19 March 2019
NAHL Group plc
("NAHL" or the "Group")
Final Results
NAHL, the leading UK marketing and services business focused on the UK consumer legal market, announces its Final Results for the year ended 31 December 2018.
Financial Highlights
• |
Revenue of £49.0 million (2017: £51.9m) |
• |
Underlying operating profit* down 16.3% to £12.1m (2017: £14.5m) primarily as a result of our transformation strategy |
• |
As anticipated, profit before tax of £9.8m (2017: £12.4m) |
• |
Underlying EPS* of 18.2p (2017: 25.0p) |
• |
Recommended final dividend of 5.7p, providing a total dividend for the year of 8.9p (2017: 15.9p). |
Operational Highlights
• |
Continued progress in transforming Personal Injury (PI) division to deliver long-term growth |
• |
Alternative Business Structure ("ABS") strategy developing well, with both firms trading profitably |
• |
Licence granted from Solicitors Regulation Authority ("SRA") to launch wholly owned law firm, National Accident Law, expected to start trading in April 2019 |
• |
Strong performance from Critical Care division, delivering double-digit profit growth and increased market share |
• |
New management team in place at Residential Property division, with initiatives in place designed to return the division to growth |
Russell Atkinson, CEO of NAHL, commented:
"As we progress through our strategy for the Group, we are pleased to have taken significant steps forward in transforming our core Personal Injury (PI) business to take advantage of the changed regulatory environment and the opportunities ahead.
"Encouragingly, we have made progress in further developing and processing enquiries through our ABS ventures. Moreover, we are excited about the potential for our wholly owned law firm, National Accident Law, which was granted a licence by the Solicitors Regulation Authority and is scheduled to launch in April 2019. This will give us a full economic interest in the success of a whole claim, bringing a state of the art, consumer-focused, technologically enabled volume processing capability as we aim to become the UK's leading volume Pl processer.
"During this transitional period, we are encouraged by the performance of Critical Care business. I am delighted to report double-digit profit growth on the back of increased market share. This business makes a significant contribution to the Group. The challenges within the housing market have been well-documented, however, we continue to trade profitably and with a new management team in place, I feel positive about the future of our Residential Property business.
"Trading in the early part of the new year has improved, albeit our markets remain competitive. Whilst there remains a great deal to do, the strength of our trusted brands, digital capabilities and talented people gives us confidence for the year ahead."
*Underlying operating profit and underlying earnings per share adjust for share-based payments, amortisation of intangible assets on business combinations and exceptional items.
Enquiries:
NAHL Group plc Russell Atkinson (CEO) James Saralis (CFO) |
via FTI Consulting Tel: +44 (0) 20 3727 1000 |
finnCap Ltd (NOMAD & Broker) Julian Blunt / James Thompson (Corporate Finance) Andrew Burdis (Corporate Broking) |
Tel: +44 (0) 20 7220 0500 |
FTI Consulting (Financial PR) Alex Beagley James Styles Laura Saraby |
Tel: +44 (0) 20 3727 1000 |
Notes to Editors
NAHL Group plc (AIM: NAH) is a leader in the Consumer Legal Services ("CLS") market. The Group provides services and products to individuals and businesses in the CLS market through its three divisions:
· Personal Injury provides outsourced marketing services to law firms through National Accident Helpline and claims processing services to individuals through Your Law and National Law Partners.
· Critical Care provides a range of specialist services in the catastrophic and serious injury market to both claimants and defendants through Bush and Company Rehabilitation.
· Residential Property provides marketing services to law firms and conveyancers as well as surveys to individuals through Fitzalan Partners. It also provides property searches through Searches UK.
More information is available at www.nahlgroupplc.co.uk
Chair's Report
This is my first Annual Report with NAHL Group plc having joined the business in December 2018.
We are midway through a significant transition and it is obvious to me that there is a realistic and achievable strategic plan in place against which the management team are executing well and making great progress.
Events in 2018 once again validated the strategic approach we are taking and the regulatory and competitive landscapes are developing as we had anticipated. Our businesses are facing into significant market change but are adapting to this and embracing the opportunity that it brings.
Financial Results and Dividend
As we have previously announced, the Group experienced a challenging fourth quarter's trading. Consequently, our profit before tax fell marginally short of the Board's expectations for the year at £9.8m (2017: £12.4m).
The Group's strategy requires investment in both working capital and infrastructure and as such, during this transitional period, profits and cash flow will be lower. This deferral in profits will support future earnings and provide the basis for a sustainable and growing earnings stream in our Personal Injury division.
Basic earnings per share declined 33.2% to 14.5p (2017: 21.7p). The Group has continued to carefully manage its balance sheet and net debt at the end of 2018 was £15.5m (2017: £12.1m).
The Board proposes, subject to the approval of shareholders at the Annual General Meeting to be held on 21 May 2019, a final dividend of 5.7p per share be payable on 31 May 2019 to ordinary shareholders registered on 26 April 2019. This gives a total dividend for the year of 8.9p, which equates to a cover of 2.0x earnings.
Strategic Progress
Our strategy is to become the leading provider in our chosen consumer legal services markets by leveraging our trusted brands; forging strategic partnerships that create mutual value; and embracing developing technologies to reach and interact with our consumers and customers.
As part of this strategy, our Personal Injury business is creating a new type of law firm that will allow us to put the consumer at the centre of the process and take an economic interest in the whole value of the claim. Through a combination of our panel, our joint-venture partnerships and our own market-leading law firm we aim to be the number one personal injury specialist in the UK.
Progress to date has been encouraging with a positive contribution from our ABS partners, and the development of our own law firm, scheduled to launch in April 2019, is on time and on budget.
In Residential Property, our new management team is putting in place strategic initiatives designed to return the business to growth in 2019; in Critical Care our strategy has already delivered double-digit profit growth and market share gains.
Board changes
I'm grateful for the contribution that Steve Halbert has made to the Group over the last nine years. Steve has successfully guided NAHL Group plc through two significant regulatory reforms, four acquisitions and the IPO in 2014.
The Group is now more diverse and resilient and is well positioned to move forward with confidence. I'd like to thank Steve for his efforts and look forward to working with the Board as we continue the Group's exciting strategy for growth.
Our people
Reflecting on my time in the business to date, I can see a team that is driven, and one that is underpinned by its values and its people.
I have seen first-hand the people, the processes and commitment in place to helping the Board achieve its growth ambitions.
I would like to take this opportunity to thank all of our colleagues for their continued support and dedication.
Outlook
Whilst market pressures persist, trading during the early part of 2019 has improved.
We remain confident in our outlook for the remainder of the year.
Caroline Brown
Chair
18 March 2019
Chief Executive's Report
Overview
During 2018 the Group continued to focus on its long-term strategy of re-engineering its core personal injury business. Simultaneously, we sought to further grow our Critical Care division and navigate significant market uncertainty in Residential Property caused by a turbulent housing market.
Overall the Group traded well during the year but had a disappointing fourth quarter as we updated in January.
As we have previously stated, the ongoing funding of work within Personal Injury impacts short-term profit recognition and cash conversion and this is clearly reflected in year on year comparisons. However, we have managed that aspect of our business well and are pleased with the overall contribution from our ABS operations.
We remain confident that the Group is well positioned to capitalise on the forthcoming regulatory changes and that our transformation strategy is progressing well.
Results
We have delivered underlying operating profit of £12.1m from revenue of £49.0m.
As anticipated, the PI division has seen an ongoing decline in Panel Law Firm demand as a result of the forthcoming regulatory changes. From a marketing perspective, heightened competitor activity depressed enquiry volumes in November and December and a significant Google algorithm change increased consumer acquisition cost. Encouragingly, our ABS operations scaled well and are already making a positive contribution to the Group's results.
Furthermore our Critical Care division continued to perform strongly, growing profits by 16.4% year on year. Strong underlying trading growth was supported by contributions from our commercial relationships with the Spinal Injuries Association and the Child Brain Injuries Trust. Although Residential Property continued to be impacted by a persistently difficult housing market, it continues to trade profitably and in combination with Critical Care, these two divisions make an important contribution to our overall results.
The Group has continued to carefully manage its balance sheet and net debt at the end of 2018 of £15.5m was lower than expected.
Market overview
The Group is a leader in the large and fragmented £7.0bn consumer legal services market and continues to focus on Personal Injury, Critical Care and Residential Property.
The overall PI market has fallen from its recent level of one million claims per annum with volumes decreasing primarily in RTA. The main claim types that make up the PI division's focus have remained broadly static, with reductions taking place in sectors such as travel sickness claims which are not part of our core personal injury target market. These changes come partly as a result of the cumulative impact on law firms of previous legislation which has led to a reduction in investment in the market.
The effect of previous legislation combined with continued lack of clarity surrounding regulatory reforms has resulted in many smaller and mid-sized firms questioning their ongoing profitability. We remain the UK's leading marketing services provider in the Personal Injury sector but are positioning ourselves to grow into a large scale volume processor opening up opportunities in the wider Personal Injury market.
Critical Care is the brand leader in the catastrophic injury segment of the medical reporting and rehabilitation market, where we provide expert witness and case management services. We estimate the catastrophic injury sector is mature and growing at between 1 and 2% per annum.
Residential Property operates within the context of the wider residential housing market and as such the division has not been immune to the well-documented challenges faced by this sector in recent years. Transaction volumes have declined by 2% in each of the last two years and we have experienced more cancellations than is typical as the uncertainty of the UK's exit from the European Union continues. However, as the market remains sizeable with over one million transactions recorded by HM Land Registry annually and the value of associated property legal services exceeding £1.8bn per annum, we are well-placed to grow market share from a small base.
Personal Injury regulatory update
From a regulatory perspective the Civil Liabilities Bill received royal assent on 20 December 2018 with implementation still planned for April 2020. No material alterations were made to the bill and the broad principles were as anticipated, namely increasing the small claims limit to £5,000 and £2,000 for RTA and non-RTA respectively, as well as a significant reduction in the compensation available to victims of whiplash injuries.
The Group now awaits clarification around the detail of how the legislation will be implemented which will allow us to validate the assumptions in our small claims processing business model.
However, it is already clear that the impact on traditional personal injury law firms is taking hold with a number already announcing that they are withdrawing from the market or moving away from lower value claims. This clearly validates our long-term strategy of developing our own processing capability to run alongside our existing panel model allowing us to capture more value and grow market share.
In addition, preparations continue to transfer regulation of claims management companies from the Ministry of Justice to the Financial Conduct Authority (FCA) from April 2019. This means that, within the Personal Injury division, National Accident Helpline (NAH), our lead generation business, will be regulated by the Financial Conduct Authority (FCA) while our legal services business will be overseen by the Solicitors Regulation Authority (SRA).
Strategic development in Personal Injury
We are midway through our transformation process and during 2018 we accelerated our investment in our ABS initiatives and began the process of establishing our own, wholly owned law firm. This has extended our processing capability and given us the opportunity to re-engineer our business model in order to take advantage of the opportunities provided by regulatory change as well as broadening the market available to us.
Progress in this area has been very encouraging with significant headway made. Our first ABS, Your Law, is trading profitably and reaching scale with £9.2 million in damages recovered for non-fault accident victims.
Progress on our own processing capability has also been pleasing. National Accident Law (NAL) has been granted its licence from the SRA and is scheduled to launch in April 2019, at which point we will have a state of the art, consumer focused, technologically enabled volume processing capability which has been designed to enable us to become the UK's leading volume PI processing provider.
The Group has restructured its operations in the PI division, creating two business units: National Accident Helpline, our marketing services business, and Legal Services, which incorporates NAL and the Group's two ABS businesses. Work on the core technology platform is well advanced, recruitment completed and office space secured.
The project is anticipated to launch on time and on budget and this marks a critical milestone in our transformation journey.
As previously announced, this ongoing investment in self-processing means a continuing deferment of profit and cash flow that is realised in future years as cases settle. However, as the model matures both profit and cash flow will normalise, enabling us to absorb the impact of regulatory changes and grow our market share without further significant disruption to the business.
Brand
The successful relaunch of the NAH brand in 2017 enabled us to build on a strong foundation. National Accident Helpline remains the most trusted brand in the personal injury sector and continues to garner excellent customer reviews.
We continued our strategy of using a lower weight of TV advertising supported by enhanced digital marketing activity including SEO and social media activity. We have invested in our in-house marketing team adding significant capability during the year and reducing our dependency on external agencies. This will help us to become more efficient and reactive in future years as we navigate the changing competitive landscape in the run up to the implementation of the reforms.
In response to competitive pressure, we have increased investment in brand recognition and undertaken further digital marketing activity, which has enhanced competitiveness and stimulated enquiry volumes in the early part of 2019. It is likely that the competitor landscape will continue to be challenging until the reforms are implemented but our brand leading proposition positions us well to adapt and respond.
Critical Care has been building on its reputation for clinical excellence and our charity partnership initiatives have further enhanced our brand positioning. During 2018 we conducted a full brand audit and are currently working through a brand refresh which will include upgrading our website. Our centrepiece annual clinical conference was a great success in 2018, bringing together over 210 lawyers, consultants and partners from across the industry and this will be repeated in July 2019.
In Residential Property, our new management team are undertaking a full review of our approach to the brand portfolio and are introducing some exciting initiatives that are designed to return the division to growth in 2019.
Strategic relationships
Whilst much of the focus in our PI division has been on the development of our self-processing capability, the panel remains a central part of our ongoing strategy. As demand has eroded for our existing model we have seen the panel shrink in size. During 2018 we announced the loss of one of our biggest customers who took the decision to focus on higher value PI claims. We also experienced one of our panel firms going into administration and had three further smaller resignations. However, despite the challenging market, we have been able to add new panel firms to our portfolio and are in discussion with several partners about potential new relationships. Additionally, we also have strong panel demand for our medical negligence claims and other specialist enquiry types. As long as demand exists, we will continue to support our panel partners with high quality enquiries.
The addition of two charity partnerships in Critical Care has been supplemented by new business relationships including a contract with a leading insurer. We have continued to invest in business development and seen healthy organic business growth from our existing customer portfolio.
In Residential Property we have experienced a reduction in core conveyancing volumes as a result of market conditions and also seen a reduction in market share as competition for remaining consumers intensifies. In Searches, the number of firms ordering has remained relatively consistent, however the volume of orders has decreased. In September we recruited a new divisional Managing Director who joined us from moneysupermarket.com and he has a remit to increase market share and return the division to growth. We are confident that the initiatives that have been identified will help achieve this objective.
Operations and IT
The establishment of National Accident Law has seen us invest significantly in our operational infrastructure, particularly in IT. We have partnered with Peppermint Technologies to implement its CX Cloud Solution creating a highly flexible and legally focused case and document management system. This is built on the Microsoft Dynamics platform which enables us to integrate with our customer facing processes and systems, thereby creating a unique consumer proposition underpinned by innovative technology. We have identified additional office space next door to our head office in Kettering which will become the initial base for National Accident Law.
In Critical Care we have continued to progress the improvement of our data and MI systems to allow us to better interrogate data and provide information and support to our clients.
People and values
In a time of great change it is critical that we have a well-motivated and capable team who can guide us through the change programme and continue to support our clients and customers with first class service. I am delighted to report that 2018 was a year of great progress in our people agenda with a number of notable achievements including:
· NAH being recognised by the Sunday Times as one of the 100 best small companies to work in for 2019;
· Significant improvements in our employee engagement scores across the Group, well ahead of national averages;
· nine out of ten staff who undertook our Pathway to Leadership development programme gaining promotions or new roles;
· 21 new staff joining our Group to establish our legal services operation;
· Investors in People Gold status awarded to NAH to go alongside our Silver award in Critical Care; and
· the establishment of our learning academy in the PI division.
Our people and values make us who we are and our 233 staff across the Group supported by 190 consultants in Critical Care are the cornerstone of our future growth. We are involved in a number of charitable and CSR initiatives that demonstrate the caring culture that is central to the services that we offer.
Outlook
After an extended period of uncertainty, the regulatory landscape in personal injury is finally becoming clearer. There are still details outstanding surrounding implementation that will help to validate the assumptions on our post reform small claims model and core technology platform but we expect clarity during 2019, giving us better visibility for 2020 and beyond.
What is clear is that the strategy we have followed to re-engineer our PI division is the right one. Without the ability to place enquiries into different distribution models we would undoubtedly have a much smaller and less profitable PI business. Clearly, changing our operating model in the current environment is challenging but it is a challenge that we have adapted to well.
Although we are in the midst of a short-term period of lower returns during this investment cycle, the cash and profits from cases that are processing will begin to return over the next 18 months. The progress we are making with our ABSs, when aligned with our own processing capability and panel, will create one of the UK's leading volume PI processing businesses. Linking that to the strength of the NAH brand, giving us control of the end-to-end process, gives me great confidence that we will be able to navigate the significant regulatory changes in our sector and grow a substantial, sustainably profitable, industry leading Personal Injury business in years to come.
Critical Care has once again performed very strongly increasing its market share and growing profits by continuing to offer clinical excellence. The outlook for this division continues to be good and we will be investing in the technology platform during the next 12 months to create the foundation for further growth.
Whilst the challenges I have already outlined in Residential Property have been difficult to manage, this division remains a profitable part of the Group and the new management team have already instituted a number of initiatives that I am confident will return us to growth.
There still remains a great deal to do but I am confident that we have the strategy and people in place to achieve our aims and I am excited by the challenge of the forthcoming year.
Russell Atkinson
Chief Executive Officer
18 March 2019
Chief Financial Officer's Report
Overview
Whilst the results reflect that 2018 was a year of planned transition for the Group, I am pleased with the progress we have made towards our strategic objectives. We have made great strides in transforming the personal injury business to one that can generate significant value post the regulatory reforms.
We have also delivered double digit profit growth in Critical Care with minimal investment, and made important leadership changes in Residential Property to address the decline in market share we suffered in 2018 and the early signs are encouraging. Throughout the year, we carefully managed our net debt whilst delivering a meaningful dividend to investors that was consistent with our stated dividend policy.
Some commentary in this report uses alternative performance measures, denoted by the prefix "underlying". Definitions and reconciliations to the IFRS measures are included in note 1 to the financial statements.
Statement of comprehensive income review
Revenue
Revenue decreased in the year by 5.7% from £51.9m to £49.0m. As we anticipated, the Personal Injury division saw an ongoing decline in Panel Law Firm demand as a result of the forthcoming regulatory changes and the Residential Property division saw revenues fall by 23.4% as a result of the well documented challenges in the UK housing market. I was pleased with the performance of the Critical Care division, which, through organic growth, generated an increase in revenue of 12.2% (2017: 6.6%).
I was also pleased with the contribution made by our ABSs in the year, where revenue has only been recognised where a claim has had liability admitted by the defendant. This is consistent with our policy on revenue recognition and our business model. Revenue on successful cases that are yet to reach this milestone will be recognised in future years.
An analysis of revenue by division is set out in the operating segments note. Further commentary on the performance of each division is included in the Chief Executive's Report.
Underlying operating profit
Underlying operating profit decreased in the year by 16.3% from £14.5m to £12.1m. A temporary reduction in profit levels was anticipated as the Group transitions to its strategy of processing personal injury claims through its ABSs and 2018 also saw us face into a number of headwinds in Personal Injury and a challenging market in Residential Property. This is explained in detail in the Chief Executive's Report. Operating profit decreased by 20.5% from £12.6m to £10.0m.
I am particularly pleased to see both ABSs return a profit for the year, after deduction of non-controlling interests.
As a result, underlying operating margin - defined as underlying operating profit divided by revenue - decreased from 27.9% in 2017 to 24.8%.
Exceptional and non-underlying items
The Group separately identifies exceptional costs, share-based payment charges and amortisation on intangible assets acquired in business combinations and excludes them from underlying performance measures to provide readers of the financial statements with a consistent basis on which to track the core trading performance.
The Group incurred a number of exceptional credits and costs in the year, set out in note 3, which resulted in a net exceptional cost of £0.4m (2017: £0.4m). These comprise restructuring costs associated with the strategic transformation of the Personal Injury division, one-off costs associated with changes to the management team in the Residential Property division, and a revaluation of the pre-LASPO ATE liability and associated costs. The latter relates to a legacy product that has not been sold by the Group since its listing on AIM in 2014. Whilst this liability has been very significant in previous years, it has been gradually reducing as previous customers' personal injury claims settle and the Directors anticipate that this will not be material to the Group's results in 2019. Accordingly, it will no longer be shown as an exceptional item.
Taxation
The Group's tax charge of £1.4m (2017: £2.5m) represents an effective tax rate of 14.2% (2017: 19.9%). The effective tax rate is lower than the standard corporation tax rate of 19.0% for the reasons set out in note 4. The most significant of these is that the Group does not account for the non-controlling interests' share of tax. This results in a reduction in effective tax rate of 3.3% (2017: nil).
Earnings per share and dividend
Basic earnings per share (Basic EPS) for the year was 14.5p (2017: 21.7p) and the diluted EPS was 14.3p (2017: 21.6p). The dilution in EPS derives from a number of share options that the Group has outstanding. This is explained in note 7 to the financial statements.
In order to compare EPS year on year, earnings have been adjusted to exclude exceptional items (net of the standard rate of corporation tax), amortisation of intangible assets acquired on business combinations and share-based payments. This is explained in note 1 to the financial statements. On this basis, underlying EPS was 18.2p (2017: 25.0p).
The Board is recommending a final dividend of 5.7p per share in respect of 2018 (2017: 10.6p). When added to the interim dividend of 3.2p (2017: 5.3p), this gives a total dividend for the year of 8.9p (2017: 15.9p). This equates to a dividend cover of 2.0x the underlying EPS, which is in line with the Board's stated policy. If approved by shareholders at the AGM on 21 May 2019, it will be paid on 31 May 2019 to shareholders on the register on 26 April 2019.
Balance sheet review
I consider the significant balance sheet items are net debt and working capital, defined as trade and other receivables less trade and other payables.
Net debt
The Group had net debt at year-end of £15.5m (2017: £12.1m), comprised of £1.6m of cash (2017: £0.9m) offset by borrowings of £17.1m (2017: £12.9m).
The borrowings represent a balance of £17.2m (2017: £13.1m) on the revolving credit facility (RCF) less pre-paid loan arrangement fees of £0.1m (2017: £0.2m), which are being written off over the term of the facility.
The Group has access to a £25m RCF with Yorkshire Bank which runs to 31 December 2021.
Working capital
Working Capital increased £4.5m during the year. This was primarily as a result of an increase in receivables associated with the Group's transition to self-processing. The total trade and other receivables balance of £28.8m (2017: £22.3m) includes the following items:
· £3.6m of recoverable disbursements (2017: £0.9m) on personal injury claims. These amounts relate to medicals and insurance products and are recoverable from the defendant where cases are won; and from After The Event (ATE) insurance policies where a case is lost. A corresponding liability, payable to the product provider, is within trade and other payables.
· Provisions for doubtful debts of £0.9m (2017: £1.1m).
· £8.4m (2017: £4.6m) of accrued revenue, comprising the following:
· £1.4m (2017: £0.2m) of work in progress recognised within the ABSs on personal injury claims which have not reached the settlement stage yet. Work in progress and the corresponding revenue is only recognised once the defendant has admitted liability on a claim. There is a significant element of uncertainty in estimating the WIP recognised in the ABSs. The Directors believe that the assumptions adopted are appropriate and based on historical experience of claims processed in our ABSs and by our panel. These assumptions will be updated with actual results as claims settle.
· £3.2m of accrued income (2017: £0.0m) of contractually guaranteed revenue on claims processed in the ABSs. A further £2.7m (2017: £2.2m) is included within trade debtors;
· £1.6m (2017: £3.4m) relating to legacy profit share deals with our panel law firms. Of this amount, £1.3m is
contractually guaranteed.
Cash flow review
The Group increased cash and cash equivalents by £0.7m in the year (2017: reduction of £4.0m). The significant items in the consolidated cash flow statement are net cash from operating activities; new and repaid borrowings; dividends paid to shareholders; and non-controlling interest drawings.
Net cash from operating activities is primarily driven by operating profit and working capital movements, both of which are discussed above.
|
2018 |
2017 |
|
£m |
£m |
|
|
|
Underlying operating profit |
12.1 |
14.5 |
Depreciation and amortisation |
0.4 |
0.3 |
Working capital movements |
(4.5) |
(6.9) |
|
|
|
Net cash generated from underlying |
|
|
operating activities |
8.0 |
7.9 |
Underlying cash conversion |
65.6% |
54.8% |
Cash flows from exceptional items |
(0.8) |
(1.8) |
Interest paid |
(0.5) |
(0.2) |
Tax paid |
(2.2) |
(3.1) |
|
|
|
Net cash from operating activities |
4.5 |
2.8 |
|
|
|
Underlying cash conversion for the year was better than the Board's expectations at 65.6% (2017: 54.8%) due to better than planned collection of receivables in the second half of the year. Prior to 2017, the Group has achieved higher levels and a reduction was planned as the Group invests in self-processing and builds a book of claims as part of its strategic transformation of the Personal Injury division. The Group anticipates returning to higher levels of cash conversion as these claims mature.
The Group made £6.4m of dividend payments to shareholders during the year (2017: £8.2m), which represented the 2017 final dividend and the 2018 interim dividend. £0.9m of drawings were paid to the ABS partners during the year under the terms of our agreements. This was the first year of payments.
The Group drew down £4.1m on its RCF during the year.
New accounting standards
The Group has adopted two new accounting standards during the year - IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.
The adoption of IFRS 15 did not result in any adjustments to the financial statements in either the current or prior years.
The adoption of IFRS 9 required a change in the accounting policy for receivables and a revision to the calculation of provisions for doubtful debts, which are now performed on an expected credit loss basis. As a result of this change, an adjustment of £0.8m (net of deferred tax) was made to retained earnings, which is explained in note 10. The resulting provisions for doubtful debts at 31 December 2018 was £0.9m (2017: £1.1m).
On 1 January 2019, the Group will adopt IFRS 16 Leases. See note 1 to the consolidated financial statements for further details.
In conclusion, the Group's financial position remains robust. We have strengthened the business in 2018 and remain on track to create a sustainable financial model to capitalise on the opportunities available to us.
James Saralis
Chief Financial Officer
18 March 2019 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
|
|
|
2018 |
2017 |
|
|
|
Note |
£000 |
£000 |
|
|
|
|
|
|
|
|
Revenue |
|
48,957 |
51,912 |
|
|
Cost of sales |
|
(24,254) |
(25,224) |
|
|
Gross profit |
|
24,703 |
26,688 |
|
|
Administrative expenses |
|
(14,683) |
(14,086) |
|
|
|
|
|
|
|
|
Underlying operating profit |
|
12,132 |
14,491 |
|
|
Share-based payments |
|
(457) |
(182) |
|
|
Amortisation of intangible assets acquired on business combinations |
|
(1,270) |
(1,307) |
|
|
Exceptional items |
3 |
(385) |
(400) |
|
|
|
|
|
|
|
|
Operating profit |
|
10,020 |
12,602 |
|
|
Financial income |
|
222 |
150 |
|
|
Financial expense |
|
(470) |
(331) |
|
|
|
|
|
|
|
|
Profit before tax |
|
9,772 |
12,421 |
|
|
Taxation |
4 |
(1,389) |
(2,467) |
|
|
|
|
|
|
|
|
Profit and total comprehensive income for the year |
|
8,383 |
9,954 |
|
|
|
|
|
|
|
|
Profit and total comprehensive income is attributable to: |
|
|
|
|
|
Owners of the Company |
|
6,674 |
9,876 |
|
|
Non-controlling interests |
|
1,709 |
78 |
|
|
|
|
|
|
|
|
|
|
8,383 |
9,954 |
|
|
|
|
|
|
|
|
|
|
2018 |
2017 |
|
|
|
|
p |
p |
|
|
|
|
|
|
|
|
Earnings per share (p) |
|
|
|
|
|
Basic earnings per share |
7 |
14.5 |
21.7 |
|
|
Diluted earnings per share |
7 |
14.3 |
21.6 |
|
|
|
|
|
|
|