REG - NAHL Group PLC - Interim Results
27/09/2022 07:00
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RNS Number : 7169A NAHL Group PLC 27 September 2022
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information for the purposes of
Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310.
With the publication of this announcement, this information is now considered
to be in the public domain.
27 September 2022
NAHL Group plc
("NAHL", the "Company" or the "Group")
Interim Results
Continued progress on strategic objectives; trading in line with expectations
NAHL, the leading UK marketing and services business focused on the UK
consumer legal market, announces its interim results for the six months ended
30 June 2022 (the "Period").
Financial Highlights
· Revenue increased 6% to £20.7m (H1 2021: £19.5m)
· Cash received from settled claims in the Group's fully integrated
law firm, National Accident Law ("NAL"), increased by 50% to £1.5m
· Operating profit decreased by 8% to £2.3m reflecting planned
investment in scaling NAL
· Profit before tax decreased to £0.1m, in line with expectations (H1
2021: £0.6m)
· Basic earnings per share were 0.0p (H1 2021: 1.0p).
· Net debt further reduced by £1.0m to £14.5m from £15.5m at 31
December 2021
Operational Highlights
· Continued to progress strategy of creating a higher margin,
integrated law firm underpinned by a flexible business model which will drive
higher returns in the medium and long-term
· 4,531 new enquiries placed into NAL, a 61% increase on H1 2021
· NAL had a book of 9,884 ongoing claims at 30 June 2022, 25% more
than at 31 December 2021 and 132% ahead of 30 June 2021
· Ongoing claims in NAL expected to convert over the next few years
into £9.8m of future cash, £7.5m of future revenue and future gross profit
of £6.5m
· The Group's market-leading brand, National Accident Helpline,
generated nearly 18,000 new enquiries in the Period, an increase of 27% on H1
2021
· Increase in enquiry numbers was achieved through market share gains,
and we estimate that at Period-end National Accident Helpline held a 19% share
of the non-road traffic accident ("non-RTA") market, comprising employers',
public and occupier liability claims
· This performance gave management confidence to return to TV
advertising in June 2022, when a new campaign was launched to strengthen
National Accident Helpline's brand position and contribute to future volume
growth
· Critical Care increased the number of expert witness reports it
issued by 11% and Initial Needs Assessment ("INA") reports by 12%, whilst
maintaining a strong book of ongoing case management clients
· Critical Care increased its pipeline of new work, generating 11%
growth in instructions for expert witness reports and 19% growth in
instructions for INA reports
· Critical Care recruited 41 new associates in key specialisms and
now works with 96 case managers and 115 expert witnesses across the UK
Outlook
· Despite the current macroeconomic uncertainty, the Group continues
to trade in line with market expectations and is on track to meet full year
forecasts
· We continue to maintain a tight control over costs and discretionary
spend whilst progressing our investments in both divisions
· The Consumer Legal Services division delivered an encouraging 4%
growth in personal injury enquiry numbers in July and August compared to last
year
· In Critical Care, in July and August:
o The number of INA reports issued was 26% ahead of last year
o The number of expert witness reports issued was 24% lower than last year,
however, this shortfall was largely down to the timing of issuing reports over
the summer holiday period and we anticipate a return to growth for the
remainder of the year
· The Group remains committed to managing net debt and anticipate it
reducing further this year
James Saralis, CEO of NAHL, commented:
"The performance of the Group in the first half of the year was in line with
our expectations and we are pleased with the progress we have made in both of
our divisions. In Consumer Legal Services, NAL increased both the number of
new enquiries by 61% and cash from settlements by 50% during the Period. These
metrics clearly illustrate the growing maturity of our law firm and give us
confidence that we are on track to build a more sustainable and profitable
business in the medium-term. Our market leading brand, National Accident
Helpline, generated 27% more enquiries than H1 last year and this was achieved
through market share gains which have grown consistently over the last 18
months and gave us confidence to return to TV advertising in June.
"Our Critical Care division had a strong start to the year and continued to
make good progress on its strategic priorities. We continue to see good
results from our business development initiatives as we look to grow Bush
& Co.'s market share by appealing to a broader customer base and
leveraging the use of technology. The business recruited 41 new associates in
key specialisms in the Period and at 30 June 2022 was working with 96 case
managers and 115 expert witnesses across the UK.
"Based on our performance in H1, and early indications in H2, the Board
believes that it can navigate this period of macroeconomic uncertainty and
deliver a full year outturn in line with market expectations. "
Enquiries:
NAHL Group plc via FTI Consulting
James Saralis (CEO) Tel: +44 (0) 20 3727 1000
Chris Higham (CFO)
Allenby Capital (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 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 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)
Use of alternative performance measures
The commentary in the Interim Management Statement includes alternative
performance measures, which are not defined by International Financial
Reporting Standards. Definitions of these measures can be found in note 1 of
the half year results. The measures provide additional information for users
on underlying business trends and performance.
Interim Management Statement
I am pleased to report NAHL's Interim Results for the six months ended 30 June
2022.
Overview
The financial results are in line with the Board's expectations. During the
Period we continued to make progress on our strategic objectives, growing the
number of personal injury enquiries that we generated, increasing the number
of claims being processed in NAL, collecting more cash from settlements in NAL
and developing our capability and pipeline of work in Bush & Co.
Summary of results
Revenue was £20.7m, which was 6% higher than the first half of last year (H1
2021: £19.5m), and 7% higher than the second half (H2 2021: £19.4m). Both
of our divisions delivered revenue growth, with Consumer Legal Services
growing by 4% and Critical Care by 12% in the Period.
Operating profit was £2.3m, which was 8% lower than last year due to the
planned investment in scaling the Group's fully integrated law firm, NAL. At
10.9%, the operating profit margin was lower than the first half of last year
(12.6%) but has recovered by 2.2 ppts compared to the 8.7% achieved in the
second half of last year.
At a divisional level, operating profit in Consumer Legal Services was 14%
lower than last year at £2.1m (H1 2021: £2.4m). This was net of a £1.4m
investment in the cost of generating new enquiries into NAL (H1 2021: £1.0m).
Many of these enquiries will not translate into winning claims this year but
go towards building the embedded value of NAL's book of claims, which will
lead to future profits and cash. At 30 June 2022, NAL had increased the
number of ongoing claims by 25% since 31 December 2021. We estimate that
NAL's book of claims is worth £7.5m of future revenue and £6.5m of future
gross profits, neither of which have yet been recognised in the profit and
loss account.
Operating profit in Critical Care was 2% lower than last year at £1.6m,
reflecting the Group's continued investment in business development, people
and systems.
The profit attributable to members' non-controlling interests in our joint
venture LLPs was £1.9m (H1 2021: £1.7m). This reflects increased
settlements of historical claims in the Group's two joint venture
partnerships, Law Together LLP and Your Law LLP.
Profit before tax decreased to £0.1m (H1 2021: £0.6m) and basic earnings per
share (EPS) were 0.0p (H1 2021: 1.0p).
The Group generated £1.0m of free cash flow ("FCF") in the Period, which was
£0.4m less than the equivalent period last year because of our investment in
new claims in NAL. Operating cash conversion was strong at 150% (H1 2021:
136%). NAL collected £1.5m of cash from settlements in the Period, which
was 50% more than last year. We estimate that the ongoing claims in NAL will
convert over the next few years into £9.8m of future cash, on settlement.
The Board remains committed to managing net debt and at 30 June 2022 net debt
was £14.5m, down 6% from £15.5m at 31 December 2021.
Consumer Legal Services
In our Consumer Legal Services division, revenue increased by 4% from £13.6m
to £14.1m, and operating profit fell by 14% to £2.1m (H1 2021: £2.4m).
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 growing enquiry volumes, 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. 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.
In the first half of 2022, we continued to build momentum in delivering this
strategy.
External data from the Claims Portal and Official Injury Claim Portal shows
that the number of new claims in the UK personal injury market remained
subdued in the Period. This is due to the combined impact of COVID-19
related changes in consumer behaviour and the implementation of the Civil
Liability Act 2018 ("CLA"), which have fundamentally reset the size of the
market in the past 24 months. This picture is consistent with Google
mobility data, which appears to have plateaued since the start of the year.
Unfortunately, these changes have also resulted in a lack of stimulation of
the market as the largest law firms and claims management companies reduce
their marketing spend to manage their profits. We estimate this market to
now be worth £1.1bn annually. We continue to believe that consumer
behaviour will change, investment levels will increase, and consequentially
the number of new claims will increase from current levels.
National Accident Helpline generated 17,933 enquiries in the Period, which was
an increase of 27% on last year. This number would have been higher had we
not taken the decision to stop processing tariff-only road traffic accident
("RTA") claims, which we announced in February, to focus our resources on
processing higher value enquiries.
Our increase in enquiry numbers was achieved through market share gains, and
we estimate that at Period-end National Accident Helpline held a 19% share of
the non-RTA market, comprising employers', public and occupier liability
claims. This has grown consistently over the last 18 months, which gave us
confidence to return to TV advertising in June 2022, when we launched a new
campaign to strengthen our brand position and contribute to future volume
growth.
The brand and our website performed well during the Period, contributing to an
improvement in the number of leads, including more organic (unpaid) leads and
a lower cost of acquisition, after adjusting for tariff-only claims. Since
Period-end, the early indications are that the TV campaign is also having a
positive effect.
25% of our total enquiries were placed into NAL during the Period, with 68%
going to the panel and 7% to our joint ventures. Demand from the panel has
remained strong throughout the Period and this distribution channel continues
to provide us with good options for short-term profit and cash generation.
The 4,531 new enquiries placed into NAL represents an increase of 61% on H1
2021. We estimate that these enquiries are worth £2.9m in future revenues.
NAL won 626 claims in the Period, which generated £1.5m of cash from
settlements for NAL. This was 50% more than the same period last year,
further proving the model.
At 30 June 2022, NAL had a book of 9,884 ongoing claims, 25% more than at 31
December 2021 (31 December 2021: 7,918 claims; 30 June 2021: 4,268 claims).
This book of existing, ongoing claims has an embedded value, being the
future profits and cash anticipated to be generated by processing those claims
through to settlement. At 30 June 2022, after already expensing marketing
costs relating to these claims and costs incurred on processing up to that
date, we anticipate that these ongoing claims will generate future revenue of
£7.5m and future gross profit of £6.5m.
The Group's Residential Property businesses, comprising Homeward Legal and
Searches UK, generated revenues of £2.4m (H1 2021: £3.3m) and operating
profit before shared costs of £0.3m (H1 2021: £0.5m). These businesses
experienced a slowdown in Q2, in line with the wider market, although Searches
UK proved more resilient and attracted several new customers. The market
slowdown follows two years of increased activity fuelled by the stamp duty
land tax holiday and sustained low interest rates.
Critical Care
In our Critical Care division, revenue increased by 12% from £6.0m to £6.7m,
and operating profit was 2% lower at £1.6m (H1 2021: £1.7m). This reflects
our continued investment in business development, people and systems.
Our strategy in Bush & Co remains to grow our market share 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.
The business operates in the catastrophic injury market, with most of the work
arising from serious RTA injuries and medical negligence. Both of these
types of claims suffered a temporary reduction in volume during the COVID-19
pandemic, but data from the Department for Transport suggests that serious RTA
injuries have returned to their long-term trend of a slow decline; and data
from IRN Research shows that the number of medical negligence claims reported
to NHS Resolution grew by 8% in 2020/21. The growth in revenue in Bush &
Co. gives us confidence that the business has grown market share in the
Period.
In the first half of 2022, we continued to make progress in our recovery from
the effects of the pandemic.
Our expert witness business performed strongly, with revenue 20% higher than
H1 2021. The number of expert witness reports completed and issued to
customers increased by 11%. The number of new instructions for expert
witness reports was also up by 11%, reflecting our focus on business
development and creating a strong pipeline of work for the future.
Our case management business has adapted to new ways of working since the
pandemic, with a mix of face-to-face and online work required by clients.
Our teams delivered 12% growth in the number of initial needs assessments
("INAs") completed in the Period and maintained a strong book of ongoing case
management clients generating recurring monthly revenue, but revenues were 3%
lower because online work is charged at a lower rate. We continue to benefit
from a strong pipeline of new work and instructions numbers for INAs grew by
19% in the Period.
The division also made good progress on many of its strategic priorities in
the first half of the year. Bush Care Solutions, which provides nurse-led
care management services, was launched in August 2021 and has been growing the
number of ongoing clients resulting in monthly recurring revenue. This
initiative complements our case management proposition and whilst it is
currently a modest, albeit profitable, contributor to the divisional results,
the early progress made gives us confidence that it can be a driver of more
significant growth in the future.
The business has also recruited 41 new associates in key specialisms in the
Period and at 30 June 2022 was working with 96 case managers and 115 expert
witnesses across the UK. This recruitment included adding to our
competencies in the specialised care of Children and Young People, which we
identified last year as a growth opportunity. I've been particularly pleased
with the level of associate recruitment that the business has achieved so far
this year, which demonstrates the high regard in which Bush & Co. is held
in the industry.
Our people
On 15 September 2022, the Board announced that Chris Higham had been appointed
as a director of the Company, in the role of Group CFO, having been appointed
acting CFO on 17 August 2021. Chris has held a variety of roles at NAHL
since 2006 and has proven himself to be a real asset to the Group.
At the same time, the Board announced that Gillian Kent had decided to step
down as non-executive director after eight years on the Board in order to
pursue other business interests. This follows Gillian's recent appointment to
the Board of THG plc as a Non-Executive Director. I'd like to thank Gillian
for her contribution and support during this period and wish her well for the
future.
With three independent non-executive directors and two executive directors,
the Board believes that its current composition provides the skills and
experience necessary to meet the Group's needs, given its size and nature.
On behalf of the Board, I want to thank all our people for their diligence and
dedication to our customers during the Period. Their continually high levels
of engagement, skill and empathy allow us to deliver our strategy and support
more victims of accidents and medical negligence.
We employed 278 people at 30 June 2022, an increase of 8% from the end of
2021, with this growth reflecting our commitment to investing in the continued
success of NAL and Bush & Co. Despite the challenging labour market, our
People Team have done a great job in supporting our recruitment and retention
needs across the Group, which has been aided by the increased prevalence of
remote working, allowing us to access highly skilled candidates across the
country.
To support our proposition, I am proud to say that we have built a Group with
a strong purpose, an inclusive and supportive culture and clear leadership.
Our focus on employee engagement was rewarded in June with another set of
excellent results in our annual engagement survey, in which we improved on
last year with overall engagement score of 78% (2021: 75%). This remains
significantly higher than the UK average of 14%, and our results buck the
trend which has seen UK average engagement scores fall over each of the last
three years.
Throughout the Period, our people have participated in numerous initiatives in
support of our local communities, charities, and the environment. This has
included donating to food banks, community garden projects, a local RSPCA
rescue centre and the Rockinghorse children's charity, in Sussex. We also
proudly supported national and international causes, including Stoke
Mandeville Spinal Research, the DEC's Ukraine Humanitarian Appeal and the
Child Brain Injury Trust.
Summary and outlook
The results for the first half of 2022 were in line with the Board's
expectations and saw the Group deliver an operating profit, generate cash and
reduce net debt.
We continued the momentum we have generated in our Personal Injury business,
increasing the number of enquiries while growing the value of NAL's book of
claims. In Critical Care, we have offset the erosion in case management
average revenue caused by COVID-19, by growing our expert witness services and
developing Bush Care Solutions, as well as recruiting 41 new associates in key
specialisms.
As we anticipated, our profits are reduced in the short-term, as we continue
our investment in NAL, but the results we are achieving gives me confidence
that we are on track to build a more sustainable and profitable business in
the medium and long-term.
In July and August, our Consumer Legal Services division delivered 4% growth
in personal injury enquiry numbers compared to last year. Whilst we are yet
to see any sustained growth in claim numbers in the market, we expect to be in
a better position to judge the market's medium-term prospects early next year.
Cash from settlements in NAL has continued to grow, and £0.6m was collected
across July and August (H1 2021: £0.3m).
In Critical Care, the number of INA reports issued in July and August was 26%
ahead of last year, but the number of expert witness reports issued was 24%
lower than last year. This shortfall was largely down to the timing of
issuing reports during the summer holiday period and we anticipate a return to
growth for the remainder of the year. The business has continued to enjoy
robust instruction levels.
We continue to maintain a tight control over costs and discretionary spend
whilst progressing our investments in both divisions. And whilst we expect
that interest rates will remain above the historical lows that we have seen
over recent years, leading to an increase in the cost of our borrowings, we
are carefully managing the Group's net debt and anticipate it reducing further
this year.
In summary, we have made good progress and I am pleased with the results the
Group achieved in the first half of the year. Based on our performance in
H1, and early indications in H2, the Board believes that it can navigate this
period of macroeconomic uncertainty and deliver a full year outturn in line
with market expectations.
James Saralis
Chief Executive Officer
27 September 2022
Consolidated statement of comprehensive income
for the 6 months ended 30 June 2022
Unaudited
6 months
ended 30
June 2022 Audited
£000 Unaudited 12 months
Note 6 months ended 31
ended 30 December 2021
June 2021 £000
£000
Revenue 2 20,732 19,509 38,947
Cost of sales (11,984) (10,251) (21,352)
Gross profit 8,748 9,258 17,595
Administrative expenses (6,493) (6,799) (13,439)
Operating profit 2 2,255 2,459 4,156
Profit attributable to members' non-controlling interests in LLPs (1,935) (1,654) (3,451)
Financial income 37 47 85
Financial expense (307) (271) (555)
Profit before tax 50 581 235
Taxation 3 (48) (130) (79)
Profit and total comprehensive income for the period 2 451 156
Profit from discontinued operations for the period 9 - 76 -
Profit from continuing operations for the period 2 375 156
Earnings per share (p) Continuing operations Unaudited Unaudited 6 months Audited 12 months
6 months ended ended
ended 30 June 31 December 2021
30 June 2021
2022
Basic earnings per share 6 0.0 0.8 0.3
Diluted earnings per share 6 0.0 0.8 0.3
Earnings per share (p) Discontinued operations Unaudited Unaudited 6 months Audited 12 months
6 months ended ended
ended 30 June 31 December 2021
30 June 2021
2022
Basic earnings per share 6 - 0.2 -
Diluted earnings per share 6 - 0.2 -
Consolidated statement of financial position
At 30 June 2022
Note Unaudited as at 30 June Unaudited as at Audited
2022 30 June as at 31 December 2021
£000 2021 £000
£000
Non-current assets
Goodwill 55,489 55,489 55,489
Other intangible assets 3,156 4,120 3,701
Property, plant and equipment 440 489 477
Right of use assets 2,171 2,608 2,315
Deferred tax asset 23 14 23
61,279 62,720 62,005
Current assets
Trade and other receivables (including £4,692,000 (June 2021: £7,811,00; 4 33,058 35,051 33,404
December 2021: £3,718,00) due in more than one year)
Cash and cash equivalents 1,974 3,037 2,458
35,032 38,088 35,862
Total assets 96,311 100,808 97,867
Current liabilities
Trade and other payables 5 (16,096) (17,999) (16,211)
Lease liabilities (258) (253) (242)
Member capital and current accounts (4,232) (4,587) (4,210)
Current tax liability (74) (376) (97)
(20,660) (23,215) (20,760)
Non-current liabilities
Lease liabilities (1,885) (2,125) (1,953)
Other interest-bearing loans and borrowings (16,424) (17,950) (17,910)
Deferred tax liability (546) (705) (625)
(18,855) (20,780) (20,488)
Total liabilities (39,515) (43,995) (41,248)
Net assets 56,796 56,813 56,619
Equity
Share capital 116 115 116
Share option reserve 4,487 4,212 4,312
Share premium 14,595 14,595 14,595
Merger reserve (66,928) (66,928) (66,928)
Retained earnings 104,526 104,819 104,524
Capital and reserves attributable to the owners of NAHL Group plc 56,796 56,813 56,619
Consolidated statement of changes in equity
for the 6 months ended 30 June 2022
Share Share Share Merger Retained Total
capital option premium reserve earnings equity
£000 reserve £000 £000 £000 £000
£000
Balance at 1 January 2022 116 4,312 14,595 (66,928) 104,524 56,619
Total comprehensive income for the period
Profit for the period - - - - 2 2
Total comprehensive income - - - - 2 2
Transactions with owners, recorded directly in equity
Share-based payments - 175 - - - 175
Total transactions with owners recorded directly in equity - 175 - - - 175
Balance at 30 June 2022 116 4,487 14,595 (66,928) 104,526 56,796
Balance at 1 January 2021 115 3,912 14,595 (66,928) 104,368 56,062
Total comprehensive income for the period
Profit for the period - - - - 451 451
Total comprehensive income - - - - 451 451
Transactions with owners, recorded directly in equity
Share-based payments - 300 - - - 300
Total transactions with owners recorded directly in equity - 300 - - - 300
Balance at 30 June 2021 115 4,212 14,595 (66,928) 104,819 56,813
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 share capital 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 6 months ended 30 June 2022
Note Unaudited 6 months ended 30 June 2022 Unaudited Audited
£000 6 months ended 30 June 2021 £000 12 months ended 31 December 2021
£000
Cash flows from operating activities
Profit for the period 2 451 156
Adjustments for:
Profit attributable to members' non-controlling interests in LLPs 1,935 1,654 3,451
Property, plant and equipment depreciation 91 86 171
Right of use asset depreciation 145 153 306
Amortisation of intangible assets 624 621 1,195
Financial income (36) (47) (85)
Financial expense 307 271 555
Share-based payments 175 300 400
Taxation 48 130 79
3,291 3,619 6,228
Decrease/(Increase) in trade and other receivables 240 (720) 1,012
(Decrease)/Increase in trade and other payables (115) 452 (1,337)
Cash generation from operations 3,416 3,351 5,903
Interest paid (267) (193) (398)
Tax paid (14) - (365)
Net cash generated from operating activities 3,135 3,158 5,140
Cash flows from investing activities
Acquisition of property, plant and equipment (54) (208) (281)
Acquisition of intangible assets (79) (184) (339)
Interest received 6 1 2
Net cash used in investing activities (127) (391) (618)
Cash flows from financing activities
Repayment of borrowings (1,500) (2,000) (2,000)
Issue of share capital - - 1
Facility arrangement fees - - (90)
Principal element of lease payments (80) (95) (166)
Drawings paid to LLP members (1,912) (1,244) (3,418)
Net cash used in financing activities (3,492) (3,339) (5,673)
(484) (572) (1,151)
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period 2,458 3,609 3,609
Cash and cash equivalents at end of period 1,974 3,037 2,458
Notes to the financial statements
1. Accounting policies
General Information
The half year results for the current and comparative period to 30 June have
not been audited or reviewed by auditors pursuant to the Auditing Practices
Board guidance of Review of Interim Financial Information.
These half year results do not comprise statutory accounts within the meaning
of Section 434 of the Companies Act 2006. Statutory accounts for the year
ended 31 December 2021 were approved by the Board of Directors on 28 March
2022 and delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of the Companies
Act 2006.
In preparing the half year results, the Board has considered the Group's
ability to continue as a going concern. This assessment included a review of
management's financial forecasts, covering a range of potential scenarios. 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 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 condensed set of financial statements was approved by the Board of
Directors on 26 September 2022.
Basis of preparation
Statement of compliance
The half year results for the current and comparative period to 30 June have
been prepared in accordance with IAS 34 Interim Financial Reporting applied in
conformity with the requirements of the Companies Act 2006 and the AIM Rules
of UK companies. They do not include all of the information required for
full annual financial statements and should be read in conjunction with the
financial statements of the Group for the year ended 31 December 2021, which
have been prepared in accordance with International Financial Reporting
Standards ("IFRS") in conformity with the requirements of the Companies Act
2006.
New and amended standards adopted by the Group
There are no new or amended standards applicable for the current reporting
period.
Use of judgements and estimates
The preparation of financial statements in conformity with IFRS requires
management to make judgements and estimates that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the year in which the estimates are
revised and in any future years affected.
In preparing the condensed set of financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were of the same type as those that
applied to the financial statements for the year ended 31 December 2021.
Significant accounting policies
The accounting policies used in the preparation of these interim financial
statements for the 6 months ended 30 June 2022 are
the accounting policies as applied to the Group's financial statements for the
year ended 31 December 2021.
Statutory and non-statutory measures
The Directors have presented these alternative performance measures (APMs) in
the Interim Results 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 Interim Results are as defined in the 2021 Annual Report
and the principles to identify adjusting items have been applied on a basis
consistent with previous years.
The APMs presented in the Interim Results are defined as follows:
Nature of Related IFRS Related IFRS
measure measure source Definition Use/relevance
Operating cash Not defined n/a Calculated as cash generated from operations divided by operating profit. Provides management with an indication of the amount of cash available for
discretionary investing or financing after removing material non-recurring
conversion by IFRS expenditure that does not reflect the underlying trading operations and allows
management to monitor the conversion of underlying profit into cash.
Free cash Not defined n/a Calculated as net cash generated
flow by IFRS from operating activities less net cash
used in investing activities less
payments made to partner LLP members and less principal element of lease
payments.
Net cash/(debt) Not defined Consolidated Net cash/(debt) is defined as cash and cash Allows management to monitor the overall level of debt in the business. As
stated in the 2021 strategic report, loan funding is key to the Group's future
by IFRS cash flow equivalents less interest-bearing strategy as an increasing proportion of profits and cash flows are deferred
until case settlement.
statement borrowings net of loan arrangement
fees.
A reconciliation of each measure is provided as follows:
Cash conversion and free cash flow:
Unaudited 6 months ended 30 June 2022 Unaudited 6 months ended 30 June 2021 Audited 12 months ended 31 December 2021
£000 £000 £000
IFRS measure - Cash generation from operations 3,416 3,351 5,903
Operating profit 2,255 2,459 4,156
Operating cash conversion 151.5% 136.3% 142.0%
Cash generation from operations 3,416 3,351 5,903
Interest paid (267) (193) (398)
Tax paid (14) - (365)
Net cash generated from operating activities 3,135 3,158 5,140
Net cash used in investing activities (127) (391) (618)
Principal element of lease payments (80) (95) (166)
Issue of share capital - - 1
Facility arrangement fees - - (90)
Drawings paid to LLP members (1,912) (1,244) (3,418)
Free cash flow 1,016 1,428 849
Net debt is defined in Note 8 to the interim financial statements.
Financial assets and liabilities
The Group's principal financial instruments comprise cash and cash
equivalents, trade and other receivables, trade and other payables
and interest-bearing borrowings.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent
to initial recognition, trade and other receivables are stated at amortised
cost using the effective interest method, less any impairment losses
calculated in line with IFRS 9.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to
initial recognition, trade and other payables are stated at
amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Cash and cash equivalents
are repayable on demand and are recognised at their
carrying amount.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective
interest method, less any impairment losses.
Recoverable disbursements and disbursements payable
Disbursement payables represent the balance of disbursements incurred in the
processing of personal injury claims. These disbursements will ultimately be
billed on settlement of a case or recovered from insurance if a case should
fail and so the recoverable disbursements represents the value of
disbursements still to be billed. Disbursement payables and receivables are
recognised initially at fair value and subsequent to initial recognition, are
stated at amortised cost using the effective interest method.
Member capital and current accounts
Member capital and current accounts represent the balances owed to
non-controlling members' in the LLPs. These consist of any capital advances
and unpaid allocated profits as at the period end. Members capital and current
accounts are classified as financial liabilities and are recognised initially
at fair value. Subsequent to initial recognition, members capital and current
accounts are stated at amortised cost using the effective interest method.
2. Operating segments
Consumer Critical Care Shared services Other items Underlying operations Eliminations(2) Total
£000
Legal Services £000 £000 £000 £000 £000
£000
6 months ended 30 June 2022
Revenue 14,061 6,671 - - 20,732 - 20,732
Depreciation and amortisation (129) (116) (179) (436) (860) - (860)
Operating profit/(loss) 2,108 1,634 (876) (611) 2,255 - 2,255
Profit attributable to members' non-controlling interests in LLPs (1,935) - - - (1,935) - (1,935)
Financial income 35 - 2 - 37 - 37
Financial expenses - (3) (304) - (307) - (307)
Profit/(loss) before tax 208 1,631 (1,178) (611) 50 - 50
Trade receivables 2,726 5,567 - - 8,293 - 8,293
Total assets(1) 29,106 6,585 78,126 - 113,817 (17,506) 96,311
Segment liabilities(1) 15,824 1,438 5,208 - 22,470 - 22,470
Capital expenditure (including intangibles) (59) (74) - - (133) - (133)
6 months ended 30 June 2021
Revenue 13,557 5,952 - 19,509 - 19,509
Depreciation and amortisation (139) (83) (176) (462) (860) - (860)
Operating profit/(loss) 2,439 1,674 (892) (762) 2,459 - 2,459
Profit attributable to members' non-controlling interests in LLPs (1,654) - - - (1,654) - (1,654)
Financial income 47 - - - 47 - 47
Financial expenses - (5) (266) - (271) - (271)
Profit/(loss) before tax 832 1,669 (1,158) (762) 581 - 581
Trade receivables 4,035 4,906 - - 8,941 - 8,941
Total Assets(1) 32,767 6,047 79,500 - 118,314 (17,506) 100,808
Segment liabilities(1) (15,170) (1,371) (3,836) - (20,377) - (20,377)
Capital expenditure (including intangibles) (30) (169) (193) - (392) - (392)
12 months 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
1. Total assets and segment liabilities exclude
intercompany loan balances as these are not included in the segment results
reviewed by the chief operating decision maker.
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.
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 the prior 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
Unaudited 6 months ended 30 June 2022 Unaudited 6 months ended 30 June 2021 Audited 12 months ended 31 December 2021
£000 £000 £000
Current tax expense
Current tax on income for the year 127 250 276
Adjustments in respect of prior years - - 13
Total current tax 127 250 289
Deferred tax credit
Origination and reversal of timing differences (79) (120) (210)
Total deferred tax (79) (120) (210)
Total expense in statement of comprehensive income 48 130 79
Total tax charge 48 130 79
Reconciliation of effective tax rate:
Unaudited 6 months ended 30 June 2022 Unaudited 6 months ended 30 June 2021 Audited 12 months ended 31 December 2021
£000 £000 £000
Profit for the period 2 451 156
Total tax expense 48 130 79
Profit before taxation 50 581 235
Tax using the UK corporation tax rate of 19.0% (June 2021: 19.0%, December 10 110 45
2021:19.0%)
Non-deductible expenses 38 57 97
Adjustments in respect of prior years - - 13
Share scheme deductions - - (8)
Short term timing differences for which no deferred tax is recognised (37) (68)
Total tax charge 48 130 79
The Group's tax charge of £48,000 (June 2021: £130,000, December 2021:
£79,000) represents an effective tax rate of 96.5% (June 2021: 22.4%,
December 2021:33.6%). The effective tax rate is higher than the standard
corporation tax rate of 19.0% for the reasons as set out above.
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%.
The effects are included within these interim financial statements.
4. Trade and other receivables
Unaudited 6 months ended 30 June 2022 Unaudited 6 months ended 30 June 2021 Audited 12 months ended 31 December 2021
£000 £000 £000
Trade receivables: receivable in less than one year 7,711 8,181 7,056
Trade receivables: receivable in more than one year 820 760 839
Accrued income: receivable in less than one year 11,356 10,692 12,414
Accrued income: receivable in more than one year 3,872 7,051 3,718
Other receivables 14 22 21
Prepayments 934 965 913
Corporation tax - 88 136
Recoverable disbursements 8,351 7,292 8,307
Total 33,058 35,051 33,404
A provision against trade receivables of £467,000 (June 2021: £739,000,
December 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
Unaudited 6 months ended 30 June 2022 Unaudited Audited 12 months ended 31 December 2021
£000 6 months £000
ended 30
June 2021
£000
Trade payables 1,434 2,706 1,452
Disbursements payable 7,388 6,686 7,222
Other taxation and social security 1,299 1,659 1,216
Other payables, accruals and deferred revenue 5,518 6,311 5,864
Customer deposits 457 637 457
Total 16,096 17,999 16,211
6. Earnings per share
The calculation of basic earnings per share at 30 June 2022 is based on profit
attributable to ordinary shareholders of the parent company of £2,000 (June
2021: £451,000, December 2021: £156,000) and a weighted average number of
Ordinary Shares outstanding of 46,325,222 (June 2021: 46,240,222, December
2021: 46,245,345).
Profit attributable to ordinary shareholders
Unaudited Unaudited Audited
6 months ended 30 June 2022 6 months ended 30 June 2021 12 months ended
£000 £000 31 December 2021
£000
Profit for the period attributable to the shareholders 2 451 156
Profit for the period from continuing operations 2 375 156
Profit for the period from discontinued operations - 76 -
Weighted average number of Ordinary Shares
Number
Unaudited 6 months ended Unaudited 6 months ended 30 June 2021 Audited 12
30 June 2022 months ended
31 December 2021
Issued Ordinary Shares at start of period 46,325,222 46,240,222 46,240,222
Weighted average number of Ordinary Shares at end of period 46,325,222 46,240,222 46,245,345
Basic earnings per share (p)
Unaudited 6 months ended 30 June 2022 Unaudited 6 months ended 30 June 2021 Audited 12
months ended
31 December 2021
Group (p) - continuing operations 0.0 0.8 0.3
Group (p) - discontinued operations - 0.2 -
Group (p) - total 0.0 1.0 0.3
The Company has in place share-based payment schemes to reward employees. As
at 30 June 2022, there were potentially dilutive shares 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
(June 2021: 1,686,327, Dec 2021:1,315,881). There are no other diluting items.
Diluted earnings per share (p)
Unaudited 6 months ended Unaudited 6 months Audited 12
30 June 2022 ended months
30 June 2021 ended
31 December 2021
Group (p) - continuing operations 0.0 0.8 0.3
Group (p) - discontinued operations - 0.2 -
Group (p) - total 0.0 1.0 0.3
7. Dividends
No dividends were paid in 2021 and the Directors have recommended an interim
dividend in respect of 2022 of nil p (2021: interim dividend of nil p).
8. Net debt
Net debt comprises cash and cash equivalents and secured bank loans.
Unaudited Unaudited Audited
as at 30 as at 30 as at 31 December 2021
June 2022 June 2021 £000
£000 £000
Cash and cash equivalents 1,974 3,037 2,458
Other interest-bearing loans and loan notes (16,424) (17,950) (17,910)
Net debt (14,450) (14,913) (15,452)
Lease liabilities (2,143) (2,378) (2,195)
Set out below is a reconciliation of movements in net debt during the period.
Unaudited Unaudited Audited
as at 30 as at 30 as at 31 December 2021
June 2022 June 2021 £000
£000 £000
Net decrease in cash and cash equivalents (484) (572) (1,151)
Net inflow from decrease in debt and debt financing 1,500 2,000 2,000
Movement in net borrowings resulting from cash flows 1,016 1,428 849
Non-cash movements - net release of prepaid loan arrangement fees (14) (49) (9)
Net debt at beginning of period (15,452) (16,292) (16,292)
Net debt at end of period (14,450) (14,913) (15,452)
Set out below is a reconciliation of movements in lease liabilities during the
period.
Unaudited Unaudited Audited
as at 30 as at 30 as at 31 December 2021
June 2022 June 2021 £000
£000 £000
Net outflow from decrease in lease liabilities 80 95 166
Movement in net borrowings resulting from cash flows 80 95 166
Non-cash movements arising from initial recognition of new (28) (30) 82
lease liabilities, revisions and interest charges
Lease liabilities at beginning of the period (2,195) (2,443) (2,443)
Lease liabilities at end of period (2,143) (2,378) (2,195)
9. Discontinued Operations
In May 2021, the Group announced its intention to investigate a potential sale
of its Residential Property business, a sub-division of its Consumer Legal
Services operating segment. As at the 2021 interim balance sheet date,
management had committed to a formal plan for the sale of the business and
were actively seeking a buyer. As such, the results from Homeward Legal and
National Conveyancing Partners were classified as discontinued operations.
These business units had no non-current assets and no fair value adjustments
arose on this classification. Subsequently, the sale did not proceed and
whilst the Board are still investigating options for Homeward Legal, the Group
has not identified a suitable acquirer at present and is not in any formal due
diligence discussions. Whilst possible, it is not considered to be highly
probable that a sale will take place within the next 12 months. These entities
were therefore de-classified as held for sale as at 31 December 2021 and the
results are presented within the continuing operations of the Group.
The results of these discontinued operations as presented in the 2021 interim
results are as follows:
Consolidated statement of comprehensive income:
Unaudited Unaudited Audited
as at 30 as at 30 as at 31 December 2021
June 2022 June 2021 £000
£000 £000
Revenue - 1,296 -
Expenses - (1,197) -
Profit before taxation - 99 -
Taxation - (23) -
Profit after taxation attributable to owners of the parent company - 76 -
Consolidated cash flow statement:
Unaudited Unaudited Audited
as at 30 as at 30 as at 31 December 2021
June 2022 June 2021 £000
£000 £000
Cash flows from operating activities - (143) -
Cash flows from investing activities - - -
Cash flows from financing activities - - -
Net cash outflow - (143) -
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