Anexo Group plc (LON:ANX), the specialist integrated credit hire and legal services provider, has announced its final results for the year ended 31 December 2020.
· Revenue increased by 10.5% to £86.8 million (2019: £78.5 million)
· Operating profit reported at £18.1 million (2019: £24.6 million), a reduction of 26.6% in line with market expectations
· Adjusted1 operating profit before exceptional items in line with market expectations, declining by 25.9% to £18.7 million (2019: £25.3 million)
· Adjusted1 operating profit margin reduced to 21.6% (2019: 32.2%)
· Profit before tax of £15.5 million (2019: £22.4 million), a reduction of 30.8%
· Adjusted1 profit before tax and exceptional items reported at £16.1 million, (2019: £23.0 million), a decline of 29.9% after £6.5 million of investment in staff, VW case acquisition costs and IT costs associated with the headcount increase
· Adjusted2 basic EPS at 11.4 pence (2019: 17.0 pence)
· Proposed final dividend of 1 penny per share giving a total dividend for the year of 1.5 pence per share (2019: 1.5 pence per share)
· Net assets reported at £110.4 million (2019: £91.7 million) representing an increase of 20.4%
· Reduction in net cash outflows from operating activities reporting a net cash inflow of £0.2 million in 2020 (2019: net cash outflow: £0.8 million)
· Net debt balance at 31 December 2020 was £40.5 million (31 December 2019: £36.2 million)
Note: The basis of preparation of the consolidated financial statements for the current and previous year is set out in the Financial Review.
1. Adjusted operating profit and profit before tax: excludes share‑based payment charges in 2019 and 2020. A reconciliation to reported (IFRS) results is included in the Financial Review.
2. Adjusted EPS: adjusted PBT less tax at statutory rate divided by the weighted number of shares in issue during the year.
Financial and Operational KPIs
· During 2020 the Group has seen continued improvement in a number of key performance measures (detailed below). These have resulted in a transition from cash absorption to cash generation by the Group, notwithstanding the issues faced during 2020 from COVID-19. This trend is particularly pleasing with an increase in the number of new cases funded, rising from 6,959 to 7,535. This illustrates increased investment in our portfolio of cases and is supported by growth in cash collections, which rose by 16.4% in the year to reach £98.0 million in FY 2020.
· This improvement has been supported by investment in legal staff. In 2019, the number of senior fee earners grew by almost 43% to reach 127 at the year end. Further recruitment in 2020 has resulted in headcount growing by a further 18 staff (an increase of 14%) to end the year at 145 senior fee earners.
|Total revenues (£’000s)||86,752||78,510||10.5%|
|Gross profit (£’000s)||67,952||62,807||8.2%|
|Adjusted operating profit (£000’s)||18,708||25,250||(25.9%)|
|Adjusted operating profit margin (%)||21.6%||32.2%||(32.9%)|
|Vehicles on hire at the year-end (no)||1,613||1,308||23.3%|
|Average vehicles on hire for the year (no)||1,515||1,454||4.2%|
|Number of hire cases settled||5,236||4,938||6.0%|
|Cash collections from settled cases (£’000s)||97,977||84,140||16.4%|
|New cases funded (no)||7,535||6,959||8.3%|
|Senior fee earners at period end (no)||145||127||14.2%|
|Average number of senior fee earners (no)||140||111||26.1%|
Commenting on the Final Results, Alan Sellers, Executive Chairman of Anexo Group plc, said:
“I am delighted to report that the Group has achieved the milestone of net cash generation throughout the Financial Year. This achievement is especially notable given the disruption we experienced throughout the year as a result of the COVID-19 pandemic.
“We continue to focus on increasing cash settlements through the expansion of our Legal Services division while using our working capital to underpin growth in our Credit Hire division. Vehicle numbers were very robust, particularly in the second half of the year, despite the pandemic.
“Both our business divisions have remained fully operational throughout the 2020 and into 2021 and the Group has demonstrated considerable resilience. Ongoing investment into our advocacy practice is forming a solid foundation for our strategy of building this into a major contributor to future revenues.
“The arrival of DBAY Advisors Limited as a significant shareholder is a major vote of confidence in the Group’s strategy and management and we look forward to working closely with DBAY to ensure continued expansion of our main business divisions and to create value for all our shareholders.
“The Board remains confident of the Group’s capacity for organic growth. We believe that we have proved the resilience of our business in the difficult circumstances we continue to experience. Given our strong financial position we believe that Anexo is well positioned to continue its growth trajectory and deliver profitable growth to our shareholders. The Board is pleased to propose a dividend of 1 penny.”
A conference call for analysts will be held at 9.30am today, 27 April 2021. A copy of the Final Results presentation is available at the Group’s website: https://www.anexo-group.com/
An audio webcast of the conference call with analysts will be available after 12pm today: https://www.anexo-group.com/content/investors/latest-results
On behalf of the Board, I am pleased to report a year of solid performance by the Group in the face of considerable nationwide challenges. Despite the difficulties caused by the COVID-19 pandemic, the Group remained fully operational throughout both the year’s national lockdowns and achieved the significant milestone of net cash generation. These results reflect our policy of increasing cash settlements through the expansion of our Legal Services division, while using our working capital to maximum effect to ensure growth in our Credit Hire division. The parallel investment in our advocacy practice will help this to become a major contributor to future revenues.
2020 also saw a significant change in the ownership structure of the Group with DBAY Advisors Limited (‘DBAY’) agreeing to acquire a minority stake of 29.0% of the issued share capital of the Group from myself, Samantha Moss and Valentina Slater at a price of 150 pence per share. Whilst the transaction will not result in any changes operationally, the Group plans to work closely with DBAY to continue the expansion of its Credit Hire and Legal Services divisions and is committed to the creation of value for all its shareholders.
DBAY is an international asset management firm with offices in the Isle of Man and London. It set up its first investment vehicle in 2008 and now manages investments on behalf of institutional investors, family offices, pension funds, trusts and foundations in various funds. DBAY is owned by members of the firm on a partnership basis.
With this development and continuing expansion of the core business in challenging times we believe that the Group is well positioned for robust growth in 2021 and beyond.
Anexo delivered a strong performance during a period of sustained investment in our infrastructure. Despite the initial disruption caused by the national lockdowns in March and November, trading recovered swiftly and levels of activity across our divisions remained high. As a result, Group revenues in 2020 increased by 10.5% to £86.8 million (2019: £78.5 million). Adjusted profit before tax fell 29.9% to £16.1 million (2019: £23.0million), reflecting expenditure of £6.5 million on investment in staff, VW case acquisition and IT costs associated with the headcount increase. This adjusted figure is in line with market expectations.
The emphasis in early 2020 was on cash generation. During 2019, cash absorption reduced from £7.0 million in the first half of the year to £1.5 million in the second half. This trend continued over the first half of 2020 and at the interim stage the Group was able to report an overall net cash inflow of £2.4 million. This achievement was a milestone for the Group and one of which the Board remains very proud, particularly in light of the disruption caused by the COVID-19 pandemic.
The second half of the year saw a number of competitors withdrawing from the market and the Group took this opportunity to expand its network of introducer garages. At the same time the Group continued the expansion of staff numbers and the necessary supporting infrastructure. As a result of this ongoing investment in both divisions, the period was one of cash absorption rather than generation.
The Board is delighted to announce that, notwithstanding the impact of the two national lockdowns and the programme of investment expenditure, the Group achieved a net cash inflow for the year of £0.2 million (2019: net cash outflow: £0.8 million). 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).
The Group took a series of prudent steps in the second half of the year to reinforce its balance sheet in the light of the pandemic. The placing of 6.0 million new shares at the end of June raised £6.9 million of new funds after expenses. In addition, the Group secured an investment of £2.1 million from a litigation funder to support its investment in the VW emissions class action and a further £5.0 million was drawn down from Secure Trust plc under the Government-backed CLBILS scheme. These transactions have resulted in a significant improvement in cash headroom for the Group.
Credit Hire division
The Group’s Credit Hire division, EDGE, saw record performance in vehicle provision during the year. The number of new vehicle hires initially saw a sharp decline upon the implementation of the first national lockdown in March. However, a large number of EDGE customers are classed as key workers, including couriers (who have been extremely active throughout the pandemic) as well as health professionals, teachers, nursery staff, emergency workers and supermarket personnel. As a consequence, vehicle numbers recovered strongly and reached record levels prior to the announcement of the second national lockdown in October. The number of vehicles on hire at the end of 2020 rose 23.3% to 1,613 (2019: 1,308) and the average number of vehicles on hire throughout the financial year rose 4.2% to 1,515 (2019: 1,454).
Revenues within the Credit Hire division grew by 7.5% to £51.6 million (2019: £48.0 million). The Group maintains its claims acceptance strategy of deploying its resources into the most valuable claims, thereby growing claims while preserving working capital. This policy, combined with increased costs incurred as a result of COVID-19 requirements, led to a reduction of 2.3% in gross profit to £33.5 million (2019: £34.3 million). The Group monitors its fleet size constantly, enabling it to respond quickly to changes in demand and strategic priorities by deploying its vehicles appropriately. Focus remains firmly on McAMS, the motorcycle division, reflecting the fact that, on average, a motorcycle claim has the same value as a car claim with a significantly lower take-on cost.
Legal Services division
The Group’s Legal Services division, Bond Turner, has continued its focus on cash collections and corresponding investment in staff to drive increased case settlements. This strategy, coupled with our conservative recognition policies, has had a significant impact on financial performance. Revenues within the Legal Services division, which strongly converts to cash, increased by 15.2% to £35.2 million (2019: £30.5 million). The continued growth of the Bolton office, which opened in December 2018, and the opening of the Leeds office scheduled for the beginning of 2021 have provided considerable opportunities for recruitment. During the pandemic, the Group has seen a number of competitors withdrawing from the market and embarking on a run-off strategy; in addition, a number of high-quality staff at competitor firms were placed on furlough. Taking advantage of these recruitment opportunities means that staff numbers have risen at all levels. At the end of December staff numbers within Bond Turner stood at 518, a 17.2% increase on the 2019 figure of 442. Of these, a total of 145 were senior fee earners, up 14.2% (2019: 127).
VW Emissions Case
The marketing campaign around the class action against Volkswagen AG (‘VW’) and its subsidiaries (the ‘VW Emissions Case’) has continued throughout 2020. A judgment announced in the High Court of Justice on 6 April 2020 found that VW had indeed subverted key air pollution tests. VW was subsequently refused permission to appeal that judgment.
Bond Turner is acting on behalf of a number of individuals who have registered claims against VW and is currently engaged on approximately 14,356 cases. The marketing campaign has been largely conducted via social media channels as well as via the use of internal customer records. The campaign is ongoing, with all marketing costs being written off as incurred.
The Board believes that, in the event of a settlement, the percentage of potential damages and associated costs accruing to Anexo would have a significant positive impact on the Group’s expectations for profits and cash flow for the relevant accounting period. There is no certainty that a settlement in favour of Bond Turner’s clients will be reached, nor is there any guarantee that such a settlement would include financial compensation. The timeline for progress towards a potential settlement is also unclear and no assumptions as to revenue have been included in the Board’s internal forecasts for FY 2021.
The Board is pleased to propose a final dividend of 1.0 pence per share which, 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. The shares will become ex-dividend on 24 June 2021. An interim dividend of 0.5 pence per share was paid on 23 September 2020 and that combined with the final dividend takes the total dividend for the year to 1.5 pence per share (2019: 1.5 pence per share).
Anexo values corporate governance highly and the Board believes that effective corporate governance is integral to the delivery of the Group’s corporate strategy, the generation of shareholder value and the safeguarding of our shareholders’ long-term interests.
As Chairman, I am responsible for the leadership of the Board and for ensuring its effectiveness in all aspects of its role. The Board is responsible for the Group’s strategic development, monitoring and achievement of its business objectives, oversight of risk and maintaining a system of effective corporate governance. I will continue to draw upon my experience to help ensure that the Board delivers maximum shareholder value.
Our employees and stakeholders
The strong performance of the Group reflects the dedication and quality of the Group’s employees. We rely on the skills, experience and commitment of our team to drive the business forward. Their enthusiasm, innovation and performance remain key assets of the Group and are vital to its future success. On behalf of the Board, I would like to thank all of our employees, customers, suppliers, business partners and shareholders for their continued support over the last year.
The advent of the COVID-19 pandemic inevitably caused some disruption to the Group’s operations. The Group’s operations are, however, categorised as essential businesses and as such have been exempted throughout from government restrictions. Its businesses supply and service a broad range of customers who are involved in a non-fault accident and who would otherwise be unable to access the mobility they need. Among these, the Group provides replacement vehicles to many key workers, including couriers (who are increasingly active during the current circumstances) and other customers such as doctors, nurses, schoolteachers, nursery staff, emergency workers and supermarket personnel.
The Group’s core businesses have continued to be fully operational following the reintroduction of a national lockdown. Activity levels in the Credit Hire Division (EDGE) continue to be high. The COVID-19 pandemic has led to a number of the Group’s competitors withdrawing from the market and, as a result, Anexo has been approached by a number of high-quality introducer garages looking for new partnerships. The Group has taken advantage of this unprecedented opportunity to expand its introducer network. Vehicles continue to be delivered and collected by staff who are protected in line with government guidelines. All returned vehicles are valeted as a matter of course before being allocated to a new customer and comprehensive cleaning procedures are being rigorously enforced.
The courts remain open, as they have done throughout the year, and notwithstanding a decline in court listings as a result of COVID, the Group’s Legal Services division, Bond Turner, has continued to reach case settlements via telephone and online hearings where necessary. The progression and settlement of cases has been aided by moves from the Ministry of Justice (MoJ), supported by the Judiciary, to allow the remote operation of courts through online and telephone hearings. Many staff have returned to office working while observing social distancing guidelines and extensive COVID safety measures have been implemented. The Bond Turner offices have remained accessible 24 hours a day during recent months and the division has remained fully operational at all times.
EDGE, the Group’s Credit Hire division, has also remained fully operational throughout 2020. Following the lifting of the first lockdown, the majority of the Group’s introducer garages returned to normal working practices and any existing backlog of repair work was cleared. Some introducer garages have once again suspended work as a result of the second lockdown but fewer delays to repair work are being experienced.
Due to the unprecedented global impacts of Covid-19, the Company has continually re-assessed and analysed its business strategy with the key focus being minimising the impact on critical work streams, ensuring business continuity and conserving cash flows. As such, increased stakeholder engagement and open communication have become increasingly important in decision making for the Board.
While the Covid-19 crisis has interrupted our regular physical face to face interactions with various stakeholders internally and externally, we do consider them to be important in maintaining open communications and team cohesion and will be reintroducing these gradually provided it is safe to do so in line with Government guidelines and the needs of individual attendees. In the meantime, we have taken advantage of various video conferencing platforms where appropriate.
Current Trading and Outlook
As our financial performance and KPI’s have demonstrated, the Group has continued to perform throughout a period of significant uncertainly, improving vehicle numbers and cash collections to record levels during 2020, demonstrating the strength and resilience of the Group during the current COVID-19 crisis. Whilst others have made redundancies, furloughed staff and withdrawn from the credit hire market, we have continued recruitment. This has impacted our reported financial performance in 2020 but these investments have been made to support continued growth into 2021 and beyond.
As a Board we developed a plan for managing the Group during this ever-changing year and continue to react to take advantage of opportunities as they arise. The expansion of the national vaccination programme and the relaxation of national lockdown from April 2021 has resulted in an increase in opportunities and vehicles on the road, consistent with the trends seen in 2020.
While uncertainties remain given the current environment, I continue to have great confidence in the strategy post COVID and look to the future with continued optimism.
27th April 2021