Basis of Preparation
As previously reported, Anexo Group Plc was incorporated on 27 March 2018, acquired its subsidiaries on 15 June 2018, and was admitted to AIM on 20 June 2018 (the ‘IPO’). Further details are included within the accounting policies.
To provide comparability across reporting periods, the results within this Financial Review are presented on an “underlying” basis, adjusting for the £0.7 million charge recorded for share-based payments in 2019 and the £0.7m charge
for share-based payments in 2020.
A reconciliation between underlying and reported results is provided at the end of this Financial Review. This Financial Review forms part of the Strategic Report of the Group.
New Accounting Standards
There have been a number of new UK IFRS accounting standards applicable from 1 January 2020, none of which have resulted in adjustment to the way in with the Group accounts or presents its financial information.
In 2020 Anexo successfully increased revenues across both its divisions, Credit Hire and Legal Services, resulting in Group revenues of £86.8 million, representing an 10.5% increase over the prior year (2019: £78.5 million). This growth is
particularly pleasing given the fact that we have all been operating under restrictions imposed by the Government to limit the impact of the COVID-19 pandemic.
During 2020 EDGE, the Credit Hire division, provided vehicles to 7,230 individuals (2019: 7,182) a slight increase on that seen in the prior year. This constitutes a strong performance given the restriction imposed during the year. As part of our
continued investment in the motorcycle community, our sponsorship of the McAMS Yamaha team in the British Superbike Championship continued into 2020. The season was curtailed but our engagement with the team was buoyed with an outstanding second place
for Jason O’Halloran in the Championship. Our strategy remains, as previously reported, to focus investment within the McAMS business. This reflects the fact that, on average, a motorcycle claim has a similar value to that of a car with a take-on
cost significantly less, allowing the Group to deploy its resources into the most valuable claims, thereby growing revenues whilst preserving working capital.
Whilst the number of claims rose only slightly in 2020, the strategy of deploying capital into the most valuable claims to the Group resulted in revenues for the Credit Hire division increasing to £51.6 million in 2020, an increase of 7.5% over
2019 (£48.0 million).
As a result of spending the majority of 2020 operating within the ongoing COVID restrictions, we have again been focused on cash collections and maintaining headroom within our working capital facilities, whilst maintaining investment for growth in 2021.
Given our conservative income recognition policies, investment within the Legal Services division in senior staff and property has had a significant impact on the financial performance of the division. Revenue growth within the Legal Services
division in 2020 reached 15.2%, with revenues rising from £30.5 million in 2019 to £35.2 million.
Expansion of headcount in Bond Turner has been critical to increasing both revenues and cash settlements within the Group and the continued growth of the Bolton office, supported by expansion into Leeds, has provided a crucial platform for growth in both
factors. During 2020, the Group continued its recruitment campaign, seeing some high-quality staff in the market as a result of competitor firms either entering a run-off plan or simply furloughing staff to remain viable. We have taken advantage of
these opportunities, taking the decision to continue to recruit throughout the year, thereby investing in the future settlement capacity of the Group and consequently driving cash collections and the number of new cases we can fund without the need
for additional working capital facilities. By the end of December 2020, we employed 518 staff in Bond Turner (December 2019: 442), of which 145 (December 2019: 127) were senior fee earners, an increase of 14.2%. With the signing of the lease for the
Leeds office, recruitment and associated training has commenced and as at 14 April 2021 we had secured 14 staff, of which 9 are senior fee earners. Recruitment is scheduled to continue throughout 2021 across all of our three office locations.
Gross profits are reported at £68.0 million (at a margin of 78.3%) in 2020, increasing from £62.8 million in 2019 (at a margin of 80.4%). It should be noted, furthermore, that staffing costs within Bond Turner are reported within Administrative
Expenses. Consequently, gross profit within Bond Turner is in effect being reported at 100%.
Gross profits for the Credit Hire division reached £33.5 million in 2020 (at a margin of 64.9%) falling from £34.3 million in 2019 (at a margin of 71.4%). The reduction reflects both our strategy for claims acceptance which seeks to maximise
value from our available working capital facilities, as well as certain additional costs which were incurred as COVID impacted utilisation within the fleet.
Administrative expenses before exceptional items increased year-on-year, reaching £42.6 million in 2020 (2019: £31.0 million), an increase of £11.6 million (37.4%). This reflects the continued investment in staffing costs within Bond
Turner to drive settlement of cases and cash collections. Staffing costs for Bond Turner increased to £16.6 million (2019: £13.5 million), an increase of £3.2 million (23.5%). Investment in the VW Emissions class action (£2.9
million) has been expensed against Group profits in the year (2019: £0.9 million), much of this expenditure being marketing costs. The balance of the increase reflects the investment in marketing, staff and infrastructure to allow the Group
to meet its growth aspirations, as well as its requirements and responsibilities as a PLC.
Adjusted EBITDA reached £25.4million in 2020, reduced from £31.8million in 2019 (20.0%). To provide a better guide to underlying business performance, adjusted EBITDA excludes share-based payments charged to profit and loss along with depreciation,
amortisation, interest and tax from the measure of profit.
The GAAP measure of the profit before interest and tax was £18.1 million (2019: £24.6 million) reflecting the non-cash share-based payment charge of £0.7 million (2019: £0.7 million). Where we have provided adjusted figures, they
are after the add-back of this item and a reconciliation of the underlying and reported results is included on page 16 of the Annual Report.
EPS and Dividend
Statutory basic EPS is 10.8 pence (2019: 16.4 pence). Statutory diluted EPS is 10.6 pence (2019: 16.0 pence). The adjusted EPS is 11.4 pence (2019: 17.0 pence). The adjusted diluted EPS is 11.2 pence (2019: 16.6 pence). The adjusted figures exclude the
effect of share-based payments. The detailed calculation in support of the EPS data provided above is included within Note 4.
A final dividend of 1 penny per share has been recommended by the Board (2019: 0.5 pence) giving a total dividend for 2020 of 1.5 pence, having paid a dividend of 0.5 pence on 23 September 2020. This dividend, if approved at the Annual General Meeting
to be held on 16 June 2021, will be paid on 20 July 2021 to those shareholders on the Register at the close of business on 25 June 2021.
Group Statement of Financial Position
The Group’s net assets position is dominated by the balances held within trade and other receivables. These balances include credit hire and credit repair debtors, together with disbursements paid in advance which support the portfolio of ongoing
claims. The gross value of the receivables totalled £262.6 million in 2020, rising from £220.5 million in 2019. In accordance with our income recognition policies, provision is made to reduce the carrying value to recoverable amounts reflecting
an initial settlement adjustment, being £126.4 million and £100.8 million respectively, an increase of 25.4%. This increase reflects the recent trading activity and strategy of the Group and is in line with management expectations given
that throughout the majority of 2020 the legal services teams have been operating within COVID-19 restrictions and there have been periods when capacity within the court system has been significantly hampered. The increase has been primarily funded
from the significant increase in cash collections seen year on year.
In addition, the Group has a total of £27.1 million reported as accrued income (2019: £24.4 million) which represents the value attributed to those ongoing hires and claims.
Whilst activity levels have risen and fallen in line with the local and national lockdowns, impacting the number of vehicles on the road and hence opportunities for new claims for the Group, further investment has been required and made in 2020 into the
motorcycle fleet so as to meet the demand from our significant pool of introducers. Total fixed asset additions totalled £11.2 million in 2020 (2019: £15.1 million); the fleet continues to be largely leased.
Trade and other payables, including tax and social security increased to £9.5 million compared to £7.9 million at 31 December 2019, an increase of 20.0%, reflecting the timing of certain payments to HMRC in line with the provisions associated
Net assets at 31 December 2020 reached £110.4 million (2019: £91.7 million).
During 2018, the Group utilised the funds raised from the AIM listing, alongside increases in debt facilities, to take advantage of the opportunities in the market and increase the number of vehicles on the road. 2019 saw a shift in focus to cash generation,
as the Group held back on growth within the Credit Hire division and focussed investment on the Legal Services division where we saw a significant investment in the number of senior staff engaged to settle cases and recover cash for the Group. This
trend continued into 2020, notwithstanding the impact of COVID-19 on the Business (further details provided earlier). The number of senior fee earners increased from 127 to 145 during 2020 (an increase of 14.2%) and continues to rise across each of
our offices, the third of which opened in Leeds in February 2021. The Group’s success in recruiting high quality staff continues, particularly while other firms are seen to be reducing headcount and utilising the Government’s Furlough
Scheme. Recruitment has continued throughout 2020 and into 2021, thereby investing in case settlement for the future.
Cash collections for the Group (and excluding settlements for our clients), a key metric for the Group, increased from £84.1 million in 2019 to £98.0 million in 2020, an increase of 16.4%. This is a significant improvement, given the fact
that many of the new recruits will not reach settlement maturity until late 2021/early 2022. Furthermore, with settlements impacted by the capacity within the court system arising from the impact of COVID, this growth is testament to the quality of
staff within the Group.
Having strategically managed vehicle numbers during 2019 so as to preserve working capital, and with the focus being on securing the most attractive and profitable claims for the Group whilst minimising take-on costs, the number of vehicles on the road
fell during 2019 from 1,531 to 1,308. During 2020, we have seen a number of competitors furlough staff and withdraw from the market leading to increases in market opportunities; we have sought to take advantage of this and increase market share. Despite
the noticeable decline in road traffic, with the overall number of vehicles on the road visibly lower than in a typical year and many people working from home, we have actually seen the average number of vehicles on the road rise in 2020, reaching
1,515 (2019: 1,454). This contributed to the strong revenue performance of the Credit Hire division. This growth correspondingly impacted cash flows in the second half of the year. As we came out of the national lockdown in the summer of 2020, vehicles
numbers on the road peaked in excess of 1,900, before dropping back to 1,613 at the end of the year as further restrictions were imposed at a regional and subsequently a national level.
Whilst conscious of investing for the future in 2020, the requirement to monitor our cash position and the headroom within our working capital facilities meant that focus remained on driving settlements and cash collections. This balance assures that
growth within the core business is not at such a level as to impact headroom significantly. Moreover, investment in the generation of claims within the VW Emissions class action case has been made in the context of the specific facility drawn down
during the year (contributing funds of £2.1 million) alongside the overall capacity within our facilities.
The Group reported a further improvement in the conversion of profits to cash flows from operating activities, reducing a cash outflow of £0.8 million in 2019 to a cash inflow of £0.2 million in 2020. This position was reached after investment
in the VW Emissions case of £2.9 million (2019: £0.9 million). Excluding this expenditure, the Group’s core business generated a net cash inflow from operations of £3.1 million in 2020 (2019: £0.1 million). Notwithstanding
a decline in case settlements as a result of COVID-19, we have continued to invest in new cases and increase market share across both the Credit Hire and Legal Services divisions. This investment absorbed a net £20.7 million of funds in 2020
(2019: £26.3 million); however, this year on year increase has been countered by the increased level of cash collections.
With a net cash inflow of £4.9 million resulting from financing activities, reflecting the fund raise in May-20 where £6.9 million was raised after expenses, (2019: net cash outflow of £1.8 million), the Group reported a net cash inflow
in 2020 of £6.0 million (2019: net cash outflow of £3.3 million). This constitutes a significant improvement on that seen in 2019, particularly given the challenging operating circumstances in 2020.
Net Debt, Cash and Financing
Cash balances improved during 2020 and at 31 December 2020 reached £8.2 million (2019: £2.3 million). This figure reflects the funds raised from the placing in May-20 (£6.9 million after expenses) as well as the improvement in cash collections
year on year. These increased by £13.8 million (16.4%) although they were countered by the continued investment into the Group case portfolio and settlement capacity.
Borrowings increased during the year to fund the additional working capital investment in the Group’s portfolio of claims and support the investment by the Group in the VW emissions claim and expansion of the vehicle fleet. The total balance rose
from £38.5 million in 2019 to £48.7 million at the end of 2020. The Group has a number of funding relationships and facilities to support its working capital and investment requirements, including an invoice discounting facility within
Direct Accident Management Limited (secured on the credit hire and repair receivables), lease facilities to support the acquisition of the fleet and a revolving credit facility within Bond Turner Limited.
In addition, during 2020 the Group secured £2.1 million of additional funding from a litigation funder to support the Group’s own investment into the VW emissions litigation as well as an additional £5.0 million of funding from Secure
Trust Bank Plc under the government backed CLBILS scheme to further enhance headroom.
Having weathered what is hoped to be the worst of the COVID-19 pandemic the Group now has a significant increase in the availability of capital to deploy and drive growth across both the core business and other niche opportunities that may arise.
Having considered the Group’s current trading performance, cash flows and headroom within our current debt facilities and the maturity of those facilities, the Directors have concluded that it is appropriate to prepare the Group and the Company’s
financial statements on a going concern basis.
Reconciliation of Underlying and Reported IFRS Results
In establishing the underlying operating profit, the costs adjusted include £0.7 million of costs related to share-based payments (2019: £0.7 million).
A reconciliation between underlying and reported results is provided below:
| ||Year to December 2020|
| || |
|Revenue ||86,752 ||- ||86,752 |
|Gross profit ||67,952 ||- ||67,952 |
|Other operating costs (net) ||(49,244) ||(658) ||(49,902) |
|Operating profit ||18,708 ||(658) ||18,050 |
|Finance costs (net) ||(2,562) ||- ||(2,562) |
|Profit before tax ||16,146 ||(658) ||15,488 |
|Depreciation & Amortisation ||6,663 ||- ||6,663 |
| || || || |
| || |
| ||Year to December 2019|
| || |
|Revenue ||78,510 ||- ||78,510 |
|Gross profit ||62,807 ||- ||62,807 |
|Other operating costs (net) ||(37,557) ||(657) ||(38,214) |
|Operating profit ||25,250 ||(657) ||24,593 |
|Finance costs (net) ||(2,202) ||- ||(2,202) |
|Profit before tax ||23,048 ||(657) ||22,391 |
|Depreciation & Amortisation ||6,582 ||- ||6,582 |
| || || || |
By order of the board
Chief Financial Officer
27th April 2021