Anexo Group prospering with expanded business model and cash generation (LON:ANX)

Anexo Group plc (LON:ANX) Head of Investor Relations Nick Dashwood Brown caught up with DirectorsTalk for an exclusive interview to discuss their strong financial position, an increase in debt facilities, how busy they are from a credit hire perspective, the benefits of the courts reopening, the major contract with MCE insurance and why investor should be investing in the company.

Anexo Group is a specialist integrated credit hire and legal services group focused on providing replacement vehicles to consumers who have been involved in a non-fault accident. Joining me today to discuss the company’s latest string of news is Head of Investor Relations, Nick Dashwood Brown.

Q1: Nick, if we can start off with your strong financial position, you must be delighted that all your KPIs increased considerably in H1 2021?

A1: Yes, we’re very happy with the performance in the first half of the year. Obviously, we were affected, as every company was, by the pandemic but I’d like to stress that we actually survived the pandemic extremely well.

Both of our core businesses, the credit hire and legal services businesses are essential businesses under government guidelines and although we saw an initial drop in the number of vehicles on the road and initial decline in the number of cases being settled, we actually bounced back extremely strongly from that.

The first half figures show that actually the number of vehicles we had on hire in the first half was considerably in excess of the second half, we also settled more cases, and most importantly, we collected more cash.

Q2: You also recently announced an increase in your debt facilities, how will that impact on the business?

A2: We’re a growth company, we make no bones about it, we believe that we’re on a growth trajectory and it seems prudent at the time that we were offered extra facilities, both from Secure Trust, who offer facilities for direct accident management which is our credit hire site and HSBC who look after the Bond Turner legal services side.

Both are these were willing to extend our lending, we think that gives us the opportunity to put more vehicles on the road and also to recruit more legal staff. It’s a very straightforward equation, if we have more legal staff, we get more settlements, and more settlements equals more cash.

So, both of these were on very good terms and we’re happy to be able to utilize that to finance the growth of the company.

Q3: I think you touched on this earlier, but how busy are you now from a credit hire perspective?

A3: We’re very busy. If we were to plot this on a graph in terms of the number of vehicles on the road, in the first lockdown which of course seems a lifetime ago now, but March of 2020, we obviously saw a fairly sharp decline in the number of vehicles on the road, but that climbed back very quickly. We had a small decline again from a hire base at the end of last year when we had the second lockdown and into 2021, but ultimately, we’ve seen a big bounce back in this and in fact, we’re running at record levels at the moment.

The number of vehicles on the hire at the end of the first half was about 1,700 and we said in October that our numbers were up to about 2,000 and we’re certainly running well over 2,000 at the moment so it’s been extremely strong.

It’s worth bearing in mind that a lot of our customers are people who are involved in essential jobs, so they kept on working throughout the pandemic. We also do a lot of courier business, the majority of our motorcycles at 125cc or below and those are the kinds of vehicles which are used by the couriers who are delivering everybody’s parcels, food, whatever it happens to be, you can imagine the home delivery market has been extremely robust.

So ultimately, we have been and remain extremely busy in terms of the credit hire side.

Q4: Has it helped that the courts have now reopened Nick?

A4: Absolutely. Obviously, there was some difficulty with the courts being closed but cases continue to be heard either by phone or by zoom, but obviously there are a number of cases where you do need witnesses to appear, or you do need defendants or claimants to appear. Those obviously were postponed.

Now, we’re seeing the courts reopening bit by bit, I think we’d like to see them open a little bit faster, but actually broadly speaking, we are where we want to be in terms of the courts, being able to hear cases face-to-face. There is an argument that some cases can continue to be heard over the phone without necessarily being in person but certainly from our perspective, on the rare occasions you do get court, and don’t forget the majority of our cases settled before court, then it usually means that there’s disputes and therefore it’s much better heard face-to-face.

So, certainly the reopening of courts is a major positive for us and will continue to be so.

Q5: Now, just moving on to some more exciting and significant news, you announced last week that you’ve signed a major contract with UK-based broker MCE insurance. What does that partnership entail and how does it benefit the group?

A5: This is a departure for us in some ways, historically we’ve always got our cases through direct capture, in other words, we get our cases directly from the customer through our network and introducer garages of which are about 1,100 independent garages. They put our customers in touch with us.

This is the first time where we’ve gone for what you might call third-party capture so MCE Insurance, which is the largest, I believe, motorcycle insurance broker in the UK, we’re now going to be looking after all their non fault accident claims.

So, anybody who insures their bike with MCE, who’s involved in a non-fault accident, their business will come to us, both for the repair or replacement vehicle by a write-off and also for the claim against the actual motorist who damaged the vehicle or the cost of the write-off and, for that matter, their associated claims with things like personal injury and also various bits of personal equipment. Two examples of that:

1) If you get knocked off a motorcycle, you’re not going to get anything like whiplash, which no longer occurs due to the Civil Liability Act, if you get knocked over on a motorcycle, it’s going to hurt.

2) There are bits of personal equipment, which are unique to motorcycles, a full set of motorcycle leathers is expensive and if those are damaged by you being knocked off your bike in an accident that wasn’t your fault, then I don’t see why it should be your responsibility to replace them.

So, all of that is, is good news for us and it’s worth bearing in mind that roughly two thirds of our business is motorcycles as opposed to cars and commercial vehicles and that’s probably going to remain relatively steady. A lot of our motorcycle business is write-off business as opposed to repair business, normally, if you’ve got a relatively cheap motorbike and it’s knocked down the road, that’s going to tend to be a write-off, nobody’s going to repair that, and write-ups tend to better for us because obviously the hire periods are longer.

For a repair, the vehicle is on the road until such time as the vehicle is repaired and returned to the owner but obviously in a write-off case, the hire vehicle is on the road until we receive a settlement cheque for the insurance company, which can take considerably longer. So, it’s a useful commercial advantage for us.

This is a big deal for us, we’re very, very pleased with it, we believe that it will not only increase the number of vehicles on the road, but it’ll increase the quality of our claims, and it will certainly give us opportunities to build better relationships with the motorcycle community.

Q6: Just for investors looking for attractive growth companies, how would you now summarise why they should invest in Anexo Group?

A6: We are unique in what we do, there isn’t really anybody who does what we do. We provide a full service in terms of claims for non-fault accidents and that goes right the way through vehicles through to settlement of the legal claim against the at fault motorists.

This is a growth area; we believe that we’re not more than 2% of the market at the moment in terms of impecunious claims and just to remind your listeners impecunious means those people who do not have the wherewithal to provide themselves with a replacement vehicle. So, without our help, they’d be walking to work or taking the kids to school on the bus, so we believe we’re also providing a useful social function.

We are cheap against the market, the valuation is not demanding, we are also a legal services group, we’re an advocacy group as well as purely dealing with the insurance side of things so we’re heavily involved.

I think your listeners will be aware of the VW emissions case which is still unfolding at the moment, but we’re heavily involved in that and we’re also getting involved in housing disrepair. A lot of people in the UK are living in substandard housing, particularly in social housing, and this is something that we’re looking at expanding and working on putting together a team to take care of that.

So, there are a number of different strings to our bow in terms of the legal business, but in terms of exposure to a market which isn’t really going to go away, there’s always going to be people having accidents and there are always going to be people who have accident which aren’t their fault, and we’re preeminent in taking those cases on.

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