Executive Chairman's Statement
On behalf of the Board, I am pleased to introduce Anexo’s results for the six month period ended 30 June 2019, a period during which the Board has concentrated firmly on moving the Group towards the inflexion point which achieves net cash generation. Anexo’s strategy in the period has been to target a more measured growth in credit hire in order to focus on the Group’s continued success in the recruitment of high quality litigators, thereby increasing its ability to settle cases
and improve cash generation. Anexo has performed strongly in H1 2019, with significant growth in both divisions compared to H1 2018. The solid platform which has been established since the Group’s AIM IPO in June 2018 provides the
Board with considerable confidence in the strong prospects for the Group for the remainder of FY 2019 and beyond.
The Group has adopted IFRS 16 (effective 1 January 2019) in these interim results (for further detail see Note 7 in the Notes to the Interim Statements).
H1 2019 Group performance
Anexo delivered a strong performance across all key Group financial metrics and KPIs in its first financial year on AIM, and this has continued into H1 2019. Group revenues in H1 2019 increased by 55.5% to £36.7 million (H1 2018: £23.6
million) and adjusted profit before tax for the period increased by 62.6% to £11.0 million (H1 2018: £6.8 million).
As announced on 6 August 2019, Anexo successfully renegotiated its working capital facilities and secured favourable financing arrangements from both new and existing providers.
Credit Hire division
As previously reported, Anexo deployed an element of the funds raised at IPO to expand its fleet. The average number of vehicles on the road reached 1,496 in H1 2019 (H1 2018: 912), a 64.0% increase on the prior year. The Board has not sought
to further increase the number of vehicles on hire in the last six months, in order to allow the Group to concentrate on the development of the litigation division and increasing the Group’s rate of cash collections. However, the like
for like increase in vehicles on the road has resulted in growth in Credit Hire revenue of 80.3%, rising from £12.9 million in H1 2018 to £23.2 million in H1 2019. Profit before tax in the Credit Hire division rose by 152% to £8.3
million in H1 2019 (H1 2018: £3.3 million).
In particular, the Group has witnessed considerable growth in its motorcycle business, facilitated by the Board’s strategic investment in the fleet. We have also sought to target the most valuable claims for the Group, the effect of which
has been to improve individual claim performance and thus further drive growth in revenues and profitability over and above the number of vehicles on the road.
As announced on 6 August 2019, the Group agreed new terms with its existing fleet insurance provider which will continue to deliver enhanced savings against original forecasts for the remainder of FY 2019 and throughout FY 2020.
Legal Services division
A significant portion of the IPO funds was targeted at increasing capacity within Bond Turner, the Group’s legal services business. This was to facilitate increased cash generation, which continues to improve month on month. Cash collections
increased by £8.4 million or 29.7% between H1 2018 and H1 2019, rising to £36.6 million from £28.2 million. This strong trend continued post period end with cash collections in July 2019 going on to be a monthly record for
Revenues for the Legal Services division, which strongly converts to cash, showed an increase of 26.2%, reaching £13.5 million in H1 2019 (H1 2018: £10.7 million). Profit before taxation declined to £2.3 million (H1 2018: £3.8
million), reflecting the significant investment in the new Bolton office and associated staff recruitment costs. Within the working capital cycle of a typical case and the timeline for settlement inherent in the court process, an experienced
litigator will not reach capacity from a settlement and cash collection position for at least nine to twelve months. Consequently, the considerable benefits to cash collections from the Group’s investment in recruitment are expected to
be realised in late FY 2019 and into FY 2020.
The Board’s focus in 2019 has been to expand capacity at Bond Turner, with the opening of the Bolton office being key to this strategy. Both in number and quality of litigators targeted for recruitment, Bolton has out-performed management’s
expectations. At 30 June 2019, the number of highly skilled and experienced litigators has increased within the Group from 74 at 30 June 2018 to 89 at 31 December 2018, and to 109 by the end of H1 2019, an increase of 38% from that seen at 30
With further investment planned for the remainder of FY 2019, these additional staff are expected to continue to drive an increase in the number of cases settled and ultimately the level of cash recovered from Bond Turner’s considerable portfolio
As previously outlined at the time of the Group’s AIM IPO, Bond Turner also operates an in-house advocacy and specialist litigation team which handles complex professional and clinical negligence claims. Many of these constitute high value and high
profile cases, some of which have been ongoing for many years; one example is the class action concerning historic abuse at Aston Hall psychiatric hospital. The Board intends to expand this specialist team in H2 2019 and FY 2020 and is exploring opportunities
to secure new business in professional and compensation claims through both targeted recruitment and digital marketing and direct capture.
The Board stated at the time of the Group’s AIM IPO that its intention was to adopt a progressive dividend policy and commenced this with the payment of final dividend of 1.5 pence per share for the period from Admission to 31 December 2018.
The Board is therefore pleased to propose an interim dividend of 1 penny per share which will be paid on 23 October 2019 to those shareholders on the register at the close of business on 20 September 2019. The shares will become ex-dividend
on 19 September 2019.
The outlook for the remainder of FY 2019 is positive and the Board remains confident that the decision to hold steady the number of vehicles on the road within the Credit Hire division, as the Group continues to expand its Legal Services division, will
allow Anexo to demonstrate its ability to generate yet further cash from its significant case portfolio.
Recruitment continues to progress better than anticipated within the Legal Services division and the Group has recently finalised the terms of a lease for a further floor in Bolton, doubling the office space to 19,490 sq.ft. The Board is also considering
additional locations for a further regional office and will make a separate announcement as and when appropriate. The additional capacity secured to date has already positively impacted cash collections and settlement numbers and rates. The
Board will continue to review this strategy to ensure that Anexo continues to leverage its case book and consequently realises the potential of the investment as a significant cash generating asset.
Anexo remains extremely well positioned to grow its market share and take advantage of the opportunities available to it. The Board views the current financial year and beyond with considerable optimism.
10 September 2019