Company Announcements
Final Results
Related Companies
By LSE RNS
21 March 2017
NAHL Group plc
("NAHL" or the "Group")
Final Results
NAHL, the leading UK consumer marketing business focused on the UK legal services market, announces its Final Results for the year ended 31 December 2016.
Financial Highlights
• Underlying revenue declined 2.6% to £49.4m (2015: £50.7m)
• Underlying operating profit up 15.1% to £18.0m (2015: £15.6m)
• Underlying operating profit margin increased by 5.6 percentage points to 36.4% (2015: 30.8%)
• Profit before tax increased 13.3% to £15.8m (2015: £14.0m)
• Cash generation of 79.7% (2015: 97.4%)
• Adjusted net debt of £8.2m at year end (£8.3m at 31 December 2015)
• Basic earnings per share of 27.0p (2015: 25.6p)
• Recommended final dividend of 12.7p, increasing the total dividend for the year by 1.6% to 19.05p (2015: 18.75p)
Operational Highlights
• First full year as a more strategically diversified business operating in aligned legal services markets
• Continued focus on sourcing high quality enquiries in Personal Injury (PI) division
• Accelerated investment in PI cases under new commercial and structural arrangements in light
of regulatory changes
• Strong contribution from Critical Care division which has continued to trade ahead of plan
• Solid revenue and profit growth in Residential Property division despite challenging market backdrop
Russell Atkinson, CEO of NAHL, commented:
"2016 saw the Group make continued progress as a diversified business, with all three of our operating divisions contributing meaningfully to a solid full year performance. Our Critical Care division benefited from the investment made in the business development function and management team, growing its market share. Against a challenging market backdrop, the Residential Property business also saw revenue and profits grow thanks to its broadened service offering.
In a more challenging year for our Personal Injury (PI) division, we delivered a resilient trading performance. As part of the Group's long term planning since the Government's consultation was first announced in 2015, we took the strategic decision to invest in a proportion of our enquiries through different commercial and structural arrangements. We have a clear strategy in place to develop our business model while our proven track record of responding to regulatory change and underlying brand strength leaves the PI division well positioned to succeed in the new landscape.
We have started 2017 on plan and believe that our continued evolution into aligned legal services areas, strong balance sheet and management experience will enable the Group to navigate the future with confidence."
Enquiries:
|
NAHL Group plc Russell Atkinson (CEO) Steve Dolton (CFO)
|
via FTI Consulting Tel: +44 (0) 20 3727 1000 |
|
Investec Bank plc (NOMAD & Broker) Garry Levin David Flin James Ireland David Anderson William Godfrey
|
Tel: +44 (0) 20 7597 5970 |
|
FTI Consulting (Financial PR) Oliver Winters Alex Beagley James Styles
|
Tel: +44 (0) 20 3727 1000 |
Notes to Editors
NAHL Group
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
Strategic Report
Chairman's Statement
The Group has experienced both growth and considerable challenge during 2016 and delivered a strong performance overall.
I am pleased to report the Group's results for the year ended 31 December 2016.
Summary of Financial Performance
The Group has performed in line with expectations. Underlying revenue was broadly flat at £49.4m (2015: £50.7m), but we were successful in delivering a 15.1% increase in underlying operating profit to £18.0m (2015: £15.6m), and profit before tax up 13.3% to £15.8m (2015: £14.0m), after a net charge of £1.8m (2015: £1.5m) relating to share-based payments, amortisation of intangible assets and a surplus from one-off items. Earnings per share increased 5.5% to 27.0p (2015: 25.6p).
One-off items comprise two main elements. In anticipation of regulatory changes in our PI division during 2017 and 2018, the Board is making an exceptional investment of £1.7m to ensure its brand positioning and processes are aligned to the new regulatory environment. £0.5m of this investment has been incurred in 2016, with the remainder planned for 2017. This charge is offset by an exceptional credit of £1.2m related to the revision of the liability for cases covered by pre-LASPO ATE insurance, for the period prior to March 2013.
In January 2016, the Group acquired Searches UK (Searches), a conveyancing search provider, for £2.1m, settled in cash. This acquisition has traded to plan and contributed £5.4m revenue and £0.6m operating profit.
Division Review - Personal Injury
NAH has faced challenging market conditions during 2016, as a consequence of the long awaited consultation on the announcement made in November 2015 of, inter alia, proposals to restrict consumers' eligibility for compensation for low value whiplash injury, along with proposals to transfer certain PI claims of up to £5,000 to the small claims track.
Ahead of these potential changes in the final quarter of 2016 and working in close collaboration with some of our larger PLFs, NAH commenced a trial of a small proportion of enquiries through different commercial and structural arrangements to those it normally deploys. This involves NAH playing a more proactive role in the conduct and financing of a PI case.
In February 2017 the Ministry of Justice (MoJ) responded to the consultation as part of the introduction of the Prisons and Courts Bill, with RTA claims up to £5,000 and non-RTA claims of up to £2,000 being dealt with in the small claims track, scheduled for implementation in October 2018. We estimate that less than 30% of our enquiries are impacted by these proposals, although there will be wider implications for the sector with a number of law firms either withdrawing from PI or taking a more cautious approach to balance sheet management and case investment.
As announced in December 2016, we are committing further investment during 2017 resulting in a deferment of profit and cash flow, which will be realised in the future as cases settle. We plan that this will be a continuing feature of NAH's business. It is our intention to increase our investment in marketing to create additional enquiry volume so that these new arrangements run alongside our existing panel strategy.
The Group has been planning for these changes since the initial proposals were announced. Whilst there is no doubt there will be some uncertainty in the short to medium term as all market participants reflect on the proposals, we are committed to maintaining both our market leading position and our relationship with our PLFs. The Board remains encouraged about the medium and long-term opportunity that the new regulatory environment will present to our PI division.
NAH's results in 2016 reflect a creditable trading performance in difficult circumstances. Significantly lower marketing spend delivered reduced but cost-effective enquiry volumes, blended to the higher value categories our PLFs prefer. Revenue in 2016 was £30.0m, down 33.4%, whilst operating profit was £14.1m, down 9.1%.
Division Review - Critical Care
The Group's Critical Care division has performed strongly and is trading ahead of plan. Revenue of £10.4m has delivered operating profit of £3.8m. The investments we made in management and business development are progressing well.
The core Critical Care proposition, namely immediate needs assessment and case management services in catastrophic and serious injury cases, is attractive to our clients and sits well with the Group's ethical philosophy and services to law firms.
Division Review - Residential Property
The Group's Residential Property division has performed well delivering good growth in revenue and operating profit, up respectively 156.1% to £9.0m and 68.6% to £1.4m. However, the impact of taxation changes and the outcome of the EU Referendum resulted in reduced residential conveyancing volumes across the market which has meant the division has traded below management plans.
The lower margin reflects the nature of search work. In the second half, we did not experience the recovery in conveyancing volumes that we expected, although we did benefit from the integration of our conveyancing and search propositions to drive further value.
Balance Sheet and Final Dividend
The Group has historically converted operating profits into cash at over 95%. Strong cash conversion continues to be an important business focus. With the expected changes in government regulatory policy relating to PI, we have invested in 2016 in new commercial arrangements for case processing and financing. For 2016, we achieved operating cash generation of £14.3m, which represents a 79.7% conversion of operating profit into cash (2015: 97.4%). The second half of the year saw a conversion of 66.4% reflecting the increased investment necessary for funding cases.
Our balance sheet remains strong and at the year-end, we had adjusted net debt of £8.2m (2015: £8.3m).
The Board proposes, subject to approval of shareholders at the Annual General Meeting to be held on 25 May 2017, a final dividend of 12.7p per share payable on 31 May 2017 to ordinary shareholders registered on 28 April 2017, making a total of 19.05p per share payable for the year. Going forward we intend to maintain our dividend policy of 1.5x cover.
Outlook
We have diversified our business proposition over the last two years and generated operating profits of £5.2m from Critical Care and Residential Property in 2016. We intend to continue to grow these businesses and will assess appropriate acquisition opportunities as they arise.
PI remains the largest part of our business, by revenue and profit. NAH's profits have contracted during 2016 for market driven reasons, and in 2017 we expect further contraction, primarily as a result of our changing business model. 2017 and 2018 will be years of transition.
We now know much of the scope of the regulatory change in PI, which is scheduled to take effect in Q4 2018. We have planned for these changes and have a clear strategy of how to develop our business model. In the short term we will grow our volume, although profits recovery will lag because our emerging business models are based on a longer investment profile. However, we have the brand strength, market know how, leadership team and PLF relationships to deliver a market leading PI performance.
The Group has experienced both growth and considerable challenge during 2016 and delivered a strong performance overall. I would like to thank our employees for their continued excellent commitment to the Group.
Steve Halbert
Chairman
20 March 2017
Chief Executive's Review
2016 was our first full year as a broader and more diversified business and the contribution from our acquisitions enabled us to report further profitable growth which endorses our strategic approach.
Overview
The performance of the Group was driven by solid full year contributions from all three operating divisions. The PI and Residential Property divisions have faced challenging market conditions that have impacted demand for our products and services, however, we have adjusted and adapted to these changes.
Outstanding service lies at the very core of our business alongside the provision of the highest quality products and services and a steadfast commitment to our ethical values that underpin our leadership position.
Results
Despite challenging market conditions for two of our divisions, trading was in line with expectations. We are pleased to have delivered continuing underlying operating profit growth of 15.1% from underlying revenue of £49.4m (a decline of 2.6%).
The former Chancellor's Autumn Statement in November 2015 outlined a series of potential industry reforms leading to a period of instability and uncertainty in the wider PI market. Against that backdrop, NAH, the Group's PI division, continued its strategy of reducing volume and focusing on high quality enquiries. We had anticipated a period of demand uncertainty but the delay of almost a year in publishing the consultation meant that this was more pronounced than we had originally planned.
Our response was to reduce volumes by lowering TV advertising investment, thereby reducing the cost of enquiry acquisition. This approach, combined with a continued focus on quality, resulted in a controlled reduction in revenue which helped lead to sustainable margin improvements whilst simultaneously reducing the average cost of enquiries to our PLFs.
The first full year of trading for our Critical Care division saw returns on our investment in improved quality and a strengthened business development function. Market share grew as we further enhanced our leadership position and grew our service offering. The division traded well for the year and made an important contribution to the Group's overall results.
The Group's Residential Property business faced market disruption following taxation changes (Stamp Duty and Mortgage Interest Relief) in the buy-to-let market, followed by the uncertainty caused by the referendum result in June which impacted the volume of property transactions. However, the successful integration of Searches, acquired in January 2016, and further work to improve efficiency and enhance margin ensured profits from the division grew significantly year on year.
Market overview
The Group continues to operate in the large and highly fragmented consumer legal services (CLS) market and remains focused on PI, the largest of the CLS segments, and Residential Property.
The PI market remains at approximately one million claims per annum and is relatively stable with small year on year decreases across claim types. In part this is as a result of the reduction in investment in the market caused by regulatory uncertainty. The largest proportion of claims, over 75%, relates to road traffic accidents (RTA). RTA claims have historically always formed a smaller part of NAH's volume and NAH has continued to focus on broader claim types with particular strength in higher value non-RTA areas.
The Group's other PI related business, Bush & Company (Bush), provides services focused exclusively on the catastrophic injury segment of the PI market. This part of the market was valued in 2016 at c£86.2m which would imply an approximate share of 12.0%.
The Group's third business, Fitzalan Partners (Fitzalan), is focused on the Residential Property market which saw some significant challenges in 2016. Increases in Stamp Duty for second homes in April 2016 meant a short-term spike in activity. This, coupled with the pending changes in Mortgage Interest Relief in the buy-to-let market, together with uncertainty caused by the result of the EU Referendum held in June, resulted in a significant reduction in transactions throughout the remainder of 2016.
Regulatory developments
In February 2017 the Government published its response to the consultation it first announced in November 2015. Whilst, from a non-RTA perspective, these changes were lower than had been proposed, they still represent a fundamental change for the PI market as a whole which will lead to significant changes in the way many PI claims are processed.
The Board estimates that historically less than 30% of total enquiry volumes generated through our PI division will fall below the new thresholds and have to be processed through the small claims track. Our approach to processing these particular claims will require further refinement and a pricing adjustment for those claims that will be subject to lower settlements.
We remain in close contact with our Panel Law Firms (PLFs), as we have done since the regulatory changes were first proposed in 2015. The discussions we have had with them, as well as the results of the trials conducted on a proportion of our case volumes, lead us to conclude that we should continue with the strategic decision we took in 2016 to invest in a proportion of our enquiries through different commercial and structural arrangements to those we normally deploy. This involves us playing a more proactive role in the entire conduct and financing of a PI case. We are committing further investment through 2017 resulting in a deferment of profit and cash flow, which will be realised in the future as cases settle. We plan that this will be a continuing feature of National Accident Helpline's business. The outcome of these initial trials has proved very encouraging and we are progressing these arrangements, which are being conducted with a number of the larger law firms in the PI market, into longer-term agreements.
Going forward we will have the flexibility to handle enquiries that we generate in a number of ways:
1. Utilising our traditional panel model to provide services in support of generating and triaging enquiries
2. Offering deferred enquiry payment terms to selected PLFs to support incremental volumes
3. Investing in cases using Alternative Business Structures (ABS)
ABSs allow NAHL to have an ownership interest in a company providing legal services. This enables the Group to enter into a form of joint venture arrangement with a law firm to fund that venture and take a share of profit from work processed by the ABS.
As previously announced, given the increased investment necessary for funding cases, an element of profits will not be recognised upfront and some of the cash will not be received until cases are settled. Both profits and cash under the ABS will normalise over time as cases settle. Average case settlement times are around 18 months and when the growth we expect in volumes is taken into consideration, we anticipate that it will take some time to reach maturity for both profits and cash under this new arrangement. Along with a short term impact on operating profit, cash generation is likely to significantly reduce in 2017 and 2018 before returning to levels previously achieved.
The deployment of these structures will allow us to manage the forthcoming period of demand uncertainty whilst enabling us to grow market share through brand investment and optimise our returns.
Brand
The Group's brands continue to be a core asset. NAH remains the leading brand in PI and continues to have market leading metrics for trust, search and click through. During 2016 we reduced investment in TV advertising and focused more heavily on digital media as we sought to improve cost efficiency in a market showing reduced demand.
The work we have undertaken in preparing the business for the forthcoming regulatory changes enables us to build on our brand to grow market share going forward. We are making an exceptional investment of c£1.0m during 2017 to ensure our brand positioning is aligned to the requirements of the new regulatory environment. This brand relaunch will be supported by further investment in our digital platform which we launched in 2016 and allows consumers to interact directly with us online. This approach will become increasingly important in future years to optimise cost in the claims process and prepare for forthcoming developments in online courts which are a stated priority for Government.
Bush has built its brand reputation on clinical independence and quality. During 2016 we increased our investment in the brand by enhancing public relations activity, upgrading our activity on social media, and continuing our thought leadership programme - including our highly successful annual clinical conference. The strong results for the division are testament to the success of these activities.
In Residential Property our main internet brands, Homeward Legal, Fridays Move, InDeed and Surveyor Local have been supplemented by our launch of Capital Conveyancing which further underpins our strategy of highly focused organic search propositions.
Our brands and internet properties remain a core aspect of what we do and how we attract consumers so we retain a sharp focus on ensuring that they mature and develop.
Customers
The Group serves over 660 law firms in its chosen markets. This covers claimant, defendant and conveyancing law firms as well as a range of licensed conveyancers, surveyors and third party providers. This broad customer base opens further opportunities to support our markets with a wider product range and build our expertise through our close commercial relationships.
Our PI panel has evolved during the year as we continue to focus on strategic relationships with key volume players and trial new and innovative commercial arrangements that enable us to navigate the changing market landscape. This evolution in our panel will continue throughout 2017 as firms choose how to react to the new regulatory environment.
In Critical Care we have continued to demonstrate our quality and clinical independence. Through investment in marketing and business development we have added new relationships that have contributed to growth in our market share.
The addition of Searches has broadened the customer base of our Residential Property division and we now support many more customers on a national basis.
Products and services
We have seen better attachment and broader use of our products by our PI firms, particularly in the area of ATE, as a result of our more focused panel strategy.
Critical Care already provides a mature and market leading service offering but we continue to review opportunities to develop this by expanding into adjacent markets.
Within Residential Property we have added a comprehensive portfolio of search products through our acquisition of Searches. In addition we have broadened our survey offering and continue to look at new opportunities.
Operations
The Group has four offices across the UK and operates two call centres from Kettering and London. They are quite distinct in nature serving a different customer base utilising different systems and staffed by different types of individuals.
As part of our PI business re-engineering we have been implementing a programme of digitising the consumer experience. This exciting and market leading initiative will enable us to remain at the forefront of the market and help us attract and retain a broader customer base.
Our Daventry office is the operational hub of Critical Care and we continue to invest in IT.
Our Residential Property division has introduced a new call routing technology which will enable us to respond to enquiries quicker and automate the lead management process.
Continued operational improvement lies at the heart of our ability to improve efficiency and during the year we appointed an experienced Head of IT to support the divisions.
People
Our people make us who we are and they are the cornerstone of our business success. We currently employ 186 staff across the group and remain committed to developing our teams. We operate to Investors in People (IiP) standards and have continued our management development programme seeing a number of the participant's secure new roles as a result of this initiative.
We have achieved a significant reduction in staff turnover from our PI call centre by introducing targeted loyalty bonuses and improving benefits provision using a series of low cost initiatives to enhance the offering to our staff.
We have strengthened the management team in our Critical Care division, through a combination of internal promotions and external recruitment and our Residential Property division has benefitted from the addition of new talent as a result of our acquisition of Searches.
Group and employee support enabled us to contribute £62,000 to our chosen charity, The Paul Bush Foundation Trust (PBFT) in 2016 which reflects the caring culture of our organisation and is a great example of living our values.
Outlook
The current market conditions, particularly in PI, remain challenging given the recent announcement regarding changes in compensation for RTA and the increases to the small claims limit.
As mentioned, we will be committing further investment during 2017 and beyond which will result in an element of profits and cash being returned over future years as cases settle. It is anticipated that such investment will be a continuing feature of NAH's business model but by following this strategy we will put ourselves in a strong position to react appropriately to changes and to grow market share.
Critical Care has an established leadership position but will continue to upgrade its business development efforts and expand its product range to provide a more comprehensive offering.
The Residential Property division's strategy of broadening its range of service offerings means it is well placed to benefit from recovery in the market and we look forward to the continued growth of this business.
We have prepared well for the year ahead and have reacted proactively by developing our people, processes and commercial structures to allow us to navigate the forthcoming changes.
I look forward to the challenges and opportunities ahead.
Russell Atkinson
Chief Executive Officer
20 March 2017
Chief Financial Officer's Report
The Group showed good growth in underlying operating profit with increased contribution from the Critical Care and Residential Property divisions.
The Group performed well in 2016 and benefited from a full year contribution from Fitzalan and Bush as well as a part year from the acquisition of Searches. As a result, underlying operating profit increased by 15.1% to £18.0m (2015: £15.6m). With low levels of adjusted net debt and a robust balance sheet we are well placed to continue with a good annual dividend.
Financial results
|
|
2016 £m |
2015 £m |
|
Underlying operating profit |
18.0 |
15.6 |
|
Share based payments |
(1.1) |
(0.8) |
|
Amortisation of intangible assets acquired on business combinations |
(1.3) |
(0.3) |
|
One-off items |
0.6 |
(0.4) |
|
Total operating profit |
16.2 |
14.1 |
|
Financial income |
- |
0.1 |
|
Financial expense |
(0.4) |
(0.2) |
|
Profit before tax |
15.8 |
14.0 |
Underlying operating profit before share based payments, amortisation of intangible assets acquired on business combinations and one-off items increased £2.4m. The increase was driven by additional contributions from Critical Care, £3.8m operating profit (2015: £0.6m) and Residential Property, £1.4m operating profit (2015: £0.8m) offset by a decline in Personal Injury operating profit of £1.4m year on year.
Underlying revenue declined by 2.6% to £49.4m. This was mainly due to a decision to focus on a smaller number of higher value claims in our PI division which saw its revenue decline by 33.4% to £30.0m. However, with a full year of trading at Fitzalan and the acquisition of Searches, the Residential Property division saw its revenue increase by 156.1% to £9.0m. Similarly, a full year of trading at Bush saw the Critical Care revenue increase by 390.0% to £10.4m.
Our underlying gross margin percentage increased by 8.7 percentage points to 57.9% and with ongoing control of costs we have seen an improvement in our underlying return on sales to 36.4% (up from 30.8% in 2015).
After allowing for share based payments, amortisation of intangible assets acquired on business combinations, one-off costs and financial income and expense, the Group returned a profit before tax of £15.8m, a 13.3% increase on 2015.
Taxation
The Group's tax charge of £3.6m (2015: £3.2m) represents an effective tax rate of 22.6% (2015: 22.8%).
Earnings per share (EPS) and dividend
Basic EPS is calculated on the total profit of the Group and most closely relates to the ongoing cash which will be attributable to shareholders and in turn the Group's ability to fund its dividend programme. The Group also has a number of share options outstanding (see note 19 of the financial statements) which resulted in a Diluted EPS.
Basic EPS for the year was 27.0p (2015: 25.6p) and Diluted EPS was 26.5p (2015: 25.0p).
The Board has proposed a final dividend of 12.7p (2015: 12.5p) which, along with the interim dividend of 6.35p (2015: 6.25p) gives a total dividend of 19.05p which is an increase of 1.6% on 2015.
Operating cash generation
|
|
2016 £m |
2015 £m |
|
Underlying operating profit |
18.0 |
15.6 |
|
Depreciation and amortisation |
0.2 |
0.2 |
|
Working capital movements |
(3.9) |
(0.6) |
|
Net operating cash generated from operating activities |
14.3 |
15.2 |
|
|
|
|
|
Net operating cash generated as a percentage of operating profits |
79.7% |
97.4% |
Whilst overall operating cash generated as a percentage of operating profit decreased to 79.7% (2015: 97.4%) this still represents a good performance. The Group took the decision to fund certain cases in its PI division during the course of the second half of 2016 and this reduced the second half to 66.4% as compared to 93.7% for the first half. The level of operating cash generation is expected to reduce in future periods as the Group continues to invest in its cases in its new PI business model.
Balance sheet
|
|
2016 £m |
2015 £m |
|
Net assets Goodwill and intangible assets |
68.8 |
67.7 |
|
Adjusted net debt: Cash and cash equivalents Borrowings Other payables relating to discontinued pre-LASPO ATE product |
4.8 (11.1) (1.9) |
10.1 (14.8) (3.6) |
|
Total adjusted net debt |
(8.2) |
(8.3) |
|
|
|
|
|
Other net liabilities |
(0.8) |
(4.3) |
|
Total net assets |
59.8 |
55.1 |
The Group's net assets at 31 December 2016 increased by £4.7m to £59.8m (2015: £55.1m) which reflects the profits for the financial year, partially offset by dividends paid.
The significant balance sheet items are goodwill and intangible assets, adjusted net debt and other net liabilities.
Goodwill and intangible assets
The Group's goodwill and intangible assets of £68.8m (2015: £67.7m) arises from the various business acquisitions undertaken by the Group. Each year the Board reviews the goodwill value for impairment and, as at 31 December 2016, whilst the Directors believe there are indicators of impairment, principally in relation to the PI division, they have concluded that goodwill is not impaired. Within the total is £8.5m of intangible assets (2015: £8.5m) and this relates largely to intangible assets identified on business combinations for items such as customer contracts, brands and IT related assets.
Adjusted net debt
The Group considers that its adjusted net debt comprises cash and cash equivalents, borrowings and other payables relating to a discontinued pre-LASPO ATE product. At 31 December 2016, adjusted net debt was £8.2m (2015: £8.3m).
Cash and cash equivalents
At 31 December 2016 the Group had £4.8m of cash and cash equivalents (2015: £10.1m). All of the Group's cash is held in its trading entities and the Group takes advantage of short-term deposit rates in maximising its interest returns.
Borrowings
At 31 December 2016 the Group had £11.1m of other interest-bearing loans and borrowings (2015: £14.8m). The current level of borrowings is due for repayment as follows:
|
Date due |
£m |
|
30 June 2017 |
1.875 |
|
29 December 2017 |
1.875 |
|
29 June 2018 |
1.875 |
|
31 December 2018 |
1.875 |
|
28 June 2019 |
1.875 |
|
31 December 2019 |
1.875 |
The reported total of £11.1m is net of £0.2m of prepaid bank arrangement fees that are to be expensed over the term of the loan. The current rate of interest payable on these borrowings is 1.65% above LIBOR.
The Group has an additional undrawn facility of £5.0m (2015: £5.0m) which can be utilised for working capital or for acquisitions. The current rate of interest payable on this undrawn facility is 0.66%. Once drawn the interest payable would be 1.65% above LIBOR.
Other payables relating to a discontinued pre-LASPO ATE product
At 31 December 2016 the Group had £1.9m of other payables relating to a legacy pre-LASPO ATE product (2015: £3.6m). This amount is payable to Allianz for previously received commissions when certain policies either fail or are abandoned. The liability is calculated using actuarial rates and during 2016 £1.25m was released to one-off items as a result of more favourable settlements during the year. The balance of £1.9m is likely to be repaid over the next three years.
Steve Dolton
Chief Financial Officer
20 March 2017
Consolidated statement of comprehensive income
for the year ended 31 December 2016
|
|
Note |
2016 |
2015 |
|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying revenue |
1, 2 |
49,385 |
50,716 |
|
|
One-off items |
4 |
1,250 |
- |
|
|
Total revenue |
|
50,635 |
50.716 |
|
|
Cost of sales |
|
(20,809) |
(25,785) |
|
|
Underlying gross profit |
|
28,576 |
24,931 |
|
|
One-off items |
4 |
1,250 |
- |
|
|
Gross profit |
|
29,826 |
24,931 |
|
|
Administrative expenses |
3 |
(13,665) |
(10,812) |
|
|
Underlying operating profit |
|
17,985 |
15,622 |
|
|
Share-based payments |
19 |
(1,052) |
(833) |
|
|
Amortisation of intangible assets acquired on business combinations |
13 |
(1,327) |
(259) |
|
|
One-off items |
4 |
555 |
(411) |
|
|
Total operating profit |
2 |
16,161 |
14,119 |
|
|
Financial income |
6 |
43 |
59 |
|
|
Financial expense |
7 |
(403) |
(228) |
|
|
Profit before tax |
|
15,801 |
13,950 |
|
|
Taxation |
8 |
(3,577) |
(3,184) |
|
|
Profit for the year and total comprehensive income |
|
12,224 |
10,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All profits and losses and total comprehensive income are attributable to the owners of the Company. |
||||
|
|
|
Note |
2016 |
2015 |
|
|
|
|
p |
p |
|
Basic earnings per share (p) |
|
|
|
|
|
Group |
|
20 |
27.0 |
25.6 |
|
|
|
|
|
|
|
Diluted earnings per share (p) |
|
|
|
|
|
Group |
|
20 |
26.5 |
25.0 |
Consolidated statement of financial position
At 31 December 2016
|
|
Note |
|
2016 |
2015 |
|
|
|
|
£000 |
£000 |
|
Non-current assets |
|
|
|
|
|
Goodwill |
12 |
|
60,362 |
59,238 |
|
Intangible assets |
13 |
|
8,474 |
8,452 |
|
Property, plant and equipment |
14 |
|
327 |
259 |
|
Deferred tax asset |
9 |
|
38 |
68 |
|
|
|
|
69,201 |
68,017 |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
15 |
|
10,287 |
8,044 |
|
Cash and cash equivalents |
|
|
4,814 |
10,056 |
|
|
|
|
15,101 |
18,100 |
|
|
|
|
|
|
|
Total assets |
|
|
84,302 |
86,117 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Other interest-bearing loans and borrowings |
16 |
|
(3,693) |
(3,693) |
|
Trade and other payables |
17 |
|
(7,631) |
(8,949) |
|
Other payables relating to legacy pre-LASPO ATE product |
2 |
|
(1,912) |
(3,601) |
|
Tax payable |
|
|
(1,937) |
(1,976) |
|
Deferred tax liability |
10 |
|
(1,914) |
(1,738) |
|
|
|
|
(17,087) |
(19,957) |
|
Non-current liabilities |
|
|
|
|
|
Other interest-bearing loans and borrowings |
16 |
|
(7,396) |
(11,089) |
|
|
|
|
|
|
|
Total liabilities |
|
|
(24,483) |
(31,046) |
|
|
|
|
|
|
|
Net assets |
|
|
59,819 |
55,071 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
18 |
|
113 |
113 |
|
Share option reserve |
|
|
1,939 |
1,121 |
|
Share premium |
|
|
14,507 |
14,262 |
|
Merger reserve |
|
|
(66,928) |
(66,928) |
|
Retained earnings |
|
|
110,188 |
106,503 |
|
Total equity |
|
|
59,819 |
55,071 |
These financial statements were approved by the Board of Directors on 20 March 2017 and were signed on its behalf by:
J R Atkinson
Director
Company registered number: 08996352
Consolidated statement of changes in equity
for the year ended 31 December 2016
|
|
Share capital |
Share option reserve |
Share premium |
Merger reserve |
Retained earnings |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
Balance at 1 January 2015 |
103 |
288 |
49,533 |
(50,000) |
36,250 |
36,174 |
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
10,766 |
10,766 |
|
Total comprehensive income |
103 |
288 |
49,533 |
(50,000) |
47,016 |
46,940 |
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in equity |
|
|
|
|
|
|
|
Bonus issue of capital reduction shares (note 24) |
16,928 |
- |
- |
(16,928) |
- |
- |
|
Capital reduction shares cancelled (note 24) |
(16,928) |
- |
- |
- |
16,928 |
- |
|
Capital reduction (note 24) |
- |
- |
(49,533) |
- |
49,533 |
- |
|
Issue of new Ordinary Shares (note 24) |
10 |
- |
14,262 |
- |
- |
14,272 |
|
Share based payments (note 19) |
- |
833 |
- |
- |
- |
833 |
|
Dividends paid |
- |
- |
- |
- |
(6,974) |
(6,974) |
|
|
|
|
|
|
|
|
|
Balance at 31 December 2015 |
113 |
1,121 |
14,262 |
(66,928) |
106,503 |
55,071 |
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
12,224 |
12,224 |
|
Total comprehensive income |
113 |
1,121 |
14,262 |
(66,928) |
118,727 |
67,295 |
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in equity |
|
|
|
|
|
|
|
Issue of new Ordinary Shares (note 24) |
- |
- |
160 |
- |
- |
160 |
|
Exercise of share options (note 24) |
- |
(85) |
85 |
- |
- |
- |
|
Share based payments (note 19) |
- |
903 |
- |
- |
- |
903 |
|
Dividends paid |
- |
- |
- |
- |
(8,539) |
(8,539) |
|
Balance at 31 December 2016 |
113 |
1,939 |
14,507 |
(66,928) |
110,188 |
59,819 |
Consolidated cash flow statement
for the year ended 31 December 2016
|
|
Note |
2016 |
2015 |
|
|
|
£000 |
£000 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Profit for the year |
|
12,224 |
10,766 |
|
Adjustments for: |
|
|
|
|
Depreciation |
3 |
170 |
175 |
|
Amortisation |
13 |
1,352 |
261 |
|
Financial income |
6 |
(43) |
(59) |
|
Financial expense |
7 |
403 |
228 |
|
Share based payments |
19 |
1,052 |
833 |
|
Taxation |
8 |
3,577 |
3,184 |
|
|
|
18,735 |
15,388 |
|
Increase in trade and other receivables |
|
(1,876) |
(813) |
|
(Decrease)/Increase in trade and other payables |
|
(1,868) |
226 |
|
Decrease in other payables relating to legacy pre-LASPO ATE product |
2 |
(1,689) |
(2,910) |
|
|
|
13,302 |
11,891 |
|
Interest paid |
|
(346) |
(216) |
|
Tax paid |
|
(3,692) |
(3,127) |
|
Net cash from operating activities |
|
9,264 |
8,548 |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment |
14 |
(232) |
(195) |
|
Interest received |
|
43 |
59 |
|
Intangible assets acquired |
13 |
(393) |
(51) |
|
Consideration paid for the acquisition of subsidiaries |
11 |
(2,090) |
(33,681) |
|
Cash acquired from business combinations |
|
295 |
5,572 |
|
Net cash used in investing activities |
|
(2,377) |
(28,296) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
New share issue |
|
160 |
14,272 |
|
Repayment of borrowings |
|
(3,750) |
(5,901) |
|
New borrowings acquired |
|
- |
15,000 |
|
Bank arrangement fees for new borrowings |
|
- |
(230) |
|
Dividends paid |
|
(8,539) |
(6,974) |
|
Net cash used in financing activities |
|
(12,129) |
16,167 |
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(5,242) |
(3,581) |
|
Cash and cash equivalents at 1 January |
|
10,056 |
13,637 |
|
Cash and cash equivalents at 31 December |
21 |
4,814 |
10,056 |
Notes
(forming part of the financial statements)
Basis of preparation
Consolidated Financial Statements
The preliminary financial information does not constitute statutory accounts for the Group for the financial periods ended 31 December 2016 and 31 December 2015, but has been derived from those accounts. Statutory accounts for the financial period ended 31 December 2015 have been delivered to the Registrar of Companies and those for the period ended 31 December 2016 will be delivered in due course. The auditors have reported on those accounts and their reports were unqualified, did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and did not contain statements under section 498(2) or (3) of the Companies Act 20016.
The Consolidated Financial Statements for the year ended 31 December 2016 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial information has been prepared on a going concern basis and under the historical cost convention.
The Directors have prepared cash flow forecasts for the period until 31 March 2018. Based on these, the Directors confirm that there are sufficient cash reserves to fund the business for the period under review, and believe that the Group is well placed to manage its business risk successfully. For this reason they continue to adopt the going concern basis in preparing the financial statements.
Basis of consolidation
The financial statements represent a consolidation of the Company and its subsidiary undertakings as at the Statement of Financial Position date and for the year then ended. In accordance with IFRS 10 the definition of control is such that an investor has control over an investee when: a) it has power over the investee, b) it is exposed, or has the rights, to variable returns from its involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. All subsidiary undertakings in which the Group has a greater than 50% shareholding have been consolidated in the Group's results.
The consolidated financial information incorporates the results of business combinations using the purchase method. In the Group statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Group statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. Acquisition costs are expensed as incurred. This policy does not apply on the acquisition of Consumer Champion Group Limited for which reverse acquisition accounting has been applied.
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.
Revenue, other than pre and post-LASPO ATE income, is not considered to be a key judgement or estimate.
Judgements
In applying the Group's accounting policies, management has applied judgement in the following area that has a significant impact on the amounts recognised in the financial statements.
Intangible assets
When the Group makes an acquisition, management determines whether any intangible assets should be recognised separately from goodwill and what value to attribute to those assets.
Estimates
Discussed below are key assumptions concerning the future, and other key sources of estimation at the reporting date, that have a risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
Impairment of goodwill
The Group determines, on an annual basis, whether goodwill is impaired. This requires an estimation of the future cash flows of the cash generating units (CGUs) to which the goodwill is allocated; see note 12.
Contingent consideration
When the Group acquires businesses, total consideration may consist of additional amounts payable on agreed post-completion dates. These further amounts are contingent on the acquired business meeting agreed performance targets. At the date of acquisition, the Group reviews the profit and cash forecasts for the acquired business and estimates the amount of contingent consideration that is likely to be due.
Recoverability of trade receivables
Trade receivables are reflected net of an estimated provision for impairment losses. This provision considers the past payment history and the length of time that the debt has remained unpaid; see notes 15 and 21.
New standards, interpretations and amendments not yet effective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
• Amendments to IAS 7: Disclosure Initiative - Effective for annual reporting periods beginning on or after 1 January 2017, with early application permitted.
• IAS 12: Recognition of deferred tax assets for unrealised losses - Effective for annual reporting periods beginning on or after 1 January 2017.
• IFRS 9: Financial Instruments - Effective for annual reporting periods beginning on or after 1 January 2018, with early application permitted.
• IFRS 15: Revenue from Contracts with Customers - Effective for annual reporting periods beginning on or after 1 January 2018, with early application permitted.
• IFRS 16: Leases - Effective for annual reporting periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15: Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.
A review of IFRS 16: Leases, which is not yet endorsed and not available for early adoption, will be conducted to determine its impact on the Group. The Group has considered the impact of the other standards and revisions above and concluded that these will not have a material impact on the Group's financial statements.
Use of non-GAAP measures
The Directors believe that underlying operating profit, underlying revenue, underlying operating cash and adjusted net debt provide additional useful information for shareholders on underlying trends and performance. These measures are used 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 one-off 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,
underlying operating cash and adjusted net debt 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 of operating profit.
The adjustments made to reported revenue are:
one-off revenues - fees related to one-off revenues in relation to release of the 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 Income Statement 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 one-off costs/income - these relate to certain one-off costs associated with the Group's acquisition activities including any costs in relation to aborted acquisitions, reorganisation costs associated with one-off projects that are not related to the core operations of the business and one-off 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.
Going concern
The Group had cash balances of £4,814,000 (2015: £10,056,000), net assets of £59,819,000 (2015: £55,071,000) and net current liabilities of £1,986,000 (2015: £1,857,000) as at each year end.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the financial statements. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. As part of the normal management process, detailed forecasts of future trading, profits and cashflows on a CGU by CGU basis are prepared, which includes the impact for possible changes in market or regulatory conditions. Based on these projections, the Board remains positive about the Group's short and medium-term prospects.
Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual report and financial statements.
Revenue
Personal Injury - Revenue is from the provision of enquiries to the Panel Law Firms, based on a cost plus margin model, on provision of the lead, plus commissions received from providers for the sale of additional products by them to the Panel Law Firms on sale of that product. Revenue recognised is equal to the cash received with no further clawback or commitments except where solicitor income gives rise to variable consideration, in which case the revenue recognised is equal to managements' best estimate of the future expected cash flows discounted for the time value of money. Where a contract contains elements of variable consideration, the turnover recognised is the amount that is probable and can be reliably estimated, discounted for the time value of money.
Pre-LASPO ATE - Revenue from 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.
Critical Care - Revenue from the provision of expert witness reports and case management support within the medico-legal framework for multi-track cases. Revenue is recognised on the completion and delivery of reports and provision of case management services.
Residential Property - Revenue from the provision of online marketing services to target home buyers and sellers in England and Wales and offering lead generation services to Panel Law Firms and surveyors in the conveyancing sector. Revenue is recognised on a fixed-fee basis on the transfer of instruction to Panel Law Firms. Search revenue is recognised as revenue in the period in which the search is delivered.
All revenue is stated net of Value Added Tax. The entire revenue arose in the United Kingdom.
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 intangible assets - 3 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:
Fixtures and fittings including:
• Office equipment - 3 to 5 years
• Computers - 3 years
Operating leases
Operating lease rentals are charged to the income statement on a straight-line basis over the period of the lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances.
Taxation
Tax on the income statement for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity (i.e. forming part of equity) only to the extent that they meet the following two conditions:
a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company (or Group); and
b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.
Finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges. Finance payments associated with financial instruments that are classified as part of shareholders' funds are dealt with as appropriations in the reconciliation of movements in equity.
Employee share schemes
The share option plans allow employees of the Group to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.
Impairment
The carrying amounts of the Group's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the CGU). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2 Operating segments
|
|
Personal Injury |
Pre-LASPO ATE |
Critical Care |
Residential Property |
Other segments |
One-off items |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Year ended 31 December 2016 |
|
|
|
|
|
|
|
|
Revenue |
30,011 |
1,250 |
10,353 |
9,021 |
- |
- |
50,635 |
|
Depreciation and amortisation |
(89) |
- |
(44) |
(147) |
- |
(1,242) |
(1,522) |
|
Operating profit/(loss) |
14,112 |
1,155 |
3,786 |
1,391 |
(1,304) |
(2,979) |
16,161 |
|
Financial income |
14 |
- |
19 |
- |
10 |
- |
43 |
|
Financial expenses |
(1) |
- |
(5) |
- |
(397) |
- |
(403) |
|
Profit/(Loss) before tax |
14,125 |
1,155 |
3,800 |
1,391 |
(1,691) |
(2,979) |
15,801 |
|
Trade receivables |
1,935 |
- |
3,929 |
343 |
- |
- |
6,207 |
|
Segment liabilities |
(5,227) |
(1,982)* |
(1,035) |
(765) |
(503) |
(31) |
(9,543) |
|
Capital expenditure (including intangibles) |
608 |
- |
96 |
46 |
- |
- |
750 |
|
Year ended 31 December 2015 |
|
|
|
|
|
|
|
|
Revenue |
45,081 |
- |
2,113 |
3,522 |
- |
- |
50,716 |
|
Depreciation and amortisation |
(160) |
- |
(5) |
(22) |
(249) |
- |
(436) |
|
Operating profit/(loss) |
15,528 |
- |
644 |
825 |
(1,375) |
(1,503) |
14,119 |
|
Financial income |
49 |
- |
- |
- |
10 |
- |
59 |
|
Financial expenses |
- |
- |
- |
(2) |
(226) |
- |
(228) |
|
Profit/(Loss) before tax |
15,577 |
- |
644 |
823 |
(1,591) |
(1,503) |
13,950 |
|
Trade receivables |
2,646 |
- |
3,351 |
215 |
- |
- |
6,212 |
|
Segment liabilities |
(6,960) |
(3,601) |
(884) |
(298) |
(807) |
- |
(12,550) |
|
Capital expenditure (including intangibles) |
82 |
- |
- |
113 |
- |
- |
195 |
*Pre-LASPO ATE liabilities include the balance of commissions received in advance that are due to be paid back to the insurance provider of £1,912,000 and accruals for associated costs of £70,000.
Geographic information
All revenue and assets of the Group are based in the UK.
Operating segments
The expansion of the Group in the prior year resulted in a change to the way the segments are reviewed by the entity's Chief Operating Decision Maker (CODM) being the Board, for performance assessment and resource allocation decisions. The segments used in reporting by the CODM, and considered relevant to the business are segmented on a product basis. These segments are:
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.
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.
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 (previously Conveyancing) - Revenue from the provision of online marketing services to target home buyers 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.
Other segments - Costs that are incurred in managing Group activities or not specifically related to a product.
One-off 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, release of ATE liability and including 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 one-off items.
Reconciliation of operating profit to net cash flows from operating activities
|
12 months ended 31 December 2016 |
Underlying operations |
Pre-LASPO ATE |
Sub-total |
One-off items |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Operating profit |
15,606 |
1,155 |
16,761 |
(600) |
16,161 |
|
Amortisation of intangible assets acquired on business combinations |
1,327 |
- |
1,327 |
- |
1,327 |
|
Equity-settled share based payments |
1,052 |
- |
1,052 |
- |
1,052 |
|
Underlying operating profit |
17,985 |
1,155 |
19,140 |
(600) |
18,540 |
|
Depreciation and amortisation |
195 |
- |
195 |
- |
195 |
|
Increase in trade/other receivables |
(1,876) |
- |
(1,876) |
- |
(1,876) |
|
(Decrease)/Increase in trade/other payables |
(1,969) |
70 |
(1,899) |
31 |
(1,868) |
|
Decrease in liabilities relating to pre-LASPO ATE product |
- |
(1,689) |
(1,689) |
- |
(1,689) |
|
Net cash flows from operating activities before interest and tax |
14,335 |
(464) |
13,871 |
(569) |
13,302 |
|
Interest paid |
(346) |
- |
(346) |
- |
(346) |
|
Tax paid |
(3,692) |
- |
(3,692) |
- |
(3,692) |
|
Net cash from operating activities |
10,297 |
(464) |
9,833 |
(569) |
9,264 |
|
12 months ended 31 December 2015 |
Underlying operations |
Pre-LASPO ATE |
Sub-total |
One-off items |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Operating profit |
14,530 |
- |
14,530 |
(411) |
14,119 |
|
Amortisation of intangible assets acquired on business combinations |
259 |
- |
259 |
- |
259 |
|
Equity-settled share based payments |
833 |
- |
833 |
- |
833 |
|
Underlying operating profit |
15,622 |
- |
15,622 |
(411) |
15,211 |
|
Depreciation |
177 |
- |
177 |
- |
177 |
|
Increase in trade/other receivables |
(813) |
- |
(813) |
- |
(813) |
|
Increase in trade/other payables |
226 |
- |
226 |
- |
226 |
|
Decrease in liabilities relating to pre-LASPO ATE product |
- |
(2,910) |
(2,910) |
- |
(2,910) |
|
Net cash flows from operating activities before interest and tax |
15,212 |
(2,910) |
12,302 |
(411) |
11,891 |
|
Interest Paid |
(216) |
- |
(216) |
- |
(216) |
|
Tax Paid |
(3,127) |
- |
(3,127) |
- |
(3,127) |
|
Net cash from operating activities |
11,869 |
(2,910) |
8,959 |
(411) |
8,548 |
3 Administrative expenses and auditor's remuneration
Included in the consolidated statement of comprehensive income are the following:
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
170 |
175 |
|
Amortisation of intangible assets (not relating to business combinations) |
|
25 |
2 |
|
Amortisation of intangible assets relating to business combinations |
|
1,327 |
259 |
|
Operating leases - land and buildings |
|
361 |
220 |
|
Operating leases - other |
|
63 |
50 |
|
Auditor's remuneration |
|
95 |
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The analysis of auditor's remuneration is as follows: |
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Audit services - statutory audit |
|
77 |
69 |
|
|
|
|
|
|
Other assurance services |
|
- |
9 |
|
Taxation compliance |
|
18 |
11 |
|
Taxation advisory services |
|
- |
6 |
|
Corporate finance services |
|
- |
74 |
|
Total non-audit remuneration |
|
18 |
100 |
4 One-off items
One-off items included in the income statement are summarised below:
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Legal and professional fees relating to acquisitions 1 |
|
78 |
570 |
|
Release of pre-LASPO ATE liability and associated costs2 |
|
(1,155) |
- |
|
Personal Injury reorganisation costs3 |
|
522 |
- |
|
IPO related costs 4 |
|
- |
(183) |
|
Vendors' consultancy fees on Fitzalan acquisition 5 |
|
- |
24 |
|
|
|
(555) |
411 |
1. Legal and professional fees paid in relation to the acquisitions of Searches UK Limited (2016) and Fitzalan, BVC and Bush (2015), including due diligence costs and Stamp Duty.
2. Previously recognised liabilities for pre-LASPO ATE commissions received in advance of £1,250,000 have been released in the year as a result of more favorable settlements. These have been offset by associated costs of £95,000.
3. Personal Injury reorganisation costs relate to costs associated with one-off projects that are not related to the core operations of the business.
4. Previously recognised accruals in respect of the IPO of £183,000 were released in the prior year.
5. Fees paid to former senior management of Fitzalan for consultancy services provided in the business post-acquisition.
5 Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
|
|
|
Number of Employees |
|
|
|
|
2016 |
2015 |
|
|
|
|
|
|
Directors |
|
5 |
4 |
|
Others |
|
195 |
154 |
|
|
|
200 |
158 |
|
The aggregate payroll costs of these persons were as follows: |
|
|
|
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Wages and salaries |
|
6,821 |
5,969 |
|
Share based payments (see note 19) |
|
1,052 |
833 |
|
Social security costs |
|
723 |
597 |
|
Pension costs |
|
65 |
31 |
|
|
|
8,661 |
7,430 |
6 Financial income
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Bank interest income |
|
25 |
59 |
|
Investment income |
|
18 |
- |
|
|
|
43 |
59 |
7 Financial expense
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
On bank loans |
|
340 |
216 |
|
Bank charges |
|
63 |
12 |
|
Total finance expense |
|
403 |
228 |
8 Taxation
|
Recognised in the consolidated statement of comprehensive income |
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
Current tax expense |
|
|
|
|
Current tax on income for the year |
|
3,582 |
3,175 |
|
Adjustments in respect of prior years |
|
(35) |
- |
|
Total current tax |
|
3,547 |
3,175 |
|
|
|
|
|
|
Deferred tax expense |
|
|
|
|
Origination and reversal of timing differences |
|
30 |
9 |
|
Total deferred tax |
|
30 |
9 |
|
|
|
|
|
|
Tax expense in income statement |
|
3,577 |
3,184 |
|
|
|
|
|
|
Total tax charge |
|
3,577 |
3,184 |
The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretation of tax law and prior experience.
|
Reconciliation of effective tax rate |
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Profit for the year |
|
12,224 |
10,766 |
|
Total tax expense |
|
3,577 |
3,184 |
|
Profit before taxation |
|
15,801 |
13,950 |
|
|
|
|
|
|
Tax using the UK corporation tax rate of 20.0% (2015: 20.25%) |
|
3,160 |
2,825 |
|
|
|
|
|
|
Income disallowable for tax purposes |
|
(3) |
- |
|
Non-deductible expenses |
|
455 |
345 |
|
Adjustments in respect of prior years |
|
(35) |
- |
|
Short-term timing differences for which no deferred tax is recognised |
|
- |
14 |
|
Total tax charge |
|
3,577 |
3,184 |
Changes in tax rates and factors affecting the future tax charge
A reduction in the UK corporation tax rate from 21.0% to 20.0% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19.0% (effective from 1 April 2017) and to 18.0% (effective from 1 April 2020) was substantively enacted on 26 October 2015 and an additional reduction to 17.0% (effective from 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax assets and liabilities at 31 December 2016 have been calculated based on these rates.
9 Deferred tax asset
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
At beginning of year |
|
68 |
77 |
|
Recognised in profit and loss (see note 8) |
|
(30) |
(9) |
|
Deferred tax asset at end of year |
|
38 |
68 |
The asset for deferred taxation consists of the tax effect of temporary differences in respect of:
|
|
Property, plant & equipment |
Bad debt provisions |
Total |
|
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2015 |
63 |
14 |
77 |
|
Recognised in profit and loss |
(19) |
10 |
(9) |
|
At 31 December 2015 |
44 |
24 |
68 |
|
Recognised in profit and loss |
(23) |
(7) |
(30) |
|
At 31 December 2016 |
21 |
17 |
38 |
10 Deferred tax liability
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
At beginning of year |
|
1,738 |
- |
|
Arising on business combination (see note 11) |
|
176 |
1,738 |
|
Deferred tax liability at end of year |
|
1,914 |
1,738 |
11 Acquisitions
Acquisition of Searches UK Limited
On 11 January 2016 the Group acquired the entire share capital of Searches UK Limited (Searches). Searches is a conveyancing search provider in England and Wales predominantly for residential property transactions.
Acquisition of Bush & Company Rehabilitation Limited
On 14 October 2015 the Group acquired the entire share capital of Bush & Company Rehabilitation Limited (Bush). Bush is a leading provider of expert witness reports and case management support within the medico-legal framework for multi-track cases.
Acquisition of Best Value Conveyancing
On 30 June 2015, Fitzalan Partners Limited (Fitzalan) acquired the trading assets of Best Value Conveyancing (BVC). BVC provides lead generation services to law firms in the conveyancing sector.
Acquisition of Fitzalan Partners Limited
On 17 February 2015 the Group acquired the entire share capital of Fitzalan. Fitzalan is an online marketing specialist servicing home buyers and sellers in England and Wales.
Fair values
The acquisitions had the following effect on the Group's assets and liabilities:
|
|
Searches
|
Total 2016 |
Fitzalan |
BVC |
Bush |
Total 2015 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
Intangible assets |
881 |
881 |
352 |
199 |
8,111 |
8,662 |
|
Revaluation of intangible assets |
- |
- |
- |
(25) |
- |
(25) |
|
Tangible assets |
6 |
6 |
- |
- |
53 |
53 |
|
Trade and other receivables |
369 |
369 |
141 |
- |
3,362 |
3,503 |
|
Cash and cash equivalents |
295 |
295 |
626 |
- |
4,946 |
5,572 |
|
Trade and other payables |
(419) |
(419) |
(445) |
- |
(1,231) |
(1,676) |
|
Deferred tax liability |
(176) |
(176) |
(71) |
(40) |
(1,627) |
(1,738) |
|
Net assets acquired |
956 |
956 |
603 |
134 |
13,614 |
14,351 |
|
Goodwill arising on acquisition |
1,124 |
1,124 |
3,709 |
40 |
15,592 |
19,341 |
|
Fair value of net assets acquired and goodwill arising |
2,080 |
2,080 |
4,312 |
174 |
29,206 |
33,692 |
|
|
|
|
|
|
|
|
|
Cash consideration |
2,080 |
2,080 |
3,512 |
163 |
28,599 |
32,274 |
|
Fair value of deferred consideration |
- |
- |
800 |
11 |
607 |
1,418 |
|
Fair value of net assets acquired and goodwill arising |
2,080 |
2,080 |
4,312 |
174 |
29,206 |
33,692 |
The Group incurred acquisition related costs of £78,000 (2015: £570,000) related to professional fees paid for due diligence, general professional fees and legal related costs. These costs have been included in one-off items in the Group's consolidated statement of comprehensive income.
At 31 December 2016 £nil (2015: £36,000) deferred consideration remained outstanding in respect of the BVC acquisition. During 2016 the final amount was settled at £11,000 with the resulting £25,000 of the deferred consideration being released.
For all acquisitions made in the year, fair values remain provisional, but will be finalised within 12 months of acquisition.
12 Goodwill
|
|
Personal Injury |
Critical Care |
Residential Property |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
|
At 1 January 2015 |
39,897 |
- |
- |
39,897 |
|
Acquired through business combinations |
- |
15,592 |
3,749 |
19,341 |
|
At 31 December 2015 |
39,897 |
15,592 |
3,749 |
59,238 |
|
|
|
|
|
|
|
Acquired through business combinations |
- |
- |
1,124 |
1,124 |
|
At 31 December 2016 |
39,897 |
15,592 |
4,873 |
60,362 |
|
|
|
|
|
|
|
Impairment |
|
|
|
|
|
At 1 January 2015 |
- |
- |
- |
- |
|
At 31 December 2015 |
- |
- |
- |
- |
|
At 31 December 2016 |
- |
- |
- |
- |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2015 |
39,897 |
15,592 |
3,749 |
59,238 |
|
At 31 December 2016 |
39,897 |
15,592 |
4,873 |
60,362 |
Where goodwill arose as part of a business acquisition, it forms part of the CGUs asset carrying value which is tested for impairment annually. The Group reassessed the CGUs in the prior year in light of the expansion to the Group and the changes to operating segments and has determined that for the purposes of impairment testing, each segment i.e. Personal Injury, Critical Care and Residential Property, is the appropriate level at which to test. Due to the discontinued nature of the pre-LASPO ATE product, no goodwill has been allocated to it.
The recoverable amounts for the CGUs are predominantly based on value in use which is calculated on the cash flows expected to be generated by the division using the latest budget data for the coming year, extrapolated at an annual growth rate for four years and no growth into perpetuity, discounted at a range of pre-tax WACCs of between 10.1% - 12.7% (2015: 8.6%). The range of WACCs represents the different risk profiles of each CGU. For the current year review we have extended the cash flows of Personal Injury for a further three years to take into account the effects of cash flows from deferred term contracts which artificially deflate the cash flows for the first five years of the forecasts. The extended three year period considers cash flows from profits and WIP generated in the initial five year forecast period only and does not include cash flows from further instructions taking place after the initial five years considered. The key assumptions in the value in use calculation are the discount rate and growth rate. The discount rates are based on the Group's pre-tax cost of capital and estimated cost of equity, which the Directors consider equated to market participants rate. The movement in the discount rates compared to the prior year is the result of the increased perceived risk due to the uncertainty over regulatory changes. In preparing the formal budget for the next financial period, expected EBITDA is based on past experience of the performance of the CGUs adjusted for known changes.
The Government has signalled its intention to increase the small claims limit. As some increase is likely in the small claims limit, it is believed that there is as much opportunity as there is risk as to the impact this could have on the profitability of the Personal Injury CGU. The best estimate of the impact of these changes has been factored into the five year forecasts.
Based on the operating performance of the CGUs, no impairment loss was identified in any of the CGUs and for Critical Care and Residential Property there is sufficient headroom to indicate that no reasonable change to key assumptions would result in an impairment of this goodwill. The key average growth assumptions for years one to five were as follows:
|
|
|
2016 |
2015 |
|
|
|
|
|
|
Personal Injury |
|
(9.2)% |
0.0% |
|
Critical Care |
|
10.0% |
10.0% |
|
Residential Property |
|
10.0% |
10.0% |
A decrease has been applied to personal injury to factor in the uncertainty over the small claims consultation.
The following table shows the percentage to which the discount rate would need to increase and the percentage by which the budgeted operating cash flows would need to decrease in order for the estimated recoverable amount of the CGUs to be equal to the carrying amount:
|
|
|
Discount Rate |
|
Cashflows |
||
|
|
|
2016 |
2015 |
|
2016 |
2015 |
|
|
|
|
|
|
|
|
|
Personal Injury |
|
14.1% |
45.0% |
|
(4.0%) |
(49.2%) |
|
Critical Care |
|
19.3% |
14.3% |
|
(15.4%) |
(10.3)% |
|
Residential Property |
|
88.6% |
252.3% |
|
(58.6%) |
(75.3%) |
The available headroom for each CGU is as follows:
|
|
|
|
|
|
||
|
|
|
|
|
|
2016 |
2015 |
|
|
|
|
|
|
|
|
|
Personal Injury |
|
|
|
|
1,638 |
22,672 |
|
Critical Care |
|
|
|
|
2,580 |
1,637 |
|
Residential Property |
|
|
|
|
5,742 |
9,511 |
There is limited headroom in the assessment of Personal Injury goodwill impairment. We have considered the effects of this limited headroom and note that:
• A much higher discount rate has been applied than in prior years to take into account the volatility and the regulatory uncertainty that existed at the year end. Following the regulatory announcement the volatility and risk premium is expected to reduce and stabilise. It is, therefore, felt that this is a time of peak uncertainty and hence the WACC used currently is considered to be at a maximum. Once the risk and uncertainty begin to stabilise and the WACC reduces then the current limited headroom will begin to improve.
• The current assessment takes no account of cash flows from profits from instructions generated after the five year forecast period. In reality, there is no reason to believe that Personal Injury will not continue trading for the foreseeable future after this 5 year forecast period and hence the cashflows it would generate over its useful economic life would be much higher than those considered by the forecast period even after the effects of discounting.
• Given the above considerations then the Directors are satisfied that it is appropriate to recognise no impairment against the Personal Injury goodwill.
13 Intangibles assets
|
|
Technology related |
Contract related |
Brand names |
Other |
Assets under construction |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
|
|
|
At 31 December 2015 |
167 |
7,746 |
749 |
47 |
4 |
8,713 |
|
Revaluation |
- |
- |
(25) |
- |
- |
(25) |
|
Additions |
- |
- |
- |
502 |
16 |
518 |
|
Additions through business combinations |
- |
720 |
161 |
- |
- |
881 |
|
At 31 December 2016 |
167 |
8,466 |
885 |
549 |
20 |
10,087 |
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
|
At 31 December 2015 |
22 |
214 |
23 |
2 |
- |
261 |
|
Amortisation charge for the year |
- |
- |
- |
25 |
- |
25 |
|
Amortisation charge on business combinations |
20 |
1,072 |
235 |
- |
- |
1,327 |
|
At 31 December 2016 |
42 |
1,286 |
258 |
27 |
- |
1,613 |
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
At 31 December 2015 |
145 |
7,532 |
726 |
45 |
4 |
8,452 |
|
At 31 December 2016 |
125 |
7,180 |
627 |
522 |
20 |
8,474 |
The intangible assets recognised on business combinations were acquired as part of the acquisition of Searches UK Limited.
|
|
Technology related |
Contract related |
Brand names |
Other |
Assets under construction |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
|
|
|
At 31 December 2014 |
- |
- |
- |
- |
- |
- |
|
Additions |
- |
- |
- |
47 |
4 |
51 |
|
Additions through business combinations |
167 |
7,746 |
749 |
- |
- |
8,662 |
|
At 31 December 2015 |
167 |
7,746 |
749 |
47 |
4 |
8,713 |
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
|
At 31 December 2014 |
- |
- |
- |
- |
- |
- |
|
Amortisation charge for the year |
- |
- |
- |
2 |
- |
2 |
|
Amortisation charge on business combinations |
22 |
214 |
23 |
- |
- |
259 |
|
At 31 December 2015 |
22 |
214 |
23 |
2 |
- |
261 |
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
At 31 December 2014 |
- |
- |
- |
- |
- |
- |
|
At 31 December 2015 |
145 |
7,532 |
726 |
45 |
4 |
8,452 |
14 Property, plant and equipment
|
|
|
|
Fixtures & fittings & total |
|
|
|
|
£000 |
|
Cost |
|
|
|
|
At 1 January 2016 |
|
|
1,434 |
|
Additions |
|
|
232 |
|
Additions through business combinations |
|
|
6 |
|
At 31 December 2016 |
|
|
1,672 |
|
|
|
|
|
|
Depreciation and impairment |
|
|
|
|
At 1 January 2016 |
|
|
1,175 |
|
Depreciation charge for the year |
|
|
170 |
|
At 31 December 2016 |
|
|
1,345 |
|
|
|
|
|
|
Net book value |
|
|
|
|
At 31 December 2015 |
|
|
259 |
|
At 31 December 2016 |
|
|
327 |
|
|
|
|
Fixtures & fittings & total |
|
|
|
|
£000 |
|
Cost |
|
|
|
|
At 1 January 2015 |
|
|
1,072 |
|
Additions |
|
|
195 |
|
Additions through business combinations |
|
|
167 |
|
At 31 December 2015 |
|
|
1,434 |
|
|
|
|
|
|
Depreciation and impairment |
|
|
|
|
At 1 January 2015 |
|
|
886 |
|
Additions through business combinations |
|
|
114 |
|
Depreciation charge for the year |
|
|
175 |
|
At 31 December 2015 |
|
|
1,175 |
|
|
|
|
|
|
Net book value |
|
|
|
|
At 31 December 2014 |
|
|
186 |
|
At 31 December 2015 |
|
|
259 |
15 Trade and other receivables
|
|
2016 |
2015 |
|
|
£000 |
£000 |
|
|
|
|
|
Trade receivables: due in less than one year |
5,382 |
5,526 |
|
Trade receivables: due in more than one year |
825 |
686 |
|
Accrued income |
3,572 |
361 |
|
Other receivables |
140 |
1,140 |
|
|
9,919 |
7,713 |
|
Prepayments |
368 |
331 |
|
|
10,287 |
8,044 |
16 Other interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's other interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate risk, see note 21.
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
Current liabilities |
|
|
|
|
Current portion of secured bank loans |
|
3,750 |
3,750 |
|
Less future finance charges |
|
(57) |
(57) |
|
|
|
3,693 |
3,693 |
|
Non-current liabilities |
|
|
|
|
Secured bank loans |
|
7,500 |
11,250 |
|
Less future finance charges |
|
(104) |
(161) |
|
|
|
7,396 |
11,089 |
|
|
|
|
|
|
Total other interest-bearing loans and borrowings |
|
11,089 |
14,782 |
Terms and debt repayment schedule
|
|
Currency |
Nominal interest rate |
Year of maturity |
Face value |
Carrying amount |
Face value |
Carrying amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
2016 |
2015 |
2015 |
|
|
|
|
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
|
Bank loan1 |
GBP |
1.65% above Libor |
2019 |
11,250 |
11,250 |
15,000 |
15,000 |
|
|
|
|
|
11,250 |
11,250 |
15,000 |
15,000 |
1. The remaining loan of £11,250,000 is repayable over six instalments of £1,875,000 every six months starting on 30 June 2017. Interest is payable at 1.65% above LIBOR.
17 Trade and other payables
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Trade payables |
|
2,755 |
3,434 |
|
Other taxation and social security |
|
823 |
517 |
|
Other payables, accruals and deferred revenue |
|
2,740 |
3,455 |
|
Customer deposits |
|
1,313 |
1,543 |
|
|
|
7,631 |
8,949 |
18 Share capital
|
|
|
2016 |
2015 |
|
Number of shares |
|
|
|
|
'A' Ordinary Shares of £0.0025 each |
|
45,349,629 |
45,265,000 |
|
|
|
45,329,629 |
45,265,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
£000 |
£000 |
|
Allotted, called up and fully paid |
|
|
|
|
45,349,629 (2015: 45,265,000) 'A' Ordinary Shares of £0.0025 each |
|
113 |
113 |
|
|
|
113 |
113 |
|
Shares classified in equity |
|
113 |
113 |
|
|
|
113 |
113 |
19 Share based payments
The Group operates three employee share plans as follows:
SAYE plan
Options may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an employees' trust or by the transfer of Ordinary Shares held in treasury.
EMI Scheme
The EMI Plan provides for the grant, to selected employees of the Group, of rights to acquire (whether by subscription or market purchase) Ordinary Shares in the Company (Options). Options may be granted as tax-favoured enterprise management incentive options (EMI Options) or non-tax favoured Options.
LTIP
The LTIP will enable selected employees (including Executive Directors) to be granted awards in respect of Ordinary Shares. Awards may be granted in the form of nil or nominal cost options to acquire Ordinary Shares; or contingent rights to receive Ordinary Shares. Awards may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an employees' trust or by the transfer of Ordinary Shares held in treasury.
The terms and conditions of grants of share options to employees of the Group, in the shares of NAHL Group plc are as follows:
|
Grant date/employees entitled/nature of scheme |
Number of instruments |
Vesting conditions |
Contractual life of options |
|
|
|
|
|
|
SAYE Equity-settled award to 35 employees granted by the parent company on 29 May 2014 |
179,436 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
|
|
|
|
|
|
LTIP Equity-settled award to 4 employees granted by the parent company on 29 May 2014 |
763,962 ordinary shares |
Performance - based |
Third anniversary of Date of Grant |
|
|
|
|
|
|
EMI Equity-settled award to 7 employees granted by the parent company on 11 December 2014 |
708,330 ordinary shares |
Performance -based |
Announcement of 2016 results |
|
|
|
|
|
|
EMI Equity-settled award to 4 employees granted by the parent company on 13 April 2015 |
257,156 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
|
|
|
|
|
|
EMI Equity-settled award to 2 employees granted by the parent company on 9 October 2015 |
135,886 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
|
|
|
|
|
|
EMI Equity-settled award to 1 employee granted by the parent company on 2 December 2015 |
120,689 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
|
EMI Equity-settled award to 1 employee granted by the parent company on 28 October 2016 |
20,964 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
|
EMI Equity-settled award to 1 employee granted by the parent company on 31 October 2016 |
61,506 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
|
EMI Equity-settled award to 1 employee granted by the parent company on 31 October 2016 |
62,893 ordinary shares |
Performance -based |
Third anniversary of Date of Grant |
The number and weighted average exercise prices of share options are as follows:
|
|
2016 |
2016 |
2015 |
2015 |
|
Weighted average exercise price |
Number of options |
Weighted average exercise price |
Number of options |
|
|
|
£ |
No. |
£ |
No. |
|
Outstanding at the beginning of the year |
1.69 |
2,621,842 |
1.13 |
1,939,748 |
|
Exercised during the year |
(1.90) |
(84,629) |
- |
- |
|
Granted during the year |
1.38 |
145,363 |
3.59 |
709,656 |
|
Cancelled during the year |
(1.75) |
(141,813) |
- |
- |
|
Forfeited during the year |
(2.89) |
(229,941) |
(1.60) |
(27,562) |
|
|
|
|
|
|
|
Outstanding at the end of the year |
1.53 |
2,310,822 |
1.69 |
2,621,842 |
|
Exercisable at the end of the year |
2.00 |
83,333 |
- |
- |
A charge of £903,000 (2015: £833,000) has been made through profit and loss in the current year in relation to the IFRS 2 share option charge and a further £149,000 (2015: £nil) has been charged to the profit and loss account in respect of a provision for Employer's National Insurance contributions that are expected to arise on the exercise of the LTIP options. The fair value of each employee share option has been measured using the Black-Scholes formula where an expected volatility of 65.0% (2015: 65.0%) has been used as well as a risk-free interest rate (based on government bonds) of 1.0% (2015: 1.0%). Service and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value.
Expected volatility has been based on evaluation of historical volatility of the Company's share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour.
20 Earnings per share
|
The calculation of basic earnings per share at 31 December 2016 is based on profit attributable to ordinary shareholders of £12,224,000 (2015: £10,766,000) and a weighted average number of Ordinary Shares outstanding of 45,294,877 (2015: 42,040,643). |
Profit attributable to ordinary shareholders (basic)
|
£000 |
|
2016 |
2015 |
|
Profit for the year attributable to the shareholders |
|
12,224 |
10,766 |
Weighted average number of ordinary shares (basic)
|
Number |
Note |
|
2016 |
2015 |
|
Issued Ordinary Shares at 1 January |
18 |
|
45,265,000 |
41,150,000 |
|
Weighted average number of Ordinary Shares at 31 December |
|
|
45,294,877 |
42,040,643 |
Basic Earnings per share (p)
|
|
|
2016 |
2015 |
|
Group |
|
27.0 |
25.6 |
|
|
|
|
|
The Group has in place share based payment schemes to reward employees. At 31 December 2016, there were potentially dilutive share options under the Group's share option schemes. The total number of options available for these schemes included in the diluted earnings per share calculation is 775,746 (2015: 938,719). There are no other diluting items.
Diluted Earnings per share (p)
|
|
|
2016 |
2015 |
|
Group |
|
26.5 |
25.0 |
|
|
|
|
|
21 Financial instruments
(a) Fair values of financial instruments
The Group's principal financial instruments comprise interest-bearing borrowings, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group has various other financial instruments such as trade and other receivables and trade and other payables that arise directly from its operations.
The main risks arising from the Group's financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. There have been no substantive changes in the Group's exposure to financial instrument risks or its objectives, policies and processes for managing and measuring those risks during the periods in this report unless otherwise stated.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.
Interest-bearing borrowings
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date.
The interest rate used to discount estimated cash flows of 12.7% (2015: 8.6%) is based on market rates.
The fair values of all financial assets and financial liabilities by class, which approximate to their carrying values, shown in the balance sheet are as follows:
|
|
Fair value hierarchy |
Carrying amount |
Fair value |
Carrying amount |
Fair value |
|
|
|
2016 |
2016 |
2015 |
2015 |
|
|
|
£000 |
£000 |
£000 |
£000 |
|
Cash and receivables |
|
|
|
|
|
|
Cash and cash equivalents |
|
4,814 |
4,814 |
10,056 |
10,056 |
|
|
|
4,814 |
4,814 |
10,056 |
10,056 |
|
Trade and other receivables (note 15) |
|
9,919 |
9,919 |
7,713 |
7,713 |
|
Total financial assets |
|
14,733 |
14,733 |
17,769 |
17,769 |
|
|
|
|
|
|
|
|
Financial liabilities measured at amortised cost |
|
|
|
|
|
|
Other interest-bearing loans and borrowings (note 16) |
Level 2 |
11,250 |
11,250 |
15,000 |
15,000 |
|
Trade payables (note 17) |
|
2,755 |
2,755 |
3,434 |
3,434 |
|
Total financial liabilities measured at amortised cost |
|
14,005 |
14,005 |
18,434 |
18,434 |
Fair value hierarchy
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the value measurements:
Level 1 - inputs are quoted prices in active markets;
Level 2 - a valuation that uses observable inputs for the asset or liability other than quoted prices in active markets; and
Level 3 - a valuation using unobservable inputs, i.e. a valuation technique.
There were no transfers between levels throughout the periods under review.
(b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and investment securities.
Management consider the credit risk to be low as a result of the deposits held for all significant customers. As at 31 December 2016 these deposits reflect 21.2% (2015: 24.8%) of the balance of trade receivables.
Exposure to credit risk
The maximum exposure to credit risk at the balance sheet date by class of financial instrument was:
|
|
2016 |
2015 |
|
|
£000 |
£000 |
|
|
|
|
|
Trade receivables |
6,207 |
6,212 |
Deposits with key customers are held to mitigate the potential credit risk. At each balance sheet date, the amount of deposit held was:
|
|
2016 |
2015 |
|
|
£000 |
£000 |
|
|
|
|
|
Customer deposits |
1,313 |
1,543 |
Credit quality of financial assets and impairment losses
The aging of trade receivables at the balance sheet date was:
|
|
Gross: |
Gross: |
Impair-ment |
Total |
Gross: |
Gross: |
Impair-ment |
Total |
|
|
2016 |
2016 |
2016 |
2016 |
2015 |
2015 |
2015 |
2015 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
|
|
Not past due |
2,111 |
1,916 |
(48) |
3,979 |
2,789 |
906 |
(56) |
3,639 |
|
Past due (1-30 days) |
679 |
41 |
- |
720 |
1,140 |
4 |
- |
1,144 |
|
Past due (30-120 days) |
862 |
18 |
- |
880 |
929 |
26 |
(11) |
944 |
|
Past due (over 120 days) |
675 |
9 |
(56) |
628 |
584 |
- |
(99) |
485 |
|
|
4,327 |
1,984 |
(104) |
6,207 |
5,442 |
936 |
(166) |
6,212 |
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
|
|
2016 |
2015 |
|
|
£000 |
£000 |
|
|
|
|
|
Balance at 1 January |
166 |
71 |
|
Allowance (released)/recognised |
(62) |
95 |
|
Balance at 31 December |
104 |
166 |
The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.
(c) Liquidity risk
Financial risk management
Liquidity risk arises from the Group's management of working capital and the finance charges on its debt instruments and repayments of principal. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts and loans to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of netting agreements:
|
2016 |
Secured bank loans |
Trade and other payables |
Total |
|
|
|
£000 |
£000 |
£000 |
|
|
Non-derivative financial instruments |
|
|
|
|
|
Carrying amount |
(11,250) |
(2,755) |
(14,005) |
|
|
Contractual cash flows: |
|
|
|
|
|
1 year or less |
(3,977) |
(2,755) |
(6,732) |
|
|
1 to 2 years |
(3,895) |
- |
(3,895) |
|
|
2 to 5 years |
(3,812) |
- |
(3,812) |
|
|
|
(11,684) |
(2,755) |
(14,439) |
|
|
2015 |
Secured bank loans |
Trade and other payables |
Total |
|
|
£000 |
£000 |
£000 |
|
Non-derivative financial instruments |
|
|
|
|
Carrying amount |
(15,000) |
(3,434) |
(18,434) |
|
Contractual cash flows: |
|
|
|
|
1 year or less |
(4,061) |
(3,434) |
(7,495) |
|
1 to 2 years |
(3,977) |
- |
(3,977) |
|
2 to 5 years |
(7,707) |
- |
(7,707) |
|
|
(15,745) |
(3,434) |
(19,179) |
(d) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments.
Market risk - foreign currency risk
The Group has no foreign currency risk as all transactions are in Sterling.
Market risk - interest rate risk
Profile
The Group is exposed to interest rate risk from its use of interest-bearing financial instruments. This is a market risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates.
At the balance sheet dates, there were no interest-bearing financial assets; however, the interest rate profile of the Group's interest-bearing financial liabilities was:
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
Variable rate instruments |
|
|
|
|
Financial liabilities |
|
11,250 |
15,000 |
|
Total interest-bearing financial instruments |
|
11,250 |
15,000 |
Sensitivity analysis
A change of 0.5% in interest rates at the balance sheet date would increase/(decrease) profit or loss in the following year by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables remain constant and considers the effect of financial instruments with variable interest rates. The analysis is performed on the same basis for the comparative periods.
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
Profit for the year |
|
|
|
|
Increase |
|
(56) |
(75) |
|
Decrease |
|
56 |
75 |
Market risk - equity price risk
The Group does not have an exposure to equity price risk as it holds no investment in equity securities which are classified as available for sale financial assets or designated at fair value through profit or loss.
(e) Capital management
Group
The Group's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern and to provide an adequate return to shareholders. Capital comprises the Group's equity, i.e. share capital including preference shares, share premium, own shares and retained earnings, as well as bank loans.
22 Operating leases
Non-cancellable operating lease rentals are payable as follows:
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Less than one year |
|
420 |
182 |
|
Between one and five years |
|
936 |
1,321 |
|
|
|
1,356 |
1,503 |
The Group leases a number of office buildings under operating leases. During the year £424,000 was recognised as an expense in the income statement in respect of operating leases (2015: £270,000).
23 Commitments
Capital commitments
At 31 December 2016 the Group had no capital commitments (2015: £nil).
24 Transactions with owners, recorded directly in equity
On 18 June 2015, NAHL Group plc carried out a capital reduction exercise. The steps required to complete the capital reduction have been included within the consolidated statement of changes in equity and have been further explained below:
Bonus issue of capital reduction shares
The amount standing to the credit of the Group's merger reserve in the sum of £16,928,000 was capitalised by way of a bonus issue of newly created capital reduction shares with a nominal value of £0.41 each.
Capital reduction shares cancelled
The newly created capital reduction shares were cancelled; the amount standing to the credit of the Group's share capital account in the sum of £16,928,000 was cancelled and recognised in retained earnings.
Capital reduction
The amount standing to the credit of the Group's share premium account in the sum of £49,532,649 was cancelled in full and the amount was recognised in retained earnings.
Following the approval by the Group's shareholders of the resolutions in the capital reduction and the subsequent approval by the Court, the Group's distributable reserves were increased by £66,460,649.
Issue of new Ordinary Shares
On the 14 October 2015, 4,115,000 new Ordinary Shares with a par value of £0.0025 were issued. These raised an additional £14,608,250 funds for the Group. The fees relating to this transaction totalled £336,600. These costs have been charged as a reduction to share premium resulting in a net increase to share premium of £14,261,363 and share capital of £10,287.
Exercise of share options
During the year 84,629 share options were exercised which resulted in the issue of 84,629 new Ordinary Shares with a par value of £0.0025. The exercising of these options raised funds of £160,508 for the Group. A charge of £85,093 has been reclassified from the share option reserve to share premium to reflect the crystalisation of previous charges in respect of these options.
25 Related parties
Transactions with key management personnel
Key management personnel in situ at the 31 December 2016 and their immediate relatives control 4.4% (2015: 4.8%) 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 and Bush & Company Rehabilitation Limited and any other management serving as part of the executive team. Detailed below is the total value of transactions with these individuals.
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Short-term employment benefits |
|
2,241 |
1,794 |
|
Termination benefits |
|
56 |
- |
|
|
|
2,297 |
1,794 |
26 Net debt
Net debt includes cash and cash equivalents, secured bank loans, loan notes and preference shares.
|
|
|
2016 |
2015 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Cash and cash equivalents |
|
4,814 |
10,056 |
|
Other interest-bearing loans and loan notes |
|
(11,089) |
(14,782) |
|
Net debt |
|
(6,275) |
(4,726) |
Set out below is a reconciliation of movements in net debt during the year.
|
|
2016 |
2015 |
|
|
£000 |
£000 |
|
|
|
|
|
Net decrease in cash and cash equivalents |
(5,242) |
(3,581) |
|
Cash and cash equivalents net outflow/(inflow) from decrease/(increase) in debt and debt financing |
3,693 |
(8,881) |
|
Movement in net borrowings resulting from cash flows |
(1,549) |
(12,462) |
|
|
|
|
|
Net (debt)/cash at beginning of year |
(4,726) |
7,736 |
|
Net debt at end of year |
(6,275) |
(4,726) |
This information is provided by RNS
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