REG - NAHL Group PLC - Final Results
02/05/2024 07:00
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RNS Number : 9161M NAHL Group PLC 02 May 2024
2 May 2024
NAHL Group plc
("NAHL", the "Company" or the "Group")
Final Results
Building on strong foundations to scale the business and outperform the
market, growing revenues and further reducing net debt
NAHL, a leading marketing and services business focused on the UK consumer
legal market, is pleased to announce its audited results for the year ended 31
December 2023.
Financial Highlights
Year ended 31 December FY2023 FY2022 Change
Group Revenue £42.2m £41.4m 2%
Operating Profit £4.1m £4.8m -13%
Profit Before Tax £0.65m £0.57m 14%
Net Debt £9.7m £13.3m -27%
· Group Revenue increased by 2% to £42.2m (2022: £41.4m).
· National Accident Law (NAL), the Group's fully integrated law firm,
collected £6.0m of cash from settlements, 73% higher than the prior year
(2022: £3.5m), a clear sign of its growing maturity.
· Delivered a 27% reduction in net debt to lower than anticipated level
at £9.7m (31 December 2022: £13.3m).
· Generated £3.6m of free cash flow, 63% more than last year. Net cash
generated from operating activities was also strong, up by 25% to £7.5m
(2022: £6.0m), and operating cash conversion increased to 217% (2022: 143%).
· Operating profit for the year was £4.1m (2022: £4.8m) against a
backdrop of higher costs and in line with our strategy to invest more in NAL
for higher profitability in the medium term.
· Proft before tax was £0.65m (2022: profit before tax of
£0.57m).
· Basic Continuing EPS increased 12.5% to 0.9p (2022: 0.8p).
Operational Highlights
● NAHL continued to make strong progress across the business in 2023, standing
the Group in good stead for further success.
● Focused on growing the value of personal injury enquires placed into NAL to
grow a more profitable and sustainable business:
o Group placed 8,518 new enquiries into NAL; these were of a higher quality
than previous years and it is estimated they will generate £6.6m in future
revenue and cash, compared to £5.9m in 2022.
o 3,633 claims settled, 92% more than 2022, and at year end NAL was
processing 9,983 ongoing claims (31 December 2022: 10,860).
o After expensing marketing and processing costs incurred to date, it is
anticipated that NAL's book of ongoing claims will generate: future revenues
of £9.9m; future gross profits of £8.6m; and future cash of £13.9m, up 24%.
The Board's strategic decision to prioritise investments in NAL rather than in
the Group's joint-ventures, enabled it to reduce the profit attributable to
members' non-controlling interests in LLPs by 29% to £2.5m (2022: £3.6m).
● National Accident Helpline generated 35,643 enquiries, up 2% on the prior year
(2022: 34,905). TV and social advertising resulted in a 7.5% increase in
market share and the National Accident Helpline brand remained the "first
choice for people who have had an accident and want legal
representation".
● The disposal of non-core Homeward Legal in April 2023 successfully removed a
drag on growth and allowed management to refocus on their strategic
priorities.
● In Critical Care, the strategy to grow market share by broadening the customer
base, extending competencies and specialisms and becoming more efficient is
working, and the division delivered double digit growth in 2023.
o Cash from operations in Critical Care increased by 61%.
o Bush & Co. delivered 11% and 29% growth in revenue and operating
profit respectively along with impressive margin expansion to 30%.
o Bush & Co. Care Solutions had a strong year with revenues growing
by 39% to £0.5m (2022: £0.4m) driven by a 40% increase in standalone
nurse-led care packages, which generate monthly recurring revenue.
o A record year for expert witness services, increasing revenues by 37%. The
team delivered 1,136 reports to customers, a 17% increase (2022: 974).
o Critical Care onboarded 76 new associates in 2023 and grew expert witness
and case management associate numbers by 22% and 22% respectively.
Post year end
· In February 2024, the Group successfully extended its banking facility
with Clydesdale Bank/Virgin Money, reducing the £20m RCF (which was due to
expire on 31 December 2024) to a £15m facility which runs to 31 December
2025.
· In March 2024, the UK Supreme Court upheld a court of appeal decision
in favour of the claimant in Rabot vs Hassam. The Board considers this a
positive development for personal injury claimants and the Group as it will
translate into increased average revenues in RTA mixed injury claims being
processed by NAL.
· On 5(th) April 2024, the Company announced that the Board is
evaluating a possible sale of Bush & Co. This remains at a very early
stage and there can be no certainty a sale will occur.
James Saralis, CEO of NAHL, commented:
"I am pleased with the solid financial performance that the Group delivered in
2023 and am encouraged that we continued to outperform the market in both
Consumer Legal Services and Critical Care while further reducing net debt and
building a more sustainable business. I would like to take this opportunity to
thank our fantastic team for their continued hard work and commitment, driving
our success.
"We demonstrated further improvements in our Personal injury business, which
was again profitable and cash generative, and delivered double digit growth in
Critical Care. These strong results position us well to maintain our growth
and realise the step-change that we have been working towards as our own fully
integrated law firm, NAL, matures.
"Building on our strong foundations and proven ability to navigate market
conditions, the Board is confident in delivering the growth in profits and
reduction in net debt in line with 2024 market expectations."
The Annual Report and notice of Annual General Meeting will be available by
the end of May 2024.
Enquiries:
NAHL Group plc via FTI Consulting
James Saralis (CEO) Tel: +44 (0) 20 3727 1000
Chris Higham (CFO)
Allenby Capital (AIM Nominated Adviser & Broker) Tel: +44 (0) 20 3328 5656
Jeremy Porter/Liz Kirchner (Corporate Finance)
Amrit Nahal/Stefano Aquilino (Sales & Corporate Broking)
FTI Consulting (Financial PR) Tel: +44 (0) 20 3727 1000
Alex Beagley NAHL@fticonsulting.com
Eleanor Purdon
Amy Goldup
Notes to Editors
NAHL Group plc (AIM: NAH) is a leader in the Consumer Legal Services market.
The Group provides services and products to individuals and businesses through
its two divisions:
· Consumer Legal Services provides outsourced marketing services to law
firms through National Accident Helpline; and claims processing services to
individuals through National Accident Law, Law Together and Your Law. In
addition, it also provides property searches through Searches UK.
· Critical Care provides a range of specialist services in the catastrophic
and serious injury market to both claimants and defendants through Bush &
Co.
More information is available at www.nahlgroupplc.co.uk
(http://www.nahlgroupplc.co.uk/) , www.national-accident-helpline.co.uk
(http://www.national-accident-helpline.co.uk/) ,
www.national-accident-law.co.uk (http://www.national-accident-law.co.uk/) and
www.bushco.co.uk (http://www.bushco.co.uk/) .
Throughout this document, references to 'joint venture' law firm relate to our
law firms Your Law LLP and Law Together LLP which we operate in partnership
with a minority member. The term 'joint venture' does not relate to the
UK-adopted International Accounting Standards (IFRS) definition. These law
firms are accounted for as subsidiary undertakings.
Chair's Report
The Group continued to deliver further progress across the business in 2023.
National Accident Law (NAL), our wholly owned law firm, almost doubled the
number of cases it settled compared with 2022 and generated £6.0m in cash
from those settlements. Each year it becomes a more significant part of our
Personal Injury business. Bush & Co had another strong year achieving 11%
growth in revenues and improving its operating profit margin to 30%. These
strong divisional performances resulted in debt falling by 27%.
Overall, we completed the year with revenues of £42.2m (2022: £41.4m), a
profit before tax of £0.6m (2022: £0.6m) and a further reduction in net debt
to £9.7m (2022: £13.3m).
Consumer Legal Services
Revenues in the Consumer Legal Services (CLS) division were marginally lower
than last year at £27.6m (2022: £28.3m) due to the disposal of our non-core
business Homeward Legal at the beginning of the year, and a reduction in the
size of our joint venture LLPs. The Personal Injury business remained
profitable and cash positive, growing market share.
NAL generated £6.0m in cash from settlements compared with £3.5m in 2022 and
£2.1m in 2021 and is nearing an important inflection point, when the expected
value of new claims started is broadly equal to the value of those settled.
Investing more enquires into NAL, now that we can see the return, will
increase its potential even further.
The Personal Injury business has outperformed the market; the volume of
enquiries generated by NAL increased by 2%, against a decline in the overall
number of claims in the market. Consequently, our market share grew by 8%
compared with 2022.
The vast majority of Road Traffic Accident (RTA) claims are directed to NAL
and we continue to screen out the lowest value RTA enquiries as they are not
profitable to process. We have also directed our marketing efforts to target
higher quality claims. This selective approach is contributing to an
improvement in the average value of an RTA claim which is now similar to a
non-RTA case, with the benefit of a slightly shorter lifecycle. As a result,
the average future value of claims going into NAL improved again in 2023.
NAL ended the year processing 9,983 open claims (2022: 10,860) which have a
combined future cash value (before future processing costs) of £13.9m (2022:
£11.2m). The improvement in future value reflects our strategic focus on
processing claims that have a better quality mix and higher average values and
is proof our strategy is working.
Currently, most of the enquiries we generate are directed to our panel,
delivering cash and profit in the short term. Whilst this model does provide
cash flow, the Group continues to believe that a better, but longer-term,
return can be made by investing those claims in NAL. We continue to monitor
the balance between these two options, as we plan the future for NAL.
Some enquires continue to be directed to our joint venture law firm, Law
Together LLP, which provides an important component of our flexible placement
model, particularly as the personal injury legal market continues to
consolidate reducing the number of panel law firms.
The other component of our Consumer Legal Services division is our searches
business. Despite difficult market conditions resulting in transaction volumes
falling, Searches UK performed well. The business was cash positive and
generated a profit of £0.2m on revenues of £2.7m.
Critical Care
Bush & Co had another strong year with revenues increasing by 11% to
£14.6m (2022: £13.2m) and operating profit growing by 29% to £4.4m (2022:
3.4m). The operating profit margin also increased to 30% (2022: 26%). Around
49% of Bush's revenues are recurring.
Case management is the most established part of our business and we have a
strong reputation for this amongst all the leading law firms in the
catastrophic and serious injury market. Whilst revenues were broadly in line
with the previous year, the profitability of this work has been enhanced. This
was achieved through our investment in technology and back-office processes,
which has now been completed.
Our expert witness offering achieved good growth again this year. It has
become an increasingly important part of our Critical Care business and now
accounts for 45% of Bush & Co.'s turnover (2022: 36%). We expect to see
further growth in this segment of the market and are continuing to recruit
associate expert witnesses to meet the strong levels of ongoing demand.
Bush & Co. Care Solutions, which was only launched towards the end of
2021, offers nurse led care management solutions in an adjacent market to case
management, generally after settlement of the litigation. It has proved to be
a successful and profitable initiative and grew its revenues by 39% to £0.5m
(2022: £0.4m). We expect to see growth continue now we have established our
position in this additional market.
Our previous investments in improving the infrastructure at Bush & Co. and
developing our expert witness and care offerings has created a highly
profitable business, with a strong record of growth and a platform for future
success.
Summary
I would like to thank all our employees for their continued commitment and
hard work. Our people and culture are central to our success.
We have made good progress again this year across the Group and delivered a
further significant reduction in debt. The personal injury business remains
cash generative and profitable and is winning an increasing share of enquiries
in the large RTA market. Our own law firm, NAL, has a strong pipeline of value
in its book of claims. It has shown what it can achieve and has the
potential to become an even more important part of the Personal Injury
business in the future. Critical Care has delivered a good return on the
investment we have made with another year of revenue and profit growth and an
impressive 30% operating profit margin. In view of its strong performance,
this could be an attractive opportunity for a buyer and generate immediate
value for shareholders. We are, therefore, at an early stage of investigating
a potential sale of Bush & Co., but there is no certainty that a sale will
happen.
The Group is in a very different place to a few years ago, and even more
strongly positioned as a result. Our strategy is producing substantive
results, and I am confident that we are on track for further success.
Tim Aspinall
Chair
CEO Report
We are making good progress across the Group, and in 2023 we grew revenues and
earnings, and significantly reduced net debt. Our strategy is working, and
we are on track to deliver substantial growth as our business matures.
Overview
In 2023, we continued building on the Group's strong foundations.
Despite the ongoing macroeconomic volatility, increasing cost pressures and
high inflation, we grew our revenues and underlying earnings and made a
significant reduction to our net debt, further strengthening our balance sheet
position. We demonstrated further improvements in our Personal Injury
business, which was again profitable and cash generative, and delivered double
digit growth in our Critical Care business. The disposal of Homeward Legal,
our non-core conveyancing business, in April 2023 successfully removed a drag
on our growth and allowed us to refocus on our strategic priorities.
These results position us well to continue our growth and realise the
step-change in profitability that we have been working towards, as our own
fully integrated law firm, National Accident Law (NAL), matures.
Financial performance
Group revenue increased by 2% in the year, to £42.2m (2022: £41.4m),
reflecting a strong performance in our Critical Care division. Revenues in
the Consumer Legal Services division were lower than last year because of the
disposal of Homeward Legal in April 2023. On a continuing basis, revenues grew
by 4% to £41.9m (2022: £40.2m).
Operating profit for the year was higher than anticipated at £4.1m, (2022:
£4.8m). The reduction versus prior year is due to the change in placement
of work, away from our joint venture partnerships and into NAL to generate
higher profits over the medium term.
Profit before tax was £0.6m (2022: profit before tax of £0.6m). Basic
earnings per share on continuing operations (EPS) increased to 0.9p (2022:
0.8p).
Last year, I said that continuing to reduce borrowing levels whilst balancing
investment in both divisions to enable future growth was a strategic priority
for the Group, and I'm pleased to report that our results exceeded our
expectations. The Group generated £3.6m of free cash flow in the year,
which was 64% more than last year. Improvements came from increased cash
from settlements in NAL, a higher return from our joint-ventures, and from a
61% increase in cash generation in Critical Care. Importantly, our Personal
Injury business was cash generative again this year. Net cash generated from
operating activities was also very strong, increasing 24% to £7.5m (2022:
£6.0m) and operating cash conversion increased to 217% (2022: 143%).
As a result of this strong cash performance, net debt at 31 December 2023 was
lower than anticipated at £9.7m, down 27% in 12 months (31 December 2022:
£13.3m).
Divisional performance
Consumer Legal Services
The personal injury market remained subdued in 2023, but our Consumer Legal
Services division performed well - growing the number of enquiries that we
generated, increasing the value of our book of claims, and improving cash
generation.
Revenue in the division reduced by 2% to £27.6m (2022: £28.3m) as a result
of the disposal of our non-core conveyancing business, Homeward Legal, in
April 2023. Excluding the discontinued business, the underlying revenues
grew by 1% and the Personal Injury business increased its revenues by 3%.
Operating profit decreased by 33% to £2.8m (2022: £4.2m). This reduction
was a consequence of our strategic decision to prioritise investing new claims
into NAL thereby reducing the flow of work to our joint-venture firms. This
will help us to create a more profitable and sustainable firm in the medium
term.
The division generated £2.1m of cash from operations in the year (2022:
£2.2m). After deducting drawings paid to LLP members, both the Personal
Injury (2023: £1.6m; 2022: £1.8m) and Residential Property (2023: £0.5m;
2022: £0.3m) businesses were cash generative.
Personal Injury
The UK personal injury market contracted further during 2023. According to
official figures from the Claims Compensation Recovery Unit of the Ministry of
Justice, the number of personal injury claims fell by 3% in the year, driven
by a 5% decrease in road traffic accident claims (RTAs). Whilst smaller in
quantum, employer liability, public liability and clinical negligence claims
increased by 2%, 11%, and 3% respectively. Our internal analysis puts the
value of the claimant-side personal injury market to be around £1.1bn, so
whilst the trend for slowly contracting claims numbers has returned to its
pre-pandemic trend, and we believe that this trend is set to continue, this
remains a large and attractive market.
Our priorities during 2023 were threefold.
1) Firstly, we wanted to grow the number of personal injury accident
victims we supported by increasing the number of enquiries we generated. We
did this successfully and the results for 2023 showed that National Accident
Helpline generated 35,643 enquiries in the year, which was 2% more than the
prior year (2022: 34,905). The mix of enquiries generated changed slightly
from last year, with RTA making up 25% of the total (2022: 22%), non-RTA 47%
(2022: 50%) and specialist enquiries remaining consistent at 28%. In the
first half of the year, the business did not have any placement options on its
panel for RTA enquiries which meant that all of these were placed into NAL.
These were higher quality claims than we anticipated, which will generate a
lifetime return akin to non-RTA, but the additional volume limited our
capacity to grow our non-RTA book during the year.
Our enquiry generation was achieved with a 2% increase in our direct media
marketing spend, including a £0.5m investment in TV advertising in the first
half of the year. Whilst our brand advertising on TV generated a positive
return, subsequent analysis showed that given the prevailing market dynamics,
we would generate a higher return by pivoting to social media advertising,
which is what we successfully executed in the second half of the year.
Our marketing efforts resulted in an 8% increase in market share during the
year and independent research revealed that the National Accident Helpline
brand remained the "first choice for people who have had an accident and want
legal representation". In RTA claims, NAHL increased its market share to its
highest level since the Government's whiplash reforms, growing from 1.5% in
December 2022 to 1.9% in December 2023, on a trailing 12-month basis. Our
share of the non-RTA market (excluding industrial disease) held broadly level
at 17%.
2) Our second priority was to grow the value of personal injury
enquiries processed in our own consumer-focused law firm, National Accident
Law, which will enable us to create a more profitable and sustainable business
over time. Whilst the results show that we placed slightly fewer new
claims into NAL in 2023, the value of these claims was substantially higher.
Furthermore, as at 31 December 2023, the value of the book of claims that the
firm was working on was 24% higher than 12 months prior.
In 2023, the Group placed 8,518 new enquiries into NAL which cost £3.0m in
marketing investment (2022: £2.7m). Whilst this was slightly fewer in
number than the prior year (2022: 8,760), these enquiries were of a higher
quality and are anticipated to generate a higher return over their
lifecycle. Such claims can take several years to process, and not all will
be won and result in settlement. However, we estimate that the new claims
introduced in 2023 will be worth £6.6m in future revenue and cash by the time
they mature, compared to new claims worth £5.9m in 2022.
NAL settled 3,633 claims during the year, which was 92% more than the 1,894
settled in 2022, demonstrating the rapid scale up of operations within the
firm. Throughout the year, NAL consistently improved its performance levels,
reducing timescales for admissions and settlements, and the team implemented
several improvements to processes and systems to help make the firm more
efficient.
At 31 December 2023, NAL was processing 9,983 ongoing claims (31 December
2022: 10,860 ongoing claims). These claims represent an embedded value to
the business, being the future profits and cash to be generated by processing
them through to settlement. In the second half of the year, we conducted a
detailed assessment of the book including previous settlement results, which
resulted in an upgrade to the value of the book by £2.1m. We estimate that
after expensing the marketing costs to generate these claims and processing
costs to date, our book of ongoing claims will generate future revenues of
£9.9m, future gross profits of £8.6m, and future cash of £13.9m. This is
24% more than the £11.2m of future cash that we estimated the book to be
worth a year ago.
3) Our final priority for 2023 was to ensure that the Personal Injury
business was self-funding and that we paid for the investment in new enquiries
in NAL by leveraging our agile and scalable placement model. This was also
achieved as the Personal Injury business generated a net cash flow, after
deduction of drawings paid to LLP members, of £1.6m (2022: £1.8m).
NAL collected £6.0m of cash from settlements in 2023, which was 73% higher
than in 2022 (2022: £3.5m), a clear sign of the growing maturity of NAL and
the focus on cash collection that has been embedded in the firm.
Our panel of third-party law firms continued to provide a good service for our
customers and an important source of cash flow to support our growth. In
total, approximately 24,500 enquiries were placed into our panel, across all
enquiry types (2022: approximately 23,500 enquiries).
Our joint-venture law firms performed well during the year. Law Together
LLP, which launched in 2019, is mature and received approximately 2,500 new
enquiries in the year (2022: approximately 3,000 enquiries). Our first
joint-venture, Your Law LLP, is in run off and took no new enquiries in either
period. Both of these partnerships are profitable for the Group and they
delivered a combined £4.4m of cash in the year (2022: £3.3m) after deducting
drawings to LLP members, reflecting the investment that we have made in these
partnerships over a number of years. We plan to continue to utilise the
flexibility that this arrangement provides us.
Residential Property
The division's Residential Property businesses, which comprised Homeward Legal
and Searches UK, generated revenues of £2.9m (2022: £4.3m) and operating
profit of £0.1m (2022: £0.3m).
As previously announced, Homeward Legal was sold during the year and has been
shown in the financial statements as a discontinued operation. The UK
residential property market proved to be challenging in 2023, caused by high
interest rates resulting in a reduction in the number of new mortgages agreed,
consequently Homeward Legal made a small loss. The business was sold in
April 2023 for £0.1m, which equated to the net asset value at the time of
disposal. Details of the sale are presented in note 9 to the financial
statements.
Searches UK, the Group's other Residential Property business which prepares
property search reports for homebuyers, also experienced challenging
conditions. Its revenues contracted by 13.5% to £2.7m but it reduced its
costs, and it returned a profit of £0.2m (2022: £0.3m). The business also
remained cash generative during the year.
Critical Care
In the Group's Critical Care division, Bush & Co. had a very strong year,
delivering double-digit growth in revenue and profit, along with impressive
margin expansion.
Revenues increased by 11% to £14.6m (2022: £13.2m), of which around 49% was
recurring. Operating profit increased by 29% to £4.4m (2022: £3.4m) and
operating profit margins increased by 4 percentage points from 26.0% to
30.0%. The business generated £4.9m of cash from operations, an increase of
61% on the prior year (2022: £3.1m).
Bush & Co. operates in the catastrophic injury and care markets, with most
work arising from injuries suffered in serious RTAs or through medical
negligence. Statistics from the Department of Transport show that the number
of serious RTAs reduced by 1%(1) in 2023 and returned to their pre-pandemic
trend of a slow decline. Conversely, data from NHS Resolution shows that the
medical negligence market has been growing steadily since 2018/19. Whilst
their most recent report shows the number of new claims registered in 2022/23
was down 10% on the prior year, this was still more than each of the preceding
eight years, and so the trend remains positive.
In Critical Care, our strategy is to grow market share by broadening our
customer base, extending our competencies and specialisms and becoming more
efficient at what we do. In 2023, we successfully delivered against each of
those objectives.
Expert witness services had its best year ever, continuing its strong growth
and increasing revenues by 37%. The team delivered 1,136 reports to
customers, an increase of 17% on the prior year (2022: 974), and there was
more demand for follow up work.
In case management services, revenues were flat year-on-year. The business
delivered 539 initial needs assessment (INA) reports, which was 2% higher than
last year. This business is servicing 1,406 ongoing case management clients
(2022: 1,354) that generate recurring revenue for the Group through our
claimant, defendant and insurer relationships. These services are billed on
a regular basis depending on the level of support required.
We grew and strengthened our customer base in the year, leveraging our
previous investments in marketing and business development to continue to grow
our pipeline of new work. Overall, instruction numbers were up 4%, with
expert witness instructions up 9% to 1,142. INA instructions were down 5% to
530 but this is against the backdrop of an exceptional year in 2022 when INA
instructions grew by 14%.
Our investment in the recruitment of new associates has proven key to the
growth in revenue in this division. We onboarded 76 new associates in the
year and grew expert witness and case management associate numbers by 22% and
22% respectively. We ended the year with 158 expert witness associates and
117 case management associates.
We also continued to grow our team of employed case managers, which enables us
to process less complex work at a higher utilisation rate, thereby increasing
margins. The team increased from seven employees at the start of the year to
nine by the end. We will continue to build in this area through 2024.
In 2021, we launched Bush & Co. Care Solutions to complement our case
management proposition and expand into the adjacent care market. This
initiative has performed well in the year, with revenues growing by 39% to
£0.5m (2022: £0.4m). This growth was driven by a 111% increase in the
number of standalone nurse-led care packages from December 2022 to December
2023, which generate monthly recurring revenue. This service is regulated by
the Care Quality Commission (CQC) and in December 2023 the CQC carried out an
inspection, rating our services as Good across all areas of the inspection.
Over the past couple of years, the business has been investing in new systems
and people in order to become more efficient and the benefits of this work
became evident in 2023. We previously implemented a new finance system and
through 2023 the team have been upgrading the back-office systems and
processes to enhance our capabilities. As a result, the team are now able to
issue invoices and statements sooner in the month, with less resource, and
better analyse the debt owed from customers. As a result, debts continue to
be recovered quicker and this contributed to the 61% improvement in cash from
operations in the year.
Due to the efficiencies achieved, the team have been able to operate with a
lower level of variable costs, resulting in improved operating leverage and
the margin expansion noted above.
Our sustainable culture
At NAHL, we are creating a sustainable business for the long-term gain of all
our stakeholders. To us, this starts with a focus on maintaining a
progressive, inclusive culture so that we can attract and retain the very best
people, whilst also being mindful of the planet and local communities. This
enables us to provide a great service to our customers, in addition to
creating long-term value for our shareholders. The Group's values of Driven,
Curious, Passionate and Unified continue to guide how we do things at NAHL.
The Group employed 280 people at 31 December 2023, which was broadly
consistent with the prior year (31 December 2022: 283), and we invested across
the business, particularly in areas such as litigation, marketing and Bush
& Co. Care Solutions. We have embraced the benefits of remote working at
NAHL, which provide us with greater access to highly skilled colleagues from
across the UK. 39% of our workforce operate on a hybrid basis, 30% work on a
fully remote basis and 31% operate permanently from one of our offices. We
are mindful of the challenges that working from home can present, and so in
2023 we launched our Fit for Work programme, aimed at improving working
relationships, productivity and collaboration between our people. Our
employees value the support and flexibility that we offer and this helped to
reduce our staff turnover by 8 percentage points in the year.
Our people are recruited to join our teams from a diverse range of backgrounds
and experience as we believe that makes us better able to serve our customers;
and we expect our leaders to engender trust with all our stakeholders by
demonstrating their ability, integrity and benevolence. When we surveyed our
people during the year, 93% said that they believed that everyone in our
business is treated fairly regardless of race, gender, ethnicity, disability,
sexual orientation or other differences, a result I am very proud of and we
remain committed to further improvements in this area.
As at 31 December 2023, the gender split across the Group was 70% female and
30% male, and on the Board it was 20% female and 80% male.
Development of our people is a key part of our employee proposition, and we
invested in almost 14,000 hours of training and development across the Group
in 2023. This included internally delivered courses on Strengths,
Self-Confidence and Imposter Syndrome, as well as our very successful Pathway
to Leadership programme for aspiring managers. In 2023, we also launched our
new Commercial Leadership Academy which is designed to develop the next
generation of leaders for the Group, and we were thrilled with the results
that it delivered.
Our employees are passionate about our business and also the communities in
which we operate. The Group and its employees raised over £8,500 for
charity in 2023, and our people volunteered 450 hours of their time to working
in our local communities.
Every year we measure the engagement levels of our people through a survey
which is based on the Gallup(2) Q12 Survey. I'm proud to report that in
2023, we achieved our highest ever score of 81% engagement (2022: 78%). This
is an outstanding result that sets us apart from other employers. According
to Gallup(2), the average engagement score of other UK companies is just 10%;
and in Gallup(2)'s best performing cohort of companies globally, who are
awarded Exceptional Workplaces, the average is still lower than NAHL at 72%.
Extended banking facilities
Since the year-end, the Group has successfully extended its banking facility
with Clydesdale Bank/Virgin Money. In February 2024, we reduced our £20m
revolving credit facility, which was due to expire on 31 December 2024, to a
£15m facility which runs to 31 December 2025. The Board has determined that
this lower facility should be adequate for the Group's needs as it continues
to deleverage, and it will enable us to save on finance costs.
Current trading and outlook
The Group has demonstrated its ability to scale and outperform its markets in
both of its divisions and we have significantly reduced net debt from a peak
of over £21.0m in 2019 to under £9.7m by the end of 2023. We remain on track
to deliver against our strategy in both of our divisions in 2024.
In Personal Injury, we are growing the value of claims processed through NAL,
which will lead to higher future profits and cash as claims mature. In
Critical Care, we have created a platform for growth with new systems, a new
care proposition and an enhanced business development capability that will
enable us to win further share in a fragmented and consolidating market. Our
strategy remains to build on these strong foundations, and the Board is
confident in delivering the growth in profits and reduction in net debt in
line with market expectations.
In March 2024, the UK Supreme Court ruled in favour of the claimant in Rabot
vs Hassam, which the Board considers a positive development for personal
injury claimants and the Group. This case determined the approach to valuing
mixed-injury RTA cases that settle in the small claims track. Mixed injury
cases are those where the claimant has suffered a minor whiplash injury and a
non-whiplash injury. The judges ruled that the overall award cannot be lower
than the value of the non-whiplash injury alone. Non whiplash injuries
generally have a higher value than whiplash injuries as they were not affected
by the civil justice reforms. This important judgement will result in an
increase in the average level of damages awarded in mixed-injury claims, and
should reduce settlement timescales, both of which will be welcome news for
accident victims. This will also translate into increased average revenues in
RTA mixed-injury claims being processed by NAL, which should help to offset
the broader market challenges described above.
In Q1 2024, we continued to scale NAL and the business has settled 26% more
claims than in the equivalent period last year and generated £2.0m of cash
from settlements, 67% more than prior year. Simultaneously, we proactively
reduced the number of enquiries that we generated in National Accident
Helpline by 30% to match a short-term reduction in panel demand whilst
protecting cases going into NAL. This led to lower revenues in the first
quarter than we anticipated, offset in part by a 45% reduction in marketing
spend. Pleasingly, demand is returning, and we have increased marketing spend
to grow enquiry numbers accordingly. In Critical Care, expert witness
services continued its excellent performance, issuing 4% more reports in the
first quarter than last year. Case management performance was largely flat
year-on-year and Care Solutions continued its strong growth, increasing
revenues by 40% in the first quarter.
As a Board, we are pleased with the progress that Bush & Co is making in
growing its revenues and profits and continue to believe that there is an
exciting opportunity for that business in its market. The Board is always
considering strategic options that seek to accelerate growth in value for
shareholders and consequently we are currently investigating the potential
sale of Bush & Co. As advised in our announcement on 5 April 2024, whilst
an adviser has been appointed to support us in this matter, we are at a very
early stage and there can be no certainty that a sale of Bush & Co will
occur, nor as to the terms or timing of such sale. The Board will provide an
update to shareholders as and when appropriate.
Finally, I'd like to pay tribute to our fantastic team of people without whom
we could not have delivered these strong results. I'm proud of our
achievements in 2023 and I look forward to working together to deliver our
future goals in 2024.
James Saralis
Chief Executive Officer
References
1.
https://www.gov.uk/government/statistics/reported-road-casualties-in-great-britain-provisional-estimates-year-ending-june-2023/reported-road-casualties-in-great-britain-provisional-estimates-year-ending-june-2023
(https://www.gov.uk/government/statistics/reported-road-casualties-in-great-britain-provisional-estimates-year-ending-june-2023/reported-road-casualties-in-great-britain-provisional-estimates-year-ending-june-2023)
2. Gallup state of the workforce report, 2023.
CFO Report
The year saw the Group continue to grow, reduce its net debt further and
dispose of the non-core Homeward Legal business. This was despite continued
headwinds in the broader personal injury market, which remained subdued.
National Accident Law (NAL) is now approaching maturity on current volume
levels being placed and is generating significant cash receipts. Meanwhile the
investments made within the Critical Care division are starting to pay back
through revenue and margin growth.
Revenue grew by 2% to £42.2m (2022: £41.4m), and 4% on a continuing basis.
Operating profit fell by 13% to £4.1m (2022: £4.8m). This was offset by
lower profits attributable to non-controlling interests which reduced to
£2.5m (2022: £3.6m).
Review of income statement
Consumer Legal Services
Revenue in the Consumer Legal Services division fell by 2% to £27.6m (2022:
£28.3m), however when excluding the disposal of Homeward Legal, revenue grew
by 1% to £27.3m (2022: £27.1m). Operating profit fell by 33% to £2.8m
(2022: £4.2m). This was expected as the business continues to grow NAL.
This profit takes longer to come through as cases settle but ultimately
generates a higher return than placing with the joint ventures and panel. The
division remained profitable after deducting non-controlling interests,
generating profits of £0.3m (2022: £0.6m).
Enquiry numbers grew by 2% to 35,643 (2022: 34,905) arising from market share
gains as the market continued to shrink slightly year on year (-3%). 8,518
enquiries were passed across to NAL during the year (2022: 8,760). This is
slightly lower than the previous year but represented a higher value mix of
cases following the decision to stop processing tariff only soft tissue cases
in early 2022.
By the end of the period, NAL was processing 9,983 open cases (2022: 10,860).
These ongoing cases are expected to contribute c.£9.9m (2022: £8.2m) in
future revenue and c.£13.9m of future cash receipts. The estimated value of
these open cases was uplifted by £2.1m in the year following a review of
historical cases which showed that cases are settling on average at higher
values than originally expected.
NAL is moving closer to maturity based on the current volumes being placed
each month and this can be seen from the cash being generated from settled
cases. Cash receipts from settled cases grew by 73% in the year to £6.0m
(2022: £3.5m) from 3,633 settled cases (2022: 1,894). This compares to £6.6m
of expected revenue across the life cycle of the new cases added during the
year (2022: £5.9m). Cash collected since inception now totals £13.0m.
Profit attributable to non-controlling interests fell by 29% in the year to
£2.5m (2022: £3.6m). This was expected as the book of open cases in Your Law
falls as it continues to run off.
The Residential Property business generated a positive contribution to profit
of £0.1m (2022: £0.3m) after allocation of shared costs. The residential
property market remains depressed due to the high cost of borrowing compared
to previous years. The Homeward Legal business, which is no longer part of the
Group, generated a loss of £49k prior to its disposal (2022: a profit of
£13k).
Critical Care
The Critical Care division had a strong year, growing revenues by 11% to
£14.6m (2022: £13.2m) with operating profit increasing by 29% to £4.4m
(2022: £3.4m) and operating margins grew by 400bps to 30%.
The division continues to benefit from previous investments in business
development activity, contributing to a 9% increase in expert witness
instructions.
A richer case mix and increased additional work per report led to an increase
in the average value of expert witness report revenues, whereas little change
has been seen in the average revenues per instruction in case management.
Bush & Co. Care Solutions continued to show growth, delivering revenues of
£0.5m in the year (2022: £0.4m) following its launch towards the end of
2021.
Shared Services and other items
The costs for the Group's Shared Services functions increased by £0.2m to
£1.9m (2022: £1.7m) largely as a result of increased staff costs due to
bonuses. Other items which include share-based payments and amortisation
increased by £0.1m to £1.2m (2022: £1.1m).
Financial expense
Costs relating to the financing of debt increased to £1.1m in the year (2022:
£0.7m) despite net debt falling by £3.6m. This is due to rising interest
rates during the year. Our debt is linked to the Sterling Overnight Index
Average (SONIA) plus 2.25%.
Taxation
The Group's tax charge of £0.3m (2022: £0.2m) represents an effective tax
charge of 40.9% (2022: 32.4%). This is higher than the standard corporation
tax rate, which rose from 19% to 25% in April 2023, due to the reasons set out
in note 3. The deferred tax credit originates from temporary differences in
intangible assets acquired on business combinations.
Earnings per share (EPS) and dividend
Basic EPS for the year was 0.8p (2022: 0.8p) and the diluted EPS was 0.8p
(2022: 0.8p), reflecting the impact of share options due to vest in future
years. Basic EPS for continuing operations was 0.9p (2022: 0.8p)
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 2023 (2022: 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 totaled £14.3m at
year end (2022: £17.1m). The reduction is primarily due to collection of
deferred payments due under the arrangements with joint venture partners which
moved from £5.2m to £2.4m.
Also within trade receivables and accrued income, although balances related to
the processing of personal injury claims fell slightly to £7.4m (2022:
£7.5m), there has been a shift between NAL and the joint ventures as NAL
becomes a bigger driver of value.
There remains a significant element of uncertainty in estimating this accrued
income. Management review historical case performance to inform the
assumptions adopted. The Directors believe that the assumptions adopted are
appropriate and based on historical experience of claims processed in our law
firms and by our panel. In practice it is rare for accrued income to be
downgraded once an admission of liability has been received. These assumptions
are updated with actual results as claims settle.
Disbursement receivables increased to £9.0m (2022: £8.4m). This was expected
as NAL continues to mature and sees an increase in the number of litigated
cases which take longer to settle.
Payables increased slightly from £15.8m on 31 December 2022 to £16.2m at the
balance sheet date largely due to accrued management bonuses, which were paid
in March 2024.
Net debt and bank facilities
Reducing net debt remains a key focus, particularly within the current high
interest cost environment. We managed our cash resources well during the year
whilst continuing to add new cases into NAL. As a result, net debt fell from
£13.3m on 31 December 2022 to £9.7m at year-end. Net debt is defined below
and is comprised of £2.0m of cash (2022: £2.6m) offset by borrowings of
£11.7m (2022: £15.9m).
The borrowings represent a balance on the Group's Revolving Credit Facility
with its lender, Yorkshire Bank. The facility has been reduced to £15m since
the balance sheet date (£20m at 31(st) December 2023) and has been extended
to run through to 31 December 2025.
Review of the cash flow statement
The Group's cash and cash equivalents reduced by £0.6m in the year (2022:
increase of £0.2m). The significant items in the consolidated cash flow
statement are net cash from operating activities, drawings paid to LLP members
and the repayment of borrowings.
Net cash from operating activities increased from £6.0m to £7.5m. This was
partly driven by maturing receipts from settled cases in NAL, which generated
£6.0m (2022: £3.5m) in receipts, and £4.4m (2022: £3.3m) cash received
from joint venture relationships. In addition to this, the Critical Care
division generated £4.9m (2022: £3.1m). This was partly offset by the
continuing investment of new cases into NAL as the law firm progresses to
maturity, as well as bank interest payments of £1.0m (2022: £0.6m).
The Group paid £3.3m (2022: £3.3m) of drawings to its partners in the joint
venture law firms during the year, under the terms of our agreements. This
reflects the continuing closure of claims won and settled during the year. The
Group also acquired £0.2m (2022: £0.2m) of intangible assets in the year as
it completed technology upgrades in Critical Care.
The Group repaid £4.3m (2022: £2.0m) of borrowings in the year on its
Revolving Credit Facility.
Free Cash Flow (FCF) is the Group's KPI with regards to cash flow. FCF in 2023
was £3.6m compared to £2.2m in 2022. The primary reason for this increase is
a rise in personal injury cash receipts on settled cases as more cases settle
in NAL and the joint venture partnerships. Personal Injury continues to be
entirely self-funding investment into new cases.
The Group also monitors operating cash conversion. This was 217% in the year
(2022: 143%), a direct reflection of the movements outlined above.
Conclusion
In conclusion, 2023 has been a positive year towards delivering on our
strategic goals. We continue to balance investing in new cases for the law
firm as it builds towards maturity whilst continuing to reduce debt. This has
been achieved despite continued headwinds in our markets and the wider
economy.
Chris Higham
Chief Financial Officer
Alternative performance 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 UK-adopted International Accounting Standards (IFRS), they may
not be directly comparable to other companies' APMs. They are not intended to
be a substitute for, or superior to, UK-adopted International Accounting
Standards (IFRS) measurements and the Directors recommend that the UK-adopted
International Accounting Standards (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 below.
Free Cash Flow
Calculated as net cash generated from operating activities less net cash used
in investing activities less payments made to partner LLP members and less
principal element of lease payments. This measure 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.
Operating cash conversion
Calculated as cash generated from operations excluding cash flows relating to
exceptional items divided by underlying operating profit. This measure allows
management to monitor the conversion of underlying operating profit into
operating cash. From 2023, there were no exceptional cash flows.
Net debt
Net debt is defined as cash and cash equivalents less interest-bearing
borrowings net of loan arrangement fees. Net debt allows management to monitor
the overall level of debt in the business. As stated in the strategic report,
managing the level of net debt is a key strategic objective for the Group.
Working capital
Working capital is defined by management as being trade and other receivables
less trade and other payables. It allows management to assess the short-term
cash flows from movements in the more liquid assets.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Note £000 £000
Revenue 1,2 42,193 41,421
Cost of sales (23,480) (23,586)
Gross profit 18,713 17,835
Administrative expenses (14,595) (13,079)
Underlying operating profit 4,118 4,756
Profit attributable to members' non-controlling interests in LLPs 2 (2,506) (3,554)
Financial income 158 80
Financial expense (1,121) (713)
Profit before tax 649 569
Taxation 3 (265) (184)
Profit and total comprehensive income for the year 384 385
Profit from continuing operations for the period 433 372
Loss from discontinued operations for the period (49) 13
All profits and losses and total comprehensive income are attributable to the
owners of the Company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2023
2023 2022
Note £000 £000
Non-current assets
Goodwill 55,489 55,489
Other intangible assets 1,784 2,714
Property, plant and equipment 328 392
Right of use assets 1,751 2,027
Deferred tax asset 25 50
59,377 60,672
Current assets
Trade and other receivables (including £5,312,000 (2022: £5,312,000) due in 3 30,526 32,886
more than one year)
Cash and cash equivalents 2,011 2,654
32,537 35,540
Total assets 91,914 96,212
Current liabilities
Trade and other payables 4 (16,246) (15,847)
Lease liabilities (244) (263)
Member capital accounts (3,692) (4,487)
Current tax liability (210) (162)
(20,392) (20,759)
Non-current liabilities
Lease liabilities (1,478) (1,724)
Other interest-bearing loans and borrowings (11,719) (15,939)
Deferred tax liability (263) (470)
(13,460) (18,133)
Total liabilities (33,852) (38,892)
Net assets 58,062 57,320
Equity
Share capital 117 116
Share option reserve 4,985 4,628
Share premium 14,595 14,595
Merger reserve (66,928) (66,928)
Retained earnings 105,293 104,909
Capital and reserves attributable to the owners of NAHL Group plc 58,062 57,320
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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 2022 116 4,312 14,595 (66,928) 104,524 56,619
Total comprehensive income for the year
Profit for the year - - - - 385 385
Total comprehensive income - - - - 385 385
Transactions with owners,
recorded directly in equity
Share-based payments - 316 - - - 316
Total transactions with owners, recorded
directly in equity - 316 - - - 316
Balance at 31 December 2022 116 4,628 14,595 (66,928) 104,909 57,320
Total comprehensive income for the year
Profit for the year - - - - 384 384
Total comprehensive income - - - - 384 384
Transactions with owners,
recorded directly in equity
Share-based payments - 357 - - - 357
Issue of share capital 1 - - - - 1
Total transactions with owners, recorded
directly in equity 1 357 - - - 358
Balance at 31 December 2023 117 4,985 14,595 (66,928) 105,293 58,062
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
£000 £000
Cash flows from operating activities
Profit for the year 384 385
Adjustments for:
Profit attributable to members' non-controlling interests in LLPs 2,506 3,554
Property, plant and equipment Depreciation 126 168
Right of use asset depreciation 276 288
Amortisation of intangible assets 1,177 1,186
Financial income (158) (80)
Financial expense 1,121 713
Share-based payments 357 316
Taxation 265 184
6,054 6,714
Decrease in trade and other receivables 2,297 448
Increase/(Decrease) in trade and other payables 569 (364)
Cash generated from operations 8,920 6,798
Interest paid (1,090) (627)
Interest received 84 13
Tax paid (402) (165)
Net cash generated from operating activities 7,512 6,019
Cash flows from investing activities
Acquisition of property, plant and equipment (62) (83)
Acquisition of intangible assets (247) (199)
Disposal of subsidiary (30) -
Net cash used in investing activities (339) (282)
Cash flows from financing activities
Repayment of borrowings (4,250) (2,000)
Issue of share capital 1 -
Lease payments (266) (264)
Drawings paid to LLP members (3,301) (3,277)
Net cash used in financing activities (7,816) (5,541)
Net (decrease)/increase in cash and cash equivalents (643) 196
Cash and cash equivalents at 1 January 2,654 2,458
Cash and cash equivalents at 31 December 2,011 2,654
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Consolidated Financial Statements
The preliminary financial statements do not constitute statutory accounts for
NAHL Group plc within the meaning of section 434 of the Companies Act 2006 but
do represent extracts from those accounts.
The statutory accounts will be delivered to the Registrar of Companies in due
course. The auditors' have reported on those accounts. Their report was
unqualified. The auditors' report does not contain a statement under either
section 498(2) of Companies Act 2006 (accounting records or returns inadequate
or accounts not agreeing with records and returns), or section 498(3) of
Companies Act 2006 (failure to obtain necessary information and explanations).
The Group's financial statements have been prepared in accordance with
UK-adopted International Accounting Standards (IFRS) in conformity with the
Companies Act 2006, IFRIC interpretations and under the historical cost
convention.
Going Concern
In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Company and
Group can continue in operational existence for the foreseeable future.
The Audit and Risk Committee has reviewed the Going Concern assessment
prepared by management. The assessment includes detailed financial forecasts
covering the Group's adopted strategy and considers a range of scenarios as
discussed below. These forecasts cover the period to the end of June 2025,
being approximately 12 months from the date of signing of the 2023 Annual
Report and Financial Statements. The going concern assessment focuses on two
key areas, being the ability of the Group to meet its debts as they fall due
and being able to operate within its banking facility.
The Group refinanced its banking facilities in February 2024 and has access to
a £15.0m revolving credit facility (RCF) with its bankers which is due to
mature on 31 December 2025. In 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 the scenarios
modelled suggest that the Group will continue to operate within its covenants
for the foreseeable future.
The key inputs to the forecasts that underpin the going concern assessment are
the cashflows that are generated during the forecast period. These cash flows
allow management to assess whether it can meet its debts as they fall due, can
operate within the £15.0m facility and can meet the covenant tests in
relation to this facility.
The forecasts assume that over the forecast period, a greater proportion of
profit and cash is generated from National Accident Law as it now reaches
maturity on its current level of enquiries and that Bush continues to operate
at an operating cash conversion of over 100%.
Management have then considered scenarios in which Personal Injury profits,
and therefore cashflows, are 30% lower than forecast and considers if Critical
Care cash collection is 10% lower than forecast. Under both scenarios, there
is still sufficient headroom in the covenant tests, and the Group is able to
operate within its £15.0m facility.
Management have not considered any climate-related factors in the assessment
of Going Concern as these do not present a material business risk to the
Group.
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
The following new or amended standards are applicable to the Group for the
current reporting period:
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2 Making Materiality Judgements: Disclosure of Accounting Policies
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates
IFRS 17 Insurance Contracts (issued May 2017) and Amendments to IFRS 17
Insurance Contracts (Issued June 2020)
Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and
IFRS 9 - Comparative Information (Issued December 2021)
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (Issued May 2021)
Amendments to IAS 12 Income Taxes: International Tax Reform - Pillar Two Model
Rules (Issued May 2023)
None of the amendments above have had a material effect on the amounts
reported or disclosures included in the 2023 financial statements.
New standards, interpretations and amendments not yet effective
There are no new standards, interpretations and amendments that are not yet
effective and that would be expected to have a material impact on the Group in
the current or future reporting periods and on foreseeable future
transactions.
2 Operating segments
Consumer Critical Shared Other
Legal Services Care Services items Eliminations(2) Total
£000 £000 £000 £000 £000 £000
Year ended 31 December 2023
Revenue 27,582 14,611 - - - 42,193
Depreciation and amortisation (251) (154) (348) (826) - (1,579)
Operating profit/(loss) 2,805 4,421 (1,924) (1,184) - 4,118
Profit attributable to non-controlling interest members in LLPs (2,506) - - - (2,506)
Financial income 145 - 13 - - 158
Financial expenses - (1) (1,120) - - (1,121)
Profit/(Loss) before tax 444 4,420 (3,031) (1,184) - 649
Trade receivables 2,446 5,728 - - - 8,174
Total assets(1) 25,935 7,262 76,223 - (17,506) 91,914
Segment liabilities(1) (17,021) (1,479) (3,160) - - (21,660)
Capital expenditure (including intangibles) 77 232 - - - 309
Year ended 31 December 2022
Revenue 28,264 13,157 - - - 41,421
Depreciation and amortisation (257) (201) (358) (826) - (1,642)
Operating profit/(loss) 4,179 3,434 (1,715) (1,142) - 4,756
Profit attributable to non-controlling interest members in LLPs (3,554) - - - (3,554)
Financial income 77 - 3 - - 80
Financial expenses - (5) (708) - - (713)
Profit/(Loss) before tax 702 3,429 (2,420) (1,142) - 569
Trade receivables 2,632 5,610 - - - 8,242
Total assets(1) 29,222 6,780 77,716 - (17,506) 96,212
Segment liabilities(1) (17,874) (1,258) (3,189) - - (22,321)
Capital expenditure (including intangibles) 95 187 - - - 282
1. Shared services and Other items do not form part of the operating
segments of the Group. They include expenses incurred that cannot be
attributable to an operating 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.
3. Total assets and segment liabilities exclude intercompany loan balances
as these are not included in the segment results reviewed by the chief
operating decision maker. Segment liabilities comprise trade and other
payables (2023: 16,246,000, 2022: 15,847,000), current lease liabilities
(2023: 244,000, 2022: 263,000), non-current lease liabilities (2023:
1,478,000, 2022: 1,724,000) and member capital accounts (2023: 3,692,000,
2022: £4,487,000).
Significant customers
No customer accounted for 10.0% or more of the total Group revenue (2022: one
customer accounted for 10.0% of the total Group revenue).
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 derived from two divisions being Personal
Injury and Residential Property.
Within Personal Injury, revenue is generated from:
a) Marketing services - revenue from the provision of marketing activities to
generate enquiries which are panelled to our panel law firms, based on a cost
plus margin model.
b) Product Provision - consisting of commissions received from product
providers for the sale of additional products by them to the panel law firms.
c) Service provision (legal services) - in the case of our ABS law firms and
self- processing operation, National Accident Law, revenue receivable from
clients for the provision of legal services.
Within Residential Property, revenue is generated from:
a) Marketing services - up until April 2023, Homeward Legal provided marketing
services to generate residential conveyancing and survey enquiries for
solicitors and surveyors
b) Expert Reports - Searches UK provides search reports.
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.
Disaggregation of revenue
The CODM monitors revenue on a divisional basis. A breakdown of revenue by
each division is as follows:
2023 2022
£000 £000
Personal Injury 24,649 23,989
Residential Property 2,933 4,275
Critical Care 14,611 13,157
Total 42,193 41,421
3 Taxation
Recognised in the consolidated statement of comprehensive income:
2023 2022
£000 £000
Current tax expense
Current tax on income for the year 462 352
Adjustments in respect of prior years (14) 14
Total current tax 448 366
Deferred tax credit
Origination and reversal of timing differences (183) (182)
Total deferred tax (183) (182)
Tax expense in statement of comprehensive income 265 184
Total tax charge 265 184
Reconciliation of effective tax rate
2023 2022
£000 £000
Profit for the year 384 385
Total tax expense 265 184
Profit before taxation 649 569
Tax using the UK corporation tax rate of 19%/25%(1) (2022: 19.00%) 161 108
Non-deductible expenses(2) 154 68
Adjustments in respect of prior years (14) 14
Share scheme deductions (56) -
De-recognition of deferred tax asset 20 -
Short-term timing differences - (6)
Total tax charge 265 184
1. A tax rate of 19% has been applied to profits apportioned to 31 March
2023 and a tax rate of 25% has been applied to profits apportioned from 1
April 2023.
Changes in tax rates and factors affecting the future tax charge
There are currently no factors that are expected to affect the future tax
charge.
4 Trade and other receivables
2023 2022
£000 £000
Trade receivables: receivable in less than one year 6,546 7,077
Trade receivables: receivable in more than one year 1,628 1,165
Contract assets: receivable in less than one year 8,706 11,137
Contract assets: receivable in more than one year 3,684 4,147
Other receivables 134 26
Prepayments 798 954
Recoverable disbursements 9,030 8,380
Total trade and other receivables 30,526 32,886
A provision against trade receivables and accrued income of £502,000 (2022:
£612,000) is included in the figures above.
Trade receivables and contract assets 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.
Contract assets consist of a) balances of £6,337,000 (2022: £9,322,000) in
respect of amounts due under contracts with customers that have not yet been
invoiced but where there is a contractual obligation to settle funds once they
become due. These amounts are increased as performance obligations are
satisfied being the provision of marketing services and generation of
enquiries to panel law firms and reduced by the subsequent raising of invoices
and payments when the balances are due for payment; and b) law firm contact
assets. These consist of estimated balances due under 'no win, no fee'
agreements where liability has been admitted. These balances increase as
liability is admitted on more claims underway and decrease either due to
amounts being invoiced and paid on claims that have settled during the year
or, in a small number of cases, where claims are subsequently abandoned prior
to settlement.
5 Trade and other payables
Amounts due within one year: 2023 2022
£000 £000
Trade payables 1,723 1,689
Disbursements payable 6,559 6,620
Other taxation and social security 1,376 1,231
Other payables, accruals and deferred revenue 6,131 5,850
Customer deposits 457 457
Total trade and other payables 16,246 15,847
6 Earnings per share
The calculation of basic earnings per share at 31 December 2023 is based on
the profit attributable to ordinary shareholders of the parent company of
£384,000 (2022: profit of £385,000) and a weighted average number of
Ordinary Shares outstanding of 46,674,661 (2022: 46,325,222).
Profit attributable to ordinary shareholders
£000 2023 2023
Profit for the year from continuing operations 433 372
Profit for the year from discontinued operations (49) 13
Profit for the year attributable to the shareholders 384 385
Weighted average number of ordinary shares
Number 2023 2022
Issued Ordinary Shares at 1 January 46,325,222 46,325,222
Weighted average number of Ordinary Shares at 31 December 46,674,661 46,325,222
Basic Earnings per share (p)
2023 2022
Group - continuing operations 0.9 0.8
Group - discontinued operations (0.1) 0.0
Group - total 0.8 0.8
The Group has in place share-based payment schemes to reward employees. At 31
December 2023, there were potentially dilutive share options under the Group's
share option schemes. The total number of options available for these schemes
included in the diluted earnings per share calculation is 2,672,476 (2022:
2,329,951). There are no other diluting items.
Diluted Earnings per share (p)
2023 2022
Group - continuing 0.9 0.8
7 Dividends
No dividends were paid in 2023 or 2022.
8 Changes in liabilities arising from financing activities
Net debt includes cash and cash equivalents and other interest-bearing loans
and borrowings.
Set out below is a reconciliation of movements in in interest-bearing loans
and borrowings arising from financing activities:
2023 2022
£000 £000
Net inflow from decrease in debt and debt financing 4,250 2,000
Movement in net borrowings resulting from cash flows 4,250 2,000
Non-cash movements - net release of prepaid loan arrangement fees (30) (29)
Interest bearing loans and borrowings at beginning of period (15,939) (17,910)
Interest bearing loans and borrowings at end of period (11,719) (15,939)
Set out below is a reconciliation of movements in lease liabilities arising
from financing activities:
2023 2022
£000 £000
Net outflow from decrease in lease liabilities 312 264
Movement in lease liabilities resulting from cash flows 264 264
Non-cash movements arising from initial recognition of new lease liabilities, (47) (56)
revisions and interest charges
Lease liabilities at beginning of period (1,987) (2,195)
Lease liabilities at end of period (1,722) (1,987)
Set out below is a reconciliation of movements in member capital accounts
arising from financing activities:
2023 2022
£000 £000
Movement in member capital liabilities resulting from cash flows 3,301 3,277
Non-cash movements: allocation of profits for the year (2,506) (3,554)
Member capital liabilities at beginning of period (4,487) (4,210)
Member capital liabilities at end of period (3,692) (4,487)
9 Discontinued Operations
On 25 April 2023, the Group announced the sale of its wholly owned subsidiary
Homeward Legal Limited. Homeward Legal utilises online marketing to target
homebuyers and sellers in England and Wales to generate leads and instructions
which it then passes to panel law firms and surveyors in the conveyancing
sector for a fixed cost. The subsidiary is considered to be non-core to the
Group's principal operations.
Consideration for the sale was finalised at £117,000 which was equivalent to
the net asset value of Homeward Legal at the date of sale. The Group incurred
legal and consultancy costs amounting to £55,000 in respect of the sale. The
consideration is payable in two annual instalments in each of the two years
following completion and additionally, the Group is entitled to receive
contingent consideration, contingent upon Homeward Legal achieving certain
performance milestones. The contingent consideration will be based on a share
of profits and trade debtors recovered above certain amounts. The Board
believes that the contingent consideration will not be material and has
estimated the fair value as nil.
At the date of disposal, the carrying amounts of Homeward Legal's net assets
were as follows:
£000
Property, plant and equipment -
Deferred tax asset 1
Trade and other receivables 255
Cash and cash equivalents 30
Total assets 286
Trade and other creditors (169)
Total liabilities (169)
Net assets 117
The gain on disposal is calculated as:
£000
Consideration received or receivable:
Cash 117
Fair value of contingent consideration -
Total disposal consideration 117
Carrying amount of net assets sold (117)
Gain on sale before income tax -
Income tax expense on gain -
Gain on sale after income tax -
The results of these discontinued operations are included in the 2023 results
up to the date of disposal, and are presented as follows:
Consolidated statement of comprehensive income:
31 31
December December 2022
2023 £000
£000
Revenue 269 1,196
Expenses (318) (1,183)
(Loss)/profit before taxation (49) 13
Taxation - -
(Loss)/profit after taxation attributable to owners of the parent company (49) 13
Consolidated cash flow statement:
31 31
December December 2022
2023 £000
£000
Cash flows from operating activities 23 41
Cash flows from investing activities - -
Cash flows from financing activities - -
Net cash inflow 23 41
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