Final Results

RNS Number : 6551Z

NAHL Group PLC

25 May 2021

NAHL Group plc

("NAHL" or the "Group")

Final Results

Resilient performance in a challenging year; strategy in place to drive growth

NAHL, the leading UK marketing and services business focused on the UK consumer legal market, announces its Final Results for the year ended 31 December 2020.

Financial Highlights

●	Revenue decreased by 20.3% to £40.9m (2019: £51.3m)
●	Underlying operating profit* decreased to £5.7m (2019: £10.4m)
●	Loss before tax decreased to £(0.2)m (2019: £(2.3)m loss), a result of lower exceptional costs in Personal Injury and an impairment charge of £5.3m recognised in respect of the Residential Property division in 2019
●	Underlying EPS* of 1.9p (2019: 9.4p)
●	Significantly improved cash generation with Free Cash Flow increasing to £6.1m from £(1.7)m in 2019 and cash conversion* of 228.9% (2019: 47.4%)
●	Net debt at 31 December 2020 of £16.3m (2019: £21.0m)

Operational Highlights

●	Decisive actions taken to increase the Group's resilience and liquidity in response to COVID-19
●	Successful merging of Personal Injury and Residential Property businesses into the new Consumer Legal Services division, driving efficiencies
●	Completed the transformation of Personal Injury business into a modern, technologically enabled law firm
●	Residential Property business rallied strongly in the second half, in line with the improved performance of the housing market
●	Resilient performance from Critical Care division with continued strategic progress delivered to support growth prospects

Current Trading and Outlook

●	Group continued to be impacted by the third national lockdown in January 2021
●	Revenue in the first four months of the year in line with the Board's expectations (19% below equivalent period in 2019)
●	During this period, over 1,600 enquiries placed into our wholly owned law firm National Accident Law, an increase of c. 1500% over the equivalent period in 2019
●	Well placed to generate value post the long-awaited PI industry reforms being introduced on 31 May 2021 by increasing the number of claims being processed through National Accident Law
●	Notwithstanding potential further Government COVID-19 restrictions, anticipate a return to the pre-pandemic trends in our markets during 2022
●	In light of on-going consolidation in the market for residential property services, the Board has decided to investigate a potential sale of its repositioned and profitable Residential Property business

Tim Aspinall, Chair of NAHL, commented:

"During a year of unparalleled challenges, I am incredibly proud of the response of our people and their unwavering focus on supporting our customers at all times. Thanks to their efforts, along with the flexibility of our business model and careful management of the cost base, the Group delivered an operating profit, improved its cash generation and reduced net debt by nearly £5m.

"Moreover, we continued to make good progress both with our operational and strategic initiatives and our Personal Injury business completed its transformation into a modern, technologically enabled law firm capable of processing its own enquiries, ahead of the introduction of the legal reforms in May this year. We are confident that these changes will result in a sustainable and profitable business, albeit with a longer profit and cash cycle.

"Critical Care continues to be a leading player in the catastrophic injury market and has some exciting plans to develop its market share and improve efficiencies.

"We are optimistic about the future and, notwithstanding any further setbacks with COVID-19, we expect to see profits in 2021 exceed those in 2020."

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

* Underlying measures adjust for exceptional items, net of tax where applicable. Underlying measures have been restated for 2019 based on a review of the classification of underlying and non-underlying items during the year. See note 10 for further details.

Video

NAHL management has recorded a video for analysts and investors, which provides an overview of the Final Results and goes into further detail on the Group's strategy for delivering sustainable, long-term value. A recording of the video has been made available on NAHL's website this morning: https://nahlgroupplc.co.uk .

Enquiries:

NAHL Group plc

Tim Aspinall (Chair)

James Saralis (CFO)

via FTI Consulting

Tel: +44 (0) 20 3727 1000

Peel Hunt LLP (Nomad & Broker)

Ed Allsopp

Miles Cox

Rishi Shah

Tel: +44 (0) 20 7418 8890

FTI Consulting (Financial PR)

Alex Beagley

James Styles

Sam Macpherson

Tel: +44 (0) 20 3727 1000

Notes to Editors

NAHL Group plc (AIM: NAH) is a leader in the Consumer Legal Services ("CLS") market. The Group provides services and products to individuals and businesses in the CLS market through its two divisions:

· Consumer Legal Services provides outsourced marketing services to law firms through National Accident Helpline and Homeward Legal; and claims processing and conveyancing services to individuals through Your Law, Law Together, National Accident Law and National Conveyancing Partners. 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 , www.national-accident-helpline.co.uk and www.bushco.co.uk

Chair's Statement

This is my first report as Chair of the Board of NAHL Group plc, having served as Non-Executive Director since 2016.

2020 was a year dominated by the challenges presented by the COVID-19 global pandemic. Our businesses faced lower demand in their markets and had to quickly adapt their operations to protect staff and customers. However, by flexing our personal injury business model, carefully managing costs and with a resilient performance by our Critical Care division, the Group remained profitable at the underlying operating profit level in the year and was able to reduce its net debt by nearly £5m.

2020 results

Group revenues decreased to £40.9m (2019: £51.3m) in the year, largely due to reduced volumes in our Personal Injury and Critical Care businesses. Underlying operating profit declined to £5.7m (2019: £10.4m). This reflects the reduction in revenues but was partially mitigated by a reduction in underlying costs of £5.7m from £40.9m to £35.2m, including the in-year benefit of annualised cost savings of £1.2m which were generated by restructuring the Group in the first half of 2020.

The loss before tax decreased to £0.2m (2019: loss of £2.3m), largely as a result of the absence of last year's one-off impairment charge recognised in respect of our Residential Property business. This has not been repeated and a review of our goodwill and intangible balances this year supports their carrying value.

Underlying earnings per share decreased to 1.9p (2019: 9.4p) and basic earnings per share increased to (0.5)p (2019: (6.4)p). The Group delivered significantly improved levels of cash generation in the year, in line with its near-term strategic focus of reducing net debt, which stood at £16.3m on 31 December 2020, down from £21.0m the year before.

Strategic development

Despite the challenges presented by COVID-19 in the year, and the extensive due diligence process undertaken as a result of the aborted takeover bid in Q4 (see further details below), the Board has remained focused on its long-term goals and made good progress in developing its strategies for the Consumer Legal Services and Critical Care divisions.

Consumer Legal Services

In Consumer Legal Services, we aim to be the UK's leading technologically enabled law firm, focusing on high-volume personal injury claims. We have made excellent progress with our personal injury transformation, following the successful launch of National Accident Law in April 2019.

During the year, we successfully transitioned from being a claims management company into a modern, technologically enabled law firm, with a market leading brand that can process its own enquiries. This transformation is essential to our future.

By the end of 2020 we had reduced the number of claims being sent to our joint ventures, as we can now make higher (although deferred) profits processing claims in National Accident Law. Alternatively, we can generate cash quicker by sending claims to the panel.

The long-awaited regulatory reforms are due to be implemented on 31 May 2021. This will significantly reduce the processing and sales value of most RTA claims, and is a key reason why we have developed our wholly owned law firm National Accident Law. Fortunately, the majority of our enquires are non-RTA, which will be largely unaffected by the reforms, but the changes will significantly impact the revenue and profit we make from RTA enquiries.

The Group has worked extremely hard over several years to ensure we are ready to embrace these changes and deliver value post the reforms, continuing to increase the proportion and number of claims being processed through National Accident Law. This should increase the average profit per claim made by us, on a blended basis, across our entire book. Our strategy, therefore, is to:

1. process all RTA claims in National Accident Law, including all RTA small claims. Since January 2021, over 80% of new RTA claims have been placed into National Accident Law and that proportion will increase to 100% before 31 May.

2. process an increasing volume of non-RTA claims in National Accident Law, generating a higher return from these claims. To date only a small number of non-RTA claims are being allocated to National Accident Law but from the second half of 2021 these numbers will grow ensuring that all the profit from them is retained in the business, rather than being shared. Panel firms will continue to receive a substantial number of non-RTA claims as these generate cash and profit in year, whereas these are deferred when claims are sent to National Accident Law.

3. leverage investments in operations, people and technology to improve both efficiency and customer experience for all claim types. To this end, key upgrades to the call centre technology, digital journey and customer triage processes were successfully implemented in December 2020. These improvements should increase conversion metrics and also facilitate the efficient processing of RTA small claims by National Accident Law after 31 May.

Critical Care

In Critical Care, Bush & Co are a leading player in the catastrophic injury market, defined by personal injury claims of over £500,000 in value and with clients requiring extensive care. Bush provides vital services to support individuals who have suffered severe and life-changing injuries whilst they pursue a compensation claim. It does this through its three strategic pillars:

1. strong and diverse customer relationships with over 400 clients across the legal, insurance, clinical and charity sectors;

2. a wide range of competencies and specialisms across our case management and expert witness businesses, creating revenue realisation opportunities throughout the multi-year rehabilitation process;

3. underpinned by our Innovate - Optimise - Grow strategic framework, focusing on technological innovation and expansion into adjacent markets.

Good progress has been made over the last year in developing the strategy for growth in Critical Care. Our strategic choices follow our Innovate - Optimise - Grow model, bringing innovative services to market; optimising our operations; and growing our footprint by expanding into adjacent sectors and building market share.

Over the last year, we have made improvements to our base technology platform, with further enhancements planned for 2021 and 2022 to drive efficiencies in our case management processes. We also made excellent progress in the development of a proprietary digital medico-legal report writing tool for Expert Witness. This will enable us to improve the efficiency of our report writing and allow our existing consultants to process more reports each month. This is currently being trialled and we plan a wider roll out later this year.

We are expanding our very successful case management business within its current market through a differentiated proposition, designed to expand our share with insurers and defendant customers. This proposition should also provide a launch-pad into the lower value, but higher volume segment of the market, for claims with a value of between £100,000 and £500,000. We have also identified significant growth opportunities in Expert Witness and are seeking to develop our capabilities in key specialisms.

Aborted takeover bid

During the year, the Group was the target of a reverse takeover bid by another AIM company, Frenkel Topping Group plc (Frenkel Topping). Despite the Board engaging in extensive discussions aimed at concluding a deal that was in the best interests of our shareholders, Frenkel Topping eventually decided not to make an offer for the Group.

Engagement with Shareholders

The Company is committed to maintaining good communication with investors and since taking the role of Chair in October 2020, I have sought to engage with our major shareholders. These discussions have been valuable in helping me understand shareholders' views and I look forward to further engagement throughout 2021. I would like to extend an invitation to all shareholders to our Annual General Meeting, which is being held on 29 June 2021. Further details will be posted on our website and a formal invitation sent to shareholders.

Governance and Board changes

NAHL Group plc places great importance on ensuring we have a strong and effective governance and compliance culture and framework.

The Company saw several changes to the composition of the Board last year. In June 2020, we welcomed Brian Phillips to the Board as Non- Executive Director. Brian has extensive experience which has already proven valuable to us. In September, Russell Atkinson stepped down as Group CEO, having made a considerable impact on the development of the Group over the eight years that he served. This included taking the business through the IPO, three acquisitions and the transformation of the Personal Injury business into a law firm. In October, Caroline Brown stepped down from the role of Chair. I would like to thank them for their contributions to the business and I wish Russell and Caroline well for the future.

Since October, the Board has consisted of four Non-Executive Directors and one Executive Director, with clear separation between the roles of Non-Executive and Executive Directors. As Chair, I am responsible for the running of the Board and have been working closely with James Saralis (Group CFO), who has responsibility for implementing the strategy agreed by the Board and managing the day-to-day operations of the Group. He is ably supported in this role by our Leadership Team and I consider this structure appropriate to the Group's current circumstances, size and complexity.

Summary

The COVID-19 pandemic has had a significant impact on our business. I am pleased with the fast and effective response our divisions made to this dislocation whilst continuing work on their longer-term strategies.

Both divisions have developed a good understanding of their respective paths to recovery from the impact of COVD-19. Our Personal Injury business has completed its transformation into a law firm capable of processing its own enquiries in good time to deal with the challenges presented by the regulatory reforms. Critical Care has some exciting plans to develop its market share and improve efficiencies. The Board continues to work with our advisers to examine each of our businesses and how they can contribute to the Group's long-term performance. These discussions have identified the potential to create near-term value for shareholders through the sale of our Residential Property business, which we will be progressing in the months to come. We remain optimistic about the future and, unless there are any further setbacks with COVID-19, expect to see profits in 2021 exceed those in 2020.

Finally, I would like to thank our people for their unwavering focus on supporting our customers during this unprecedented year, and our shareholders for their continued support.

Tim Aspinall

Chair

24 May 2021

Operating review

2020 was an extraordinary year, in which the business - indeed the whole country - had to adapt and respond to the rapidly evolving threat of COVID-19.

Overview

For us, COVID-19 posed a risk to our employees and customers, many of whom are vulnerable. The lockdown measures imposed by the Government caused a 27% reduction in consumer accidents in the year, which had a significant impact on our revenues. This had the potential to cause irreversible damage to our businesses.

I am pleased with our response to these threats, which was swift and decisive. We implemented our business continuity plans and transitioned our staff to working from home using our recently upgraded technology solutions. We continued to provide uninterrupted support for our customers and developed new ways of working with the restrictions put in place. We restructured the Group to cut costs and re-focusing on short-term tactics to increase our liquidity. We adapted our business models, generated over £6m in free cash flow, reduced net debt and de-risked the balance sheet.

Whilst managing these challenges, the Group continued to make progress with its long-term objectives. The Consumer Legal Services division completed much of its transformation into a modern, technologically-enabled law firm and our Critical Care division advanced initiatives that will contribute to its recovery.

Despite the challenges that we faced, we have continued to support our customers and in this period we have helped over 36,000 customers with new personal injury claims (2019: 56k); issued 1,148 expert witness reports and initial needs assessments (2019: 1,325); and provided over 1,200 clients with case management to support their rehabilitation (2019: 1,294).

Response to COVID-19

The various lockdown measures introduced by the Government had a dramatic effect on our business. Throughout the pandemic, our priority has been ensuring the wellbeing of our staff and supporting our customers and business partners through these unprecedented times. To that end, in March, our IT and Operations teams implemented continuity plans which enabled colleagues to work safely from home and to provide remote access to clients. Recent investments in technology enhanced our ability to maintain high levels of service under difficult conditions.

After the initial reaction to the pandemic, we took a number of actions designed to increase our resilience and liquidity, summarised below.

i. We leveraged the flexibility in our Personal Injury business model to prioritise placement of enquiries into the panel to maximise cash flow.

ii. We implemented measures to reduce our costs, including reducing property and lease costs, introduced temporary voluntary pay reductions for the Board and senior management, and cancelled the planned pay increase across the workforce.

iii. We restructured the Group, merging our Personal Injury and Residential Property businesses into the Consumer Legal Services division and created a Shared Services function. We identified and secured £1.2m of annualised savings, including the closure of our London office.

iv. We made use of Government support in the form of the Coronavirus Job Retention Scheme (CJRS) and the deferral of VAT payments. At the peak of its usage in May, the Group furloughed 82 staff (30% of total) and by the end of the year this had reduced to two staff members. In total, we expect £0.4m will have been claimed under the CJRS, which helped to keep redundancies to a minimum.

Financial Performance

Review of the income statement

	2020 £m	2019 restated £m	Change £m	Change %
Consumer Legal Services	29.6	37.7	(8.1)	-21.8
Critical Care	11.3	13.6	(2.3)	-16.4
Revenue	40.9	51.3	(10.4)	-20.3

Consumer Legal Services	5.4	8.8	(3.4)	-38.5
Critical Care	3.6	5.0	(1.4)	-28.3
Shared Services	(1.9)	(1.6)	(0.3)	-17.2
Other items	(1.4)	(1.8)	0.4	+18.3
Underlying operating profit	5.7	10.4	(4 .7 )	-45.7

(The 2019 results have been restated to better reflect the structure of the Group as well as a revision to the presentation of the income statement as explained below . Total revenue and underlying operating profit are unchanged. See note 10 to the financial statements for further details.)

Revenue across the Group decreased in the year by 20.3% from £51.3m to £40.9m, largely as a result of reduced demand for our services caused by fewer accidents. As a result, underlying operating profit also decreased, by 45.7% from £10.4m to £5.7m at an underlying margin of 13.8% (2019: 20.3%).

Changes to financial reporting disclosures

During the year, the Directors, in conjunction with the Group's new external auditors, undertook a review of NAHL's financial reporting disclosures. As a result of this assessment, the Directors have simplified the presentation of the income statement and amended the classification of certain costs along with the definition of certain alterative performance measures (APMs). In addition, the Directors have determined that the presentation of the non-controlling members' interests in the profits of the Group's ABS law firms should be amended in the financial statements and, as required by IAS 8, the Group has restated the 2019 comparatives to be consistent with this new presentation. Further details are presented in note 10 and below.

The impact of these changes on the 2019 results is as follows:

	2019 as previously reported	Adjustment 1	Adjustment 2	Adjustment 3	2019 as restated
Impact on consolidated statement of comprehensive income	£000	£000	£000	£000	£000
Revenue	51,314	-	-	-	51,314
Cost of sales	(24,990)	(2,043)	-	-	(27,033)
Gross profit	26,324	(2,043)	-	-	24,281
Administrative expenses	(23,761)	2,043	-	-	21,718
Underlying operating profit	12,192	-	(1,771)	-	10,421
Share-based payments	(811)	-	811	-	-
Amortisation of intangible assets acquired on business combinations	(960)	-	960	-	-
Exceptional items	(7,858)	-	-	-	(7,858)
Operating profit	2,563	-	-	-	2,563

Profit attributable to non-controlling interest members in LLPs	-	-	-	(4,474)	(4,474)
Financial income	202	-	-	-	202
Financial expense	(615)	-	-	-	(615)
Profit/(loss) before tax	2,150	-	-	(4,474)	(2,324)
Taxation	(635)	-	-	-	(635)
Profit/(loss) and total comprehensive income for the year	1,515	-		(4,474)	(2,959)

Profit and total comprehensive income is attributable to:
Owners of the company	(2,959)	-	-	-	(2,959)
Non-controlling interests	4,474	-		(4,474)	-
	1,515	-	-	(4,474)	(2,959)

Impact on statement of financial position
Member capital and current accounts (financial liability)	-			(3,315)	(3,315)
Total current liabilities	(17,766)			(3,315)	(21,081)
Total liabilities	(42,488)			(3,315)	(45,803)
Net assets	59,079			(3,315)	55,764
Capital and reserves attributable to non-controlling interests	3,315			(3,315)	-

Adjustment 1 - Following the restructure of the Group during the year, costs relating to the Group's call centre and lead triage operations have been reclassified from administrative expenses to cost of sales. This ensures consistency between the Group's Personal Injury and Residential Property businesses. There is no change to the underlying operating profit of Consumer Legal Services as a result of this change.

Adjustment 2 - In line with best practice, the Group has presented the costs of share-based payments and amortisation of intangible assets arising on business combinations within underlying operating profit rather than as non-underlying items. The Directors consider that this change will result in greater comparability of the Group results with other listed entities.

Adjustment 3 - Following a detailed review of the LLP agreements in respect of the Group's joint-venture law firms, and in consultation with the Group's new auditors, the Directors have determined that the non-controlling member capital and current accounts previously accounted for as equity in the consolidated statement of financial position, meets the definition of a financial liability under IAS32 and should be presented as such. There is no change to the capital and reserves attributable to the owners of the Company.

As a result, the profit attributable to non-controlling interests has now been reclassified as an expense in the statement of comprehensive income rather than shown as an allocation of profits to a non-controlling interest. This is in line with treatment of income and returns on financial liabilities under IAS 32. There is no change to the profit and total comprehensive income attributable to the owners of the Company.

The Directors believe that these changes to presentation better reflect the nature of the costs and the operations of the respective businesses.

Consumer Legal Services performance

In the Consumer Legal Services division, revenue contracted by 21.8% from £37.7m to £29.6m, and underlying operating profit fell by 38.5% from £8.8m to £5.4m. At the start of 2020, the division was operating as two distinct businesses and the Personal Injury business had a solid start to the year. Lead volumes were showing a positive trend, we were airing a new TV campaign and our flexible placement strategy was operating well and growing claim volumes in National Accident Law. Our Residential Property business also had an encouraging start to the year as the first two months of 2020 saw clear signs of growing optimism in the housing market with the clarity provided by the outcome of the December 2019 General Election. We witnessed a sharp increase in market activity and this, combined with the market share wins delivered in 2019, resulted in strong top line growth through the first quarter.

However, as it became clear in March that the country was heading for the first national lockdown, lead volumes and consumers' propensity to convert dropped dramatically. At its worst, in April, personal injury enquiry volumes dropped to 30% of 2019 levels and Q2, in total, delivered 45% of 2019 volumes. As underlying demand dropped away, our flexible business model allowed us to respond quickly, eliminating any marketing spend rendered inefficient by changes in consumer behaviour and prioritising the placement of personal injury enquiries into the panel to maximise cash flow.

Although we temporarily slowed placement of enquiries into our law firms in 2020 to maximise the cash opportunity from our panel, our law firms continued to convert enquiries into ongoing claims ahead of our target of 67%. Our wholly owned law firm NAL and the Group's joint venture law firms, Your Law and Law Together, saw a 15% increase in claims won in the year to 31 December 2021 and our estimate of the unrecognised profits attributable to ongoing claims at 31 December 2020 increased by 85% to £6.1m from the prior year (profit after deduction of processing costs and minority interests), representing a store of value to drive future growth.

Recognising the significance of the pandemic and associated lockdown measures, we moved early and quickly to execute a significant organisational change programme designed to deliver over £1m in annualised cost-savings, while supporting the recovery and future growth prospects of the Group.

Our Personal Injury and Residential Property businesses were merged into a new division, Consumer Legal Services, combining marketing, IT, finance and operations to streamline activities and share expertise. The targeted £1m cost-savings were exceeded through optimising staffing levels under the new structure, closing our London office and rationalising management teams.

Our extensive experience in managing change and our culture of strong staff engagement ensured that our people embraced these changes, setting the division up for a recovery once lockdown measures were relaxed.

Within the newly combined Consumer Legal Services division, the Personal Injury business benefitted from a reassuring recovery in demand through the summer months and the number of no-fault accidents naturally increased to 65% of 2019 levels across Q3. The subsequent imposition of tiered restrictions and the eventual second national lockdown saw a corresponding decrease in activity, but at no point did lead volumes fall back to the lows of Q2, and Q4 delivered 55% of 2019 levels.

Our business model once again proved its flexibility during this period and, as volumes improved, we cautiously increased the proportion of our enquiries into National Accident Law, helping to build experience in the team and increase the number of ongoing claims.

The Residential Property business also rallied strongly as some of the more onerous restrictions on the housing market were relaxed in late spring. Pent-up demand, coupled with the stimulus of the Stamp Duty Land Tax (SDLT) holiday on properties valued up to £500,000 and ongoing business development successes, led to consistently strong demand for our services throughout H2.

Despite the highly unusual circumstances, we continued to make progress with our strategic priorities during 2020. On 2 January 2020, the Group terminated its partnership in its joint-venture law firm, National Law Partners. In December, we completed our three-year Personal Injury investment programme to prepare us for the forthcoming industry reforms. Following the launch of National Accident Law in 2019, we had identified three key enhancements that were required to be ready for the implemented of reforms, now scheduled for 31 May 2021.

1. Firstly, in June 2020, the Personal Injury business merged its two distinct operating units - a law firm regulated by the Solicitor's Regulation Authority (SRA) and a claims management company (CMC) regulated by the Financial Conduct Authority. These combined to create a technologically enabled law firm, solely regulated by the SRA, with a market leading brand and capable of processing its own work. The move to one regulator, and away from being a CMC, has brought benefits of simplification, greater flexibility in marketing and a significant cost saving.

2. Secondly, in December, the National Accident Law team implemented their 'One Call' process to reduce the number of touchpoints required to convert a lead into a claim. One Call offers a seamless customer sign-up journey from initial contact through to commencing the claim process with National Accident Law and initial results from One Call are encouraging and suggest an increase in the Claim Underway rate of c.10%.

3. Thirdly, also in December, the business introduced a new digital customer journey for RTA claimants. Building on our digital-first infrastructure on top of our previously launched 'MyAccount' self-service claim management portal, the new digital tool provides customers with a simple and intuitive online sign-up journey, meaning that a standard RTA claim can now be completed entirely online. Along with One Call, these initiatives serve to improve the speed and efficiency of the sign-up process and reduce the time spent on a case, supporting our plans to profitably process small claims at scale.

In addition, the division continued the turnaround in the Residential Property business. With a robust marketing engine now delivering increasing numbers of leads, the team started work on improvements to our triage and processing capabilities, including a new customer proposition and CRM system that builds on the technology platform developed for National Accident Law. This was subsequently delivered in Spring 2021.

With these initiatives delivered, and an optimised team and organisational structure in place, National Accident Law is well prepared to process an increasing volume of self-generated work from 2021, including RTA small claims. The next objective will be scaling National Accident Law to deal with this increased volume and continuing to balance the working capital investment required to process our own work with cash generated from our panel.

Critical Care performance

The performance in Critical Care was more resilient and revenue decreased by 16.4% from £13.6m to £11.3m. Underlying operating profit fell 28.3% from £5.0m to £3.6m at a margin of 31.7% (2019: 37.0%). The year started strongly, building on a successful 2019, with promising numbers of new Case Management and Expert Witness instructions in Q1. Whilst not immediately impacted by the COVID-19 pandemic, Bush & Co's clients comprise of highly vulnerable individuals with complex clinical needs, and so it was inevitable that our business would be affected. Initially difficulties arose from challenges associated with providing rehabilitation services and access to clients, but later instruction levels reduced due to fewer accidents occurring.

As expected, Case Management services were first to be affected, given the typical four to six week time lag between an individual suffering a catastrophic injury and the start of their rehabilitation. Our Expert Witness business proved more resilient in the year and the impact is likely to be felt over subsequent years, as the nature of these reports means that they are generally commissioned several years post-injury. There were nevertheless delays in producing reports through this period as many third-party providers, such as insurers, the NHS, and defendant law firms, faced their own challenges providing timely information whilst dealing with the impact of the pandemic on their own operations.

We demonstrated, once again, that Bush & Co is a leader in its field with an innovative and forward looking response to the restrictions placed on the business. As elsewhere in the Group, the team seamlessly transitioned to remote working in the early days of lockdown, but also led industry thinking by quickly introducing online assessment and consultations. In an industry-first at this scale, we provided our clients with tablet devices to enable them to remain in close contact with their Case Manager throughout lockdown - and beyond, in the case of those needing to shield. Online assessments were introduced to allow Expert Witness and Initial Needs Assessments to continue throughout, helping to support new business enquiries.

We also continued our track record of innovation in B2B marketing, focusing our efforts on strengthening relationships with clients, law firms and associates. With the introduction of remote case conferences and court hearings, the team placed themselves at the forefront of innovation in this area and were recognised for a second consecutive year with the prestigious 'Supporting the Industry Award' at the Personal Injury Awards, highlighting their added value to the industry and their clients.

As lockdown restrictions eventually eased, we saw a gradual recovery in Case Management enquiries in H2 and Expert Witness rebounded strongly. Business development activity continued uninterrupted and we strengthened support for our charity partners, helping to raise money and build new client relationships. In such a busy and challenging year, the team were honoured to be asked to produce a report to support the Thalidomide Trust in their successful bid to secure lifetime financial support for Thalidomide survivors. This is a great example of the value provided by our medico-legal reports and we were thrilled to hear the announcement by the Chancellor of the Exchequer in the March 2021 budget and to have been able to contribute to this important work.

The division continued to make progress with strategic initiatives that will support our recovery. We continued with our technology transformation and strengthened our management team with the appointment of an experienced Operations Director to lead this initiative. Project Svelte, our proprietary report writing tool designed to streamline the production of Expert Witness reports, progressed at pace throughout the year ahead of being rolled out in Q2 2021. Headway was also made with the company's insurer proposition, with the core IT infrastructure completed and two associate Case Managers deployed to work specifically in this area.

We also appointed a Head of Care Services to support our ambition to be accredited for Treatment, Disease, Disorder, Injury (TDDI) cases with the Care Quality Commission. This accreditation will allow the business to service the needs of those requiring nurse-led care. Progress was also made in implementing fixed-fee Initial Need Assessments to support new client acquisition and we expect this to lead to market share growth.

Shared services performance

The costs of the Group's Shared Services functions increased in the year by £0.3m to £1.9m (2019: £1.6m). The increase was due to one-off costs, primarily from management changes.

Government support

The Group made use of £0.4m of Government support in the form of the CJRS. This income is shown in the financial statements in underlying operating profit, netted off administration expenses within the divisional results. We also deferred VAT payments of £0.4m from 2020 to 2021. At peak, the Group furloughed 82 members of staff and this figure reduced to two staff by the end of the year. The majority of these staff were in the operations areas of our businesses, which were overstaffed following the reduction in enquiries due to the pandemic. Had the CJRS not been in place then the Group would have undoubtedly been forced to cut costs further and this is likely to have involved additional redundancies. The Board was pleased to have been able to utilise this scheme and are in no doubt that it has enabled us to retain a large proportion of our workforce.

Exceptional and non-underlying items

The Group's accounting policy, set out in note 1 to the financial statements, is to separately identify exceptional items and exclude them from underlying performance measures to provide readers of the financial statements with a consistent basis on which to track the core trading performance.

The Group incurred a number of exceptional items in the year which are set out in note 3 to the financial statements totalling £1.4m (2019: £7.9m). These include the following.

i. £0.6m of restructuring costs associated with the strategic transformation of the Group's personal injury business. These costs relate to the activities described above and as this transformation is now complete, 2020 is the final year of such costs.

ii. £0.4m in relation to the restructure of the Consumer Legal Services division in the first half of the year including closure of the London office.

iii. £0.3m of due diligence costs relating to the takeover bid for the Group by Frenkel Topping. This comprises all costs incurred by the Group in connection with this transaction.

Taxation

The Group's tax charge of £2,000 (2019: £635,000) represents an effective tax rate of (0.9)% (2019: (27.3)%). The effective tax rate is lower than the standard corporation tax rate of 19.0% for the reasons set out in note 4 to the financial statements. The deferred tax credit originates from temporary differences in intangible assets acquired on business combinations.

Earnings per share (EPS) and dividend

Underlying EPS for the year was 1.9p (2019: 9.4p). Underlying EPS provides a better comparison year-on-year as earnings have been adjusted to exclude certain exceptional items (net of the standard rate of corporation tax). This is explained in note 1 to the financial statements.

Basic EPS for the year was (0.5)p (2019: (6.4)p) and the diluted EPS was (0.5)p (2019: (6.4)p). In line with IAS 33, as the Group has a negative earnings per share, it is assumed that there are no dilutive shares. The fall in EPS is due to a reduction in volume of enquiries in the personal injury business and Critical Care division as a result of the measures taken by the Government in response to the COVID-19 pandemic. The effects of these measures are explained in more detail above.

The Board does not believe it is appropriate to reinstate dividends at this time and the Directors have recommended that no final dividend be paid in respect of 2020.

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 £16.7m at year-end, which is £5.1m less than last year (2019: £21.8m after adjusting for the disposal of NLP). I am pleased with the reduction in working capital in the year, which has been achieved by placing an increased proportion of personal injury enquiries into the panel to drive in-year cash flow, and by realising growth in settlements relating to historical claims. This has helped to increase cash flows and reduce net debt.

Trade receivables and accrued income balances related to the processing of personal injury claims increased from £4.3m to £7.3m as the Consumer Legal Services division increased the number of new claims placed into its law firms. These claims are yet to reach the settlement stage but have all had liability admitted by the defendant, in line with the Group's accounting policy for legal services revenue. There is a significant element of uncertainty in estimating the WIP recognised in our law firms. The Directors believe that the assumptions adopted are appropriate and based on historical experience of claims processed in our law firms and by our panel. These assumptions are updated with actual results as claims settle.

Through the flexibility provided by our business model, we were able to offset this investment with a significant reduction in trade receivables and accrued income balances associated with our panel relationships in the year. This reduced from £19.2m at 31 December 2019 to £13.7m at 31 December 2020, largely through collecting cash on historical deals with our panel members. Included within this, is £2.9m (2019: £4.3m) of accrued income relating to non-contingent future settlements relating to the termination of the Group's partnership in National Law Partners. £1.4m of cash was received in 2020 in relation to this deal and the remaining amount is due to be settled by the end of April 2022.

Net debt and bank facilities

The Group carefully managed its cash resources during the year and took a number of actions to conserve cash. As a result, net debt at year-end reduced from £21.0m at 31 December 2019 to £16.3m at year-end. Net debt is defined in note 9 to the financial statements and is comprised of £3.6m of cash (2019: £2.6m) offset by borrowings of £19.9m (2019: £23.6m).

The borrowings represent a balance on the Group's revolving credit facility (RCF) with its lender, Yorkshire/Clydesdale Bank. In last year's Final Results, the Group highlighted that it may breach its banking covenants during 2020 and that it was in positive discussions with its lender to remedy this. On 23 July 2020, the Board announced that these discussions had concluded successfully and new covenants had been agreed. Importantly, the Group remained in full covenant compliance throughout the year and we expect this to continue through to the end of the facility term. As part of that agreement, Yorkshire Bank also agreed to extend the facility term for a further 12 months, through to 31 December 2022.

Review of the cash flow statement

Free cash flow (FCF) is the Group's KPI with regards to cash flow and I am pleased to report that the Group increased FCF from £(1.7)m in 2019 to £6.1m in 2020. As noted above, this increase was achieved by maximising the placement of new personal injury claims into the panel and by realising an increasing level of settlements from historical claims, as well as £0.4m of VAT deferred into 2021. Cash on historical claims includes the £1.4m received in the period in relation to the termination of our partnership in National Law Partners.

The Group also monitors underlying cash conversion, which increased to 228.9% in the year (2019: 47.4%).

On a statutory basis, the Group increased cash and cash equivalents by £1.0m in the year (2019: £1.0m). This was primarily the result of an increase in net cash generated from operating activities, partially offset by a repayment of borrowings. Other significant items include payments made to our partners in the joint-venture ABS law firms and the acquisition of intangible assets. Net cash from operating activities increased from £1.5m in 2019 to £11.0m in 2020. A key factor influencing this was the strong positive working capital movements achieved in the year, which is discussed above. Also, the reduction in profits last year resulted in £1.0m less tax being paid in 2020 compared to the previous year.

£3.2m (2019: £2.2m) of drawings were paid to our partners in the joint-venture law firms during the year under the terms of our agreements. This increase year-on-year reflects the growth in claims won and settled during the year. The Group also acquired £0.8m of intangible assets in the year (2019: £0.5m). These were linked to upgrades in the call centre technology and digital journey in our Consumer Legal Services division, as well as technology improvements and the development of our proprietary Expert Witness report writing tool in Critical Care.

The Group repaid £3.8m of borrowings in the year (2019: draw down of £6.5m of borrowings) on its RCF.

Our people and values

Our people have always been a source of strength for the Group and in 2020 that strength translated into improved business resilience. Our Group Values have always been central to the way that we do business and last year having a team that is Driven, Unified, Passionate and Curious was more important than ever. In response to the pandemic, management recognised the importance of visibility of leadership and regular communications with staff. A series of weekly briefings and monthly 'town hall' type events were all delivered remotely and were extremely well received. These allowed management to demonstrate their commitment to open, honest and transparent communications, even in the hardest of times, and was consistent with the Group's four principles of operation that guided our COVID-19 response.

Conscious that at times throughout the year a proportion of our staff was placed on furlough to support the business needs, we ensured this group were included in our communications and I was pleased with how engaged the business remained. I would like to thank everyone who spent some time on furlough over the past year for the important sacrifice they made for the success of the Group.

Staff wellbeing was a focus for our management teams in 2020. A range of activities were delivered such as ongoing training and yoga. These were designed to stimulate and support staff who were each going through their own personal challenges. We were rewarded for our people culture with incredibly high engagement scores in our annual staff survey, far exceeding national benchmarks.

We were pleased to receive external validation when Investors in People awarded its Silver status to our Residential Property business as well as Gold standard for Critical Care, adding to the same award given to our Personal Injury business in 2019.

Brands

The Group's two divisions have a long history of brand-building investment in their respective markets (more than 25 years in the case of National Accident Helpline and 35 years for Bush & Co). Over the years this investment has created high levels of brand equity amongst our target customers, with National Accident Helpline commanding a position amongst the very best known and most-trusted consumer brands in the personal injury sector, and Bush & Co maintaining a similarly strong position in the minds of client firms in the catastrophic injury sector.

In the case of National Accident Helpline, this underlying strength allowed us to make a tactical choice to flex our brand marketing spend through the year in line with anticipated return on investment: when the market was functioning normally at the start of the year, we aired new TV adverts building on our established 'when its wrong, make it right' campaign, but stopped advertising as the volume of accidents reduced. A decision to resume brand advertising will be made according to the potential for positive returns as the market opens up, the volume of potential customers increases, and post-pandemic media consumption patterns are established.

Bush & Co is predominantly a B2B brand, but the strength and innovative marketing approaches of the brand helped the business development team nevertheless maintain and build client relationships throughout lockdown.

Since the Group acquired Fitzalan Partners in 2015, our Residential Property business has developed a market leading organic search presence through the use of several established websites. A project was commenced in 2020 to streamline its brand proposition to provide great focus on the brand that drives most of the volume and reduces the cost of supporting a broad brand portfolio. This culminated in the re-launch of our Homeward Legal brand in Q1 2021, which enjoys strong support from first-time buyers and is well placed to exploit the paid search market in the future.

Diversity in our people

Key to the success of our people agenda is maintaining a positive gender balance in our leadership, management and staff bodies. Our gender balance statistics at 31 December 2020 are as follows:

Board: male to female 60:40 (2019: 50:50)

All staff: male to female 34:66 (2019: 37:63)

In 2020, our Leadership Team concluded that it wanted to promote increased diversity across our workforce and it introduced a series of initiatives, including formal training, mentoring and an action group of influential colleagues from across the Group, to develop this objective and to enhance our culture. The Group strongly believes that having a more diverse workforce can help to attract and retain the best talent and make an important contribution to the success and sustainability of our business.

Potential sale of our Residential Property business

Over the last two years, the Group has completed significant strides to reposition and streamline the operations of its Residential Property business. The business has performed well through the pandemic and we believe is now positioned to grow profitably in the years to come due to its strong marketing and lead generation capabilities and full suite search business. However, the market for conveyancing and residential property services continues to consolidate with several large acquisitive platforms emerging. Having observed these trends and in light of several in-bound enquiries, the Board has decided to formally investigate a potential sale of the Residential Property business and will be launching this process in the coming weeks.

Conclusion and outlook

2020 saw the Group demonstrate its trading resilience through a year of unprecedented market change. The impact of the pandemic on our businesses was severe but we remained profitable, reduced net debt and de-risked the balance sheet.

In doing so, we delayed scaling National Accident Law but we made progress with our personal injury transformation and have created a new, sustainable business model and we will be ready for the industry reforms being introduced on 31 May 2021.

Since the year-end, the third national lockdown in January 2021 caused another reduction in the number of accidents, which again impacted our business. The volume of personal injury enquiries in Q1 2021 fell to 46% of 2019 (pre-COVID) levels, albeit that this increased to 57% in April.

Revenue in the first four months of the year was in line with the Board's expectations at 19% below 2019, reflecting the impact of the third lockdown on volumes but importantly also reflecting the increased investment in processing enquiries in National Accident Law. In this period in 2021, over 1,600 enquiries were placed into National Accident Law, including over 80% of all of our self-generated RTA enquiries. In 2019 this figure was just over 100 new claims demonstrating how far the business has come in processing its own claims. This investment will generate profits and cash later in 2021 and beyond.

From 31 May 2021, we will process all RTA enquiries in National Accident Law and in the second half of 2021, if conditions allow, we plan to process an increasing number of non-RTA enquiries. Looking further ahead, and assuming the continued success of the UK vaccination programme and the current timetable for bringing COVID-19 restrictions to an end, we anticipate a return to the pre-pandemic trends in our markets in 2022. We expect personal injury enquiry levels to increase sequentially each quarter this year and to deliver 80-90% of 2019 levels by December 2021. In Critical Care, we forecast the market will return to pre-pandemic levels of catastrophic injuries during 2022 with a similar delay between accident and instruction as before, although expert witness instruction will be subject to some longer-term softening in market volumes resulting from depressed volumes in the preceding 14 months. If these forecasts are correct, we would expect to see growth in 2021 revenue and profit in both divisions compared to 2020.

Finally, NAHL is a group built around a strong values-based culture with talented and committed people at its heart. This year has highlighted their resilience and adaptability in the most extreme of circumstances. I would like to thank them all for their exceptional work during a challenging year.

James Saralis

Chief Financial Officer

24 May 2021

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

		2020	2019¹ restated
	Note	£000	£000

Revenue	1,2	40,875	51,314
Cost of sales	10	(21,602)	(27,033)

Gross profit	10	19,273	24,281
Administrative expenses	10	(14,964)	(21,718)

Underlying operating profit	1	5,659	10,421
Exceptional items	3	(1,350)	(7,858)

Operating profit	2	4,309	2,563
Profit attributable to members' non-controlling interests in LLPs	10	(4,115)	(4,474)
Financial income		168	202
Financial expense		(585)	(615)

Loss before tax		(223)	(2,324)
Taxation	4	(2)	(635)

Loss and total comprehensive income for the year	10	(225)	(2,959)

1. During the year, the Group undertook a review of its accounting treatment and presentation of several significant items that resulted in the restatement of its 2019 results. See note 10 for further details.

All profits and losses and total comprehensive income are attributable to the owners of the Company.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2020

		2020	2019¹ restated
	Note	£000	£000

Non-current assets
Goodwill		55,489	55,489
Other intangible assets		4,557	5,082
Property, plant and equipment		367	267
Right of use assets		2,761	264
Deferred tax asset		14	30

		63,188	61,132

Current assets
Trade and other receivables (including £7,828,000 (2019: £8,279,000) due in more than one
year)	5	34,285	37,871
Cash and cash equivalents		3,609	2,564

		37,894	40,435

Total assets		101,082	101,567

Current liabilities
Trade and other payables	6	(17,547)	(17,216)
Lease liabilities		(248)	(187)
Member capital and current accounts	10	(4,177)	(3,315)
Current tax liability		(126)	(363)

		(22,098)	(21,081)

Non-current liabilities
Lease liabilities		(2,195)	(60)
Other interest-bearing loans and borrowings		(19,901)	(23,594)
Deferred tax liability		(826)	(1,068)

		(22,922)	(24,722)

Total liabilities		(45,020)	(45,803)

Net assets	10	56,062	55,764

Equity
Share capital		115	115
Share option reserve		3,912	3,389
Share premium		14,595	14,595
Merger reserve		(66,928)	(66,928)
Retained earnings		104,368	104,593

Capital and reserves attributable to the owners of NAHL Group plc	10	56,062	55,764

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

								Capital and
								reserves
			Share					attributable to
		Share	option	Share	Merger		Retained	the owners of	Non-controlling	Total
		capital	reserve	premium	reserve		earnings	NAHL Group plc	Interest	Equity
	Note	£000	£000	£000	£000		£000	£000	£000	£000

Balance at 1 January 2019 as previously reported	10	115	2,578	14,595	(66,928) 111,384			61,744	947	62,691
Adjustment to presentation of members' non-controlling interests in LLPs¹		-	-	-	-		-	-	(947)	(947)
Balance at 1 January 2019 as restated		115	2,578	14,595	(66,928)		111,384	61,744	-	61,744

Total comprehensive income for the year
Loss for the year		-	-	-	-		(2,959)	(2,959)	-	(2,959)

Total comprehensive income		-	-	-	-		(2,959)	(2,959)	-	(2,959)

Transactions with owners,
recorded directly in equity
Share-based payments		-	811	-	-		-	811	-	811
Dividends paid	8	-	-	-	-		(3,832)	(3,832)	-	(3,832)

Total transactions with owners, recorded
directly in equity		-	811	-	-		(3,832)	(3,021)	-	(3,021)

Balance at 31 December 2019		115	3,389	14,595	(66,928)	104,593		55,764	-	55,764


Total comprehensive income for the year
Loss for the year	-	-	-	-	(225)	(225)	-	(225)

Total comprehensive income	-	-	-	-	(225)	(225)	-	(225)

Transactions with owners,
recorded directly in equity
Issue of new Ordinary Shares	-	-	-	-	-	-	-	-
Share-based payments	-	523	-	-	-	523	-	523

Total transactions with owners, recorded
directly in equity	-	523	-	-	-	523	-	523

Balance at 31 December 2020	115	3,912	14,595	(66,928) 104,368		56,062	-	56,062

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2020

	2020	2019
	£000	£000

Cash flows from operating activities
Loss for the year	(225)	(2,959)
Adjustments for:
Profit attributable to members' non-controlling interests in LLPs	4,115	4,474
Property, plant and equipment Depreciation	169	147
Right of use asset depreciation	430	419
Amortisation of intangible assets	1,345	1,332
Impairment of goodwill and intangible assets	-	5,322
Financial income	(168)	(202)
Financial expense	585	615
Share-based payments	523	811
Taxation	2	635

	6,776	10,594
Decrease/(Increase) in trade and other receivables	2,223	(8,880)
Increase in trade and other payables	2,945	1,836

	11,944	3,550
Interest paid	(469)	(529)
Tax paid	(450)	(1,479)

Net cash generated from operating activities	11,025	1,542

Cash flows from investing activities
Acquisition of property, plant and equipment	(269)	(219)
Acquisition of intangible assets	(820)	(463)
Disposal of subsidiary net of cash disposed of¹	(1,273)	-
Interest received	10	9

Net cash used in investing activities	(2,352)	(673)

Cash flows from financing activities
(Repayment of)/Proceeds from borrowings	(3,750)	6,500
Facility arrangement fees	(121)	-
Principal element of lease payments	(558)	(465)
Dividends paid	-	(3,832)
Drawings (paid to)/capital receipts from LLP members	(3,199)	(2,106)

Net cash generated (used in)/from financing activities	(7,628)	97

Net increase in cash and cash equivalents	1,045	966
Cash and cash equivalents at 1 January	2,564	1,598

Cash and cash equivalents at 31 December	3,609	2,564

1. The Group disposed of its interest in National Law Associates LLP on 2 January 2020 for nil consideration. Cash balances of £1,273,000 were de-recognised from the consolidated statement of financial position from this date.

NOTES TO THE FINANCIAL STATEMENTS

1 Accounting policies

Basis of preparation

Consolidated Financial Statements

The preliminary announcement for the year ended 31 December 2020 has been prepared in accordance with International Accounting Standards in conformity with the requirements of Companies Act 2006. The annual financial information presented in the preliminary announcement for the year ended 31 December 2020 is based on, and is consistent with, that in the Group's unaudited Financial Statements for the year ended 31 December 2020, and those Financial Statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The Group's financial statements have been prepared in accordance with International Accounting Standards in conformity with the Companies Act 2006, IFRIC interpretations and under the historical cost convention.

Going Concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Company and Group can continue in operational existence for the foreseeable future.

The Board have considered detailed financial forecasts of future trading, profits and cash flows covering a range of potential scenarios that

account for any further impacts of COVID-19 on the business. 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 £25.0m revolving credit facility (RCF) with its bankers and at the time of writing, it has drawn £19.0m of this facility and has cash of £3.5m. 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.

The Group has modelled a worst-case scenario, assuming that volumes fall back to their 2020 levels, and has then considered the options it would have available to mitigate against any shortfall in profits and cash. Under this scenario, the Group would be able to implement sufficient mitigating actions in order to operate within its covenants. The likelihood of this scenario occurring is considered to be remote and therefore the Directors consider the Going Concern basis of accounting to be appropriate.

The Directors have also considered the ability of the Group to refinance, given the loan term expires on 31 December 2022, and are confident that the Group will be able to secure future funding considering its bankers have historically been supportive of any changes needed to the terms of the facility.

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.

Prior year adjustments

During the year, the Group undertook a review of its accounting treatment and presentation of several significant items that resulted in the restatement of its 2019 results. See note 10 for further details.

New standards and amendments adopted by the Group

There are no new or amended standards applicable for the current reporting period.

New standards, interpretations and amendments not yet effective

There are no new standards, interpretations and amendments that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

Statutory and non-statutory measures

The financial statements contain all the statutory measures and disclosures required under IFRS, which is the financial reporting

framework adopted by the Group. In addition to these measures, management monitors a number of non-statutory, alternative

performance measures (APMs) as part of its internal performance monitoring and when assessing the future impact of operating

decisions. The APMs allow a year-on-year comparison of the underlying performance of the business by removing the impact of items

occurring either outside the normal course of operations or as a result of intermittent activities, such as acquisitions or strategic projects.

The Directors have presented these APMs in the Strategic Report because they believe they provide additional useful information for

shareholders on underlying business trends and performance. As these APMs are not defined by IFRS, they may not be directly

comparable to other companies' APMs. They are not intended to be a substitute for, or superior to, IFRS measurements and the Directors

recommend that the IFRS measures should also be used when users of this document assess the performance of the Group.

Trading losses associated with the COVID-19 pandemic and corresponding Government support claimed have not been treated as exceptional items.

The APMs used in the Strategic Report are defined in the table below. The principles to identify adjusting items have been adjusted from 2019 to remove the IFRS 2 share based payment charge and the amortisation charge arising on intangibles acquired as part of business combinations. Further details on this adjustment can be found in note 10. The key adjusting items in arriving at the APMs are as follows:

· Exceptional items are non-recurring items that are material by nature and separately identified to allow for greater comparability of underlying Group operating results year-on-year. Examples of exceptional items in the current and/or previous years include reorganisation and restructuring costs; revaluation of liability associated with legacy ATE products; and acquisition related costs. Exceptional costs are separately identified to allow for greater comparability of underlying Group operating results year-on-year.

Nature of measure	Related IFRS measure	Related IFRS source	Definition	Use/relevance
Underlying operating profit	Operating profit	Consolidated income statement	Based on the related IFRS measure but excluding exceptional items.

Allows management and users of the financial statements to assess the underlying trading results after removing material, non-recurring items that are not reflective of the core trading activities and allows comparability of core trading performance year on year

Underlying operating cash flow	Cash flow from operating activities	Consolidated cash flow statement	Based on the related IFRS measure but excluding cash flows in respect of the items excluded from underlying operating profit as described above.
Underlying cash conversion	Not defined by IFRS	n/a	Calculated as underlying operating cash flow divided by underlying operating profit.
Free Cash Flow	Not defined by IFRS	n/a	Calculated as net cash generated from operating activities less net cash used in investing activities (excluding any disposals of subsidiaries) less payments made to partner LLP members and less principal element of lease payments
Provides management with an indication of the amount of cash available for discretionary investing or financing after removing material non-recurring expenditure that does not reflect the underlying trading operations and allows management to monitor the conversion of underlying profit into cash
Underlying Basic	Basic EPS	Consolidated income statement	Based on the related IFRS measure but calculated using underlying profit for the year attributable to shareholders
EPS
Allows management and users of the financial statements to assess the underlying trading results after removing material, non-recurring items that are not reflective of the core trading activities and allows comparability of core trading performance year-on-year
Working capital	Movement in receivables and movement in payables	Consolidated statement of cash flows	Working capital is not defined by IFRS. This is defined by management as being the movement in trade receivables less the movement in trade payables.
Allows management to assess the short-term cash flows from movements in the more liquid assets
Net debt	Not defined by IFRS	Consolidated cash flow statement	Net debt is defined as cash and cash equivalents less interest bearing borrowings net of loan arrangement fees.
Allows management to monitor the overall level of debt in the business. As stated in the strategic report, loan funding is key to the Group's future strategy as an increasing proportion of profits and cash flows are deferred until case settlement

A reconciliation of each measure is provided as follows:

Underlying operating profit:	2020	2019
	2020	2019
	£000	£000

IFRS measure - operating profit	4,309	2,563
Exceptional items	1,350	7,858

Underlying operating profit	5,659	10,421

Underlying operating cash flow and underlying cash conversion:

	2020	2020		2019	2019
	Underlying	Exceptional	2020	Underlying	Exceptional	2019
	operations	items	Total	operations	items	Total
	£000	£000	£000	£000	£000	£000

Operating profit	5,659	(1,350)	4,309	10,421	(7,858)	2,563
Share-based payments	523	-	523	811	-	811
Depreciation and amortisation	1,944	-	1,944	1,898	-	1,898
Impairment of goodwill and intangible assets	-	-	-	-	5,322	5,322
Decrease/(Increase) in trade/other receivables	2,223	-	2,223	(10,027)	1,147	(8,880)
Increase in trade/other payables	2,607	338	2,945	1,836	-	1,836

Operating cash flow	12,956	(1,012)	11,944	4,939	(1,389)	3,550

Underlying Operating cash conversion	228.9%			47.4%
Interest paid			(469)			(529)
Tax paid			(450)			(1,479)
Net cash generated from operating activities			11,025			1,542
Net cash used in investing activities (excluding disposals of subsidiaries)			(1,079)			(623)
Lease payments			(558)			(465)
Facility arrangement fees			(121)			-
Payments to/from partner LLP members			(3,199)			(2,156)
Free cash flow			6,068			(1,702)

Underlying EPS:		2020	2019
		2020	2019
		£000	£000

IFRS measure - loss for the year attributable to shareholders		(225)	(2,959)
Exceptional items		1,350	7,858
Tax effect of the above		(257)	(567)

Underlying profit for the year attributable to shareholders		868	4,332

Weighted average number of shares	46,238,878		46,178,716
Underlying basic EPS		1.9	9.4

Working capital:		2020	2019
		2020	2019
		£000	£000

Movement in trade and other receivables		2,223	(8,880)
Movement in trade and other payables		2,945	1,836

Working capital		5,168	(7,044)
Movement in interest accruals		(158)	(114)
Corporation tax debtor		15	(103)
Movement in financing accruals		110	-
IFRS measure - movement in trade and other receivables less movement in trade and other payables		5,135	(7,261)

Net debt is defined in Note 9.

2 Operating segments

	Consumer	Critical			Underlying	Exceptional
	Legal Services	Care	Group	Other items	operations	Items	Eliminations	Total
	£000	£000	£000	£000	£000	£000	£000	£000

Year ended 31 December 2020
Revenue	29,537	11,338	-	-	40,875	-	-	40,875
Depreciation and amortisation	(636)	(137)	(247)	(924)	(1,944)	-	-	(1,944)
Operating profit/(loss)	5,407¹	3,594¹	(1,895)	(1,447)	5,659	(1,350)	-	4,309
Profit attributable to non-controlling interest members in LLPs	(4,115)	-	-	-	(4,115)	-	-	(4,115)
Financial income	161	6	1	-	168	-	-	168
Financial expenses	(1)	(8)	(576)	-	(585)	-	-	(585)
Profit/(Loss) before tax	1,452	3,592	(2,470)	(1,447)	1,127	(1,350)	-	(223)
Trade receivables	3,422	4,870	-	-	8,292	-	-	8,292
Total assets¹	32,859	5,990	79,739	-	118,588	-	(17,506)	101,082
Segment liabilities¹	(19,001)	(1,232)	(3,934)	-	(24,167)	-	-	(24,167)
Capital expenditure (including intangibles)	540	244	305	-	1,089	-	-	1,089

Year ended 31 December 2019
Revenue	37,748	13,566	-	-	51,314	-	-	51,314
Depreciation and amortisation	(781)	(152)	(5)	(960)	(1,898)	-	-	(1,898)
Operating profit/(loss)	8,796¹	5,013¹	(1,617)	(1,771)	10,421	(7,858)	-	2,563
Profit attributable to non-controlling interest members in LLPs	(4,474)	-	-	-	(4,474)	-	-	(4,474)
Financial income	201	-	1	-	202	-	-	202
Financial expenses	(7)	(10)	(598)	-	(615)	-	-	(615)
Profit/(Loss) before tax	4,516	5,003	(2,214)	(1,771)	5,534	(7,858)	-	(2,324)
Trade receivables	5,057	5,143	4	-	10,204	-	-	10,204
Total assets¹	35,180	6,297	77,596	-	119,073	-	(17,506)	101,567
Segment liabilities¹	(19,086)	(1,175)	(517)	-	(20,778)	-	-	(20,778)
Capital expenditure (including intangibles)	457	181	44	-	682	-	-	682

1. Total assets and segment liabilities exclude intercompany loan balances as these do not form part of the operating activities of the segment.

Significant customers

No customers account for greater than 10% of the total Group revenue (20 19: 16.2% from 2 customers). These revenues are attributable to the Consumer Legal Services and Critical Care segments.

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 in the personal injury and conveyancing sectors.

Critical Care - Revenue from the provision of expert witness reports and case management support within the medico-legal framework for

multi-track cases.

Shared Services - Costs that are incurred in managing Group activities or not specifically related to a product.

Other items - Other items represent share-based payment charges and amortisation charges on intangible assets recognised as part of business combinations.

Exceptional items - items that are non-recurring and that are material by nature and separately identified to allow for greater comparability of underlying Group operating results year-on-year. Examples of exceptional items in the current and/or previous years include reorganisation and restructuring costs; revaluation of liability associated with legacy ATE products; and acquisition related costs. Exceptional costs are separately identified to allow for greater comparability of underlying Group operating results year-on-year.

3 Exceptional items
Exceptional items included in the income statement are summarised below:
	2020	2019
	£000	£000

Group strategic and reorganisation costs¹	613	1,297
Group restructure²	399	-
Due diligence costs³	338	-
Termination of strategic partnership⁴	-	1,239
Impairment of Residential Property goodwill and intangible assets⁵	-	5,322

	1,350	7,858

1. Group strategic and reorganisation costs relate to project costs to implement fundamental strategic plans that fall outside of the core trading operations of the business.

2. Group restructure costs largely relate to redundancy costs and other one-off costs associated with the closure of the Chancery Lane office and merger of the residential property and personal injury businesses into a new Consumer Legal Services division.

3. Due diligence costs consisting of legal and advisory costs in respect of a potential offer made for the Group during the year.

4. The decision was made in December 2019 to terminate the relationship in respect of National Law Associates LLP. As part of this agreement, a one-off provision of £1.1m has been required along with £0.1m of legal and advisory fees incurred.

5. In light of the 2019 trading performance of the Residential Property division and the emerging global risk of COVID-19, the directors conducted an impairment review of the Residential Property division and concluded that there are insufficient future cash flows to support the carrying value of goodwill and intangible assets attributable to this division. These assets have therefore been written off in full.

4 Taxation

Recognised in the consolidated statement of comprehensive income

	2020	2019
	£000	£000

Current tax expense
Current tax on income for the year	202	883
Adjustments in respect of prior years	26	(121)

Total current tax	228	762

Deferred tax credit
Origination and reversal of timing differences	(226)	(127)

Total deferred tax	(226)	(127)

Tax expense in statement of comprehensive income	2	635

Total tax charge	2	635

Reconciliation of effective tax rate
	2020	2019
	£000	£000

Profit for the year	(225)	(2,959)
Total tax expense	2	635

Profit before taxation	(223)	(2,324)
Tax using the UK corporation tax rate of 19.00% (2019: 19.00%)	(42)	(441)

Non-deductible expenses	100	1,189
Adjustments in respect of prior years	26	(121)
Share scheme deductions	(11)	-
Short-term timing differences for which no deferred tax is recognised	(71)	8

Total tax charge	2	635

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 not substantively enacted at the reporting date and so the effects are not included within these financial statements.


5 Trade and other receivables
	2020	2019
	£000	£000

Trade receivables: receivable in less than one year	7,493	9,556
Trade receivables: receivable in more than one year	799	648
Accrued income: receivable in less than one year	11,398	11,205
Accrued income: receivable in more than one year	7,029	7,631
Other receivables	14	1,045

	26,733	30,085
Prepayments	703	1,144
Corporation tax	88	103
Recoverable disbursements	6,761	6,539

	34,285	37,871

A provision against trade receivables and accrued income of £673,000 (2019: £554,000) is included in the figures above.

6 Trade and other payables

Amounts due within one year:	2020	2019
	£000	£000

Trade payables	3,201	3,935
Disbursements payable	6,001	5,835
Other taxation and social security	1,791	835
Other payables, accruals and deferred revenue	5,849	5,742
Customer deposits	705	869
Total trade and other payables	17,547	17,216

7 Earnings per share

The calculation of basic earnings per share at 31 December 2020 is based on the loss attributable to ordinary shareholders of the parent company of £(225,000) (2019: loss of £2,959,000) and a weighted average number of Ordinary Shares outstanding of 46,238,878 (2019: 46,178,716).

Loss attributable to ordinary shareholders

£000	2020		2019

Loss for the year attributable to the shareholders		(225)	(2,959)
Weighted average number of ordinary shares
Number	2020		2019

Issued Ordinary Shares at 1 January	46,178,716		46,178,716
Weighted average number of Ordinary Shares at 31 December	46,238,878		46,178,716

Basic Earnings per share (p)
	2020		2019

Group		(0.5)	(6.4)

In line with IAS 33, as the Group has a negative basic earnings per share, it is assumed that there are no dilutive shares.

Diluted Earnings per share (p)

	2020	2019

Group	(0.5)	(6.4)

8 Dividends

No dividends were paid in 2020. On 31 May 2019 the Group paid final dividends in respect of 2018 of £2,631,000 which represented a dividend per share of 5.7p. On 31 October 2019 the Group paid interim dividends in respect of 2019 of £1,201,000 which represented a dividend per share of 2.6p. The Directors did not recommend a final dividend in respect of 2019.

9 Net debt and changes in liabilities arising from financing activities
Net debt includes cash and cash equivalents and other interest-bearing loans and borrowings.
	2020	2019
	£000	£000

Cash and cash equivalents	3,609	2,564
Other interest-bearing loans and borrowings	(19,901)	(23,594)

Net debt	(16,292)	(21,030)

Lease liabilities	(2,443)	(247)

Set out below is a reconciliation of movements in net debt during the period.
	2020	2019
	£000	£000

Net increase in cash and cash equivalents	1,045	966
Net outflow/(inflow) from decrease/(increase) in debt and debt financing	3,750	(6,500)

Movement in net borrowings resulting from cash flows	4,795	(5,534)
Non-cash movements - net increase to/(release of) prepaid loan arrangement fees	(57)	28
Net debt at beginning of period	(21,030)	(15,524)
Net debt at end of period	(16,292)	(21,030)

Set out below is a reconciliation of movements in lease liabilities arising from financing activities:

	2020	2019
	£000	£000

Net outflow from decrease in lease liabilities	558	465

Movement in lease liabilities resulting from cash flows	558	465
Non-cash movements arising from initial recognition of new lease liabilities, revisions and interest charges	(2,754)	(39)
Non-cash movements arising from initial recognition on adoption of IFRS 16	-	(673)
Lease liabilities at beginning of period	(247)	-
Lease liabilities at end of period	(2,443)	(247)

10 Prior period adjustments

During the year, the Group undertook a review of its accounting treatment and presentation of several significant items. The result of this was that the following adjustments have been made to the presentation of gross profit, underlying profit and balances previously identified as non-controlling interests:

1. As part of the restructure of its Consumer Legal Services division in the year ended 31 December 2020 the Group reclassified the costs of its call centre and lead triage operations from administrative expenses to cost of sales. The Directors believe this better reflects the nature of the costs and the operations of the respective businesses. Accordingly, cost of sales, gross profit and administrative expenses for 2019 have been restated to reflect the reallocation of these costs on the same basis to allow for greater comparability year on year.

2. The Group undertook a review of its non-underlying items. In line with best practice, the Group has decided that the IFRS 2 share based payment charge and amortisation of intangible assets arising on business combinations will now be presented within operating profit rather than as non-underlying items. This change will result in greater comparability of the Group results with other listed entities.

3. During the year the Group undertook a review of its contracts in relation to its ABS LLP law firms. As part of this review, it identified that member capital, previously accounted for as equity under IAS 32, met the definition of a financial liability rather than as an equity instrument under this standard. Given the materiality of these balances, in line with IAS 8, the Group has restated the 2019 financial statements as a result of this. The impact of this adjustment is that balances previously accounted for as non-controlling interests within equity have been reclassified to financial liabilities within the statement of financial position. This has reduced the Group's net assets by £3,315,000 as at 31 December 2019. There is no impact on the overall profit and total comprehensive income attributable to the owners of the company but the profit attributable to non-controlling interests has now been reclassified as an expense in the statement of comprehensive income in line with treatment of income and returns on financial liabilities under IAS 32, rather than shown as an allocation of profits to a non-controlling interest.

The impact of these adjustments on the financial statements is as follows:

	2019 as previously reported	Adjustment 1	Adjustment 2	Adjustment 3	2019 as restated
Impact on consolidated statement of comprehensive income	£000	£000	£000	£000	£000
Revenue	51,314	-	-	-	51,314
Cost of sales	(24,990)	(2,043)	-	-	(27,033)
Gross profit	26,324	(2,043)	-	-	24,281
Administrative expenses	(23,761)	2,043	-	-	21,718
Underlying operating profit	12,192	-	(1,771)	-	10,421
Share-based payments	(811)	-	811	-	-
Amortisation of intangible assets acquired on business combinations	(960)	-	960	-	-
Exceptional items	(7,858)	-	-	-	(7,858)
Operating profit	2,563	-	-	-	2,563

Profit attributable to non-controlling members in LLPs	-	-	-	(4,474)	(4,474)
Financial income	202	-	-	-	202
Financial expense	(615)	-	-	-	(615)
Profit/(loss) before tax	2,150	-	-	(4,474)	(2,324)
Taxation	(635)	-	-	-	(635)
Profit/(loss) and total comprehensive income for the year	1,515	-		(4,474)	(2,959)

Profit and total comprehensive income is attributable to:
Owners of the company	(2,959)	-	-	-	(2,959)
Non-controlling interests	4,474	-		(4,474)	-
	1,515	-	-	(4,474)	(2,959)

Impact on statement of financial position
Member capital and current accounts (financial liability)	-	-	-	(3,315)	(3,315)
Total current liabilities	(17,766)	-	-	(3,315)	(21,081)
Total liabilities	(42,488)	-	-	(3,315)	(45,803)
Net assets	59,079	-	-	(3,315)	55,764
Capital and reserves attributable to non-controlling interests	3,315	-	-	(3,315)	-

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