Trusted when it matters
NAHL Group plc Annual Report and Accounts 2017
INTRODUCTION AND HIGHLIGHTS
Trusted...
by our customers and partners
to keep our promises
to act with integrity
to achieve the right result
to provide help when it matters
Visit us online to see how our
brands are trusted to provide
help when it matters
www.nahlgroupplc.co.uk/trusted
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
NAHL Group plc is a leading marketing and
services business focused on the UK consumer
legal services market.
Revenue (£m)
Profit Before Tax (£m)
Basic EPS
Dividend per share (p)
£51.9m +2.5%
£12.4m -21.4%
21.7p -19.6%
15.90p
60
50
40
30
20
10
0
50.7
50.6
51.9
43.8
2014
2015
2016
2017
20
16
12
8
4
0
15.8
14.0
12.1
12.4
2014
2015
2016
2017
30
24
18
12
6
0
25.6
27.0
20.6
21.7
2014
2015
2016
2017
20
16
12
8
4
0
18.75
19.05
15.70
15.90
2014
2015
2016
2017
Operational highlights
¡ A year of progress with continued evolution
of Personal Injury division.
¡ Establishment and operational launch of two
Alternative Business Structure (ABS)
ventures with early signs encouraging.
¡ Successful relaunch of National Accident
Helpline brand generating positive results.
¡ Critical Care division ahead of last year with
continued growth in market share.
¡ Solid trading performance from Residential
Property division against a challenging
market backdrop.
Financial highlights
¡ Trading perfomance in line with expectations.
¡ Revenue up 2.5% to £51.9m (2016: £50.6m).
¡ As expected, underlying operating profit
down 19.4% to £14.5m (2016: £18.0m).
¡ Profit before tax of £12.4m (2016: 15.8m).
¡ EPS ahead of expectations at 21.7p (2016:
27.0p).
¡ Recommended final dividend of 10.60p
resulting in a total dividend for the year of
15.90p (2016: 19.05p).
Strategic report
Introduction and Highlights
At a Glance
Our Market
Business Model
Strategy for Growth
Strategy in Action
Chairman’s Statement
Chief Executive’s Review
Chief Financial Officer’s Report
Principal Risks and Uncertainties
People and Communities
Our People
Our Communities
1
2
4
6
8
10
16
18
22
26
28
30
Governance
Board of Directors
Executive Management Team
Directors’ Report
Corporate Governance Statement
Statement from the Chairman of
the Remuneration Committee
Directors’ Remuneration Report
Directors’ Remuneration Policy
Statement of Directors’ Responsibilities
32
34
36
38
40
41
45
50
Financial statements
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Company Balance Sheet
Company Statement of
Changes in Equity
Company Cash Flow Statement
51
54
55
56
57
58
78
79
80
Notes to the Company Financial Statements 81
Advisors
Glossary
NAHL Group plc Annual Report and Accounts 2017
86
87
1
AT A GLANCE
NAHL Group plc operates in the UK Consumer
Legal Services market across three divisions.
Current staff
220
Our Mission
Care experts
164
To provide exceptional service to our consumers
and customers by being outstanding at everything
we do.
Consumers supported
151,178
Our Vision
To become the leading provider in our
chosen consumer legal services markets by:
¡ creating trusted brands that enable consumers to
access the law;
¡ forging strategic customer partnerships that create
mutual value; and
¡ embracing developing technologies to reach and
interact with our consumers and customers.
Key milestones since flotation
May 2014
Feb 2015
Jul 2015
Oct 2015
Floated NAHL Group plc on AIM
Acquired Fitzalan Partners
Acquired Best Value Conveyancing
Acquired Bush & Company Rehabilitation
Investing in our future, increasing
our profile and status, signalling our
intention towards future growth.
Entering the residential property
market, diversifying our business.
Cementing our position in
the residential property market.
Building on our expertise in Personal Injury (PI) by
expanding into the catastrophic injury market.
2
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Our trading divisions
Personal Injury
National Accident Helpline
(NAH)
Critical Care
Bush & Company Rehabilitation
(Bush)
Residential Property
Fitzalan Partners and Searches UK
(Fitzalan and Searches)
Attracting consumers via its market
leading brand, sympathetically validating
the legitimacy of their claim and
connecting them to an appropriate
expert law firm.
Market leading provider of Case Managers
and Expert Witnesses to solicitors and
insurance companies in support of serious
and catastrophic injury victims.
Utilising proprietary web-based platforms
to target prospective homebuyers and
sellers in order to provide conveyancing,
searches (via Searches) and survey
services via a carefully selected panel of
law firms, conveyancers and surveyors.
Revenue
Revenue
Revenue
£31.7m
£11.0m
£8.3m
Underlying operating profit
Underlying operating profit
Underlying operating profit
£11.0m
£3.9m
£1.4m
Jan 2016
Acquired Searches UK
Significantly expanding the product
offering of the residential property
division providing a comprehensive
service to consumers.
Jul 2017 – Established Your Law LLP,
our first ABS with NewLaw Solicitors
Nov 2017 – Established second
ABS with Lyons Davidson Solicitors
Getting closer to the claim, delivering
improved consumer experience.
Trading as National Law Partners and
continuing our intention to increase
involvement in the claim and be
outstanding in everything we do.
NAHL Group plc Annual Report and Accounts 2017
3
Key milestones since flotation
OUR MARKET
The Group operates in the Consumer Legal
Services market enabling consumers to
access support when it matters.
Consumer Legal Services
Consumer Legal Services (CLS) continues to be a fragmented
market with a great deal of confusion from consumers around
the legal process and how to access it. Ongoing media
commentary around the market itself and changes to it
(including Personal Injury reforms, Stamp Duty and so on) add
to this sense of uncertainty. The knock-on effect of this is that
consumers can find it challenging to identify the best provider
for their legal concern from amongst the many choices open to
them in the market.
In order to support consumers in making the right choice, we
firmly believe there is a need for greater clarity and guidance and
for the legal sector to identify trusted, knowledgeable partners
to work with. The speed of the development of the sector and
the myriad ways that consumers can access this help is
increasing. NAHL Group plc has been at the leading edge of this
change to ensure that it is in the best possible position to provide
the support and guidance that consumers need in the wake of
these ongoing changes.
Our three divisions focus on the Personal Injury (PI), Critical
Care ((CC), incorporating medical reporting/rehabilitation) and
Residential Property (RP) markets within CLS. These markets
are valued at £6.7bn1.
UK Legal Services Market by Key Practice Area,
2017 (£bn)*
We are focused on Personal Injury,
(the largest of the CLS segments),
Critical Care and Residential Property.
Personal Injury
The PI market has been broadly static in recent years at just
under one million claims per annum. However, we anticipate a
softening in the overall market as a result of a reduction in Road
Traffic Accident (RTA) claims caused by the cumulative impact
of prior legislative change which has resulted in demand
uncertainty.
Whilst data from April 2017 onwards is not yet available, our
belief is that non-RTA volumes will remain broadly static and,
coupled with our enquiry rate increasing2 year on year, we will
therefore have increased our market share.
There has been an apparent decline in Employer Liability cases
but this is attributed to a significant reduction in noise induced
hearing loss (NIHL) cases rather than an overall reduction in
these claims. NAH has deliberately not been active in the volume
NIHL market due to concerns about the nature of some claims
and so its value to Panel Law Firms (PLFs). There has been a
marked increase in claims categorised as “other” and this is
driven by a spike in foreign, gastric illness claims which is an area
that NAH is not engaged with.
External factors such as ministerial changes and Britain’s
intended exit from the European Union have created increased
uncertainty about the implementation of reforms proposed by
the former Chancellor of the Exchequer. The delay in progressing
the Civil Liability Bill will inevitably push out the timelines for
regulatory change.
1. IRN Research, UK Legal Services Market Report, March 2018 and IRN
Medico-Legal Insurance Services Report, February 2018
2. Management Information, March 2018
Corporate/commercial
work
Commercial property
Personal injury/clinical
negligence
Family law
Residential conveyancing
Employment law
Probate, wills and trusts
Crime
Other
Medical Reporting/
Rehabilitation
* Source: IRN Research, UK Legal Services Market Report, March 2018.
IRN Medico-Legal Insurance Services Report, February 2018.
4
NAHL Group plc Annual Report and Accounts 2017
11.43.73.72.42.32.31.71.83.40.70
Strategic report
Governance
Financial statements
Critical Care
Despite being a relatively small market, in comparison to the others in
which we operate, 2017 has, nevertheless, seen some interesting
developments. There have been a number of mergers and
acquisitions amongst the smaller providers whilst some of the larger
Fast Track companies have developed propositions in the
catastrophic sector.
The war for talent is an ongoing and important dynamic so
continuing our focus on quality and supporting our consultant base
remains a key priority and during the year we have increased the
number of Case Managers working with Bush.
Although the regulatory changes in PI do not directly affect Bush we
have seen growing cost pressures and price sensitivity as firms
grapple with the impact of overall lower claims revenue in other
sectors of the market. In addition we anticipate government initiatives
that focus on the use of technology to create efficiencies for the
courts, including, reduced court time and associated expenses. This
will have the benefit of affording our experts more time for other
areas of their core work. Bush is further responding to these trends
by taking steps to ensure its own report templates and processes are
as streamlined as possible.
We are also sensing a greater focus on a more strategic approach by
firms who are adopting a procurement based model. Bush has
successfully adapted to compete effectively in such initiatives,
securing insurer contracts that help us grow joint instructions.
An additional, positive development has been a growing number of
strategic partnerships. As an example Bush has been working with
the Child Brain Injury Trust (CBIT) on a new commercial alliance
which we anticipate will contribute to 2018 growth.
Residential Property
The RP market has continued to be challenging with a 25% drop in
volume sales in 20171 – resulting in a 30 year low in home
ownership2. The result of this is that 46.1% of people between the
ages of 25 and 34 are renting privately, up from 24.2% in 2005-063.
This challenge was recognised by the Government in their
decision at the Budget to remove Stamp Duty for first time
buyers in a bid to stem this decline and encourage a pick up at
the entry end of the market.
Homebuyers’ confidence is a key driver of market performance and
research4 in Q4 showed that this is at its lowest level since December
2012. Furthermore, between April and October 2017 house price
optimism dropped 14 points5, matching the record fall following the
EU Referendum result.
Whilst these difficulties in the market have made for a tough
environment for Fitzalan and Searches, the Government’s action on
looking to rejuvenate the first time buyer market did open the
opportunity for the division to provide a one-stop shop for those
looking to purchase their own home, providing all the help and
information they will need while navigating this complex process.
1. Land Registry Transaction Data.
2. English Housing Survey, March 2017
3. English Housing Survey, March 2017
4. Halifax Customer Sentiment Survey, October 2017
5. Halifax Customer Sentiment Survey, October 2017
Number of cases registered to the CRU
800
640
480
320
160
0
770,791
780,324
2016/17
2015/16
Total 2016/17
978,816
Total 2015/16
981,324
86,495
73,355
92,709
85,504
17,895
17,894
11,388
20,047
2,046
1,692
Clinical Negligence
Employer
Motor
Public
Other
Liability not known
Source: Compensation Recovery Unit performance data, May 2017
NAHL Group plc Annual Report and Accounts 2017
5
BUSINESS MODEL
Providing exceptional service to our
consumers and partners by being
outstanding at everything we do.
What we do
Value created for stakeholders
Attract
In our PI and RP divisions, we leverage our brands and
digital marketing is used to attract consumers. While in
CC, this is achieved through an awareness of the clinical
expertise, experience, independence and reputation of
the business and its consultants who work on behalf of
Bush.
Empathise and Understand
Our teams take the time to empathise with the
consumer’s position and gain a full understanding
of their needs. Once they have all the necessary
information they are best placed to recommend a
course of action.
Act and Deliver
Consumers are then matched with an expert who is
most appropriate to serve their needs, be they as legal
firm, surveyor, Expert Witness or Case Manager. They
are then on their way to a satisfactory outcome.
How we get paid
Customers pay for these services either via commercial
agreement for the supply of services (PI) or a fee per
finalised instruction (RP). In our ABSs we are paid a
pre-agreed proportion of the consumer’s final settlement.
In CC, the Expert Witness service receives a fee per
finalised report while the Case Management service is
paid on an ongoing basis dependent on the level of
support provided.
Our Values
We are Curious
We question the status quo, seek to understand
our customers and resolve how we could do
things better for them.
6
NAHL Group plc Annual Report and Accounts 2017
Shareholders
The Group is focused on increasing
long-term shareholder value through the
execution of its chosen strategy and
prudent capital management.
Dividend paid
£8.2m
Consumers
The Group is committed to ensuring
that consumers receive an exceptional
service at every stage of their journey,
constantly looking for ways to improve
and develop in order to secure their
trust in us when it matters.
Consumers supported
151,178
Partners
The Group operates in a fair and
transparent way with all corporate
partners, delivering to agreed
conversion rates and service levels,
providing high quality cases and
ensuring appropriate match and fit
with consumers.
Law firm relationships
697
We are Driven
We value achieving results, we strive to make
them happen, we want to build something
meaningful and have fun while we do it.
Strategic report
Governance
Financial statements
Delivering quality
customer service
Our teams are highly trained, well skilled,
empathic listeners who are able to signpost
both customers and consumers to the legal
help most appropriate to their needs.
For information please
see Our People on page 28.
Value created for stakeholders
Values in Action
Consumers supported
151,178
Proud of our Values
Our businesses take their obligation to operate responsibly
extremely seriously and we are proud of the work that we
have done in this area, not just within our own divisions but
with the wider consumer law community. This commitment
is borne out in our Values which inspire both our personal
and business behaviours and activities. To this end, we are
proud that our Values can be so evidently shown in action:
Curious
We have been aware that the PI industry has been in need
of a new approach for some time, with a view to improving the
consumer experience. Being Curious about how we could be at
the forefront of this, NAH created its own ABSs. Your Law and
National Law Partners both enable NAH to get closer to the claim
while also providing a streamlined experience for the consumer.
Driven
We know that cold calling has played a large part in the
negative public perception of the PI industry. As a business
we have never made, and will never make, a cold call and so
have been Driven to eradicate this blight on the industry.
NAH has actively lobbied Government to ban this intrusive
and damaging practice. Having led the charge, we are
delighted, therefore, that the Government has brought
forward legislation to make cold calling illegal in the UK.
This is likely to be implemented in 2019.
Passionate
Bush is Passionate about providing the best possible service
and support to those who have suffered a catastrophic
injury by delivering the highest clinical standards to its
consumers. This passion has been evidenced in 2017 by
Bush being awarded Rehabilitation Provider of the Year in
the Lawyer Monthly Annual Awards. We were also thrilled
when two Bush Case Managers received industry awards
this year - Rachel Wilson as Case Management Society UK
(CMSUK) ‘Catastrophic’ Case Manager of the Year and
Kayur Kotecha as CMSUK Clinical Case Manager of the Year.
Unified
Being Unified reflects not only how our colleagues interact
with one another but also with consumers. In our RP division
we know how overwhelming buying your first home can be
– especially when areas of law and financing can be so
changeable. As a result, bringing together all this vital
information within the First Time Buyers’ Hub, including
guidance related to the Stamp Duty changes announced in
the Budget, was an important step towards accompanying
homebuyers on this exciting and all-consuming journey.
We are Passionate
We care about what we do and how we do it,
we empathise with our customers and keep
our promises.
We are Unified
We are one team committed to integrity, taking
individual responsibility for our actions whilst
trusting and respecting each other.
NAHL Group plc Annual Report and Accounts 2017
7
STRATEGY FOR GROWTH
Well positioned for future opportunities.
Strategic priority
Progress in 2017
Business Re-engineering
¡ Your Law and National Law Partners ABSs successfully launched (PI)
¡ First Notification of Loss (FNOL) capability developed and launched (PI)
¡ Front-end customer acquisition process upgraded to include
'no completion, no fee' proposition (RP)
Brand Development
¡ New National Accident Helpline creative campaign successfully
developed and launched
¡ Industry award achievements underpin Bush reputation
¡ Upgrading of Homeward Legal site driving conversion improvements
in RP
Technology Platforms
& Digital Solutions
Commercial Relationships
¡ Improved digital capability, allowing customers to begin claim online
(PI)
¡ Technology to support move from postcode allotment to rota system
and in splitting of enquiry types implemented (PI)
¡ Introduced skills base routing into telephony platform (PI)
¡ Implemented a new data warehouse to improve Management
Information(MI)(CC)
¡ Continued development of new commercial arrangements wih PLFs
including deferred payment model and allocation of preferred enquiry
types (PI)
¡ Focus on larger strategic relationships resulting in important contract
wins (CC)
¡ Re-tendering of conveyancing panel to improve offering and optimise
returns (RP)
Acquisitions
¡ No suitable opportunities aligned to our strategy.
8
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Priorities for 2018
¡ Manage and monitor existing ABSs as volumes build
¡ Develop new small claims ready ABS
¡ Extend FNOL capability and introduce sign up and portal processing
for new ABS
¡ Use the functionality developed to ensure the business is small
claims ready
¡ Accelerate investment in claims processed through ABSs
¡ Evolve National Accident Helpline brand building on success of 2017
launch
¡ Insource marketing capability in our PI division
¡ Continue to invest in presenting Bush as the quality care provider
¡ Drive improvements from Homeward Legal into other RP brands
¡ Extend digital capabilities to enable a better online consumer journey
(PI)
¡ Define and implement case management software for 3rd ABS (PI)
¡ Identify technological solutions to improve efficiency at Bush providing
tools for our consultant base (CC)
¡ Review customer ordering systems at Searches (RP)
¡ Evolve panel relationships to be more bespoke and interact with our
new capabilities e.g. FNOL and portal processing (PI)
¡ Maximise opportunity provided by contract wins whilst cultivating
existing relationships (CC)
¡ Develop new commercial relationships that drive leads and top line
growth (RP)
¡ Continue to consider small, earnings accretive acquisitions to enhance
our existing divisions
NAHL Group plc Annual Report and Accounts 2017
9
STRATEGY IN ACTION
Preparing for change, investing in the future.
Trustpilot score
9.2
NAH received an overall
Trustpilot score of 9.2
out of 10 during 2017*
(*Source: Brand Trustpilot
2017)
Personal Injury
2017 has been a year of continued investment in
the PI division with a number of new projects which,
we believe, will further establish NAH as the
company of choice for those who need to access
justice.
A fresh, new brand
We began the year by initiating our brand redesign
and new campaign. Having carried out extensive
research into the market and how it presents itself,
our new activities were borne out of this feedback.
We discovered that our consumers often feel that
they have been wronged by their injury – it may
have caused them to suffer long lasting effects
meaning that their quality of life is changed, or they
may have lost earnings through being unable to
work. In these circumstances, they need the help
that NAH can give to make it right again.
This feedback informed our new advertising campaign
which focuses on what our advisors
do best – conversations – and the empathic
and knowledgeable support that they provide.
The Legal Support Advisors at NAH are experts
in sensitively accompanying consumers through the
complex and sometimes daunting process of making a
claim. This new brand differentiates us, not only from
our previous marketing messages, but also those of
the majority of our competitors. For us and our
consumers it’s about accessing justice.
NAH’s new strapline of ‘When it’s wrong, make it
right’ reflects this focus on justice and now
permeates all activities throughout the business.
Government Consultation results –
NAH was ready
In February 2017, the Government announced the
results of its Consultation on reforming the soft
tissue injury (whiplash) claims process which
included:
• Setting the small claims limit to £2,000 for
non-RTA and £5,000 for RTA (as against
£5,000 across the board, as could have been
the case).
• The Government will ban pre-medical offers to
settle RTA related whiplash claims.
• The ban will cover both the offering and
requesting of such settlements, and there will
be no exceptions to the ban.
It is anticipated that these changes will take
place no earlier than Q2 2019.
•
The results were better than expected for NAH and
the business was well placed to respond. NAH
didn’t wait for the announcement to come in order
to plan for its future and so had been strategising
around the possible outcomes for some time. As a
result, we were on the front foot when the
announcement came, enabling us to move forward
with our plans for growth.
“After speaking with the lady, she
was really nice and she was very
sympathetic.”
- Teusday
10
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Upfront investment for future profit
The development of the ABSs presents a change in
how the revenue from these businesses is recognised
as compared to the PI division as a whole. We have
made a large upfront investment into these new
ventures and the returns will not be seen until future
years. This was a planned development with the
intention that the vast majority of revenue and profits
generated from these ventures will not materialise until
liability for the claim is admitted, reflecting the time it
takes to process a claim.
Investing in the consumer experience
As with all businesses, the power of digital and
its potential impact on the bottom line, isn’t to be
underestimated. Alongside the new brand and
campaigns came further investment in our
digital capabilities, both with regard to attracting
higher numbers of consumers and ensuring
they can complete a greater degree of the
claim process online.
Increasing market share
These plans include NAH’s medium-term strategy
to grow its share of the personal injury market,
whilst continuing to provide high quality marketing
services to its PLFs. As a result, we were able to
launch two ABSs this year.
Your Law LLP
The first, Your Law LLP, is a joint venture with
NewLaw and went live in July 2017. Your Law
operates out of offices in Cardiff and Bristol and
services in excess of 1,000 new consumers each
month. Your Law focuses on personal injury law
but also has the capacity to provide other
consumer law services. Both parties are excited
about the potential for further growth of Your Law.
The launch of Your Law is also important to us in
our aim to continue to provide high quality advice
that consumers can trust, while championing our
ethical business model. This joint venture reflects
our confidence in the future of the industry in the
face of further regulatory changes.
National Law Partners
In November, we were pleased to launch our
second ABS, National Law Partners, a further joint
venture working with law firm Lyons Davidson.
National Law Partners operates from Lyons
Davidson’s offices in Cardiff and employs around
35 staff seconded in from the firm. National Law
Partners has also established a legal services team
in Kettering which handles the front end of the
claims process for the ABS, ensuring that we can
contribute our expertise in this area.
As with Your Law, the claims being processed via
National Law Partners don’t constrain the supply of
enquiries to our PLFs and we remain committed to
operating a UK-wide panel of solicitors providing
both full geographical coverage and market leading
expertise.
NAHL Group plc Annual Report and Accounts 2017
11
STRATEGY IN ACTION CONTINUED
David’s story
My name is David, I’m 69 years old and I’m retired. I
love riding my motorbike and doing it up, I do a lot of
my own mechanics. I was riding my motorbike when a
van suddenly pulled across in front of me. I had no
chance of avoiding him or to stop, and I hit the side of
it. I was thrown over the top and was knocked out. My
wrist was broken and I suffered concussion.
Having a broken wrist made life very difficult,
I couldn’t wash myself properly and had to keep
asking people to do things around the house. I also
couldn’t ride my bike which was written off after the
accident, so I had to take the bus which, where I live, is
challenging as they’re every two hours.
As soon as it happened I thought ‘this guy’s not going
to get away with it’. He didn’t even come over and
apologise after it happened. I rang the National
Accident Helpline.
I’d never had an accident before, so I didn’t know what
to expect but I spoke to a young lady who was very
approachable and listened to what I had to say - asking
how I was feeling and being worried about my injuries.
I felt like I was in the right hands.
They passed my details on to the solicitors who took it
on from there and they kept me up to date with what
was happening. The claim was eventually settled out
of court, and I’ve bought a new motorbike!
“I spoke to a young lady who was very approachable and
listened to what I had to say - asking how I was feeling
and being worried about my injuries. I felt like I was in
the right hands.” – David
12
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Developing partnerships,
demonstrating excellence.
Critical Care
In the last year Bush has concentrated much of its
focus on building its new strategic affinity
relationships, including with the Child Brain Injury Trust
(CBIT). Our success in securing such relationships
stems from Bush’s excellent reputation in the CC
sector. It also demonstrates the cohesion between the
values, aims and ambitions of our partner
organisations.
Developing market share
Bush remains focused on continuing to develop
market share through the organic growth of our
core business, building on relationships with
solicitors firms alongside other strategic
partnerships. These relationships are vital to us in
our growth plans.
Improving efficiencies has been an important area
of development for us this year, with our projects
to streamline our own templates, saving Case
Managers and Expert Witnesses valuable time as
well as providing uniformity. We expect these
changes to ensure we are ahead of the curve as
further efficiencies within the court and legal
system work their way through.
Demonstrating excellence
Formalising and demonstrating excellence is a
large part of winning contracts and securing work
for Bush. To this end, we were delighted to be
awarded Lawyer Monthly’s Rehabilitation Provider
of the Year as well as the Investors in People Silver
grade at our first assessment – a great
achievement. This second award reflected Bush’s
success in fully engaging the staff in its aspirations
as well as their own commitment to identifying the
role each of them plays in delivering against Bush’s
ambitious growth strategy.
97%1
of our customers would
recommend Bush
1 Management Information,
January 2018.
NAHL Group plc Annual Report and Accounts 2017
13
STRATEGY IN ACTION CONTINUED
Maintaining profitability,
maximising opportunity.
Trustpilot score
8.7
Fitzalan’s largest brand,
Homeward Legal,
received an overall
Trustpilot score of 8.7
out of 10 during 2017*
(*Source:
Brand Trustpilot 2017)
Residential Property
Fitzalan and Searches have been operating in a
market that has declined by 25%1, making for a
very challenging environment. The teams have,
therefore, focused on maintaining profitability,
making efficiencies and maximising opportunities.
Focusing on conversion
There has been a real focus on conversion this year,
maintaining the high customer service standards
that both Fitzalan and Searches are known for. We
have maintained our focus on improving our
branded websites for usability and content. These
are our primary channels for driving customers to
the business, so ensuring these are operating at
the highest level is vital. These activities have
enabled us to partially defray market impacts in
what has been,overall, a challenging year.
First Time Buyers’ Hub launches
Fitzalan has also invested in new product offerings,
most notably the First Time Buyers’ Hub,
incorporating a comprehensive guide to the Stamp
Duty changes announced by the Government. The
First Time Buyers’ Hub is a one-stop guide to
becoming a homeowner, walking newcomers to the
housing market through every aspect of buying a
property for the first time and offering transparent,
fixed-price deals on conveyancing and survey fees.
The First Time Buyers’ Hub is packed with tips,
checklists and downloadable resources that answer
questions about buying for the first time, from
simplifying legal terms to Help to Buy options and
securing a mortgage.
“I’m a first time buyer so I wasn’t too sure what
questions or information I needed. Jake made it very
easy, he explained everything and made me feel very
comfortable about any questions I did have. Really
polite and very helpful.” – Leanne, Trustpilot
1. Land Registry Transaction Data
14
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
“This is a super-fast service, with
a dedicated person who explains
everything, answers questions
and gets the move underway
effectively and efficiently. We had
everything we needed to start
our moving process in under
30 minutes – that included a phone
call and all the information from the
solicitor who had been appointed!
Impressive!” – Marie, Trustpilot
NAHL Group plc Annual Report and Accounts 2017
15
CHAIRMAN’S STATEMENT
The Group has experienced both growth and
considerable challenge during 2017 and delivered
a strong performance overall.
Steve Halbert
Chairman
“We are enthused by the potential for
change in PI. We have a market leading
brand, and the leadership team to
evolve and develop the division to
create strong, predictable and
sustainable earnings and cash flow.”
2017 Revenue
£51.9m
Profit before tax
£12.4m
I am pleased to report the Group’s results for the
year ended 31 December 2017.
Summary of Financial Performance
2017 has been a year of considerable change for
the Group, primarily in our Personal Injury (PI)
division. We performed as expected, with 2017
revenue ahead at £51.9m (2016: £50.6m), primarily
due to a 5.5% increase in PI revenues. Underlying
operating profit declined as expected to £14.5m
(2016: £18.0m), reflecting marginal growth in our
non-PI businesses and significant structural
changes in our PI division, as we invested in cases
through our newly launched ABSs. Total operating
profit was £12.6m, down from £16.2m in 2016, after
charges for share-based payments, amortisation
of intangible assets acquired on business
combinations and exceptional items, with profit
before tax of £12.4m (2016: £15.8m). Earnings per
share declined 19.6% to 21.7p (2016: 27.0p).
16
NAHL Group plc Annual Report and Accounts 2017
Divisional Review – Personal Injury
During 2017 we made strong progress in preparing for
the regulatory changes previously announced by the
Ministry of Justice. It is anticipated that these changes
will take place no earlier than Q2 2019.
Our preparation for these changes included a
brand relaunch for National Accident Helpline and
the establishment and operational launch of two
ABS ventures. These ventures involve investment
in certain types of PI cases, with a consequential
deferral of cash flow, revenue and profit
recognition. We continued to invest in cases with
our strategic PLF partners.
Metrics from our brand relaunch in June 2017 have
been building and we are pleased with progress,
operating under the theme ‘When it’s wrong, make
it right’.
Investment in cases with PLFs and through our
ABS ventures changes our medium-term profit
and cash profiles as we build the number of cases
in progress, and is the primary reason behind the
reduction in Group profits in the current year. PI
operating profits are down from £14.1m in 2016 to
£11.0m in 2017, with the related deferral of profits
intended to support future earnings’ stability
and predictability. Early indications from our ABS
ventures have been positive, moreover, we are
already identifying ways to improve their returns,
supporting our strategy of investing in ABS
structures.
Our preparations for regulatory changes continue
in 2018, particularly in relation to the
consequences of the expected significant change
in the small claims limit, and the potential
compensation available for low value whiplash
injuries in road traffic accidents (RTA). We
anticipate a broadly unchanged landscape in terms
of the number of accidents, and the number of
consumers seeking redress, but expect to
experience a progressive reduction in PLF appetite
for these smaller value cases.
Our strategy is twofold – namely to continue to
work with our PLF partners and ABS ventures on PI
cases, whilst establishing processes in-house to
support consumers who might be unable to access
justice through more traditional channels. Whilst
our PLF partners may be less inclined to work with
smaller value cases, handled correctly, we believe that
Strategic report
Governance
Financial statements
they still offer NAH a valuable opportunity to leverage
its twin attibutes of process efficiency and empathic
customer focus. With this in mind, during 2018 we
intend to establish a third ABS, incurring set up costs in
2018 and 2019. This ABS will be small claims ready,
and will, in due course, provide digitally enabled
consumer advice and support. Set up costs, including
capital expenditure, are expected to amount to
approximately £4.0m during the next 2 years and will
comprise investment in people, technology and
process capability.
Dividend Policy
In 2017, we have invested over £6.5m in PI cases
through our ABS ventures and with our PLF partners.
With positive early indications from both ABS
structures, as well as the identification of ways of
enhancing their future returns, we expect to accelerate
this investment in 2018. Whilst our internal projections
show significant banking facility headroom available
we wish to maintain this to preserve maximum
operational flexibility and to allow us to take advantage
of opportunities which may arise in due course.
Accordingly, the Board intends to fund further ABS
investments, partly by amending its dividend
policy. With effect from the 2018 interim dividend,
dividend cover will be increased from 1.5x to 2.0x
EPS though the total dividend will continue to be
paid as to one third at the interim stage with the
balance to be paid following the full year results.
We will review our dividend policy again in 2020
having regard to our rate of cash generation and to
our debt levels both in absolute terms and as
compared to our operating profits.
Outlook
Trading during the early part of 2018 has been in line
with expectations.
The evolution of our PI division is on track and we
plan to counter the financial challenges caused
by changing regulation. Whilst this necessitates
investment in both PI cases and operational
structures and processes, we expect to see some
payback in 2019, accelerating thereafter. We
continue to expect 2018 to be a year of transition
and earnings contraction, however, we are enthused
by the potential for change in PI. We have a market
leading brand and the leadership team to evolve and
develop the division to create strong, predictable and
sustainable earnings and cash flow.
We anticipate further growth from CC, supported by
recent commercial successes. The residential
property marketplace is likely to remain challenging in
the short term and our focus will be on operational
efficiency whilst we engineer market share gains.
2017 has been a challenging year, as 2018 will be.
Our businesses have responded to those
challenges strongly, and I would like to thank both
our business partners and our employees for their
continued support.
Steve Halbert
Chairman
19 March 2018
Divisional Review – Critical Care
The Group’s Critical Care (CC) division has
performed ahead of last year, but experienced
slightly softer trading in Q4 compared with our
expectations. Revenue was up 6.6% to £11.0m
(2016: £10.4m), delivering operating profits up
2.5% at £3.9m (2016: £3.8m).
The division has recently secured a number of
strategic business development opportunities that
we expect to contribute to growth in H2 2018.
Divisional Review – Residential Property
The Group’s Residential Property (RP) division has
performed solidly in difficult market conditions.
Revenue was down 7.5% to £8.3m (2016: £9.0m),
with operating profits unchanged at £1.4m.
Weakening consumer demand and taxation
changes have impacted residential conveyancing
volumes across the market. Management has
responded to difficult market conditions by
focusing on operational efficiency to good effect.
We expect trading conditions to continue to be
difficult reflecting the macro-economic dynamics
facing homeowners and consumers generally.
Balance Sheet and Final Dividend
As previously indicated, cash generation across the
Group has been lower than in prior years, with a 54.8%
(2016: 79.7%) cash conversion of underlying operating
profit from continuing operations into net cash flows
from operating activities before interest and tax.
This decline reflects the planned investment in PI
cases, with a corresponding increase in trade
receivables and payables on the balance sheet. We
expect this lower level of cash conversion to continue in
2018 as we build a sustainable business model for the
new PI regulatory environment.
At the year-end we had adjusted net debt of £12.7m
(2016: £8.2m), which includes £0.7m of other payables
relating to the legacy pre-LASPO ATE product. During
the year we refinanced and significantly increased our
banking facilities with a £25.0m rolling credit facility
(RCF) maturing in December 2021, which will support
our investment in our PI business.
The Board proposes, subject to approval of
shareholders at the Annual General Meeting to be held
on 23 May 2018, a final dividend of 10.6p per share
payable on 31 May 2018 to ordinary shareholders
registered on 27 April 2018, making a total of 15.9p per
share payable for the year.
NAHL Group plc Annual Report and Accounts 2017
17
CHIEF EXECUTIVE’S REVIEW
Embracing change, innovating for the future,
evolving our business.
Russell Atkinson
Chief Executive Officer
“All the key elements of our strategy
are being successfully implemented
and we continue to make strong
progress as we adapt the business.”
Overview
2017 was an important year for the Group as we accelerated the process of
re-engineering our Personal Injury (PI) division and navigating challenging
market conditions in Residential Property (RP).
Despite the twin challenges of regulatory uncertainty and market
headwinds, the Group traded well during 2017 delivering underlying
operating profit in line with expectations.
As we have previously indicated, the funding of work within PI impacts
short-term profit recognition and cash conversion and this is reflected in
year-on-year comparisons.
Having managed that aspect of our business as planned and whilst
satisfied with the early contribution of our new ABS ventures, we believe
that these structures offer a valuable opportunity to leverage the Group’s
core skills in the PI market to drive future returns still further.
It is encouraging that all the key elements of our strategy are being successfully
implemented and we continue to make strong progress as we adapt the
business to take advantage of the opportunities provided by change.
18
NAHL Group plc Annual Report and Accounts 2017
Results
We have delivered continuing underlying operating
profit of £14.5m from underlying revenue of £51.0m.
The formation of our two ABS ventures, whilst
working with a smaller number of more efficient
panel law firms (PLFs), has been the main driver
of improving our ability to manage demand. Whilst
the traditional panel model remains core to our
strategy, the increased flexibility provided by our
new arrangements has enabled us to invest in the
brand with confidence. The initial KPIs from the
ABS ventures have been encouraging and we
continue to manage and monitor these carefully.
Having reduced investment in the National
Accident Helpline brand in 2016 we have been able
to successfully relaunch the brand during the year.
The new campaign is generating positive results
with brand metrics improving strongly. Research
indicates that our trust scores are almost 2.51
times better than our nearest competitor.
Additionally, the investment in improving our digital
functionality has resulted in growing numbers of
enquiries generated via these new capabilities.
Our Critical Care (CC) division made progress in
2017 although the final quarter was slightly more
challenging as a result of a slower than expected
rollout of some commercial initiatives. However,
despite this, we have continued to grow market
share and developed a solid pipeline of contract
wins. Our credibility as brand leader has been
further enhanced by winning Lawyer Monthly
magazine Rehabilitation Provider of the Year.
The Group’s RP business faced further market
headwinds during 2017 with Land Registry figures
indicating a decline in annual volume of 25%2.
However, our focus on website conversion, margin
management and cost control enabled us to report
profits for this division in line with those of 2016 - a
robust performance.
Market overview
The Group continues to operate in the large and
fragmented Consumer Legal Services (CLS)
market, remaining focused on PI and RP and we are
proud to be the UK’s leading marketing services
provider in the personal injury sector.
1.
Independent Brand Tracking Data (The Nursery)
November 2017
2. HM Land Registry Transaction data
Strategic report
Governance
Financial statements
The PI market has been broadly static in recent
years at just under one million claims per annum3.
However, we anticipate there has been a softening
in the overall market during 2017 as a result of a
reduction in Road Traffic Accident (RTA) claims
caused by the cumulative impact of prior legislative
change which has resulted in reduced marketing
activity. Whilst data from April 2017 onwards is not yet
available, our belief is that non-RTA volumes will
remain largely unchanged and, coupled with our
enquiry rate increasing year-on-year4, we will,
therefore, have increased our market share.
The number of Claims Management Companies
(CMCs) has dropped from a peak of 2,500 in
2011/12 to approximately 6705. The effect of
previous legislation combined with a continuing
lack of clarity surrounding the timing and impact
of regulatory reforms has driven many smaller and
mid-sized firms to question ongoing profitability
causing uncertainty in decision making about
future investment. This has depressed demand in
the market as a whole for the traditional panel
model and we expect this trend to continue, albeit
we plan to mitigate the effect of this through our
combined ABS and PLF strategy.
Critical Care focuses exclusively on the catastrophic
injury market, where we provide expert witness and
case management services. Whilst not directly
impacted by the proposed regulatory changes, the
contagion effect felt by law firms from lower value
claims, as well as the impact on insurers arising from
the Ogden Reforms (changes to the discount rate), has
resulted in some small changes in solicitor and insurer
behaviour.
The Group’s third business, RP, is focused on lead
origination and survey and search process
management in residential property transactions and
the challenges in this market are well documented.
Poor availability of housing stock, 30 year lows in home
ownership, continuing falls in new mortgage approvals
and low levels of consumer confidence characterise
the current climate. The Government has taken action
to stimulate first time buyer transactions but this will
take time to feed through. The market overall,
therefore, remains challenging.
PI Regulatory update
In February 2017 the Government published its
response to the consultation into, amongst other
things, PI related soft tissue cases and small claims
which it first announced in November 2015. Over a
year later, despite the visibility provided by the
consultation response, there is currently no
definitive timetable for the introduction of
legislation. Clearly the political turmoil caused by
the 2017 general election combined with the
continuing focus of legislation related to Britain’s
proposed exit from the European Union means that
progress has been slow. We anticipate that these
changes will be implemented no earlier than Q2
2019.
Strategic development in PI
Our PI division has been making significant
preparations in anticipation of regulatory change.
In particular we are now processing our own work
through ABS ventures. Whilst these are in their
early stages, we are encouraged by current levels
of settled income from case successes (or accrued
income for cases where liability has been admitted,
though which remain unsettled).
Our first ABS, now in its eighth month of operation,
is already profitable month-on-month and has
covered its projected fixed costs for its first full year
of operation. Importantly though, we are also
identifying ways of improving ABS profitability
through a range of initiatives to improve processes
and, ultimately, returns. We have consequently
further refined our business models and we are
now confident that we understand how to manage
the financial impact that changes to the small
claims limit and whiplash reform will have on
our business.
The success of our 2017 strategy, continued panel
demand uncertainty and increased clarity in our
post-reform business models lead the Board to
conclude that we are best served to accelerate our
investment in processing capability. Our strategy
will continue to evolve and we plan to focus our
investment in the following areas:
• extending our ABS capability by creating a third
ABS that allows NAH deeper involvement in the
process in preparation for small claims;
further developing our commercial models
with PLF partners;
•
• evolving the National Accident Helpline brand
to build on the impact created by our new
campaign; and
• building our digital capability to enable
a better experience for consumers.
This investment creates a platform for growth
that will enable us, over time, to transform the
consumer’s journey from initial contact to
settlement, modernising the experience and
offering a more efficient digital proposition
combined with the service approach for which we
are already acknowledged. We believe that the
platform will also enable us to transition into
processing small claims on an efficient and
cost-effective basis.
Increased investment 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.
3. Compensation Recovery Unit Performance Data, May 2017
4. Management Information, March 2018
5. IRN Research, UK Legal Services Market Report 2018.
NAHL Group plc Annual Report and Accounts 2017
19
CHIEF EXECUTIVE’S REVIEW CONTINUED
Brand
During 2017 we made an exceptional investment of
over £1m in relaunching our PI brand, National
Accident Helpline. The creative approach has been
developed to reposition the brand and broaden its
appeal to a wider segment of the market. The
campaign has been successful and allowed us to
adjust our media strategy to be more efficient
using a lower weight of TV advertising than in
previous years, enabling us to optimise other
elements of our marketing mix.
Our focus on enhancing our digital offering has
seen consumers able to start their claim online.
This initiative has seen us achieve significant
growth in such enquiries. Further investment in this
area will be critical to enable us to support small
claims and modernise the claims process.
Critical Care, operating under the Bush brand, has
always had an enviable reputation for clinical
excellence. Throughout 2017 we continued to
invest in building this reputation. This has led to
significant recognition with four important industry
award wins during the year. Once again, our highly
successful clinical conference was the centerpiece
of our marketing activity positioning us as an
industry thought-leader and further underpinning
our proposition.
In RP we have continued to evolve our portfolio of
brands as they focus on a localised organic search
approach. Particularly pleasing, in a challenging
market, were the improvements that we made to
website conversion. Our ability to plan ahead was
demonstrated by the introduction of our First Time
Buyers’ Hub the day after the Government
announced changes to Stamp Duty.
Ongoing focus on the brands that underpin our
business will always be a core feature of the Group.
Customers
Central to the Group’s strategy has been serving a
cross-section of claimant, defendant and
conveyancing law firms with a range of services
and products. Our customer base is broad,
currently standing at 697 firms.
In PI 2017 has seen us begin the process of
supporting consumers directly, through the
introduction of Your Law and National Law
Partners, our ABS ventures. In this way, we now
earn a proportion of our revenue from successfully
processing a consumer’s claim. Our PLFs, however,
continue to play a critical role for us and we have
evolved our commercial models to provide more
flexibility and choice.
In CC we continue to grow our customer base and
this has been crucial in supporting our market
share growth. Particularly satisfying has been the
development of larger more strategic relationships
with key insurers and law firms. In addition we have
established a contractual relationship with The
Child Brain Injury Trust (CBIT). This is an important
charity that helps severely injured children and
young people and we look forward to supporting
them.
In RP we optimised our conveyancing panel and
continue to grow our customer base in Searches.
Operations
The Group operates from four offices across the
UK and has contact centres in two of these -
Kettering and London.
Our PI contact centre added new capability during
2017 in support of our National Law Partners ABS
and we now progress the call directly through to
verbal retainer for this proportion of our work.
Additionally, our ABSs commenced operations
from the offices of our partners in Bristol and
Cardiff with specific staff seconded to our
operations. 35 new jobs were created as a result.
Our Daventry office remains the operational hub of
CC and, once again, we have continued to grow our
clinical capability through the introduction of new
operations managers who support our consultants
in their interactions with clients.
Our RP division has focused on sharpening our call
handling processes and adjusting our consumer
offering to better reflect the nature of the service
we provide. The impact of these initiatives will be
seen in better conversion from first contact by the
consumer, which will be an important part of our
growth going forward.
People and values
Our people make us who and what we are and we
employ a talented and motivated team of 220 staff
across the Group. In addition, we work with a
further 164 Expert Witnesses and Case Managers
who form the cornerstone of the service we provide
in CC.
Throughout 2017 we have been building our
capabilities in our PI contact centres which has
resulted in us employing a further 15 staff.
Additionally we have strengthened the operational
management team in CC where we have been
awarded silver status by Investors in People.
The development of our people continues and we
have instituted a series of management
development days and a Group-wide leadership
school to supplement the on-the-job training that
we have always provided.
We were encouraged by the outputs from our
annual employee engagement survey with overall
engagement scoring over seven times the UK
national average (see page 28 for further
information), performing strongly in the areas of
trust in leadership, feeling valued and
recommending the Group as a great place to work.
Additionally staff turnover dropped by 6.8
percentage points year-on-year.
20
NAHL Group plc Annual Report and Accounts 2017
Group and employee support enabled us to
contribute over £65,000 to our chosen charities
across the business. This once again reflects the
caring culture of our organisation and the high
level of engagement from our teams.
Outlook
Within PI the pace of regulatory implementation
has been frustratingly slow, causing continued
market uncertainty, but we have been very active
in adapting and developing our business model in
preparation for the changes.
Our policy remains to increase investment in self
processing. Whilst this results in some profits and
cash being returned over future years as cases
settle, it inevitably impacts returns during the next
18 to 24 months as the initial investment continues
to be made. However, we remain firmly of the view
that the PI market, despite the well publicised
regulatory changes of the last few years, remains a
valuable market to operate in, particularly so for
NAH with its long history, brand strength and deep
understanding of the marketplace.
Properly served, the PI market is still able to
generate attractive returns provided the operating
model is cost-effective and case screening is
rigorous. Increasing our own involvement in the
end-to-end economics of a PI case enables us to
leverage our know-how to maximum advantage
and allows us to absorb the potential impact of the
small claims and whiplash reforms without
significant disruption to the business.
Critical Care has established an excellent pipeline
of business with some significant new contract
wins. Whilst work continues to convert the
opportunity into instructions we remain confident
in the outlook for this division.
Residential Property has managed the headwinds
of a downturn in the market well. In the short term,
it is difficult to see the market improving, therefore,
our focus is on growing market share through a
number of business development initiatives.
Due to a lack of opportunities aligned with our
business strategy, we paused our acquisition
strategy in 2017 but continue to monitor the market
for suitable small-scale, earnings accretive
acquisitions to bolster our existing operations.
Whilst there is, undoubtedly, much work to do I am
confident that we have the strategy and team in
place to achieve our aims and I am excited by the
challenge of the year ahead.
Russell Atkinson
Chief Executive Officer
19 March 2018
Strategic report
Governance
Financial statements
Investment case
Our key competitive advantages position us
well to meet near-term challenges and realise
long-term opportunities.
1. Nationally recognised market leader in
Personal Injury
2. Strong value set
3. Trusted brands
4. Multi-channel fulfilment model
5. Technology-enabled proposition
6. Experienced leadership team
7. Careful financial management
NAHL Group plc Annual Report and Accounts 2017
21
CHIEF FINANCIAL OFFICER’S REPORT
Investing today for future growth.
Financial Results
Underlying operating
profit
Share-based payments
Amortisation of intangible
assets on business
combinations
Exceptional items
Operating profit
Financial income
Financial expense
Profit before tax
2017
£m
14.5
(0.2)
(1.3)
(0.4)
12.6
0.1
(0.3)
12.4
2016
£m
18.0
(1.1)
(1.3)
0.6
16.2
–
(0.4)
15.8
Underlying operating profit before share-based
payments, amortisation of intangible assets
acquired on business combinations and
exceptional items decreased by £3.5m. The
decrease was a consequence of our strategy to
invest in our PI division in order to grow future
market share and expand our placement strategy
ahead of the previously announced regulatory
changes.
Financial results for each division are presented in
note 2, Operating segments. Underlying operating
profit in the PI division reduced in 2017 by 21.8% to
£11.0m (2016: £14.1m) as we invested in the
working capital required to fund cases through our
two new ABS businesses. These joint operations
with two of our PLFs will deliver profit as their cases
begin to settle.
Critical Care had a good year and increased
underlying operating profit by 2.5% to £3.9m
(2016: £3.8m). Residential Property delivered a
creditable performance, delivering £1.4m of
underlying operating profit (2016: £1.4m) at an
expanded margin.
Underlying revenue increased by 3.3% to £51.0m.
This was mainly a result of the relaunch of the
National Accident Helpline brand during the year
and we experienced an increase in leads generated
year-on-year. PI underlying revenue increased by
5.5% to £31.7m (2016: £30.0m). Our CC division
experienced 6.6% growth in revenue to £11.0m
(2016: £10.4m) and the future outlook for this
business is encouraging.
James Saralis
Chief Financial Officer
“The Group continues to maintain a
robust balance sheet with modest
levels of debt and a prudent capital
model.”
Overview
The Group performed in line with the Board’s
expectations in 2017, against a backdrop of
uncertainty created by regulatory change and
continued soft markets experienced by some of
our businesses. It was also a year of progress,
as our PI division successfully evolved its
business model in response to these challenges
and relaunched the National Accident Helpline
brand, to good effect.
Revenue increased in 2017 by 2.5% to £51.9m
(2016: £50.6m) but the investments made to
establish the basis for future growth came with
significant cost resulting in a decrease to
underlying operating profit of 19.4% to £14.5m
(2016: £18.0m). This was as expected.
The Group continues to maintain a robust
balance sheet with modest levels of debt and
a prudent capital model.
22
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Residential Property revenues contracted by 7.5%
to £8.3m (2016: £9.0m) in a subdued residential
property market that continues to lack sales
momentum. The management team is focused on
growing market share through optimising our
operations and developing a number of business to
business (B2B) initiatives.
After allowing for share-based payments,
amortisation of intangible assets acquired on
business combinations, exceptional costs and
financial income and expense, the Group returned
a profit before tax of £12.4m, a 21.4% decrease on
2016 (2016: £15.8m).
Exceptional items
The Group incurred £0.4m of exceptional costs
during the year (2016: a £0.6m exceptional credit).
This comprises £1.2m (2016: £0.5m) of costs
associated with the National Accident Helpline
brand relaunch and a £0.8m credit relating to
releases from the pre-LASPO ATE liability and
associated costs (2016: £1.2m).
Taxation
The Group’s tax charge of £2.5m (2016: £3.6m)
represents an effective tax rate of 19.9% (2016:
22.6%).
Earnings per share (EPS) and dividend
Basic EPS is calculated on the total profit of the
Group and most closely relates to the ongoing cash
which will be attributable to shareholders and in
turn the Group’s ability to fund its dividend
programme. The Group also has a number of share
options outstanding (see note 21 of the financial
statements) which resulted in a Diluted EPS.
Basic EPS for the year was 21.7p (2016: 27.0p) and
Diluted EPS was 21.6p (2016: 26.5p) which was
ahead of the Board’s expectation due to the lower
level of exceptional costs and a better than
expected level of net debt during the year.
Subject to approval at the AGM on 23 May 2018,
the Board has proposed a final dividend of 10.60p
(2016: 12.70p) which, when added to the interim
dividend of 5.30p (2016: 6.35p) gives a total
dividend of 15.90p. This is a decrease of 16.5%
on last year.
For 2018, the Board intends to amend its dividend
policy to 2.0x cover of retained earnings, which it
will review again in 2020 once our third ABS is fully
established. We believe this to be a prudent
solution to funding our new strategy whilst also
maintaining sufficient flexibility within our debt
facility at a relatively low leverage.
Balance sheet
2017
£m
2016
£m
Goodwill and intangible
assets
Other net assets/(liabilities)
Cash and cash equivalents
Borrowings
Net Debt
Other payables relating to
legacy pre-LASPO ATE
product
Adjusted net debt
Net assets
67.6
6.9
0.9
(12.9)
(12.0)
(0.7)
(12.7)
61.8
68.8
(0.8)
4.8
(11.1)
(6.3)
(1.9)
(8.2)
59.8
The Group’s net assets at 31 December 2017
increased by £2.0m to £61.8m (2016: £59.8m)
which reflects the profits for the financial year, less
the dividend paid to shareholders.
The significant balance sheet items are goodwill
and intangible assets, adjusted net debt and other
net assets/(liabilities).
(i) Goodwill and intangible assets
The Group‘s goodwill and intangible assets of
£67.6m (2016: £68.8m) arise from the past
business acquisitions undertaken by the Group.
Each year the Board reviews the goodwill value for
impairment and, as at 31 December 2017, they have
concluded that goodwill is not impaired (see note
13). Included within the total are £6.6m (2016:
£7.9m) of intangible assets identified on business
combinations, such as customer contracts, brands
and IT related assets.
(ii) Other net assets/(liabilities)
At 31 December 2017 the Group had other net
assets of £6.9m (2016: other net liabilities of
£0.8m). The increase is largely in trade receivables
and reflects the Group’s decision to fund certain
cases in its PI division.
(iii) Net debt and adjusted net debt
The Group’s net debt at 31 December 2017 was
£12.0m (2016: £6.3m), being cash and cash
equivalents less borrowings. In addition to this,
management monitor adjusted net debt, which the
Group defines as net debt less other payables
relating to a discontinued pre-LASPO ATE product.
At 31 December 2017, adjusted net debt was
£12.7m (2016: £8.2m).
NAHL Group plc Annual Report and Accounts 2017
23
CHIEF FINANCIAL OFFICER’S REPORT CONTINUED
Net debt
reconciliation
Net cash flows from
underlying operating
activities
Net cash flows from
non-underlying activities
Tax and net interest paid
Net cash from operating
activities
Dividends paid
Other
Net debt on 1 January
2017
£m
2016
£m
7.9
14.3
(1.8)
(3.3)
2.8
(8.2)
(0.3)
(5.7)
(6.3)
(1.0)
(4.0)
9.3
(8.5)
(2.4)
(1.6)
(4.7)
(6.3)
Net debt on 31 December
(12.0)
Further detail on net cashflows from underlying
activities and net cashflows from non-underlying
activities is given in note 2 to the financial
statements. The individual elements of net debt
and adjusted net debt are as follows:
Cash and cash equivalents
At 31 December 2017 the Group had £0.9m of cash
and cash equivalents (2016: £4.8m). All of the
Group’s cash is held in its trading entities and the
Group takes advantage of short-term deposit rates
in maximising its interest returns.
Borrowings
During the year the Group renewed its banking
facilities with Yorkshire Bank and entered into a
new £25.0m RCF which is repayable in full on
31 December 2021.
The new RCF was used to repay the previous
outstanding balance on the Term Loan of £9.4m
and replaces the previous £5.0m RCF. The new
facility provides financial flexibility for the Group
and can be utilised for general business purposes,
including working capital and the payment of
dividends, and supports the Group’s long-term
business strategy.
At 31 December 2017 the Group had a balance of
£13.1m on the RCF (2016: £11.3m of other interest-
bearing loans and borrowings). The reported total of
£12.9m is net of £0.2m of prepaid bank arrangement
fees that are being expensed over the term of the loan.
The current rate of interest payable on these
borrowings is 1.25% above LIBOR.
The Group has an additional undrawn balance of
£11.9m (2016: £5.0m) under this facility which can be
utilised for working capital or for acquisitions. The
current rate of interest payable on this undrawn facility
is 1.0%. Once drawn the interest payable would be a
maximum of 1.45% above LIBOR.
24
NAHL Group plc Annual Report and Accounts 2017
Other payables relating to a discontinued
pre-LASPO ATE product
At 31 December 2017 the Group had £0.7m of other
payables relating to a legacy pre-LASPO ATE
product (2016: £1.9m). This amount is payable to
Allianz for previously received commissions when
certain policies either fail or are abandoned. The
liability is calculated using actuarial rates and
during 2017 £0.9m was released to exceptional
items as a result of more favourable settlements
during the year. The balance of £0.7m is likely to be
repaid over the next two years.
Cash flow
Underlying operating
profit
Depreciation and
amortisation
Working capital movements
Net cash generated from
underlying operating
activities
Net operating cash
generated as a
percentage of
underlying operating
profit
2017
£m
2016
£m
14.5
18.0
0.3
(6.9)
0.2
(3.9)
7.9
14.3
54.8%
79.7%
As indicated in last year’s report, the level of
operating cash generated on underlying activities
as a percentage of underlying operating profit
decreased in 2017 to 54.8% (2016: 79.7%). This
was a result of the Group’s decision to fund certain
cases in its PI division and the investment in its new
PI business model.
This rate of conversion is expected to remain at
lower levels than traditionally experienced as the
Group continues to re-engineer its business and is
expected to return to previously experienced levels
once the transition is more advanced.
New accounting standards
The Group has not had to apply any new or
revised IFRS accounting standards during the year.
IFRS 15: Revenue from Contracts with Customers
becomes effective next year. The Group has
undertaken an impact assessment of this new
standard and does not foresee a material impact
on the financial statements in the year of adoption.
In conclusion, I believe the Group is financially
strong and, through the successful execution of our
new strategy, is well placed to capitalise on the
opportunities ahead of us.
James Saralis
Chief Financial Officer
19 March 2018
Strategic report
Governance
Financial statements
Key Performance Indicators
Description
In PI, revenue is generated within NAH from PLFs paying for
marketing and triage services resulting in the supply of qualified
enquiries. Commission is also receivable from our product
suppliers where our products are used by the PLFs in progressing
cases. In the case of our ABSs, revenue is generated from
consumers for the provision of legal services. Revenue increased
by 5.5% in 2017, largely as a result of the relaunch of the National
Accident Helpline brand which resulted in an increase in enquiries
placed with PLFs.
In CC, revenue is generated from law firms and insurers for the
provision of expert witness reports and case management support
within the medico-legal framework for multi-track cases. Revenue
increased by 6.6% in 2017 following significant investment in the
previous year in new leadership roles and clinical leads.
In RP, revenue is generated from lead generation services for PLFs
and surveyors through the provision of online marketing services
to homebuyers and sellers in England and Wales. Revenue is also
generated from the provision of conveyancing searches to
solicitors and licenced conveyancers. Revenue decreased by 7.5%
in 2017, which resulted from a contraction in the total market.
Group underlying operating profit decreased by £3.5m in 2017.
This was in line with our expectation and resulted from our chosen
strategy to invest in our PI division in response to changing
regulation and PLF demand, including the establishment of two
ABS ventures. These ventures will start to generate profit in future
years as the cases they are processing start to mature. This
investment also resulted in a reduction in the underlying operating
profit margin from 36.4% to 28.4%
As planned, operating cash generation has decreased from 79.7%
in 2016 to 54.8% in 2017 as a result of the Group’s strategy of
investment in the PI division. As a result, net debt has increased by
£4.5m to £12.7m.
The Board considers the Group to be well funded and during the
year the Group entered into a new £25.0m RCF with Yorkshire
Bank, which can be utilised for general business purposes.
At 31 December 2017, £11.9m of this facility remained undrawn.
Group underlying revenue £m
£51.0m +3.3%
2.1
3.5
45.1
2.1
3.5
45.1
2.1
3.5
45.1
43.8
43.8
43.8
10.4
11.0
9.0
10.4
30.0
9.0
10.4
30.0
9.0
30.0
8.3
11.0
31.7
8.3
11.0
31.7
8.3
31.7
0
2014
2015
2016
2017
50
40
50
30
40
50
20
30
40
10
20
30
0
10
20
Critical Care
Residential
Property
Personal Injury
Critical Care
Residential
Property
Personal Injury
Critical Care
Residential
Property
Personal Injury
0
2015
2014
0
10
Group underlying operating profit £m
and underlying operating profit margin %
2016
2017
0
0
36%
£14.5m -19.4%
36.4%
2016
2014
2015
2017
35%
36%
30%
35%
25%
30%
20%
36%
25%
15%
35%
20%
10%
30%
15%
5%
25%
10%
0%
20%
5%
15%
0%
36.4%
36.4%
18.0
30.8%
30.8%
15.6
18.0
30.8%
15.6
29.0%
29.0%
12.7
29.0%
12.7
28.4%
28.4%
14.5
28.4%
14.5
2014
2015
2016
2017
2014
12.7
15.6
2015
18.0
2016
2017
14.5
10%
110%
Adjusted net (debt)/cash £m and
5%
97.4%
cash generation %
100%
110%
0%
1.2
2014
97.6%
2016
2017
54.8%
90%
100%
97.6%
2015
97.4%
1.2
79.7%
79.7%
-8.2
79.7%
-8.2
97.4%
1.2
97.6%
-8.3
-8.3
2014
2015
2016
-12.7
2017
2014
-8.3
2015
-8.2
2016
2017
54.8%
-12.7
90%
80%
110%
80%
70%
100%
70%
60%
90%
60%
50%
80%
50%
40%
70%
40%
0%
60%
0%
50%
40%
Operating
profit
return %
Operating
profit
return %
Operating
profit £m
Operating
profit £m
Operating
profit
return %
Operating
profit £m
Cash
generation %
Cash £m
Cash
generation %
Net (Debt) £m
Cash £m
Net (Debt) £m
Cash
generation %
Cash £m
54.8%
Net (Debt) £m
54.8%
-12.7
0%
2014
2015
2016
2017
NAHL Group plc Annual Report and Accounts 2017
25
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has ultimate responsibility for
setting the Group’s risk appetite and for
effective management of risk.
An annual assessment of key risks is performed by the Executive Directors and presented to the Board. A risk register is maintained
and regularly reviewed by the Executive Directors. All risks take into consideration the likelihood of the event occurring and the
impact of that event. Once the risks have been assessed appropriate mitigation actions are determined for each key risk identified.
The principal risks identified are as follows:
Principal risk Description
Mitigation
Regulation
The Group, its PLF partners and ABSs are subject to an extensive
regulatory and legal framework, including the provisions of the LASPO
Act 2012 and regulation by either the Claims Management Regulation
Unit (CMRU) or the Solicitors Regulation Authority (SRA). Regulatory
oversight for claims management companies will transfer to the
Financial Conduct Authority (FCA) in 2019.
The Group monitors regulatory and legal developments closely
and this informs our strategic plans and consumer proposition.
Management continue to work with the Regulators to ensure
compliance and are already interacting with the FCA as it plans
its transition.
The Government announced plans to change the small claims limit and
restrict compensation for soft tissue injury in February 2017, which they
intend to implement in 2018. These changes will have a significant
impact on the PI sector, upon which the Group is reliant on for a
significant part of its revenue and profits. If the Group or its customers
fail to, or are unable to, adapt their business models then this could have
a significant impact on the Group’s future revenue and profits.
The business model has proven to be adaptable and resilient to
change in the past and continues to develop in response to the
various regulatory changes including our current re-
engineering of our personal injury division. The Board will
continue to review the model for appropriateness as the
regulatory environment develops and adapt accordingly.
Reputation
Corporate Profile and Brands
The Group’s success and results are dependent, in part, on the strength
and reputation of the Group and its brands. The Group relies on its
brands which includes National Accident Helpline, the various
residential property brands and the Bush & Company Rehabilitation
brand and is exposed to the risk of these brands being tarnished via any
significant adverse publicity.
Quality and Independence
In CC, Bush’s success is largely dependent on the quality of written
materials, its consultants and the preservation of clinical independence.
Failure to maintain such quality and independence exposes the business
to a tarnished reputation for handling and processing cases which could
result in a deterioration in financial performance.
Technology
The Group utilises various IT systems in support of the business and
depends on these to deliver the various service offerings to customers
and consumers. A major IT or system failure could interrupt our ability to
provide those services and impact the business.
Furthermore, within PI and RP, technology is becoming an increasingly
important part of the consumer proposition and is used to reach out to
consumers and differentiate the business from its competitors. Should
this technology fail, it could result in reputational as well as financial
risks.
Through the normal course of its business, the Group handles personal
data and it commits to consumers that this data will be protected and
only used for the purposes for which it was provided. If this data is not
safeguarded, there is a risk that it could be used for malicious purposes,
including identity theft, which could result in reputational damage for
the Group and/or a significant fine if the Group was found to have not
complied with the regulations.
26
NAHL Group plc Annual Report and Accounts 2017
The Group’s investments in its CC and RP divisions help to
mitigate its reliance on the PI sector.
The Group engages external advisors to help protect its
corporate profile and advise on public relations. Brand
performance is tracked and measured on an ongoing basis to
ensure that it remains ahead of competitors and delivers
compelling messages which drive consumer contacts.
Bush is registered as a Domiciliary Care Service accredited with
the CQC and adheres to various care standards by the relevant
registered authorities. This ensures the Group maintains its
brand trust ratings and its reputation. Quality is maintained by a
clinical supervision process and highly trained teams of
administration support. Clinical independence is the cornerstone
of Bush’s business and all consultants have a mixed caseload of
claimant and defendant instructions.
The Group does not rely on one single system or platform,
rather having individual systems for specific purposes.
These systems are supported by appropriately experienced
individuals and third parties and subject to back up and disaster
recovery processes. Critical systems fail over and recovery
processes have been successfully tested with no issues
identified. The Group operates Information Security policies to
the principles of ISO 27001.
The Group continues to invest heavily in optimising the
consumer journey through the use of technology to ensure it
remains competitive and attractive to its consumer base. The
Group takes data security very seriously and has put in place
robust data protection procedures to ensure it is compliant with
the Data Protection Act 1998 and other relevant regulations.
The Group has planned carefully for the forthcoming GDPR
regulations to ensure compliance.
Strategic report
Governance
Financial statements
Principal risk Description
Mitigation
Market
Panel Capacity
In NAH, the Group is dependent upon its PLF customers in order to
maintain a flexible distribution strategy. The announcement of the
planned regulatory changes described has prompted some law firms to
review their investments in the PI sector and consequently some
demand reduction has already been evident. Depending on the
long-term impact of the reforms it is likely that PLF demand will be
permanently affected for specific claim types which could negatively
impact the financial performance of the Group.
ABS Performance
In response to forthcoming reforms and the changes to panel demand,
the Group has launched two ABSs ventures and announced plans for a
third ABS aligned with further investment in case load and capability.
The Group is planning for an increasing proportion of claims generated
by NAH to be processed via these ABSs and this will require increased
investment in working capital as the cases may take a number of years
to settle.
Should cases not be progressed in line with the Group’s expectations or
perform in a way that wasn’t predicted, it could lead to significant impact
on the quantum and timing of revenue recognition and cash conversion
thereby having a material impact on Group performance.
Online Marketing
The Group relies on its marketing strategy to retain its market leading
position in both the PI and RP sectors. Any significant change in
technology, cost increases, changes to search engine algorithms or
terms of services could impact the Group’s ability to maintain its
rankings on search results and ultimately lead to it having to spend more
resource and expenditure to meet its financial returns.
The Group continues to provide its customers with high quality
business that ensures they maximise their financial
performance. In recent years, the Group has rationalised its
panel and built strategic partnerships with a fewer number of
larger PLFs whom the Group believes have the operational
experience and financial strength to succeed in this market.
That said, the Group ensures that no single customer accounts
for a disproportionate amount of the Group’s business each
month.
In response to these challenges, NAH continues to explore new
relationships with its customer base, including offering PLFs
different funding models whilst ensuring it is able to service the
needs of the Group.
Like the rest of the Group, the ABSs are subject to budgetary
control and ABS business plans reflect both the Group’s
significant experience of PLF operating models and
performance metrics and those of the ABS partners, who are
themselves successful PI law firms. This provides reasonable
assurance over the accuracy of the ABSs forecasts.
Additionally, as the controlling partner, the Group conducts
ongoing reviews of the key performance parameters on a
weekly and monthly cycle. These metrics are monitored by the
Board and management at an ABS, divisional and Group level.
Any significant deviations from plan are investigated and
improvement plans implemented in line with contractual
Service Level Agreements (SLAs).
The Group has extensive experience of managing its marketing
strategy through a combination of internal marketing experts
and external agencies. In 2017, the Group has strengthened its
internal capabilities to ensure it has the flexibility and speed
required to react to the potential risks outlined.
Financial
Following the acquisition of subsidiary companies the Group and
Company have recognised investment and goodwill assets on their
balance sheets, the value of which is supported by their future cash
flows. If the performance of these acquisitions falls below expectation,
there is a risk that these assets may become impaired and require a
writedown in value which could negatively impact financial performance
of the Group and its ability to pay future dividends to its shareholders.
The headroom, or difference between the valuation of
investment and goodwill assets and their carrying value in the
financial statements, is assessed regularly and reviewed by the
Board at least annually and upon discovery of any indicators of
impairment. Assessment is conducted with reference to the
Group’s long-term forecasting model and is subject to
stress-testing and scenario planning.
As the Group has diversified and operates a number of distinct business
models there is increased risk that revenue and profit may be incorrectly
recognised, or recognised in the wrong period.
The Group has put in place formal revenue recognition policies
covering each of the businesses and implemented financial and
operating systems with a series of controls to ensure revenue is
not materially misstated. This is supported by monthly
reconciliation procedures conducted by the Group’s finance
function and periodic internal audit reviews, backed up by
independent assurance from the Group’s auditors.
People
The Group’s future growth and success depends, in part, on the
leadership and performance of its Executive Directors and Senior
Management Team. The loss of any key individual or the inability to
attract appropriate personnel could impact its ability to execute its
business strategy successfully which could negatively impact the
Group’s future performance.
The Group maintains competitive and attractive employment
terms and conditions, fully empowering key individuals and
allowing them to maximise their job satisfaction. The Group
incentivises key management through annual incentive plans in
the short-term and through share options for medium- and
long-term retention.
This strategic report was approved by the Board on 19 March 2018 and signed on its behalf by:
Steve Halbert
Chairman
19 March 2018
NAHL Group plc Annual Report and Accounts 2017
27
OUR PEOPLE
NAHL Group plc has a team
of 220 staff.
Recruiting against our Values of Curious, Driven,
Passionate and Unified as well as our business
needs means that we can be sure that we’re
equipped for all the challenge and complexity that
the future might bring.
Keeping staff engaged
Research from Gallup1 in 2016 showed that only 8% of employees in
the UK are engaged at work. We are, therefore, delighted that the
engagement figures for staff employed across the Group sits at 60%2.
We have always shown real commitment to ensuring that our
employees are engaged in the business and happy in their work.
In 2017, we rebranded our staff survey as OwnIt! to emphasise the
autonomy that staff can have for their own learning, development
and engagement – as well as to making improvements to their own
working lives where they identify them.
We were proud of these results from across the Group, consistently
showing that staff at NAHL’s businesses have trust in their leadership,
feel valued and rewarded and would recommend the Group as a great
place to work.
Keeping staff informed
Our programme of Brown Bag Lunches (all staff briefings over lunch)
which have been very successful at National Accident Helpline, was
extended further into the Group in 2017. A great mix of updates from
senior leaders and presentations by staff ensured that colleagues
were involved in the delivery, not just the receiving of, these
messages. These events will continue to evolve to ensure they are
keeping staff engaged and active.
Bringing leaders together
Following on from some key leadership appointments made in 2016,
2017 was a time of stability and cohesion. This allowed the Group to
bring the four businesses together to learn with and from one another
and to build supportive relationships across our geographically
diverse teams.
2017 signalled this intention with our inaugural Leadership
Conference. Assembling the Group’s top 30 leaders, its primary focus
was to reflect on how we operate as a Group, its successes and
challenges, as well as to give the team the time and space to get to
know one another and to share experiences and expertise.
1. Gallup Research: Percentage of Employees Who Are Engaged at Work: U.S. and
Selected European Countries, 2016
1. Management Information - June 2017.
28
NAHL Group plc Annual Report and Accounts 2017
NAHL Group plc staff engagement rate
60%
Compared to Gallup
survey’s UK engaged staff
rate of 8%
80%
of staff across the Group would
recommend their company as a great
place to work
Strategic report
Governance
Financial statements
Investing in our future leaders – succession planning
Identifying, developing and retaining our future leaders is vital if the
business is to ensure strong succession planning. Taking a long-term
view of this progression has been an important part of the development
of our people this year. With that in mind, we have a development
approach which is flexible depending upon a colleague’s current level
within the business – and staff are able to dip in and out of offerings as
appropriate.
It’s about who we are
Beginning with our Management Development Days, leaders are able
to both attend these sessions as well as recommend a future leader. These
training days don’t focus solely on business critical topics like Finance for
non-Finance Managers and Project Management but also learning about
who our colleagues are as people and how we work together.
One of our most successful development days focused on Strengths
Based Leadership where managers and teams got to really understand
their own strength sets and how these can be viewed by others and so
benefit the Group through cross-business working.
Leading the leaders
Following on from our Management Development Days came the
Leadership School where colleagues came together for intensive
training on topics to equip and inspire them to be excellent people
managers and leaders.
The final step on the leadership journey comes in the form of our
Pathway to Leadership (P2L) programme where our future leaders
benefit from six training days, two mentoring sessions with a senior
leader from a different part of the business and two development
discussions with their manager. This strategy of Management
Development Days, Leadership School and P2L gives our stars of the
future a clear direction of travel to ensure they can maximise their
potential and that we can retain our best colleagues for the ultimate
benefit of the business.
NAHL Group plc Annual Report and Accounts 2017
29
“The Conference was great to
understand what the other
businesses are challenged with
and where we might be able to
assist one another.”
Brown Bag Lunches
17 lunches held
170 colleagues
attended
Management Development Days
10 events
151 attendees
Leadership School
6 sessions
10 attendees
OUR COMMUNITIES
We are proud to be part of our communities
– both those local to us and those that
reflect our business activities.
For two years now the Group has supported the Paul Bush
Foundation Trust (PBFT) both with fundraising and grants and
over this time has donated over £120,000. In 2016 Russell
Atkinson, was appointed as Trustee of the PBFT and takes an
active role in the running of the Trust. Paul, a paraplegic since
1975 and his daughter, Rachel, a specialist spinal nurse,
ploughed their passion for improving the lives of people with a
disability into both Bush & Company Rehabilitation and the
PBFT. Paul sadly passed away in 2017 but his passion lives on in
both the PBFT and the values and principles by which Bush
operates its business. The Group is proud to support it.
As well as the Group’s commitment to the PBFT, each division
selects its own charities and activities to support.
Personal Injury
NAH staff are enthusiastic and generous charity supporters.
In 2017, NAH went into partnership with Warwickshire and
Northamptonshire Air Ambulance to raise funds for this vital
service. Three members of staff kicked off the fundraising by
taking part in an abseil down the Northampton Lift Tower
followed by a team from the business taking part in
Northampton’s Dragon Boat Race.
NAH MD, Simon Trott, also led from the front by cycling the great
Mont Ventoux…twice… in 35 degree heat! During December,
colleagues from our newly formed National Law Partners
themed their office as a traditional German Market selling festive
food and drink. The staff have raised over £3,300 altogether,
which will be matched by NAH for this most important cause.
NAH staff’s support for the local community was demonstrated by
their overwhelming generosity for the second year running towards
the Kettering Food Bank, donating hundreds of pounds worth of food
through the Reverse Advent Calendar scheme. This activity provides
a real helping hand to those struggling in the run up to Christmas.
NAH’s ongoing relationship with Latimer Arts College, a local senior
school, included the sponsoring and presenting of one of their
awards at their annual prize night. For the second year running,
several members of NAH’s Executive Team took part in the school’s
Dragon’s Den event, fostering the student’s creativity and business
thinking, with Debbie Britton, NAH's Marketing Director, giving the
keynote address at the beginning of the day as well as providing
specialist marketing advice to the groups as they worked.
Critical Care
Staff at Bush have always been keen to raise money and 2017
was no different.
The year began with the announcement that Bush & Company would
be the first Fundraising Baton Holder for the Mary Seacole Trust; a
charity that inspires young people to challenge exclusion
and promotes increasing participation through equality of
opportunity. The team threw themselves into their fundraising with
themed lunches including Super Soup Mondays and Mexican Day.
Bush’s continued support of the PBFT and the staff’s passion for
their cause, ensured it benefitted from the proceeds of the
Summer Raffle drawn at the Bush Annual Conference Gala
Dinner in July. The raffle raised over £2,000 which will be well
used by the Trust in their work to support individuals who have
an acquired disability and the organisations that help them.
The team also took part in GLOW Day, organised by CBIT, to
encourage parents to ensure their children can Be Seen Not Hurt
during the winter months. Staff wore their brightest clothes and
held a tombola, raising approximately £200 for this great charity.
30
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Searches fundraising for Rockinghorse Children’s Charity
Residential Property
Our RP division supports a number of local and national charities
and organisations throughout the year.
A long-standing commitment of Searches, in partnership with
Portfolio Magazine, is the hosting of the quarterly Property
Professionals Lunch. This networking lunch includes a
fundraising prize draw to support the Rockinghorse Children’s
Charity. The event has already raised enough money to buy two
incubators for premature and ill babies. Rockinghorse also
receives support from the Searches team through its annual
Hallowe’en Quiz night where the team’s enthusiasm was
rewarded by winning the fancy dress competition.
The staff at Searches are always ready to get involved too
with baking and dress up days for breast cancer awareness and
Macmillan’s coffee morning alongside Christmas jumper day for
Save The Children. The business also supports a number of
individual fundraising activities undertaken by key contacts in
the industry with sponsorship and donation of prizes.
NAH fundraising for Warwickshire and
Northamptonshire Air Ambulance
Bush fundraising for CBIT’s GLOW Day
NAHL Group plc Annual Report and Accounts 2017
31
BOARD OF DIRECTORS
Steve Halbert
Chairman
Russell Atkinson
Chief Executive Officer
James Saralis
Chief Financial Officer
Steve Halbert is Non-Executive Chairman
of the Group, which he joined in 2010.
He has over 25 years Board experience.
Steve is also Chair of the Audit Committee
and Nomination Committee.
Russell Atkinson became Chief Executive
Officer of the Group, following its
Admission to AIM in 2014. He joined NAH
in 2012 as Managing Director and had a
pivotal role in implementing its strategy
following regulatory change in 2013.
As Chairman, Steve is responsible for
the proper operation of the Board and
its committees, compliance with the
Company’s Code of Corporate
Governance and, working closely with
the CEO, ensuring the business regularly
reviews its strategic plans.
Steve is currently Chairman of Alcumus
Holdings Limited and Safestyle UK plc, an
AIM quoted company.
His responsibilities include developing and
implementing the Group-wide strategy
and ensuring delivery of budgeted
financial performance, promoting the
Group’s values and supporting divisional
strategies.
Prior to joining the Group, Russell held
Managing Director roles at international
firms including UK Managing Director of
Lebara Mobile Limited, Managing Director
of Blackhawk Network (UK) Limited, a
division of Safeway Inc. and Director of
E-Payments at Travelex.
Russell holds a Bachelor of Arts from
Leicester Polytechnic and a diploma in
marketing from The Chartered Institute
of Marketing and is a fellow of the Institute
of Directors.
James Saralis is Chief Financial Officer
of the Group, which he joined in
January 2018.
His responsibilities include the overall
management of the finance function
within the Group and liaising with the
Group’s investors and the banks.
James brings with him a wealth of
experience both operationally and of the
AIM market. Previously, he spent over 10
years in the general insurance industry,
most recently as CFO of the Direct &
Partnerships and Employee Benefit
divisions of Jelf, part of Marsh &
McLennan Companies. James has also
held various finance roles in Clearspeed
Technology plc, HBOS plc and RAC plc.
He is a Chartered Accountant and a fellow
of the ICAEW, having been a member
since 2003. He holds a Bachelor of
Science from the University of Bristol.
32
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Tim Aspinall
Non-Executive Director
Gillian Kent
Non-Executive Director
Gillian Kent became Non-Executive
Director in November 2014 and is Chair of
the Group’s Remuneration Committee.
Gillian is also an independent Non-
Executive Director at Pendragon plc,
Ascential plc, Mothercare plc and Coull
Ltd and Chairman at No Agent
Technologies Ltd.
Her executive career in the digital and
online sectors includes Managing Director
of Microsoft’s largest online business in
the UK. Gillian has also served as Chief
Executive Officer and Digital Consultant at
GK Associates, Chief Executive Officer
at Propertyfinder.com, and Director of
Strategy and Business Development at
Microsoft (MSN).
Tim Aspinall became Non-Executive
Director in June 2016 and sits on
the Audit, Remuneration and
Nomination Committees.
Tim is the CEO of Aspinall Consultants
Limited, a management consultancy
business advising professional services
firms on strategy, performance
management and mergers and
acquisitions.
Tim is also a Non-Executive Director of
Premier Medical Holdings Limited which is
one of the leading providers of medical
reports in the UK.
His senior leadership career in the legal
sector includes Managing Partner of
DMH Stallard LLP where he led its
transformation into an award winning and
highly respected mid-market law firm.
Tim is passionate about the arts and is a
Non-Executive Director at Brighton Dome
& Festival and a Trustee of the Royal
Pavilion Foundation.
NAHL Group plc Annual Report and Accounts 2017
33
EXECUTIVE MANAGEMENT TEAM
Helen Jackson
Managing Director –
Bush & Company Rehabilitation
(Critical Care)
Helen was appointed as Managing
Director at Bush & Company in
July 2016 having spent four years
as Group HR Director.
Responsible for overall strategy and
leadership within the division as well as
business development, quality and clinical
independence, Helen has driven a number
of business improvements. Focusing on
market adaptation and addressing the
evolving needs of case management
services and claimant and defendant
solicitors she has built on Bush’s 30 years
of success within the Critical Care sector.
Previously, Helen held HR leadership roles
at Everest, BUPA and Tesco.
Simon Trott
Managing Director –
National Accident Helpline
(Personal Injury)
Simon is Managing Director responsible
for NAH executive leadership and
business operations, in addition to being
a Board member of the Group’s joint
ventures; Your Law LLP and National Law
Partners.
Simon is leading the PI division through
a period of transformational change
ensuring the Group capitalises on the
changing PI market and landscape
alongside preparation for future
regulatory changes. To date, he has
executed a number of strategic business
initiatives to drive efficiencies and create
strong lasting partnerships, relaunched
the NAH brand and developed
enhancements in the consumer journey.
Previously Simon spent 20 years within
the general insurance industry in a
number of senior executive positions,
most recently at Towergate Partnership
Group, culminating in his roles as CEO of
Towergate Direct Division & RKH Group.
34
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Richard Rickwood
Managing Director –
Fitzalan Partners and Searches UK
(Residential Property)
Marcus Lamont
Group HR Director
Richard joined the Group in 2011 as
Group Operations Director. Following a
restructure in 2013, Richard took on the
role of Managing Director for PPI Claimline
which was demerged prior to listing
in 2014.
Richard is now Managing Director at
Fitzalan Partners where he has grown the
business through the successful
acquisition of Searches UK in January
2016. He has also enhanced the
Residential Property offering through the
addition of strategic product and service
developments to satisfy both solicitor and
conveyancer relationships while meeting
the evolving needs of homebuyers and
sellers in an ever-changing market.
Previously, Richard worked at BGL Group,
Travelex, Thomas Cook and AMP Pearl.
Marcus joined the Group as Group HR
Director in July 2016.
During his time with the Group, Marcus
has embarked on delivering
improvements to talent development,
embedding the Group’s culture and values
and enhancing recruitment processes,
with significant focus on an aligned
approach across all divisions.
Marcus joined from Everest where he
was HR Director, taking the lead on talent
management, leadership development,
employee engagement and change
management. Prior to that, Marcus
held senior positions at UPS plc, across
the globe.
NAHL Group plc Annual Report and Accounts 2017
35
DIRECTORS’ REPORT
The Directors of NAHL Group plc present their Annual Report and audited financial statements for the year ended 31 December 2017.
Results and dividend
The Group’s profit after tax for the year was £10.0m (2016: £12.2m).
The Directors propose a final dividend of 10.6p per share (2016: 12.7p) which, subject to approval at the Annual General Meeting, will
be paid on 31 May 2018 to shareholders registered on 27 April 2018.
There are no significant events affecting the Company and Group since the balance sheet date. A review of the business, including
future developments, is included in the Strategic Report on pages 1 to 28.
Directors’ third party indemnity provisions
The Company maintained during the period and to the date of approval of the financial statements, indemnity insurance for its
Directors and Officers against liability in respect of proceedings brought by third parties, subject to the terms and conditions of
the Companies Act 2006.
Capital structure
Details of the capital structure can be found in note 20 of the consolidated financial statements. The Group has employee share
option plans in place, full details of which can be found in note 21 to the financial statements.
Financial instruments
The Group’s principal financial instruments comprise cash and cash equivalents, other receivables, interest-bearing loans and trade
payables. Further details on financial instruments are given in note 23 to the financial statements.
Directors
Biographies of the present Directors of the Company are listed on pages 32 to 33.
Details of the remuneration of the Directors is disclosed in the Remuneration Report on pages 41 to 44.
Political donations
No political donations were made during the year or the previous year.
Disclosure of information to the Auditor
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
•
•
so far as the Director is aware, there is no relevant audit information of which the Group’s Auditor is unaware; and
the Director has taken all the steps that ought to have been taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Group’s Auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Auditor
KPMG LLP have been re-appointed as Auditor and have expressed their willingness to continue in office as Auditor and a resolution
to reappoint them will be proposed at the forthcoming Annual General Meeting.
Other information
An indication of likely future developments in the business and particulars of significant events which have occurred since the end of
the year have been included in the Strategic Report on pages 1 to 28.
Going concern
The Group’s business activities, together with risk factors which impact these activities are included within the Chief Financial
Officer’s report on pages 22 to 25. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are
also described in the Chief Financial Officer’s report. Having regard to the matters above, and after making reasonable enquiries, the
Directors have a reasonable expectation that the Company and the Group have adequate resources to continue operations for the
foreseeable future.
For that reason, they continue to adopt the going concern basis in the preparation of the accounts approved by the Board of
Directors and signed on behalf of the Board.
36
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Group response to Modern Slavery Act 2015
• Organisational structure and recruitment processes
The Group’s organisational structures include the Board, Senior Management teams across all three organisational divisions,
Contact Centres at two of the four locations and standard support functions across all sites.
Recruitment processes include the monitoring of passport documentation, with all new recruits expected to show their passport
as a proof of identity. The Group also reviews shared addresses. In addition, the Group monitors the ongoing wellbeing of its
employees through line management relationships and an Employee Assistance Programme.
Where recruitment agencies are used to employ staff, the Group ensures these agencies also have an approved statement in
support of the Modern Slavery Act 2015.
As these structures and recruitment processes apply to UK-based operations, the Group considers these to be very low risk.
• Services
The services NAHL Group plc provides to its customers and consumers are UK office-based, with minimal UK field-based
services.
The Group’s supply chain in relation to services consists, on the whole, of marketing and processing services across personal
injury, critical care and residential property. The Group considers these to be very low risk in relation to slavery and human
trafficking so takes no specific action in relation to these relationships.
• Goods
In terms of goods supplied to the Group, the majority of goods will be goods for use in an office environment such as stationery
and office equipment. The Group considers these to be very low risk in relation to slavery and human trafficking so takes no
specific action in relation to these relationships.
James Saralis
Chief Financial Officer
19 March 2018
NAHL Group plc Annual Report and Accounts 2017
37
CORPORATE GOVERNANCE STATEMENT
The UK corporate governance code
Companies listed on the main market of the London Stock Exchange are required to comply with the UK Corporate Governance
Code. NAHL Group plc’s shares are traded on AIM and as such, the Group is not subject to the requirements of the UK Corporate
Governance Code on corporate governance, nor is it required to disclose its specific policies in relation to corporate governance.
However, as a publicly quoted company, the Company maintains appropriate standards of corporate governance. The UK Corporate
Governance Code represents the ‘gold standard’. However, the UK Corporate Governance Code was not designed with smaller
companies in mind. Adherence to the full UK Corporate Governance Code is often impractical for smaller companies. In the past, in
the absence of an alternative code, many AIM companies have adopted the UK Corporate Governance Code ‘to the extent
applicable’.
In July 2005 the Quoted Companies Alliance (QCA) introduced a simple set of guidelines for corporate governance for AIM
companies, which were updated in July 2007, September 2010 and again in May 2013. According to the QCA, the guidelines have
been devised in consultation with a number of significant institutional smaller company investors.
The Directors recognise the importance of sound corporate governance and the Company holds membership of the QCA and
complies with the QCA Guidelines and the main provisions of the UK Corporate Governance Code, insofar as is practicable to do so
for a company of NAHL Group plc’s current size and stage of development, save in relation to certain Directors, who will not be
independent because of the grant or proposed grant of options to them by the Company.
The Board of Directors operates within the framework described below.
Table of committees
The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate actions. Board
meetings are held at least every two months and at such other times as the Directors deem necessary. The Group has appointed
Steve Halbert as the Group’s Senior Independent Non-Executive Director. The Board has created an Audit Committee, a
Remuneration Committee and a Nomination Committee where the current composition and responsibilities of the committees are
as follows:
Audit Committee
The Audit Committee consists of Steve Halbert as Chairman, Gillian Kent and Tim Aspinall. It meets at least twice each year and is
responsible for ensuring that the financial performance of the Group is properly monitored and reported on and for meeting with the
Auditor and reviewing findings of the audit with the external Auditor. It is authorised to seek any information it properly requires from
any employee and may ask questions of any employee. It meets with the Auditor at least twice a year and is also responsible for
considering and making recommendations regarding the identity and remuneration of such Auditor.
Remuneration Committee
The Remuneration Committee consists of Gillian Kent as Chairman, Steve Halbert and Tim Aspinall. It meets at least twice each year
and considers and recommends to the Board the framework for the remuneration of the Executive Directors of the Group and any
other senior management. It further considers and recommends to the Board the total individual remuneration package of each
Executive Director including bonuses, incentive payments and share options or other share awards. In addition, subject to existing
contractual obligations, it reviews the structure of all share incentive plans for approval by the Board and, for each such plan,
recommends whether awards are made and, if so, the overall amount of such awards, the individual awards to Executive Directors
and the performance targets to be used. No Director is involved in decisions concerning his own remuneration.
Nomination Committee
The Nomination Committee consists of Steve Halbert as Chairman, Gillian Kent and Tim Aspinall. The Nomination Committee meets
at least once each year and considers the selection and re-appointment of Directors. It identifies and nominates candidates to all
Board vacancies and regularly reviews the structure, size and composition of the Board (including the skills, knowledge and
experience) and makes recommendations to the Board with regard to any changes. The Group has adopted a share dealing code
(based on the AIM Rules and with reference to the Market Abuse Regulations (MAR)) and the Group takes all proper and reasonable
steps to ensure compliance by the Directors and relevant employees.
The Board is also responsible for ensuring the Group’s compliance with all applicable anti-corruption legislation, including, but not
limited to, the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act 1977. The Group complies and always has complied
with all applicable anti-corruption laws. In view of the requirement in the UK Bribery Act 2010 for relevant companies to have
adequate anti-bribery procedures, the Group has devised and implemented a suite of anti-corruption policies and procedures
designed to prevent corruption by anyone working on its behalf. The Group has adopted a ‘zero tolerance’ approach to corruption
and is committed to ethical business practices.
38
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
The Board of Directors
Director
Date appointed/resigned
Russell Atkinson
Steve Dolton
James Saralis
Steve Halbert
Gillian Kent
Tim Aspinall
1 May 2014
14 April 2014/1 January 2018
1 January 2018
1 May 2014
3 November 2014
1 June 2016
Remuneration
Committee
Audit
Committee
Nomination
Committee
-
-
-
√
√(Chair)
√
-
-
-
√ (Chair)
√
√
-
-
-
√ (Chair)
√
√
Internal control
The Group has implemented policies on internal control and corporate governance. These have been prepared in order to
ensure that:
• proper business records are maintained and reported on, which might reasonably affect the conduct of the business;
• monitoring procedures for the performance of the Group are presented to the Board at regular intervals;
• budget proposals are submitted to the Board no later than one month before the start of each financial year;
• accounting policies and practices suitable for the Group’s activities are followed in preparing the financial statements;
•
•
the Group is provided with general accounting, administrative and secretarial services as may reasonably be required; and
interim and annual accounts are prepared and submitted in time to enable the Group to meet statutory filing deadlines.
By order of the Board
Russell Atkinson
Chief Executive Officer
19 March 2018
James Saralis
Chief Financial Officer
19 March 2018
NAHL Group plc Annual Report and Accounts 2017
39
STATEMENT FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE
elements will be as follows:
• The CEO has been awarded a 2%
increase in base salary with effect from
1 March 2018, in line with the
percentage increase in base salary
awarded to the wider workforce. No
salary increase was awarded to the
CFO.
• The CEO’s annual bonus opportunity
•
for 2018 will continue to be subject to a
maximum of 100% of base salary.
It is proposed that the CFO’s annual
bonus opportunity for 2018 will be
subject to a maximum of 80% of base
salary. Notwithstanding that, the new
Policy allows for a maximum
opportunity of 100% of base salary for
the CFO.
• Annual bonus awards for 2018 will be
•
based on operating profit and
individual objectives which are aligned
to the Group’s strategy.
It is proposed that LTIP awards will be
granted to Executive Directors during
2018, the details of which will be
provided at the time of grant.
• Non-Executive Directors’ basic fee and
the Chairman’s fee were increased by
2% with effect from 1 March 2018.
• The Committee now has authority to
reduce or withdraw unvested LTIP
awards where the participant is guilty
of gross misconduct, in addition to a
material misstatement of the Group’s
financial results.
In line with best practice, clawback
provisions have been included within
the annual bonus and LTIP. For two
years following the determination of an
annual bonus and the date an LTIP
vests, the Committee has the authority
to ‘claw-back’ vested LTIP awards and
any annual bonus payments.
•
Conclusion
We are committed to a responsible and
transparent approach in respect of
executive pay. The Committee believes
that subjecting the Directors’
Remuneration Policy and Annual Report
on Remuneration to an advisory vote
provides a greater degree of
accountability and gives shareholders a
say on this important area of corporate
governance.
Gillian Kent
Chairman of the Remuneration Committee
19 March 2018
Dear Shareholder
I am pleased to present the Directors’
Remuneration Report for the financial
year ended 31 December 2017, which sets
out the future Directors’ Remuneration
Policy, intended to take effect from the
close of the 2018 Annual General Meeting
and the Annual Report on Remuneration.
Our previous Directors’ Remuneration
Policy was approved by an advisory vote
at the 2015 Annual General Meeting and
became effective for three years from the
close of that meeting. The Committee
believes that the current remuneration
framework continues to effectively
support the delivery of our business
strategy and the creation of shareholder
value. Consequently, the Committee has
decided to make minor amendments only
to ensure that the Directors’
Remuneration Policy is appropriate for the
next three years and to reflect
developments in best practice for large
AIM listed companies. The future
Directors’ Remuneration Policy will be
subject to an advisory vote at the 2018
Annual General Meeting.
The Annual Report on Remuneration
provides details of the amounts earned in
respect of the year ended 31 December
2017 and how the Directors’
Remuneration Policy will be applied for
2018.
in the restructure of the PI division in
preparation for regulatory changes,
trading through strong headwinds in RP
and growth in market share in CC.
The 2017 annual bonus was assessed
against operating profit performance as
regards 75% of the award and individual
objectives as regards 25% of the award.
Based on 2017 operating profit
performance of £14.5m and performance
against individual objectives, the CEO will
receive a payout of 35% of his maximum
annual bonus opportunity. Further details
are set out on page 42.
Long-Term Incentive Plan (LTIP) awards
granted on 13 April 2015 in the form of
market value share options were subject
to EPS performance over the three-year
period ended 31 December 2017. The EPS
target was not achieved and the awards
will therefore lapse in full. Further details
are set out on page 42.
Appointment of new CFO
James Saralis was appointed as CFO on
1 January 2018 following Steve Dolton’s
resignation as a Director on 1 January
2018. James Saralis was granted an LTIP
award following his appointment subject
to the same terms and performance
measures as those awards granted to the
CEO on 31 October 2017. Details of the
awards will be disclosed in the 2018
Annual Report on Remuneration.
Review of the 2017 financial year
As highlighted earlier in the Executives’
reports, the Company has performed in
line with expectations, with good progress
Outlook for the 2018 financial year
Details in relation to the application of the
Directors’ Remuneration Policy in 2018
are set out on page 45, however, the key
40
NAHL Group plc Annual Report and Accounts 2017
DIRECTORS’ REMUNERATION REPORT
Strategic report
Governance
Financial statements
Single figure of remuneration
The table below details the elements of remuneration receivable by each Director for the financial year ended 31 December 2017 and
the total remuneration receivable by each Director for that financial year and for the financial year ended 31 December 2016.
Executive Directors
J R Atkinson
S Dolton1
Non-Executive Directors
R S Halbert
T J M Aspinall 2
G D C Kent
Salary and
fees
£000
Benefits
£000
Annual
Bonus
£000
Pension
£000
Long-term
incentives
£000
Total
Remuneration
2017
£000
Total
Remuneration
2016
£000
218
175
85
43
48
17
16
–
–
–
76
–
–
–
–
1
–
–
–
–
477
320
–
–
–
789
511
85
43
48
232
187
83
24
47
1. S Dolton resigned as a Director on 1 January 2018. S Dolton was contracted to work four days per week and his salary was calculated on a pro-rata basis to
reflect this time commitment.
2. T J M Aspinall was appointed to the Board on 1 June 2016.
The taxable benefits received during the financial year ended 31 December 2017 are principally car allowance and private
medical insurance.
Individual elements of remuneration
Base salary and fees
The base salaries for 2017 and 2018 are as set out below:
J R Atkinson
S Dolton2
J D Saralis3
Details of Non-Executive Directors’ fees for 2017 and 2018 are as set out below:
Chairman’s fee
Non-Executive Directors’ fee
Chair of the Remuneration Committee
1. Salary/Fee increase with effect from 1 March 2018.
2. S Dolton resigned as a Director on 1 January 2018.
3. J D Saralis was appointed to the Board of Directors on 1 January 2018.
2017
base salary
£000
2018
base salary1
£000
218
175
N/A
2017
fee
£000
85
43
5
222
N/A
150
2018
fee1
£000
87
44
5
% increase
2%
N/A
N/A
% increase
2%
2%
0%
NAHL Group plc Annual Report and Accounts 2017
41
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual bonus plan
The maximum annual bonus opportunity for the CEO was 100% of salary in respect of the year ended 31 December 2017. 75% of the
annual bonus was assessed against operating profit performance and 25% was assessed against individual objectives.
The following table sets out the bonus payout to the CEO and how this reflects performance for the year.
Performance measure
Operating profit
Personal objectives
Proportion of bonus determined
by measure
75%
25%
Performance
Operating profit of £14.5m was achieved.
This resulted in a pay out of 26% of salary.
These included the re-engineering of the
PI division and measures to support growth in
RP and CC.
Bonus
earned
£000
57
19
S Dolton resigned as a Director on 1 January 2018 and therefore did not receive a bonus payout.
Long-term incentives
Awards vesting in respect of the financial year
Awards granted on 13 April 2015 in the form of market value share options were subject to EPS performance over a three-year period
ended 31 December 2017. The EPS performance target was as follows:
Average annual compound growth in EPS between 2015 and 2017
10%
The EPS target was not achieved and the awards will therefore lapse in full.
Director
J R Atkinson
Percentage
of option
vesting
100%
Total number
of share
options
Share
price
Exercise
price
Value
71,267
£1.5411
£2.88
£0.002
1. Based on the average mid-market closing share price over the three- month period to 31 December 2017.
2.
The value is assumed to be £0.00 on the basis that the share price is less than the exercise price (i.e. the share options are underwater).
S Dolton resigned as a Director on 1 January 2018 and his awards have therefore lapsed in accordance with the rules of the LTIP.
Awards granted during the financial year
The following award was granted during the year under the LTIP:
Director
J R Atkinson
Date of grant
Type of award
31 October
2017
Nominal
cost share
option
Number of
shares
Face value at
grant1
Performance
period
87,552
129,577
3 years
1.
The mid-market closing share price on the date immediately prior to the grant date was used to determine the face value of the awards.
50% of the award vests subject to EPS performance and 50% of the award vests subject to absolute TSR performance.
42
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Statement of Directors’ shareholding and share interests
The interests of the Directors and their immediate families in the Company’s Ordinary Shares as at 31 December 2017
and as at 31 December 2016 were as follows:
Executive Directors
J R Atkinson
S Dolton
Non-Executive Directors
R S Halbert
T J M Aspinall
G D C Kent
31 December
2017
31 December
2016
1.12%
1.95%
0.77%
1.48%
1.40%
0.00%
0.00%
1.42%
0.00%
0.00%
The interests of each Executive Director of the Company as at 31 December 2017 in the Company’s share schemes were as follows:
Director
Plan
Exercised
during the year
Lapsed
during the year
Unvested and
subject to
performance
measures
Unvested and
not subject to
performance
measures
Total as at
31 December
2017
J R Atkinson
LTIP (nominal cost options)
312,501
-
EMI1
SAYE2
-
-
S Dolton3
LTIP (nominal cost options)
237,501
124,999
-
-
87,552
71,267
–
–
EMI
SAYE2
-
-
124,999
45,611
-
–
–
–
–
–
–
–
87,552
71,267
–
-
45,611
–
1. The EPS target attaching to these EMI options was not achieved and the options will therefore lapse in full in 2018.
2. During the year both J R Atkinson and S Dolton cancelled their SAYE savings contracts and cash invested was returned to them. Their SAYE options were
subsequently cancelled.
3. S Dolton’s EMI options lapsed on the date of his resignation as a Director.
NAHL Group plc Annual Report and Accounts 2017
43
DIRECTORS’ REMUNERATION REPORT CONTINUED
Implementation of Directors’ Remuneration Policy for the financial year commencing 1 January 2018
Information on how the Company intends to implement the Directors’ Remuneration Policy for the financial year commencing on
1 January 2018 is set out below:
Salary/Fees
The CEO was awarded a 2% increase to base salary, with effect from 1 March 2018, in line with the percentage increase awarded to
the wider workforce. No salary increase was awarded to the CFO.
Non-Executive Directors’ basic fee and the Chairman’s fee were increased by 2% with effect from 1 March 2018.
Annual bonus plan
The maximum bonus opportunity for the CEO and CFO will be 100% of salary. It is proposed that the CFO will be granted an annual
bonus opportunity of 80% of salary for the 2018 financial year.
75% of the annual bonus will be assessed against operating profit performance and 25% will be assessed against individual
objectives. Performance targets will continue to be set at the challenging levels of previous years. The individual objectives are likely
to focus around key areas such as the continued restructure of the PI division, development of the CC and RP divisions and a smooth
transition in CFO role. The actual performance targets are not disclosed as they are considered to be commercially sensitive at this
time. The targets will be disclosed in next year’s Directors’ Remuneration Report or at such point that the Committee considers that
the performance targets are no longer commercially sensitive.
Long-term incentives
LTIP awards are made to Executive Directors on an annual basis to ensure they are appropriately incentivised and aligned with
shareholders’ interests over the longer term. The Committee has yet to determine details of the awards to be made to Executive
Directors for 2018. Full details of the size of the awards and the performance measures attaching to the awards will be disclosed at
the time of grant and in the Company’s 2018 Annual Report on Remuneration.
Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration Committee is composed of the Company’s independent Non-Executive Directors, Gillian Kent (Chairman),
Steve Halbert and Tim Aspinall. Executive Directors only attend meetings by invitation.
The Committee’s key responsibilities are:
• reviewing the ongoing appropriateness and relevance of remuneration policy;
• reviewing and approving the remuneration packages of the Executive Directors;
• monitoring the level and structure of remuneration of the senior management; and
• production of the Annual Report on the Directors’ remuneration.
Advisors
During the financial year, the Committee received independent advice from Deloitte LLP. Deloitte is a founder member of the
Remuneration Consultants Group and voluntarily operates under its code of conduct in its dealings with the Committee.
Approval
This report was approved by the Board on 19 March 2018 and signed on its behalf by:
Gillian Kent
Chairman of the Remuneration Committee
19 March 2018
44
NAHL Group plc Annual Report and Accounts 2017
DIRECTORS’ REMUNERATION POLICY
Strategic report
Governance
Financial statements
This section sets out the Company’s Directors’ Remuneration Policy, which will apply from the date of the 2018 Annual General
Meeting. The Policy is determined by the Committee of the Company.
The Directors’ Remuneration Policy was first approved at the 2015 Annual General Meeting. No significant changes have been made
to the Policy. Minor amendments have been made to ensure that the Policy is appropriate for the next three years. The amendments
to the Policy are as follows:
• The CFO’s maximum annual bonus opportunity has been increased from 70% to 100% of salary, in line with the annual bonus
opportunity available to the CEO.
• The Committee has introduced a normal maximum LTIP opportunity of 100% of salary for both the CEO and CFO. The overall
maximum LTIP award remains at 300% of salary.
• The Committee has extended the operation of malus under the LTIP to include the ability to reduce unvested awards where the
participant is guilty of gross misconduct.
• The Committee has introduced clawback into the operation of the annual bonus and LTIP. The Committee is now able to claw
back annual bonus payments and vested LTIP awards for up to two years following the date of the bonus determination and LTIP
vesting, in the case of a material misstatement of the Group’s financial results or if the participant is guilty of gross misconduct.
• The Committee has introduced flexibility to award pension contributions of up to 10% of salary. Executive Directors currently
receive nominal or no pension contributions.
• A Policy on the Committee’s approach to payments for loss of office has been introduced.
Key principles
The Company’s remuneration package for Executive Directors has been designed based on the following key principles:
• promote the long-term success of the Company, with transparent and stretching performance conditions, which are rigorously
applied;
• provide appropriate alignment between the Company’s strategic goals, shareholder returns and executive reward; and
• have a competitive mix of base salary and short- and long-term incentives, with an appropriate proportion of the package
determined by stretching targets linked to the Company’s performance.
NAHL Group plc Annual Report and Accounts 2017
45
DIRECTORS’ REMUNERATION POLICY CONTINUED
Although there is no overall
maximum, salary increases are
normally reviewed in the context of
the salary increases across the wider
Group.
The Committee may award salary
increases above this level to take
account of individual circumstances
such as:
• increase in scope and
responsibility;
• increase to reflect the Executive
Director’s development and
performance in the role; or
• alignment to market level.
Whilst the Committee has not set an
absolute maximum on the level of
benefits Executive Directors receive,
the value of the benefit is at a level
which the Committee considers
appropriate against the market and
provides sufficient level of benefit
based on individual circumstances.
Executive Directors currently receive
nominal or no pension contributions.
The Committee retains flexibility to
award pension contributions of up to
10% of salary.
Operation
Maximum opportunity
Policy table for Executive Directors
Component
Base salary
Purpose and
link to strategy
Core element of fixed
remuneration to
provide a competitive
base salary for the
markets in which the
Group operates to
attract and retain
Executive Directors of a
suitable calibre.
Salaries are reviewed annually taking
into account:
• underlying Group performance;
• role, experience and individual
performance;
• competitive salary levels and
market forces; and
• pay and conditions elsewhere in
the Group.
Benefits
To provide a market
competitive benefits
package as part of total
remuneration.
Executive Directors receive benefits
in line with market practice, and
these include principally life
insurance, private medical insurance
and a car allowance.
Other benefits may be provided
based on individual circumstances.
Retirement
benefits
To provide an
appropriate level of
retirement benefit.
Executive Directors are eligible to
participate in the Group’s defined
contribution pension plan.
SAYE Plan
Annual bonus
To create alignment
with the Group and
promote a sense of
ownership.
Rewards performance
against annual targets
which support the
strategic direction of
the Group.
Executive Directors are entitled to
participate in an HMRC tax qualifying
all employee SAYE Plan.
Participation limits are those set by
the UK tax authorities.
Awards are based on annual
performance against key financial
targets and/or the delivery of
strategic/personal objectives.
Maximum bonus opportunity for the
Executive Directors is up to 100% of
base salary in respect of a financial
year.
The Committee has discretion to
amend the payout should any
formulaic output not reflect the
Committee’s assessment of overall
business performance.
For up to two years following the
determination of a bonus payout
the Committee has the right to
recover some or all of the bonus
payout in the event of a material
misstatement of the Group’s
financial results or if the participant
has been guilty of gross
misconduct.
46
NAHL Group plc Annual Report and Accounts 2017
Performance
measures
Not applicable.
Not applicable.
Not applicable.
Not subject to
performance measures
in line with HMRC
practice.
Targets are set annually
reflecting the Group’s
strategy and aligned
with key financial,
strategic and/or
individual targets.
At least 50% of the
bonus is assessed
against financial
performance metrics of
the business and the
balance is based on
strategic/personal
objectives.
Stretching targets are
required for maximum
payout.
Component
Long-term
incentive
Purpose and
link to strategy
To drive and reward the
achievement of
longer-term objectives,
support retention and
promote share
ownership for
Executive Directors.
Strategic report
Governance
Financial statements
Performance
measures
Relevant performance
measures are set that
reflect underlying
business performance.
Performance measures
and their weighting
where there is more
than one measure are
reviewed annually to
maintain
appropriateness and
relevance.
Operation
Maximum opportunity
Under the nominal LTIP and EMI Plan
rules, the overall combined
maximum award that may be
granted in respect of a financial year
is 300% of base salary. Awards may
be granted in excess of this limit in
exceptional circumstances.
It is intended that the normal
combined maximum award will not
be more than 100% of salary in
respect of a financial year.
The Group operates a nominal cost
LTIP scheme and an Enterprise
Management Incentive (EMI) Plan,
collectively the ‘LTIP schemes’.
Under the nominal cost LTIP, awards
may be granted in the form of nil or
nominal cost share options, or
contingent rights to receive shares.
Under the EMI Plan, awards may be
granted in the form of tax qualifying
share options or non-tax qualifying
share options.
The vesting of awards granted under
the nominal cost LTIP and EMI Plan
will normally be subject to the
achievement of specified
performance conditions, normally
over a period of at least three years.
The Committee may reduce
unvested awards granted under the
nominal cost LTIP and EMI Plan in
the event of a material misstatement
of the Group’s financial results or if
the participant has been guilty of
gross misconduct.
For up to two years following the
determination of the vesting
outcome of an award, the Committee
has the right to cancel the award if it
has not been exercised, or require
repayment of some or all of the
award in the event of a material
misstatement of the Group’s
financial results or if the participant
has been guilty of gross misconduct.
NAHL Group plc Annual Report and Accounts 2017
47
DIRECTORS’ REMUNERATION POLICY CONTINUED
Non-Executive Directors
Purpose and link to strategy
Approach of the Group
Sole element of Non-Executive
Director remuneration, set
at a level that reflects market
conditions and is sufficient to
attract individuals with
appropriate knowledge and
experience.
Fees are normally reviewed annually.
Fees paid to Non-Executive Directors for their services are approved by the Remuneration
Committee. Fees may include a basic fee and additional fees for further responsibilities (for
example, chairmanship of Board committees).
Non-Executive Directors do not participate in any of the Company’s share options schemes or
annual bonus scheme nor do they receive any pension contributions. Non-Executive Directors may
be eligible to receive benefits such as the use of secretarial support, travel costs or other benefits
that may be appropriate.
Actual fee levels are disclosed in the Annual Report on Remuneration for the relevant financial year.
Explanation of performance measures chosen
Performance measures are selected that are aligned with the performance of the Group and the interests of shareholders. Stretching
performance targets are set for the annual bonus and long-term incentive awards. When setting these performance targets, the Committee
will take into account a number of different reference points, which may include the Group’s business plans and strategy and the economic
environment. Full vesting will only occur for what the Committee considers to be stretching performance.
The annual bonus is based on financial metrics and strategic metrics which support the strategic direction of the Group. Long-term
incentive awards are based on EPS growth and Total Shareholder Return. The Committee considers these to be key external
measures of performance over the longer term in terms of delivering value to shareholders.
The Committee retains the ability to adjust or set different performance measures if events occur which cause the Committee to
determine that the measures are no longer appropriate and that amendment is required so that they achieve their original purpose.
Awards and options may be adjusted in the event of a variation of share capital in accordance with the rules of the nominal cost LTIP
and EMI Plan.
Policy for the remuneration of employees more generally
Remuneration arrangements are determined throughout the Group based on the same principle that reward should be achieved for
delivery of the business strategy and should be sufficient to attract, retain and motivate high-calibre employees. The Group operates
an HMRC tax qualifying SAYE Plan and invites all employees to participate at the discretion of the Committee, therefore encouraging
wider workforce share ownership.
There is no consultation with employees regarding Director’s remuneration.
Service contracts
Russell Atkinson’s service contract is on a rolling basis and may be terminated on nine months’ notice by the Company or the Executive.
James Saralis’ service contract is on a rolling basis and may be terminated on six months’ notice by the Company or the Executive.
All Non-Executive Directors have initial fixed-term agreements with the Company of no more than three years.
Details of the Directors’ service contracts and notice periods are set out below:
Name
J R Atkinson
J D Saralis
R S Halbert
T J M Aspinall
G D C Kent
Commencement
Normal notice period
29 May 2014
1 January 2018
29 May 2014
1 June 2016
1 November 2014
nine months
six months
three months
three months
three months
48
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Payments for loss of office
The principles on which the determination of payments for loss of office will be approached are set out below:
Payment in lieu of notice
In line with the provisions of the Executive Directors’ service contracts.
Policy
Annual Bonus
At the discretion of the Committee dependent upon the circumstances of departure and
contribution to the business during the bonus period.
Long-term incentives
The extent to which any unvested award will vest will be determined in accordance with the rules
of the nominal cost LTIP and EMI Plan. Unvested awards will normally lapse on cessation of
employment, other than when the individual is considered to be a ‘good leaver’.
Other payments
In appropriate circumstances, payments may also be made in respect of accrued holiday,
outplacement, legal fees and under the terms of the SAYE Plan.
Statement of consideration of shareholder views
The Committee considers shareholder feedback received on remuneration matters, including issues arising in relation to the AGM,
as well as any additional comments received during any other meetings with shareholders. The Committee will seek to engage
directly with major shareholders and their representative bodies should any material changes be made to the Directors’
Remuneration Policy.
NAHL Group plc Annual Report and Accounts 2017
49
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and
regulations.
Company Law requires the Directors to prepare Group and parent company financial statements for each financial year. As required
by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with
IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same
basis.
Under Company Law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group
and parent company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
• assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern ;and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to
ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
50
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF NAHL GROUP PLC
1. Our opinion is unmodified
We have audited the financial statements of NAHL Group plc (“the Company”) for the year ended 31 December 2017 which comprise
the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Cash Flow Statement, the Company Balance Sheet, the Company Statement of
Changes in Equity, the Company Cash Flow Statement and the related notes, including the accounting policies in note 1.
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 December 2017 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by the EU);
the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for our opinion.
Overview
Materiality:
Group financial statements as a whole
£0.58m (2016: £0.75m)
4.7% (2016: 4.7%) of Group profit before tax
Coverage
100% (2016: 100%) of Group profit before tax
Risks of material misstatement
Recurring risks
Revenue recognition
Valuation of Goodwill
Recoverability of parent Company’s investment in subsidiaries
vs 2016
tu
tu
tu
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion
above, the key audit matters, in decreasing order of audit significance, were as follows (unchanged from 2016):
Revenue
recognition
(£51.9m;
2016: £50.6m)
Refer to
page 60
(accounting
policy) and
page 62
(financial
disclosures).
The Risk
Processing error and element
of judgement:
The key revenue streams, being income from
solicitors for the provisions of marketing
services, provision of case management
services and expert witness reports and lead
generation services to conveyancer solicitors
and surveyors and the provision of Search
reports vary depending on the product/
service being delivered by the group. The
resulting large volume of non-homogenous
transactions creates a risk of processing
error. The Group also receives variable
consideration in respect of some of the
services provided to the law firms over and
above a guaranteed minimum, upon the
successful outcome of each case. As revenue
is recognised when these amounts are
considered probable there is judgement in
determining the anticipated outcome of
cases. The recognition is based on historic
data and is included within accrued revenue
at the year end totalling £1.5m.
Our response
Our procedures included:
— Tests of details: We performed a reconciliation of the cash
received in the year to the revenue recognised. This included
testing the underlying data used in the performance of this test;
— We selected a sample of revenue items recognised immediately
prior to and immediately after the year end and obtained invoices
and proof of delivery or service, (contracts; supporting
calculations; timesheets; report delivery emails), to check these
had been accounted for in the correct period;
— For a sample of deferred and accrued income at the period end, we
determined whether revenue had been recorded in the appropriate
period by checking delivery documentation, (contracts; supporting
calculations; timesheets; report delivery emails);
— We inspected a sample of credit notes raised post year end
to determine whether they related to revenue recognised in
the year;
— We obtained 100% of the journals posted in respect of revenue
and, using computer assisted audit techniques, analysed these to
identify and investigate any entries which appeared unusual based
upon the specific characteristics of the journal, considering in
particular whether the non-revenue side of the journal entry was
as expected, based on our business understanding;
— Our sector experience: Challenging management’s
assumptions over the accrued variable revenue based on our
knowledge of the Group; and
— Historical comparisons: Checking reasonableness of expected
success rates by comparing actual experience to previous
expected rates.
NAHL Group plc Annual Report and Accounts 2017
51
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF NAHL GROUP PLC
2. Key audit matters: our assessment of risks of material misstatement continued
Valuation of
Goodwill
(£60.4m;
2016: £60.4m)
Refer to page 60
(accounting
policy) and page 67
(financial disclosures).
Parent:
Recoverability of
Parent Company
Investment in
Subsidiaries
(£52.7m;
2016: £52.7m)
Refer to page 81
(accounting
policy) and page 82
(financial disclosures).
The Risk
Our response
Forecast-based valuation:
Our procedures included:
Goodwill relates to all three divisions:
Personal Injury (£39.9m), Critical
Care (£15.6m) and Residential
Property (£4.9m). There is
judgement with regard to
assumptions and estimates involved
in forecasting future cash flows,
which form the basis of the
assessment of the recoverability
of goodwill balances.
These include budgeted volumes,
operating margin, long-term growth
rates and the discount rate used.
— Benchmarking Assumptions: Comparing the Group’s
assumptions to externally derived data in relation to key inputs
such as projected economic growth, competition, and
discount rates.
— Historical Comparisons: We assessed the reasonableness of
assumptions we assessed the historical accuracy of the
Group’s forecasting through checking management forecasts
to actual results.
— Sensitivity Analysis: Performing scenario-specific analysis
on models including changes to, and breakeven analysis on,
the discount rate, long term growth rates and forecast cash
flows; and
— Assessing Transparency: Assessing whether the Group’s
disclosures about the sensitivity of the outcome of the
impairment assessment to changes in key assumptions
reflected the risks inherent in the valuation of goodwill.
Low risk, high value:
Our procedures included:
— Comparing valuations: comparing the carrying value of the
investment to the market capitalisation of the Group at the
balance sheet date.
The carrying amount of the parent
company’s investments in the
subsidiary company held at cost less
impairment represents 74% (2016:
67%) of the company’s total assets.
Its recoverability is not at a high risk
of significant misstatement or
subject to significant judgement.
However, due to its materiality in the
context of the parent company
financial statements, this is
considered to be the area that had
the greatest effect on our overall
parent company audit.
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the group financial statements as a whole was set
at £0.58m, determined with reference to a benchmark of group
profit before tax, of which it represents 4.7% (2016: 4.7%).
Materiality for the Parent Company financial statements as a
whole was set at £0.46m (2016: £0.65m), determined with
reference to a benchmark of company net assets, of which it
represents 0.7% (2016: 0.8%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £29k, in
addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 10 (2016: 8) reporting components, we subjected
5 (2016: 8) to full scope audits for group purposes and 5 (2016:
nil) to specified risk-focused audit procedures. The latter were
not individually financially significant enough to require a full
scope audit for group purposes, but did present specific
individual risks that needed to be addressed.
The components within the scope of our work accounted for the
percentages illustrated opposite.
52
NAHL Group plc Annual Report and Accounts 2017
The Group team approved the component materialities, which
ranged from £90k to £275k, having regard to the mix of size and
risk profile of the Group across the components.
The Group team performed the audit of the Group as if it was a
single aggregated set of financial information. The audit was
performed using the materiality levels set out above. The Group
team visited 4 (2016: 4) component locations in Kettering,
Daventry, London and Hove to assess the audit risk and strategy.
Profit Before Tax
£12.4m (2016: £15.8m)
Group Materiality
£0.58m (2016: £0.75m)
£0.58m
Whole financial
statements materiality
(2016: £0.75m)
£0.44m
Range of materiality at 10
components (£90k to £275k)
(2016: £1k to £600k)
£29k
Misstatements reported
to the audit committee
(2016: £37.5k)
Profit Before Tax
Group materiality
Strategic report
Governance
Financial statements
Group revenue
Group profit before tax
6. We have nothing to report on the other matters on which
100%
(2016 100%)
100
100
Group total assets
100%
(2016 100%)
100
100
100%
(2016 100%)
100
100
Full scope for group audit
purposes 2017
Full scope for group audit
purposes 2016
4. We have nothing to report on going concern
We are required to report to you if we have concluded that the
use of the going concern basis of accounting is inappropriate
or there is an undisclosed material uncertainty that may cast
significant doubt over the use of that basis for a period of at
least twelve months from the date of approval of the financial
statements. We have nothing to report in these respects.
5. We have nothing to report on the other information in
the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the
•
•
strategic report and the directors’ report;
in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent Company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
•
law are not made; or
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 50,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance
is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Charlotte Anderson
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Altius House,
North Fourth Street,
Milton Keynes
MK9 1NE
NAHL Group plc Annual Report and Accounts 2017
53
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
Underlying revenue
Exceptional items
Revenue
Cost of sales
Underlying gross profit
Exceptional items
Gross profit
Administrative expenses
Underlying operating profit
Share-based payments
Amortisation of intangible assets acquired on business combinations
Exceptional items
Operating profit
Financial income
Financial expense
Profit before tax
Taxation
Profit for the year and total comprehensive income
Profit and total comprehensive income is attributable to:
Owners of the company
Non-controlling interests
Earnings per share (p)
Basic earnings per share
Diluted earnings per share
The notes on pages 58 to 77 form part of these financial statements.
Note
1, 2
4
1,2
1
4
3
1
21
15
4
2
7
8
9
Note
22
22
2017
£000
51,037
875
2016
£000
49,385
1,250
51,912
(25,224)
50,635
(20,809)
25,813
875
28,576
1,250
26,688
(14,086)
29,826
(13,665)
14,491
(182)
(1,307)
(400)
12,602
150
(331)
12,421
(2,467)
17,985
(1,052)
(1,327)
555
16,161
43
(403)
15,801
(3,577)
9,954
12,224
9,876
78
9,954
2017
p
21.7
21.6
12,224
–
12,224
2016
p
27.0
26.5
54
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2017
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Trade and other receivables (including £7,280,000 (2016: £825,000) due in greater than
one year)
Cash and cash equivalents
Total assets
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Other payables relating to legacy pre-LASPO ATE product
Current tax liability
Deferred tax liability
Non-current liabilities
Other interest-bearing loans and borrowings
Total liabilities
Net assets
Equity
Share capital
Share option reserve
Share premium
Merger reserve
Retained earnings
Total equity attributable to the owners of NAHL Group plc
Non-controlling interests
Total equity
The notes on pages 58 to 77 form part of these financial statements.
Note
2017
£000
2016
£000
13
15
16
10
17
18
19
2
11
60,362
7,217
267
34
60,362
8,474
327
38
67,880
69,201
22,261
858
23,119
10,287
4,814
15,101
90,999
84,302
–
(12,415)
(676)
(1,513)
(1,662)
(3,693)
(7,631)
(1,912)
(1,937)
(1,914)
(16,266)
(17,087)
18
(12,922)
(7,396)
(29,188)
(24,483)
61,811
59,819
20
115
2,121
14,507
(66,928)
111,893
61,708
103
61,811
113
1,939
14,507
(66,928)
110,188
59,819
–
59,819
These financial statements were approved by the Board of Directors on 19 March 2018 and were signed on its behalf by:
J R Atkinson
Director
Company registered number: 08996352
NAHL Group plc Annual Report and Accounts 2017
55
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Balance at 1 January 2016
113
1,121
14,262 (66,928) 106,503 55,071
– 55,071
Share
capital
£000
Share
option
reserve
£000
Note
Share
premium
£000
Merger
reserve
£000
Retained
earnings
£000
Non-
controlling
interest
£000
Total
£000
Total
equity
£000
Total comprehensive income for
the year
Profit for the year
Total comprehensive income
Transactions with owners, recorded
directly in equity
Issue of new Ordinary Shares
Exercise of share options
Share based payments
Dividends paid
26
26
21
–
–
–
–
–
–
–
–
–
(85)
903
–
–
–
160
85
–
–
–
–
–
–
–
–
12,224
12,224
12,224
12,224
–
–
–
(8,539)
160
–
903
(8,539)
–
–
–
–
–
–
12,224
12,224
160
–
903
(8,539)
Balance at 31 December 2016
113
1,939
14,507 (66,928) 110,188 59,819
– 59,819
Total comprehensive income for
the year
Profit for the year
Total comprehensive income
Transactions with owners, recorded
directly in equity
Issue of new Ordinary Shares
Member capital
Share based payments
Dividends paid
–
–
2
–
–
–
–
–
–
–
182
–
–
–
–
–
–
–
–
–
–
–
–
–
9,876
9,876
9,876
9,876
–
–
–
(8,171)
2
–
182
(8,171)
78
78
–
25
–
–
9,954
9,954
2
25
182
(8,171)
26
21
Balance at 31 December 2017
115
2,121
14,507 (66,928) 111,893 61,708
103
61,811
The notes on pages 58 to 77 form part of these financial statements.
56
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation
Financial income
Financial expense
Share based payments
Taxation
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in other payables relating to legacy pre-LASPO ATE product
Interest paid
Tax paid
Note
16
15
7
8
21
9
2017
£000
2016
£000
9,954
12,224
171
1,437
(150)
331
182
2,467
14,392
(11,974)
4,963
(1,236)
6,145
(178)
(3,139)
170
1,352
(43)
403
1,052
3,577
18,735
(1,876)
(1,868)
(1,689)
13,302
(346)
(3,692)
Net cash from operating activities
2,828
9,264
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Interest received
Consideration paid for the acquisition of subsidiaries
Cash acquired from business combinations
Non-controlling interest member capital
Net cash used in investing activities
Cash flows from financing activities
New share issue
Repayment of borrowings
New borrowings
Bank arrangement fees for new borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
(111)
(305)
12
–
–
25
(379)
2
(11,250)
13,125
(111)
(8,171)
(232)
(393)
43
(2,090)
295
–
(2,377)
160
(3,750)
–
–
(8,539)
(6,405)
(12,129)
(3,956)
4,814
(5,242)
10,056
858
4,814
NAHL Group plc Annual Report and Accounts 2017
57
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Consolidated Financial Statements
The Consolidated Financial Statements for the year ended 31 December 2017 have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union (IFRS) and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS.
The consolidated financial information has been prepared on a going concern basis and under the historical cost convention.
The Directors have prepared cash flow forecasts for the period until 31 March 2019. Based on these, the Directors confirm that there
are sufficient cash reserves to fund the business for the period under review, and believe that the Group is well placed to manage its
business risk successfully. For this reason they continue to adopt the going concern basis in preparing the financial statements.
Basis of consolidation
The financial statements represent a consolidation of the Company and its subsidiary undertakings as at the Statement of Financial
Position date and for the year then ended. In accordance with IFRS 10 the definition of control is such that an investor has control
over an investee when: a) it has power over the investee, b) it is exposed, or has the rights, to variable returns from its involvement
with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to
have control over an investee. All subsidiary undertakings in which the Group has a greater than 50% shareholding have been
consolidated in the Group’s results.
The consolidated financial information incorporates the results of business combinations using the purchase method. In the Group
statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their
fair values at the acquisition date. The results of acquired operations are included in the Group statement of comprehensive income
from the date on which control is obtained. They are deconsolidated from the date on which control ceases. Acquisition costs are
expensed as incurred. This policy does not apply on the acquisition of Consumer Champion Group Limited for which reverse
acquisition accounting has been applied. The group recognises any non-controlling interest in the acquired entity on an acquisition
by acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable
assets.
Joint arrangements
Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures.
The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint
arrangement. NAHL Group plc has joint operations only. As the Group has overall control of these joint operations, the results of the
joint operations have been consolidated within these financial statements.
Use of judgements and estimates
The preparation of financial statements in conformity with IFRSs requires management to make judgements and estimates that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may
differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the year in which the estimates are revised and in any future years affected.
Revenue, other than pre- and post-LASPO ATE income, is not considered to be a key judgement or estimate.
Judgements
In applying the Group’s accounting policies, management has applied judgement in the following areas that have a significant impact
on the amounts recognised in the financial statements.
Intangible assets
When the Group makes an acquisition, management determines whether any intangible assets should be recognised separately
from goodwill and what value to attribute to those assets.
Accounting policy choice for non-controlling interests
The group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition by acquisition basis.
For the non-controlling interests in Your Law LLP and National Law Associates LLP (trading as National Law Partners), the Group
elected to recognise the non-controlling interests at their proportionate share of the acquired net identifiable assets.
Estimates
Discussed below are key assumptions concerning the future, and other key sources of estimation at the reporting date, that have a
risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
Impairment of goodwill
The Group determines, on an annual basis, whether goodwill is impaired. This requires an estimation of the future cash flows of the
cash generating units (CGUs) to which the goodwill is allocated; see note 13.
58
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Recoverability of trade receivables
Trade receivables are reflected net of an estimated provision for impairment losses. This provision considers the past payment
history and the length of time that the debt has remained unpaid; see notes 17 and 23.
New standards, interpretations and amendments not yet effective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
• IFRS 9: Financial Instruments – Effective for annual reporting periods beginning on or after 1 January 2018, with early application
permitted.
• IFRS 15: Revenue from Contracts with Customers – Effective for annual reporting periods beginning on or after 1 January 2018,
with early application permitted.
• IFRS 16: Leases – Effective for annual reporting periods beginning on or after 1 January 2019. Early adoption is permitted for
entities that apply IFRS 15: Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.
A review of IFRS 16: Leases will be conducted to determine its impact on the Group. The Group has considered the impact of the
other standards and revisions above and concluded that these will not have a material impact on the Group’s financial statements.
Use of non-GAAP measures
The Directors believe that underlying operating profit, underlying revenue, underlying operating cash and adjusted net debt provide
additional useful information for shareholders on underlying trends and performance. These measures are used by management for
performance analysis and are considered useful as they relate to the core underlying trading activities of the Group i.e. they reflect
the current ongoing activities of the Group and do not include any items that relate to significant exceptional projects that are not
expected to recur or any items that relate to activities that are outside the normal course of trading (e.g. acquisitions or share-based
costs that are not directly related to the current operating performance of the Group). Underlying operating profit, underlying
revenue, underlying operating cash and adjusted net debt are not defined by IFRS and therefore may not be directly comparable to
other companies’ adjusted profit, revenue, cash or debt measures. They are not intended to be a substitute for, or superior to IFRS
measurements.
The adjustments made to reported revenue are:
Exceptional revenues – fees related to exceptional revenues in relation to release of the ATE liability that are not expected to recur
and are not related to the continuing core operations of the business.
The adjustments made to reported operating profit are:
IFRS 2 Share-Based Payments – non-cash Group statement of comprehensive income charge for share-based payments and
related National Insurance costs. IFRS 2 requires the fair value of equity instruments measured at grant date to be spread over the
period during which the employees become unconditionally entitled to the options. This is a non-cash charge and has been excluded
from underlying operating profit as it does not reflect the underlying core trading performance of the Group.
IFRS 3 (Revised) Business Combinations – intangible asset amortisation charges and costs arising from acquisitions. Under IFRS 3
intangible assets are required to be amortised on a straight-line basis over their useful economic life and as such this is a non-cash
charge that does not reflect the underlying performance of the business acquired. Similarly, the standard requires all acquisition
costs to be expensed in the Group Income Statement. Due to their nature, these costs have been excluded from underlying
operating profit as they do not reflect the underlying core trading performance of the Group.
Other exceptional costs/income – these relate to certain exceptional costs associated with the Group’s acquisition activities
including any costs in relation to aborted acquisitions, reorganisation costs associated with exceptional projects that are not related
to the core operations of the business and exceptional income for the release of previously recognised liability for pre-LASPO ATE.
These have been excluded from underlying operating profit as they do not reflect the underlying core trading performance of the
Group.
Going concern
The Group had cash balances of £858,000 (2016: £4,814,000), net assets of £61,811,000 (2016: £59,819,000) and net current
assets of £6,853,000 (2016: net current liabilities £1,986,000) as at each year end.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of approval of the financial statements. As a consequence, the Directors
believe that the Group is well placed to manage its business risks successfully. As part of the normal management process, detailed
forecasts of future trading, profits and cashflows on a CGU by CGU basis are prepared, which includes the impact for possible
changes in market or regulatory conditions. Based on these projections, the Board remains positive about the Group’s short- and
medium-term prospects.
Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.
NAHL Group plc Annual Report and Accounts 2017
59
NOTES CONTINUED
1 Accounting policies continued
Revenue
Personal Injury – Revenue is from:
a) Solicitor income (traditional) – Marketing services resulting in the provision of enquiries to Panel Law Firms, based on a cost-plus
margin model with reference to the cost of the marketing resources needed to generate the enquiry. These revenues are recognised
when the service is delivered.
b) Solicitor income (variable) – Marketing services resulting in the provision of enquiries to certain Panel Law Firms where we receive
variable consideration based on the ultimate case outcome. The revenue recognised on deferral of enquiries is equal to
management’s best estimate of the future expected cash flows discounted for the time value of money. This is only recognised to the
extent that the amount is probable and can be reliably estimated.
c) Product income – Commissions received from product providers for the sale of additional products to the Panel Law Firms.
Revenue is recognised on sale of the product to a PLF to the extent that the amount is probable and can be reliably estimated.
d) ABS income – Fees receivable from clients for the provision of legal services. Revenue is recognised once it is virtually certain that
the case will be won.
Pre-LASPO ATE – Revenue from commissions received from the insurance provider for the use of after the event policies by Panel
Law Firms. From 1 April 2013, this product was no longer available as a result of LASPO regulatory changes. Consequently, there is a
remaining liability which is being unwound through revenue as historic cases are settled.
Critical Care – Revenue from the provision of expert witness reports and case management support within the medico-legal
framework for multi-track cases. For expert witness, revenue is recognised on the completion and delivery of reports and for case
management revenue is recognised based on the level of services provided on a monthly basis.
Residential Property – Revenue from the provision of online marketing services to target homebuyers and sellers in England and
Wales and offering lead generation services to Panel Law Firms and surveyors in the conveyancing sector. Revenue is recognised on
a fixed-fee basis on the transfer of instruction to Panel Law Firms or surveyors. Search revenue is recognised as revenue in the
period in which the search report is delivered.
All revenue is stated net of Value Added Tax. The entire revenue arose in the United Kingdom.
Goodwill
Goodwill represents the excess of the fair value of the consideration given over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortised but is tested for impairment
annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment.
Any impairment is recognised in the statement of comprehensive income.
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
Amortisation
Intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:
• Technology related intangibles
• Contract related intangibles
• Brand names
• Other intangible assets
5 to 10 years
3 to 10 years
3 to 10 years
3 to 5 years
–
–
–
–
No amortisation is charged on assets under construction as these are not yet in use.
Depreciation
Depreciation is calculated to write off the cost, less estimated residual value, of property, plant and equipment by equal instalments
over their estimated useful economic lives as follows:
Fixtures and fittings including:
• Office equipment
• Computers
–
–
3 to 5 years
3 years
Operating leases
Operating lease rentals are charged to the income statement on a straight-line basis over the period of the lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances.
60
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Taxation
Tax on the income statement for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive
income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is
the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax
asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity (i.e. forming part of equity) only to the extent that they meet the
following two conditions:
a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets
or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the
Company (or Group); and
b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the
Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up
share capital and share premium account exclude amounts in relation to those shares.
Finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges.
Finance payments associated with financial instruments that are classified as part of shareholders’ funds are dealt with as
appropriations in the reconciliation of movements in equity.
Employee share schemes
The share option plans allow employees of the Group to acquire shares of the Company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is
measured using an option pricing model, taking into account the terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is
only due to share prices not achieving the threshold for vesting.
Impairment
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable
amount is estimated each year at the same time.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that
cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or groups of assets (the CGU). The goodwill acquired in a business
combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the
purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which
impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a
business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the
other assets in the unit (group of units) on a pro rata basis.
NAHL Group plc Annual Report and Accounts 2017
61
NOTES CONTINUED
1 Accounting policies continued
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods
are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
2 Operating segments
Personal
Injury
£000
Critical
Care
£000
Residential
Property
£000
Group
£000
Underlying
operations
£000
Pre-LASPO
ATE
£000
Other
items
£000
Total
£000
Year ended 31 December 2017
Revenue
Depreciation and amortisation
Operating profit/(loss)
Financial income
Financial expenses
Profit/(Loss) before tax
Trade receivables
Segment liabilities
Capital expenditure (including intangibles)
Year ended 31 December 2016
Revenue
Depreciation and amortisation
Operating profit/(loss)
Financial income
Financial expenses
Profit/(Loss) before tax
Trade receivables
Segment liabilities
Capital expenditure (including intangibles)
31,660
(178)
11,033
143
(1)
11,175
11,442
(10,453)
53
30,011
(89)
14,112
14
(1)
14,125
1,935
(5,227)
608
11,037
(49)
3,882
5
(4)
3,883
4,386
(806)
47
10,353
(44)
3,786
19
(5)
3,800
3,929
(1,035)
96
8,340
(74)
1,385
–
–
1,385
419
(506)
191
9,021
(147)
1,391
–
–
1,391
343
(765)
46
–
–
(1,809)
2
(326)
(2,133)
–
51,037
(301)
14,491
150
(331)
14,310
16,247
(600) (12,365)
291
–
875
–
800
–
–
800
–
(726)1
–
51,912
–
(1,608)
(1,307)
12,602
(2,689)
150
–
(331)
–
12,421
(2,689)
–
16,247
– (13,091)
291
–
–
–
(1,304)
10
(397)
(1,691)
–
(503)
–
49,385
(280)
17,985
43
(403)
17,625
6,207
(7,530)
750
1,250
–
1,155
–
–
1,155
–
(1,982)1
–
–
(1,242)
(2,979)
–
–
(2,979)
–
(31)
–
50,635
(1,522)
16,161
43
(403)
15,801
6,207
(9,543)
750
1. Pre-LASPO ATE liabilities include the balance of commissions received in advance that are due to be paid back to the insurance provider of £676,000 (2016: £1,912,000)
and accruals for associated costs of £50,000 (2016: £70,000).
Geographic information
All revenue and assets of the Group are based in the UK.
Operating segments
The activities of the Group are managed by the Board, which is deemed to be the chief operating decision maker (CODM).
The CODM has identified the following segments for the purpose of performance assessment and resource allocation decisions.
These segments are split along product lines and consistent with those reported last year.
Personal Injury – Revenue from the provision of enquiries to the PLFs, based on a cost plus margin model, plus commissions
received from providers for the sale of additional products by them to the PLFs and in the case of the ABSs, revenue receivable from
clients for the provision of legal services.
Pre-LASPO ATE – Revenue is commissions received from the insurance provider for the use of after the event policies by PLFs. From
1 April 2013, this product was no longer available as a result of LASPO regulatory changes. Included in the balance sheet is a liability
that has been separately identified due to its material value. This balance is commissions received in advance that are due to be paid
back to the insurance provider. No interest is due on this liability.
Critical Care – Revenue from the provision of expert witness reports and case management support within the medico-legal
framework for multi-track cases.
Residential Property – Revenue from the provision of online marketing services to target homebuyers and sellers in England and
Wales, offering lead generation services to PLFs and surveyors in the conveyancing sector and the provision of conveyancing
searches for solicitors and licensed conveyancers.
Group – Costs that are incurred in managing Group activities or not specifically related to a product.
Other items – Costs associated with the acquisition of subsidiary undertakings, reorganisation costs associated with exceptional
projects that are not related to the core operations of the business, share-based payments and amortisation charges on intangible
assets recognised as part of business combinations.
62
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Cash flows from operating activities
A reconciliation of operating profit to cash generation from operations has been presented below separately identifying net cash
flows relating to underlying operations (comprising cash flows associated with PI, CC, RP and other segments), the pre-LASPO ATE
product segment and other items.
Reconciliation of operating profit to net cash from operating activities
12 months ended 31 December 2017
Operating profit
Amortisation of intangible assets acquired on business
combinations
Equity-settled share based payments
Underlying operating profit
Depreciation and amortisation
Increase in trade/other receivables
Increase/(decrease) in trade/other payables
Decrease in liabilities relating to pre-LASPO ATE product
Net cash flows from operating activities before interest
and tax
Interest paid
Tax paid
Net cash from operating activities
12 months ended 31 December 2016
Operating profit
Amortisation of intangible assets acquired on business
combinations
Equity-settled share based payments
Underlying operating profit
Depreciation and amortisation
Increase in trade/other receivables
Increase/(decrease) in trade/other payables
Decrease in liabilities relating to pre-LASPO ATE product
Net cash flows from operating activities before interest
and tax
Interest paid
Tax paid
Net cash from operating activities
Underlying
operations
£000
Pre-LASPO
ATE
£000
Sub-total
£000
Other
items
£000
Total
£000
13,002
800
13,802
(1,200)
12,602
1,307
182
14,491
301
(11,974)
5,120
–
7,938
(178)
(3,139)
4,621
–
–
800
–
–
(20)
(1,236)
(456)
–
–
(456)
1,307
182
15,291
301
(11,974)
5,100
(1,236)
7,482
(178)
(3,139)
–
–
(1,200)
–
–
(137)
–
(1,337)
–
–
1,307
182
14,091
301
(11,974)
4,963
(1,236)
6,145
(178)
(3,139)
4,165
(1,337)
2,828
Underlying
operations
£000
Pre-LASPO
ATE
£000
Sub-total
£000
Other
items
£000
Total
£000
15,606
1,155
16,761
(600)
16,161
1,327
1,052
17,985
195
(1,876)
(1,969)
–
14,335
(346)
(3,692)
10,297
–
–
1,155
–
–
70
(1,689)
(464)
–
–
(464)
1,327
1,052
19,140
195
(1,876)
(1,899)
(1,689)
13,871
(346)
(3,692)
9,833
3 Administrative expenses and auditor’s remuneration
Included in the consolidated statement of comprehensive income are the following:
Depreciation of property, plant and equipment
Amortisation of intangible assets (not relating to business combinations)
Amortisation of intangible assets relating to business combinations
Operating leases – land and buildings
Operating leases – other
Auditor’s remuneration
The analysis of auditor’s remuneration is as follows:
Audit services – statutory audit
Taxation compliance
Total non-audit remuneration
–
–
(600)
–
–
31
–
(569)
–
–
(569)
2017
£000
171
130
1,307
369
57
130
2017
£000
111
19
19
1,327
1,052
18,540
195
(1,876)
(1,868)
(1,689)
13,302
(346)
(3,692)
9,264
2016
£000
170
25
1,327
361
63
95
2016
£000
77
18
18
NAHL Group plc Annual Report and Accounts 2017
63
NOTES CONTINUED
4 Exceptional items
Exceptional items included in the income statement are summarised below:
Release of pre-LASPO ATE liability and associated costs1
Personal Injury reorganisation costs2
Legal and professional fees relating to acquisitions3
2017
Revenue
£000
2017
Operating Profit
£000
2016
Revenue
£000
2016
Operating Profit
£000
(875)
–
–
(875)
(800)
1,200
–
(1,250)
–
–
400
(1,250)
(1,155)
522
78
(555)
1. Previously recognised liabilities for pre-LASPO ATE commissions received in advance of £875,000 (2016: £1,250,000) have been released into revenue in
the year as a result of more favorable settlements. These have been offset by associated costs of £75,000 (2016: £95,000).
2. Personal Injury reorganisation costs relate to costs associated with exceptional projects that are not related to the core operations of the business.
3. Legal and professional fees paid in relation to the acquisitions of Searches UK Limited, including due diligence costs and Stamp Duty.
5 Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
Number of Employees
2017
5
201
206
2017
£000
7,541
182
793
80
8,596
2017
£000
1,476
2016
5
195
200
2016
£000
6,821
1,052
723
65
8,661
2016
£000
573
Salary
and fees
£000
Benefits
£000
Annual
bonus
£000
Long-term
incentives
£000
Pension
£000
Total
£000
218
175
85
48
43
569
17
16
–
–
–
33
76
–
–
–
–
76
477
320
–
–
–
797
1
–
–
–
–
1
789
511
85
48
43
1,476
Directors
Others
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Share based payments (see note 21)
Social security costs
Pension costs
6 Directors’ emoluments
Statutory Directors’ emoluments
Statutory Directors’ emoluments
Year ended 31 December 2017
Executive Directors
J R Atkinson
S Dolton1
Non-Executive Directors
R S Halbert
G D C Kent
T J M Aspinall
64
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Year ended 31 December 2016
Executive Directors
J R Atkinson
S Dolton1
Non-Executive Directors
R S Halbert
G D C Kent
T J M Aspinall2
Salary
and fees
£000
Benefits
£000
Annual
bonus
£000
Long-term
incentives
£000
Pension
£000
Total
£000
214
171
83
47
24
539
17
16
–
–
–
33
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
1
232
187
83
47
24
573
1. S Dolton resigned from the Board on 1 January 2018.
2. T J M Aspinall was appointed to the Board on 1 June 2016.
The Group contributed £1,000 to pension schemes in respect of Directors during the year (2016: £1,000).
The emoluments of the highest paid Director were £789,000 (2016: £232,000).
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Group. Key management personnel include members of the operational board who are not statutory directors in
addition to the main Board. Disclosure of transactions with key management is detailed in note 27.
7 Financial income
Bank interest income
Investment income
Other income
8 Financial expense
Interest on bank loans
Amortisation of facility arrangement fees
Total finance expense
9 Taxation
Recognised in the consolidated statement of comprehensive income
Current tax expense
Current tax on income for the year
Adjustments in respect of prior years
Total current tax
Deferred tax expense
Origination and reversal of timing differences
Total deferred tax
Tax expense in income statement
Total tax charge
2017
£000
6
5
139
150
2017
£000
257
74
331
2016
£000
25
18
–
43
2016
£000
340
63
403
2017
£000
2016
£000
2,690
25
2,715
(248)
(248)
2,467
2,467
3,582
(35)
3,547
30
30
3,577
3,577
The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors,
including interpretation of tax law and prior experience.
NAHL Group plc Annual Report and Accounts 2017
65
NOTES CONTINUED
9 Taxation continued
Reconciliation of effective tax rate
Profit for the year
Total tax expense
Profit before taxation
Tax using the UK corporation tax rate of 19.25% (2016: 20.00%)
Income disallowable for tax purposes
Non-deductible expenses
Adjustments in respect of prior years
Short-term timing differences for which no deferred tax is recognised
Total tax charge
2017
£000
9,954
2,467
12,421
2,391
(1)
48
25
4
2,467
2016
£000
12,224
3,577
15,801
3,160
(3)
455
(35)
–
3,577
Changes in tax rates and factors affecting the future tax charge
A reduction in the UK corporation tax rate from 21.0% to 20.0% (effective from 1 April 2015 ) was substantively enacted on 2 July
2013. Further reductions to 19.0% (effective from 1 April 2017) and to 18.0% (effective from 1 April 2020) was substantively enacted
on 26 October 2015 and an additional reduction to 17.0% (effective from 1 April 2020) was substantively enacted on 6 September
2016. This will reduce the Group’s future current tax charge accordingly. The deferred tax assets and liabilities at 31 December 2017
have been calculated based on these rates.
10 Deferred tax asset
At beginning of year
Recognised in profit and loss (see note 9)
Deferred tax asset at end of year
The asset for deferred taxation consists of the tax effect of temporary differences in respect of:
At 1 January 2016
Recognised in profit and loss
At 31 December 2016
Recognised in profit and loss
At 31 December 2017
11 Deferred tax liability
At beginning of year
Arising on business combination (see note 12)
Recognised in profit and loss (see note 9)
Deferred tax liability at end of year
2017
£000
38
(4)
34
Property,
plant &
equipment
£000
Bad debt
provisions
£000
44
(23)
21
(8)
13
24
(7)
17
4
21
2017
£000
1,914
–
(252)
1,662
2016
£000
68
(30)
38
Total
£000
68
(30)
38
(4)
34
2016
£000
1,738
176
–
1,914
The deferred tax liability arises in respect of intangible assets acquired on business combinations.
66
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
12 Acquisitions
Acquisition of Searches UK Limited
On 11 January 2016 the Group acquired the entire share capital of Searches UK Limited (Searches). Searches is a conveyancing
search provider in England and Wales predominantly for residential property transactions.
Fair values
The acquisitions had the following effect on the Group’s assets and liabilities:
Intangible assets
Tangible assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liability
Net assets acquired
Goodwill arising on acquisition
Fair value of net assets acquired and goodwill arising
Cash consideration
Fair value of deferred consideration
Fair value of net assets acquired and goodwill arising
Searches
£000
881
6
369
295
(419)
(176)
956
1,124
Total
2016
£000
881
6
369
295
(419)
(176)
956
1,124
2,080
2,080
2,080
–
2,080
2,080
–
2,080
The Group incurred acquisition related costs of £nil (2016: £78,000) related to professional fees paid for due diligence, general
professional fees and legal related costs. These costs have been included in exceptional items in the Group’s consolidated statement
of comprehensive income.
For all acquisitions, fair values remain provisional in the first year and will be finalised within 12 months of acquisition.
During 2017, the Group incorporated two new ABSs through joint partnerships with members of its PLFs. This led to
the Group acquiring interests in Your Law LLP and National Law Associates LLP. Project Jupiter Limited, a 100% subsidiary of
NAHL Group plc, is a member firm of Your Law LLP and National Law Associates LLP. Member capital of £75,000 was advanced
to the LLPs. There were no other acquisition costs involved.
13 Goodwill
Cost
At 1 January 2016
Acquired through business combination
Personal
Injury
£000
Critical
Care
£000
Residential
Property
£000
Total
£000
39,897
–
15,592
–
3,749
1,124
59,238
1,124
At 31 December 2016 and 31 December 2017
39,897
15,592
4,873
60,362
Impairment
At 1 January 2016
At 31 December 2016
At 31 December 2017
Net book value
At 31 December 2016
At 31 December 2017
–
–
–
–
–
–
–
–
–
–
–
–
39,897
39,897
15,592
15,592
4,873
4,873
60,362
60,362
Where goodwill arose as part of a business acquisition, it forms part of the CGU's asset carrying value which is tested for impairment
annually. The Group has determined that for the purposes of impairment testing, each segment i.e. PI, CC and RP, is the appropriate
level at which to test. Due to the discontinued nature of the pre-LASPO ATE product, no goodwill is allocated to it.
The recoverable amounts for the CGUs are based on value in use which is calculated on the operating cash flows expected to be
generated by the division using the latest budget data for the coming year, extrapolated at a forecast growth rate for four years and
no growth into perpetuity, discounted at a range of pre-tax WACCs of between 7.5%-8.4% (2016: 10.1%–12.7%). The range of WACCs
represents the different risk profiles of each CGU.
NAHL Group plc Annual Report and Accounts 2017
67
NOTES CONTINUED
13 Goodwill continued
For the current year review and going forward, we have added a terminal value onto each forecast which represents the cash flows of
the CGU into perpetuity with 0% growth assumed. Previous years have considered a forecast period of five years only. This change
in basis has arisen due to the evolution of the PI business model. As the ABSs are expected to account for a greater proportion of
profits and cash flows going forward we have deemed it appropriate to consider the cash flows over a longer period to reflect the
delay and deferment of profits between initial enquiry generation and profit recognition as legal cases in the ABSs can take up to
three years or more to settle. This is as permitted under IAS36 Impairment of assets.
Management consider the key assumptions in the value in use calculation to be the discount rate and operating profit growth rate.
The discount rates are based on the Group’s pre-tax cost of capital and estimated cost of equity, which the Directors consider
equated to market participants rate. The movement in the discount rates compared to the prior year is the result of greater stability
in the share price since the announcement in February 2017 of regulatory changes in the PI market. In preparing the formal budget
for the next financial period, expected underlying operating profit is based on past experience of the performance of the CGUs
adjusted for known changes.
The operating profit compound annual growth rate assumptions for years one to five were as follows:
Personal Injury
Critical Care
Residential Property
2017
2016
(1.4)%
7.5%
0.0%
(3.6)%
10.0%
10.0%
A negative growth assumption has been applied to personal injury to account for the new ABS models where profit recognition and
cash profile are delayed for up to three years until settlement of cases.
Based on the operating performance of the CGUs, no impairment loss was identified in any of the CGUs and there is sufficient
headroom (calculated as the difference between value in use and the carrying value of each CGU's goodwill) to indicate that no
reasonable change to key assumptions would result in an impairment of this goodwill.
The available headroom for each CGU is as follows:
Personal Injury
Critical Care
Residential Property
2017
80,592
41,377
17,845
2016
1,638
2,580
5,742
The following table shows the percentage to which the discount rate would need to increase and the percentage by which the
budgeted operating cash flows would need to decrease in order for the estimated recoverable amount of the CGUs to be equal to the
carrying amount:
Personal Injury
Critical Care
Residential Property
14 Non-controlling interests
The Group has the following investments in joint arrangements:
Discount Rate
Cashflows
2017
2016
2017
2016
49.6%
64.5%
100.3%
(4.0)%
14.1% (66.9)%
(72.6)%
19.3%
(15.4)%
(78.6)% (58.6)%
88.6%
Name of subsidiary
Country of incorporation
and principal place
of business
Nature of interest Principal activity
Your Law LLP
National Law Associates LLP
United Kingdom
United Kingdom
LLP member
LLP member
Personal injury lawyers
Personal injury lawyers
Ownership
2017
n/a
n/a
2016
–
–
Your Law LLP and National Law Associates LLP are both considered to be joint operations as Project Jupiter Limited, a 100%
subsidiary of NAHL Group plc, is a member firm of each of the LLPs and National Accident Helpline Limited provides marketing
services and supplies instructions to the LLPs. Each member firm of the LLP is required to appoint individuals to the management
Board of the LLPs. As Project Jupiter Limited can appoint the majority of individuals to these Boards who are ultimately responsible
for the day to day operations, decision making and strategic development of the LLPs then the Group is considered to have overall
control of the LLPs. As the Group has overall control then the results of these joint operations have been consolidated within these
financial statements.
68
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
The Group’s interests in individually immaterial joint ventures is analysed, in aggregate, in the below table:
Share of net assets of joint ventures
Share of:
– Profit/(Loss) from continuing operations
– Post-tax profit or loss from continuing operations
– Other comprehensive income
– Total comprehensive income
2017
£000
87
12
12
–
12
Non-Controlling Interests
The following table summarises the information relating to each of the Group’s joint operations with material Non-Controlling
Interests (NCI), before intra-group eliminations.
£000
NCI share of:
Non-current assets
Current assets
Current liabilities
Net assets (100%)
Carrying amount of NCI
Revenue
Profit/(Loss) after tax
Other comprehensive income
Total comprehensive income
Profit/(Loss) allocated to NCI
Other comprehensive income allocated to NCI
Cash flows from operating activities
Cash flows from investment activities
Cash flows from financing activities
Net increase in cash and cash equivalents
15 Intangible assets
Cost
At 31 December 2016
Additions
At 31 December 2017
Amortisation
At 31 December 2016
Amortisation charge for the year
Amortisation charge on business combinations
At 31 December 2017
Net book value
At 31 December 2016
At 31 December 2017
2017
Your Law
LLP
–
1,252
(1,042)
210
113
288
110
–
110
88
–
46
–
–
46
Assets
under
construction
£000
20
59
79
–
–
–
–
20
79
2017
National
Law
Associates
LLP
–
32
(68)
(36)
(10)
31
(36)
–
(36)
(10)
–
–
–
–
–
Total
£000
10,087
180
10,267
1,613
130
1,307
3,050
8,474
7,217
Technology
related
£000
Contract
related
£000
Brand
names
£000
167
–
167
42
–
20
62
125
105
8,466
–
8,466
1,286
–
1,077
2,363
7,180
6,103
885
–
885
258
–
210
468
627
417
Other
£000
549
121
670
27
130
–
157
522
513
NAHL Group plc Annual Report and Accounts 2017
69
NOTES CONTINUED
15 Intangible assets continued
Cost
At 31 December 2015
Revaluation
Additions
Additions through business combinations
At 31 December 2016
Amortisation
At 31 December 2015
Amortisation charge for the year
Amortisation charge on business combinations
At 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
Technology
related
£000
Contract
related
£000
167
–
–
–
167
22
–
20
42
145
125
7,746
–
–
720
8,466
214
–
1,072
1,286
7,532
7,180
Brand
names
£000
749
(25)
–
161
885
23
–
235
258
726
627
Other
£000
47
–
502
–
549
2
25
–
27
45
522
Assets under
construction
£000
4
–
16
–
20
–
–
–
–
4
20
Total
£000
8,713
(25)
518
881
10,087
261
25
1,327
1,613
8,452
8,474
The intangible assets recognised on business combinations were acquired as part of the acquisition of Searches UK Limited.
16 Property, plant and equipment
Cost
At 1 January 2017
Additions
At 31 December 2017
Depreciation and impairment
At 1 January 2017
Depreciation charge for the year
At 31 December 2017
Net book value
At 31 December 2016
At 31 December 2017
Cost
At 1 January 2015
Additions
Additions through business combinations
At 31 December 2016
Depreciation and impairment
At 1 January 2015
Depreciation charge for the year
At 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
70
NAHL Group plc Annual Report and Accounts 2017
Fixtures &
fittings &
total
£000
1,672
111
1,783
1,345
171
1,516
327
267
Fixtures &
fittings & total
£000
1,434
232
6
1,672
1,175
170
1,345
259
327
Strategic report
Governance
Financial statements
17 Trade and other receivables
Trade receivables: due in less than 1 year
Trade receivables: due in more than 1 year
Accrued income
Other receivables
Prepayments
2017
£000
8,967
7,280
4,568
150
20,965
1,296
2016
£000
5,382
825
3,572
140
9,919
368
22,261
10,287
18 Other interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group’s other interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group’s exposure to interest rate risk, see note 23.
Current liabilities
Current portion of secured bank loans
Less facility arrangement fees
Non-current liabilities
Secured bank loans
Less facility arrangement fees
Total other interest-bearing loans and borrowings
Terms and debt repayment schedule
Bank loan1
GBP 1.25%–1.45% above Libor
Currency Nominal interest rate
2017
£000
2016
£000
–
–
–
13,125
(203)
12,922
12,922
Face
value
2016
£000
11,250
11,250
3,750
(57)
3,693
7,500
(104)
7,396
11,089
Carrying
amount
2016
£000
11,250
11,250
Year of
maturity
2021
Face
value
2017
£000
13,125
13,125
Carrying
amount
2017
£000
13,125
13,125
1. The Group renewed its banking facilities in September 2017 by taking out a rolling credit facility of £25,000,000 and repaying the outstanding term loan
at that date of £9,375,000. This facility is due to terminate on 31 December 2021. Interest is payable at between 1.25%–1.45% (2016: 1.65%) above LIBOR
per annum. A further £111,000 facility arrangement fees were incurred during the year and are being amortised over the term of the facility.
19 Trade and other payables
Trade payables
Other taxation and social security
Other payables, accruals and deferred revenue
Customer deposits
2017
£000
2,808
1,059
7,515
1,033
12,415
2016
£000
2,755
823
2,740
1,313
7,631
NAHL Group plc Annual Report and Accounts 2017
71
NOTES CONTINUED
20 Share capital
Number of shares
‘A’ Ordinary Shares of £0.0025 each
Allotted, called up and fully paid
At 31 December 2016: 45,349,629 ‘A’ Ordinary Shares of £0.0025 each
Issued during the year
At 31 December 2017: 46,061,090 ‘A’ Ordinary Shares of £0.0025 each
Shares classified in equity
At 31 December 2016
Issued during the year
At 31 December 2017
2017
2016
46,061,090
45,349,629
46,061,090
45,349,629
£000
£000
113
2
115
115
2
115
113
–
113
113
–
113
Merger reserve
In 2014 NAHL Group plc declared a bonus issue of a single deferred share of £0.0001 (a “Deferred Share”) with a share premium
£50,000,000. This transaction resulted in £50,000,000 of the merger reserve being transferred to the share premium account. In
2015 a further amount standing to the credit of the Company’s merger reserve in the sum of £16,928,000 was capitalised by way of
a bonus issue of newly created Capital Reduction Shares.
21 Share based payments
The Group operates three employee share plans as follows:
SAYE plan
Options may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an employees’ trust or by
the transfer of Ordinary Shares held in treasury.
EMI Scheme
The EMI Plan provides for the grant, to selected employees of the Group, of rights to acquire (whether by subscription or market
purchase) Ordinary Shares in the Company (Options). Options may be granted as tax-favoured enterprise management incentive
options (EMI Options) or non-tax favoured Options.
Nominal Cost LTIP
The nominal cost LTIP will enable selected employees (including Executive Directors) to be granted awards in respect of Ordinary
Shares. Awards may be granted in the form of nil or nominal cost options to acquire Ordinary Shares or contingent rights to receive
Ordinary Shares. Awards may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an
employees’ trust or by the transfer of Ordinary Shares held in treasury.
The terms and conditions of grants of share options to employees of the Group, in the shares of NAHL Group plc are as follows:
Grant date/employees entitled/nature of scheme
Number of instruments
Vesting conditions
Contractual life of options
SAYE Equity-settled award to 35 employees
granted by the parent company on 29 May 2014
LTIP Equity-settled award to 1 employee
granted by the parent company on 29 May 2014
EMI Equity-settled award to 3 employees
granted by the parent company on 13 April 2015
EMI Equity-settled award to 1 employee
granted by the parent company on 2 December 2015
EMI Equity-settled award to 1 employee
granted by the parent company on 31 October 2016
EMI Equity-settled award to 1 employee
granted by the parent company on 31 October 2016
EMI Equity-settled award to 12 employees
granted by the parent company on 31 October 2017
179,436 ordinary shares
Performance-based
52,501 ordinary shares
Performance-based
124,740 ordinary shares
Performance-based
120,689 ordinary shares Performance-based
61,506 ordinary shares
Performance-based
62,893 ordinary shares
Performance-based
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
407,129 ordinary shares
Performance-based On determination of
performance criteria
(as soon as
practicable after
31 December 2019)
72
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Cancelled during the year
Lapsed during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
2016
Weighted
average
exercise price
£
1.53
(0.0025)
0.0025
(3.18)
(2.00)
(3.64)
Number of
options
No.
2,310,822
(711,461)
407,129
(157,182)
(708,330)
(132,084)
Weighted
average
exercise price
£
Number of options
No.
1.69
(1.90)
1.38
(1.75)
–
(2.89)
2,621,842
(84,629)
145,363
(141,813)
–
(229,941)
1.14
1.24
1,008,894
231,937
1.53
2.00
2,310,822
83,333
A charge of £182,000 (2016: £903,000) has been made through the income statement in the current year in relation to the IFRS 2
share option charge and a further £nil (2016: £149,000) has been charged to the income statement in respect of a provision for
Employer’s National Insurance contributions that are expected to arise on the exercise of the nominal cost LTIP options.
The fair value of each employee share option has been measured using the Black-Scholes formula where an expected volatility
of 65.0% (2016: 65.0%) has been used as well as a risk-free interest rate (based on government bonds) of 1.0% (2016: 1.0%).
Service and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value.
Expected volatility has been based on evaluation of historical volatility of the Company’s share price, particularly over the historical
period commensurate with the expected term. The expected term of the instruments has been based on historical experience and
general option holder behaviour.
22 Earnings per share
The calculation of basic earnings per share at 31 December 2017 is based on profit attributable to ordinary shareholders of the
parent company of £9,876,000 (2016: £12,224,000) and a weighted average number of Ordinary Shares outstanding of 45,548,243
(2016: 45,294,877).
Profit attributable to ordinary shareholders
£000
Profit for the year attributable to the shareholders
Weighted average number of ordinary shares
Number
Issued Ordinary Shares at 1 January
Weighted average number of Ordinary Shares at 31 December
Basic Earnings per share (p)
Group
2017
9,876
2016
12,224
Note
2017
2016
20 45,349,629
45,548,243
45,265,000
45,294,877
2017
21.7
2016
27.0
The Group has in place share based payment schemes to reward employees. At 31 December 2017, there were potentially dilutive
share options under the Group’s share option schemes. The total number of options available for these schemes included in the
diluted earnings per share calculation is 205,303 (2016: 775,746). There are no other diluting items.
Diluted Earnings per share (p)
Group
2017
21.6
2016
26.5
NAHL Group plc Annual Report and Accounts 2017
73
NOTES CONTINUED
23 Financial instruments
(a) Fair values of financial instruments
The Group’s principal financial instruments comprise interest-bearing borrowings, cash and short-term deposits. The main purpose
of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments such
as trade and other receivables and trade and other payables that arise directly from its operations.
The main risks arising from the Group’s financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees
policies for managing each of these risks and they are summarised below. There have been no substantive changes in the Group’s
exposure to financial instrument risks or its objectives, policies and processes for managing and measuring those risks during the
periods in this report unless otherwise stated.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of
interest at the balance sheet date if the effect is material.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of
interest at the balance sheet date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is
not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of
interest at the balance sheet date.
Interest-bearing borrowings
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of
interest at the balance sheet date.
The interest rate used to discount estimated cash flows of 8.4% (2016: 12.7%) is based on market rates.
The fair values of all financial assets and financial liabilities by class, which approximate to their carrying values, shown in the
balance sheet are as follows:
Cash and receivables
Cash and cash equivalents
Trade and other receivables (note 17)
Total financial assets
Fair value
hierarchy
Carrying
amount
2017
£000
Fair
value
2017
£000
Carrying
amount
2016
£000
858
20,965
858
20,965
4,814
9,919
Fair
value
2016
£000
4,814
9,919
21,823
21,823
14,733
14,733
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 18)
Trade payables (note 19)
Level 2
13,125
2,808
13,125
2,808
11,250
2,755
11,250
2,755
Total financial liabilities measured at amortised cost
15,933
15,933
14,005
14,005
Fair value hierarchy
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used
in the value measurements:
Level 1 – inputs are quoted prices in active markets
Level 2 – a valuation that uses observable inputs for the asset or liability other than quoted prices in active markets and
Level 3 – a valuation using unobservable inputs, i.e. a valuation technique.
There were no transfers between levels throughout the periods under review.
(b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers.
74
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
Exposure to credit risk
The maximum exposure to credit risk at the balance sheet date by class of financial instrument was:
Trade receivables
2017
£000
2016
£000
16,247
6,207
Management consider the credit risk to be mitigated as a result of a) the holding of deposits for all significant customers and b) only
offering significant deferred terms to those PLFs with whom we hold strategic partnerships and after satisfactory credit checks have
been obtained. As at 31 December 2017 these deposits reflect 6.4% (2016: 21.2%) of the balance of trade receivables. At each
balance sheet date, the amount of deposit held was:
Customer deposits
Credit quality of financial assets and impairment losses
The aging of trade receivables at the balance sheet date was:
2017
£000
1,033
2016
£000
1,313
Not past due
Past due (1-30 days)
Past due (30-120 days)
Past due (over 120 days)
Gross:
Standard
Terms
2017
£000
5,831
865
528
1,079
8,303
Gross:
Deferred
Terms
2017
£000
7,960
34
32
32
8,058
Impairment
2017
£000
(114)
–
–
–
(114)
Total
2017
£000
13,677
899
560
1,111
16,247
Gross:
Standard
Terms
2016
£000
2,111
679
862
675
Gross:
Deferred
Terms
2016
£000
1,916
41
18
9
Impairment
2016
£000
(48)
–
–
(56)
4,327
1,984
(104)
Total
2016
£000
3,979
720
880
628
6,207
13.0% of standard terms trade receivables are 120 days or more past due (2016: 15.6%). These receivables arise primarily in Critical
Care where our standard credit terms are 30 days. As mentioned in the Strategic Report increasing cost pressures on solicitiors
mean they often do not settle these balances until interim funds are available or a case has settled. This is often within 12 months
and, therefore, formal deferred terms are not utilised. We monitor these debts closely through regular contact with these solicitors
and do not consider there to be any significant risks regarding recoverability.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 January
Allowance recognised/(released)
Balance at 31 December
2017
£000
104
10
114
2016
£000
166
(62)
104
The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the
amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.
(c) Liquidity risk
Financial risk management
Liquidity risk arises from the Group’s management of working capital and the finance charges on its debt instruments and
repayments of principal. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The
Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts and loans to
ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of
netting agreements:
2017
Non-derivative financial instruments
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
Secured
bank loans
£000
Trade and
other
payables
£000
Total
£000
(13,125)
(2,808)
(15,933)
(295)
(295)
(13,420)
(2,808)
–
–
(3,103)
(295)
(13,420)
(14,010)
(2,808)
(16,818)
NAHL Group plc Annual Report and Accounts 2017
75
NOTES CONTINUED
23 Financial instruments continued
2016
Non-derivative financial instruments
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
Secured
bank loans
£000
Trade and
other
payables
£000
Total
£000
(11,250)
(2,755)
(14,005)
(3,977)
(3,895)
(3,812)
(2,755)
–
–
(6,732)
(3,895)
(3,812)
(11,684)
(2,755)
(14,439)
(d) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments.
Market risk – foreign currency risk
The Group has no foreign currency risk as all transactions are in Sterling.
Market risk – interest rate risk
Profile
The Group is exposed to interest rate risk from its use of interest-bearing financial instruments. This is a market risk that the fair
value or future cash flows of a financial instrument will fluctuate because of changes in interest rates.
At the balance sheet dates, there were no interest-bearing financial assets; however, the interest rate profile of the Group’s interest-
bearing financial liabilities was:
Variable rate instruments
Financial liabilities
Total interest-bearing financial instruments
2017
£000
2016
£000
13,125
13,125
11,250
11,250
Sensitivity analysis
A change of 0.5% in interest rates at the balance sheet date would increase/(decrease) profit or loss in the following year by the
amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
This analysis assumes that all other variables remain constant and considers the effect of financial instruments with variable
interest rates. The analysis is performed on the same basis for the comparative periods.
Profit for the year
Increase
Decrease
2017
£000
(66)
66
2016
£000
(56)
56
Market risk – equity price risk
The Group does not have an exposure to equity price risk as it holds no investment in equity securities which are classified as
available for sale financial assets or designated at fair value through profit or loss.
(e) Capital management
Group
The Group’s objectives when maintaining capital are to safeguard the entity’s ability to continue as a going concern and to provide an
adequate return to shareholders. Capital comprises the Group’s equity, i.e. share capital including preference shares, share
premium, own shares and retained earnings, as well as bank loans.
76
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
24 Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than 1 year
Between 1 and 5 years
2017
£000
402
491
893
2016
£000
420
936
1,356
The Group leases a number of office buildings under operating leases. During the year £426,000 was recognised as an expense in
the income statement in respect of operating leases (2016: £424,000).
25 Commitments
Capital commitments
At 31 December 2017 the Group had no capital commitments (2016: £nil).
26 Transactions with owners, recorded directly in equity
Exercise of share options
During 2016 84,629 share options were exercised which resulted in the issue of 84,629 new Ordinary Shares with a par value of
£0.0025. The exercising of these options raised funds of £160,508 for the Group. A charge of £85,093 has been reclassified from
the share option reserve to share premium to reflect the crystallisation of previous charges in respect of these options.
During 2017 711,461 share options were exercised which resulted in the issue of 711,461 new Ordinary Shares with a par value of
£0.0025. The exercising of these options raised funds of £1,779 for the Group.
27 Related parties
Transactions with key management personnel
Key management personnel in situ at the 31 December 2017 and their immediate relatives control 4.5% (2016: 4.4%) of the voting
shares of the Company.
Key management personnel are considered to be the Directors of the Company as well as those of National Accident Helpline
Limited, Fitzalan Partners Limited and Bush & Company Rehabilitation Limited and any other management serving as part of the
executive team. Detailed below is the total value of transactions with these individuals.
Short-term employment benefits
Termination benefits
28 Net debt
Net debt includes cash and cash equivalents and other interest bearing loans and borrowings.
Cash and cash equivalents
Other interest-bearing loans and borrowings
Net debt
Set out below is a reconciliation of movements in net debt during the period.
Net decrease in cash and cash equivalents
Cash and cash equivalents net (inflow)/outflow from (increase)/decrease in debt and debt financing
Movement in net borrowings resulting from cash flows
Net debt at beginning of period
Net debt at end of period
2017
£000
3,291
32
3,323
2016
£000
2,241
56
2,297
2017
£000
2016
£000
858
(12,922)
4,814
(11,089)
(12,064)
(6,275)
2017
£000
(3,956)
(1,833)
(5,789)
(6,275)
2016
£000
(5,242)
3,693
(1,549)
(4,726)
(12,064)
(6,275)
NAHL Group plc Annual Report and Accounts 2017
77
COMPANY BALANCE SHEET
AT 31 DECEMBER 2017
Non-current assets
Investments
Current assets
Trade and other receivables
Net assets
Equity
Share capital
Share option reserve
Share premium
Retained earnings
Total equity
Note
2017
£000
2016
£000
2
3
5
52,700
52,700
18,259
70,959
26,246
78,946
115
2,121
14,507
54,216
113
1,939
14,507
62,387
70,959
78,946
The notes on pages 81 to 85 form part of these financial statements.
These financial statements were approved by the Board of Directors on 19 March 2018 and were signed on its behalf by:
J R Atkinson
Director
Company registered number: 08996352
78
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Balance at 1 January 2016
Transactions with owners, recorded
directly in equity
Issue of new Ordinary Shares
Exercise of share options
Share based payments
Dividends paid
Balance at 31 December 2016
Transactions with owners, recorded
directly in equity
Issue of new Ordinary Shares
Share based payments
Dividends paid
Note
Share
capital
£000
113
Share
option
reserve
£000
Share
premium
£000
Merger
reserve
£000
Retained
earnings
£000
Total
£000
1,121
14,262
–
70,926
86,422
8
8
6
8
6
–
–
–
–
–
(85)
903
–
160
85
–
–
113
1,939
14,507
2
–
–
–
182
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,539)
160
–
903
(8,539)
62,387
78,946
–
–
(8,171)
2
182
(8,171)
54,216
70,959
Balance at 31 December 2017
115
2,121
14,507
The notes on pages 81 to 85 form part of these financial statements.
NAHL Group plc Annual Report and Accounts 2017
79
COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
Cash flows from operating activities
Profit for the year
Adjustments for:
share based payments
Decrease in trade and other receivables
Net cash from operating activities
Cash flows from financing activities
New share issue
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
2017
£000
–
182
182
7,987
2016
£000
–
903
903
7,476
8,169
8,379
2
(8,171)
160
(8,539)
(8,169)
(8,379)
–
–
–
–
–
–
80
NAHL Group plc Annual Report and Accounts 2017
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Strategic report
Governance
Financial statements
1 Accounting policies
Basis of preparation
Financial Statements
The Financial Statements for the year ended 31 December 2017 have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS) and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial information has been prepared on a going concern basis and under the historical cost convention.
The company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented
its own income statement in these financial statements. The Group profit includes a profit after tax for the parent company of £nil
(2016: £nil).
Use of judgements and estimates
The preparation of financial statements in conformity with IFRSs requires management to make judgements and estimates that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may
differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the year in which the estimates are revised and in any future years affected.
Judgements
In applying the Company’s accounting policies, management has applied the following judgement that has a significant impact on
the amounts recognised in the financial statements.
Impairment of Investment
The Directors have considered the carrying value of the investment and performed an impairment review comparing the carrying
amount to fair value less cost to sell. The Directors have not considered value in use as under the fair value method, the fair value
less costs to sell is sufficiently in excess of the carrying amount of the investment. It is the Directors’ opinion that, as this value
exceeds the carrying amount of the investment, then no impairment should be recognised. Further details of the key assumptions
used in this judgement are given in note 2.
Estimates
Discussed below are key assumptions concerning the future, and other key sources of estimation at the reporting date, that have a
risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
Recoverability of trade receivables
Trade receivables are reflected net of an estimated provision for impairment losses. This provision considers the past payment
history and the length of time that the debt has remained unpaid.
New standards, interpretations and amendments not yet effective
The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective:
• IFRS 9: Financial Instruments – Effective for annual reporting periods beginning on or after 1 January 2018, with early
application permitted.
• IFRS 15: Revenue from Contracts with Customers – Effective for annual reporting periods beginning on or after 1 January 2018,
with early application permitted.
• IFRS 16: Leases – Effective for annual reporting periods beginning on or after 1 January 2019. Early adoption is permitted for
entities that apply IFRS 15: Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.
The Company has considered the impact of the above standards and revisions and has concluded that they will not have a material
impact on the Company’s financial statements.
Going concern
The Company had net assets of £70,959,000 (2016: £78,946,000) and net current assets of £18,259,000 (2016: £26,246,000) as
at each year end.
After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. As a consequence, the Directors believe that the Company is well placed to manage
its business risks successfully. As part of the normal management process, detailed projections of future trading are prepared,
which includes the impact for possible changes in market or regulatory conditions. Based on these projections the Board remains
positive about the Company’s short- and medium-term prospects.
Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.
NAHL Group plc Annual Report and Accounts 2017
81
NOTES CONTINUED
1 Accounting policies continued
Employee share schemes
The share option plans allow employees of the Group to acquire shares of the Company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is
measured using an option pricing model, taking into account the terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture
is only due to share prices not achieving the threshold for vesting.
Impairment
The carrying amounts of the Company’s non-financial assets, are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses
are recognised in the income statement. Impairment losses recognised in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
2 Investments
The Company has the following investments in subsidiaries:
Name of subsidiary
Country of incorporation
and principal place
of business
Consumer Champion Group Limited United Kingdom
United Kingdom
Bush & Company Rehabilitation
Limited
Fitzalan Partners Ltd
NAH Holdings Limited
NAH Group Ltd
National Accident Helpline Limited
Lawyers Agency Services Limited
Accident Helpline Limited
NAH Support Services Limited
Tiger Claims Limited
Your Law 1 Limited
NAH Legal Services Limited
Searches UK Limited
Inside Eye Limited
Project Jupiter Limited
Your Law LLP1
National Law Associates LLP1
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class of
shares held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
n/a
n/a
Ownership
Principal activity
Holding company
Critical care services
Agency services for solicitors
Holding company
Holding company
Agency services for solicitors
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Agency services for solicitors
Dormant
Holding company
Personal Injury lawyers
Personal Injury lawyers
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
n/a
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
n/a
1 Your Law LLP and National Law Associates LLP are Limited Liability Partnerships. Project Jupiter Limited is a member firm of these LLPs with overall control
of the voting rights.
The registered office of all of the above 100% subsidiaries is 1430 Montagu Court, Kettering Parkway, Kettering Venture Park,
Kettering, Northamptonshire, NN15 6XR.
The registered office of Your Law LLP is Helmont House, Churchill Way, Cardiff, CF10 2HE.
The registered office of National Law Associates LLP is 43 Queen Square, Bristol, United Kingdom, BS1 4QP.
At 31 December 2017 the value of the investment in Consumer Champion Group Limited, its only directly owned subsidiary, was
as follows:
Valuation
At 1 January 2017 and 31 December 2017
Total
£000
52,700
Impairment has been assessed on a fair value less costs to sell basis. The key assumption for the fair value less costs to sell basis is
the control premium. The Directors believe that if the Group were to be sold then a 30% control premium would be a realistic
premium to add. If the control premium were removed entirely then carrying value would still be less than fair value less costs to sell.
As the control premium sensitivity is so wide, the directors have not considered additional indicators and have concluded that the
investment is not impaired on a fair value less costs to sell basis.
82
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
3 Trade and other receivables
Amounts due from Group undertakings
4 Financial instruments
2017
£000
18,259
18,259
2016
£000
26,246
26,246
Amounts due from Group undertakings
The fair value of amounts owed by Group undertakings are estimated as the present value of future cash flows, discounted at the
market rate of interest at the balance sheet date if the effect is material.
Management believes there are no risks arising from these financial instruments on the grounds that the amounts are payable
on demand and no interest is charged to Group undertakings. The Board reviews and agrees policies for managing these risks.
There have been no substantive changes in the Company’s exposure to financial instrument risks or its objectives, policies and
processes for managing and measuring those risks during the periods in this report unless otherwise stated.
Amounts due from Group undertakings
Total financial assets
Fair
value
hierarchy
Carrying
amount
2017
£000
Fair
value
2017
£000
3
18,259
18,259
18,259
18,259
Carrying
amount
2016
£000
26,246
26,246
Fair
value
2016
£000
26,246
26,246
Fair value hierarchy
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used
in the value measurements:
Level 1 – inputs are quoted prices in active markets
Level 2 – a valuation that uses observable inputs for the asset or liability other than quoted prices in active markets and
Level 3 – a valuation using unobservable inputs, i.e. a valuation technique.
Reconciliation of Level 3 fair value:
Balance at 31 December 2016
Settlements
Balance at 31 December 2017
There were no transfers between levels throughout the periods under review.
5 Share capital
Number of shares
‘A’ Ordinary Shares of £0.0025 each
Allotted, called up and fully paid
At 31 December 2016: 45,349,629 ‘A’ Ordinary Shares of £0.0025 each
Issued during the year
At 31 December 2017: 46,061,090 ‘A’ Ordinary Shares of £0.0025 each
Shares classified in equity
At 31 December 2016
Issued during the year
At 31 December 2017
Non-derivative
financial asset
Total
26,246
26,246
(7,987)
(7,987)
18,259
18,259
2017
2016
46,061,090
45,349,629
46,061,090
45,349,629
£000
£000
113
2
115
113
2
115
113
–
113
113
–
113
NAHL Group plc Annual Report and Accounts 2017
83
NOTES CONTINUED
6 Share based payments
The Company operates three employee share plans as follows:
SAYE plan
Options may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an employees’ trust or by
the transfer of Ordinary Shares held in treasury.
EMI Scheme
The EMI Plan provides for the grant, to selected employees of the Group, of rights to acquire (whether by subscription or market
purchase) Ordinary Shares in the Company (Options). Options may be granted as tax-favoured enterprise management incentive
options (EMI Options) or non-tax favoured Options.
LTIP
The LTIP will enable selected employees (including Executive Directors) to be granted awards in respect of Ordinary Shares. Awards
may be granted in the form of nil or nominal cost options to acquire Ordinary Shares; or contingent rights to receive Ordinary Shares.
Awards may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an employees’ trust or by
the transfer of Ordinary Shares held in treasury.
The terms and conditions of grants of share options to employees of the Group, in the shares of NAHL Group plc are as follows:
Grant date/employees entitled/nature of scheme
Number of instruments
Vesting conditions
Contractual life of options
SAYE Equity-settled award to 35 employees
granted by the parent company on 29 May 2014
LTIP Equity-settled award to 1 employee
granted by the parent company on 29 May 2014
EMI Equity-settled award to 3 employees
granted by the parent company on 13 April 2015
EMI Equity-settled award to 1 employee
granted by the parent company on 2 December 2015
EMI Equity-settled award to 1 employee
granted by the parent company on 31 October 2016
EMI Equity-settled award to 1 employee
granted by the parent company on 31 October 2016
EMI Equity-settled award to 12 employees
granted by the parent company on 31 October 2017
179,436 ordinary shares
Performance-based
52,501 ordinary shares
Performance-based
124,740 ordinary shares
Performance-based
120,689 ordinary shares Performance-based
61,506 ordinary shares
Performance-based
62,893 ordinary shares
Performance-based
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
407,129 ordinary shares
Performance-based On determination of
performance criteria
(as soon as
practicable after
31 December 2019)
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Cancelled during the year
Lapsed during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
2016
Weighted
average
exercise
price
£
Number of
options
No.
1.53 2,310,822
(711,461)
407,129
(157,182)
(708,330)
(132,084)
(0.0025)
0.0025
(3.18)
(2.00)
(3.64)
1.14 1,008,894
231,937
1.24
Weighted
average
exercise
price
£
Number of
options
No.
1.69
(1.90)
1.38
(1.75)
–
(2.89)
2,621,842
(84,629)
145,363
(141,813)
–
(229,941)
1.53
2.00
2,310,822
83,333
A charge of £182,000 (2016: £903,000) has been made through profit and loss in the current year. This amount has been recharged
to the subsidiary companies and as such no cost has been recognised within the Company.
The fair value of each employee share option has been measured using the Black-Scholes formula where an expected volatility of
65.0% (2016: 65.0%) has been used as well as a risk-free interest rate (based on government bonds) of 1.0% (2016: 1.0%). Service
and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value.
Expected volatility has been based on evaluation of historical volatility of the Company’s share price, particularly over the historical
84
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
period commensurate with the expected term. The expected term of the instruments has been based on historical experience and
general option holder behaviour.
7 Commitments
Capital commitments
At 31 December 2017 the Company had no capital commitments (2016: £nil).
8 Transactions with owners, recorded directly in equity
Exercise of share options
During 2016 84,629 share options were exercised which resulted in the issue of 84,629 new Ordinary Shares with a par value of
£0.0025. The exercising of these options raised funds of £160,508 for the Company. A charge of £85,093 was reclassified from the
share option reserve to share premium to reflect the crystallisation of previous charges in respect of these options.
During 2017 711,461 share options were exercised which resulted in the issue of 711,461 new Ordinary Shares with a par value of
£0.0025. The exercising of these options raised funds of £1,779 for the Group.
9 Related parties
Transactions with key management personnel
Key management personnel in situ at 31 December 2017 and their immediate relatives control 4.5% (2016: 4.4%) of the voting
shares of the Company.
Key management personnel are considered to be the Directors of the Company as well as those of National Accident Helpline
Limited, Fitzalan Partners Limited and Bush & Company Rehabilitation Limited and any other management serving as part of the
executive team. Detailed below is the total value of transactions with these individuals.
Short-term employment benefits
Termination benefits
2017
£000
3,291
32
3,323
2016
£000
2,241
56
2,297
NAHL Group plc Annual Report and Accounts 2017
85
ADVISORS
Company registration number:
08996352
Auditors:
KPMG LLP
Altius House
One North Fourth Street
Milton Keynes
MK9 1NE
Solicitors to the Company:
Pinsent Masons LLP
3 Colmore Circus
Birmingham
B4 6BH
Osborne Clarke
2 Temple Back East
Temple Quay
Bristol
BS1 6EG
Bankers:
Yorkshire Bank plc
Birmingham Financial Solutions Centre
Temple Point
No.1 Temple Row
Birmingham
B2 5YB
NOMAD:
finnCap Ltd
60 New Broad Street
London
EC2M 1JJ
Company Registrars:
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Financial PR:
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
86
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
GLOSSARY
ABS
Alternative Business Structure
Adjusted net debt
Net debt including the pre-LASPO liability
AIM
B2B
Bush
CBIT
CC
CGU
CLS
CMC
CMRU
CMSUK
CODM
CQC
CRU
EMI Options
EPS
ETR
Fast Track
FCA
Fitzalan
FNOL
Group
IFRSs
ISO 27001 – Information
Governance
Alternative Investment Market, part of the London Stock Exchange
Business to business
Bush & Company Rehabilitation
Child Brain Injury Trust
Critical Care
Cash Generating Unit
Consumer Legal Services
Claims Management Companies
Claims Management Regulation Unit
Case Management Society UK
Chief Operating Decision Maker
Care Quality Commission
Compensation Recovery Unit
Enterprise Management Incentive Options
Earnings Per Share
Effective Tax Rate
Claims valued at £1,000 to £25,000
Financial Conduct Authority
Fitzalan Partners
First Notification of Loss
NAHL Group plc
International Financial Reporting Standards
Risk-based information security standard and Business Continuity
LASPO
Legal Aid, Sentencing and Punishment of Offenders Act 2012 (enacted 01 April 2013)
Legal Support Advisors
Fully trained employees within National Accident Helpline’s Legal Suppport Centre taking
calls from consumers to assist with their claim
LIBOR
LTIP
MAR
Medico-Legal
MI
Multi-Track
NAH
NCI
NIHL
London Interbank Offered Rate
Long-term Incentive Plan
Market Abuse Regulations
A claim or similar involving both medical and legal aspects
Management Information
Claims over £25,000 or complex points of law/evidence.
National Accident Helpline
Non-controlling interests
Noise Induced Hearing Loss
Non-GAAP Measures
An alternative method to generally accepted accounting principles used to measure the
financial performance
Non-RTA
Ogden Reforms
PBFT
PI
PLF
Post-LASPO
Pre-LASPO
QCA
RCF
RP
RTA
Non-Road Traffic Accidents (includes employer, occupier and public liability)
Changes to the discount rate applied to high value settlements
Paul Bush Foundation Trust
Personal Injury – an injury or illness suffered through no fault of an individual’s own (for
example, in a road accident, a slip, trip or fall, medical negligence, work accident or an
industrial disease)
Panel Law Firm – a law firm selected to sit on our panel
After enactment of LASPO on 1 April 2013
Before enactment of LASPO on 1 April 2013
Quoted Companies Alliance
Rolling Credit Facility
Residential Property
Road Traffic Accidents (also, non-RTA - non Road Traffic Accidents)
NAHL Group plc Annual Report and Accounts 2017
87
GLOSSARY CONTINUED
SAYE
The Save As You Earn share scheme that was introduced for employees on admission,
giving them an opportunity to purchase shares in the Company at a discounted rate following
a three-year savings period
Searches
Searches UK
SLA
SRA
TSR
Service Level Agreement
Solicitors Regulation Authority
Total Shareholder Return
Underlying operating cash flow
Cash flows from underlying operating profit and excluding any exceptional items
Underlying operating profit
Profit from underlying core trading operations excluding amortisation on intangible assets
arising on business combinations, IFRS 2 share option charges and exceptional items
Underlying revenue
Revenue from underlying core trading activities excluding any exceptional items
WACC
Weighted average cost of capital
88
NAHL Group plc Annual Report and Accounts 2017
Strategic report
Governance
Financial statements
NAHL Group plc Annual Report and Accounts 2017
89
Strategic report
Governance
Financial statements
NAHL Group plc Annual Report and Accounts 2017
G
NAHL Group plc
1430 Montagu Court
Kettering Parkway
Kettering
Northamptonshire
NN15 6XR
T: +44 (0) 1536 527 500
E: investors@nahl.co.uk