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NAHL Group PLC (NAH)

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Tuesday 18 September, 2018

NAHL Group PLC

Interim Results

RNS Number : 0302B
NAHL Group PLC
18 September 2018
 

18 September 2018

NAHL Group plc

 

("NAHL" or the "Group")

 

Interim Results

 

Earnings in line with expectations

 

NAHL (AIM: NAH), the leading UK consumer marketing business focused on the UK legal services market, announces its Interim Results for the six months ended 30 June 2018.

 

Financial Highlights

 

·      Revenue of £24.9m (2017 H1: £24.9m)

·      Underlying operating profit of £6.4m (2017 H1: £7.3m)

·      Profit before tax of £5.3m after exceptional costs relating to the establishment of wholly owned small claims ready law firm or Alternative Business Structure ("ABS") (2017 H1: £5.3m)

·      As anticipated, basic earnings per share of 8.2p (2017 H1: 9.0p)

·      Interim dividend of 3.2p per share (2017 H1: 5.3p) as Group adopts more prudent dividend policy in light of investment plans

 

Operational Highlights

 

·      Personal Injury division performing in line with plan, with strong enquiry volumes

·      Encouraging performance from two joint venture ABS partnerships, giving Group confidence to launch in H1 2019 a wholly owned small claims ready law firm

·      Continued strong progress from Critical Care division, with increased revenue and profit

·      Residential Property division performance reflective of continuing difficult wider market conditions

 

Russell Atkinson, CEO of NAHL, commented:

 

"We are pleased to have delivered Group earnings in line with expectations, having made good progress in adapting our Personal Injury (PI) division to capture the opportunity to deliver materially enhanced profits over the long-term.

 

"2018 represents a year of transition for our PI division. The Government's reforms will have no bearing on the number of accidents that occur but it is clear that there is an opportunity for a new type of law firm to help consumers with genuine claims to obtain access to justice. NAH, with its market leading brand and focus on its consumers' experience, is well placed to seize this opportunity.  We have been encouraged by the performance of our two joint venture ABS law firms and are excited about the launch of our third, wholly owned law firm in the first half of 2019. This will give us full economic interest in the success of the whole claim, helping to deliver greater value for our shareholders.

 

"We are pleased with the performance of our Critical Care division, which has continued to win new business and gain market share. The difficulties facing the housing market have been well documented and this has inevitably impacted our Residential Property division. We have made a leadership change and the division remains well placed to benefit from market recovery.

 

"As we move forward, our focus is on investing in our PI division to deliver long term growth. As previously indicated we anticipate continued challenges with panel demand for enquiries as a result of regulatory change. As an example, we are in discussion with one of our major PLFs about leaving our panel in H1 2019. We have well developed plans for such a situation which involves placement of enquiries through a combination of PLFs and our joint ventures. We expect to deliver full year earnings in line with the Board's expectations."

 

For further information please call:

 

NAHL Group PLC

Russell Atkinson (CEO)

James Saralis (CFO)

 

via FTI Consulting

Tel: +44 (0) 20 3727 1000

finnCap Ltd (NOMAD & Broker)

Julian Blunt

James Thompson

Andrew Burdis

 

Tel: +44 (0207 220 0500

FTI Consulting (Financial PR)

Alex Beagley

James Styles

Laura Saraby

 

Tel: +44 (0) 20 3727 1000

 

Notes to Editors

NAHL Group plc is a leading UK consumer marketing business focused on the UK legal services market. The Group comprises three companies: National Accident Helpline (NAH), Fitzalan Partners (Fitzalan) and Bush & Company Rehabilitation (Bush). NAH provides outsourced marketing services in the personal injury market, Fitzalan, which includes Searches UK a leading conveyancing search provider, provides marketing services in the property market and Bush provides a range of specialist services in the catastrophic injury market.

 

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

 

Chairman's Statement

 

I am pleased to report the Group's results for the six months ended 30 June 2018.

 

Summary of Financial Performance

 

NAHL has performed in line with our expectations, with revenue unchanged at £24.9m (2017 H1: £24.9m), delivering underlying operating profit of £6.4m (2017 H1: £7.3m). After exceptional costs, related to the establishment of our third ABS, profit before tax is unchanged at £5.3m (2017 H1: £5.3m, after exceptional brand repositioning costs). In the first half of 2018 we have seen contributions from our first two ABS joint ventures, so consequently have charges for minority interests, meaning that basic earnings per share reduces, as anticipated, to 8.2p (2017 H1: 9.0p).

 

Trading Review - Personal Injury ("PI")

 

National Accident Helpline (NAH), part of our PI division, is a leading marketing services business and offers outstanding consumer service. Combining these capabilities with the regulatory changes impacting the sector creates the opportunity for the Group to develop additional earnings streams. So far this has been achieved through joint ventures but in H1 2019 we will launch a wholly owned, modern, digitally enabled, purpose built, small claims ready law firm.

 

NAH has to date had two options for placement of enquiries.  Firstly, its traditional panel law firms (PLFs) who operate on a mix of commercial terms; and, secondly, its joint venture partnerships (technically, an Alternative Business Structure, or ABS), which benefit from working capital and expertise provided by our partners, who share in the ultimate profit of the joint venture. This placement strategy in part reflects reducing PLF appetite, caused by lower operating margins together with increased working capital requirements, compounded by uncertainties surrounding the small claim reforms. These reforms, first announced in November 2015, are now expected to be implemented in April 2020, at the earliest.

 

We have invested heavily into these partnerships both in terms of finance and know-how and continue to accelerate this investment. With our expertise, we are in the process of setting up a third placement option and, from H1 2019, some enquiries will be placed with a new ABS which will be 100% owned by the Group. The set up of this third ABS (reflected in the exceptional costs as part of our previously announced £4m commitment) is on schedule and on budget. This new ABS will manage the whole cycle of a PI legal case, with marketing and legal processing profits accruing to the Group. This will continue to change the Group's financial profile as both profit recognition and cash realisation are deferred until case settlement. With our passion for customer service, combined with our process and management capabilities, we expect to earn materially enhanced profits and cash flow as the profile of our cases matures, likely to be from 2021.

 

The PI division has performed in line with plan in H1 2018. Following our 2017 investment in the NAH brand, enquiry volumes remain strong. PI revenue increased by 4.3% to £15.5m, reflecting the consolidation of £1.7m of ABS revenue, which includes revenue from the launch of the Group's second ABS in Q4 2017. Operating profit was 13.9% lower at £4.6m, as a result of the later profit recognition when we invest in PI case processing, and from expensing £0.6m of enquiry origination costs related to our second ABS. We have continued to increase investment in PI cases, through both PLFs and ABSs, with an extra £5.3m invested in net working capital in the first half, and £10.2m in the last 12 months.

 

Our first ABS, in conjunction with NewLaw, is operating well, and our second ABS, working with Lyons Davidson, is beginning to show comparable levels of processing capability. We will commit further funds to the ABS as we are confident of their execution capability and economic performance.

 

As previously outlined, we expect to experience decline in PLF demand as a result of forthcoming regulatory changes. As an example, we are in discussion with one of our major PLFs about leaving our panel in H1 2019. We have well developed plans for such a situation which involves placement of enquiries through a combination of PLFs and our joint ventures. The impact on our overall profit per enquiry is unlikely to be material, although this defers an element of profits from 2019.

 

Trading Review - Critical Care

 

Bush, our Critical Care division, has made good progress year on year and is has performed in line with our plans. We expect this to continue for the rest of 2018. Revenue increased 7.3% to £6.0m, and operating profit was up 4.4% to £2.1m.

 

Trading Review - Residential Property

 

Our Residential Property division has had a disappointing first half delivering revenue of £3.4m, down 24.5%, with operating profit down 27.0% at £0.6m, reflecting continuing difficult market conditions. We have made leadership changes aimed at capitalising on opportunities to grow share in a shrinking market.

 

Cash Conversion, Balance Sheet and Interim Dividend

 

As we continue to invest in PI cases and working capital, our cash generation declines, as planned, with underlying cash conversion down at 20.3% compared with 54.8% for H1 2017. We expect a low conversion, albeit improved from the first half, for the rest of 2018, with some recovery in 2019 as our earlier investment in PI cases starts to mature.

 

We have bank facilities of £25m in place and at 30 June 2018 had net bank borrowings of £17.4m. Our Rolling Credit Facility, which matures in December 2021, supports our investment plans.

 

As we previously reported, the level of our investment means that we have adopted a more prudent dividend policy until our PI investment cycle matures. Our dividend policy is 2.0x cover, before exceptional costs and non-cash charges.

 

We are declaring an interim dividend of 3.2p per share payable on 31 October 2018 to ordinary shareholders registered on 28 September 2018.

 

Current Year Outlook

 

As expected, 2018 is part of a transitional phase for our PI division as we respond to changing market conditions and evolve our enquiry placement strategies. We continue to invest in our joint ventures and develop our own law firm which are progressing well. We are enthused about building a market leading PI volume law firm to complement our market leading PI marketing services brand, National Accident Helpline.

 

We expect progress in Critical Care in the second half, although we expect further challenges in Residential Property where market volumes continue to be disappointing.

 

We currently anticipate 2018 earnings to be in line with the Board's expectations for the Group as a whole.

 

Steve Halbert

Chairman

 

18 September 2018

 

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2018

 

 

 

 

 

 

 

Note

Unaudited

6 months

ended 30

June 2018

£000

 

 

 

Unaudited

6 months

ended 30

June 2017

£000

 

 

Audited

12 months

ended 31

December 2017

£000

 

 

 

 

 

Underlying revenue

2

24,865

24,930

51,037

Exceptional items

 

-

-

875

Total revenue

 

24,865

24,930

51,912

Cost of sales

 

(12,217)

(12,014)

(25,224)

Underlying gross profit

 

12,648

12,916

25,813

Exceptional items

 

-

-

875

Gross profit

 

12,648

12,916

26,688

Administrative expenses

 

(7,269)

(7,504)

(14,086)

Underlying operating profit

 

6,360

7,347

14,491

Share-based payments

 

(191)

(281)

(182)

Amortisation of intangible assets acquired on business combinations

7

(648)

(654)

(1,307)

Exceptional items

5

(142)

(1,000)

(400)

Total operating profit

2

5,379

5,412

12,602

Financial income

3

98

38

150

Financial expense

4

(206)

(166)

(331)

Profit before tax

 

5,271

5,284

12,421

Taxation

 

(953)

(1,187)

(2,467)

Profit for the period and total comprehensive income

 

4,318

4,097

9,954

 

 

 

 

 

Profit and total comprehensive income is attributable to:

 

 

 

 

Owners of the company

 

3,758

4,097

9,876

Non-controlling interests

 

560

-

78

 

 

4,318

4,097

9,954

 

 

 

Unaudited 6 months ended

30 June 2018

Unaudited 6 months

ended

30 June

2017

Audited 12 months

ended 

31 December 2017

Basic earnings per share (p)

10

8.2

9.0

21.7

Diluted earnings per share (p)

10

8.0

8.9

21.6

 

Consolidated statement of financial position

At 30 June 2018

 

 

Note

Unaudited 6 months ended 30 June 2018

£000

Unaudited 6 months ended 30 June 2017

£000

Audited 12 months ended 31 December 2017

£000

Non-current assets

 

 

 

 

Goodwill

6

60,362

60,362

60,362

Intangibles

7

6,647

7,783

7,217

Property, plant and equipment

 

225

290

267

Deferred tax asset

 

34

38

34

 

 

67,268

68,473

67,880

Current assets

 

 

 

 

Trade and other receivables (including £9,538,000 (June 2017: £2,041,000, December 2017: £7,280,000) due in greater than one year)

 

29,978

14,142

22,261

Cash and cash equivalents

 

939

799

858

 

 

30,917

14,941

23,119

Total assets

 

98,185

83,414

90,999

Current liabilities

 

 

 

 

Other interest-bearing loans and borrowings

 

-

(3,693)

-

Trade and other payables

 

(14,770)

(9,360)

(12,415)

Other payables relating to legacy pre-LASPO ATE product

2

(865)

(2,026)

(676)

Deferred tax liability

 

(1,500)

(1,914)

(1,662)

Tax payable

 

(1,290)

(1,432)

(1,513)

 

 

(18,425)

(18,425)

(16,266)

Non-current liabilities

 

 

 

 

Other interest-bearing loans and borrowings

 

(18,334)

(6,550)

(12,922)

Total liabilities

 

(36,759)

(24,975)

(29,188)

Net assets

 

61,426

58,439

61,811

Equity

 

 

 

 

Share capital

8

115

114

115

Share option reserve

 

2,312

2,220

2,121

Share premium

 

14,595

14,507

14,507

Merger reserve

 

(66,928)

(66,928)

(66,928)

Retained earnings

 

110,756

108,526

111,893

Total equity attributable to the owners of NAHL Group plc

 

60,850

58,439

61,708

Non-controlling interests

 

576

-

103

Total equity

 

61,426

58,439

61,811

 

 Consolidated statement of changes in equity

for the 6 months ended 30 June 2018

 

 

Share

capital

£000

Share

option

reserve

£000

Share

premium

£000

Merger

reserve

£000

Retained

earnings

£000

 

 

Total

 £000

 

 

 

Non-controlling interest

£000

Total

equity

£000

Balance at 1 January 2018

115

2,121

14,507

(66,928)

111,893

61,708

103

61,811

Total comprehensive income for the period

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

3,758

3,758

560

4,318

Total comprehensive income

-

-

-

-

3,758

3,758

560

4,318

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

Issue of new Ordinary Shares (note 9)

-

-

88

-

-

88

-

88

Share-based payments

-

191

-

-

-

191

-

191

Dividends paid

-

-

-

-

(4,895)

(4,895)

-

(4,895)

Non- controlling interest member drawings

-

-

-

-

-

-

(87)

(87)

Balance at 30 June 2018

115

2,312

14,595

(66,928)

110,756

60,850

576

61,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017

113

1,939

14,507

(66,928)

110,188

59,819

-

59,819

Total comprehensive income for the period

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

4,097

4,097

-

4,097

Total comprehensive income

-

-

-

-

4,097

4,097

 

4,097

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

Issue of new Ordinary shares (note 9)

1

-

-

-

-

1

-

1

Share-based payments

-

281

-

-

-

281

-

281

Dividends paid

-

-

-

-

(5,759)

(5,759)

-

(5,759)

Balance at 30 June 2017

114

2,220

14,507

(66,928)

108,526

58,439

-

58,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017

113

1,939

14,507

(66,928)

110,188

59,819

-

59,819

Total comprehensive income for the year

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

9,876

9,876

78

9,954

Total comprehensive income

-

-

-

-

9,876

9,876

78

9,954

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

 

Issue of new Ordinary Shares (note 9)

2

-

-

-

-

2

-

2

Member capital

-

-

-

-

-

-

25

25

Share-based payments

-

182

-

-

-

182

-

182

Dividends paid

-

-

-

-

(8,171)

(8,171)

-

(8,171)

Balance at 31 December 2017

115

2,121

14,507

(66,928)

111,893

61,708

103

61,811

 

Consolidated cash flow statement

for the 6 months ended 30 June 2018

 

 

Note

Unaudited 6 months ended 30 June 2018

£000

Unaudited

6 months ended 30 June 2017 £000

Audited

12 months ended 31 December 2017

£000

Cash flows from operating activities

 

 

 

 

Profit for the period

 

4,318

4,097

9,954

Adjustments for:

 

 

 

 

Depreciation and amortisation

 

810

808

1,608

Financial income

3

(98)

(38)

(150)

Financial expense

4

206

166

331

Share-based payments

 

191

281

182

Taxation

 

953

1,187

2,467

 

 

6,380

6,501

14,392

Increase in trade and other receivables

 

(7,621)

(3,822)

(11,974)

Increase in trade and other payables

 

2,340

1,713

4,963

Increase/(decrease) in other payables relating to legacy pre-LASPO ATE product

 

189

114

(1,236)

Cash generation from operations

2

1,288

4,506

6,145

Interest paid

 

(154)

(121)

(178)

Tax paid

 

(1,338)

(1,692)

(3,139)

Net cash from operating activities

 

(204)

2,693

2,828

 

Cash flows from investing activities

 

 

 

 

Acquisition of property, plant and equipment

 

(42)

(80)

(111)

Acquisition of intangible assets

 

(156)

-

(305)

Interest received

 

2

5

12

Non-controlling interest member capital

 

-

-

25

Net cash used in investing activities

 

(196)

(75)

(379)

 

Cash flows from financing activities

 

 

 

 

New share issue

 

88

1

2

Repayment of borrowings

 

-

(1,875)

(11,250)

New borrowings acquired

 

5,375

1,000

13,125

Bank arrangement fees for new borrowings

 

-

-

(111)

Dividends paid

 

(4,895)

(5,759)

(8,171)

Non- controlling interest member drawings

 

(87)

-

-

Net cash used in financing activities

 

481

(6,633)

(6,405)

 

Net increase/(decrease) in cash and cash equivalents

 

81

(4,015)

(3,956)

Cash and cash equivalents at beginning of period

 

858

4,814

4,814

Cash and cash equivalents at end of period

 

939

799

858

 

 

Notes to the financial statements

 

1. Accounting policies

 

General Information

The half year results for the current and comparative period to 30 June have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance of Review of Interim Financial Information.

 

These half year results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2017 were approved by the Board of Directors on 19 March 2018 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

 

Having made due enquiries the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason, they continue to adopt the going concern basis in preparing the condensed set of financial statements.

 

The condensed set of financial statements was approved by the Board of Directors on 17 September 2018.

 

Basis of preparation

 

Statement of compliance

The half year results for the current and comparative period to 30 June have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules of UK companies.  They do not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Group for the year ended 31 December 2017, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

New and amended standards adopted by the Group

 

The following new or amended standards became applicable for the current reporting period:

 

IFRS 9 - Financial Instruments

IFRS 15 - Revenue from Contracts with Customers

 

The Group has considered its accounting policies with reference to the new or amended standards and concluded that the existing accounting policies adopted by the Group adhere to the new or amended standards. There are therefore no retrospective adjustments to be made to amounts previously reported.

 

Use of judgements and estimates

The preparation of financial statements in conformity with IFRSs requires management to make judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future years affected.

 

The preparation of the condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

 

In preparing the condensed set of financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were of the same type as those that applied to the financial statements for the year ended 31 December 2017.

 

Significant accounting policies

The accounting policies used in the preparation of these interim financial statements for the 6 months ended 30 June 2018 are the accounting policies as applied to the Group's financial statements for the year ended 31 December 2017.

 

Use of non-GAAP measures

 

The Directors believe that underlying operating profit, underlying revenue and underlying operating cash provide additional useful information for shareholders on underlying trends and performance. These measures are used by management for performance analysis and are considered useful as they relate to the core underlying trading activities of the Group i.e. they reflect the current ongoing activities of the Group and do not include any items that relate to significant exceptional projects that are not expected to recur or any items that relate to activities that are outside the normal course of trading (e.g. acquisitions or share-based costs that are not directly related to the current operating performance of the Group). Underlying operating profit, underlying revenue and underlying operating cash are not defined by IFRS and therefore may not be directly comparable to other companies' adjusted profit, revenue, cash or debt measures. They are not intended to be a substitute for, or superior to IFRS measurements.

 

The adjustments made to reported revenue are:

 

Exceptional revenues - fees related to exceptional revenues in relation to release of the pre-LASPO ATE liability that are not expected to recur and are not related to the continuing core operations of the business.

 

The adjustments made to reported operating profit are:

 

IFRS 2 Share-Based Payments - non-cash Group statement of comprehensive income charge for share-based payments and related National Insurance costs. 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. This is a non-cash charge and has been excluded from underlying operating profit as it does not reflect the underlying core trading performance of the Group.

 

IFRS 3 (Revised) Business Combinations - intangible asset amortisation charges and costs arising from acquisitions. Under IFRS 3 intangible assets are required to be amortised on a straight-line basis over their useful economic life and as such this is a non-cash charge that does not reflect the underlying performance of the business acquired. Similarly, the standard requires all acquisition costs to be expensed in the Group Income Statement. Due to their nature, these costs have been excluded from underlying operating profit as they do not reflect the underlying core trading performance of the Group.

 

Other exceptional costs/income - these relate to certain exceptional costs associated with the Group's acquisition activities including any costs in relation to aborted acquisitions, reorganisation costs associated with exceptional projects that are not related to the core operations of the business, set up costs of new Group entities including new alternative business structures and exceptional income for the release of previously recognised liability for pre-LASPO ATE. These have been excluded from underlying operating profit as they do not reflect the underlying core trading performance of the Group.

 

Goodwill

Goodwill represents the excess of the fair value of the consideration given over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition.  Goodwill is not amortised but is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. Any impairment is recognised in the statement of comprehensive income.

 

Other intangible assets

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.

 

Amortisation

Intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:

•               Technology related intangibles               -               5 to 10 years

•               Contract related intangibles                    -               3 to 10 years

•               Brand names                                           -               3 to 10 years

•               Other intangibles assets                         -               3 to 5 years

No amortisation is charged on assets under construction as these are not yet in use.

 

Depreciation

Depreciation is calculated to write off the cost, less estimated residual value, of property, plant and equipment by equal instalments over their estimated useful economic lives as follows:

•               Office equipment                     -               3 to 5 years

•               Computers                               -               3 years

 

2. Operating segments

 

Critical

Care

£000

Residential Property

£000

 

 

 

Underlying operations £000

 

 

 

Pre-LAPSO ATE        £000

Other

  items

£000

Total

£000

6 months ended 30 June 2018

 

 

 

 

 

 

 

 

Revenue

15,489

5,970

3,406

-

24,865

-

-

24,865

Depreciation and amortisation

(94)

(18)

(50)

-

(162)

-

(648)

(810)

Operating profit/(loss)

4,622

2,087

588

(937)

6,360

-

(981)

5,379

Financial income

97

-

-

1

98

-

-

98

Financial expenses

-

-

-

(206)

(206)

-

-

(206)

Profit/(loss) before tax

4,719

2,087

588

(1,142)

6,252

-

(981)

5,271

Trade receivables

14,572

4,655

795

-

20,022

-

-

20,022

Segment liabilities

(12,492)

(1,003)

(569)

(706)

(14,770)

(865)1

-

15,635

Capital expenditure

21

20

157

-

198

-

-

198

 

 

 

 

 

 

 

 

 

6 months ended 30 June 2017

 

 

 

 

 

 

 

 

Revenue

14,854

5,564

4,512

-

24,930

-

-

24,930

Depreciation and amortisation

(91)

(32)

(31)

-

(154)

-

(654)

(808)

Operating profit/(loss)

5,371

2,000

805

(829)

7,347

-

(1,935)

5,412

Financial income

36

-

-

2

38

-

-

38

Financial expenses

-

(2)

-

(164)

(166)

-

-

(166)

Profit/(loss) before tax

5,407

1,998

805

(991)

7,219

-

(1,935)

5,284

Trade receivables

4,117

4,210

499

-

8,826

-

-

8,826

Segment liabilities

(6,884)

(885)

(984)

(492)

(9,245)

(2,026)1

(115)

(11,386)

Capital expenditure

33

27

20

-

80

-

-

80

 

 

 

 

 

 

 

 

 

12 months ended 31 December 2017

 

 

 

 

 

 

 

 

Revenue

31,660

11,037

8,340

-

51,037

875

-

51,912

Depreciation and amortisation

(178)

(49)

(74)

-

(301)

-

(1,307)

(1,608)

Operating profit/(loss)

11,033

3,882

1,385

(1,809)

14,491

800

(2,689)

12,602

Financial income

143

5

-

2

150

-

-

150

Financial expenses

(1)

(4)

-

(326)

(331)

-

-

(331)

Profit/(loss) before tax

11,175

3,883

1,385

(2,133)

14,310

800

(2,689)

12,421

Trade receivables

11,442

4,386

419

-

16,247

-

-

16,247

Segment liabilities

(10,453)

(806)

(506)

(600)

(12,365)

(726)1

-

(13,091)

Capital expenditure

53

47

191

-

291

-

-

291

1.          Pre-LASPO ATE liabilities include the balance of commissions received in advance that are due to be paid back to the insurance  
 provider of £865,000 (June 2017: £2,026,000, December 2017: £676,000 plus associated accrued costs of £50,000).

 

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 consistent with those reported last year.

 

Personal Injury - Revenue from the provision of enquiries to the PLFs, based on a cost plus margin model, plus commissions received from providers for the sale of additional products by them to the PLFs and in the case of the ABSs, revenue receivable from clients for the provision of legal services.

 

Pre-LASPO ATE - Revenue is commissions received from the insurance provider for the use of after the event policies by PLFs. 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.

 

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 PLFs 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.

 

Other items  - Costs associated with the acquisition of subsidiary undertakings, reorganisation costs associated with one-off 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.

 

Cash flows from operating activities

A reconciliation of operating profit to cash generation from operations has been presented below separately identifying net cash flows relating to underlying operations (comprising cash flows associated with Personal Injury, Critical Care, Residential Property and other segments), the Pre- LASPO ATE product segment and other items.

 

Reconciliation of operating profit to net cash flows from operating activities

               

 

Underlying operations

£000

Pre-LASPO

ATE

£000

Sub-total

£000

Other items

£000

Total

£000

6 months ended 30 June 2018

 

 

 

 

 

Operating profit

5,521

-

5,521

(142)

5,379

Amortisation of intangible assets acquired on business combinations

648

-

648

-

648

Equity-settled share-based payments

191

-

191

-

191

Underlying operating profit

6,360

-

6,360

(142)

6,218

Depreciation and amortisation

162

-

162

-

162

(Increase) in trade/other receivables

(7,621)

-

(7,621)

-

(7,621)

Increase/(decrease) in trade/other payables

2,390

(50)

2,340

-

2,340

Increase in liabilities relating to pre-LASPO ATE product

-

189

189

-

189

Net cash flows from operating activities before interest and tax

1,291

139

1,430

(142)

1,288

Interest paid

(154)

-

(154)

-

(154)

Tax paid

(1,338)

-

(1,338)

-

(1,338)

Net cash from operating activities

(201)

139

(62)

(142)

(204)

 

6 months ended 30 June 2017

 

 

 

 

 

Operating profit

6,412

-

6,412

(1,000)

5,412

Amortisation of intangible assets acquired on business combinations

654

-

654

-

654

Equity-settled share-based payments

281

-

281

-

281

Underlying operating profit

7,347

-

7,347

(1,000)

6,347

Depreciation and amortisation

154

-

154

-

154

(Increase) in trade/other receivables

(3,822)

-

(3,822)

-

(3,822)

Increase/(decrease) in trade/other payables

1,668

(70)

1,598

115

1,713

Increase in liabilities relating to pre-LASPO ATE product

-

114

114

-

114

Net cash flows from operating activities before interest and tax

5,347

44

5,391

(885)

4,506

Interest paid

(121)

-

(121)

-

(121)

Tax paid

(1,692)

-

(1,692)

-

(1,692)

Net cash from operating activities

3,534

44

3,578

(885)

2,693

                 

 

 

 

 

 

 

 

12 months ended 31 December 2017

 

 

 

 

 

Operating profit

13,002

800

13,802

(1,200)

12,602

Amortisation of intangible assets acquired on business combinations

1,307

-

1,307

-

1,307

Equity-settled share-based payments

182

-

182

-

182

Underlying operating profit

14,491

800

15,291

(1,200)

14,091

Depreciation and amortisation

301

-

301

-

301

(Increase) in trade/other receivables

(11,974)

-

(11,974)

-

(11,974)

Increase/(decrease) in trade/other payables

5,120

(20)

5,100

(137)

4,963

Decrease in liabilities relating to pre-LASPO ATE product

-

(1,236)

(1,236)

-

(1,236)

Net cash flows from operating activities before interest and tax

7,938

(456)

7,482

(1,337)

6,145

Interest paid

(178)

-

(178)

-

(178)

Tax paid

(3,139)

-

(3,139)

-

(3,139)

Net cash from operating activities

4,621

(456)

4,165

(1,337)

2,828

 

3. Financial income

 

Unaudited 6 months ended 30 June 2018

£000

Unaudited 6 months ended 30 June 2017

£000

Audited 12 months ended 31 December 2017

£000

Bank interest income

2

5

6

Other interest income

96

33

139

Investment income

-

-

5

Total finance income

98

38

150

 

4. Financial expense

 

Unaudited 6 months ended 30 June 2018

£000

Unaudited 6 months ended 30 June 2017

£000

Audited 12 months ended 31 December 2017

£000

Interest on bank loans

169

135

257

Amortisation of facility arrangement fees

37

31

74

Total finance expense

206

166

331

 

5. Exceptional items

 

Unaudited 6 months ended 30 June 2018

£000

Unaudited 6 months ended 30 June 2017

£000

Audited 12 months ended 31 December 2017

£000

Set up costs for new ABS1

(142)

-

-

Personal Injury reorganisation costs2

-

(1,000)

(1,200)

Release of pre-LASPO ATE liability and associated costs3

-

-

800

Total

(142)

(1,000)

(400)

 

1.     Set up costs for new ABS include legal and professional fees, consultancy fees, IT costs and other directly attributable costs that 
  are wholly necessary to bring the new alternative business structure into operational existence. 

2.    Personal Injury reorganisation costs relate to costs associated with exceptional projects that are not related to the core operations   
  of the business.

3.     Previously recognised liabilities for pre-LASPO ATE commissions received in advance of £875,000 were released in 2017 as a result of more favourable settlements. These have been offset by associated costs of £75,000.

 

6. Goodwill

 

 

Personal Injury

£000

Residential

property

£000

Critical

Care

£000

Total

£000

Cost

 

 

 

 

At 30 June 2017

39,897

4,873

15,592

60,362

At 30 December 2017

39,897

4,873

15,592

60,362

At 30 June 2018

39,897

4,873

15,592

60,362

Impairment

 

 

 

 

At 30 June 2017

-

-

-

-

At 30 December 2017

-

-

-

-

At 30 June 2018

-

-

-

-

Net book value

 

 

 

 

At 30 June 2017

39,897

4,873

15,592

60,362

At 30 December 2017

39,897

4,873

15,592

60,362

At 30 June 2018

39,897

4,873

15,592

60,362

 

7. Intangibles

 

 

Technology related

£000

Contract related

£000

Brand names

£000

Other

£000

Assets under construction

£000

Total

£000

Cost

 

 

 

 

 

 

At 30 June 2017

167

8,466

885

549

43

10,110

At 31 December 2017

167

8,466

885

670

79

10,267

Additions

-

-

-

32

124

156

At 30 June 2018

167

8,466

885

702

203

10,423

Amortisation

 

 

 

 

 

 

At 30 June 2017

52

1,824

364

87

-

2,327

At 31 December 2017

62

2,363

468

157

-

3,050

Amortisation charge on business combinations

10

538

100

-

-

648

Amortisation charge for the period

-

-

-

78

-

78

At 30 June 2018

72

2,901

568

235

-

3,776

Net book value

 

 

 

 

 

 

At 30 June 2017

115

6,642

521

462

43

7,783

At 31 December 2017

105

6,103

417

513

79

7,217

At 30 June 2018

95

5,565

317

467

203

6,647

 

The intangible assets recognised were acquired as part of the acquisitions of Fitzalan, BVC, Bush and Searches UK.

 

8. Share capital

 

 

30 June 2018

30 June 2017

31 December 2017

Number of shares

 

 

 

'A' Ordinary Shares of £0.0025 each

46,178,716

45,511,088

46,061,090

 

 

 

 

 

£000

£000

£000

Allotted, called up and fully paid

 

 

 

'A' Ordinary Shares of £0.0025 each

115

114

115

 

 

 

 

Shares classified in equity

115

114

115

 

9. Transactions with owners, recorded directly in equity

 

During 2017, 711,461 share options were exercised which resulted in the issue of 711,461 new ordinary shares with a par value of

£0.0025. The exercising of these options raised funds of £1,779 for the Group.

 

During 2018, 117,626 share options were exercised from the LTIP and SAYE schemes which resulted in the issue of 117,626 new ordinary shares with a par value of £0.0025. The exercising of these options raised funds of £88,356 for the Group and resulted in an increase to the share premium account of £88,062.

 

10. Earnings per share

 

The calculation of basic earnings per share at 30 June 2018 is based on profit attributable to ordinary shareholders and a weighted average number of Ordinary Shares outstanding at the end of the period as follows:

 

Profit attributable to ordinary shareholders (basic)

 

 

Unaudited 6 months ended 30 June

2018

£000

 

Unaudited 6 months ended 30 June

2017

£000

 

 

Audited 12 months ended 31 December  2017

£000

Profit for the period attributable to the shareholders

3,758

4,097

9,876

 

Weighted average number of Ordinary Shares (basic)

Number

 

 

 

 

 

Unaudited 6 months ended

30 June 2018

 

Unaudited 6 months ended 30 June 2017

 

Audited 12 months ended 31 December 2017

Issued Ordinary Shares at start of period

 

46,061,090

45,349,629

45,349,629

Weighted average number of Ordinary Shares at end of period

 

46,100,876

45,350,071

45,548,243

 

Basic earnings per share (p)

 

Unaudited 6 months ended 30 June 2018

Unaudited 6 months ended 30 June 2017

Audited 12 months ended 31 December 2017

Group (p)

8.2

9.0

21.7

 

The Company has in place share-based payment schemes to reward employees. The incremental shares available for these schemes included in the diluted earnings per share calculation are 958,388 (June 2017: 602,503; December 2017: 205,303). There are no other diluting items.

 

Diluted earnings per share (p)

 

Unaudited 6 months ended 30 June 2018

Unaudited    6 months ended 30 June 2017

Audited 12 months ended 31 December

 2017

Group (p)

8.0

8.9

21.6

 

11. Financial risk management

 

The Group's financial risk management objectives and policies are consistent with those disclosed in the financial statements for the year ended 31 December 2017. At 1 January 2018 and 30 June 2018 the Group held all financial instruments at Level 3 (as defined in IFRS 7 Financial instruments: disclosures) and there have been no transfers of assets or liabilities between levels of the fair value hierarchy.

 

12. Net debt

 

Net debt includes cash and cash equivalents, secured bank loans, loan notes and preference shares.

 

 

 30 June 2018

£000

 30 June

2017

£000

31 December 2017

£000

Cash and cash equivalents

939

799

858

Other interest-bearing loans and loan notes1

(18,334)

(10,243)

(12,922)

Net debt

(17,395)

(9,444)

(12,064)

1.   Other interest-bearing loans and loan notes are stated after deducting facility arrangement fees of £166,000 (June 2017: £132,000, December 2017: £203,000). These fees are being amortised over the term of the facility.

 

Set out below is a reconciliation of movements in net debt during the period.

 

30 June 2018

£000

30 June

2017

£000

31 December 2017

£000

Net increase/(decrease) in cash and cash equivalents

81

(4,015)

(3,956)

Cash and cash equivalents net inflow from increase in debt and debt financing

(5,412)

846

(1,833)

Movement in net borrowings resulting from cash flows

(5,331)

(3,169)

(5,789)

Movement in net debt in period

(5,331)

(3,169)

(5,789)

Net debt at beginning of period

(12,064)

(6,275)

(6,275)

Net debt at end of period

(17,395)

(9,444)

(12,064)

 

The Group refinanced its bank facilities on the 8 September 2017. During the first half of 2018 the Group made further drawdowns of £5,375,000 on its rolling credit facility. It is the Group's intention to repay the balance on the rolling credit facility in more than 12 months time and hence the gross balance of £18,500,000 is deemed to be a non-current liability.

 

13. Related parties

 

Transactions with key management personnel

 

Key management personnel in situ at 30 June 2018 and their immediate relatives control 3.1 per cent (June 2017: 4.1 per cent, December 2017: 4.5 per cent) of the voting shares of the Company.

 

Key management personnel are considered to be the Directors of the Company as well as those of National Accident Helpline Limited, Fitzalan Partners Limited, Bush & Company Rehabilitation Limited, Searches UK Limited and any other management serving as part of the executive team.

 


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 [email protected] or visit www.rns.com.
 
END
 
 
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a d v e r t i s e m e n t