Latest Results

Executive Chairman’s Statement

On behalf of the Board, I am pleased to present Anexo’s results for the six-month period ended 30 June 2024. The Group has continued to demonstrate the effectiveness of its business model, concentrating firmly on driving growth and investment in new claims, across multiple disciplines, without the need for meaningful increases in borrowings. Vehicle numbers within the credit hire division continue to be actively managed to forecast levels, while increased case settlements within the legal services division, including HDR, have driven the improvement in cash collections.

H1 2024 Group Performance

The Board has remained focused on the effective use of working capital and has actively managed the business to attain its stated goals of driving growth and improving the conversion of profits to free cash. The Group has delivered a strong performance, in line with management expectations, across all key financial metrics and KPIs over the first six months of the year. Whilst we have reported a reduction in revenues and profitability, reflecting the timing of the agreement of the VW Emissions Claim in H1 2023, which is subject to confidentiality arrangements, the underlying businesses have continued to perform well.

Legal Services Division

The Group remains committed to its strategy of increasing its claim settlement capacity, thereby maximising cash collections. Accordingly, the Group continued to expand the number of legal staff, which increased by over 10% in the period, reaching 761 at 30 June 2024 (30 June 2023: 690). This figure includes the total of senior fee earners during the period, which stood at 287 as at 30 June 2024 (an increase of over 18% in the period). Investment in new staff inevitably impacts reported performance as costs are incurred on appointment and, as always, revenues from settlements do not reach maturity for some months.

Investment in earlier periods has underpinned continued growth in cash collections, which rose 8% in H1 2024 to £83.8 million (H1 2023: £77.4 million). Revenues from the Legal Services division, which strongly converts to cash, reduced in the period (H1 2024: £33.5 million, H1 2023: £48.9 million) reflecting the impact of the VW agreement in H1 2023, excluding which revenues would show an increase over that reported in H1 2023. First half performance was impacted by the 10% increase in headcount, alongside investment in HDR claims (which increased by 17% in the period) and continued investment in diesel emissions claims.

Housing Disrepair

The Group’s HDR division continues to report growth in claim numbers and settlements driving revenues. The number of ongoing claims currently stands at approximately 3,900. HDR continued to be cash generative, with the value of fee income generated from settled claims exceeding the investment in staff and marketing costs for the generation of new claims. Net cash generation totalled £1.4 million in H1 2024 (H1 2023: Net cash inflow £0.4 million).

Emissions Litigation

Following the positive impact of the Group has felt from its involvement in the Diesel Emissions claims to date, the Group has continued to invest in the marketing of these claims. Bond Turner is now acting for claimants in claims against Mercedes Benz, Vauxhall, BMW/Mini, Peugeot/Citroen and Renault/Nissan.

In each of the claims against each of the respective Manufacturer group of defendants, a Group Litigation Order (“GLO”) has been made by the Court and Bond Turner’s clients will form part of the respective GLOs, which should facilitate a more efficient legal process to achieve a quicker resolution to the cases.

The Court is case managing all of the emissions claims in a co-ordinated manner, using the Mercedes Case as a ‘lead’ GLO case, with the intention that it will set precedent for the resolution of the other manufacturer cases.  The Court has further appointed three other cases to be Additional Lead GLO’s (‘ALGLOs’).  These are essentially cases which will progress alongside Mercedes to act as reserve cases in the event that Mercedes settles, and to involve additional issues that Mercedes does not but which are relevant to the Group Litigation as a whole.  The ALGLOs appointed are Ford, Nissan/Renault and Peugeot/Citroën. There has been a consolidated costs management hearing at which budgets were set for all parties for future costs.

By June 2024, court proceedings had been issued and served by Bond Turner against the Mercedes defendants in approximately 12,000 claims, and approximately 25,000 claims against Vauxhall, BMW/Mini, Peugeot/Citroen and Renault/Nissan. All of these cases will be added to the respective GLO Register of Claimants over the summer. Settlement of these claims is expected to significantly enhance profitability and cashflows although the timing of any negotiations remains uncertain.

The Court is keen to progress these cases as quickly as possible and has set a rigid timetable to do so:  disclosure is underway and several trial dates have been set with the first being heard in October 2024 involving several of the manufacturers issued against, dealing specifically with the issue of whether decisions by the German regulatory body (responsible for giving the vehicles ‘type approval’ to be manufactured and sold) are binding in England and Wales.  

In October 2025 liability will be determined raising legal and factual issues of whether the vehicles contained prohibited defeat devices. To assist the Court, this will include the selection and testing of sample vehicles across several manufacturers including Mercedes, Ford, Renault/Nissan and Peugeot/Citroën manufacturers.

Finally in October 2026 a trial will address causation and loss issues. This trial will involve all manufacturers.

Credit Hire Division

The Group has continued its policy of accepting only those claims generating best value for the Group and has actively managed the number of new claims accepted to levels which are in line with forecasts and which maintain a conversion of profitability to operating cash flows whilst supporting funding into other group activities such as HDR and emissions.

Having ended 2023 with record activity levels, and with cash collections rising to new record levels, the Group has increased the number of claims funded throughout H1 2024 compared to H1 2023. Claim acceptances increased by 13.2% from 4,920 in H1 2023 to 5,770 in H1 2024 contributing to the strong growth in revenues which are reported at £35.2 million in H1 2024 (H1 2023: £28.9 million). The strong start to the year means that activity in the second half can continue to be managed with the aim of driving growth without the need for significant increases in borrowings. Credit hire remains the mainstay of the Groups’ overall performance and vehicle activity is fundamental to managing revenues and profits. The current position and ongoing level of opportunities supports the Group’s expectation of strong performance in the second half of the year.

Dividend

The Group continues to invest heavily in future opportunities including HDR, Large Loss and Emissions and the Board has therefore resolved that the interests of the Group and its shareholders would be best served by considering the position with regards to payment of a dividend following the preparation of the Group’s full year results.

Outlook

The focus in the first half of 2024 has been firmly on the conversion of profits to operating cash flows and managing claim acceptances in line with cash collections. The second half of the year is always more significant as a result of seasonality; this has been factored into our forecasts, which indicate that performance in the second half will outperform that of the first half.

The continued growth in cash collections, following ongoing investment in the legal teams and IT infrastructure,  allows the Group to increase activity, without the need for significant increases in net debt. Management look to the second half of 2024 and beyond with optimism.

Post Balance Sheet Events

In August 2024 the Group agreed a £30m loan facility with Callodine Commercial Finance LLC. The Group has drawn down £20m of this facility, to provide further headroom and to repay the loan provided by Blazehill Capital Limited, the refinancing significantly reducing the overall cost of capital to the Group.

In August 2024 the Group also agreed an increase in the funding available under the facility provided by Secure Trust Bank PLC. Secure Trust have extended the funding period within the £40m facility limit previously agreed.

Alan Sellers
Executive Chairman
20 August 2024