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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Nahl Group Plc | LSE:NAH | London | Ordinary Share | GB00BM7S2W63 | ORD GBP0.0025 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 67.00 | 65.00 | 69.00 | 66.00 | 66.00 | 66.00 | 73,887 | 16:35:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Advertising Agencies | 41.42M | 385k | 0.0082 | 80.49 | 30.95M |
From Apr 2019 to Apr 2024
TIDMNAH
RNS Number : 0488L
NAHL Group PLC
28 April 2020
28 April 2020
NAHL Group plc
("NAHL" or the "Group")
Final Results
NAHL, the leading UK marketing and services business focused on the UK consumer legal market, announces its audited Final Results for the year ended 31 December 2019.
Financial Highlights
-- Revenue increased by 4.8% to GBP51.3m (2018: GBP49.0m) -- Underlying* operating profit maintained at GBP12.2m (2018: GBP12.1m)
-- Profit before tax decreased to GBP2.2m (2018: GBP9.8m), a result of previously announced exceptional costs in Personal Injury and an impairment charge of GBP5.3m recognised in respect of the Residential Property division
-- Underlying EPS (before NAL start-up losses) of 14.4p (2018: 18.2p) -- Net debt at 31 December 2019 GBP21.0m (2018: GBP15.5m)
Operational Highlights
-- Continued progress made in transforming and positioning Personal Injury business for long-term growth, including launch of National Accident Law, on time and on budget in April 2019
-- Launch of fourth ABS law firm, Law Together LLP, in October 2019 and agreement reached to terminate the Group's relationship in National Law Partners with effect from 2 January 2020
-- Claim volumes in Group's ABS law firms increased by 46.0%
-- Critical Care achieved growth in underlying operating profit of 10.9%. This is the fourth consecutive year of growth since acquisition in 2015
-- NAH recognised by The Sunday Times as one of the Top 100 Best Small Companies To Work For 2019
Outlook
-- The recent emergence and spread of the Covid-19 virus and its potential impact on the business is now the Board's primary focus
-- Priority is the health and wellbeing of NAHL's employees and supporting the Group's customers and business partners through this unprecedented challenge. Measures have been taken to reduce costs and ensure sufficient liquidity to run the business through a prolonged period
-- In April 2020 the Government announced delay to the personal injury reforms to April 2021
-- Management have modelled the financial impact of a number of potential scenarios on the business, but it is too early to assess the full impact with any degree of certainty
Russell Atkinson, CEO of NAHL, commented:
"2019 was a challenging year for the Group, exacerbated by a competitive and volatile market back drop affecting our Residential Property and Personal Injury businesses. Despite this, our Critical Care division again enjoyed another strong year and we continued to make progress in implementing the necessary strategic changes to better position our business for long-term growth.
"Having started 2020 with confidence that the Group's strategic growth plans were progressing well and early signs of market improvement in Residential Property, we have completely switched our focus on channelling our resources to tackle the business challenges posed by the spread of the Covid-19 virus.
"Our number one priority is the safety, wellbeing and health of our people across the business, along with our customers and partners. Since the emergence of the virus in the UK, we have taken various measures to reduce our costs and ensure we have sufficient liquidity to run the business through a prolonged period.
"I would like to thank all colleagues for their commitment and flexibility during what will be a testing period. Our experience in navigating change in difficult markets stands us in good stead to emerge from this as a sustainable business poised to benefit from the recovery that will follow."
* Underlying measures adjust for share-based payments, amortisation of intangibles assets acquired on business combinations and exceptional items, net of tax where applicable.
Enquiries:
NAHL Group plc via FTI Consulting Russell Atkinson (CEO) Tel: +44 (0) 20 3727 1000 James Saralis (CFO) finnCap Ltd (NOMAD & Broker) Tel: +44 (0) 20 7220 0500 Julian Blunt / James Thompson (Corporate Finance) Andrew Burdis (Corporate Broking) FTI Consulting (Financial PR) Tel: +44 (0) 20 3727 1000 Alex Beagley James Styles Sam Macpherson
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 three divisions:
-- Personal Injury provides outsourced marketing services to law firms through National Accident Helpline and claims processing services to individuals through Your Law, Law Together and National Accident Law.
-- Critical Care provides a range of specialist services in the catastrophic and serious injury market to both claimants and defendants through Bush and Company Rehabilitation.
-- Residential Property provides marketing services to law firms and conveyancers as well as surveys to individuals through Fitzalan Partners. It also provides property searches through Searches UK.
More information is available at www.nahlgroupplc.co.uk and www.national-accident-helpline.co.uk .
Chair's Statement
2019 has been a challenging year for NAHL Group plc and its Board and has tested the resilience of the operations and the adaptability of the team. 2020 is presenting a new set of challenges related to the spread of Covid-19.
During the year, continued political and regulatory uncertainties in our markets have increased the risks faced by the Group. The residential property sector experienced depressed market conditions in 2019 and the personal injury market experienced challenges in both supply and demand. In light of a challenging set of circumstances, management has sought to mitigate operating risks during the year, including the slowing of investment in work in progress, with some success. The Group as a whole has fallen short of the financial targets set by the Board despite good performances from some of our businesses, most notably Critical Care.
2019 results
Group revenues increased to GBP51.3m (2018: GBP49.0m) and we made notable progress in delivering the Group's strategy. Despite this progress, underlying operating profit was flat at GBP12.2m (2018: GBP12.1m) due to difficult conditions in the residential property market. Profit before tax declined to GBP2.2m (2018 GBP9.8m) as a result of exceptional costs in Personal Injury and an impairment charge recognised in respect of the Residential Property division. Basic earnings per share declined to (6.4)p (2018: 14.5p) and year end net debt was GBP21.0m (2018: GBP15.5m).
Our Critical Care business continued its impressive growth trajectory in the year, achieving revenues of GBP13.6m (2018: GBP12.4m) and delivering 10.9% annual growth in underlying operating profit (2019: GBP5.0m; 2018: GBP4.5m). During the year, the business continued to invest in the development of its core markets, increasing its market share and growing its pipeline of work.
The Personal Injury division grew revenues to GBP31.7m (2018: GBP29.5m) and whilst underlying operating profit grew to GBP9.1m (2018: GBP8.4m), the amount of profit attributable to non-controlling interests in our joint venture ABS law firms increased to GBP4.5m (2018: GBP1.7m). Our business transformation continued with the successful launch of our wholly owned ABS law firm, National Accident Law, and the establishment of a new joint venture ABS law firm Law Together. We experienced reduced supply in the market for personal injury enquiries and higher costs to acquire them amidst competitive pressures, together with declining processing appetite from our panel law firms.
Results in our Residential Property division, particularly in the second half, disappointed with revenues of GBP6.0m (2018: GBP6.4m) and an underlying operating loss of GBP0.3m (2018: profit GBP0.7m). In light of the obvious weaknesses in the UK housing market, further evidenced by the recent impact of Covid-19, the Directors have decided to book an impairment provision against the goodwill and other intangible assets relating to this division.
Operating cash flows were adversely impacted by the specific commercial challenges seen in the Personal Injury division. However, the previously announced negotiated settlement with a former joint venture partner will result in the Group receiving GBP5m over the next three years. Year end net debt was higher than anticipated at GBP21.0m; we will work to reduce this in 2020 whilst investing carefully in processing claims in our ABS law firms. Despite the Personal Injury division facing its challenges, it was nonetheless pleasing to see growth in the number of ongoing claims in our legal services business. This represents a store of value, which we are confident will deliver growth in future years, as the claims are realised in full.
Governance
Following an evaluation in the first half of 2019, we took steps to strengthen the Board in terms of experience and governance. In July, Sally Tilleray, a finance specialist and Non-Executive Director, joined the Board. She became Chair of the Audit & Risk Committee in September. In early 2020, we appointed Tim Aspinall as Senior Independent Director. He is a seasoned legal professional who has served on our Board since June 2016.
Dividend
The Group had paid an interim dividend for the year ended 31 December 2019 of 2.6p per share (2018: 3.2p). As previously announced, in early 2020 the Board took the difficult decision to suspend the dividend and not to propose a final dividend. This decision allows us to reduce net debt and de-risk the balance sheet.
Summary
The resulting 2019 outturn, together with continued regulatory uncertainty, has meant that the financial returns from the strategic transformation of our Personal Injury business model are taking longer than expected to be realised. We remain committed to our strategy of maximising the value of the work that we generate through a combination of self-processing and the application of consumer-focused technological solutions.
I want to express the Board's appreciation to all our customers, employees and partners working with the Group as we navigate what are now extremely challenging market conditions in light of the Covid-19 global pandemic. Our Group has a strong purpose and I am extremely grateful for our employees' enthusiasm and dedication. Finally, I would like to thank our shareholders for their patience whilst the Board takes the necessary steps to deliver value and a sustainable business model.
Caroline Brown
Chair
27 April 2020
Chief Executive's Report
Navigating change in complex markets
Overview
2019 was undoubtedly a challenging trading year for the Group. The markets in which we operate were volatile and competitive, while the long-awaited clarification of the timing and nature of the regulatory reforms in the personal injury market failed to materialise. This resulted in continued uncertainty amongst our key customer base. We also faced some commercial challenges as we sought to optimise our ABS law firm processing operations. The ongoing funding of work within our Personal Injury business impacts short-term profit recognition and cash conversion and this is clearly reflected in our year-on-year comparisons.
However, we made solid strategic progress across the Group, successfully implementing several key initiatives including the launch of National Accident Law, our wholly owned Personal Injury processing unit and a new ABS law firm partnership, Law Together. These initiatives were delivered on time and on budget and represent the fundamental building blocks of the future growth of the business.
Additionally, I am delighted with the progress that we have made in Critical Care which has, once again, delivered double-digit profit growth.
Results
The Group delivered underlying operating profit of GBP12.2m from revenue of GBP51.3m for the year. This was lower than the Board's original expectations, caused mainly by the changing business mix and exceptional costs in the Personal Injury division and the Residential Property division returning a modest loss. Residential Property operates in a UK market that has been dominated by political uncertainty and which contracted in 2019. On a more positive note Critical Care had another strong year of underlying operating profit growth.
Toward the end of the year, as previously announced, the Group reached an agreement to terminate its relationship in respect of National Law Partners, one of its ABS law firm partnerships. As part of this agreement the Group will receive GBP5m over three years in payment for historic panel enquiries while registering a one-off provision recognised in exceptional costs amounting to GBP1.2m in the 2019 financial year. This settlement avoided a protracted dispute and the prospect of complex and time-consuming litigation between the parties. The Group continues to carefully manage its balance sheet and net debt as we transform the Personal Injury business to take advantage of market opportunity and invest in Critical Care to underpin its future growth.
Market overview
The Group operates leading brands in the large and fragmented UK legal services market with a focus on personal injury, medical reporting/rehabilitation and residential conveyancing.
The overall personal injury market peaked at a level of just over one million claims in 2013 and since that point volumes have decreased primarily as a result of reductions in Road Traffic Accident (RTA) claims. The main claim types that make up the personal injury division's focus, non-RTA, have remained broadly static with any reductions taking place in sectors such as travel sickness claims which are not part of our core personal injury target market.
Law firms are feeling the cumulative impact of previous legislation and the prospect of the forthcoming reforms. The increase in the small claims limit to GBP5,000 in RTA (GBP2,000 in non- RTA) removes the prospect of legal fees for a large proportion of their work which, combined with a significant reduction in damages for consumers, will have a material impact on law firm revenue. This has led many traditional panel firms to question the long-term viability of their business model in personal injury. Overall, market conditions reduce demand for the type of enquiries we provide. Our anticipation of this has been the driving force behind our strategy to build our own processing capability. However, in addition to long-term reductions in panel demand, we have seen some of the larger players in the field continue to compete aggressively as they build their book of work prior to reform implementation.
From a regulatory perspective the Civil Liabilities Bill received Royal Assent in December 2018 and, until recently, implementation was planned for August 2020. However, with the emergence of the Covid-19 pandemic, the Ministry of Justice recently announced that this will now take effect in April 2021.
Our Critical Care division, trading as Bush & Co, is the brand leader in the catastrophic injury segment of the medical reporting and rehabilitation market, where we provide expert witness and case management services. This market is growing at between 1 and 2%(1) per annum and is not directly affected by the personal injury reforms.
Residential Property operates within the UK residential housing market and as such the division has been directly impacted by well-documented challenges facing this sector. The decline in transaction volumes accelerated during the year as political uncertainty drove caution amongst buyers and sellers. Despite making gains in market share during the year the overall decline created challenges for the division.
Strategic development
Personal Injury
As already mentioned, the core of our Personal Injury strategy has been driven by significant structural change in the market. Whilst the continuing delays and uncertainties surrounding the timing and implementation of the reforms have made navigating the transformation of our Personal Injury business challenging, we have nevertheless made excellent progress. In April we launched National Accident Law (NAL), our wholly-owned ABS law firm focused on processing our own enquiries in a post-reform environment. We have been very pleased by early trading at NAL and are confident that we have created an efficient, technologically-enabled business unit that will be a leading processor of personal injury claims in the post-reform world and, in particular, those claims that will be defined as small claims.
In addition, we are happy with continued progress and delivery from the Group's wider legal services strategy. Our first and largest ABS, Your Law LLP continues to perform well and is profitable in its own right. We are also encouraged by the early results from our new partnership, Law Together. These self-processing operations continue to scale up and we have significantly increased the number of cases we are handling.
The Group's Personal Injury business now comprises the following:
-- National Accident Helpline (the UK's most trusted personal injury brand) -- National Accident Law (wholly-owned ABS law firm) -- Your Law (joint venture ABS law firm) -- Law Together (joint venture ABS law firm)
During 2019 Personal Injury faced a competitively challenging market and continued panel volatility. This required us to manage volumes carefully and optimise placement throughout the year resulting in a lower overall volume of enquiries than planned with fewer going into NAL. However, we did grow the overall book of cases by 46.0%. This careful management of working capital to balance risk and reward is a continuing feature of our business as we progress through the transition period.
Critical Care
In Critical Care we are examining the opportunities provided by both our core market and adjacent markets. We can use the skill sets we possess to expand our market share and to provide products and services in areas such as Court of Protection and Care which will underpin our continued growth over future years.
Residential Property
In Residential Property we are conducting a small-scale test on processing our own work in conjunction with a partner. Unlike personal injury claims, conveyancing instructions do not require any significant working capital investment but should enable us, over time, to offer consumers a better end-to-end service which will strengthen our marketing proposition.
Brands
The National Accident Helpline (NAH) brand remains the most trusted on the market(2) and during 2019 we continued our investment in TV advertising which underpins our significant commitment to digital marketing and Search Engine Optimisation. As we have already mentioned we faced ongoing competitor activity throughout the period which required us to continually review and alter our volumes and we adjusted our TV investment to be always on air which helps the brand remain front of mind for consumers. During the final quarter we began work to refresh the NAH campaign to ensure it continues to cut through in a busy TV advertising market.
Bush & Co once again grew its market share and following a full marketing audit launched a brand refresh which included upgrading our websites and developing the capability to receive enquiries digitally. Our centrepiece annual clinical conference was again a great success, bringing together up to 200 lawyers, consultants and partners from across the industry. As well as this, we were pleased to receive the Supporting the Industry award at 2019's Personal Injury Awards. Within Residential Property work commenced on a project to streamline its brand proposition providing greater focus on those brands that drive volume and value and reduce the costs of supporting a broad brand portfolio.
Operations and IT
A fundamental building block of our strategic transformation in Personal Injury is the technology that supports our processing. In order to create our own ABS law firm, we invested in a new case management platform. This has enabled us to build our own bespoke interfaces and develop a consumer journey that is optimised for the new market realities as well as being highly efficient. This was launched on time and to budget and has been operating well since NAL commenced trading in April 2019.
We have also made excellent progress on our small claims proposition although, as we have stated, we require the MoJ to finalise several important matters prior to completing the operating system. We will also upgrade our legal support centre software during 2020 to enhance our ability to offer a seamless process for consumers.
During 2019 we also transitioned our NAH website moving it onto a new platform, which has enhanced loading speeds by up to 50% and improved the consumer experience. We also conducted a similar exercise in Residential Property which has improved our ability to adapt our messages in a timely fashion.
In addition, we have begun the process of upgrading our systems in Critical Care. We will be upgrading our core case management and office packages and developing a state-of-the-art reports tool that will enable our consultants to work more efficiently.
These investments support the continued growth of the Group and enable us to better adapt to the continually changing market circumstances that we face.
People and values
Delivering the transformation agenda across the Group against a backdrop of challenging market conditions requires a talented and committed team who can support our customers with a first-class service. Our values are central to the way that we do business and we are delighted with the way our people have supported the Group through this period of great change. We have continued to make significant progress with our people initiatives:
-- Employee engagement scores that continue to significantly outperform the national average (79.5% against a UK average of 11%(3) )
-- 17 staff undertaking training through our Pathway to Leadership Programme
-- Investors in People Silver awarded to Residential Property to go alongside our Silver award in Critical Care and Gold in NAH;
-- NAH being recognised by The Sunday Times as one of the Top 100 Best Small Companies To Work For 2019; and
-- Extending our in-house learning academy to benefit employees across the Group.
Our people and values make us who we are and our staff body (now in excess of 250 people and growing) is the cornerstone of our future growth.
Key to this is ensuring a positive gender balance in our leadership, management and staff bodies. This is evidenced by the following male/female gender split:
Group Board: 50%(M)/50%(F)
Senior Management: 50%(M)/50%(F)
Staff: 37%(M)/63%(F)
Outlook
As we started 2020, we were confident that the continued transformation of our Personal Injury division was progressing well; that Critical Care would continue to grow; and that Residential Property would gain market share and return a modest profit.
However, during March 2020 the emergence of Covid-19 in the UK and its potential impact on our business became our primary focus. In common with most other businesses, we are facing a major economic challenge which has the potential to severely disrupt demand for our offerings, erode confidence in our markets and create ongoing issues with delivering service. Our priority is the wellbeing of our employees and supporting our customers and business partners through these unprecedented times.
In response to this challenge, we have been developing and implementing business continuity plans that allow us to continue to trade and our well supported systems are enabling home working and remote access for the vast majority of our teams. This has enabled us to continue to support customers and clients across our three divisions.
We have developed several scenarios to help us model the potential financial impacts on our business, although at present it is difficult to predict the broader and on-going economic ramifications of the situation.
In our Personal Injury business, whilst we have seen a significant reduction in new enquiries, our ABS law firms continue to process historic claims, agree settlements and generate cash. In order to manage our cash position during this period of uncertainty, management are controlling enquiry volumes and placement decisions and reducing costs including adjusting marketing spend. However, these measures are expected to result in a reduction in volume of new claims placed into our ABS law firms which will impact future profits.
Since mid-March, the Group's Critical Care division has remained resilient with only a modest impact noted to date and this is expected to continue in the short to medium term. However, in adapting to new Government restrictions, conducting virtual expert witnesses and case management assessments may result in lower revenues per case. We have been able to utilise our newly developed technology to enable remote working which, when combined with the flexibility of our workforce, is enabling us to continue to support our clients through this difficult time.
In Residential Property, market volumes have been significantly impacted with any nascent housing market recovery failing to materialise as property viewings are cancelled, impacting both conveyancing activity and search volumes.
We have proactively taken measures to reduce our costs across the Group and ensure we have sufficient liquidity to operate the business through this period. We will continue to evaluate and implement further measures as necessary to optimise the structure of the business, maximise savings, reduce property and lease costs, leverage IT to support broader based home working and delay capital expenditure. Our aim is to ensure the sustainability of our business and to position it to benefit from the recovery in confidence that will follow. After the initial shock, during which the business adapted quickly, I expect the recovery will be a gradual process. Our experience in managing change in difficult markets should hold us in good stead.
NAHL Group plc is a resilient business with talented and committed people who are working through the impacts of this rapidly changing environment and I am confident that we can navigate the weeks and months ahead, emerging with our long term growth strategy in place.
Russell Atkinson
Chief Executive Officer
27 April 2020
1. Management Estimate
2. Independently researched by The Nursery Research & Planning Ltd - November 2019
3. OwnIt! survey results/Gallup State of the Workforce Report 2017
Chief Financial Officer's Report
Overview
The Group faced a number of challenges in 2019, including a weak residential property market; competitive pressures in personal injury exacerbated by uncertainty around the forthcoming Government reforms; and instability in some of its partner relationships. Although this led to a set of financial results that were lower than originally planned, it is clear that there are also some positives to draw out.
From an operational perspective, the Group grew revenue by 4.8% in 2019 and delivered GBP2.2m of profit before tax (2018: GBP9.8m). Our Critical Care division had another strong year, delivering growth in underlying operating profit of 10.9% and our Personal Injury division delivered marginally ahead on the Board's underlying operating profit expectation. In addition to this, the Group has built up claim volumes in its ABS law firms (including National Law Partners) from 10,274 ongoing claims at the start of the year to 15,005 at the end of the year (a growth of 46.0%). This represents a store of value, much of which has yet to be recognised in the financial results but will deliver growth in future years.
2019 was an important year strategically for the Group. We launched two new ABS law firms in the year, including our wholly-owned ABS, National Accident Law (NAL), on time and on budget in April 2019. We also continue to make good progress with our small claims proposition and started a programme of investment in technology and building new propositions in Critical Care as we look to develop our track record of growth in this business.
We invested in working capital during the year to facilitate growth in our ABS law firms and this required an increase in our net debt to GBP21.0m at year-end. The actions that the Board took in January 2020 to slow the deployment of working capital and suspend the dividend were aimed at de-risking the business. In light of Covid-19, we are carefully monitoring our balance sheet and believe that the Group will be able to manage net debt within the current headroom.
Review of income statement
Hot Features
Premium
2019 2018 Growth
GBPm GBPm %
Personal Injury 31.7 29.5 7.4
Critical Care 13.6 12.4 9.6
Residential Property 6.0 6.4 (5.3)
Pre-LASPO ATE - 0.7 -
Revenue 51.3 49.0 4.8
Personal Injury - Excluding NAL start- up losses 10.0 8.4 19.1
Personal Injury - NAL start-up losses (0.9) - -
Personal Injury 9.1 8.4 8.1
Critical Care 5.0 4.5 10.9
Residential Property (0.3) 0.7 (142.4)
G roup Costs (1.6) (1.5) 5.0
Underlying operating profit 12.2 12.1 0.5
Revenue
Revenue increased in the year by 4.8% from GBP49.0m to GBP51.3m, compared to a decrease of 5.7% in 2018.
The Personal Injury division grew revenue by 7.4% from GBP29.5m to GBP31.7m in 2019. This compares with a contraction in revenue of 6.8% last year. As anticipated, revenue from Panel Law Firms continued to decline but this was offset by strong growth in legal services revenue as the Group's ABS law firm strategy started to deliver a material contribution. Our revenue recognition policy for the provision of legal services is set out in note 1. Revenue in the law firms is recognised in milestones such that no revenue is recognised until liability for a claim is admitted by the defendant and much of the 2019 revenue relates to claims commenced in prior years.
As planned, Critical Care delivered another good performance, growing revenue 9.6% (2018: 12.2%) from GBP12.4m to GBP13.6m. It was pleasing to see both the case management and expert witness parts of the business performing strongly, with the former delivering 12.0% revenue growth.
Unfortunately, Residential Property faced significant market challenges as the number of transactions in the UK property market contracted further in 2019. As a result, revenues in this division fell by 5.3%.
An analysis of revenue by division is set out in the operating segments note.
Underlying operating profit
Underlying operating profit increased in the year by 0.5% from GBP12.1m to GBP12.2m at an underlying margin of 23.8% (2018: 24.8%). Despite the cost of enquiry acquisition remaining higher than anticipated due to high levels of competition in the market, the Personal Injury division delivered growth in underlying operating profit of 8.1% from GBP8.4m to GBP9.1m. This was after deducting GBP0.9m of start-up losses in the Group's wholly-owned law firm, National Accident Law.
Whilst these do not meet the Group's definition of exceptional items, they are one-off in nature. Before these losses, the increase in underlying operating profit was 19.1%.
The Critical Care division traded strongly in the year and the organic revenue growth translated into increased underlying operating profit, which rose by 10.9% from GBP4.5m to GBP5.0m. The division invested in business development and technology but maintained its strong margin (2019: 37.0%; 2018: 36.5%).
Underlying operating profit in the Residential Property division fell as a result of the revenue challenge and the business made a small loss of GBP0.3m (2018: GBP0.7m profit). Group costs were flat year-on-year at GBP1.6m (2018: GBP1.5m).
Exceptional and non-underlying items
The Group's policy, set out in note 1, is to separately identify exceptional and non-underlying items and exclude them from underlying performance measures to provide readers of the financial statements with a consistent basis on which to track the core trading performance.
The Group incurred a number of exceptional items in the year which are set out in note 4 totalling GBP7.9m (2018: GBP0.4m). These include GBP1.3m of restructuring costs associated with the Group's strategic transformation, a GBP1.2m write-down relating to the termination of its partnership in National Law Associates LLP and a GBP5.3m impairment charge in respect of Residential Property.
Share-based payments and amortisation of intangible assets acquired on business combinations were in line with plan.
Taxation
The Group's tax charge of GBP0.6m (2018: GBP1.4m) represents an effective tax rate of 29.5% (2018: 14.2%). The effective tax rate is higher than the standard corporation tax rate of 19.0% for the reasons set out in note 4. The most significant of these is the non-taxable impairment of goodwill and intangible assets and that the Group does not account for the non-controlling interests' share of tax within its ABS law firms. This results in a reduction in effective tax rate of 11.4% (2018: 3.3%) which is significantly higher than the previous year due to the growth in the ABS law firm profits attributable to non-controlling interests. The deferred tax expense originates from temporary differences in intangible assets acquired on business combinations and bad debt provisions.
Earnings per share and dividend
Basic earnings per share (Basic EPS) for the year was (6.4)p (2018: 14.5p) and the diluted EPS was (6.4)p (2018: 14.3p). The dilution in EPS in 2018 derived from share options schemes.
In order to compare EPS year-on-year, earnings have been adjusted to exclude certain exceptional items, amortisation of intangible assets acquired on business combinations and share-based payments (net of the standard rate of corporation tax). This is explained in note 1. On this basis, underlying EPS (before NAL start-up losses) was 14.4p (2018: 18.2p).
The fall in EPS is due to a greater proportion of profits being attributable to non-controlling interests (NCI) and reducing the profit attributable to shareholders of the parent company. (In 2019 NCI was GBP4.5m, and in 2018 it was GBP1.7m).
The Group paid an interim dividend of 2.6p per share in May 2019 (3.2p in May 2018). The Board is not recommending a final dividend in respect of 2019 (2018: 5.7p).
Review of the statement of financial position
In reviewing the statement of financial position, I consider the significant items to be goodwill and intangible assets, working capital, defined as trade and other receivables less trade and other payables, and net debt.
Goodwill and intangible assets
Goodwill and other intangible assets amounted to a combined total of GBP60.6m (2018: GBP66.8m). The movement since last year comprises GBP0.5m of new other intangible assets less GBP1.3m of amortisation and less a GBP5.3m impairment. The amortisation is consistent with our accounting policy to amortise intangible assets over their estimated useful lives.
Goodwill is tested annually for impairment. In undertaking the review in the current year, the Directors gave careful consideration to the levels of uncertainty in the UK housing market at the end of 2019 and the disappointing performance of the Residential Property division in the year. Further evidence of this market weakness was provided by the impact of the Covid-19 virus in March 2020. Accordingly, the Directors have concluded that it is appropriate to book an impairment of GBP5.3m to the goodwill and other intangible assets attributed to this division in the financial statements. No impairment to goodwill relating to the other divisions was deemed necessary.
Working capital
Trade and other receivables less trade and other payables totalled GBP20.7m at year-end (2018: GBP13.7m).
As anticipated, the increase primarily arose in the Personal Injury division as the Group progressed its transition to a model of increasing self-processing in its ABS law firms. This is a more capital-intensive model, particularly in the early years of these firms before they build up a mature book of work-in-progress (WIP), but it will generate higher returns on investment over the case settlement cycle.
At 31 December 2019, the Group had accrued income balances totalling GBP18.8m (2018: GBP8.4m). Of this amount, GBP4.1m (2018: GBP1.4m) relates to WIP recognised on personal injury claims in the ABS law firms. These claims are yet to reach the settlement stage but have all had liability admitted by the defendant, in line with the Group's accounting policy for legal services revenue in note 1.
There is a significant element of uncertainty in estimating the WIP recognised in the ABS law firms, as discussed further in note 1. The Directors believe that the assumptions adopted are appropriate and based on historical experience of claims processed in our ABS law firms and by our panel. These assumptions are updated with actual results as claims settle.
A further GBP4.3m of accrued income relates to non-contingent future settlements relating to the termination of the Group's partnership in National Law Partners which are due to be settled by the end of April 2022.
Net debt
The Group had net debt at year-end of GBP21.0m (2018: GBP15.5m). This is defined in note 9 and comprised of GBP2.6m of cash (2018: GBP1.6m) offset by borrowings of GBP23.6m (2018: GBP17.1m).
The borrowings represent a balance on the Group's revolving credit facility (RCF). This facility, with Yorkshire/Clydesdale Bank, expires in December 2021 and provides up to GBP25m of credit at a reasonable interest rate of up to 1.65% over LIBOR. The growth in the usage of the facility during the year has been due to investment in working capital, payment of the dividend and a delay in the receipt of amounts due from the Group's partners in National Law Partners.
Review of the cash flow statement
The Group increased cash and cash equivalents by GBP1.0m in the year (2018: GBP0.7m). The significant items in the consolidated cash flow statement are net cash from operating activities; non-controlling interest drawings; dividends paid to shareholders; and new borrowings.
Net cash from operating activities is primarily driven by operating profit and working capital movements, both of which are discussed above.
The Group made GBP3.8m of dividend payments to shareholders during the year (2018: GBP6.4m), which represented the 2018 final dividend and the 2019 interim dividend paid in October 2019. GBP2.2m (2018: GBP0.9m) of drawings were paid to the ABS law firm partners during the year under the terms of our agreements. This increase year-on-year reflects the growth in claims won during the year.
The Group drew down GBP6.5m (2018: GBP4.1m) on its RCF during the year to fund working capital investments and dividend payments.
Free cash flow (FCF) is the Group's KPI with regards to cash flow. FCF in 2019 was GBP(1.7)m compared to GBP2.9m in 2018. The primary reason for the reduction was a delay in receiving amounts due from the Group's partners in National Law Partners. As part of the termination agreement, these amounts are now due in future years. The Group anticipates returning to higher levels of FCF in 2020 as the ABS law firms mature. The Group also monitors underlying cash conversion, which was lower than the Board expected at 40.5% (2018: 65.6%) for the same reasons.
New accounting standards
The Group has adopted one new accounting standard during the year - IFRS 16 Leases - from 1 January 2019. As was anticipated in last year's financial statements, the adoption of IFRS 16 did not result in a fundamental change on the financial statements, as the Group does not have many high value leases and those it has do not have long to run. Therefore, in adopting this standard, the Board decided to take the modified retrospective approach permitted by IFRS 16 whereby comparative information is not restated.
The full details of the change are presented in note 10, but in summary this required a change in the accounting policy and the recognition of a right of use asset of GBP640,000 and a lease liability for all operating leases of GBP673,000. The rent expense in the income statement is replaced with a depreciation charge on the asset and an interest charge on the liability.
Conclusion
In conclusion, despite facing a number of market and commercial challenges in 2019, the Group has made substantial progress on its strategic transformation programme. Whilst 2020 brings a fresh challenge in the form of Covid-19, the decisions we have taken to protect cash, reduce costs and ensure there is sufficient liquidity to run the business through a prolonged period of disruption give me confidence in the Group's ability to emerge from this period as a sustainable business.
James Saralis
Chief Financial Officer
27 April 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
2019 2018
Note GBP000 GBP000
Revenue 1,2 51,314 48,957
Cost of sales (24,990) (24,254)
Gross profit 26,324 24,703
Administrative expenses (23,761) (14,683)
Underlying operating profit 1 12,192 12,132
Share-based payments (811) (457)
Amortisation of intangible assets acquired
on business combinations (960) (1,270)
Exceptional items 3 (7,858) (385)
Operating profit 2 2,563 10,020
Financial income 202 222
Financial expense (615) (470)
Profit before tax 2,150 9,772
Taxation 4 (635) (1,389)
Profit and total comprehensive income for
the year 1,515 8,383
(Loss)/profit and total comprehensive income
is attributable to:
Owners of the company (2.959) 6,674
Non-controlling interests 4,474 1,709
1,515 8,383
2019 2018
Note p p
Earnings per share (p)
Basic earnings per share 7 (6.4) 14.5
Diluted earnings per share 7 (6.4) 14.3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2019
2019 2018
Note GBP000 GBP000
Non-current assets
Goodwill 55,489 60,362
Other intangible assets 5,082 6,400
Property, plant and equipment 267 195
Right of use assets 264 -
Deferred tax asset 30 177
61,132 67,134
Current assets
Trade and other receivables (including GBP8,279,000
(2018: GBP6,603,000) due in more than one
year) 5 37,871 28,806
Cash and cash equivalents 2,564 1,598
40,435 30,404
Total assets 101,567 97,538
Current liabilities
Trade and other payables 6 (17,216) (15,111)
Lease liabilities (187) -
Other payables relating to legacy pre-LASPO ATE
product - (301)
Current tax liability (363) (975)
(17,766) (16,387)
Non-current liabilities
Lease liabilities (60) -
Other interest-bearing loans and borrowings (23,594) (17,122)
Deferred tax liability (1,068) (1,342)
(24,722) (18,464)
Total liabilities (42,488) (34,851)
Net assets 59,079 62,687
Equity
Share capital 115 115
Share option reserve 3,389 2,578
Share premium 14,595 14,595
Merger reserve (66,928) (66,928)
Retained earnings 104,593 111,380
Capital and reserves attributable to the owners
of NAHL Group plc 55,764 61,740
Non-controlling interests 3,315 947
Total equity 59,079 62,687
These financial statements were approved by the Board of Directors on 27 April 2020 and were signed on its behalf by:
J D Saralis
Director
Company registered number: 08996352
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Capital
and
reserves
attributable
Share to Non-
the owners
Share option Share Merger Retained of controlling Total
NAHL Group
capital reserve premium reserve earnings plc interest equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2018 115 2,121 14,507 (66,928) 111,079 60,894 103 60,997
Total comprehensive income
for the year
Profit for the year - - - - 6,674 6,674 1,709 8,383
Total comprehensive income - - - - 6,674 6,674 1,709 8,383
Transactions with owners,
recorded directly in
equity
Issue of new Ordinary
Shares - - 88 - - 88 - 88
Member drawings - - - - - - (865) (865)
Share-based payments - 457 - - - 457 - 457
Dividends paid 8 - - - - (6,373) (6,373) - (6,373)
Total transactions with
owners, recorded
directly in equity - 457 88 - (6,373) (5,828) (865) (6,693) Balance at 31 December 2018 115 2,578 14,595 (66,928) 111,380 61,740 947 62,687 Adjustment on initial application of IFRS 16, net of tax 10 - - - - 4 4 - 4 Restated balance at 1 January 2019 115 2,578 14,595 (66,928) 111,384 61,744 947 62,691 Total comprehensive income for the year Profit for the year - - - - (2,959) (2,959) 4,474 1,515 Total comprehensive income - - - - (2,959) (2,959) 4,474 1,515 Transactions with owners, recorded directly in equity Member capital - - - - - - 50 50 Member drawings - - - - - - (2,156) (2,156) Share-based payments - 811 - - - 811 - 811 Dividends paid 8 - - - - (3,832) (3,832) - (3,832) Total transactions with owners, recorded directly in equity - 811 - - (3,832) (3,021) (2,106) (5,127) Balance at 31 December 2019 115 3,389 14,595 (66,928) 104,593 55,764 3,315 59,079
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2019
2019 2018
GBP000 GBP000
Cash flows from operating activities
Profit for the year 1,515 8,383
Adjustments for:
Property, plant and equipment Depreciation 147 173
Right of use asset depreciation 419 -
Amortisation of intangible assets (not relating
to business combinations) 372 187
Amortisation of intangible assets relating
to business combinations 960 1,270
Impairment of goodwill and intangible assets 5,322 -
Financial income (202) (222)
Financial expense 615 470
Share-based payments 811 457
Taxation 635 1,389
10,594 12,107
Increase in trade and other receivables (8,880) (7,358)
Increase in trade and other payables 1,836 2,775
Decrease in other payables relating to legacy
pre-LASPO ATE product - (375)
3,550 7,149
Interest paid (529) (474)
Tax paid (1,479) (2,202)
Net cash generated from operating activities 1,542 4,473
Cash flows from investing activities
Acquisition of property, plant and equipment (219) (145)
Acquisition of intangible assets (463) (640)
Disposals of property, plant and equipment - 42
Interest received 9 35
Non-controlling interest member capital 50 -
Net cash used in investing activities (623) (708)
Cash flows from financing activities
New share issue - 88
Proceeds from borrowings 6,500 4,125
Principal element of lease payments (465) -
Dividends paid (3,832) (6,373)
Non-controlling interest drawings (2,156) (865)
Net cash generated from/(used in) financing
activities 47 (3,025)
Net increase in cash and cash equivalents 966 740
Cash and cash equivalents at 1 January 1,598 858
Cash and cash equivalents at 31 December 2,564 1,598
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, but draws attention to a material uncertainty related to going concern. 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 IFRS as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS, 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.
In addition to the normal process of producing detailed forecasts of future trading, profits and cash flows on a CGU basis the Board have also considered the potential impact of COVID-19 on the cash flows of the Group for a period in excess of 12 months from the date of signing the financial statements. This has been done by modelling the financial impact of a range of potential COVID-19 scenarios on the business, resulting in a best-case, worst-case and most probable scenario. For further details refer to the Chief Executive's Report.
As a result of the recent restructuring of the Group's Personal Injury operations, a significant proportion of the Group's cash receipts planned for this year are derived from historic enquiries, whether panel firms benefiting from deferred terms, or settlement of claims in the Group's ABS law firms. In the short-term, there is therefore less reliance on current enquiry levels to generate cash. The Directors note that there is a risk over recoverability of debts from the Group's customers, as these customers may themselves be impacted by COVID-19. The Directors have conducted an assessment of the recoverability of these balances and reflected the results in its scenarios.
The ability of the Group to operate as a going concern relies on it being able to meet its debts as they fall due and being able to operate within its financial covenants. The Group has access to a GBP25.0m revolving credit facility ("RCF") with its bankers which expires in December 2021 and at 31 December 2019, has net debt of GBP21.0m. In the scenarios the Group has modelled, including estimates regarding the impact of COVID-19, the Group expects to retain sufficient headroom within its current RCF to meet its liabilities as they fall due and does not foresee the need to access additional funding.
However, the Group's RCF is subject to quarterly covenant testing and the scenarios modelled suggest that the Group would breach its leverage covenant from Q2 2020. The Group are currently in supportive discussions with the bank to secure a relaxation of the covenant, however at the date of approving the financial statements the covenant relaxation has not been approved in writing by the bank.
If the potential breach was not remedied then the Group has a number of mitigating options it could consider, including operating more aggressive cost saving exercises to increase profitability; and seeking alternative funding, such as the Government's Coronavirus Large Business Interruption Loan Scheme.
The impact of COVID-19 on the potential covenant breach indicates the existence of a material uncertainty which may cast significant doubt about the Company's and the Group's ability to continue as a going concern. The Company and Group financial statements do not include the adjustments that would result if the Company and Group were unable to continue as a going concern. Notwithstanding this material uncertainty, 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 Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2019:
IFRS 16 Leases - Effective for annual reporting periods beginning on or after 1 January 2019.
In light of this new standard, the Group revised its accounting policies and made the necessary opening balance adjustments following the adoption of IFRS 16. The changes as a result of adopting IFRS 16 are disclosed in note 10.
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 with the exception of exceptional revenues arising from the release of the pre-LASPO ATE liability. Given the magnitude of the pre-LASPO ATE liability, it is no longer considered to be a material item and therefore from 1 January 2019 the Directors have made the decision to no longer include revenues related to the release of this liability as an exceptional item . The key adjusting items in arriving at the APMs are as follows:
-- IFRS 2 Share-based Payments - This is the charge for share-based payments calculated in line with IFRS 2. IFRS 2 requires the fair value of equity instruments measured at grant date to be spread over the period during which the employees become unconditionally entitled to the options. The calculation behind the charge can fluctuate year-on-year as new grants are made depending on inputs such as the expected volatility, the share price, exercise price etc. and therefore the charge can vary with little correlation to the underlying trading activities. For example, in the six years since the Group's flotation on AIM, the IFRS 2 charge has been as low as GBP182,000 and as high as GBP1,052,000. Management therefore believe it is appropriate to exclude this charge from the underlying operating profit to allow for greater comparability of the underlying core trading performance of the Group year-on-year.
-- IFRS 3 (Revised) Business Combinations - This is the amortisation charge for intangible assets arising on acquisitions and expenditure arising from acquisition activity. Under IFRS 3 all acquisition costs are required to be expensed in the Group Income Statement and intangible assets arising on acquisition are required to be amortised over their useful economic life. Management believes that it is useful to separately identify these costs due to their materiality to the Group results and due to the fact that the amortisation is calculated on a straight-line basis, it therefore has little correlation to the trading activities of the acquired entity in any particular year. To allow for greater comparability of the trading results year-on-year, this charge is therefore excluded from underlying operating profit.
-- 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 Definition Use/relevance
measure measure source
============= =============== ================= ============================== ===================================
Underlying Operating Consolidated Based on the related IFRS Allows management and users
operating profit income measure but excluding of the financial statements
profit statement exceptional items, IFRS to assess the underlying
2 share-based payment trading results after removing
charges and amortisation material, non-recurring
of intangible assets acquired items that are not reflective
on business combinations. of the core trading activities
and allows comparability
of core trading performance
year on year
============= =============== ================= ============================== ===================================
Underlying Cash flow Consolidated Based on the related IFRS Provides management with
operating from cash flow measure but excluding an indication of the amount
cash flow operating statement cash flows in respect of cash available for discretionary
activities of the items excluded investing or financing
from underlying operating after removing material
profit as described above. non-recurring expenditure
that does not reflect the
underlying trading operations
and allows management to
monitor the conversion
of underlying profit into
cash.
------------- --------------- ----------------- ------------------------------
Underlying Not defined n/a Calculated as underlying
cash by IFRS operating cash flow divided
conversion by underlying operating
profit.
------------- --------------- ----------------- ------------------------------
Free Cash Not defined n/a Calculated as net cash
Flow by IFRS generated from operating
activities less net cash
used in investing activities
less payments made to
non-controlling interests
and less principal element
of lease payments
============= =============== ================= ============================== ===================================
Underlying Basic EPS Consolidated Based on the related IFRS Allows management and users
Basic income statement measure but calculated of the financial statements
using underlying profit to assess the underlying
for the year attributable trading results after removing
to shareholders. material, non-recurring
items that are not reflective
of the core trading activities
and allows comparability
of core trading performance
year-on-year
EPS (before
NAL Start-up
losses)
============= =============== ================= ============================== ===================================
Working Movements Consolidated Working capital is not Allows management to assess
capital in receivables statement defined by IFRS. This the short-term cash flows
and movement of cash flows is defined by management from movements in the more
in payables as being the movement liquid assets.
in tradereceivables less
the movement in trade
payables.
============= =============== ================= ============================== ===================================
Net debt Not defined Consolidatedcash Net debt is defined as Allows management to monitor
by IFRS flow statement cash and cash equivalents the overall level of debt
less interest bearing in the business. As stated
borrowings net of loan in the strategic report,
arrangement fees. 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:
2019 2018
GBP000 GBP000
IFRS measure - operating profit 2,563 10,020
Exceptional items 7,858 385
Share-based payments 811 457
Amortisation of intangible assets acquired
on business combinations 960 1,270
Underlying operating profit 12,192 12,132
Underlying operating cash flow and underlying cash conversion:
2019 2019 2018 2018
Underlying Exceptional 2019 Underlying Exceptional 2018
operations items Total operations items Total
12 months ended 31 December 2019 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Operating profit 10,421 (7,858) 2,563 10,405 (385) 10,020
Amortisation of intangible assets
acquired on business
combinations 960 - 960 1,270 - 1,270
Share-based payments 811 - 811 457 - 457
Underlying operating profit 12,192 (7,858) 4,334 12,132 (385) 11,747
Depreciation and amortisation
(excluding amortisation on intangible
assets acquired on business combinations) 938 - 938 360 - 360
Impairment of goodwill and intangible
assets - 5,322 5,322 - - -
Increase in trade/other receivables (10,027) 1,147 (8,880) (7,358) - (7,358)
Increase in trade/other payables 1,836 - 1,836 2,825 (50) 2,775
Decrease in liabilities relating
to Pre-LASPO ATE product - - - - (375) (375)
Underlying operating cash flow 4,939 (1,389) 3,550 7,959 (810) 7,149
Underlying Operating cash conversion 40.5% 65.6%
Interest paid (529) (474)
Tax paid (1,479) (2,202)
Net cash generated from operating
activities 1,542 4,473
Net cash used in investing activities (623) (708)
Lease payments(1) (465) -
Payments to/from non-controlling
interests (2,156) (865)
------------------------------------------ ---------- ----------- ------- ---------- ----------- -------
Free cash flow (1,702) 2,900
------------------------------------------ ---------- ----------- ------- ---------- ----------- -------
1. In the prior year payments made in respect of leases were included within operating cash flows.
Underlying EPS (before NAL start-up
losses):
2019 2018
GBP000 GBP000
IFRS measure - (loss)/profit for
the year attributable to shareholders (2,959) 6,674
Exceptional items 7,858 385
Start-up losses associated with NAL 926 -
Share-based payments 811 457
Amortisation of intangible assets acquired
on business combinations 960 1,270
Tax effect of the above (962) (393)
Underlying profit for the year
attributable to shareholders 6,634 8,393
Weighted average number of shares 46,178,716 46,160,172
Underlying basic EPS (before NAL
start-up losses) 14.4 18.2
Working capital:
2019 2018
GBP000 GBP000
Movement in trade and other receivables (8,880) (7,358)
Movement in trade and other payables 1,836 2,775
Working capital (7,044) (4,583)
IFRS 9 opening balance adjustment - 1,002
Movement in interest accruals (114) (268)
Corporation tax debtor (103) -
IFRS measure - movement in trade
and other receivables less movement
in trade and other payables (7,261) (3,849)
---------------------------------------------- ---------- ----------
Net debt is defined in Note 9.
2 Operating segments
Personal Critical Residential Underlying Pre-LASPO Other
Injury Care Property Group operations ATE Items(4) Eliminations Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Year ended 31 December
2019
Revenue 31,701 13,566 6,047 - 51,314 - - - 51,314
Depreciation and
amortisation (425) (152) (356) (5) (938) - (960) - (1,898)
Operating profit/(loss) 9,105(1) 5,013(1) (309)(1) (1,617) 12,192 - (9,629) - 2,563
Financial income 201 - - 1 202 - - - 202
Financial expenses (4) (10) (3) (598) (615) - - - (615)
Profit/(Loss) before
tax 9,302 5,003 (312) (2,214) 11,779 - (9,629) - 2,150
Trade receivables 4,439 5,143 618 4 10,204 - - - 10,204
Total assets(3) 34,157 6,297 1,023 77,596 119,073 - - (17,506) 101,567
Segment liabilities(3) (15,371) (1,175) (400) (517) (17,463) - - - (17,463)
Capital expenditure
(including intangibles) 381 181 76 44 682 - - - 682
------------------------ -------- -------- ----------- ------- ---------- --------- -------- ------------ --------
Year ended 31 December
2018
Revenue 29,522 12,383 6,388 - 48,293 664 - - 48,957
Depreciation and
amortisation (195) (48) (117) - (360) - (1,270) - (1,630)
Operating profit/(loss) 8,424(1) 4,520(1) 728(1) (1,540) 12,132 589 (2,701) - 10,020
Financial income 191 30 - 1 222 - - - 222
Financial expenses - (5) - (465) (470) - - - (470)
Profit/(Loss) before
tax 8,615 4,545 728 (2,004) 11,884 589 (2,701) - 9,772
Trade receivables 10,200 5,036 598 - 15,834 - - - 15,834
Total assets(3) 24,528 5,800 1,269 78,574 110,171 - - (12,633) 97,538
Segment liabilities(3) (13,254) (1,137) (364) (356) (15,111) (301)(2) - - (15,412)
Capital expenditure
(including intangibles) 245 188 352 - 785 - - - 785
------------------------ -------- -------- ----------- ------- ---------- --------- -------- ------------ --------
1. These are the respective underlying operating profits of the division.
2. Pre-LASPO ATE liabilities include the balance of commissions received in advance that are due to be paid back to the insurance provider of GBPnil (2018: GBP301,000).
3. Total assets and segment liabilities exclude intercompany loan balances as these do not form part of the operating activities of the segment.
4. Other items include all non-underlying items (exceptional items, IFRS 2 share-based payment charges and amortisation of intangible assets acquired on business combinations).
Significant customers
Revenues of approximately GBP8.3m are derived from two external customers (20 18: GBP9.0m from a single customer). These revenues are attributable to the Personal Injury and Critical Care segments.
Geographic information
All revenue and assets of the Group are based in the UK.
Operating segments
The activities of the Group are managed by the Board, which is deemed to be the chief operating decision maker (CODM). The CODM has
identified the following segments for the purpose of performance assessment and resource allocation decisions. These segments are split along product lines and are consistent with those reported last year.
Personal Injury - Revenue from the provision of enquiries to the Panel Law Firms, based on a cost plus margin model, plus commissions received from providers for the sale of additional products by them to the Panel Law Firms and in the case of the ABSs, 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.
Residential Property - Revenue from the provision of online marketing services to target homebuyers and sellers in England and Wales, offering lead generation services to Panel Law Firms and surveyors in the conveyancing sector and the provision of conveyancing searches for solicitors and licensed conveyancers.
Group - Costs that are incurred in managing Group activities or not specifically related to a product.
Pre-LASPO ATE - Revenue is commissions received from the insurance provider for the use of after the event policies by Panel Law Firms. From 1 April 2013, this product was no longer available as a result of LASPO regulatory changes. Included in the balance sheet is a liability that has been separately identified due to its material value. This balance is commissions received in advance that are due to be paid back to the insurance provider. No interest is due on this liability. Given the magnitude of the pre-LASPO ATE liability, it is no longer considered to be a material item and therefore, from 1 January 2019, the directors have made the decision not to separately disclose this item.
Other items - Costs associated with the acquisition of subsidiary undertakings, reorganisation costs associated with exceptional projects
that are not related to the core operations of the business, share-based payments and amortisation charges on intangible assets
recognised as part of business combinations.
3 Exceptional items
Exceptional items included in the income
statement are summarised below:
2019 2018
GBP000 GBP000
Group strategic and reorganisation costs(1) 1,297 816
Termination of strategic partnership(2) 1,239 -
Impairment of Residential Property goodwill
and intangible assets(3) 5,322 -
Release of pre-LASPO ATE liability and
associated costs(4) - (589)
Residential Property reorganisation costs(5) - 158
7,858 385
--------------------------------------------- ------ ------
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. The decision was made in December 2019 to terminate the relationship in respect of NLP. As part of this agreement, a one-off provision of GBP1.1m has been required along with GBP0.1m of legal and advisory fees incurred.
3. In light of the 2019 trading performance of the Residential Property division and the emerging global risk of COVID-19, the directors conducted an impairment review of the Residential Property division and concluded that there are insufficient future cash flows to support the carrying value of goodwill and intangible assets attributable to this division. These assets have therefore been written off in full.
4. Previously recognised liabilities for pre-LASPO ATE commissions received in advance of GBPnil (2018: GBP664,000) have been released into revenue in the year as a result of more favourable settlements. These have been offset by associated costs of GBPnil (2018: GBP75,000). , Given the magnitude of the pre-LASPO ATE liability, it is no longer considered to be a material item and therefore from 1 January 2019 the Directors have made the decision to no longer include revenues related to the release of this liability as an exceptional item.
5. Costs of management reorganisation in the Residential Property division.
4 Taxation
Recognised in the consolidated statement of comprehensive income
2019 2018
GBP000 GBP000
Current tax expense
Current tax on income for the year 883 1,824
Adjustments in respect of prior years (121) (160)
Total current tax 762 1,664
Deferred tax credit
Origination and reversal of timing differences (127) (275)
Total deferred tax (127) (275)
Tax expense in statement of comprehensive income 635 1,389
Total tax charge 635 1,389
Reconciliation of effective tax rate
2019 2018
GBP000 GBP000
Profit for the year 1,515 8,383
Total tax expense 635 1,389
Profit before taxation 2,150 9,772
Tax using the UK corporation tax rate of 19.00%
(2018: 19.00%) 409 1,856
Income disallowable for tax purposes - (6)
Non-deductible expenses 1,189 100
Adjustments in respect of prior years (121) (160)
Share scheme deductions - (18)
Non-controlling interest share of tax (850) (324)
Short-term timing differences for which no deferred
tax is recognised 8 (59)
Total tax charge 635 1,389
---------------------------------------------------- ------ ------
Changes in tax rates and factors affecting the future tax charge
In the Spring Budget 2020 the Government announced that from 1 April 2020 the corporation tax rate would remain at 19% (rather than reducing to 17% as previously announced). This new law was substantively enacted on 17 March 2020. As the proposal to keep the rate at 19% had not been substantively enacted at the balance sheet date, the effects are not included within these financial statements. However, it is likely that the overall effect of the change, had it been substantively enacted by the balance sheet date, would be immaterial to both the tax expense for the period and to the balance of the deferred tax asset and liability at the balance sheet date.
5 Trade and other receivables
2019 2018
GBP000 GBP000
Trade receivables: receivable in less than one
year 9,556 13,234
Trade receivables: receivable in more than one
year 648 2,600
Accrued income: receivable in less than one
year 11,205 4,359
Accrued income: receivable in more than one
year 7,631 4,003
Other receivables 1,045 308
30,085 24,504
Prepayments 1,144 673
Corporation tax 103 -
Recoverable disbursements 6,539 3,629
37,871 28,806
----------------------------------------------- ------ ------
A provision against trade receivables and accrued income of GBP554,000 (2018: GBP909,000) is included in the figures above.
6 Trade and other payables
Amounts due within one year: 2019 2018
GBP000 GBP000
Trade payables 3,935 2,493
Disbursements payable 5,835 3,712
Other taxation and social security 835 1,028
Other payables, accruals and deferred revenue 5,742 6,907
Customer deposits 869 971
---------------------------------------------- ------ ------
Total trade and other payables 17,216 15,111
---------------------------------------------- ------ ------
7 Earnings per share
The calculation of basic earnings per share at 31 December 2019 is based on the loss attributable to ordinary shareholders of the parent company of GBP(2,959,000) (2018: profit GBP6,674,000) and a weighted average number of Ordinary Shares outstanding of 46,178,716 (2018: 46,160,172).
Profit attributable to ordinary shareholders
GBP000 2019 2018
(Loss)/profit for the year attributable
to the shareholders (2,959) 6,674
-------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
Number 2019 2018
Issued Ordinary Shares at 1 January 46,178,716 46,061,090
Weighted average number of Ordinary Shares
at 31 December 46,178,716 46,160,172
Basic Earnings per share (p)
2019 2018
Group (6.4) 14.5
-------------------------------------------- ---------- ----------
In line with IAS 33, as the Group has a negative basic earnings per share, it is assumed that there are no dilutive shares.
Diluted Earnings per share (p)
2019 2018
Group (6.4) 14.3
------ ----- ----
8 Dividends
On 31 May 2019 the Group paid final dividends in respect of 2018 of GBP2,631,000 (2018: final dividends in respect of 2017 of GBP4,895,000)
which represented a dividend per share of 5.7p (2018: 10.6p). On 31 October 2019 the Group paid interim dividends in respect of 2019
of GBP1,201,000 (2018: interim dividends in respect of 2018 of GBP1,478,000) which represented a dividend per share of 2.6p (2018: 3.2p).
The Directors have not recommended a final dividend in respect of 2019.
9 Net debt
Net debt includes cash and cash equivalents and other
interest-bearing loans and borrowings.
2019 2018
GBP000 GBP000
Cash and cash equivalents 2,564 1,598
Other interest-bearing loans and borrowings (23,594) (17,122)
Net debt (21,030) (15,524)
Set out below is a reconciliation of movements in
net debt during the period.
2019 2018
GBP000 GBP000
Net increase in cash and cash equivalents 966 740
Net inflow from increase in debt and debt financing (6,500) (4,125)
Movement in net borrowings resulting from cash flows (5,534) (3,385)
Non-cash movements - net increase to/(release of)
prepaid loan arrangement fees 28 (75)
Net debt at beginning of period (15,524) (12,064)
------------------------------------------------------ -------- --------
Net debt at end of period (21,030) (15,524)
------------------------------------------------------ -------- --------
10 Changes in accounting policies
The Group has adopted the modified retrospective approach with the right of use asset measured as if IFRS 16 had been applied since the commencement date of a lease using a discount rate based on the Group's incremental borrowing rate at the date of initial application and the lease liability at transition date as the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at the date of initial application, adjusted by any prepayments or lease incentives recognised immediately before the date of initial application. Under the modified retrospective transition approach, the comparative information is not restated.
The Group has elected to apply a single discount rate to assets with similar characteristics. The Group has also elected not to recognise right of use assets and lease liabilities for short-term leases or low-value assets. The Group will continue to expense the lease payments associated with these leases on a straight-line basis over the lease term.
Leases
The Group leases property and certain items of office equipment.
Property Office equipment Total
GBP000 GBP000 GBP000
----------------------------- --------- ----------------- --------
Balance at 1 January 2019 531 109 640
----------------------------- --------- ----------------- --------
Balance at 31 December 2019 180 84 264
----------------------------- --------- ----------------- --------
Impact on Financial Statements
1) Impact on transition
On transition to IFRS 16, the Group recognised additional right of use assets and lease liabilities recognising the difference in retained earnings. This impact on transition is summarised below.
Total
GBP000
------------------------------------------------------------------------------------ -------
Right of use assets 640
------------------------------------------------------------------------------------ -------
Lease liabilities (673)
------------------------------------------------------------------------------------ -------
Release of rent-free period adjustments and adjustments to dilapidations provisions 37
------------------------------------------------------------------------------------ -------
Impact on retained earnings 4
------------------------------------------------------------------------------------ -------
2) Impacts for the period
As a result of applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Group recognised GBP264,000 of right of use assets and GBP247,000 of lease liabilities as at 31 December 2019.
Also, in relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs, instead of operating lease expense. During the twelve months ended 31 December 2019, the Group recognised GBP419,000 of depreciation charges and GBP9,000 of interest costs from those leases.
11 Posting of accounts
It is intended that the financial statements for the year ended 31 December 2019 will be made available to shareholders on the Group's website www.nahlgroupplc.co.uk on 28 April 2020 and will also be available thereafter at the registered office, 1430 Montagu Court, Kettering Parkway, Kettering Venture Park, Kettering, Northamptonshire NN15 6XR.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR PPUAPCUPUPGM
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April 28, 2020 02:00 ET (06:00 GMT)
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