Final Results

RNS Number : 3149G

NAHL Group PLC

29 March 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.

29 March 2022

NAHL Group plc

("NAHL" or the "Group")

Final Results

Building a valuable bank of sustainable profits and cash

NAHL, the leading UK marketing and services business focused on the UK consumer legal market, announces its Final Results for the year ended 31 December 2021.

Financial Highlights

· Revenue decreased by 4.7% to £38.9m (2020: £40.9m), reflecting the impact from COVID-19 restrictions on accident numbers

· Cash received from settled claims in National Accident Law (NAL) increased by 62% to £2.1m (2020: £1.3m)

· Underlying¹ operating profit decreased to £4.2m (2020: £5.7m) reflecting continued strategic investment in Consumer Legal Services and Critical Care

· Profit before tax increased to £0.2m (2020: loss before tax of £0.2m)

· Underlying EPS of 0.3p (2020: 1.9p)

· Net debt at 31 December 2021 £15.5m (2020: £16.3m)

Operational Highlights

· Continued to build our fully integrated law firm, NAL, and reduced reliance on joint venture partnerships, for higher returns in the medium and long term

o  Increased enquiries placed into NAL by 130%; and grown ongoing claims at year-end by 166% to 7,918 claims

o  NAL processed 26% of all enquiries generated in 2021 compared to 10% in 2020

o  Reduced enquiries placed into joint-venture partnerships by 73%

o  Maintained proportion of enquiries placed with our panel of third-party laws firms

· Ongoing claims in NAL expected to convert into £8.4m of future cash

· National Accident Helpline continues to be the Most Trusted Brand 2 contributing to organic search performance improvement year on year despite an increasingly competitive market

· 32,132 new enquiries generated in the year (2020: 36,214), reflecting a full year of the impact of the COVID 19 pandemic

· Critical Care increased the number of Expert Witness reports it issued by 21%, Initial Needs Assessment (INA) reports by 26% and ongoing case management clients it supported by 1%

· Critical Care recruited 34 new associates to grow market share and competencies
 

Outlook  

· Strategic progress in 2021 has continued into 2022

· Personal Injury enquiry volumes in the first two months of the year were 42% ahead of the same period last year

· Average daily enquiry run rate has improved each month since December 2021

· 31% of enquiries in the first two months of the year have been placed into NAL compared to 23% for the same period in 2021, reflecting the continued scaling of NAL

· In Critical Care, Expert Witness and INA reports issued in the first two months of the year were 8% and 7% ahead of the same period last year respectively

· For the same period, Expert Witness and INA report instructions were ahead by 7% and 28% respectively

· Now that the last of the COVID-19 restrictions have been lifted, we expect to see mobility across the UK continue to improve and therefore result in a gradual increase in the number of accidents in our markets

[1] Underlying measures adjust for exceptional items, net of tax where applicable

2 Based on independent research produced by The Nursery Research & Planning Ltd, September 2021

James Saralis, CEO of NAHL, commented:

"2021 was a year of strategic progress for the Group despite the continued difficulties presented by the COVID-19 pandemic. We progressed on our key objectives, increasing enquiries placed into NAL, reducing our reliance on joint-venture partnerships and growing our ongoing claims in NAL at year-end by 166%. In Critical Care, we increased revenues by 9% largely due to successful new business development initiatives, with Expert Witness volumes up 21% year on year. The Group achieved this while reducing net debt and remaining profitable. 

At year-end we had 7,918 ongoing claims in NAL, up from 2,975 claims at the end of 2020 which we expect to convert into £8.4m of future cash.

With the last of the COVID-19 restrictions now having been lifted, we expect to see mobility levels across the UK improve and for this to result in a gradual increase in the number of accidents in our markets.

Finally, I would like to thank our employees for their hard work, support and commitment. They faced many challenges during 2021, including having to adjust to the changing COVID-19 restrictions, and demonstrated their resilience and dedication to supporting our customers and each other."

The Annual Report and notice of Annual General Meeting will be posted to shareholders by the end of April 2022 and will then be available on www.nahlgroupplc.co.uk .

Enquiries:

NAHL Group plc James Saralis (CEO) Chris Higham (CFO)	via FTI Consulting Tel: [phone]
Allenby Capital (Nomad & Broker) Jeremy Porter/Liz Kirchner/Vivek Bhardwaj (Corporate Finance) Amrit Nahal (Sales & Corporate Broking)	Tel: [phone]
FTI Consulting (Financial PR) Alex Beagley Sam Macpherson	Tel: [phone] [e-mail]

Notes to Editors

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

· Consumer Legal Services  provides outsourced marketing services to law firms through National Accident Helpline and Homeward Legal; and claims processing and conveyancing services to individuals through Your Law, Law Together and National Accident Law.  In addition, it also provides property searches through Searches UK.

· Critical Care provides a range of specialist services in the catastrophic and serious injury market to both claimants and defendants through Bush & Co.

  More information is available at www.nahlgroupplc.co.uk , www.national-accident-helpline.co.uk , www.national-accident-law.co.uk and www.bushco.co.uk  

Chair's Report

Like many other businesses, the COVID-19 global pandemic continued to affect our trading in 2021. Notwithstanding this, we completed the year with a profit before tax of £0.2m (2020: loss of £0.2m) and a reduction in net debt to £15.5m (2020: £16.3m) as we focused on investing in the growth of National Accident Law (NAL) and the continued recovery of our Critical Care division.

2021 results

Our Personal Injury business saw enquiry levels decrease compared with the previous year. This was a direct consequence of fewer accidents (both Road Traffic Accident (RTA) and non-RTA) due to a decrease in population mobility as a result of COVID-19 restrictions. As planned, in 2021 we placed more of the enquires we generated into NAL, which continues to grow in size. NAL processed 26% of our enquiries in 2021 and had 7,918 cases underway at the end of the year.  Although a relatively small part of our portfolio, our residential property business benefitted from a hot market and we continue to explore our options for this business.  

Critical Care revenues increased by 9%, driven in large part, by 21% more Expert Witness instructions. These were generated from successful business development initiatives but this was offset by increased operating costs due to our investment in people, systems and marketing.

Strategic progress

The Group made good progress in implementing its strategy. Most notably, NAL is now processing all RTA enquiries and an increasing number of non-RTA enquiries. Consequently, significantly less work is being placed into our joint venture law firms.  Notwithstanding this, we will continue to place enquiries with our panel to generate short term cash and profit that will be reinvested, where possible, in NAL. NAL is central to the Group's future success and its creation and development were essential in anticipation of the regulatory changes introduced in May 2021. Having our own modern, technologically-enabled law firm is expected, in time, to generate higher margins for our personal injury work, as well as significantly reducing our non-controlling interest payments. In the short-term, however, the strategic focus on growing NAL will continue to depress profits until the level of admissions and settlements increases to compensate for the investment in new claims.

During the year, Critical Care enhanced its business development capabilities to drive further growth in its core markets. It has also invested in new services to move into adjacent markets. This has enhanced Critical Care's reputation and created a strong pipeline of work for the future, as case management projects can last several years.

Good governance

We remain committed to engaging positively with our investors and being transparent about the challenges and opportunities ahead. In addition to regular meetings with our largest shareholders during the year we also met with retail shareholders using the InvestorMeetCompany platform for the first time. This enabled the Group to host a live Q&A session and engage with a wider audience.

In August 2021, James Saralis was appointed CEO and Chris Higham replaced him as acting CFO.  The Board unanimously supported these internal appointments and are delighted with their contributions to date. We also appointed Allenby Capital as our new Nominated Adviser and Sole Broker in February 2022 and look forward to working with them to increase shareholder value.

Summary

I would like to thank all our employees for their continued commitment and hard work over the last year. Our people adapted to home working arrangements and then hybrid working effectively. We will continue to operate a hybrid model as the COVID-19 pandemic ends. Our people and our culture are essential to our future success.

In summary, I believe we are making good progress with the development of our Personal Injury business and the growth of our Critical Care division, but the COVID-19 pandemic has made it more difficult, reducing the number of accidents to well below 2019 levels. We expect to see accident numbers increase gradually in 2022 as mobility levels increase and people return to work.  Pleasingly, early indications are supportive. Our Personal Injury business will continue to place an increasing number of enquiries into NAL in order to maximise future profit, and our Critical Care division already has a strong pipeline of work as it starts 2022.  In the short-term our strategy means profits will remain depressed, as we continue our investment in NAL, but I remain optimistic about the future, particularly now that the COVID-19 restrictions have come to an end.

Tim Aspinall

Chair

CEO Report

I am pleased to report our results for the year ended 31 December 2021.

Overview

2021 saw the Group make progress with the implementation of its strategy, but the COVID-19 pandemic continued to have an impact on our markets throughout the year.  Government restrictions and cautious consumer behaviour supressed accident numbers and resulted in less work for our Personal Injury and Critical Care businesses. Nevertheless, we continued to make progress with our strategy, manage our debt and secure debt funding to the end of 2024, whilst remaining profitable. 

We have repositioned our Consumer Legal Services division and created a fully integrated law firm, capable of generating its own leads and focused on processing higher margin personal injury claims, while reducing our reliance on joint venture partnerships.  In our Critical Care division, we have invested in business development initiatives to grow instruction volumes and are seeing encouraging results.  While these investments will take time to translate into profits, we expect them to produce greater returns for shareholders in the medium and long term. 

Meanwhile, in the short-term, as the UK adjusts to living with COVID-19 and mobility levels across the UK recover, we expect to see accident numbers gradually increase in our markets. This is expected to provide the Group with more opportunities to support customers with their personal injury claim or rehabilitation needs.

COVID-19

In 2020, the Group, and indeed the whole country, had to quickly adapt and respond to the rapidly evolving threat of COVID-19.  As a Group, we prioritised our staff and supporting our customers through that initial period and adapted our ways of working to enable homeworking and remote access to clients.  We prioritised liquidity, slowed investment and protected jobs.

2021 started with the third of the Government lockdowns.  In many ways, the third lockdown was the most challenging as it was both unanticipated and also the longest and therefore stifled our ability to recover at the pace we would have liked to.  However, operational adaptations that we implemented in 2020 stood us in good stead and we were able to deliver a good service to our customers and generate cash flow.  This gave us the confidence to increase the level of our investment in our Personal Injury and Critical Care businesses, despite slow growth in these markets. 

We completed the year with the threat of a new wave of restrictions in response to the Omicron variant.  Thankfully, this turned out to be less serious than the Government first thought, but it did result in another reduction in mobility levels across the country in December 2021, and consequently fewer accidents. 

Overall, I'm pleased with the Group's response to the COVID-19 crisis and by applying the learnings from successive lockdowns we are well placed to grow back stronger.

2021 results and net debt

The Group finished the year with results that were in line with the Board's expectations. 

Revenue fell by 5% to £38.9m (2020: £40.9m), in the first full year to be affected by the COVID-19 pandemic. 

This was primarily due to a 10% reduction in revenues in our Consumer Legal Services division, caused by a reduction in the number of personal injury accidents in the market and our decision to place more enquiries into National Accident Law (NAL) for higher future profits.  Revenues in our Critical Care division grew by 9% to £12.3m (2020: £11.3m). 

As a consequence, the Group's underlying operating profit¹ reduced by 27% in the year to £4.2m (2020: £5.7m).  As expected, underlying operating profit margins decreased from 13.8% to 10.7%.  In the Consumer Legal Services division, underlying operating profit reduced by 31% to £3.7m (2020: £5.4m) and in Critical Care, underlying operating profit reduced by 8% from £3.6m in 2020 to £3.3m.

Our decision to grow case processing in NAL required investment in the year, however this is expected to generate higher margins in the medium and long term.  In our Critical Care division, our investments in people, systems and marketing activity, as well as changes to the commercial agreements we have with our case management and Expert Witness associates intended to secure resource, will help us to grow our market share and increase future revenues. 

We reduced costs in our Group shared services functions by 16% in the year to £1.6m (2020: £1.9m) and other items, which comprise share-based payment charges and amortisation charges on intangible assets recognised as part of business combinations, were 12% lower at £1.2m (2020: £1.4m).

There were no exceptional costs incurred in the year.  In 2020 we recognised £1.4m of exceptional costs, largely related to the transformation and restructure of the Group's Consumer Legal Services division.  This work is now complete. 

The profit attributable to members' non-controlling interests in our joint venture LLPs reduced by 16% to £3.5m (2020: £4.1m) and we reduced the number of new enquiries placed with joint venture partners by 73% in the year. 

Profit before tax increased to £0.2m, from a loss before tax of £0.2m in 2020.  Basic earnings per share (EPS) were 0.3p (2020: loss per share of 0.5p) and diluted EPS were 0.3p (2020: a loss per share of 0.5p).  Underlying basic EPS, the calculation of which is explained in note 1, were 0.3p (2020: 1.9p).

The Group has continued to carefully manage its cash flows while investing in its two divisions for future growth.  Free cash flow (FCF) was £0.8m for the year.  This compares to £6.1m in 2020, but our focus then was on increasing liquidity in response to the initial wave of the pandemic.  Net debt reduced in the year to £15.5m at 31 December 2021, down from £16.3m at the end of 2020.

We extended the term of our Revolving Credit Facility with Yorkshire Bank by two years to the end of 2024 and felt confident to reduce the size of the facility from £25.0m to £20.0m, consistent with our objective to reduce net debt. At year-end we had headroom in the facility of £2.0m in addition to £2.5m of cash in the bank.

The Board does not believe that it is appropriate to reinstate dividends at this time and the Directors have recommended that no final dividend be paid in respect of 2021. 

Consumer Legal Services

In our Consumer Legal Services division, revenue contracted by 10% from £29.6m in 2020 to £26.6m in 2021, and underlying operating profit fell by 31% to £3.7m (2020: £5.4m). 

Our strategy to succeed in the personal injury market is to create a higher margin, integrated law firm underpinned by our flexible business model.  We will achieve this by continuing to generate our own work, using our National Accident Helpline brand and by processing an increasing number of those enquiries through our own consumer-focused law firm, National Accident Law.  Over time, we will process an increasing number of higher-margin, non-RTA claims and our small claims proposition will allow us to maximise the return from lower value RTA claims.  Finally, our agile and scalable placement model is designed to balance the work we place with our panel, and joint venture partners, for in-year profit and cash with the work we process ourselves for greater, but deferred profit and cash. 

Despite the challenges of operating in the pandemic, I'm pleased to report that we made progress with this strategy in 2021. 

Claim volumes in the personal injury market remained depressed throughout 2021 with registered claim numbers in the market running at c.60% of pre-COVID levels throughout much of the second half of 2021. This was due to two reasons. 

1)  Firstly, the Government restrictions that were put in place in response to the COVID-19 pandemic resulted in reduced mobility levels across the UK.  This was evidenced in mobility data provided by Google, which started 2021 mobility levels at c. 30% of the baseline² before COVID-19 and grew to around 75% of baseline by November 2021.  December 2021 then saw a further significant reduction, falling to around 40% before partially recovering in the new year. 

2)  The second factor that caused claim numbers to be depressed was the impact of the regulatory changes to low value RTA claims from 31 May 2021.  On this date, the Government implemented its planned changes to reduce compensation tariffs and eliminate cost awards for most RTA claims worth £5,000 or less.  This removed the majority of value for firms processing RTA cases.  If the intention was to encourage the majority of claimants to manage their own claim using the Government's online portal, then the reality is very different.  Since launch, fewer than 10% of claimants have processed their own claim and the vast majority still chose to rely on a law firm to represent them.  The significant reduction in compensation available to injured claimants combined with the complexity of the process has resulted in a lower appetite to claim, leading to fewer RTA claims since implementation.

The Government continues to pursue reform to the personal injury market.  In 2021, the Government confirmed that the small claim limit for non-RTA claims will increase from £1,000 to £1,500 from 6 April 2022.  Then in January 2022, the Department of Health launched a consultation on fixing costs in clinical negligence claims worth up to £25,000.  The proposals are designed to reduce claimant's legal costs, saving the NHS an estimated £500m over 10 years.  We were anticipating both of these proposals, and we do not expect them to have a significant impact on our business.

The National Accident Helpline brand continues to be the most trusted in the industry³ and independent research found it to be associated with being helpful, experienced and professional.  Our marketing activity produced 32,132 new enquiries in the year, which was fewer than the prior year (2020: 36,214) but that reflects a full year of COVID-19 impact. Pleasingly, 10% more enquiries were delivered in the period April to December 2021 then the equivalent COVID-19 affected period in the prior year.  Furthermore, this period delivered 18% more enquiries from organic channels in 2021 than the previous year, which helped us to manage our marketing cost in a highly competitive environment. 

We increased our placement of enquiries into NAL by 130% in the year, which included 569 non-RTA enquiries and 3,529 small claims.  Overall, 26% of our total enquiries were placed into NAL for processing, which was a significant increase on the 10% placed in 2020.  As a result, at the end of the year, NAL was processing 7,918 ongoing claims, which was an increase of 166% on the previous year.  These claims represent a store of value for the business that will deliver future revenues and cash at an enhanced margin over what we could achieve through placing the claims into our panel.  Based on our current assumptions on claim success and value, we estimate that these claims will generate c.£6.7m (2020: £3.8m) of future revenue and future cash receipts of £8.4m (2020: £4.7m).  We maintained the proportion of enquiries placed with our panel of third-party laws firms and reduced the proportion of enquiries in our joint venture law firms by 73%.

Also within our Consumer Legal Services division is our Residential Property business, comprising Homeward Legal and Searches UK.  This business had a strong year, buoyed by the stimulus of the Stamp Duty Land Tax holiday and very strong levels of business development success in our search business.  These businesses generated revenue and contribution to operating profit before shared costs of £5.6m (2020: £6.3m) and £0.8m (2020: £0.3m) respectively and were a net contributor to the Group's free cash flow in 2021. 

Critical Care

Revenues in our Critical Care business, Bush & Co, grew by 9% to £12.3m (2020: £11.3m) and underlying operating profit reduced by 8% to £3.3m (2020: £3.6m). 

Our strategy in Bush & Co is to grow share in our market by appealing to a broader customer base, extending our competencies and specialisms and to be more efficient at what we do through the use of technology.  I am pleased with the progress we made with these objectives in 2021. 

Bush & Co operates in the catastrophic injury market, which suffered a similar impact from COVID-19 as in Personal Injury, although it is unaffected by the small claims' reforms.  The majority of work stems from RTA injuries and medical negligence, both of which have seen reduced volumes over the past couple of years.  Case management work is required soon after an accident and so the impact on our business was clear in 2020 and throughout 2021.  Expert Witness services, conversely, are not required until the legal claim is well underway and average times from accident to instruction are around three years.  Therefore, the full effect of the pandemic may not be seen for some time.

We invested in marketing and business development in the year and our focus on building strong, enduring customer relationships was rewarded with a 23% increase in instructions for Expert Witness work and a 5% increase for instructions for case management INAs. 

We continued our innovative "Happy Post" marketing campaign, delivering treats and wellbeing packs to solicitors and insurers, which attracted praise from across the industry and won us the accolade of Marketing Campaign of the Year at the 2021 PI Awards. 

Since the team relaunched the brand in 2019, Bush & Co has enhanced its reputation as an award winning, independent market leader, known for delivering a premium service with expertise, integrity and professionalism. 

The business increased the number of Expert Witness reports it issued by 21%, INA reports by 26% and ongoing case management clients it supported by 1%.  This was an excellent result delivered by our operations teams and associates.  We recruited 34 new associates and proudly work with 93 case managers and 96 expert witnesses across the UK, across a range of specialisms.

We launched Bush Care Solutions in August 2021, which is our expanded care proposition to support clients who require nurse-led care in their homes.  This has been accredited by the Care Quality Commission and, along with our case management service, provides for a fully managed solution.  We also launched our differentiated case management proposition, which is targeted at serious claims valued between £100,000 and £500,000.  The division employed three new case managers in the year to deliver this proposition and the team have already started securing relationships with insurer customers. 

We have continued to invest in technology in Bush & Co, which will drive efficiency savings and be a growth enabler.  In April 2021, we launched our proprietary medico-legal report writing tool for Expert Witness reports and this was utilised on 26% of reports in 2021.  We also continued to roll out improvements to our case management system. 

Our people, culture and communities

At NAHL, we aim to build a sustainable business for the long-term gain of all our stakeholders.  While an important part of that is the development of our business models in our two divisions, we are committed to doing business in a way that is beneficial to our people, our communities and the environment. 

We employed 258 people as at 31 December 2021, a decrease of 1% from the end of 2020 and our team is split in the ratio 30:70 male to female staff.  We have an experienced and capable leadership team that was restructured in the year, following my appointment as CEO.  Chris Higham was appointed to the role of acting CFO and Will Herbertson to the role of Managing Director of the Consumer Legal Services division.  In October 2021, we were pleased to welcome John Kushnick to the Group to take on the role of Legal Operations Director, responsible for growing NAL.  John is well known and respected in the industry, and we are already benefiting greatly from his experience. 

My team and I have always believed that for a business to be sustainable, it requires an inclusive and supportive culture, with clear leadership and a strong focus on employee engagement.  The Group's values of Driven, Curious, Passionate and Unified guide us in our short and long-term decision making and our culture has helped to sustain the business through the challenges of COVID-19 and our business transformation. 

In 2021, we continued our focus on clear and regular staff communication, with regular meetings and weekly updates.  As the conditions evolved, so too did our communications, with an increased focus on connecting with people working remotely and on staff wellbeing.  This was enhanced with the addition on our Group-wide employee engagement platform, called Totem, during the year.  This mobile app helped our people to connect and award each other recognition, post videos and share encouragement.

Our annual engagement survey proved once again that our people appreciate our focus on culture and communication. Our engagement score of 75% is significantly higher than the UK average of 11%⁴. We have also received external validation of our culture, with our Personal Injury and Critical Care businesses holding the prestigious Gold status from Investors In People and our Residential Property business being awarded Silver.

Finally, we were thrilled that Bush & Co was placed at number 43 on Best Companies' 'The UK's 100 Best Small Companies to Work for 2021', building on a similar award achieved by National Accident Helpline in 2019. 

We were pleased to support a number of community initiatives during the year, including supporting local food banks through monetary donations, collections and donations of Christmas lunches. As at 31 December, the Group had also funded the planting of 172 trees in Madagascar, one for each Consumer Legal Service employee. This will be extended to include Critical Care in 2022 and we will continue adding trees each time we recruit someone new. 

Potential sale of Homeward Legal

We announced last year that we intended to explore a potential sale of our repositioned and streamlined Residential Property business, Homeward Legal.  While this initially attracted encouraging levels of interest from the focused group of potential buyers we engaged with, it proved very difficult to complete a deal due to external factors beyond our control.  While we are not in negotiations with a buyer at present, we will look to explore a sale and consider our strategic options for this business in 2022.

Conclusion and outlook

In 2021, we increased the number of claims being processed in NAL and launched several new initiatives across both divisions.  We carefully managed our investment levels to remain profitable and showed a reduction in net debt.

This progress has continued into 2022 as we look to grow the number of enquiries we generate, increase the number of claims we are processing in NAL, and develop our pipeline of work in Bush & Co.

In our Personal Injury business, enquiry numbers for the first two months of 2022 were up 42% compared to the same period in 2021 and we have experienced an improvement in the average daily enquiry run rate each month since December 2021.  We allocated 31% of these enquiries to NAL, compared to 23% for the same period in 2021.  In Critical Care, despite a relatively slow start in January caused by concerns around the Omicron variant of COVID-19, the number of Expert Witness and INA reports issued in the first two months of 2022 increased by 8% and 7% respectively on the same period in 2021.  Instruction numbers for the same period were also robust, with Expert Witness ahead by 7% and INA instructions by 28%.

Now that the last of the COVID-19 restrictions have been lifted, we expect to see mobility levels across the UK continue to improve and for this to result in a gradual increase in the number of accidents in our markets.  The Board have undertaken an impact assessment considering the recent developments in the Ukraine crisis and do not consider that this will have a significant impact on the Group's operations.

Thank you to our employees

I would like to end by putting on record my thanks to our employees for their hard work, support and commitment.  They faced many challenges during 2021, including having to adjust to the changing COVID-19 restrictions, and demonstrated their resilience and dedication to supporting our customers and each other.

James Saralis

Chief Executive Officer

1.  Underlying operating profit excludes certain exceptional items as detailed in note 1. Refer to note 1 for a reconciliation of this measure to IFRS operating profit.

2.  COVID-19 Community Mobility Reports, google.com

3.  Independent research produced by The Nursery Research & Planning Ltd, September 2021

4.  Gallup state of the global workplace report 2021

CFO report

Overview

The year began with the UK in its third and most protracted lockdown as the Group continued to feel the effects of COVID-19 disrupting volumes in our markets as consumer behaviour changed and accident numbers were supressed. The year also saw the long anticipated small claims reforms come into effect at the end of May. Despite this, the Group remained profitable, generated cash and reduced net debt.

In 2020, we focused on generating immediate cash and profit through placement of enquiries into our panel law firms. Having created our wholly-owned law firm, National Accident Law (NAL), this year we turned attention to scaling the business to realise higher returns and higher profit in the future.

We also invested in new initiatives and technology in the Critical Care division to underpin future growth.

From an operational perspective, revenue fell 5% from £40.9m to £38.9m. This was largely due to the full year impact of the COVID-19 pandemic effecting accident numbers, and reducing demand for our services, along with our strategic decision to grow the number of enquiries we placed with our law firm, NAL. 

Underlying operating profit decreased by 27% from £5.7m to £4.2m at an underlying margin of 10.7% (2020: 13.8%), operating profit fell £0.1m to £4.2m and profit before tax was £0.2m (2020: loss of £0.2m).

Review of income statement

	2021 £m	2020 £m	Change £m	Change %
Consumer Legal Services	26.6	29.6	(3.0)	(10.0)
Critical Care	12.3	11.3	1.0	(9.1)
Revenue	38.9	40.9	(2.0)	(4.7)
Consumer Legal Services	3.7	5.4	(1.7)	(31.1)
Critical Care	3.3	3.6	(0.3)	(8.4)
Shared Services	(1.6)	(1.9)	0.3	16.0
Other items	(1.2)	(1.4)	0.2	12.1
Underlying operating profit	4.2	5.7	(1.5)	(26.6)
Exceptional items	0.0	(1.4)	1.4	(100.0)
Operating profit	4.2	4.3	(0.1)	(3.5)
Profit attributable to members' non-controlling interests in LLPs	(3.5)	(4.1)	0.6	16.1
Financial income	0.1	0.2	(0.1)	(49.4)
Financial expense	(0.6)	(0.6)	0.0	5.1
Profit/(Loss) before tax	0.2	(0.2)	0.5	205.0
Taxation	(0.0)	(0.0)	(0.0)	-295.0
Profit/(Loss) and total comprehensive income for the year	0.2	(0.2)	0.4	163.9

Consumer Legal Services

The Consumer Legal Services division generated £26.6m of revenue, a decline of 10% from £29.6m while underlying operating profit fell by 31% from £5.4m to £3.7m. The national lockdown at the start of the year once again supressed accident numbers with enquiry volumes 18% lower than the second half of 2020. Across the full year, the National Accident Helpline brand generated 32,132 enquiries, 11% lower than last year (2020: 36,214) albeit 2020 was largely unaffected by COVID-19 in the first quarter. Enquiries grew 27% in the second half of the year compared to the first half. 

We increased the number of enquiries placed into our wholly-owned law firm, NAL and following the introduction of the new rules around low value Road Traffic Accident (RTA) claims at the end of May, all volume from RTA in England and Wales has been placed with NAL. This has contributed to a 130% year-on-year increase in the number of enquiries processed by NAL. At the end of 2021, NAL was processing 7,918 ongoing claims, an increase of 166% on the previous year. These ongoing cases are expected to contribute c£6.7m (2020: £3.8m) in future revenue and c£8.4m of future cash receipts (2020: £4.7m). Enquiry volumes placed with joint venture law firms decreased by 73% in the year. 

The enquiries processed by NAL have a longer revenue cycle that can run to a number of years compared to that of our panel arrangements, due to NAL recognising income only once an admission of liability has been received from the defendant. As we anticipated, the reforms have also resulted in a material reduction in revenue from a large proportion of our RTA claims.

The Residential Property business generated a positive contribution to profit of £0.8m (2020: £0.3m) before allocation of shared costs. The business benefitted from an extension to the market stimulus in the form of the Stamp Duty Land Tax holiday on properties valued up to £500,000 alongside business development successes and a full year impact of cost savings delivered in the previous year.

Critical Care

The Critical Care division grew revenue by 9% from £11.3m to £12.3m (2020: a reduction of 16%) with Underlying Operating Profit reducing by 8% from £3.6m to £3.3m.

The division has continued to invest in business development activity contributing to a 23% increase to Expert Witness instructions and a 6% increase in INA instructions. Expert Witness reports delivered grew by 21%. The number of ongoing case management cases has also marginally increased although revenue from these cases is broadly flat as appointments have been carried out remotely during COVID-19 as opposed to face-to-face.

Operating costs increased in the year due to investments in people, marketing activity and systems to grow the business including new initiatives, Hubs and Bush Care Solutions (see CEO report) as well as changes to commercial agreements to secure associate resource which also further strengthened our IR35 position with associates.

Shared Services

The costs for the Group's Shared Services functions fell by £0.3m to £1.6m (2020: £1.9m).

Government Support

The Group made use of £0.01m of Government support in the form of the Coronavirus Job Retention Scheme (2020: £0.4m). This income is shown in the financial statements in underlying operating profit as netted off administration expenses within the divisional results. We repaid £0.4m of VAT deferred from 2020 in the year with no further deferral in 2021.

Exceptional and non-underlying items

The Group did not incur any exceptional costs in the year (2020: £1.4m). Costs relating to the exploration of disposing of the Residential Property business have been expensed within underlying operating profit.

Taxation

The Group's tax charge of £79,000 (2020: £2,000) represents an effective tax charge of 33.6% (2020: -0.9%). The tax charge is higher than the standard corporation tax rate of 19% for the reasons set out in note 9. The deferred tax credit originates from temporary differences in intangible assets acquired on business combinations.

Earnings per share (EPS) and dividend

Underlying EPS for the year were 0.3p (2020: 1.9p). Underlying EPS provide a better comparison year on year as earnings have been adjusted to exclude certain exceptional items (net of the standard rate of corporation tax). This is explained in note 1.

Basic EPS for the year were 0.3p (2020: -0.5p) and the diluted EPS were 0.3p (2020: -0.5p), reflecting the impact of share options due to vest in future years.

The growth in basic EPS is due to the exceptional costs totalling £1.4m (comprising costs for the strategic transformation of the Personal Injury division, restructure of Residential Property and Personal Injury into a new Consumer Legal Services division and due diligence costs relating to a potential offer for the Group) not repeated in 2021, partially offset by a full year impact of COVID-19 and continuing investment in the Personal Injury and Critical Care businesses.

The Board does not believe it is appropriate to re-instate dividends at this time and the Directors have recommended that no final dividend be paid in respect of 2021 (2020: nil).

Review of the statement of financial position

In reviewing the statement of financial position, I consider the significant items to be working capital, defined as trade and other receivables less trade and other payables, and net debt.

Working Capital

Trade and other receivables less trade and other payables totalled £17.2m at year end (2020: £16.7m).

Trade receivables and accrued income balances related to the processing of personal injury claims decreased to £6.9m (2020: £7.3m). These claims are yet to reach the settlement stage but have received an admission of liability from the defendant. This is in line with the Group's accounting policy for legal services revenue. Accrued income included £1.7m (2020: £0.9m) relating to liability admissions received on open cases within National Accident Law.

There is a significant element of uncertainty in estimating this accrued income. The Directors believe that the assumptions adopted are appropriate and based on historical experience of claims processed in our law firms and by our panel. These assumptions are updated with actual results as claims settle.

Disbursement receivables increased from £6.7m to £8.3m as we scaled NAL.

Receivables not relating to the law firms decreased from £20.3m to £18.2m. This is a result of the maturity of historic deferred debt from our panel debtors including having received £1.5m of the settlement relating to the termination of National Law Partners, agreed in 2019. The remaining amount of £1.4m is due to be settled by the end of Q2 2022. 

Payables reduced from £17.5m on 31 December 2020 to £16.2m at the balance sheet date. This was due to the unwinding of product commissions settled in advance and a £0.4m payment for VAT deferred from 2020, offset by an increase in disbursement payables in our law firms. The latter increased, as expected, from £6.0m to £7.2m. 

Net debt and bank facilities

We carefully managed our cash resources during the year to balance an investment in processing personal injury cases with a desire to reduce net debt. As a result, net debt fell from £16.3m as at 31 December 2020 to £15.5m at year-end. Net debt is defined in note 9 and is comprised of £2.5m of cash (2020: £3.6m) offset by borrowings of £17.9m (2020: £19.9m).

The borrowings represent a balance on the Group's Revolving Credit Facility with its lender, Yorkshire Bank. We successfully renegotiated the facility with Yorkshire Bank extending the facility term for a further 24 months through to 31 December 2024. As part of the agreement with Yorkshire Bank, new covenants have been agreed aligning with our latest internal forecasts and the overall facility has reduced from £25m to £20m to appropriately reflect our medium-term requirements.

Review of the cash flow statement

	2021 £m	2020 £m	Change £m	Change %
Net cash generated from operating activities	5.1	11.0	(5.9)	(53.4)
Net cash used in investing activities (excl. disposal of subsidiaries)	(0.6)	(1.1)	0.5	(42.7)
Principal element of lease payments	(0.2)	(0.5)	0.3	(70.3)
Drawings paid to LLP members	(3.4)	(3.2)	(0.2)	(6.8)
Facility arrangement fees	(0.1)	(0.1)	0.0	(25.6)
Net cash used in financing activities (before borrowings)	(3.7)	(3.8)	0.1	5.3
Free cash flow	0.8	6.1	(5.3)	(86.0)
Disposal of subsidiaries	0.0	(1.3)	1.3	(100.0)
Repayment of borrowings	(2.0)	(3.8)	1.8	(46.7)
Net (decrease)/increase in cash and cash equivalents	(1.2)	1.0	(2.2)	(210.1)

The Group's cash and cash equivalents reduced by £1.2m in the year (2020: increase of £1.0m). This was primarily due to repaying borrowings and increased investment. The significant items in the consolidated cash flow statement are net cash from operating activities, drawings paid to LLP members and the repayment of borrowings.

Net cash from operating activities reduced from £11.0m to £5.1m as we switched focus back to growing the number of cases processed in NAL in line with our strategy.  We temporarily changed focus to increase liquidity in 2020, in the immediate aftermath of the onset of the COVID-19 pandemic.  Net cash generated from operating activities included £2.1m in relation to claims settlements received by National Accident Law (2020: £1.3m).

The Group paid £3.4m (2020: £3.2m) of drawings to its partners in the joint-venture law firms during the year, under the terms of our agreements. This reflects the growth in claims won and settled during the year.  The Group also acquired £0.3m (2020: £0.8m) of intangible assets in the year as it sought to improve its technological offering in Critical Care. 

The Group repaid £2.0m (2020: £3.8m) of borrowings in the year on its Revolving Credit Facility.

Free Cash Flow (FCF) is the Group's KPI with regards to cash flow. FCF in 2021 was £0.8m compared to £6.1m in 2020. The primary reason for this decrease is the change of focus to processing more cases in NAL as outlined above.

The Group also monitors underlying cash conversion. This fell to 150.2% in the year (2020: 228.9%), a direct result of the fall in operating cash as explained above.

Conclusion

In conclusion, despite the continued disruption caused by the COVID-19 pandemic, we have made progress with our strategy, investing in both the Consumer Legal Services and Critical Care divisions, positioning them well to maximise future returns whilst continuing to manage debt.

Chris Higham

Acting Chief Financial Officer

 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

			2021	2020
		Note	£000	£000
	Revenue	1,2	38,947	40,875
	Cost of sales		(21,352)	(21,602)
	Gross profit		17,595	19,273
	Administrative expenses		(13,439)	(14,964)
	Underlying operating profit	1	4,156	5,659
	Exceptional items	3	-	(1,350)
	Operating profit Profit attributable to members' non-controlling interests in LLPs	2	4,156 (3,451)	4,309 (4,115)
	Financial income		85	168
	Financial expense		(555)	(585)
	Profit/(Loss) before tax		235	(223)
	Taxation	4	(79)	(2)
	Profit/(Loss) and total comprehensive income for the year		156	(225)

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2021

		2021	2020
	Note	£000	£000
Non-current assets
Goodwill		55,489	55,489
Other intangible assets		3,701	4,557
Property, plant and equipment		477	367
Right of use assets		2,315	2,761
Deferred tax asset		23	14
		62,005	63,188
Current assets
Trade and other receivables (including £3,718,000 (2020: £7,828,000) due in more than one
year)	5	33,404	34,285
Cash and cash equivalents		2,458	3,609
		35,862	37,894
Total assets		97,867	101,082
Current liabilities
Trade and other payables	6	(16,211)	(17,547)
Lease liabilities		(242)	(248)
Member capital accounts		(4,210)	(4,177)
Current tax liability		(97)	(126)
		(20,760)	(22,098)
Non-current liabilities
Lease liabilities		(1,953)	(2,195)
Other interest-bearing loans and borrowings		(17,910)	(19,901)
Deferred tax liability		(625)	(826)
		(20,488)	(22,922)
Total liabilities		(41,248)	(45,020)
Net assets		56,619	56,062
Equity
Share capital		116	115
Share option reserve		4,312	3,912
Share premium		14595	14,595
Merger reserve		(66,928)	(66,928)
Retained earnings		104,524	104,368
Capital and reserves attributable to the owners of NAHL Group plc		56,619	56,062

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

								Capital and
								reserves
			Share					attributable to
		Share	option	Share	Merger		Retained	the owners of
		capital	reserve	premium	reserve		earnings	NAHL Group plc
	Note	£000	£000	£000	£000		£000	£000
Balance at 1 January 2020		115	3,389	14,595	(66,928)		104,593	55,764
Total comprehensive income for the year
Loss for the year		-	-	-	-		-	(225)
Total comprehensive income		-	-	-	-		-	(225)
Transactions with owners,
recorded directly in equity
Issue of new Ordinary Shares		-	-	-	-		-	-
Share-based payments		-	523	-	-		-	523
Total transactions with owners, recorded
directly in equity		-	523	-	-		-	523
Balance at 31 December 2020		115	3,912	14,595	(66,928)	104,368		56,062

Total comprehensive income for the year
Profit for the year		-	-	-	-	156	156
Total comprehensive income		-	-	-	-	156	156
Transactions with owners,
recorded directly in equity
Issue of new Ordinary Shares		1	-	-	-	-	1
Share-based payments		-	400	-	-	-	400
Total transactions with owners, recorded
directly in equity		1	400	-	-	-	401
Balance at 31 December 2021		116	4,312	14,595	(66,928) 104,524		56,619

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

		2021	2020
		£000	£000
Cash flows from operating activities
Profit for the year		156	(225)
Adjustments for:
Profit attributable to members' non-controlling interests in LLPs		3,451	4,115
Property, plant and equipment Depreciation		171	169
Right of use asset depreciation		306	430
Amortisation of intangible assets		1,195	1,345
Financial income		(85)	(168)
Financial expense		555	585
Share-based payments		400	523
Taxation		79	2
		6,228	6,776
Increase in trade and other receivables		1,012	2,223
Increase in trade and other payables		(1,337)	2,945
		5,903	11,944
Interest paid		(398)	(469)
Tax paid		(365)	(450)
Net cash generated from operating activities		5,140	11,025
Cash flows from investing activities
Acquisition of property, plant and equipment		(281)	(269)
Acquisition of intangible assets		(339)	(820)
Disposal of subsidiary net of cash disposed of1		-	(1,273)1
Interest received		2	10
Net cash used in investing activities		(618)	(2,352)
Cash flows from financing activities
Repayment of borrowings		(2,000)	(3,750)
Issue of share capital		1	-
Facility arrangement fees		(90)	(121)
Principal element of lease payments		(166)	(558)
Drawings paid to LLP members		(3,418)	(3,199)
Net cash generated from/(used in) financing activities		(5,673)	(7,628)
Net (decrease)/increase in cash and cash equivalents		(1,151)	1,045
Cash and cash equivalents at 1 January		3,609	2,564
Cash and cash equivalents at 31 December		2,458	3,609

1.  The Group disposed of its interest in National Law Associates LLP on 2 January 2020 and de-consolidated its results from this point.

NOTES TO THE FINANCIAL STATEMENTS

1 Accounting policies

Basis of preparation

Consolidated Financial Statements

The preliminary financial statements do not constitute statutory accounts for NAHL Group plc within the meaning of section 434 of the Companies Act 2006 but do represent extracts from those accounts.

The statutory accounts will be delivered to the Registrar of Companies in due course.  The auditors' have reported on those accounts.  Their report was unqualified.  The auditors' report does not contain a statement under either section 498(2) of Companies Act 2006 (accounting records or returns inadequate or accounts not agreeing with records and returns), or section 498(3) of Companies Act 2006 (failure to obtain necessary information and explanations).

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

Going Concern

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

The Audit and Risk Committee has reviewed the Going Concern assessment prepared by management. The assessment includes detailed financial forecasts covering the Group's adopted strategy and considers a range of sensitivities. The period considered by the forecasts is to the end of June 2023, being approximately 12 months from the date of signing of the 2021 annual report and financial statements. The key assumptions in the forecasts are a) number of PI enquiries generated and b) placement of these enquiries (into our panel, our joint venture law firms or NAL). The going concern assessment focuses on two key areas, being the ability of the Group to meet its debts as they fall due and being able to operate within its banking facility.

The Group has access to a £20.0m revolving credit facility (RCF) with its bankers.. In all of the sensitivities the Group has modelled it would have sufficient liquidity within its current RCF to meet its liabilities as they fall due and would not need to access additional funding.

The Group's RCF is subject to quarterly covenant testing. The Group has modelled a worst-case scenario, assuming that volumes remain at 2021 levels, and has then considered the options it would have available to mitigate against any shortfall in profits and cash. Under this

scenario, the Group would be able to implement sufficient mitigating actions in order to operate within its covenants. The likelihood of this scenario occurring is considered to be remote and therefore the directors consider the Going Concern basis of accounting to be appropriate.

Considering the above, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in existence for the foreseeable future and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements.

New standards and amendments adopted by the Group

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

New standards, interpretations and amendments not yet effective

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

Statutory and non-statutory measures

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

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

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

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

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

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

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

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

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

The APMs used in the Strategic Report are defined in the table below and the principles to identify adjusting items have been applied on a

basis consistent with previous years The key adjusting items in arriving at the APMs are as follows:

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

Nature of	Related IFRS	Related IFRS
measure	measure	source	Definition	Use/relevance

Underlying	Operating	Consolidated	Based on the related IFRS measure
operating	profit	income	but excluding exceptional items, IFRS
profit		statement	2 share-based payment charges and
			amortisation of intangible assets
			acquired on business combinations.

 

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

Underlying	Cash flow	Consolidated	Based on the related IFRS measure
operating	from	cash flow	but excluding cash flows in respect of
cash flow	operating	statement	the items excluded from underlying
	activities		operating profit as described above.
Underlying	Not defined	n/a	Calculated as underlying operating
cash	by IFRS		cash flow divided by underlying
conversion			operating profit.
Free Cash Flow	Not defined by IFRS	n/a	Calculated as net cash generated from operating activities less net cash used in investing activities (excluding any disposals of subsidiaries) less payments made to partner LLP members and less principal element of lease payments

 

Provides management with an indication of the amount of cash available for discretionary investing or financing after removing material non-recurring expenditure that does not reflect the underlying trading operations and allows management to monitor the conversion of underlying profit into cash.

Underlying Basic	Basic EPS	Consolidated income statement	Based on the related IFRS measure but calculated using underlying profit for the year attributable to shareholders.
EPS (before NAL Start-up losses)

 

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

Working	Movement in Consolidated		Working capital is not defined by
capital	receivables	statement of	IFRS. This is defined by management
	and	cash flows	as being the movement in trade
	movement		receivables less the movement in
	in payables		trade payables.

 

Allows management to assess the short-term cash flows from movements in the more liquid assets.

Net debt	Not defined	Consolidated	Net debt is defined as cash and cash
	by IFRS	cash flow	equivalents less interest bearing
		statement	borrowings net of loan arrangement
			fees.

 

Allows management to monitor the overall level of debt in the business. As stated in the strategic report, loan funding is key to the Group's future strategy as an increasing proportion of profits and cash flows are deferred until case settlement.

A reconciliation of each measure is provided as follows:

Underlying operating profit:					2021	2020
					£000	£000
IFRS measure - operating profit					4,156	4,309
Exceptional items					-	1,350
Underlying operating profit					4,156	5,659

Underlying operating cash flow and underlying cash conversion:

	2021	2021		2020	2020
	Underlying	Exceptional	2021	Underlying	Exceptional	2020
	operations	items	Total	operations	items	Total
	£000	£000	£000	£000	£000	£000
Operating profit	4,156	-	4,156	5,659	(1,350)	4,309
Share-based payments	400	-	400	523	-	523
Depreciation and amortisation	1,672	-	1,672	1,944	-	1,944
Increase in trade/other receivables	1,012	-	1,012	2,223	-	2,223
Increase in trade/other payables	(999)	(338)	(1,337)	2,607	338	2,945
Operating cash flow	6,241	(338)	5,903	12,956	(1,012)	11,944
Underlying Operating cash conversion	150.2%			228.9%
Interest paid			(398)			(469)
Tax paid			(365)			(450)
Net cash generated from operating activities			5,140			11,025
Net cash used in investing activities (excluding disposals of subsidiaries)			(618)			(1,079)
Lease payments			(166)			(558)
Issue of share capital			1			-
Facility arrangement fees			(90)			(121)
Payments to/from partner LLP members			(3,418)			(3,199)
Free cash flow			849			6,068

Underlying basic EPS:					2021	2020
					£000	£000
IFRS measure - loss for the year attributable to shareholders					156	(225)
Exceptional items					-	1,350
Tax effect of the above					-	(257)
Underlying profit for the year attributable to shareholders					156	868
Weighted average number of shares				46,245,345		46,238,878
Underlying basic EPS (before NAL start-up losses)					0.3	1.9
Working capital:					2021	2020
					£000	£000
Movement in trade and other receivables					1,012	2,223
Movement in trade and other payables					(1,337)	2,945
Working capital					(325)	5,168
Movement in interest accruals					(84)	(158)
Corporation tax debtor					(47)	15
Movement in financing accruals					-	110
IFRS measure - movement in trade and other receivables less movement in trade and other payables					(456)	5,135

Net debt is defined in Note 9.

2 Operating segments

	Consumer	Critical		Other	Underlying	Exceptional
	Legal Services	Care	shared Services	items	operations	items	Eliminations2	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Year ended 31 December 2021
Revenue	26,583	12,364	-	-	38,947	-	-	38,947
Depreciation and amortisation	(272)	(166)	(363)	(871)	(1,672)	-	-	(1,672)
Operating profit/(loss)	3,726	3,293	(1,592)	(1,271)	4,156	-	-	4,156
Profit attributable to non-controlling interest members in LLPs	(3,451)	-	-		(3,451)			(3,451)
Financial income	85	-	-	-	85	-	-	85
Financial expenses	-	(10)	(545)	-	(555)	-	-	(555)
Profit/(Loss) before tax	360	3,283	(2,137)	(1,271)	235	-	-	235
Trade receivables	2,999	4,896	-	-	7,895	-	-	7,895
Total assets1	29,625	6,335	79,413	-	115,373	-	(17,506)	97,867
Segment liabilities1	(17,754)	(1,306)	(3,556)	-	(22,616)	-	-	(22,616)
Capital expenditure (including intangibles)	60	326	234	-	620	-	-	620
Year ended 31 December 2020
Revenue	29,537	11,338	-	-	40,875	-	-	40,875
Depreciation and amortisation	(636)	(137)	(247)	(924)	(1,944)	-	-	(1,944)
Operating profit/(loss)	5,4071	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

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

2.  Eliminations represents the difference between the cost of subsidiary investments included in the total assets figure for each segment and the value of goodwill arising on consolidation.

Significant customers

No customers account for greater than 10% of the total Group revenue (20 20: no customers).

Geographic information

All revenue and assets of the Group are based in the UK.

Operating segments

The activities of the Group are managed by the Board, which is deemed to be the chief operating decision maker (CODM). The CODM has

identified the following segments for the purpose of performance assessment and resource allocation decisions. These segments are split along product lines and are consistent with those reported last year.

Consumer Legal services - Revenue is split along 3 separate streams being: a) Panel - revenue from the provision of personal injury and conveyancing enquiries to the Panel Law Firms, based on a cost plus margin model b) Products - consisting of commissions received from providers for the sale of additional products by them to the Panel Law Firms, surveys and the provision of conveyancing searches and c) Processing - in the case of our ABSs and self- processing operations, revenue receivable from clients for the provision of legal services.

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

multi-track cases.

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

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

Exceptional items - items that are non-recurring and that are material by nature and separately identified to allow for greater comparability of underlying Group operating results year-on-year. Examples of exceptional items in the current and/or previous years include reorganisation

and restructuring costs; revaluation of liability associated with legacy ATE products; and acquisition related costs. Exceptional costs are separately identified to allow for greater comparability of underlying Group operating results year-on-year.

3 Exceptional items
Exceptional items included in the income statement are summarised below:
			2021	2020
			£000	£000
Group strategic and reorganisation costs1			-	613
Group restructure2			-	399
Due Diligence costs3			-	338
			-	1,350

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

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

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

4 Taxation

Recognised in the consolidated statement of comprehensive income

	2021	2020
	£000	£000
Current tax expense
Current tax on income for the year	276	202
Adjustments in respect of prior years	13	26
Total current tax	289	228
Deferred tax credit
Origination and reversal of timing differences	(210)	(226)
Total deferred tax	(210)	(226)
Tax expense in statement of comprehensive income	79	2
Total tax charge	79	2
Reconciliation of effective tax rate
	2020	2020
	£000	£000
Profit for the year	156	(225)
Total tax expense	79	2
Profit before taxation	235	(223)
Tax using the UK corporation tax rate of 19.00% (2018: 19.00%)	45	(42)
Non-deductible expenses	97	100
Adjustments in respect of prior years	13	26
Share scheme deductions	(8)	(11)
Short-term timing differences for which no deferred tax is recognised	(68)	(71)
Total tax charge	79	2

Changes in tax rates and factors affecting the future tax charge

The UK Government announced in the 2021 budget that from 1 April 2023, the rate of corporation tax in the United Kingdom will increase from 19% to 25%. This was substantively enacted at the reporting date and so the effects are included within these financial statements.

5 Trade and other receivables
		2021	2020
		£000	£000
Trade receivables: receivable in less than one year		7,056	7,493
Trade receivables: receivable in more than one year		839	799
Accrued income: receivable in less than one year		12,414	11,398
Accrued income: receivable in more than one year		3,718	7,029
Other receivables		21	14
Prepayments		913	703
Corporation tax		136	88
Recoverable disbursements		8,307	6,761
		33,404	34,285

A provision against trade receivables and accrued income of £740,000 (2020: £673,000) is included in the figures above. Trade receivables and accrued income receivable in greater than one year are classified as current assets as the Group's working capital cycle is considered to be up to 36 months as extended credit terms are offered as part of commercial agreements.

6 Trade and other payables

Amounts due within one year:	2021	2020
	£000	£000
Trade payables	1,452	3,201
Disbursements payable	7,222	6,001
Other taxation and social security	1,216	1,791
Other payables, accruals and deferred revenue	5,864	5,849
Customer deposits	457	705
Total trade and other payables	16,211	17,547

7 Earnings per share

The calculation of basic earnings per share at 31 December 2021 is based on the profit attributable to ordinary shareholders of the parent company of £156,000 (2020: loss of £225,000) and a weighted average number of Ordinary Shares outstanding of 46,245,345 (2020: 46,238,878).

Profit/(Loss) attributable to ordinary shareholders

£000		2021		2020
Profit/(Loss) for the year attributable to the shareholders			156	(225)
Weighted average number of ordinary shares
Number		2021		2020
Issued Ordinary Shares at 1 January		46,240,222		46,178,716
Weighted average number of Ordinary Shares at 31 December		46,245,345		46,238,878
Basic Earnings per share (p)
		2021		2020
Group			0.3	(0.5)

The Group has in place share-based payment schemes to reward employees. As at 31 December 2021 there were potentially dilutive share options under the Group's share option schemes. The total number of options available for these schemes included in the diluted earnings per share calculation is 1,315,881 (2020: in line with IAS 33, as the group has a negative earnings per share, it is assumed there are no dilutive shares). There are no other diluting items.

Diluted Earnings per share (p)

	2021	2020
Group	0.3	(0.5)

8 Dividends

No dividends were paid in 2021 or 2020.

9 Net debt and changes in liabilities arising from financing activities
Net debt includes cash and cash equivalents and other interest-bearing loans and borrowings.
	2021	2020
	£000	£000
Cash and cash equivalents	2,458	3,609
Other interest-bearing loans and borrowings	(17,910)	(19,901)
Net debt	(15,452)	(16,292)
Lease liabilities	(2,195)	(2,443)
Set out below is a reconciliation of movements in net debt during the period.
	2021	2020
	£000	£000
Net (decrease)/increase in cash and cash equivalents	(1,151)	1,045
Net inflow from decrease in debt and debt financing	2,000	3,750
Movement in net borrowings resulting from cash flows	849	4,795
Non-cash movements - net release of prepaid loan arrangement fees	(9)	(57)
Net debt at beginning of period	(16,292)	(21,030)
Net debt at end of period	(15,452)	(16,292)

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

	2021	2020
	£000	£000
Net outflow from decrease in lease liabilities	166	558
Movement in lease liabilities resulting from cash flows	166	558
Non-cash movements arising from initial recognition of new lease liabilities, revisions and interest charges	82	(2,754)
Lease liabilities at beginning of period	(2,443)	(247)
Lease liabilities at end of period	(2,195)	(2,443)

 

END

 

 

FR DZGZFZRNGZZZ