had suffered a no-fault accident in the last three years,
only 50% of these attempted to make a claim and only half of those went ahead.
We found that a quarter of those who could have made a claim had 'no idea'
they were entitled to compensation, while a similar number did not pursue a
claim because they thought the process 'felt too complicated'. Other reasons
for not claiming included the cost of making a claim, the stigma associated
with claiming and worries about the process and any potential impact on their
job.
We believe that this reluctance to make a claim and the lack of understanding
surrounding the claim process is a result of a reduction in advertising by
firms since the start of the pandemic.
Our analysis of these three factors leads us to conclude that whilst the size
of the market is smaller now than before the pandemic, the opportunity remains
very significant and there is a large latent demand that could be unlocked by
a firm who can stimulate the market, educate customers on their rights and
change the perception of claiming.
Strategic progress
Our strategy to succeed in the personal injury market is to grow the number of
accident victims that we can support by leveraging the strength of the
National Accident Helpline brand and processing an increasing number of those
enquiries through our own consumer-focused law firm, National Accident Law.
This will enable us to develop a sustainable, higher margin business. We will
fund this through our agile and scalable placement model which is designed to
balance the work we place with our panel, and joint venture partner for
in-year profit and cash, with the work we process ourselves for greater, but
deferred profit and cash.
I'm pleased to report that we made clear progress with this strategy in 2022.
National Accident Helpline generated 34,905 personal injury enquiries in the
year, which was an increase of 9% over 2021. This number would have been
higher had it not been for our decision to stop targeting tariff-only RTA
claims, from February 2022, to focus on higher-value opportunities. The brand
continues to be the "first choice for people who have had an accident and want
legal representation", according to independent research.
The category mix of enquiries generated was broadly consistent with last year,
with 22% RTA claims, 51% non-RTA and 27% specialist claims, which we don't
process in NAL. Pleasingly, the RTA claims that we attracted should ultimately
be more profitable than last year, as they comprised a far lower proportion of
low value tariff-only claims.
In June 2022, the business returned to TV advertising for the first time since
January 2020 with its #TellYourStory campaign, giving accident victims a
platform to speak up and feel listened to. Whilst brand advertising on TV is
intended to develop long-term awareness, the in-year performance of the
campaign was encouraging and it resulted in growth in lead numbers and
improved conversion. Our high-performance digital marketing and
conversion-optimised website also delivered good results in the year and the
number of organic (unpaid) leads to our website increased by 9% compared to
2021.
This activity helped to generate market share gains and in our key category of
non-RTA claims, we consistently grew our trailing 12-month market share from
15.0% on 1 January 2022 to 16.8% by year-end. This is our highest share of the
market since early 2020 and gives me confidence that our marketing investments
are delivering. Furthermore, we remain optimistic about the potential for
additional opportunities when the market begins to grow again.
In line with our strategy, we continued to rapidly scale NAL during the year.
We allocated 8,760 new enquiries to NAL in 2022, which was 6% more than in
2021. These enquiries cost £2.7m to generate and our proven model estimates
that these will be worth £5.9m in future revenue and cash.
NAL won 1,894 claims in the year, 60% more than prior year (2021: 1,187) and
this generated £3.5m in cash from settlements. This was an increase of 67%
(2021: £2.1m), further demonstrating the growing maturity of the firm.
At 31 December 2022, NAL had grown its book of ongoing claims by 37% to 10,860
(2021: 7,918). This book of existing claims has an embedded value, being the
future profits and cash expected to be generated by processing these claims
through to settlement. At 31 December 2022, after already expensing the
marketing costs to generate those claims and processing costs to that date, we
anticipated that the ongoing claims will generate future revenue of £8.2m and
future gross profit of £7.1m.
The division continued to utilise its flexible placement model to good effect
and enjoyed strong demand for enquiries from its panel of third-party law
firms, increasing its allocation by 7%. The Group's joint venture law firms,
which are now mature, also performed well during the year. Over the past
three years, the Group has significantly reduced the allocation of new
enquiries to its joint ventures, as growth in NAL has been prioritised in
order to increase profitability over the medium term. In 2022, approximately
3,000 enquiries were distributed to Law Together LLP with no new enquiries
into Your Law LLP, as planned. Following investment over a number of years,
these relationships continue to generate good levels of cash flow and
delivered £3.3m in the year (2021: £3.6m), after deducting drawings to LLP
members.
Residential Property
The division's Residential Property business, comprising Homeward Legal and
Searches UK, generated revenues of £4.3m, which was 23% lower than prior year
(2021: £5.6m). Operating profit was £0.3m (2021: £0.4m).
The business experienced a slowdown from the second quarter of 2022, in line
with the wider market, and accordingly, Homeward Legal generated 33% fewer
conveyancing instructions than the prior year. Searches UK proved to be more
resilient and the number of search packs its generated was just 10% lower than
the previous year, reflecting several new customer mandates.
Critical Care
Financial performance
Our Critical Care division, operating as Bush & Co., increased its
revenues by 6% to £13.1m (2021: £12.3m). Operating profit increased by 4% to
£3.4m (2021: £3.3m) and the business generated £3.1m of cash from
operations in the year.
Market conditions
Bush & Co. operates in the catastrophic injury market, with most of the
work arising from serious RTA injuries and medical negligence. Whilst there is
no official definition, we categorise catastrophic injuries as those resulting
in damages worth £500,000 or more.
There were fewer serious RTA claims during the COVID-19 pandemic due to a
reduction in traffic on the roads, but this was a temporary feature. Recent
data from the Department for Transport showed that the number of seriously
injured casualties on roads in Great Britain in the year to June 2022
increased by 18% in the period but was 6% lower than before the pandemic
(2019). Due to the severity of the victims' injuries, this market is not
affected by the Whiplash Reforms nor any reluctance to claim, as is the case
in our Consumer Legal Services business.
For medical negligence claims, data from NHS Resolution shows that the number
of clinical claims for catastrophic injury made against the NHS in 2021/22 was
slightly down on 2020/21 (-7%). However, this was 24% more than the average
number in each of the preceding four years, indicating that there has been a
step change in the number of medical negligence claims since 2019/20.
Building on our platform for growth
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.
In 2022, we continued to make good progress with this strategy.
Revenues from the division's case management service grew by 3% in the year,
and it issued 529 initial needs assessments (INAs), which was 5% more than the
prior year. The business supported 1,354 ongoing case management clients
during the year, generating recurring revenue, although at a lower average
revenue per client than before the pandemic. This is a permanent change
because some of our client support team meetings transitioned online during
the pandemic, which has since become normal practice across the industry,
meaning less time and travel costs becoming chargeable.
Our investments in marketing and business development resulted in a 14%
increase in the number of new instructions for INAs to 557 (2021: 490).
We started the year trialling a new initiative in which the business delivered
case management services for less complex cases through a team of three
in-house, employed case managers. The results were encouraging and by the end
of the year we had grown the team to seven employed case managers, operating
at a higher utilisation rate, resulting in enhanced profit margins. We hope to
support more customers with this service in 2023 and grow the team further.
Our expert witness service had a very strong year in 2022, and increased
revenues by 13%. The business issued 974 reports, which was 10% more than in
2021, and the average revenue per report increased due to a favourable mix and
additional elements being required by customers. Instruction numbers increased
7% (1,044 compared to 973 in 2021) to historically high levels.
Finally, I am pleased to report very encouraging results in Bush Care
Solutions, which was launched in 2021. This proposition provides a support
and management service for employing care staff, which complements our
existing case management service and also attracts standalone work. Bush Care
Solutions delivered revenue growth of 24% to £0.4m in 2022, delivering 10
ongoing care packages at year-end. Whilst currently modest in size, this
service looks to be an important growth driver over the next few years. I am
particularly proud of the excellent job the team have done in developing this
service, which has been well received by customers as evidenced by its
nomination for the Supporting the Industry award at the 2022 PI Awards.
Bush & Co. continued to develop its range of specialisms in the year and
recruited 61 new associates in 2022 to support its growth and enhance its
proposition. At 31 December 2022, the business works with 96 associate case
managers and 129 expert witnesses, in addition to its in-house teams.
Our people, culture and communities
At NAHL, we aim to build a sustainable business for the long-term gain of all
our stakeholders. For us, this includes being a great company to work for,
creating long-term value for our shareholders and also contributing to our
communities and the environment.
The Group employed 283 people at 31 December 2022, which was an increase of
10% on last year. Much of the growth in employee numbers has arisen in NAL
and, as we look to scale the business, we have further invested in experienced
people in technical areas of the law firm to support our growth. We also
revitalised our marketing team in Consumer Legal Services during the year,
recruiting a Marketing and Brand Director and several other new members of the
team. I look forward to this investment helping to take our marketing
performance to the next level and build on the growth in market share that we
have been able to generate to date. Other areas of our recruitment focus have
been employing case managers and care managers in Bush & Co. to facilitate
our growth.
Due to the functionality provided by previous investments in our systems, 33%
of our people now work remotely and 49% on a hybrid basis. This has been of
significant benefit to our business, opening up new recruitment opportunities
and expanding our access to technical legal talent to support the scaling up
of NAL, as well as offering more choice and improved work-life balance for our
people.
As well as recruiting the best talent available, our People Team added
significant value through the delivery of several in- house training courses
in the year. In addition to courses focused on developing personal strengths,
dealing with imposter syndrome and developing remote management skills, the
team prepared 13 employees for a leadership role in our year- long Pathway to
Leadership programme. In total, 246 hours of training and coaching were
delivered in 2022.
We also made some changes to our Board in the year. On 30 September 2022,
Gillian Kent decided to step down as a Non- Executive Director after eight
years in the role. I'd like to thank Gillian for her support and wise counsel
over the years and wish her the best of luck in her future endeavours.
Also in September, I was delighted to welcome Chris Higham to the Board as an
Executive Director when he was appointed to the role of CFO on a permanent
basis. Chris has been with the Group for 16 years and his experience, through
the IPO and the subsequent transformation of the Personal Injury business has
proved invaluable. I look forward to continuing to work closely with Chris as
we realise our vision for the Group. With these changes, the Directors believe
that the Board composition is suitable for the Group in its current state.
Through our company culture, we aim to maintain a high-trust environment for
the benefit of everyone, irrespective of who an individual is or what they do
for the Group. Our people are recruited to join our teams from a diverse range
of backgrounds and experience as we believe that makes us better able to serve
our customers; and we expect our leaders to engender trust with all our
stakeholders by demonstrating their ability, integrity and benevolence. When
we surveyed our people during the year, 93% said that they believed that
everyone in our business is treated fairly regardless of race, gender,
ethnicity, disability, sexual orientation or other differences, a result I am
very proud of.
As at 31 December 2022, the gender split across the Group was 72% female and
28% male. At a Board level, the Board was 20% female and 80% male.
The Group's values of Driven, Curious, Passionate and Unified continue to
guide how we do things at NAHL. In June 2022, our annual employee survey
demonstrated the progress we are making with the culture and the strong levels
of employee engagement within the Group. Our overall engagement score was 78%,
which was a 3 ppt improvement on the previous year and significantly higher
than the UK average of 14%(5). Significant improvements compared to 2021 were
identified in communication and our contribution to our communities. In
December 2022, Investors in People reaccredited our Personal Injury business
with a Gold award to add to the Gold award held by our Critical Care division
and Silver award held by Residential Property.
We were pleased to support a number of separate charities during the year by
fundraising over £50,000 and giving up our time to help with a number of
worthy causes. This included supporting the Child Brain Injury Trust,
Kettering and Daventry foodbanks, and the DEC's Ukraine Appeal. We continued
our work to support the environment, donating 120 hours of volunteering at the
Green Patch community project in Kettering, and continuing our pledge to fund
the planting of a tree for every new employee that joins the Group. By 31
December 2022 we had a total of 463 mangrove trees growing in our forest in
Madagascar, which will sequester approximately 139 tonnes of CO2 over their
lifetime.
Current trading and outlook
In 2022, in spite of subdued market conditions, we achieved our financial
goals and returned the Group to growth. After several years of transformation,
we delivered a profit before tax in our Personal Injury business and we can
now start to realise a return on our investments. We also continued to build a
strong platform in our Critical Care business, from which we can grow and
expand into adjacent markets. Pleasingly, we finished the year strongly and
this gave us momentum as we went into 2023.
For these reasons, as I look ahead to 2023 and beyond, I am cautiously
optimistic that the Group is well placed to continue its growth and strong
cash generation.
In our Personal Injury business, we plan to increase our advertising spend in
2023 to try to win further market share. We aim to continue to grow the
embedded value of our ongoing claims and win more settlements in NAL, driving
cash generation. In the first two months of the year, we are on track to
deliver these plans. Excluding tariff-only RTA claims, which are no longer
being targeted, enquiry numbers are 3% higher than the equivalent period in
2022 driven by strong levels of RTA leads. In NAL, we have collected £0.6m
of cash from settlements, 89% more than in the same period in 2022.
In Critical Care, we expect to see continued strong growth in expert witness
services and Bush Care Solutions, with continued, but modest, growth in case
management. Our upgrades to the case management and finance technology systems
are due to be implemented this year, which should drive improvements in future
operating profit margin over the coming years. In the first two months of
2023, the case management team delivered 83 INAs, which was 9% more than the
same period in the prior year, although instruction numbers were flat compared
to last year. In expert witness, 197 reports were issued in January and
February, which was 27% more than the same period in the prior year, and
instructions were up 21%.
Given the persistently high levels of inflation in the UK, the Board expects
UK interest rates to remain at higher levels in 2023 leading to higher
borrowing costs for the Group. In response, the Group will continue to
leverage its flexible placement model to drive short-term cash flow. This, in
addition to its maturing book of claims in NAL and the strong levels of cash
originating from its joint ventures and Critical Care division, will enable
the Group to accelerate cash collection in 2023 and further reduce net debt.
Finally, I want to take this opportunity to pay tribute to our people who go
above and beyond to deliver to the best of their ability for our customers.
I'm proud to be leading such a talented and committed team and look forward to
delivering on our commitments to our customers and shareholders and continuing
to improve our performance.
James Saralis
Chief Executive Officer
Footnotes:
1. Internal research produced during the year
2. Department for Transport, reported road casualties by severity and
road user type: Great Britain
3. Independent research produced by Censuswide Limited, December 2022
4. Independent Research by The Nursery Research & Planning Ltd, March
2023
5. Gallup 'State of the Global Workplace 2022 Report'
CFO Report
Overview
The year saw the business return to growth and reduce its net debt. This was
despite volumes in our markets remaining subdued, a pattern we have seen
continue since the COVID-19 pandemic.
Our wholly owned law firm, National Accident Law (NAL), continues to scale and
is now generating significant cash receipts as the book of cases continues to
mature.
We continued to invest in new technologies in the Critical Care division. This
investment is now largely complete, setting the business up for future growth.
From an operational perspective, revenue grew by 6.4% to £41.4m (2021:
£38.9m) and operating profit grew by 14.4% to £4.8m (2021: £4.2m) with
growth seen across both divisions.
Review of income statement
2022 2021 Change Change
£m £m £m %
Consumer Legal Services 28.3 26.6 1.7 6.3%
Critical Care 13.1 12.3 0.8 6.4%
Revenue 41.4 38.9 2.5 6.4%
Consumer Legal Services 4.2 3.7 0.5 12.2%
Critical Care 3.4 3.3 0.1 4.3%
Shared Services (1.7) (1.6) (0.1) 5.9%
Other items (1.1) (1.2) 0.1 -10.2%
Operating Profit 4.8 4.2 0.6 14.4%
Profit attributable to non-controlling interest in LLPs (3.6) (3.5) (0.1) 3.0%
Financial income 0.1 0.1 (0.0) -6.3%
Financial expense (0.7) (0.6) (0.1) 28.6%
Profit before tax 0.6 0.2 0.4 142.1%
Taxation (0.2) 0.0 (0.2) 132.9%
Profit and total comprehensive income for the year 0.4 0.2 0.2 146.8%
Consumer Legal Services
The Consumer Legal Services division increased revenue by 6% to £28.3m (2021:
£26.6m) and operating profit grew by 12% to £4.2m (2021: £3.7m). Enquiry
numbers grew by 9% to 34,905 (2021: 32,132) despite the personal injury market
remaining subdued, as discussed in the CEO report and our strategic decision
to stop accepting low value soft-tissue injury Road Traffic Accident (RTA)
claims in the first quarter of 2022.
The number of enquiries passed across to our wholly owned law firm, NAL,
increased by 6% and the law firm continues to process all the RTA enquiries
generated for accidents in England and Wales. These enquiries represented an
investment of £2.7m when taking into account the cost of advertising and
overheads related to the generation of these enquiries.
The enquiries processed by NAL have a longer revenue cycle than the panel
relationships. The cases can take a number of years to conclude, and NAL first
recognises revenue from a case when an admission of liability has been
received from the defendant. The enquiries passed to NAL in the year are
expected to generate c.£5.9m (2021: £6.0m) in revenue across their life
cycle.
By the end of the period, NAL was processing 10,860 open cases (2021: 7,918),
an increase of 37% as the law firm continues to mature. These ongoing cases
are expected to contribute c.£8.2m (2021: £6.7m) in future revenue and
c.£11.2m of future cash receipts (2021: £8.4m).
The law firm is yet to reach maturity but cash receipts from settled cases
give an indication of the progress made. Cash receipts from cases settled grew
by 67% to £3.5m in the year (2021: £2.1m) and the total cash receipts from
settled cases since inception of the law firm is £7.0m. Once the law firm is
fully mature we would expect cash receipts in a period to largely match the
expected revenue from new enquiries added.
The Residential Property business generated a positive contribution to profit
of £0.3m (2021: £0.4m) after allocation of shared costs. The business was
negatively impacted by the end of the Stamp Duty Land Tax holiday on
properties valued up to £500,000 as well as rising consumer borrowing costs
towards the end of the year.
Critical Care
The Critical Care division grew revenue by 6% to £13.1m (2021: £12.3m) with
operating profit increasing by 4% to £3.4m (2021: £3.3m).
The division benefitted from investment in business development activity
contributing to a 7% increase to expert witness instructions and a 14%
increase in Initial Need Assessment (INA) instructions. Average revenues per
instruction on expert witness increased in the year due to mix and additional
work requested by customers. Average revenues per instruction for case
management has continued to be impacted by the changes in working practices
brought about by the pandemic. These new patterns are expected to continue
going forward.
The business also saw an encouraging performance from Bush Care Solutions
which delivered £0.4m of revenue in the year following its launch towards the
latter part of 2021. Although still relatively small, Bush Care Solutions
offers the opportunity for further growth in an adjacent market.
Shared Services and other items
The costs for the Group's Shared Services functions increased by £0.1m to
£1.7m (2021: £1.6m) and other items which include share-based payments and
amortisation fell to £1.1m (2021: £1.2m).
Financial expense
Costs relating to the financing of debt increased to £0.7m in the year (2021:
£0.6m) despite net debt falling. This is due to rising interest rates during
the year. Our debt is linked to the Sterling Overnight Index Average (SONIA)
plus 2.25%.
Exceptional and non-underlying items
The Group did not incur any exceptional costs in the year (2021: £0.0m).
Taxation
The Group's tax charge of £184,000 (2021: £79,000) represents an effective
tax charge of 32.4% (2021: 33.6%). The tax charge is higher than the standard
corporation tax rate of 19% for the reasons set out in note 3. The deferred
tax credit originates from temporary differences in intangible assets acquired
on business combinations.
Earnings per share (EPS) and dividend
Basic EPS for the year were 0.8p (2021: 0.3p) and the diluted EPS were 0.8p
(2021: 0.3p), reflecting the impact of share options due to vest in future
years.
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 2022 (2021: 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 £17.1m at
year end (2021: £17.2m).
Trade receivables and accrued income balances related to the processing of
personal injury claims increased to £7.5m (2021: £6.9m). The increase is due
to cases settling in the more mature joint ventures offset by a growing claims
book in NAL, which is yet to reach full maturity. Accrued income on open cases
in NAL within this balance was £2.7m (2021: £1.7m). 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.
There remains 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. In practice it is rare for accrued income to be downgraded once an
admission of liability has been received. These assumptions are updated with
actual results as claims settle.
Disbursement receivables remained relatively flat at £8.4m (2021: £8.3m).
Receivables not relating to the law firms decreased from £18.2m to £17.0m.
This is largely due to clearing a historic £1.4m debt owed on a settlement
relating to the termination of National Law Partners, as agreed in 2019.
Payables reduced from £16.2m on 31 December 2021 to £15.8m at the balance
sheet date largely due to a reduction in disbursements payable as mature cases
settling in the joint ventures were partly offset by immature cases in NAL.
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, particularly in light of rising interest costs towards the end of the
year. As a result, net debt fell from £15.5m on 31 December 2021 to £13.3m
at year-end. Net debt is defined in note 8 and is comprised of £2.6m of cash
(2021: £2.5m) offset by borrowings of £15.9m (2021: £17.9m).
The borrowings represent a balance on the Group's £20.0m Revolving Credit
Facility with its lender, Yorkshire Bank. The facility is in place to run
through to 31 December 2024.
Review of the cash flow statement
2022 2021 Change £m Change
£m £m %
Net cash generated from operating activities 6.0 5.1 0.9 16.9%
Net cash used in investing activities (0.3) (0.6) 0.3 56.4%
Facility arrangement fees 0.0 (0.1) 0.1 -100.0%
Principal element on lease payments (0.3) (0.2) (0.1) -59.0%
Drawings paid to LLP members (3.2) (3.4) 0.2 4.1%
Net cash using in financing activities (before borrowings) (3.5) (3.7) 0.2 -2.3%
Free cash flow 2.2 0.8 1.4 158.7%
Repayment of borrowings (2.0) (2.0) 0.0 0.0%
Net increase/(decrease) in cash and cash equivalents 0.2 (1.2) 1.4 117.1%
The Group's cash and cash equivalents increased by £0.2m in the year (2021:
reduction of £1.2m). 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 increased from £5.1m to £6.0m. This was
driven by maturing receipts from settled cases in both NAL and the joint
venture relationships, generating £3.5m and £3.3m respectively. This was
partly offset by the continuing investment of new cases to NAL as the law firm
continues to scale as well as interest payments of £0.6m (2021: £0.4m).
The Group paid £3.2m (2021: £3.4m) of drawings to its partners in the joint
venture law firms during the year, under the terms of our agreements. This
reflects the continuing closure of claims won and settled during the year. The
Group also acquired £0.2m (2021: £0.3m) of intangible assets in the year as
it continued to improve its technological offering in Critical Care.
The Group repaid £2.0m (2021: £2.0m) 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 2022
was £2.2m compared to £0.8m in 2021. The primary reason for this increase is
an increase in personal injury cash receipts on settled cases as more cases
settle in NAL and the joint venture partnerships. Personal Injury is now
entirely self-funding investment into new cases.
The Group also monitors operating cash conversion. This was 143% in the year
(2021: 150%), a direct reflection of the movements outlined above.
Conclusion
In conclusion, despite headwinds in our markets and the wider economy, we have
continued to make progress with our strategy, investing in both divisions to
deliver growth whilst continuing to manage down our debt.
Chris Higham
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £000 £000
Revenue 1,2 41,421 38,947
Cost of sales (23,586) (21,352)
Gross profit 17,835 17,595
Administrative expenses (13,079) (13,439)
Operating Profit 4,756 4,156
Profit attributable to members' non-controlling interests in LLPs 2 (3,554) (3,451)
Financial income 80 85
Financial expense (713) (555)
Profit before tax 569 235
Taxation 3 (184) (79)
Profit and total comprehensive income for the year 385 156
All profits and losses and total comprehensive income are attributable to the
owners of the Company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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 2021 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
Total comprehensive income for the year
Profit for the year - - - - 385 385
Total comprehensive income - - - - 385 385
Transactions with owners,
recorded directly in equity
Share-based payments - 316 - - - 316
Total transactions with owners, recorded
directly in equity - 316 - - - 316
Balance at 31 December 2022 116 4,628 14,595 (66,928) 104,909 57,320
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
£000 £000
Cash flows from operating activities
Profit for the year 385 156
Adjustments for:
Profit attributable to members' non-controlling interests in LLPs 3,554 3,451
Property, plant and equipment Depreciation 168 171
Right of use asset depreciation 288 306
Amortisation of intangible assets 1,186 1,195
Financial income (80) (85)
Financial expense 713 555
Share-based payments 316 400
Taxation 184 79
6,714 6,228
Decrease in trade and other receivables 448 1,012
Decrease in trade and other payables (364) (1,337)
Cash generated from operations 6,798 5,903
Interest paid (627) (398)
Tax paid (165) (365)
Net cash generated from operating activities 6,006 5,140
Cash flows from investing activities
Acquisition of property, plant and equipment (83) (281)
Acquisition of intangible assets (199) (339)
Interest received 13 2
Net cash used in investing activities (269) (618)
Cash flows from financing activities
Repayment of borrowings (2,000) (2,000)
Issue of share capital - 1
Facility arrangement fees - (90)
Principal element of lease payments (264) (166)
Drawings paid to LLP members (3,277) (3,418)
Net cash used in financing activities (5,541) (5,673)
Net increase/(decrease) in cash and cash equivalents 196 (1,151)
Cash and cash equivalents at 1 January 2,458 3,609
Cash and cash equivalents at 31 December 2,654 2,458
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
UK-adopted International Accounting Standards (IFRS) 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.
These forecasts consist of the 2023 budget and extended forecasts and the
period considered for the going concern review is to the end of March 2024,
being approximately 12 months from the date of signing of the 2022 Annual
Report and financial statements. The key assumption in the forecast is the
growth of the Personal Injury division's self- processing operations as this
growth is the key driver for both profitability and cash going forward. 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 refinanced its banking facilities in December 2021 and has access to
a £20.0m revolving credit facility (RCF) with its bankers. In all of the
scenarios 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 and all of the
scenarios modelled suggest that the Group will continue to operate within its
covenants for the foreseeable future.
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.
2 Operating segments
Consumer Critical Shared Other
Legal Services Care Services items Eliminations(2) Total
£000 £000 £000 £000 £000 £000
Year ended 31 December 2022
Revenue 28,264 13,157 - - - 41,421
Depreciation and amortisation (257) (201) (358) (826) - (1,642)
Operating profit/(loss) 4,179 3,434 (1,715) (1,142) - 4,756
Profit attributable to non-controlling interest members in LLPs (3,554) - - - (3,554)
Financial income 77 - 3 - - 80
Financial expenses - (5) (708) - - (713)
Profit/(Loss) before tax 702 3,429 (2,420) (1,142) - 569
Trade receivables 2,632 5,610 - - - 8,242
Total assets(1) 29,222 6,780 77,716 - (17,506) 96,212
Segment liabilities(1) (17,874) (1,258) (3,189) - - (22,321)
Capital expenditure (including intangibles) 95 187 - - - 282
Year ended 31 December 2021
Revenue 26,583 12,364 - - - 38,947
Depreciation and amortisation (272) (166) (363) (871) - (1,672)
Operating profit/(loss) 3,726 3,293 (1,592) (1,271) - 4,156
Profit attributable to non-controlling interest members in LLPs (3,451) - - - (3,451)
Financial income 85 - - - - 85
Financial expenses - (10) (545) - - (555)
Profit/(Loss) before tax 360 3,283 (2,137) (1,271) - 235
Trade receivables 2,999 4,896 - - - 7,895
Total assets(1) 29,625 6,335 79,413 - (17,506) 97,867
Segment liabilities(1) (17,754) (1,306) (3,556) - - (22,616)
Capital expenditure (including intangibles) 60 326 234 - - 620
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
One customer in the Consumer Legal Services segment accounted for 10.0% of the
total Group revenue. No other customers accounted for greater than 10% of the
total Group revenue (2021: 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.
3 Taxation
Recognised in the consolidated statement of comprehensive income
2022 2021
£000 £000
Current tax expense
Current tax on income for the year 352 276
Adjustments in respect of prior years 14 13
Total current tax 366 289
Deferred tax credit
Origination and reversal of timing differences (182) (210)
Total deferred tax (182) (210)
Tax expense in statement of comprehensive income 184 79
Total tax charge 184 79
Reconciliation of effective tax rate
2022 2021
£000 £000
Profit for the year 385 156
Total tax expense 184 79
Profit before taxation 569 235
Tax using the UK corporation tax rate of 19.00% (2021: 19.00%) 108 45
Non-deductible expenses 68 97
Adjustments in respect of prior years 14 13
Share scheme deductions - (8)
Short-term timing differences (6) (68)
Total tax charge 184 79
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.
4 Trade and other receivables
2022 2021
£000 £000
Trade receivables: receivable in less than one year 7,077 7,056
Trade receivables: receivable in more than one year 1,165 839
Accrued income: receivable in less than one year 11,137 12,414
Accrued income: receivable in more than one year 4,147 3,718
Other receivables 26 21
Prepayments 954 913
Corporation tax - 136
Recoverable disbursements 8,380 8,307
Total trade and other receivables 32,886 33,404
A provision against trade receivables and accrued income of £612,000 (2021:
£740,000) 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.
5 Trade and other payables
Amounts due within one year: 2022 2021
£000 £000
Trade payables 1,689 1,452
Disbursements payable 6,620 7,222
Other taxation and social security 1,231 1,216
Other payables, accruals and deferred revenue 5,850 5,864
Customer deposits 457 457
Total trade and other payables 15,847 16,211
6 Earnings per share
The calculation of basic earnings per share at 31 December 2022 is based on
the profit attributable to ordinary shareholders of the parent company of
£385,000 (2021: profit of £156,000) and a weighted average number of
Ordinary Shares outstanding of 46,325,222 (2021: 46,245,345).
Profit attributable to ordinary shareholders
£000 2022 2021
Profit for the year attributable to the shareholders 385 156
Weighted average number of ordinary shares
Number 2022 2021
Issued Ordinary Shares at 1 January 46,325,222 46,240,222
Weighted average number of Ordinary Shares at 31 December 46,325,222 46,245,345
Basic Earnings per share (p)
2022 2021
Group 0.8 0.3
The Group has in place share-based payment schemes to reward employees. At 31
December 2022, 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 2,329,951 (2021:
1,315,881). There are no other diluting items.
Diluted Earnings per share (p)
2022 2021
Group 0.8 0.3
7 Dividends
No dividends were paid in 2022 or 2021.
8 Net debt and changes in liabilities arising from financing activities
Net debt includes cash and cash equivalents and other interest-bearing loans
and borrowings.
2022 2021
£000 £000
Cash and cash equivalents 2,654 2,458
Other interest-bearing loans and borrowings (15,939) (17,910)
Net debt (13,285) (15,452)
Lease liabilities (1,987) (2,195)
Set out below is a reconciliation of movements in net debt during the period.
2022 2021
£000 £000
Net increase/(decrease) in cash and cash equivalents 196 (1,151)
Net inflow from decrease in debt and debt financing 2,000 2,000
Movement in net borrowings resulting from cash flows 2,196 849
Non-cash movements - net release of prepaid loan arrangement fees (29) (9)
Net debt at beginning of period (15,452) (16,292)
Net debt at end of period (13,285) (15,452)
Set out below is a reconciliation of movements in lease liabilities arising
from financing activities:
2022 2021
£000 £000
Net outflow from decrease in lease liabilities 264 166
Movement in lease liabilities resulting from cash flows 264 166
Non-cash movements arising from initial recognition of new lease liabilities, (56) 82
revisions and interest charges
Lease liabilities at beginning of period (2,195) (2,443)
Lease liabilities at end of period (1,987) (2,195)
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