Creating a platform for growth
NAHL Group plc Annual Report and Accounts 2018
WHO WE ARE
We are a group of
businesses providing
products and services
to consumers in the UK
legal services market.
Strategic Report
Highlights
At a Glance
Market Overview
Business Model
Strategy
Strategy in Action
Divisional Reviews
Chair’s Statement
Chief Executive’s Report
Our Values – Q&A
Chief Financial Officer’s Report
Principal Risks and Uncertainties
Corporate and Social Responsibility
Corporate and Social Responsibility
Governance
Board of Directors
Executive Management Team
The Board
Corporate Governance Statement
Directors’ Report
Statement of Directors’ Responsibilities
Audit Committee Report
Remuneration Committee Report
Directors’ Remuneration Report
1
2
4
6
8
10
12
15
16
20
22
26
30
36
38
39
41
43
45
46
48
49
59
58
54
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 Consolidated
Financial Statements
62
Company Balance Sheet
86
87
Company Statement of Changes in Equity
Company Cash Flow Statement
88
Notes to the Company Financial Statements 89
95
Advisors
Glossary
96
60
61
Our Personal Injury business
is changing to meet a new
regulatory landscape
Ú see pages 10-12 for more information
Our Critical Care business
is growing its market share
and reputation
Ú see page 13 for more information
Our Residential Property
business is investing in digital for
increased market share
Ú see page 14 for more information
Strategic Report
Strategic Report
Governance
Financial Statements
Financial performance
Revenue (£m)
Profit before tax (£m)
£49.0m -5.7%
£9.8m -21.3%
60
50
40
30
20
10
0
50.7
50.6
51.9
49.0
43.8
2014
2015
2016
2017
2018
20
16
12
8
4
0
15.8
14.0
12.1
12.4
9.8
2014
2015
2016
2017
2018
Basic EPS
Dividend per share (p)
14.5p -33.2%
8.9p
30
24
18
12
6
0
27.0
25.6
20.6
21.7
14.5
2014
2015
2016
2017
2018
20
16
12
8
4
0
18.75
19.05
15.7
15.9
8.9
Investment case
2014
2015
2016
2017
2018
Financial highlights
¡ Revenue of £49.0m (2017: £51.9m)
¡ Underlying operating profit down 16.3% to £12.1m
(2017:£14.5m), primarily as a result of our transformation
strategy
¡ As anticipated, profit before tax of £9.8m (2017: £12.4m)
¡ Underlying EPS of 18.2p (2017: 25.0p)
¡ Recommended final dividend of 5.7p, providing a total
dividend for the year of 8.9p (2017: 15.9p).
Operational highlights
¡ Continued progress in transforming Personal Injury division
to deliver long-term growth.
¡ Alternative business structure (ABS) strategy developing
well, with both firms trading profitably.
¡ Licence granted from Solicitors Regulation Authority to
launch wholly-owned law firm, National Accident Law,
expected to start trading in April 2019.
¡ Strong performance from Critical Care division, delivering
double digit profit growth and increased market share.
¡ New management team in place at Residential Property
division, with initiatives in place designed to return the
division to growth.
We are primed for new opportunities in evolving markets
Investing in innovative solutions to maximise the growth
opportunity across all our businesses.
Ú see CEO’s Report on page 16
We have a clear brand proposition
Nationally recognised in the market with strong
leadership and trust in our individual businesses.
Ú see Divisional Reviews on page 12
We are led by a strong, experienced and collaborative
leadership team
Dedicated to operational excellence with a track record of
delivering sustainable growth when faced with market
reforms.
Ú see Board of Directors on page 36
We live by a strong set of embedded company values
Our values of Curious, Unified, Driven, Passionate inspire
positive behaviours and support business objectives.
Ú see Business Model on page 6
We have a robust and sustainable financial model
Long-term revenue streams and developing
growth on investor returns through the cycle.
Ú see CFO's Report on page 22
NAHL Group plc Annual Report and Accounts 2018
1
CSR AT A GLANCE
Trust in
our vision
NAHL Group plc stands alongside consumers at key stages of
their lives, when it really matters. When moving house, recovering
from an injury or coming to terms with sustaining a life changing
injury, you need to know that the people you employ to support
you are capable and trustworthy.
Every one of the businesses within our three divisions is committed
to delivering the best possible consumer experience, giving great
service to their legal and specialist care partners all while delivering
real value to investors. In our Personal Injury division we are
breaking new ground in how people who sustain an injury that
wasn’t their fault are treated. National Accident Law – our new
wholly owned law firm - will provide the consistent and timely expert
help that we know our customers want. In doing this, we are
changing the face of consumer law.
Our Mission
To provide exceptional service to our
consumers and customers by being
outstanding at everything we do.
Consumers supported
Care experts
153,238
190
233
Current staff
Personal Injury
National Accident Helpline, Your Law LLP,
National Law Partners
(NAH, Your Law, NLP)
Attracting consumers via its market leading brands,
sympathetically validating the legitimacy of their
claim and connecting them to an appropriate expert
law firm.
I’d like to thank them for
everything they’ve done –
it just meant that I could carry
on with my life.
– Martin
Revenue
£29.5m
Underlying operating profit
£8.4m
2
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Strategic Report
Governance
Financial Statements
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
Embracing developing technologies to reach and
interact with our consumers and customers
Critical Care
Bush & Company Rehabilitation
(Bush)
Residential Property
Fitzalan Partners and Searches UK
(Fitzalan and Searches)
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 and survey
services via a carefully selected panel of law firms,
conveyancers and surveyors.
Revenue
£12.4m
Underlying operating profit
£4.5m
Revenue
£6.4m
Underlying operating profit
£0.7m
NAHL Group plc Annual Report and Accounts 2018
3
CSR MARKET OVERVIEW
At the forefront of a large and
fragmented market
Changes in legislation, negative media commentary and
economic volatility are never far away. These factors impact
understanding and make it challenging for customers to
navigate the Consumer Legal Services market, making it
difficult for them to make informed choices when looking for
a provider to support their concern.
The rate of change and ongoing sector developments mean the
channels for accessing support continue to diversify. We therefore
believe that in order to support consumers in making the right
choice, there is a need for greater clarity and guidance and a place
available for trusted, knowledgeable partners to work with.
Agile to change, in our 25 years of business we’ve adapted; always
putting our people-first ethos front of mind and ourselves in the
best possible position to provide the support and guidance that
consumers need in the wake of ongoing changes.
The Group’s divisions focus on the Personal Injury, Critical
Care (incorporating medical reporting/rehabilitation) and
Residential Property markets within the Consumer Legal Services
industry. These markets are valued at £7.0bn.
UK Legal Services Market drivers
¡ Consumer Legal Services is a highly fragmented subset of the
UK Legal Services market.
¡ Consumers are confused by how the legal process works.
¡ The personal injury market has been impacted by regulatory
change with further changes to be implemented in April 2020.
¡ The volatile residential property market has been challenging in
recent years.
UK Legal Services Market by Key Practice Area, 2018 (£bn)1
Corporate/commercial work
Commercial property
Personal injury/clinical
negligence
Family law
Residential conveyancing
Employment law
Probate, wills and trusts
Crime
Other
Medical Reporting/
rehabilitation 2
1 Source: IRN Research, UK Legal Services Market Report, March 2019
2 Source: IRN Medico-Legal Insurance Services Report, February 2018
Market Value of UK Legal Service sector serviced by
NAHL Group plc
£7.0bn
Number of cases registered to the CRU (Compensation Recovery Unit)
800
640
480
320
160
0
2017/18
2016/17
780,324
650,019
Total 2017/18
853,615
Total 2016/17
978,816
17,894
17,400
73,355
69,230
85,504
96,067
20,047
19,172
1,692
1,727
Clinical Negligence
Employer
Motor
Public
Other
Liability not known
4
NAHL Group plc Annual Report and Accounts 2018
12.24.23.92.52.42.41.72.03.80.70
Strategic Report
Strategic Report
Governance
Financial Statements
Personal Injury Market
The Personal Injury market has
performed much as we predicted.
Road Traffic Accidents (RTA) have
seen a significant reduction in claims
as the previous reforms have begun to
have an effect.
Critical Care Market
The catastrophic injury market is
a subset of the medical reporting/
rehabilitation market and has
grown at approximately 1.4% per
annum. This sub-sector is valued at
approximately £90m.
The consolidation activity which took place in
2017 has slowed down and, despite being a
highly fragmented market, it is expected that
market share will be moving in favour of the
larger organisations who are able to agree
contracts with the emerging number of
procurement departments in the larger firms.
In addition, the larger case management
companies are more likely to become
approved suppliers for insurers who value
preferred providers with specific commercial
terms.
This market remains competitive and we
continually focus on retaining and developing
our consultants in order to best compete in
the ongoing war for talent.
However, RTAs are not a core area of business
for our Personal Injury division so we are
relatively unaffected by this development. This
reduction has impacted the figures overall and
we expect this trend to continue through 2019.
Similarly, there has been a significant spike in
other claims in 2018 and this sector includes
holiday illness cases. As a business that leads
the field in its ethical operations, this is an
area that NAH doesn’t actively target as it has
been openly criticised for dubious claims. We
fully expect a significant reduction in claims in
this area due to Government intervention, so
this temporary spike and subsequent drop
off will not affect our business in any way.
Other than these distinct areas, other sectors
of interest to the Personal Injury division have
remained relatively flat. Our core market of
Employer’s Liability and Public Liability claims
has remained robust with some marginal
growth and this is something we predict to
continue for the next 12 months.
1 Source: HM Land Registry
2 Source: IRN Research, Conveyancing Market Briefing 2018; HM Land Registry
3 Source: Office for National Statistics, 2011 Census, England & Wales; Legal
Services Consumer Panel Tracker Survey 2018, The Mortgage Lenders and
Administrators Return (MLAR) / Bank of England / IRN Research.
Residential Property Market
2018 was another challenging year
for the Residential Property division as
the market has become increasingly
volatile due to increasing political
uncertainty.
In 2018 the residential property market
withstood a 2% drop, compared to a 1.9%
decline in 2016/17. However, overall volumes
remain above one million transactions per
year which is relatively high, meaning that
opportunities remain to grow our market
share.
The market continues to be volatile but
there are signs of mitigation which have
led to transactions in the second half of
the year being on average flat vs 2017,
compared to a 4% drop in the first half
of the year.1
The conveyancing market is consolidating,
even the market leader has a relatively small
market share. The number of conveyancing
firms has decreased 14% since 2012 to
approximately 5,500, while transactions
per firm have increased from 102 to 171 - an
increase of 68% over the same time period.
These are big changes but from a low base,
and the market is still predominantly made
up of small, local firms.2
A new generation is now using conveyancing
services, many of whom will be First-Time
Buyers. This group is becoming increasingly
important to the home purchasing market,
making up 21% of all mortgage advances by
value in 2017.
In contrast to their older counterparts who
will solicit recommendations from trusted
friends and colleagues, these younger
consumers are more likely to shop around,
using the internet and online
recommendations to inform their decision-
making. The emergence of this new
generation as the largest cohort in the market
will drive a significant shift in market
dynamics over the coming years.3
Personal Injury Market
Critical Care Market (based on 2018 figures)
Residential Property Market
£3.9bn
£0.7bn
£2.4bn
NAHL Group plc Annual Report and Accounts 2018
5
CSR BUSINESS MODEL
Delivering
exceptional service
What we do
Our opportunity to add more value
NAHL Group plc’s marketplace
¡ We operate in a highly fragmented subset of the UK
legal services market.
¡ The Group’s market was valued at £7.0bn in 2018.
¡ Consumers are confused by how the legal process in
this market works.
¡ The personal injury market has been impacted by
regulatory change with further changes to be
implemented in April 2020.
¡ The residential property market has been challenging
in recent years and is undergoing a digital makeover.
NAHL Group plc’s approach
¡ Our aim is to provide clarity and guidance for
consumers.
¡ To invest in technological solutions that simplify our
business processes and allow consumers easier access
to our services.
¡ Adapting our business models to take advantage of the
opportunity provided by dynamic markets and
regulatory change.
¡ To continue to invest in and develop our people who are
the core of the services we offer.
We generate enquiries
Personal Injury – We use our extensive reach and brand
trust to generate personal injury enquiries which are then
passed to partner law firms for a fee.
Residential Property – We use our brands to generate
conveyancing enquiries which we then pass on to one of
our Panel Law Firms for a fee.
We provide services
Personal Injury – We charge legal and service fees
to individual consumers for processing their claim.
Critical Care – We charge fees to law firms for the work
performed by our Case Managers in respect of the
assessment and management of the care and
rehabilitation needs of their clients.
We prepare expert reports
Critical Care – We charge fees for one-off Initial Need
Assessments or Expert Witness Reports.
Residential Property – We charge fees for survey
or search reports.
We provide ancillary products
Personal Injury – We earn product commissions from
insurance and medical providers.
Residential Property – We earn product commissions
from insurance providers.
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.
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.
6
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Strategic Report
Governance
Financial Statements
Well positioned to address
the opportunities
¡ Consumer focused.
¡ Technology enabled.
¡ Efficient digitised processes.
¡ Existing brand recognition and market presence.
¡ Small-claims ready through ABS model.
¡ Expert people across organisation.
How we’ll get there
¡ Grow market share in the larger personal injury market
(£7.0bn) rather than just the smaller CMC sub-sector
(£157.1m).1
¡ Take an economic interest in the success of the whole
claim and capture previously unavailable value.
¡ Develop technological and end-to-end efficiencies to
optimise the consumer experience and deliver
profitable growth.
¡ Grow market share in Critical Care via investment in
brand, website and overall marketing activity,
capitalising on partnerships entered into during 2018.
¡ Grow market share in Residential Property, utilising web
optimisation and moving into the referrals market
through the roll out of its online conveyancing platform
for estate agents, The Conveyancing Exchange.
Source: Claims Management Regulation Annual Report
1
2017/18
Value for stakeholders
Shareholders
Attractive dividend yield and
long-term value creation.
Dividend paid
£6.4m
Employees
Investing in business growth
and development of people.
Investment in training
£192,000
Consumers
Supporting consumers
across our three divisions.
Our business
partners
Maximising the value to our
partners and evolving
our proposition.
Consumers supported
153,238
Law firm relationships
754
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 2018
7
CSR
STRATEGY
Building
for the future
Strategic priority
Progress in 2018
Priorities for 2019
Business Re-engineering
Brand Development
Technology Platforms
& Digital Solutions
¡ Managed existing ABS law firms as volumes built.
¡ Continue to evolve ABS partnerships and develop improved commercial relationships.
¡ Development of new wholly-owned law firm to enable process of own work.
¡ Launch wholly-owned law firm in April and scale volume throughout the year.
¡ Prepared to re-engineer the business to ensure it is small claims ready ahead of
¡ Continue small claims development ahead of implementation in 2020.
reforms in 2020.
¡ £5m invested in claims processed through ABSs.
¡ Strengthened the Residential Property team and made leadership change to
help return the division to growth.
¡ Release working capital invested in partner ABSs to invest in wholly-owned law firm.
¡ Increase investment in technology solutions.
¡ Continued to evolve National Accident Helpline brand, building on success
¡ Deliver a successful brand refresh and continue to position Bush as the market leader with
of 2017 relaunch.
a focus on quality.
¡ Insourced the marketing capability in our Personal Injury division .
¡ Increased investment in TV advertising.
¡ Continued to invest in presenting Bush & Company as the quality care provider
¡ Building organic search capability, strengthening team and driving online sales channel.
¡ Securing two high profile strategic partnerships with care charities and
obtaining a place on the preferred supplier panel with a major insurer for Critical
Care.
¡ Repositioning the Residential Property brand and development of digital channels.
¡ Defined and developed case management software for wholly owned law firm.
¡ Developing a customer-centric platform that allows us to tailor our proposition, expand
¡ Operation of a number of established digital properties in the consumer
conveyancing sector.
¡ Improvement of customer experience, focusing on increasing the efficiency and
efficacy of our digital marketing spend.
¡ Launched ‘The Conveyancing Exchange’ – our introducer quotation platform,
building market penetration amongst introducers to open new routes to market.
applications and enable volume processing in Critical Care.
¡ Identify technological solutions to improve efficiency at Bush, providing tools that support
our consultant base.
Commercial Relationships
¡ Managed and evolved Personal Injury panel relationships ahead of market
¡ Evolve the Personal Injury panel proposition to maintain enquiry volumes.
reforms.
¡ Consider expanding into adjacent markets in Critical Care, building new strategic
¡ Maximised opportunity provided by contract wins whilst cultivating existing
relationships.
relationships in Critical Care.
¡ Developed new commercial relationships that position our Residential Property
division for future growth.
Acquisitions
¡ No suitable opportunities aligned to our strategy emerged.
¡ Continue to consider small, earnings accretive acquisitions to enhance
our existing divisions.
8
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Strategic Report
Governance
Financial Statements
Strategic priority
Progress in 2018
Priorities for 2019
Business Re-engineering
Brand Development
Technology Platforms
& Digital Solutions
Commercial Relationships
¡ Managed existing ABS law firms as volumes built.
¡ Continue to evolve ABS partnerships and develop improved commercial relationships.
¡ Development of new wholly-owned law firm to enable process of own work.
¡ Launch wholly-owned law firm in April and scale volume throughout the year.
¡ Prepared to re-engineer the business to ensure it is small claims ready ahead of
¡ Continue small claims development ahead of implementation in 2020.
¡ Release working capital invested in partner ABSs to invest in wholly-owned law firm.
¡ Increase investment in technology solutions.
reforms in 2020.
¡ £5m invested in claims processed through ABSs.
¡ Strengthened the Residential Property team and made leadership change to
help return the division to growth.
¡ Continued to evolve National Accident Helpline brand, building on success
¡ Deliver a successful brand refresh and continue to position Bush as the market leader with
of 2017 relaunch.
a focus on quality.
¡ Insourced the marketing capability in our Personal Injury division .
¡ Increased investment in TV advertising.
¡ Continued to invest in presenting Bush & Company as the quality care provider
¡ Building organic search capability, strengthening team and driving online sales channel.
¡ Repositioning the Residential Property brand and development of digital channels.
¡ Securing two high profile strategic partnerships with care charities and
obtaining a place on the preferred supplier panel with a major insurer for Critical
Care.
¡ Defined and developed case management software for wholly owned law firm.
¡ Developing a customer-centric platform that allows us to tailor our proposition, expand
applications and enable volume processing in Critical Care.
¡ Identify technological solutions to improve efficiency at Bush, providing tools that support
our consultant base.
¡ Operation of a number of established digital properties in the consumer
conveyancing sector.
¡ Improvement of customer experience, focusing on increasing the efficiency and
efficacy of our digital marketing spend.
¡ Launched ‘The Conveyancing Exchange’ – our introducer quotation platform,
building market penetration amongst introducers to open new routes to market.
¡ Managed and evolved Personal Injury panel relationships ahead of market
¡ Evolve the Personal Injury panel proposition to maintain enquiry volumes.
¡ Maximised opportunity provided by contract wins whilst cultivating existing
relationships.
¡ Consider expanding into adjacent markets in Critical Care, building new strategic
reforms.
relationships in Critical Care.
division for future growth.
¡ Developed new commercial relationships that position our Residential Property
Acquisitions
¡ No suitable opportunities aligned to our strategy emerged.
¡ Continue to consider small, earnings accretive acquisitions to enhance
our existing divisions.
NAHL Group plc Annual Report and Accounts 2018
9
CSR STRATEGY IN ACTION
Creating a new
Personal Injury business
Our Personal Injury business is changing to better serve consumers’ needs.
Change in regulation
The Personal Injury market is fragmented and, rightly, a highly
regulated field. We support the work to improve the reputation of
the sector and very proud of the work that we have carried out with
Government and other agencies to ensure that both the consumers
and the industry are protected from less credible businesses. As
these reforms continue to move closer to implementation, we
expect to see traditional law firms reduce their appetite for
enquiries.
Meeting consumers’ needs
Responding to the changing needs of both consumers and
Government, the Group is building a new type of law firm which will
take responsibility for a claim from the first phone call to its
conclusion. This will give consumers the peace of mind they need
as well as a timely and customer focused experience. It will also add
value through the full cycle of all claims – irrespective of claim size
- through the development of digital platforms that will facilitate
smaller claims.
Personal Injury Market Value
£3.9bn
We’re responding to regulatory changes...
...by creating a new kind of law firm...
Consumers will still need help and support
accessing the legal system and advice on how
to get the right help.
By creating our own markets for enquiries we can
take an economic interest in the success of the
claim, participate in the whole PI market and meet
our ambitions for growth.
Specialist
ABS firms
Wholly owned
law firm
Continued support for our
panel, supplemented by...
Established in
2017 - 2019
Focus for
2019 onwards
10
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Our ambition is simple
and clear - we aim to be the
number one PI firm in the UK
and we have a plan for how we’ll
make that happen.
...and optimising the consumer experience
Two new business units
Our platform is intended to grow profitably through
modern processes, generating efficiencies and
optimising the consumer experience throughout
the claims cycle.
NAHL GROUP plc
Personal Injury division
NAH Division
Legal Services Division
Technology
enabled
Consumer
focused
All claim sizes
considered
Our regulators
NAHL Group plc Annual Report and Accounts 2018
11
CSR DIVISIONAL REVIEWS
Personal
Injury
We continue to be a leading provider of products and services to
consumers in the personal injury market, now worth £3.9bn.
This part of our Group is the largest and is currently transforming
its business to ensure we can best serve our consumers’ needs
and respond to industry-wide reforms.
Number of staff
150
101,045
Consumers supported
Our ambition is simple and clear, we aim
to be the number one PI firm in the UK and
we have a plan for how we’ll make that
happen.
A new type of law firm
We believe that a new type of law firm is
needed to deal with these contemporary
challenges, one that is technologically
enabled and focused on the consumer.
A firm that recognises the value in
supporting consumers with a valid and
worthwhile claim, irrespective of its size.
Suzie’s story
My name is Suzie, I’m a mother and I
work for the NHS. My accident happened
when we were walking home from having
a meal. We were walking past a building
site, the area wasn’t lit and I fell on
uneven paving. It was agony.
I went to the hospital and had x-rays on
both my knees and ankles, and I was
given crutches.
I couldn’t even get up the stairs or look
after my children as normal, and I had to
give up work for a while.
We struggled to pay our bills and had to
borrow money from family and on a
credit card, which was a constant
stress and worry.
It was my sister’s idea to contact
National Accident Helpline. I didn’t know
what to expect and I didn’t think I was
going to get anywhere with it.
The phone call initially was really good
– I went through everything and they
were really easy to talk to, there was
no pressure.
When they did take it on, the whole
process was all taken care of – I was
really surprised.
The relief when the compensation came
through was just unreal – I thought ‘I can
pay that off, I can pay them back’.
It put a smile on the face of my children
because I was able to walk and play with
them again and I wasn’t worrying about
where the money was coming from.
National Accident Helpline listened
to what I went through and were
really understanding, they helped
me from start to finish and made
everything better.
12
NAHL Group plc Annual Report and Accounts 2018
One that can grow profitably through modern processes
generating efficiencies and optimising the consumer
experience throughout the entire claim cycle.
It’s clear to us that consumers risk being disadvantaged
by these reforms. We believe that we are uniquely placed
to deliver a solution based on the strength of our brand,
our deep knowledge of PI, and the high trust that we enjoy
with our consumers.
Prior to 2017 we placed all our enquiries into partner
law firms to process. However, due to the reforms, the
appetite for this service will reduce and so in 2017 we
began our strategy to transform the Group by adding
specialist personal injury law firms in ABS partnerships.
Our new ABS law firms allow us to take ownership for the
consumer journey using our experience and knowledge of
the legal system to ensure the best consumer experience
possible.
In addition, we will continue to service our panel who
remain an important part of our strategy. As long as
demand exists, we will ensure our partners receive high
quality enquiries from us.
By creating our own markets for enquiries we can take an
economic interest in the success of the claim, participate
in the whole PI market, and meet our ambitions for
growth. So far, we’ve outsourced the legal processing
tasks in our ABS firms to a partner.
In 2019 we will launch a third law firm where we’ll deliver
the entire process ourselves, optimising the consumer
experience and creating maximum value for our
shareholders. In building our new law firms, we’re
challenging market norms and responding to the
opportunities presented by regulatory change.
We’re excited about the proposition for our consumers
and the long-term growth opportunity this presents
for our business in what continues to be a highly
valuable market.
Evolving to meet a new
regulatory landscape
Strategic Report
Governance
Financial Statements
Critical
Care
2018 has been a year of significant growth for Bush & Company.
Maintaining a focus on our position as catastrophic injury experts, we
have also strengthened our marketing, business development finance
and operations teams. Our network of case managers and expert
witnesses has also grown to its biggest size to date and we now boast
114 case managers and 76 expert witnesses.
The power of expertise
In 2018 we welcomed nine new specialist case
managers - each joined us having accumulated a
minimum of seven years’ experience within clinical roles
and have subsequently undertaken further, robust
in-house training to ensure optimal standards.
Furthermore, with our expert witness service, we
continue to produce a high number of exceptional
quality reports.
Case managers
114
76
Expert witnesses
Robert’s* story
At eight, life seemed simple and fun. My
acquired brain injury shattered that
norm and life changed forever. I was
angry and frustrated. Suddenly my life
was full of people telling me what to do.
As I grew up things became harder.
People told me how good I’d been before
my accident – I knew I wasn’t the same,
which upset me. I needed help with
everything, at a time when I should have
been gaining independence.
I hated school; I was bullied for being
different. My behaviour therapist and
case manager from Bush & Company saw
how upset I was and found me a new
school placement. I could learn in
practical ways, including on a farm looking
after sheep and chickens. I felt much
calmer outdoors and achieved NVQ
qualifications which I am really proud of.
I’m also proud I have learned to control
my anger. I have a partner and am a
dad, which never seemed possible. My
hopes and dreams are for my son to be
happy and for me to help and support
him and others.
My case manager and behaviour
therapist helped me be me again. They
understood my emotions and helped me
to recognise my own behaviour and
others’. I don’t know what I would have
done without them. Today, I am more
settled and it’s reassuring to know
they’re there if I need them.”
*Name has been changed to protect
the anonymity of the client
This investment in expertise has had a direct impact
on all areas of the business, not least the securing of
a tender to work with the Thalidomide Trust in 2019.
The subsequent feedback we received described a
competition that simply could not match our capability
and expertise.
Collaboration
This year has seen us launch two partnerships with large,
established charities, the Spinal Injuries Association and
the Child Brain Injury Trust. These represent the only
partnerships of their kind in our sector and are helping
to promote our expertise and commitment to the
catastrophic injury space.
The two services provide clients with reassurance that
they are supported by the very best, and give us the
opportunity to help shape future support for people
following acquired brain injury and spinal cord injury.
Moving forward
2019 looks set to be a year of significant investment and
a broadening of activity. Further increases in
investment are planned for a number of key areas
including technology to ensure the systems we use are
ready for growth and are able to deliver efficiencies.
Investment in our brand is already underway having
initiated a project that will see us redefine our brand
value and which will further set us apart from the
competition. Our website’s improved search capability
will enable our customers to easily find the perfect
consultant for their needs based on their strengths and
experience.
Our joint ventures
NAHL Group plc Annual Report and Accounts 2018
13
CSR DIVISIONAL REVIEWS CONTINUED
Residential
Property
2018 was not a vintage year for the UK housing market.
Fewer people moved house with the number of transactions
down from 2017. Our businesses in this market, Fitzalan Partners
and Searches UK, are small players in the sector, however this
presents a large opportunity.
Fresh leadership
In 2018 we welcomed Will Herbertson as Managing
Director of our Residential Property division. Will is an
experienced business leader who shares our drive and
is committed to our values and culture.
Over the course of the year, the division supported over
50,000 customers with their transactions. In addition, it
delivered more than £6.4m of revenue and has done so
while being awarded more than 250 ‘five-star-reviews’
for service on Trustpilot and achieved an average score
of 8.7.
Next year there will be a refocus of Business
Development and Product Management Teams, and
we’ll continue to strengthen our external presence
through 2019 with a greater focus on digital marketing.
Digital opportunities
Fitzalan Partners and Searches UK are small players in
a large market. Though not currently market leaders,
their smaller size presents advantages such as an
agility to react more quickly to market forces and an
ability to differentiate themselves with a more
personal service.
However, it is the increasing digitalisation of the
property buying chain which presents the most
compelling opportunities. It is now commonplace for
people to search for properties and indeed sell them,
online. The next big step will be the process of arranging
mortgages being transferred to fully digitised systems.
The Residential Property division intends to position
itself at the forefront of this development.
Both Fitzalan Partners and Searches UK are successful,
dynamic businesses with great people and outstanding
reputations. We are confident that by capitalising on
their agility and personalised services whilst working
hard to prepare for the onset of greater digitalisation,
when the market inevitably picks up again, we can win
more market share and establish ourselves as a major
player.
.
Residential conveyancing Market Value
£2.4bn
Preparing for better
market conditions
5 star Trustpilot reviews:
“I found Homeward Legal gave me an honest,
trustworthy service. I found them helpful and
informative about the fees and process. When I had
queries about my conveyancing they were dealt with
in a straightforward, reassuring way, and I was
pleased with the outcome. No hassles. Very good
service.”
“After my internet enquiry I was contacted and from
that moment on with their obvious expertise in this
field they took every worry that I had explaining in
terms I understood off my shoulders, taking time to
listen to my concerns and putting my mind at rest. To
top this all off the money that I saved was
unbelievable. I am absolutely delighted with the
service I have received.”
14
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
CHAIR’S STATEMENT
Identifying opportunity,
delivering success
Strategic Progress
Our strategy is to become the leading provider in our chosen
consumer legal services markets by leveraging our trusted brands;
forging strategic partnerships that create mutual value; and
embracing developing technologies to reach and interact with our
consumers and customers.
As part of this strategy, our Personal Injury business is creating a
new type of law firm that will allow us to put the consumer at the
centre of the process and take an economic interest in the whole
value of the claim. Through a combination of our panel, our
joint-venture partnerships and our own market-leading law firm
we aim to be the number one personal injury specialist in the UK.
Progress to date has been encouraging with a positive contribution
from our ABS partners, and the development of our own law firm,
scheduled to launch in April 2019, is on time and on budget.
In Residential Property, our new management team is putting in
place strategic initiatives designed to return the business to growth
in 2019; in Critical Care our strategy has already delivered double-
digit profit growth and market share gains.
Board changes
I’m grateful for the contribution that Steve Halbert has made to the
Group over the last nine years. Steve has successfully guided NAHL
Group plc through two significant regulatory reforms, four
acquisitions and the IPO in 2014.
The Group is now more diverse and resilient and is well positioned to
move forward with confidence. I’d like to thank Steve for his efforts
and look forward to working with the Board as we continue the
Group’s exciting strategy for growth.
Our people
Reflecting on my time in the business to date, I can see a team that
is driven, and one that is underpinned by its values and its people.
I have seen first-hand the people, the processes and commitment in
place to helping the Board achieve its growth ambitions.
I would like to take this opportunity to thank all of our colleagues for
their continued support and dedication.
Outlook
Whilst market pressures persist, trading during the early part of 2019
has improved.
We remain confident in our outlook for the remainder of the year.
Caroline Brown
Chair
This is my first Annual Report with NAHL Group plc having joined the
business in December 2018.
We are midway through a significant transition and it is obvious to me that
there is a realistic and achievable strategic plan in place against which the
management team are executing well and making great progress.
Events in 2018 once again validated the strategic approach we
are taking and the regulatory and competitive landscapes are
developing as we had anticipated. Our businesses are facing into
significant market change but are adapting to this and embracing
the opportunity that it brings.
Financial Results and Dividend
As we have previously announced, the Group experienced a challenging
fourth quarter’s trading. Consequently, our profit before tax fell marginally
short of the Board’s expectations for the year at £9.8m (2017: £12.4m).
The Group’s strategy requires investment in both working capital
and infrastructure and as such, during this transitional period, profits
and cash flow will be lower. This deferral in profits will support future
earnings and provide the basis for a sustainable and growing earnings
stream in our Personal Injury division.
Basic earnings per share declined 33.2% to 14.5p (2017: 21.7p).
The Group has continued to carefully manage its balance sheet and
net debt at the end of 2018 was £15.5m (2017: £12.1m).
The Board proposes, subject to the approval of shareholders at the
Annual General Meeting to be held on 21 May 2019, a final dividend of
5.7p per share be payable on 31 May 2019 to ordinary shareholders
registered on 26 April 2019. This gives a total dividend for the year of
8.9p, which equates to a cover of 2.0x earnings.
Caroline Brown
Chair
18 March 2019
NAHL Group plc Annual Report and Accounts 2018
15
CSR CHIEF EXECUTIVE’S REPORT
Bold decisions
to deliver growth
Results
We have delivered underlying operating profit of £12.1m from
revenue of £49.0m.
As anticipated, the PI division has seen an ongoing decline in Panel
Law Firm demand as a result of the forthcoming regulatory
changes. From a marketing perspective, heightened competitor
activity depressed enquiry volumes in November and December
and a significant Google algorithm change increased consumer
acquisition cost. Encouragingly, our ABS operations scaled well and
are already making a positive contribution to the Group’s results.
Furthermore our Critical Care division continued to perform
strongly, growing profits by 16.4% year on year. Strong underlying
trading growth was supported by contributions from our
commercial relationships with the Spinal Injuries Association and
the Child Brain Injuries Trust. Although Residential Property
continued to be impacted by a persistently difficult housing market,
it continues to trade profitably and in combination with Critical
Care, these two divisions make an important contribution to our
overall results.
The Group has continued to carefully manage its balance sheet and
net debt at the end of 2018 of £15.5m was lower than expected.
Market overview
The Group is a leader in the large and fragmented £7.0bn consumer
legal services market and continues to focus on Personal Injury,
Critical Care and Residential Property.
The overall PI market has fallen from its recent level of one million
claims per annum with volumes decreasing primarily in RTA.
The main claim types that make up the PI division’s focus have
remained broadly static, with reductions taking place in sectors
such as travel sickness claims which are not part of our core
personal injury target market. These changes come partly as a
result of the cumulative impact on law firms of previous legislation
which has led to a reduction in investment in the market.
The effect of previous legislation combined with continued lack of
clarity surrounding regulatory reforms has resulted in many smaller
and mid-sized firms questioning their ongoing profitability. We
remain the UK’s leading marketing services provider in the Personal
Injury sector but are positioning ourselves to grow into a large scale
volume processor opening up opportunities in the wider Personal
Injury market.
Critical Care is the brand leader in the catastrophic injury segment
of the medical reporting and rehabilitation market, where we
Russell Atkinson
Chief Executive Officer
Overview
During 2018 the Group continued to focus on its long-term strategy of
re-engineering its core personal injury business. Simultaneously, we
sought to further grow our Critical Care division and navigate
significant market uncertainty in Residential Property caused by a
turbulent housing market.
Overall the Group traded well during the year but had a disappointing
fourth quarter as we updated in January.
As we have previously stated, the ongoing funding of work within
Personal Injury impacts short-term profit recognition and cash
conversion and this is clearly reflected in year on year comparisons.
However, we have managed that aspect of our business well and
are pleased with the overall contribution from our ABS operations.
We remain confident that the Group is well positioned to capitalise
on the forthcoming regulatory changes and that our transformation
strategy is progressing well.
16
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
provide expert witness and case management services. We
estimate the catastrophic injury sector is mature and growing at
between 1 and 2% per annum.
Residential Property operates within the context of the wider
residential housing market and as such the division has not been
immune to the well-documented challenges faced by this sector in
recent years. Transaction volumes have declined by 2% in each of
the last two years and we have experienced more cancellations
than is typical as the uncertainty of the UK's exit from the European
Union continues. However, as the market remains sizeable with
over one million transactions recorded by HM Land Registry
annually and the value of associated property legal services
exceeding £1.8bn per annum, we are well-placed to grow market
share from a small base.
Personal Injury regulatory update
From a regulatory perspective the Civil Liabilities Bill received royal
assent on 20 December 2018 with implementation still planned for
April 2020. No material alterations were made to the bill and the
broad principles were as anticipated, namely increasing the small
claims limit to £5,000 and £2,000 for RTA and non-RTA
respectively, as well as a significant reduction in the compensation
available to victims of whiplash injuries. The Group now awaits
clarification around the detail of how the legislation will be
implemented which will allow us to validate the assumptions in our
small claims processing business model. However, it is already
clear that the impact on traditional personal injury law firms is
taking hold with a number already announcing that they are
withdrawing from the market or moving away from lower value
claims. This clearly validates our long-term strategy of developing
our own processing capability to run alongside our existing panel
model allowing us to capture more value and grow market share.
In addition, preparations continue to transfer regulation of claims
management companies from the Ministry of Justice to the Financial
Conduct Authority (FCA) from April 2019. This means that, within the
Personal Injury division, National Accident Helpline (NAH), our lead
generation business, will be regulated by the Financial Conduct
Authority (FCA) while our legal services business will be overseen by
the Solicitors Regulation Authority (SRA).
Strategic development in Personal Injury
We are midway through our transformation process and during
2018 we accelerated our investment in our ABS initiatives and
began the process of establishing our own, wholly owned law firm.
This has extended our processing capability and given us the
opportunity to re-engineer our business model in order to take
advantage of the opportunities provided by regulatory change as
well as broadening the market available to us.
Progress in this area has been very encouraging with significant
headway made. Our first ABS, Your Law, is trading profitably and
reaching scale with £9.2 million in damages recovered for non-fault
accident victims.
Progress on our own processing capability has also been pleasing.
National Accident Law (NAL) has been granted its licence from the
SRA and is scheduled to launch in April 2019, at which point we will
have a state of the art, consumer focused, technologically enabled
volume processing capability which has been designed to enable us
to become the UK’s leading volume PI processing provider.
The Group has restructured its operations in the PI division, creating
two business units: National Accident Helpline, our marketing services
business, and Legal Services, which incorporates NAL and the Group’s
two ABS businesses. Work on the core technology platform is well
advanced, recruitment completed and office space secured.
The project is anticipated to launch on time and on budget and this
marks a critical milestone in our transformation journey.
As previously announced, this ongoing investment in self-processing
means a continuing deferment of profit and cash flow that is realised
in future years as cases settle. However, as the model matures both
profit and cash flow will normalise, enabling us to absorb the impact
of regulatory changes and grow our market share without further
significant disruption to the business.
NAHL Group plc Annual Report and Accounts 2018
17
CSR
CHIEF EXECUTIVE’S REPORT CONTINUED
Brand
The successful relaunch of the NAH brand in 2017 enabled us to
build on a strong foundation. National Accident Helpline remains
the most trusted brand in the personal injury sector and continues
to garner excellent customer reviews.
We continued our strategy of using a lower weight of TV advertising
supported by enhanced digital marketing activity including SEO
and social media activity. We have invested in our in-house
marketing team adding significant capability during the year and
reducing our dependency on external agencies. This will help us to
become more efficient and reactive in future years as we navigate
the changing competitive landscape in the run up to the
implementation of the reforms.
In response to competitive pressure, we have increased investment
in brand recognition and undertaken further digital marketing
activity, which has enhanced competitiveness and stimulated
enquiry volumes in the early part of 2019. It is likely that the
competitor landscape will continue to be challenging until the
reforms are implemented but our brand leading proposition
positions us well to adapt and respond.
Critical Care has been building on its reputation for clinical
excellence and our charity partnership initiatives have further
enhanced our brand positioning. During 2018 we conducted a full
brand audit and are currently working through a brand refresh which
will include upgrading our website. Our centrepiece annual clinical
conference was a great success in 2018, bringing together over 210
lawyers, consultants and partners from across the industry and
this will be repeated in July 2019.
In Residential Property, our new management team are undertaking
a full review of our approach to the brand portfolio and are
introducing some exciting initiatives that are designed to return the
division to growth in 2019.
18
NAHL Group plc Annual Report and Accounts 2018
Strategic relationships
Whilst much of the focus in our PI division has been on the
development of our self-processing capability, the panel remains a
central part of our ongoing strategy. As demand has eroded for our
existing model we have seen the panel shrink in size. During 2018
we announced the loss of one of our biggest customers who took
the decision to focus on higher value PI claims. We also experienced
one of our panel firms going into administration and had three
further smaller resignations. However, despite the challenging
market, we have been able to add new panel firms to our portfolio
and are in discussion with several partners about potential new
relationships. Additionally, we also have strong panel demand for
our medical negligence claims and other specialist enquiry types.
As long as demand exists, we will continue to support our panel
partners with high quality enquiries.
The addition of two charity partnerships in Critical Care has been
supplemented by new business relationships including a contract
with a leading insurer. We have continued to invest in business
development and seen healthy organic business growth from our
existing customer portfolio.
In Residential Property we have experienced a reduction in core
conveyancing volumes as a result of market conditions and also
seen a reduction in market share as competition for remaining
consumers intensifies. In Searches, the number of firms ordering
has remained relatively consistent, however the volume of orders
has decreased. In September we recruited a new divisional
Managing Director who joined us from moneysupermarket.com
and he has a remit to increase market share and return the division
to growth. We are confident that the initiatives that have been
identified will help achieve this objective.
Operations and IT
The establishment of National Accident Law has seen us invest
significantly in our operational infrastructure, particularly in IT.
We have partnered with Peppermint Technologies to implement its
CX Cloud Solution creating a highly flexible and legally focused case
and document management system. This is built on the Microsoft
Dynamics platform which enables us to integrate with our customer
facing processes and systems, thereby creating a unique consumer
proposition underpinned by innovative technology. We have
identified additional office space next door to our head office in
Kettering which will become the initial base for National Accident
Law.
In Critical Care we have continued to progress the improvement of
our data and MI systems to allow us to better interrogate data and
provide information and support to our clients.
Strategic Report
Governance
Financial Statements
People and values
In a time of great change it is critical that we have a well-motivated
and capable team who can guide us through the change programme
and continue to support our clients and customers with first class
service. I am delighted to report that 2018 was a year of great
progress in our people agenda with a number of notable
achievements including:
¡ NAH being recognised by the Sunday Times as one of the 100
best small companies to work in for 2019;
¡ Significant improvements in our employee engagement scores
across the Group, well ahead of national averages;
Critical Care has once again performed very strongly increasing its
market share and growing profits by continuing to offer clinical
excellence. The outlook for this division continues to be good and
we will be investing in the technology platform during the next 12
months to create the foundation for further growth.
Whilst the challenges I have already outlined in Residential Property
have been difficult to manage, this division remains a profitable part
of the Group and the new management team have already instituted
a number of initiatives that I am confident will return us to growth.
¡ nine out of ten staff who undertook our Pathway to Leadership
development programme gaining promotions or new roles;
¡ 21 new staff joining our Group to establish our legal services
There still remains a great deal to do but I am confident that we
have the strategy and people in place to achieve our aims and I am
excited by the challenge of the forthcoming year.
Russell Atkinson
Chief Executive Officer
18 March 2019
operation;
¡ Investors in People Gold status awarded to NAH to go alongside
our Silver award in Critical Care; and
¡ the establishment of our learning academy in the PI division.
Our people and values make us who we are and our 233 staff
across the Group supported by 190 consultants in Critical Care are
the cornerstone of our future growth. We are involved in
a number of charitable and CSR initiatives (see page 32) that
demonstrate the caring culture that is central to the services that
we offer.
Outlook
After an extended period of uncertainty, the regulatory landscape
in personal injury is finally becoming clearer. There are still details
outstanding surrounding implementation that will help to validate
the assumptions on our post reform small claims model and core
technology platform but we expect clarity during 2019, giving us
better visibility for 2020 and beyond.
What is clear is that the strategy we have followed to re-engineer
our PI division is the right one. Without the ability to place enquiries
into different distribution models we would undoubtedly have a
much smaller and less profitable PI business. Clearly, changing our
operating model in the current environment is challenging but it is
a challenge that we have adapted to well.
Although we are in the midst of a short-term period of lower returns
during this investment cycle, the cash and profits from cases that are
processing will begin to return over the next 18 months. The
progress we are making with our ABSs, when aligned with our own
processing capability and panel, will create one of the UK’s leading
volume PI processing businesses. Linking that to the strength of the
NAH brand, giving us control of the end-to-end process, gives me
great confidence that we will be able to navigate the significant
regulatory changes in our sector and grow a substantial,
sustainably profitable, industry leading Personal Injury business in
years to come.
NAHL Group plc Annual Report and Accounts 2018
19
CSR
OUR VALUES – Q&A
Our values are at the
heart of what we do
Q Why are the Group’s values so
important to the business?
A They are, quite simply, the bedrock
upon which the Group sits. They
influence every decision we make and
every direction we steer the business.
Without constant reference to our
values, we could easily lose sight of
the reason we exist, which is to help
alleviate the pressures of people
experiencing hardship.
Q Does being values-driven
make a difference to the
Group’s success?
A We’d go even further than that and
say it is arguably the key driver to our
success. Ours is an industry in which
unscrupulous practice still persists
and we are conscious of how
damaging it is, not just to customers’
experiences, but also to companies’
reputations.
Were we to abandon our values,
there’s a risk our key motivations
would stray from helping to improve
lives. We will never allow that
to happen.
Adhering tightly to our values allows
us to offer a level of service hard to
find anywhere else and keeps us at the
forefront of our sector.
Q How do you measure the effect
of being so values-driven?
A It’s difficult to measure the effect
of something that is both intangible
and subjective. However, we have
seen many examples of how our
commitment to our values is both
celebrated and shapes our sector.
The Group and individuals within it,
regularly win awards for providing
service levels underpinned by our
values and we have even influenced
standards at a Governmental level
aimed at improving customer
experiences of our industry as a whole.
Q Is it difficult motivating your
people to observe the Group’s
values?
A On the contrary, our people regularly
inform us that they love working for a
company so committed to doing the
right thing and fully support our vision.
Our recruitment process is also
heavily geared towards bringing in
professionals who want to work for
a company that cares.
We also maintain open and
transparent lines of communication
with our employees and they often
provide ideas as to how we can further
align our values with our practice.
Q How will the Group’s values
evolve over time?
A The four pillars of our value-set are to
always be Curious, Driven, Passionate,
and Unified. Going forward, it’s
unlikely that these values will change,
but what might begin to evolve is how
we put them into practice.
Emerging technologies coupled with
an uncertain economic climate may
alter how we interpret our values
whilst ensuring they are upheld. What
will never alter though, is how robustly
they will apply to all levels of the
business and to every interaction we
have with our customers.
Our key competitive advantages
position us well to meet near-
challenges and realise
opportunities.
term
long-term
20
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
The Trusted Executive Framework
The world is going through a period of
profound change.
As well as the widespread presence of
technology and constant regulatory change,
one of the biggest changes we are seeing is
that of personal attitudes.
Power, once the epicentre of decision-making
for business leaders and customers, has been
replaced with the concept of trust and a
desire to see the ‘right thing’ being done.
For NAHL Group plc, it’s a period of change
we have been able to absorb better than
most. I firmly believe that is underpinned by
the strong values we work and live by –
something I am incredibly proud of.
The Trusted Executive Framework
Though our values have always sat at the
heart of what we do, and despite having
always maintained a philosophy built around
openness to change, the Group remains
hungry for and excited by new ideas.
It’s for these reasons that when I was
introduced to The Trusted Executive
Framework, I knew I’d found something that
chimed with the very essence of our business,
something I’ve recently launched and shared
with colleagues across the Group.
I had been searching for a framework
compatible with the personality, values, and
ethos of NAHL Group plc. So it was something
of a ‘Eureka!’ moment when I was introduced
to John Blakey and his Trusted Executive
leadership model.
The model is based on the belief that the
traditional concept of ‘power’ as a method for
leading a successful organisation is no longer
fit for purpose.
Blakey bases his model on the three pillars of
integrity, ability and benevolence, and nine
positive behaviours: Coach, Be Consistent, Be
Honest, Be Open, Be Humble, Evangelise, Be
Brave, Be Kind and Deliver.
Ultimately, the framework is used to promote
deeper thinking about how executives
operate, how they process their thoughts,
and how they act as individuals.
Dealing with change and uncertainty in
a rapidly evolving world
We have transitioned into a world where
business success is now about dealing with
change and uncertainty at high speed, and
doing it in an ethical manner. Equipping
ourselves to deal with these changes is crucial
to our continued success as an organisation.
It means being open to change and evolution
while, at the same time, retaining our core
values.
We’ve all seen how trust has been lost in
established institutions, from finance and
politics, through to the charity sector – with
ethics called into question and reputations
left in tatters. What’s more, no organisation is
immune.
And it’s not just the change and uncertainty
itself that businesses today need to deal with;
it’s the sheer pace of it.
It’s a reality which our business has not been
immune to. We are actively working and
evolving to meet the demands of the
Government’s Civil Liability Bill and are
setting our businesses up for the future.
Having an engaged workforce that believes in
and is on the journey is key to its success.
Why ‘The Trusted Executive’?
I am deeply proud of our values – the
emphasis we place on them makes the Group
unique as a business. We reward against
them and they are embedded into every level
of our organisation. They really are at the
heart of what we do.
Supporting our values, I believe the Trusted
Executive model that we are now rolling out is
going to further enhance our business, and
support our future success.
I invited John Blakey himself to come in and
do a workshop with the senior team and it
proved to be a most worthwhile exercise.
Following that session, the team is utilising the
framework to share feedback, learnings and
proposed changes, each taking one or two
habits, going back into their areas of the
business and taking the opportunity to
strengthen and demonstrate the nine positive
traits.
As this journey progresses, we will go on to
identify areas for improvement and further
support our people, helping them and
equipping them for a changing workplace and
a changing world.
Ultimately, the Framework is used to promote
deeper thinking about how executives operate,
how they process their thoughts, and how they
act as individuals.
NAHL Group plc Annual Report and Accounts 2018
21
CSR CHIEF FINANCIAL OFFICER’S REPORT
2018 saw the Group create a
stronger business despite operating
in challenging markets
Statement of comprehensive income review
Revenue
Revenue decreased in the year by 5.7% from £51.9m to £49.0m.
As we anticipated, the Personal Injury division saw an ongoing decline
in Panel Law Firm demand as a result of the forthcoming regulatory
changes and the Residential Property division saw revenues fall
by 23.4% as a result of the well documented challenges in the UK
housing market. I was pleased with the performance of the Critical
Care division, which, through organic growth, generated an
increase in revenue of 12.2% (2017: 6.6%).
I was also pleased with the contribution made by our ABSs in the
year, where revenue has only been recognised where a claim has
had liability admitted by the defendant. This is consistent with our
policy on revenue recognition set out in note 1 to the financial
statements and our business model. Revenue on successful cases
that are yet to reach this milestone will be recognised in future
years.
An analysis of revenue by division is set out in the operating segments
note on page 70. Further commentary on the performance of each
division is included in the Chief Executive’s Report on page 16.
Underlying operating profit
Underlying operating profit decreased in the year by 16.3% from
£14.5m to £12.1m. A temporary reduction in profit levels was
anticipated as the Group transitions to its strategy of processing
personal injury claims through its ABSs and 2018 also saw us face
into a number of headwinds in Personal Injury and a challenging
market in Residential Property. This is explained in detail in the Chief
Executive’s Report. Operating profit decreased by 20.5% from
£12.6m to £10.0m.
I am particularly pleased to see both ABSs return a profit for the
year, after deduction of non-controlling interests.
As a result, underlying operating margin - defined as underlying
operating profit divided by revenue - decreased from 27.9% in 2017
to 24.8%.
Exceptional and non-underlying items
The Group separately identifies exceptional costs, share-based
payment charges and amortisation on intangible assets acquired in
business combinations and excludes them from underlying
performance measures to provide readers of the financial
statements with a consistent basis on which to track the core
trading performance. We have set out our policy for Exceptional
Items in note 1 to the financial statements.
James Saralis
Chief Financial Officer
Overview
Whilst the results reflect that 2018 was a year of planned transition
for the Group, I am pleased with the progress we have made
towards our strategic objectives. We have made great strides in
transforming the personal injury business to one that can generate
significant value post the regulatory reforms.
We have also delivered double digit profit growth in Critical Care
with minimal investment, and made important leadership changes
in Residential Property to address the decline in market share we
suffered in 2018 and the early signs are encouraging. Throughout the
year, we carefully managed our net debt whilst delivering a
meaningful dividend to investors that was consistent with our
stated dividend policy.
Some commentary in this report uses alternative performance
measures, denoted by the prefix “underlying”. Definitions and
reconciliations to the IFRS measures are included in note 1 to the
financial statements.
In 2018 the Group invested £5m
in generating enquiries processed
in our ABSs.
22
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
The Group incurred a number of exceptional credits and costs
in the year, set out in note 4, which resulted in a net exceptional cost
of £0.4m (2017: £0.4m). These comprise restructuring costs
associated with the strategic transformation of the Personal Injury
division, one-off costs associated with changes to the management
team in the Residential Property division, and a revaluation of the
pre-LASPO ATE liability and associated costs. The latter relates to a
legacy product that has not been sold by the Group since its listing
on AIM in 2014. Whilst this liability has been very significant in
previous years, it has been gradually reducing as previous
customers’ personal injury claims settle and the Directors
anticipate that this will not be material to the Group’s results in
2019. Accordingly, it will no longer be shown as an exceptional item.
Taxation
The Group’s tax charge of £1.4m (2017: £2.5m) represents an
effective tax rate of 14.2% (2017: 19.9%). The effective tax rate
is lower than the standard corporation tax rate of 19.0% for the
reasons set out in note 9 to the financial statements. The most
significant of these is that the Group does not account for the
non-controlling interests’ share of tax. This results in a reduction in
effective tax rate of 3.3% (2017: nil).
Earnings per share and dividend
Basic earnings per share (Basic EPS) for the year was 14.5p (2017:
21.7p) and the diluted EPS was 14.3p (2017: 21.6p). The dilution in
EPS derives from a number of share options that the Group has
outstanding. This is explained in note 22 to the financial statements.
In order to compare EPS year on year, earnings have been adjusted to
exclude exceptional items (net of the standard rate of corporation tax),
amortisation of intangible assets acquired on business combinations
and share-based payments. This is explained in note 1 to the financial
statements. On this basis, underlying EPS was 18.2p (2017: 25.0p).
The Board is recommending a final dividend of 5.7p per share in
respect of 2018 (2017: 10.6p). When added to the interim dividend of
3.2p (2017: 5.3p), this gives a total dividend for the year of 8.9p (2017:
15.9p). This equates to a dividend cover of 2.0x the underlying EPS,
which is in line with the Board’s stated policy. If approved by
shareholders at the AGM on 21 May 2019, it will be paid on 31 May
2019 to shareholders on the register on 26 April 2019.
Balance sheet review
I consider the significant balance sheet items are net debt and
working capital, defined as trade and other receivables less trade
and other payables.
Net debt
The Group had net debt at year-end of £15.5m (2017: £12.1m),
comprised of £1.6m of cash (2017: £0.9m) offset by borrowings
of £17.1m (2017: £12.9m).
The borrowings represent a balance of £17.2m (2017: £13.1m) on
the revolving credit facility (RCF) less pre-paid loan arrangement
fees of £0.1m (2017: £0.2m), which are being written off over the
term of the facility.
The Group has access to a £25m RCF with Yorkshire Bank which
runs to 31 December 2021.
Working capital
Working capital increased £4.5m during the year (2017: £7.0m).
This was primarily as a result of an increase in receivables
associated with the Group’s transition to self-processing. The total
trade and other receivables balance of £28.8m (2017: £22.3m)
includes the following items:
¡ £3.6m of recoverable disbursements (2017: £0.9m) on personal
injury claims. These amounts relate to medicals and insurance
products and are recoverable from the defendant where cases
are won; and from After The Event (ATE) insurance policies
where a case is lost. A corresponding liability, payable to the
product provider, is within trade and other payables.
¡ Provisions for doubtful debts of £0.9m (2017: £1.1m).
¡ £8.4m (2017: £4.6m) of accrued revenue, comprising the
following:-
¡ £1.4m (2017: £0.2m) of work in progress recognised within
the ABSs on personal injury claims which have not reached the
settlement stage yet. Work in progress and the corresponding
revenue is only recognised once the defendant has admitted
liability on a claim. This is explained in our accounting policy for
revenue in note 1 to the financial statements.There is a
significant element of uncertainty in estimating the WIP
recognised in the ABSs, as discussed in note 1 to the financial
statements.The Directors believe that the assumptions adopted
are appropriate and based on historical experience of claims
processed in our ABSs and by our panel. These assumptions will
be updated with actual results as claims settle.
¡ £3.2m of accrued income (2017: £0.0m) of contractually
guaranteed revenue on claims processed in the ABSs. A further
£2.7m (2017: £2.2m) is included within trade debtors;
¡ £1.6m (2017: £3.4m) relating to legacy profit share share deals
with our panel law firms. Of this amount, £1.3m is contractually
guaranteed.
Cash flow review
The Group increased cash and cash equivalents by £0.7m in the year
(2017: reduction of £4.0m). The significant items in the consolidated
cash flow statement are net cash from operating activities; new and
repaid borrowings; dividends paid to shareholders; and non-
controlling interest drawings.
Net cash from operating activities is primarily driven by operating
profit and working capital movements, both of which are discussed
above.
NAHL Group plc Annual Report and Accounts 2018
23
CSR CHIEF FINANCIAL OFFICER’S REPORT CONTINUED
Underlying operating profit
Depreciation and amortisation
Working capital movements
2018
£m
12.1
0.4
(4.5)
2017
£m
14.5
0.3
(6.9)
Underlying operating cash flow
Underlying cash conversion
8.0
65.6%
7.9
54.8%
Cash flows from exceptional items
Interest paid
Tax paid
Net cash from operating activities
(0.8)
(0.5)
(2.2)
4.5
(1.8)
(0.2)
(3.1)
2.8
Underlying cash conversion for the year was better than the Board’s
expectations at 65.6% (2017: 54.8%) due to better than planned
collection of receivables in the second half of the year. Prior to 2017,
the Group has achieved higher levels and a reduction was planned
as the Group invests in self-processing and builds a book of claims
as part of its strategic transformation of the Personal Injury
division. The Group anticipates returning to higher levels of cash
conversion as these claims mature.
The Group made £6.4m of dividend payments to shareholders
during the year (2017: £8.2m), which represented the 2017 final
dividend and the 2018 interim dividend. £0.9m of drawings were
paid to the ABS partners during the year under the terms of our
agreements. This was the first year of payments.
The Group drew down £4.1m on its RCF during the year.
New accounting standards
The Group has adopted two new accounting standards during
the year – IFRS 9 Financial Instruments and IFRS 15 Revenue
from Contracts with Customers.
The adoption of IFRS 15 did not result in any adjustments to the
financial statements in either the current or prior years.
The adoption of IFRS 9 required a change in the accounting policy for
receivables and a revision to the calculation of provisions for doubtful
debts, which are now performed on an expected credit loss basis.
As a result of this change, an adjustment of £0.8m (net of deferred
tax) was made to retained earnings, which is explained in note 30.
The resulting provisions for doubtful debts at 31 December 2018
was £0.9m (2017: £1.1m).
On 1 January 2019, the Group will adopt IFRS 16 Leases.
After conducting an impact assessment, the Group does
not believe that adoption will result in a material impact on
the financial statements. See note 1 to the consolidated financial
statements for further details.
In conclusion, the Group’s financial position remains robust. We
have strengthened the business in 2018 and remain on track to
create a sustainable financial model to capitalise on the
opportunities available to us.
James Saralis
Chief Financial Officer
18 March 2019
24
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Key Performance Indicators
The Board monitors a number of key performance indicators (KPIs)
to assess the Group’s performance against its strategic objectives.
These KPIs comprise financial and non-financial measures and
include alternative performance measures, as defined in note 1 to
the financial statements. The non-financial KPIs are not directly
reflected in the Group’s financial statements but are assessed on
a regular basis and managed by the respective divisional
management teams.
A number of these KPIs are presented on this page as the Directors
believe that they provide additional insight into performance from
the perspective of shareholders and other stakeholders.
Profitability
Underlying EPS (Basic) (p)
This profit metric, excludes exceptional and non-underlying costs; and
the profit attributable to non-controlling interests; and is presented
on a per share basis. It is defined in note 1 to the financial statements.
2018
2017
2016
2015
2014
18.2
25.0
25.0
31.3
29.0
Cash generation
Free cash flow (£m)
Marketing services
Enquiries/Instructions generated
Free cash flow comprises the cash that the Group has generated
from operating activities, less cash used in investing (including
capital expenditure), less payments made to non-controlling
interests. As free cash flow grows, the Group has more resourced
to pay down debt and make dividend payments to investors.
Our ability to generate personal injury enquiries and conveyancing
instructions are a core competency and demonstrate the strength
of our brands. These represent leading indicators of our ability to
generate revenue.
2,900
2,424
2018
2017
2016
2015
2014
1,352
8,682
8,361
2018
2017
2016
2018
2017
2016
65,468
66,457
61,307
64,611
35,248
48,171
National Accident Helpline
Residential Property
Service provision
Expert reports
Claims underway/Cases managed in the year
Reports issued in Critical Care/Residential Property
We generate revenue through processing claims in Personal Injury
and through managing cases in Critical Care.
We charge fees for expert reports. In Critical Care we issue expert
witness reports and initial needs assessments and in Residential
Property we issue surveys and search reports.
4,515
61,307
2018
2017
2016
2018
2017
2016
13,503
2018
2017
2016
1,110
2018
1,047
989
2017
2016
88,696
95,397
98,201
1,292
1,175
1,213
Claims underway in ABSs
Open case management
Residential Property
Critical Care
cases in CC
NAHL Group plc Annual Report and Accounts 2018
25
CSR PRINCIPAL RISKS AND UNCERTAINTIES
The Board has ultimate
responsibility for risk management
Senior management lead an ongoing identification and assessment process of the key risks (both financial and non-financial), which is
reviewed quarterly by the Executive Directors and presented annually to the Board. The review process includes an evaluation of the
detailed risk registers and is designed to ensure that significant risks are identified and prioritised according to the likelihood of the event
occurring and the impact of that event. Once the risks have been assessed, appropriate mitigation actions are implemented. The principal
risks identified are as follows:
Principal risk
Description
Mitigation
Impact of
regulation
The Group operates in a number of regulated markets. In
Personal Injury, this includes the need to comply with the
provisions of the LASPO Act 2012 and regulation by both the
Claims Management Regulation Unit (CMRU) of the Ministry of
Justice (MOJ) and the Solicitors Regulation Authority (SRA).
Non-compliance could result in additional costs and/or
reputational damage.
Regulatory oversight for claims management companies will
transfer from the CMRU to the Financial Conduct Authority (FCA)
in April 2019. If the Group were to fail to adapt to this change then
the risk of non-compliance could increase.
Regulations and laws are open to change as demonstrated by the
Government’s decision to change the small claims limit and
restrict compensation for soft tissue injuries in the Civil Liabilities
Bill, due to be implemented in April 2020. The main
consequences of this Bill are well documented, however, some
key details of implementation still need to be clarified. In the event
either the Group or its customers fail to, or are unable to, change
their business models then this could have a significant impact on
the Group’s future prospects.
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 working closely with the FCA as it
plans its transition.
The business model has proven to be adaptable and resilient to
change in the past and continues to develop in response to
regulatory change including our current re-engineering of our
Personal Injury division.
The Group is working closely with the MoJ and other stakeholder
groups to get clarification of the key aspects of regulatory
implementation. The Board will continue to review the model for
appropriateness as the regulatory environment develops and
adapt accordingly.
Brand and
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.
These brands, which include National Accident Helpline, a number
of residential property brands and the Bush & Co brand, are
exposed to the risk of being tarnished by any significant adverse
publicity, including being falsely accused of using unethical
marketing techniques such as cold-calling, which could adversely
impact the Group’s financial performance.
Quality and Independence
The Group’s success in the Critical Care sector is largely dependent
on the quality of its consultants and expert reports; and the
preservation of high standards of clinical governance. 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.
The Group engages external advisors to help protect its
corporate profile and advise on public relations. The
performance of the Group’s brands are tracked and actions
taken to ensure they remain effective and ahead of competitors.
In Personal Injury, our brands operate in regulated
environments, which provides additional protection against
unethical marketing practices. False attribution of cold-calling
is mitigated through our clearly documented ethical approach to
marketing; our work with the Government’s Insurance Fraud
Task Force and the Department of Culture, Media and Sport to
ban cold-calling; and through supporting consumers making
complaints to the Regulator where they have suffered from
cold-calling.
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 protects its brand
and its reputation. Quality is maintained by a clinical supervision
process supported by highly trained case administrators.
Clinical governance is the cornerstone of Bush’s business and
all consultants have a mixed caseload of claimant and
defendant instructions.
26
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Principal risk
Description
Mitigation
Market
disruption
Online marketing
The Group relies on its marketing strategy to retain its market
leading position in Personal Injury and Residential Property. Any
significant change in technology, cost of acquisition, or changes
to search engine algorithms could impact the Group’s ability to
maintain its rankings on search results and increase the cost to
achieve its revenue targets.
Panel Demand in Personal Injury
The Group is partially dependent upon its Panel Law Firm
customers in order to maintain a flexible distribution strategy.
The forthcoming regulatory reforms have prompted some law
firms to review their level of investment in personal injury cases
and seen some close their doors to new business altogether. If
this is more prevalent in our panel than we have planned, there is
a risk that it could have an impact on the financial performance of
the Group, specifically a reduction in short-term profits due to an
increase in the working capital required to process additional
enquiries in our ABSs.
Residential Property Market
A significant and prolonged deterioration in the UK residential
property market could result in a reduction in house prices and a
reduction in the volume of instructions sourced by our Residential
Property division.
This would limit our ability to achieve our financial forecasts.
This could include, but not be limited to, the impact of Brexit on the
market. Whilst a positively received outcome on Brexit could boost
the market with an increase in supply of houses to sell, a no-deal
outcome or delay to the leave date could result in further
uncertainty and a slower market as buyers and sellers retrench
and delay planned moves. This could result in lower levels of
instructions and have a financial detriment to our plans.
The Group has extensive experience of managing its marketing
strategy through a combination of internal marketing experts
and external agencies. The Group strengthened its internal
competencies during 2018 and reduced its reliance on agencies
to ensure it has the flexibility and capability required to react to
the potential risks outlined. The Group also transitioned to a
leading digital search agency during the year to support its paid
search activity in Personal Injury.
The Group continues to provide its customers with high quality
enquiries that ensures they maximise their financial return. In
order to secure stability of distribution, the Group has provided a
limited number of panel firms with enhanced credit terms, which
are managed very carefully.
In recent years, the composition of the panel has changed and
the Group seeks to ensure that no single customer accounts for
a disproportionate amount of the Group’s business each month.
Whilst the Group sees flexibility of distribution as an important
part of its strategy, the development of the Group’s ABSs has
ensured that it can manage the placement of its enquiries
strategy and reduce the concentration risk.
The Group are continually monitoring market trends and adjust
our forecasts accordingly. Revenues derived from conveyancing,
surveys and searches are largely linked to the volume of
instructions processed rather than house prices.
The risk of a house price ‘crash’ would be mitigated through our
focus on the first-time buyer market, which would likely be less
impacted, and our value proposition, which may be more
important to home owners in a distressed market.
The Directors believe that the impact on the property market
is the only material exposure to Brexit risk and is mitigated
as above.
NAHL Group plc Annual Report and Accounts 2018
27
CSR PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal risk
Description
Mitigation
Business model ABS Performance
An increasing volume of personal injury claims are now processed
in our ABSs, which exposes us to financial risk based on case
performance. Performance levels that are lower than forecast
could impact the quantum and timing of revenue recognition and
cash conversion thereby having a material impact on the Group’s
financial prospects.
For our joint-venture ABSs, we rely on the ability of our ABS
partners to process work in a way that is consistent with the
assumptions we have made in our business models.
Demand for consultants in Critical Care
Competition for the best case managers and expert witnesses
remains high within the sector. A failure to attract and retain high
quality consultants could constrain our capacity and limit our
ability to hit our financial forecasts.
Our assumptions have been produced in conjunction with our
ABS partners, who are themselves experienced and successful PI
law firms, and using our 25 years of experience of working with
panel law firms. We update our assumptions regularly to reflect
actual performance. This gives us confidence that the
assumptions are realistic and achievable.
We maintain control over our wholly owned ABS and have in place
a comprehensive set of metrics to help manage the performance
of each cohort of claims.
In our joint-ventures, we work closely with our ABS partners to
manage performance through weekly performance reviews,
contractual SLAs and monthly Board meetings. We also exercise
audit rights over the book.
In Critical Care, we offer our consultants a chance to be part of
an award winning, supportive and growing team with extensive
training to support their CPD requirements; access to clinical
specialists; and opportunities to network with their peer group.
Consultants value the scale of the business, which provides
geographical benefits, and the level of back office support that
smaller competitors cannot match. In 2019 we are investing to
enhance our consultant proposition and further differentiate
ourselves from our competitors.
Transformation In pursuing its transformation strategy within Personal Injury, the
Group may incur substantial unforeseen costs and issues which
could divert management attention from the day-to-day
business.
The Board closely monitors the execution of the strategy through
a programme governance group, chaired by a Non-Executive
Director (Tim Aspinall) and includes the Executive Directors
and management.
Financial
The regulatory changes discussed above along with the high
acquisition cost of personal injury claims is resulting in
consolidation among small and medium sized personal injury
firms, with some firms ceasing to take on new business or trade
entirely as a result. This presents an increased credit risk,
including the risk of insolvency among panel firms.
Detailed project plans and risk registers are maintained for each
element of the transformation programme, with a focus on
technology and people, and costs are subject to budgetary
control.
Within Critical Care, settlements are made from client funds which
are held in trust account under SRA rules. This provides
protection against credit risk.
Within Personal Injury, smaller panel firms are required to provide
deposits to limit the financial exposure of the Group. A small
number of firms are permitted extended credit terms, but these
are limited and carefully controlled. Firms are credit checked and
financial information is regularly reviewed by management to
ensure ongoing credit-worthiness. The Group operates a
delegated authority list, which includes approval of extended
credit terms by the Board for significant exposures.
The Group has adopted IFRS 9 Financial Instruments during the
year and provides for debts on an expected credit-loss basis.
At 31 December 2018 the Group had provisions for doubtful debts
amounting to £0.9m.
28
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Principal risk
Description
Mitigation
IT, systems and
data security
The Group utilises various IT systems in support of the business,
including website and call centre technologies. It depends on these
systems to deliver the various service offerings to customers and
consumers. A major IT or system failure, or a malicious attack, data
breach or viruses could interrupt our ability to provide those
services.
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.
In Personal Injury and Residential Property, 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.
Regular assessment of vulnerability to malicious attacks is
performed and any weaknesses are rectified. All employees sign
up to the Group’s IT policy which, along with various anti-virus
tools, is designed to protect the business from attack.
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.
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, GDPR and other relevant
regulations.
People
The Group’s future growth and success depends, in part, on the
leadership and performance of its Executive Directors and senior
leadership team. The loss of a 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 performance-related pay
in the short-term and through share options for medium and
long-term retention.
In addition, high employee turnover in operational areas of the
business could risk successful delivery of key operations, which
could result in reputational damage and an impact on financial
performance.
The Group enjoys low employee turnover compared to its peers
and high levels of employee engagement. This is achieved
through the development of its values-led culture with strong
leadership, high levels of organisational capability and a focus on
employee development. The Group operates learning and
development initiatives to increase job satisfaction and promote
the opportunity for internal succession.
This strategic report was approved by the Board on 18 March 2019 and signed on its behalf by:
Caroline Brown
Chair
18 March 2019
NAHL Group plc Annual Report and Accounts 2018
29
CSR CORPORATE AND SOCIAL RESPONSIBILITY
Proud of
our service
At NAHL Group plc, we take pride in the service
we deliver and the manner in which we deliver it.
We believe our approach to our customers, our
investment in our people, and our methodologies
for achieving success make us more than just
another legal services provider.
We maintain a passionate commitment to improving
the lives of everyone connected with our brand and
believe we have a duty to care for our colleagues as well
as the wider community. It’s a belief underpinned by the
four key values of our brand; to always be Passionate,
Driven, Curious and Unified.
Working tirelessly to improve the life experience of our
employees, our clients and those people who have
suffered misfortune, we also push back against an
industry plague of cold-calling and dishonest
marketing.
An impressive 83.4%
of our people agree or
strongly agree that
‘Our values guide the way
we work.1
30
NAHL Group plc Annual Report and Accounts 2018
We’ve helped nearly 2,000 people
make official complaints about cold
calls in the last four years and this
ethical approach will remain part of
our foundation as a business.2
Social Purpose
Standing firm in a turbulent industry
When we began our mission to bring justice to those
affected by accidents back in 1993, we did so with a
people-first ethos that has remained steadfast.
Upcoming changes to legislation such as the Civil
Liability Bill look set to change the industry in ways we
are unconvinced are in the interests of the injured. This
is partly the reason we are making significant
investment into a dedicated, digitally-enabled, small
claims-ready law firm in the first half of 2019.
Accidents will still happen, and people will still suffer
physically, mentally and financially as a result. We need
to be prepared to maintain access to justice for all.
Championing a more ethical approach
We possess both a commitment and duty to protect the
public from some of the more aggressive, intrusive
practices which emanate from our industry.
In 2012, we tabled amendments to the Legal Aid,
Sentencing and Punishment of Offenders Act (LASPO)
and made our stance clear on nuisance calls which
continue to afflict the PI claims industry.
Following extensive work with the Government’s
Insurance Fraud Task Force and the Department of
Culture, Media and Sport, we were pleased to see a
number of regulations introduced that should reduce
cold calls in our sector.
To now support effective enforcement, the Group has
established processes with the Information
Commissioner’s Office (ICO) and Claims Management
Regulator (CMR) allowing us to provide an exceptional
level of data to support our sector in the fight against
cold calls.
We’ve helped nearly 2,000 people make official
complaints about cold calls in the last four years and
this ethical approach will remain part of our foundation
as a business.
1. Assessment Report, PI Division 2018 – Investors in People
2. National Accident Helpline complaints data log
Strategic Report
Governance
Financial Statements
Financial Statements
“The amazing opportunity to have a
work experience placement with a high-
quality law firm is an honour and will
allow to me to develop my
understanding of the practical work that
takes place in a legal environment . ”
– Gbemisola Martha Obolo, Future Legal Mind winner, 2018
Future Legal Mind
The Personal Injury division is also committed to
supporting young professionals looking to enter this
area of the legal sector and does this through its annual
Future Legal Mind competition. We believe it is crucial
to have the very best people engaged in the legal sector,
so this competition aims to give the brightest minds the
support they need today to make a difference
tomorrow.
The competition – now in its fifth year – challenges
entrants to show their expertise with a short essay
response to a given statement.
In 2018 the award was won by Gbemisola Martha Obolo
who said of her big win; “I feel encouraged and more
confident in myself. I am grateful that my hard work and
the skills that I have cultivated have been recognised.
The amazing opportunity to have a work experience
placement with a high-quality law firm is an honour and
will allow to me to develop my understanding of the
practical work that takes place in a legal environment.”
Communities
We believe that it’s within the strength of local
communities that lives can be improved. When
people of all backgrounds come together, the
potential for positive change is limitless.
As such, we invest heavily in local communities by
providing charities with the resources they need to
perform their outstanding and vital work.
Supporting young adults
We have a strong belief that the success of our
communities depends on the engagement of
young people.
Members of the Executive Team from NAH have,
for several years now, taken part in a Dragon’s Den
event at a local senior school, providing advice,
support and feedback to Year 7 students as they
work to develop a new product for pitching to the
Dragons in hope of a fictional cash injection. We also
sponsor one of the school’s end of term awards and
attend the awards evening to congratulate the
winners and show commitment to the school and all it is
hoping to achieve with its students.
NAHL Group plc Annual Report and Accounts 2018
31
CSRCSR CORPORATE AND SOCIAL RESPONSIBILITY CONTINUED
Communities
Ongoing commitment to charity
Supporting local charities has been a constant
endeavour throughout our history. We earmark a day
each year for a Family Fun Day where colleagues and
those who support them come together for fun and
food alongside fundraising activities. This year the
Group acted as main sponsor for the local Rotary
Dragon Boat Race which saw over 40 boats take to the
water. The Group’s sponsorship of and fundraising for
this event raised £6,000 for the local Rotary
organisation which this year is supporting two hospices
from the region.
Our calendar is full of additional charity events led by
our people. Events just this year have raised over
£1,200 for charities including the local food bank and
Breast Cancer Research.
The Paul Bush Foundation Trust
For three years the Group has supported the Paul Bush
Foundation Trust, donating over £180,000. Paul himself
sadly passed away in 2017 but his passion lives on in the
values and principles by which Bush & Company
operates.
Para Dance UK
In 2018, Bush & Company became a supporter of Para
Dance UK, the national governing body for Para Dance
Sport in the UK.
Its aim is to develop and promote dance as a sport and
an inclusive leisure activity across the country for those
who would otherwise be excluded. This fits perfectly
with Bush’s belief that engagement with dance and
movement not only has a positive affect on physical
health, but also a persons ability to engage with
rehabilitation following catastrophic injury.
32
NAHL Group plc Annual Report and Accounts 2018
74.6% of our people agree that ‘My
organisation has a possitive impact
on society for 2018.’3
One of the ways that Para Dance UK benefited this year
was from Bush’s charity auction at its Gala Dinner in
July. Over the course of the year Bush raised £4,940
which is the equivalent of 494 props or musical
instruments for the organisation to use in its lessons.
Bush is looking to extend this work in 2019 with
renewed commitment to the aims and objectives of
Para Dance UK.
Across the company 79.7% of
our people say ‘The Company
encourages community and
charitable activities’ – up from
65.6% in 2017.4
Strategic Report
Governance
Financial Statements
Financial Statements
Though we invest in marketing and
communicating our brand through an attractive
website, advertisements and strong messaging,
ultimately it is our people and their talents,
dedication and vision which has created a
company which continues to grow and touch the
lives of others.
This fact shapes how we interact with our employees
and how we can support them to achieve their full
potential. Rigorous training and robust people
development equips our staff with the skills they need to
deliver the very best for our customers and consumers.
Our leadership training focuses on giving current and
future leaders the tools to get the best from their
people, understand personal strengths, and deliver
on our mission and values.
In our Legal Support Centre, the training never stops.
With a full suite of KPIs monitored daily, we react
quickly to training needs with new modules and 1-2-1
coaching. This targeted approach means that every
member of the back-office team has a development
programme tailored to their individual development
needs.
A new approach to wellbeing
The wellbeing of our employees is paramount to our
business and we are determined to ensure they have
access to the support they need to achieve optimal
mental and physical health.
As a result of our efforts across all our
charitable endeavours, in this year’s annual
survey, 79.2% of our people agreed with the
statement that ‘The company cares about
the community it operates within’ – up from
53.2% in 2017.5
3. Assessment Report, PI Division 2018 – Investors in People
4. OwnIt! Group Staff Engagement Survey, 2018
5. OwnIt! Group Staff Engagement Survey, 2018
NAHL Group plc Annual Report and Accounts 2018
33
CSRCSR CORPORATE AND SOCIAL RESPONSIBILITY CONTINUED
Employees
We formalised a new approach to wellbeing following a
review in 2017 which includes:
¡ Wellbeing Hub – Our internal communications
platform SourceIt! now includes a specialist area
where colleagues can access everything from
healthy eating recipes to information on applying for
a loan or mortgage alongside exercise videos for
every level of fitness.
¡ Employee Assistance Line – Our employee
assistance line is open 24/7 and available to all staff
allowing them to discuss any issues in complete
confidence.
¡ Mental Health First Aiders – We recognise that
mental health should be held in equal regard to
physical wellbeing and so have introduced Mental
Health First Aiders to the business, ensuring
colleagues have a safe place to discuss any issues
and get signposting to further support.
¡ Added wellbeing extras – We know the ‘little things’
are important to our colleagues which is why we
provide free parking and breakfast.
Reward and recognition
Ultimately, the best way to ensure our workforce feels
valued and engaged with our mission, is by recognising
and rewarding their efforts - and give them the
opportunity to recognise and reward one another.
In 2018, as part of the relaunch of SourceIt!, our internal
communications platform, we revisited our offering and
launched eCards across the business so that colleagues
could welcome, congratulate and thank one another for
a job well done. These cards sit alongside Hero cards
(where recipients can receive a tangible gift from the
office Hero Store) and Star cards, awarded quarterly by
the Executive teams of each business to those who have
gone above and beyond to deliver.
We have also created an electronic ‘Wow Wall’ where
team members can see one anothers’ eCards and
messages as well as add their own, amplifying the
colleague’s recognition further.
34
NAHL Group plc Annual Report and Accounts 2018
Going for Gold
In 2018, following a period of research and assessment,
National Accident Helpline was awarded Gold standard
by Investors In People. This was an incredible
achievement, celebrating the excellent levels of staff
engagement that the business enjoys. The key
strengths highlighted through the assessment process
included:
¡ Involvement of people – Communications have
improved in terms of information cascade, within
and across teams, and via SourceIt!.
¡ Learning and development – There are extensive
and innovative opportunities to develop for anyone
demonstrating drive and potential.
¡ Company values – Are well embedded across the
organisation and used effectively in performance
management and recognition and reward.
¡ Future vision – There is a very clear view about
where the organisation is headed that people are
finding exciting and engaging.
¡ Using influence for good – The organisation is
applying itself to driving positive change in the
sector; people are proud of this stance and the
efforts to date.
When asked in 2017 ‘Is there is a strong
feeling of team work, co-operation and fun
across the Company’, only 63.6% of our
people agreed or strongly agreed with the
statement. Our determination to make ours
the best place for people to grow saw that
figure rise to 83.9% this year.6
Strategic Report
Governance
Financial Statements
Financial Statements
83.4% of our people agreed or strongly
agreed with the statement ‘I value my
organisation’s benefits package’ and an
impressive 78.1% agreed or strongly agreed
with the simple but powerful statement;
‘I feel appreciated for the work I do’.7
Hitting the Top 100
National Accident Helpline was also delighted to be named in the
Sunday Times Top 100 Small Companies to Work For - an
impressive achievement, especially as it was the first time it had
entered.
This accomplishment puts the business on a par with many major
businesses like Beaverbrooks and Toyota who value their staff and
are keen to give them a superior workplace experience.
As usual, the business celebrated with the staff who made it happen
and 16 colleagues from across the business attended the black tie
celebration at the Battersea Evolution.
Obviously, all staff weren’t able to attend so the business celebrated
the following week by decorating the office and presenting each
member of staff with a gift box.
In addition to the business’s success in the Top 100, it was also
placed number 13 in the Top 25 businesses in the Midlands. This
placement takes into account companies of all specialisms and
sizes and so to place so highly represents what a truly excellent
company National Accident Helpline is.
78.6% of our employees
agreed or strongly agreed with
the statement ‘I am given
praise and recognition when I
do a good job’.8
Statements to which employees agreed or strongly
agreed were based on assessment against the 6th
Generation of the Investors in People Framework from
April to June 2018. The assessment was conducted with
staff in the PI division in line with international Investors in
People assessment methodology. Assessment activities
included online assessment, interviews, observations
and desk top review.
6. OwnIt! Group Staff Engagement Survey, 2018
7. Assessment Report, PI Division 2018 – Investors in People
8. OwnIt! Group Staff Engagement Survey, 2018
NAHL Group plc Annual Report and Accounts 2018
35
CSRCSR
BOARD OF DIRECTORS
Trust in our leadership
Chair’s Introduction
to Governance
Dear Shareholder,
On behalf of the Board, I am pleased to introduce our Corporate
Governance statement for the year ended 31 December 2018.
The purpose of this section of the Annual Report is to set out our
commitment to good corporate governance, which should be read in
conjunction with our website which provides further detail.
The Board is ultimately responsible for Corporate Governance,
which is the way in which companies are directed and controlled.
We believe that good corporate governance is vital to support
long-term growth in shareholder value and to achieve this,
companies require an efficient, effective and dynamic management
framework that is accompanied by clear communication, which
helps to promote confidence and trust.
Corporate Governance Code
Companies listed on the main market of the London Stock
Exchange are required to comply with the Financial Reporting
Council’s UK Corporate Governance Code. NAHL Group plc’s
shares are traded on AIM and as such are not subject to the same
level of regulation. However, on 30 March 2018 the London Stock
Exchange implemented new rules for companies listed on AIM,
which required all companies to adopt a recognised corporate
governance code.
The Board has decided to adopt the Quoted Companies Alliance
(QCA) Corporate Governance Code (April 2018 edition). We believe
that the QCA code is a pragmatic, principles-based tool that
enhances the Group’s ability to explain its approach to corporate
governance and is appropriate for the needs and circumstances of
small and mid-sized quoted companies on a public market, such as
ourselves. It is based around a set of ten principles to which the
Group must either comply or explain why it does not comply.
Compliance with the QCA Corporate Governance Code
The ten principles of the code are set out in the table on page 41 to
42.
I can confirm that we are in compliance with the requirements
of the code and the table provides signposts to the relevant
disclosures and explanations.
Shareholder engagement
An important part of the QCA code concerns engagement and
communication with our shareholders. Our Investors section of our
website explains how we have sought to do this, including meeting
investors at our Annual General Meeting. I would like to extend an
invitation to all shareholders to attend our AGM which will be held
on 21 May 2019, and to engage with the Board and other members
of our senior leadership team who will be in attendance.
Caroline Brown
Non-Executive Chair
Caroline became Chair in January 2019 having joined the Board
on 18 December 2018. She is a Non-Executive Director and
commercially focused business leader with 20 years’ main
Board experience driving strategic growth and leading high
performing teams in the media, professional services, energy,
and technology sectors.
She has delivered business strategy across EMEA, the
Americas, former-CIS, India and the Far East in commercial
leadership roles for FTSE100 groups, mid-cap companies,
and innovative small and medium-sized enterprises.
Caroline is also a Non-Executive Director of Georgia Capital plc,
Luceco plc and Earthport plc
Her early career was in corporate finance with Merrill Lynch
(New York), UBS and HSBC advising global corporations and
governments. Caroline’s current portfolio is supported by a
strong interdisciplinary background. She is a Fellow of the
Chartered Institute of Management Accountants and an MBA.
We believe that good corporate
governance is vital to support long-
term growth in shareholder value.
36
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Russell Atkinson
James Saralis
Chief Executive Officer
Chief Financial Officer
Russell Atkinson became Chief Executive Officer of the Group,
following its admission to AIM in 2014.
James Saralis is Chief Financial Officer of the Group, which he
joined in January 2018.
He joined NAH in 2012 as Managing Director and had a pivotal
role in implementing its strategy following regulatory change
in 2013.
His responsibilities include the overall management of the
finance function within the Group and liaising with the Group’s
investors and the banks.
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 Lebara Mobile Limited and
Blackhawk Network (UK) Limited, a division of Safeway Inc.
as well as 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 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.
Tim Aspinall
Gillian Kent
Non-Executive Director
Non-Executive Director
Tim Aspinall became Non-Executive Director in June 2016 and
sits on the Audit, Remuneration and Nomination Committees.
Gillian Kent became Non-Executive Director in November 2014
and is Chair of the Group’s Remuneration Committee.
Tim runs 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.
Gillian is also an independent Non-Executive Director at
Pendragon plc, Ascential plc, Mothercare plc and Coull Ltd and
Chair 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).
NAHL Group plc Annual Report and Accounts 2018
37
CSRCSR EXECUTIVE MANAGEMENT TEAM
Simon Trott
Chief Executive Officer –
Personal Injury
Helen Jackson
Managing Director –
Critical Care
Simon is the Chief Executive Officer responsible for the Personal
Injury division’s executive leadership and business operations.
Helen was appointed as Managing Director at Bush & Company
in July 2016 having spent four years as Group HR Director.
This includes; National Accident Helpline, Your Law LLP &
National Law Partners in addition to our new wholly owned law
firm, National Accident Law.
Simon is leading the division through a period of transformational
change ensuring the Group capitalises on the changing personal
injury market alongside preparing for future regulatory changes.
He has executed a number of strategic business initiatives to
drive efficiencies and create strong lasting partnerships, created
our new law firm, relaunched the NAH brand and developed
enhancements in the consumer journey.
Previously, Simon spent 20 years in senior positions within the
general insurance industry, most recently at Towergate
Partnership Group, culminating in his roles as CEO of Towergate
Direct Division & RKH Group.
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.
More recently of note, Helen led Bush in launching two industry
leading ventures with the Spinal Injuries Association and Child
Brain Injury Trust (both prominent charities in the sector),
reinforcing the Company’s market positioning as the leader in
catastrophic injury in case management, building on Bush’s 30
years of success within the Critical Care sector.
Previously, Helen held HR leadership roles at Everest, BUPA and
Tesco.
Will Herbertson
Managing Director –
Residential Property
Marcus Lamont
Group HR Director
Will Herbertson joined the Group as Managing Director of the
Group’s Residential Property division in September 2018.
Will is responsible for managing the Fitzalan Partners Ltd
(conveyancing and surveys) and Searches UK Limited (property
searches) businesses.
Will brings extensive commercial, marketing and digital leadership
experience to the division. Prior to joining the Group, Will was a
Commercial Director at MoneySupermarket where he had
responsibility for one of the Company’s three product verticals.
Will has also held both UK and international sales and marketing
positions at Procter & Gamble, where he started his career.
He has a Bachelor’s Degree in Management Science from the
University of Warwick Business School.
Marcus joined 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.
Passionate about staff engagement and recognition, Marcus recently
delivered Gold Standard Investors in People status for the Personal
Injury division as well as ensured its inclusion for the first time in the
Sunday Times Top 100 Best Small Companies to work for.
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.
38
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
THE BOARD
Board composition
The Board comprises the Non- Executive Chair, two independent
Non-Executive Directors and two Executive Directors. Their
biographies can be found on page 36.
There is a clear separation of the roles of Non-Executive Chair and
Chief Executive Officer. The Chair, Caroline Brown, is responsible
for the running of the Board and for ensuring that all Directors are
fully informed of matters, sufficient to make informed judgements.
As Chief Executive Officer, Russell Atkinson has responsibility for
implementing the strategy agreed by the Board and managing the
day-to-day operations of the Group. He is supported in this role by
the Chief Financial Officer, James Saralis, and other senior leaders
in the Group.
As Company Secretary, James Saralis, who is also an Executive
Director, supports the Board with compliance and governance
matters. The Board believes this is appropriate given the size and
complexity of the Group and he reports directly to the Chair
on governance matters and where any potential conflicts between
the two roles arise.
The Board has determined that the Non-Executive Directors are
independent, experienced and influential individuals with
complementary skill sets. Members of the Board maintain
memberships of a number of professional bodies and ensure their
skill sets are constantly developed. As part of our ongoing
commitment to staff development, Executive Directors and senior
leaders have personal development programmes which include
mentoring, attendance at high level leadership programmes and
individual support for specific and identified development needs
and to ensure they are kept up to date on relevant legal
developments or changes in best practice.
The Nomination Committee is responsible for considering the
makeup of the Board and identifies any succession planning
requirements.
No individual or group dominates the Board’s decision-making
processes.
The role of the Board
The Board sets the strategic aims of the Group and its values,
provides the leadership required to put them into effect, supervises
and constructively challenges management, who are responsible for
the day-to-day running of the Group, and reports to shareholders on
their stewardship. The Board is also responsible for risk management,
and we have set out our approach to risk management in the
Principle Risks and Uncertainties section of the Annual Report on
page 26.
The Board met nine times during 2018 and the meetings last for
approximately half a day. In addition to this, all Directors attend an
annual strategy planning day, which was held on 2 October 2018,
and the Group's Annual General Meeting, which is usually held in
May. Additional meetings or conference calls are convened as
required. Members of the Board also chair and sit on the Board
Committees and these each have their own time commitments.
Non-Executive Directors are contracted to the following minimum
time commitments:
¡ Caroline Brown (Chair) – 35 days per annum
¡ Gillian Kent – 20-24 days per annum
¡ Tim Aspinall – 20 days per annum
Executive directors are contracted on a full time basis to the Group.
The following table shows the Directors’ attendance at Board and
Committee meetings during the year:
Board
Audit
Remuneration
Nomination
Caroline Brown*
Steve Halbert
Russell Atkinson
James Saralis
Gillian Kent
Tim Aspinall
–
11/11
11/11
11/11
11/11
11/11
–
4/4
–
–
4/4
4/4
–
3/3
–
–
3/3
3/3
–
2/2
–
–
2/2
2/2
* Caroline Brown was appointed as a Director on 18 December 2018.
The Group's Annual General Meeting is held in May and all Board
members attend in addition to senior leaders from across the
business.
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.
Board effectiveness
The Chair annually reviews the contributions of Board members,
with a focus on ensuring effectiveness and relevance. The Board
periodically reviews its effectiveness and performance as a unit to
ensure that it is operating collectively in an efficient, informed,
productive and open manner. The Board intends to undertake its
next review in the first half of 2019.
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.
The Group continues to review its system of internal control to ensure
compliance with best practice, whilst also having regard to its size and
the resources available. The Board considers that the introduction
of an internal audit function is not appropriate at this juncture.
NAHL Group plc Annual Report and Accounts 2018
39
CSRCSR THE BOARD CONTINUED
Board Committees
To assist it in carrying out its duties, the Board has set up three committees comprising the Audit Committee, the Remuneration
Committee, and the Nomination Committee with formally delegated duties and responsibilities and with written terms of reference.
From time to time separate committees may be set up by the Board to consider specific issues when the need arises. An explanation of the
responsibilities and composition of these committees is set out below and the terms of reference can be downloaded from our website.
Audit Committee
The Audit Committee consists of:
Remuneration Committee
The Remuneration Committee consists of:
Nomination Committee
The Nomination Committee consists of:
Caroline Brown Chair
Gillian Kent
Tim Aspinall
Gillian Kent Chair
Caroline Brown
Tim Aspinall
Caroline Brown Chair
Gillian Kent
Tim Aspinall
Steve Halbert chaired the Audit
Committee during 2018 and 2019 until
his resignation from the Board on 30
January 2019.
Steve Halbert was a member of the
Remuneration Committee during 2018 and
2019 until his resignation from the Board
on 30 January 2019.
Steve Halbert chaired the Nomination
Committee during 2018 and 2019 until
his resignation from the Board on 30
January 2019.
The Nomination Committee is expected
to meet not less than once a year and
at such other times as required. It has
responsibility for reviewing the structure,
size and composition (including the skills,
knowledge and experience) of the Board,
and giving full consideration to succession
planning. It also has responsibility for
recommending new appointments to
the Board.
The Audit Committee is expected to
meet formally at least twice a year and
otherwise as required. It has
responsibility for ensuring that the
financial performance of the Group is
properly reported on and reviewed, and
its role includes monitoring the integrity
of the financial statements of the Group
(including annual and interim accounts
and results announcements), reviewing
internal control and risk management
systems, reviewing any changes to
accounting policies, reviewing and
monitoring the extent of the non-audit
services undertaken by external
auditors and advising on the
appointment of external auditors.
The Remuneration Committee is expected
to meet not less than twice a year and at such
other times as required. The Remuneration
Committee has responsibility for
determining, within the agreed terms
of reference, the Group’s policy on the
remuneration packages of the Company’s
Chief Executive, the Chair, the Executive
and Non-Executive Directors, the Company
Secretary and other senior executives.
The Remuneration Committee also has
responsibility for:
i. determining the total individual
remuneration package of the Chair,
each Executive Director and the Chief
Executive Officer (including bonuses,
incentive payments and share options
or other share awards); and
ii. determining the total individual
remuneration package of the Company
Secretary and all other senior executives
(including bonuses, incentive payments
and share options or other share
awards), in each case within the terms
of the Group’s policy and in consultation
with the Chair of the Board and/or the
Chief Executive Officer. No director or
manager may be involved in any
discussions as to their own
remuneration.
40
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
CORPORATE GOVERNANCE STATEMENT
The QCA Corporate Governance Code
The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code. Set out below are the ten key principles of the
code and a brief explanation as to how we currently comply with each.
Governance principles
Explanation
Further reading
Deliver growth
1. Establish a strategy and business
model which promote long-term value
for shareholders
Our vision is to become the leading provider in our chosen
consumer legal services markets; and to provide exceptional
service to our consumers and customers by being
outstanding at everything we do. Our investment case
explains why we believe we can deliver long-term value to
shareholders.
Ú See page 1
(Investment Case)
and pages 2 to 3
(At a Glance)
Ú See our Group website
(About Us)
2. Seek to understand and meet
shareholder needs and expectations
3. Take into account wider stakeholder
and social responsibilities and their
implications for long-term success
Ú See our Group website
(Investors)
Ú See pages 12 to 14
Ú See pages 30 to 35
Ú See page 26
The Group aims to maintain an ongoing dialogue with
shareholders throughout the year, to manage their
expectations and understand the motivation behind
shareholder voting decisions. Our Investors section of our
website explains how we have sought to do this, including
meeting investors at our AGM.
The long-term success of the Group depends upon our
interaction with our wider stakeholder base – consumers,
our partners, employees, regulators and the wider
community. The Corporate and Social Responsibility section
of our annual report sets out how we engage with employees
and our communities; and our Divisional Reviews explain the
interaction with our consumers.
We are regulated by the CMRU (who are transferring
responsibility for regulation to the FCA from April 2019),
the SRA and CQC. Given the nature of the work we
undertake, an effective relationship with our regulators is
an important aspect of our operations. The Principle Risks
and Uncertainties section of our annual report sets out how
we manage that engagement.
Feedback from our stakeholders is encouraged through
regular meetings including with senior leaders from each
division and the Group who evaluate this on a case by case
basis.
4. Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
The Board has ultimate responsibility for risk and has
embedded a process to identify and seek to mitigate key risks
within the business. This process, along with the key risks,
are described on pages 26 to 29.
Ú See page 26 to 29
Maintain a dynamic
management
framework
5. Maintain the Board as a well-
functioning, balanced team led by
the Chair
The Chair leads the Board and is ultimately responsible for all
matters of Corporate Governance. The composition and role
of the Board are described on page 39, including the number
of meetings held by the Board and its committees and the
time commitment of Directors. The Board considers that
there is an appropriate balance between Executive and
Non-Executive Directors and has determined that the
Non-Executive Directors are independent.
There is a regular and timely information flow to all Directors
concerning the Group’s operational and financial
performance ahead of scheduled Board meetings. In
addition, all Directors have access to the advice and services
of the Company Secretary and are able to take independent
professional advice in the execution of their duties, at the
Company’s expense.
Ú See page 39
Ú See our Group website
(Maintaining an
effective Board,
Meet the Board,
Meet the Senior
Leaders, and
Our Committees)
NAHL Group plc Annual Report and Accounts 2018
41
CSRCSR CORPORATE GOVERNANCE STATEMENT CONTINUED
Governance principles
Explanation
Maintain a dynamic
management
framework continued
6. Ensure that between them the
Directors have the necessary up-to-date
experience, skills and capabilities
The Board considers that there is currently an appropriate
balance of sector, financial and public markets skills and
experience, as well as an appropriate balance of personal
qualities and capabilities. Biographies of Board members are
on pages 36 and 37. Directors maintain their knowledge and
skills sets by attending relevant seminars and role or industry
specific events and the Executive Directors each have
tailored development plans to support their needs.
The Nominations Committee is responsible for considering
the makeup of the Board and identifies any succession
planning requirements. Where new appointments are
necessary, the Committee leads a search process; seeks
advice from the Group’s advisers and considers other
matters, such as diversity, including gender balance.
No individual or group dominates the Board’s decision-
making process.
Further reading
Ú See pages 37 to 39
Ú See our Group website
(Maintaining an
effective Board and
Meet the Board)
7. Evaluate board performance based on
clear and relevant objectives, seeking
continuous improvement
8. Promote a corporate culture that is
based on ethical values and behaviours
9. Maintain governance structures and
processes that are fit for purpose and
support good decision-making by the
Board
The Chair reviews the contributions of Board members, as
well as the Board Committees and conducts effectiveness
reviews. The next review is due to be undertaken in H1 2019.
Executive Directors have personal development programmes
and the Nominations Committee is responsible for
considering the makeup of the Board and identifying any
succession planning requirements.
Ú See page 39
Ú See our Group website
(Maintaining an
effective Board)
The Group has a strong corporate culture that is embedded in
the business and underpins our strategy. This is described in
the Chief Executive’s Q&A on page 20 and can be demonstrated
in our Corporate and Social Responsibility section on pages
30-35. Our employees value and are attracted by our culture
and this helps us to mitigate the people risk described on
page 29.
Ú See pages 20, 29
and 30 to 35
Ú See our Group website
(Our Culture and
Our Values)
The governance structure adopted by the Group is set out in
the Governance section of this annual report and on our
Group website. This includes, but is not limited to, the
composition and role of the Board; roles and responsibilities
of the Board; the roles of Board Committees and the
compliance with our chosen corporate governance code.
The terms of reference of our Board Committees is available
on our Group website. The Board believes our governance
framework is consistent with our culture and appropriate to
our size and requirements. We will continue to evolve our
governance framework, as necessary.
Ú See pages 36 to 53
Ú See our Group website
(Governance)
Build trust
10. Communicate how the Group is
governed and is performing by
maintaining a dialogue with
shareholders and other relevant
stakeholders
The Group aims to maintain an ongoing dialogue with
shareholders throughout the year, to manage their
expectations and understand the motivation behind
shareholder voting decisions.
The Board’s primary contact with shareholders is through
the Chief Executive and Chief Financial Officer, who aim to
develop an understanding of the views of major institutional
shareholders by meeting with them at least twice a year,
normally as part of a roadshow after the announcement of
the full year and interim results. They also attend certain
private shareholder events throughout the year and ensure
reports on any meetings are made to the Board.
In addition, major shareholders are invited to raise any company
matters of interest to them at meetings with the Chair of the
Board and the Chair of the Remuneration Committee. Private
shareholders are invited to write to the Chair or any other
Director and express their views on any issues of concern at any
time and the AGM provides an opportunity for private
shareholders to put their questions in person.
Ú See pages 36 and the
reports from the Audit
and Remuneration
Committees on
pages 36 to 53
Ú See our Group website
(Investors)
42
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
DIRECTORS’ REPORT
The Directors of NAHL Group plc present their Annual Report and audited consolidated financial statements for the year ended 31
December 2018.
Results and dividend
The Group’s profit after tax for the year was £8.4m (2017: £10.0m).
The Directors propose a final dividend of 5.7p (2017: 10.6p) per share which, subject to approval at the Annual General Meeting, will be
paid on 31 May 2019 to shareholders registered on 26 April 2019.
There are no significant events affecting the Company and the Group since the balance sheet date. A review of the business, including
future developments, is included in the Strategic Report on pages 1 to 29.
Substantial shareholdings
The Group was notified of the following interests amounting to 10% or more of its issued share capital at the financial year end:
Schroder Investment Management - 14.35%.
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 37 to 38.
Details of the remuneration of the Directors is disclosed in the Remuneration Report on pages 48-49.
Political donations
No political donations were made during the year or the previous year.
Disclosure of information to the Auditors
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 Auditors are unaware; and
¡ the Director has taken all the steps that ought to have been taken as a Director in order to make him/herself aware of any relevant
audit information and to establish that the Group’s Auditors are 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
PricewaterhouseCoopers LLP has been 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 29.
Going concern
The Group’s business activities, together with risk factors which impact these activities are included within the Strategic Report on
pages 26 to 29. 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.
NAHL Group plc Annual Report and Accounts 2018
43
CSRCSR DIRECTORS’ REPORT CONTINUED
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
18 March 2019
44
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have prepared the
Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and
company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
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 company and of the profit or loss of the group and company for that period. In preparing the financial
statements, the Directors are required to:
¡ select suitable accounting policies and then apply them consistently;
¡ state whether applicable IFRSs as adopted by the European Union have been followed for the group financial statements and IFRS as
adopted by the European Union have been followed for the company financial statements, subject to any material departures disclosed
and explained in the financial statements;
¡ make judgements and accounting estimates that are reasonable and prudent; and
¡ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure
that the financial statements comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ confirmations
In the case of each Director in office at the date the Directors’ Report is approved:
¡ so far as the director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware; and
¡ they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s auditors are aware of that information.
NAHL Group plc Annual Report and Accounts 2018
45
CSRCSR AUDIT COMMITTEE REPORT
Financial reporting council letter
The Group received a letter from the Financial Reporting Council’s
(FRC) Corporate Reporting Review team on 18 October 2018, in
which it stated that it had carried out a review of the Group’s annual
report for the year ended 31 December 2017. This was further to
informing us during 2017 that the Group had been selected to take
part in the FRC’s thematic review of smaller listed and AIM
company reports and accounts.
In its letter the FRC sought clarification on the basis for the
impairment assessment performed on the investment held by the
Parent Company and made some recommendations to enhance
the disclosures around revenue recognition and critical judgements
and estimates. Whilst there was no suggestion that the figures or
disclosures in 2017 were inaccurate, the Committee accepts that
fuller disclosure would enhance the readers’ understanding of the
financial statements. Accordingly, the accounting policy for
revenue and the critical judgements and estimates in note 1 have
been updated this year to reflect this advice along with note 2 to the
Parent Company financial statements on page 90. There has not
been a requirement to restate any prior period amounts. The FRC
subsequently issued a closure letter and has ended its review.
External audit process
The external auditor prepares a plan for its audit of the full year
financial statements, which is presented to the Committee in
November. The audit plan sets out the scope of the audit, areas of
significant risk to focus their work on and audit timetable. This plan
is reviewed and agreed in advance by the Audit Committee.
Following its external audit process, the auditor presented its
findings to the Audit Committee for discussion. No major areas of
concern were highlighted by the external auditor during the year,
however, areas of significant risk and other matters of audit
relevance were discussed.
Critical accounting judgements and key sources of
estimation uncertainty
The critical accounting judgements considered by the Committee
during the year are set out in note 1 to the financial statements on
page 62. In consideration of these judgements, the Committee
reviewed the recommendations of the finance function and
received reports from the external auditors on their findings.
These judgements comprised the following.
¡ The decision to consolidate the results and net assets of two
Limited Liability Partnership (LLP) law firms in the financial
statements. The committee considers that Your Law LLP and
National Law Associates LLP, trading as National Law Partners,
are controlled through the Group’s 100% subsidiary, Project
Jupiter Limited who is entitled to appoint the majority of
members to the management Boards and so the Group are
correct in consolidating these entities within the financial
statements with a corresponding non-controlling interest
recognised for our partner firms’ share of profit, total
comprehensive income and net assets.
The Committee has also considered the key sources of estimation
uncertainty which comprise three items as follows.
¡ The revenue recognition on provision of legal services. The
Group recognises revenue in its ABSs using the expected value
method provided by IFRS 15 Revenue from Contracts with
Customers. There is uncertainty in determining the transaction
price, which is dependent on the stage at which a claim settles
and the quantum of final damages, but management use
historical experience and average fee history in order to
calculate an estimated price. The estimate is revised as the
claim progresses and assumptions are updated to reflect actual
Caroline Brown
Chair of the
Audit Committee
Dear Shareholder,
I am pleased to present the report of the Audit Committee for
the year ended 31 December 2018.
The composition and responsibilities of the Committee are set
out on page 40. The Chief Executive Officer, Chief Financial
Officer and external auditors attend the Committee by invitation
if required.
The main items of business considered by the Committee during
the year included:
Appointment of the external auditor
The Committee considers a number of areas when reviewing
the external auditor appointment, namely their performance
in discharging the audit, the scope of the audit and terms of
engagement, their independence and objectivity, and remuneration.
The Committee concluded that after four years with KPMG as the
Group’s external auditors, a competitive tender process should be
conducted and as a result of that process,
PricewaterhouseCoopers (PwC) were appointed as the Group’s
new external auditor on 31 October 2018.
KPMG LLP resigned by notice to the Company and confirmed that
there are no matters connected with it ceasing to hold office that
need to be brought to the attention of members or creditors of the
Company for the purposes of section 519 of the Companies Act
2006. PwC conducted the audit of the Group’s financial statements
for the financial year to 31 December 2018.
The Committee monitors the provision of non-audit services
by the external auditor. The breakdown of fees between audit
and non-audit services is provided in note 3 of the financial
statements. The non-audit fees relate to tax compliance for the
Group.
The Committee has confirmed it is satisfied with the independence,
objectivity and effectiveness of PwC and has recommended to the
Board that the auditors be reappointed, and there will be a
resolution to this effect at the forthcoming Annual General Meeting.
46
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Risk management and controls
As described on page 26 of the Strategic Report and page 41 of the
Corporate Governance Statement, the Board has established a
framework of risk management and internal control systems,
policies and procedures. The Audit Committee is responsible for
reviewing the risk management and internal control framework and
ensuring that it operates effectively. During the year, the
Committee has reviewed the framework and the Committee is
satisfied that the internal control systems in place are currently
operating effectively.
At present the Group does not have an internal audit function.
During 2018, the finance function conducted quarterly reviews of
the financial controls operating within each of the businesses and
reported the outcomes to management and the Executive
Directors.
The Committee believes that in view of the current size and nature
of the Group’s businesses, management is able to derive sufficient
assurance as to the adequacy and effectiveness of internal controls
and risk management procedures without a formal internal audit
function. This will be kept under review as the business evolves.
Caroline Brown
Chair of the Audit Committee
18 March 2019
experience. The Committee considers that management adopt
a conservative approach to recognition as no revenue is
recognised until liability is admitted on a claim and, as a result,
there is less risk of significant revenue write offs in future. See
note 1 on page 62 for further details.
¡ Recoverability of trade receivables. The Group recognises trade
receivables and accrued income in the financial statements net
of an estimated provision for impairment losses. This has been
calculated using an expected credit loss methodology, in line
with the guidance in IFRS 9 Financial Instruments, along with
individual provisions for balances where management has
specific concerns. The Committee has reviewed the basis for the
calculation of the provision and the underlying assumptions
(explained in note 1 on page 62), and is satisfied that the
provision is appropriately valued.
¡ Impairment of goodwill. Management conducted a review of the
carrying value of goodwill in the consolidated financial
statements to determine whether there was any requirement for
an impairment charge, in accordance with IAS 36 Impairment of
Assets. This was an area of focus for the Committee given the
size of the balance and the results in the year. Having reviewed
the assumptions used in the calculation of carrying value, and
the sensitivity analysis performed, the Committee were satisfied
that sufficient headroom to the carrying value existed.
Accordingly, the Committee concluded that this did not warrant
disclosure under the key estimates in note 1.
New and forthcoming accounting standards
The Group has adopted two new accounting standards during
the year – IFRS 9 Financial Instruments; and IFRS 15 Revenue
from Contracts with Customers. The Committee has reviewed
accounting papers presented by the finance function that describe
how the provisions of these standards have been applied to the
Group and have also received reports from the external auditors on
their review of these papers. The Committee has concluded that
these standards have been appropriately applied in the financial
statements.
The Group has adopted IFRS 16 Leases from 1 January 2019,
although this standard was not effective for the year ended 31
December 2018 and so not reflected in financial statements.
Management have conducted an impact assessment of this
standard and the results are reported in note 1 to the financial
statements on page 63. In summary, this standard is not expected
to have a material impact on the statement of comprehensive
income for the year ended 31 December 2019 but the impact of
bringing the Group’s operating leases onto the balance sheet will
require the recognition of a right-of-use asset of £0.6m and a lease
liability of £0.6m This change in accounting does not have any
impact on the Group’s financial covenants associated with its
borrowing facility.
NAHL Group plc Annual Report and Accounts 2018
47
CSRCSR
REMUNERATION COMMITTEE REPORT
than that paid to his predecessor, a reflection that this is James’
first public company CFO role. The Committee granted James 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 which are on page 57.
On the 17 December 2018 we also announced the appointment of
Caroline Brown to succeed the Group’s Non-Executive Chairman,
Steve Halbert, who notified the Board earlier in the year of his
intention to step down from the Board after nine years. Caroline
joined the Board as Non-Executive Chair designate with immediate
effect and took on the Non-Executive Chair role, as well as Chair of
Audit and Nomination Committees from the 30 January 2019.
Caroline’s fees on appointment are £80,000 as Non-Executive
Chair and £5,000 for Chair of Audit.
We thank Steve for his outstanding service and welcome Caroline
as our new Non-Executive Chair.
Outlook for the 2019 financial year
Details in relation to the application of the Directors’ Remuneration
Policy in 2019 are set out on page 53 however, the key elements
will be as follows:
¡ The CEO has been awarded a 2% increase in base salary with
effect from 1 March 2019, in line with the percentage increase in
base salary awarded to the wider workforce.
¡ The CFO has been awarded an increase in base salary of 13% to
£170,000 in recognition of how well he has settled into the role
and his performance.
¡ The CEO’s annual bonus opportunity for 2019 will continue to be
subject to a maximum of 100% of base salary and the CFO's to
80% of base salary.
¡ Annual bonus awards for 2019 will be based on underlying
operating profit and individual objectives which are aligned to the
Company’s strategy.
¡ It is proposed that LTIP awards will be granted to Executive
Directors during 2019, the details of which will be provided at the
time of grant.
¡ Non-Executive Directors’ basic fee were increased by 2% with
effect from 1 March 2019.
¡ An additional fee of £10,000 per annum is to be paid to
Tim Aspinall in recognition of the increasing time requirement
of his role as Chair of the Personal Injury Law Firm Governance
Committee. This is not a Board Committee but a temporary
oversight Committee for the establishment of our own law firm.
The fee will be pro-rated based on its duration.
Conclusion
We are committed to a responsible and transparent approach in
respect of executive pay. The Annual Report on Remuneration will
be subject to an advisory vote at the 2019 Annual General Meeting.
The Committee believes that the advisory vote provides a greater
degree of accountability and gives shareholders a say on this
important area of corporate governance. The Committee will
continue to monitor remuneration policy to ensure it remains
aligned to the business strategy and delivery of shareholder value.
I hope you find the Remuneration Report useful and the Committee
looks forward to your continued support.
Gillian Kent
Chair of the Remuneration Committee
18 March 2019
Gillian Kent
Chair of the Remuneration
Committee
Dear Shareholder,
On behalf of the Remuneration Committee and the Board,
I am pleased to present the Directors’ Remuneration Report
for the financial year ended 31 December 2018. The
composition and responsibilities of the Committee are
set out on page 40.
We presented the 2017 Directors’ Remuneration Report in two
sections: the Directors’ Remuneration Policy and the Annual
Report on Remuneration. Both the Directors’ Remuneration Policy
and Annual Report on Remuneration were subject to an advisory
vote by shareholders at the Annual General Meeting in May 2018.
The Committee believes that the Directors’ Remuneration Policy
remains appropriate and will continue to apply it in 2019.
Accordingly, we have not included the Directors’ Remuneration
Policy in this Directors’ Remuneration Report, however, a copy is
available in our 2017 Directors’ Remuneration Report. The Annual
Report on Remuneration provides details of the amounts earned
in respect of the year ended 31 December 2018 and how the
Directors’ Remuneration Policy will be operated for the year
commencing 1 January 2019.
Review of the 2018 financial year
2018 has been a strong year of execution against strategy in our
3 divisions, with the continued investment and delivery of the
transformation of the Personal Injury division, the strengthening of
the management team and business model in Residential Property
and the continued growth in Critical Care.
While the Group traded well over the year we closed on a
disappointing fourth quarter with revenue of £49m for the year
ended 31st December 2018 and profit before tax of £9.8m.
The 2018 annual bonus was assessed against operating profit
performance as regards 75% of the award and individual objectives
as regards 25% of the award. The operating profit target threshold
for 2018 was not achieved and in line with the rules of the annual
bonus Executive Directors were not eligible for a bonus.
There were no long-term incentive awards eligible to vest based
on performance to 31 December 2018, with the next awards vesting
in 2020.
All eligible employees were once again invited to participate in the
Group’s Sharesave plans, which gives employees the opportunity
to benefit from the business success they help to create.
Board changes
We welcomed our new CFO James Saralis on 1 January 2018.
The remuneration package offered to James is fully in line with
the recruitment requirements of our Remuneration Policy.
James joined us on an annual base salary of £150,000, lower
48
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
DIRECTORS’ REMUNERATION REPORT
Single figure of remuneration
The table below details the elements of remuneration receivable by each Director for the financial year ended 31 December 2018 and the
total remuneration receivable by each Director for that financial year and for the financial year ended 31 December 2017.
Executive Directors
J R Atkinson
J D Saralis1
Non-Executive Directors
R S Halbert
C Brown2
T J M Aspinall3
G D C Kent
Salary and
fees
£000
Benefits
£000
Annual Bonus
£000
Pension
£000
Total
Remuneration
2018
£000
Total
Remuneration
2017
£000
223
150
87
4
48
49
17
17
–
–
–
–
–
–
–
–
–
–
1
1
–
–
–
1
241
168
87
4
48
50
789
N/A
85
–
43
48
1
J D Saralis was appointed as a Director on 1 January 2018.
2 C Brown was appointed as a Director on 18 December 2018.
3 T J M Aspinall received an additional annual fee of £10,000 pro-rated for his additional contribution as Chair of the Personal Injury Law Firm Governance Committee
in 2018. This amounted to £5,000 for 2018 and forms part of the £48,000 disclosed above.
The taxable benefits received during the financial year ended 31 December 2018 are principally car allowance and private
medical insurance.
Individual elements of remuneration
Base salary and fees
The base salaries for 2018 and 2019 are as set out below:
J R Atkinson
J D Saralis
Details of Non-Executive Directors’ fees for 2018 and 2019 are as set out below:
Chair’s fee
Non-Executive Directors’ fee
Chair of the Audit Committee
Chair of the Remuneration Committee
2018
base salary
£000
2019
base salary1
£000
223
150
2018
fee
£000
82
44
5
5
226
170
2019
fee1
£000
82
45
5
5
% increase
2%
13%
% increase
0%
2%
0%
0%
1 Salary/Fee increase with effect from 1 March 2019. The Chair’s fee for 2018 of £82,000 relates to fees paid to Steve Halbert. Caroline Brown’s fees on appointment
were £80,000 and are due to increase by 2% in March 2019.
NAHL Group plc Annual Report and Accounts 2018
49
CSRCSR DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual bonus plan
The maximum annual bonus opportunity for the CEO was 100% of salary and for the CFO was 80% of salary in respect of the year ended
31 December 2018. Of these amounts, 75% of the annual bonus was assessed against operating profit performance and 25% was
assessed against individual objectives. However, the threshold operating profit for bonus payments was not achieved and in line with the
annual bonus rules the CEO and CFO were not eligible for a bonus payment.
The following table sets out the bonus criteria for the CEO and CFO and how this reflects performance for the year.
CEO Russell Atkinson
Performance measure
Proportion of bonus determined
by measure
Operating profit threshold was not achieved.
Performance
Underlying Operating profit
Personal objectives1
CFO James Saralis
75%
25%
These included the re-engineering of the Personal Injury
division, and supporting the strategic and operational plans
to support growth in Residential Property and Critical Care
and the seamless induction of the new CFO.
Performance measure
Proportion of bonus determined
by measure
Operating profit threshold was not achieved.
Performance
Underlying Operating profit
Personal objectives1
75%
25%
These included a transition into the CFO role,
establishing investor relations, supporting the
re-engineering of the Personal Injury division, and
Residential Property and Critical Care in the delivery of their
plans.
Bonus
earned
£000
0
0
Bonus
earned
£000
0
0
1 Both the CEO and CFO performed strongly against their personal objectives. However, no bonus was payable against the individual element as the operating profit
threshold was not achieved.
50
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Long-term incentives
Awards vesting in respect of the financial year
No awards vested in respect of the financial year 2018. No other options were exercised, hence no gains or losses were made by the
Directors.
Awards granted during the financial year
The following awards were granted during the year under the LTIP:
Awards granted on 24 May 2018
Director
J R Atkinson
J D Saralis
Date of grant
Type of award
24 May 2018
24 May 2018
Nominal cost
share option
Nominal cost
share option
Number of
shares
Face value
at grant1
£
Performance
period
152,498
194,435
3 years
91,463
116,615
3 years
1 The mid-market closing share price on the date immediately prior to the grant date (£1.275) 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. The targets are
as follows:
EPS for the year ending 31 December 2020
Less than 17.1p
17.1p
19.6p
Vesting
(% maximum)
TSR1
0%
Less than 201p
50%
100%
201p
234p
Vesting
(% maximum)
0%
25%
100%
1 TSR is defined as the average mid-market closing share price for the month to 24 May 2021 plus total dividends declared between the grant date and 24 May 2021 or
such other date as the Remuneration Committee determines.
2 Vesting percentages accrue on a straight-line basis between 50% - 100% and 25% - 100%.
Awards granted on 11 January 2018
Director
J D Saralis
Date of grant
Type of award
11 January 2018
Nominal cost
share option
Number of
shares
Face value
at grant1
£
Performance
period
33,898
59,999
3 years
1 The mid-market closing share price on the date immediately prior to the grant date (£1.77) 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. The targets are
as follows:
EPS for the year ending 31 December 2020
Less than 15.7p
15.7p
17.3p
Vesting
(% maximum)
TSR1
0%
Less than 220p
60%
100%
220p
250p
Vesting
(% maximum)
0%
25%
100%
1 TSR is defined as the average mid-market closing share price for the month to 31 October 2020 plus total dividends declared between the grant date and 31 October
2020 or such other date as the Remuneration Committee determines.
2 Vesting percentages accrue on a straight-line basis between 60% - 100% and 25% - 100%.
NAHL Group plc Annual Report and Accounts 2018
51
CSRCSR DIRECTORS’ REMUNERATION REPORT CONTINUED
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 2018 and as at
31 December 2017 were as follows:
Executive Directors
J R Atkinson
J D Saralis
Non-Executive Directors
R S Halbert
C Brown
T J M Aspinall
G D C Kent
31 December
2018
31 December
2017
1.12%
0.00%
1.12%
N/A
1.39%
1.40%
0.00% 0.00%
0.02%
0.00%
0.00%
0.00%
The interests of each Executive Director of the Company as at 31 December 2018 in the Company’s share schemes were as follows:
Exercised during
the
year
Vested but
unexercised
during the year
Unvested and
subject to
performance
measures
Unvested and not
subject to
performance
measures
–
–
–
–
–
–
–
240,050
–
–
–
125,361
124,999
–
–
–
–
Total as at
31 December
2018
240,050
124,999
–
125,361
10,514
–
–
–
–
14,913
14,913
–
10,514
Director
Plan
J R Atkinson
LTIP (nominal cost options)
EMI
SAYE
J D Saralis
LTIP (nominal cost options)
EMI (nominal cost options)
SAYE
52
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Implementation of Directors’ Remuneration Policy for the financial year commencing 1 January 2019
Information on how the Company intends to implement the Directors’ Remuneration Policy for the financial year commencing on 1 January
2019 is set out below:
Salary/Fees
The CEO was awarded a 2% increase to base salary, with effect from 1 March 2019, in line with the percentage increase awarded to the
wider workforce. The CFO was awarded a 13% increase in base salary, with effect from 1 March 2019, in recognition of how well he has
settled into the role and his performance.
Non-Executive Directors’ basic fee were increased during the year by 2%, with effect from 1 March 2019.
Annual bonus plan
The maximum bonus opportunity for the CEO will be 100% of salary and the CFO 80% of salary for the 2019 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 Personal Injury division and the delivery of the wholly owned law firm, the return to
growth of the Residential Property division and the continued development of the market leading Critical Care division. The actual
performance targets are not disclosed as they are considered to be 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 2019.
Details of the awards will be disclosed at the time of grant and in the Company’s 2019 Annual Report on Remuneration.
Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration Committee is composed of the Company’s Non-Executive Chair (Caroline Brown) and Independent Non-Executive
Directors Gillian Kent (Chair) 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 18 March 2019 and signed on its behalf by:
Gillian Kent
Chair of the Remuneration Committee
18 March 2019
NAHL Group plc Annual Report and Accounts 2018
53
CSRCSR INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF NAHL GROUP PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion, NAHL Group plc’s Group financial statements and Company financial statements (the “financial statements”):
¡ give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2018 and of the Group’s profit and
the Group’s and the Company’s cash flows for the year then ended;
¡ have been properly prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union
and, as regards the Company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
¡ have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the
consolidated statement of financial position as at 31 December 2018; the Company balance sheet as at 31 December 2018, the
consolidated statement of comprehensive income, the consolidated and Company cash flow statements, and the consolidated and
Company statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description
of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our audit approach
Overview
¡ Overall Group materiality: £505,000 (2017: £580,000), based on 5% of profit before tax before
exceptional items.
Materiality
¡ Overall Company materiality: £651,310 (2017: £460,000), based on 1% of total assets.
Audit scope
¡ We performed full scope audits of the four financially significant components: Searches UK, Fitzalan
Partners, National Accident Helpline and Bush & Company Rehabilitation.
¡ In addition we performed an audit of the Company financial statements and the financial statement
line items that are managed at head office, including goodwill, intangible assets, tax, borrowings and
directors’ emoluments.
¡ This scoping provided coverage of 92% of revenue, 85% of profit before tax and 93% of total assets.
Key audit
matters
Our assessment of the risk of material misstatment also informed our views on the areas of particular
focus for our work which are listed below:
¡ Recoverability of trade receivables and accrued income (Group).
¡ Carrying value of goodwill (Group) and investments (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk
of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, 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, and any comments we make on the results of our procedures
thereon, 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. This is not a complete list of all risks identified by our audit.
54
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Key audit matter
How our audit addressed the key audit matter
Recoverability of trade receivables
and accrued income
Refer to the Audit Committee Report on
page 46 and 47, the critical accounting
estimates and judgements within the
Accounting Policies in note 1 and page
63 for recoverability of trade
receivables.
A provision of £0.9 million is recognised
against trade and accrued receivables
of £24.5 million. The provision involves
judgement in determining the expected
loss to the Group.
The Group enters into contracts with the
customers on varied credit terms, some
of which are extended credit terms of up
to two years as a result of commercial
negotiations. There is a risk that
customers are unwilling, or unable, to
meet their payment obligations.
In addition, accrued income includes an
element of revenue based on estimated
final damages awarded to the client.
Carrying value of goodwill (Group)
and investments (Company)
Refer to the Audit Committee Report on
page 46 and 47, note 13 of the
consolidated financial statements for
goodwill and note 2 of the company
financial statements for investments.
The carrying value of goodwill in the
consolidated statement of financial
position is £60.3 million.
The carrying amount of investments
in the Company balance sheet is
£52.7 million.
Recoverability of these assets is
assessed using the ‘Value-In-Use’ (VIU)
methodology. The calculation of VIU
includes assumptions such as growth
rates, future cash flows and discount
rate, and these inherently involve
estimation.
We performed enquiries with management to ascertain their assessment of the recoverability.
We targeted specific customer balances to test and then tested a sample of other customer
balances and sought evidence to support recoverability, either directly from the customer or
using information provided by management, as noted below. Our procedures for each
customer included a combination of the tests below:
¡ Requesting and obtaining independent confirmation from the customer of their accounts
receivable and accrued income balances;
¡ Where cash had been received from customers subsequent to the year-end, vouching this
cash to the bank statement;
¡ Verifying a sample of underlying contracts, invoices and instruction letters to ensure that
the performance obligation had been delivered by the company to the customer;
¡ Reviewing a right of offset, where in place, for receivable and payable balances with the
same customer;
¡ Confirming actual payments received during the year against agreed payment plan;
¡ Agreeing guaranteed amount per claim to the contract;
¡ Obtaining a signed contractual agreement confirming amounts due and dates of
repayment;
¡ Reviewing total enquiries passed to the customer, as well as their average value, together
with historic success rates, to determine the estimated recoverable amounts from
customers compared to receivables recognised; and
¡ We also tested management’s estimate of the expected credit loss provision by performing
a ‘lookback’ test of the aged receivable balances. Using actual experience of collection, we
challenged the assumptions used by the management to determine this estimate using the
historical pattern of debt write-offs and expected losses arising.
We found that the provisions recorded by the management were consistent with the evidence
obtained.
The valuation methodology used for the impairment assessment has been reviewed to ensure
that the methodology is in line with the principles of IAS 36 Impairment of assets.
We challenged management’s determination of Cash Generating Units.
We tested the mathematical integrity of the cash flow model.
The key assumptions used by management in the calculation have been tested in the following
manner:
¡ Cash flows – We agreed forecasts to Board-approved budgets and extrapolations of
budgets if less than five years. We also performed a ‘lookback’ analysis to determine
management’s forecasting accuracy against budget.
¡ Discount rate and other assumptions – We challenged the key inputs used for the
determination of discount rates, such as cost of debt, cost of equity, beta factor, risk free
rate, company specific return, as well as growth rates against company performance,
market data and our own benchmarks, with assistance from our valuation experts.
We performed sensitivity analysis on the key estimates within the model such as growth rates,
discount rates and cash flows to determine the extent to which these would need to change to
cause an impairment. The sensitivities required to be applied to cause an impairment were
significant, indicating the risk of impairment is low.
We found the carrying values stated were consistent with the evidence obtained.
NAHL Group plc Annual Report and Accounts 2018
55
CSR INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF NAHL GROUP PLC CONTINUED
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
The Group has four wholly owned trading subsidiaries, two controlled but not wholly owned trading subsidiaries and a number of
intermediate dormant holding companies. We have defined a component to be an individual entity for which Group or component
management prepares financial information that is included in the Group financial statements. Accordingly, the parent Company and each
subsidiary is considered as a component.
Scoping of components for the purpose of auditing the Group’s financial statements is primarily based on the financial performance of the
subsidiaries and including their balance sheets, and any qualitative risks associated with the component. Accordingly, the engagement
team performed full scope audits on the four wholly owned trading subsidiaries, as these are considered most significant to the Group’s
overall financial performance. The engagement team also audited the Company financial statements and performed desk top reviews of
the controlled but not wholly owned trading subsidiaries.
In addition we performed an audit of financial statement line items that are managed at head office, including goodwill, intangible assets,
tax, borrowings and Directors’ emoluments.
This scoping provided coverage of 92% of revenue, 85% of profit before tax and 93% of total assets.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£505,000 (2017: £580,000).
£651,310 (2017: £460,000).
How we determined it
5% of profit before tax before exceptional items.
1% of total assets.
Rationale for
benchmark applied
Profit before tax before exceptional items is the
primary measure used by the shareholders in
assessing the performance of the Group, and is a
generally accepted auditing benchmark. We have
applied a rule of thumb of 5% to this benchmark
which is appropriate for a profit oriented entity.
NAHL Group plc is an investment holding company and
has no trading operations. The benchmark for this entity
is based on total assets of the entity as this is the entity’s
primary value and relates to investment in subsidiary
companies. We have applied a 1% rule of thumb which is
appropriate for this asset based entity.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £30,000 and £480,000. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £25,250 (Group audit)
(2017: £29,000) and £32,570 (Company audit) (2017: £29,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
¡ the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
¡ the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the Group’s and Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and Company’s
ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union, which
is currently due to occur on 29 March 2019, are not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade,
customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
56
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report
certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 December 2018 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 45, the Directors are responsible for the preparation
of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
Directors are also 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.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the 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 the
Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
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 an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a 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 the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
¡ we have not received all the information and explanations we require for our audit; or
¡ adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
¡ certain disclosures of Directors’ remuneration specified by law are not made; or
¡ the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Milton Keynes
18 March 2019
NAHL Group plc Annual Report and Accounts 2018
57
CSR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Revenue
Cost of sales
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 and total comprehensive income for the year
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 62 to 85 form part of these financial statements.
Note
1,2
3
1
21
15
4
2
7
8
9
Note
22
22
2018
£000
48,957
(24,254)
24,703
(14,683)
12,132
(457)
(1,270)
(385)
10,020
222
(470)
9,772
(1,389)
8,383
6,674
1,709
8,383
2018
p
14.5
14.3
2017
£000
51,912
(25,224)
26,688
(14,086)
14,491
(182)
(1,307)
(400)
12,602
150
(331)
12,421
(2,467)
9,954
9,876
78
9,954
2017
p
21.7
21.6
58
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2018
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Trade and other receivables (including £6,603,000 (2017: £7,280,000) due in more than one
year)
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Other payables relating to legacy pre-LASPO ATE product
Current tax liability
Non-current liabilities
Other interest-bearing loans and borrowings
Deferred tax liability
Total liabilities
Net assets
Equity
Share capital
Share option reserve
Share premium
Merger reserve
Retained earnings
Capital and reserves attributable to the owners of NAHL Group plc
Non-controlling interests
Total equity
The notes on pages 62 to 85 form part of these financial statements.
Note
2018
£000
2017
£000
13
15
16
10
17
19
2
18
11
20
60,362
6,400
195
177
60,362
7,217
267
34
67,134
67,880
28,806
1,598
30,404
22,261
858
23,119
97,538
90,999
(15,111)
(301)
(975)
(12,415)
(676)
(1,513)
(16,387)
(14,604)
(17,122)
(1,342)
(12,922)
(1,662)
(18,464)
(14,584)
(34,851)
(29,188)
62,687
61,811
115
2,578
14,595
(66,928)
111,380
61,740
947
62,687
115
2,121
14,507
(66,928)
111,893
61,708
103
61,811
These financial statements were approved by the Board of Directors on 18 March 2019 and were signed on its behalf by:
J D Saralis
Director
Company registered number: 08996352
NAHL Group plc Annual Report and Accounts 2018
59
CSR CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share
capital
£000
Share
option
reserve
£000
Note
Share
premium
£000
Merger
reserve
£000
Retained
earnings
£000
Capital and
reserves
attributable to
the owners of
NAHL Group plc
£000
Non-
controlling
interest
£000
Total
equity
£000
Balance at 1 January 2017
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
Total transactions with owners, recorded
directly in equity
26
21
27
–
–
2
–
–
–
2
–
–
–
–
182
–
182
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,876
9,876
–
–
–
(8,171)
(8,171)
Balance at 31 December 2017
115
2,121
14,507 (66,928) 111,893
9,876
9,876
78
78
9,954
9,954
2
–
182
(8,171)
2
–
25
25
–
182
– (8,171)
(7,987)
61,708
25 (7,962)
103 61,811
Adjustment on initial application of IFRS 9,
net of tax
30
–
–
–
–
(814)
(814)
–
(814)
Adjusted balance at 1 January 2018
115
2,121
14,507 (66,928) 111,079
60,894
103 60,997
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 drawings
Share-based payments
Dividends paid
Total transactions with owners, recorded
directly in equity
26
21
27
–
–
–
–
–
–
–
–
–
–
–
457
–
457
–
–
88
–
–
–
88
–
–
6,674
6,674
6,674
6,674
1,709 8,383
1,709 8,383
–
–
–
–
–
–
– (6,373)
88
–
457
(6,373)
–
88
(865)
(865)
457
–
– (6,373)
– (6,373)
(5,828)
(865) (6,693)
Balance at 31 December 2018
115
2,578 14,595 (66,928) 111,380
61,740
947 62,687
The notes on pages 62 to 85 form part of these financial statements.
60
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation of intangible assets (not relating to business combinations)
Amortisation of intangible assets relating to business combinations
IFRS 9 provision movements
Financial income
Financial expense
Share-based payments
Taxation
Increase in trade and other receivables
Increase in trade and other payables
Decrease in other payables relating to legacy pre-LASPO ATE product
Interest paid
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Disposals of property, plant and equipment
Interest received
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
Non-controlling interest drawings
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Note
2018
£000
2017
£000
8,383
9,954
16
15
15
7
8
173
187
1,270
206
(222)
470
457
1,389
12,313
(7,564)
2,775
(375)
7,149
(474)
(2,202)
4,473
(145)
(640)
42
35
–
171
130
1,307
–
(150)
331
182
2,467
14,392
(11,974)
4,963
(1,236)
6,145
(178)
(3,139)
2,828
(111)
(305)
–
12
25
(708)
(379)
88
–
4,125
–
(6,373)
(865)
2
(11,250)
13,125
(111)
(8,171)
–
(3,025)
(6,405)
740
858
1,598
(3,956)
4,814
858
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
NAHL Group plc Annual Report and Accounts 2018
61
CSR
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Consolidated Financial Statements
The Consolidated Financial Statements for the year ended 31 December 2018 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.
Going concern
The Group had cash balances of £1,598,000 (2017: £858,000), net assets of £62,687,000 (2017: £61,811,000) and net current assets of
£14,017,000 (2017: £8,515,000) 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 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.
The Directors have prepared cash flow forecasts for the period until 30 June 2020. 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
risks successfully.
Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and 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 for which the Group meets these three criteria for control 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.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements and estimates that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates are based on past
experience and other reasonable assessment criteria. Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the year in which the estimates
are revised and in any future years affected.
In accordance with IAS 1 the Group is required to disclose critical accounting judgements and key sources of estimation uncertainty.
Critical accounting judgements
Control over an investee
Within its Personal Injury division the Group has interests in two Limited Liability Partnerships (LLPs) in conjunction with third party law
firms. The LLPs are called Your Law LLP and National Law Associates LLP which trades as National Law Partners. Each LLP is run by a
management board, which is responsible for the day-to-day operations, decision-making and strategic development of the LLPs. Through
its 100% subsidiary, Project Jupiter Limited, the Group has determined that it exercises control over these LLPs as it is entitled to appoint
the majority of members to each of the management Boards, with the remainder being appointed by the respective third-party law firm.
In accordance with IFRS 10 Consolidated Financial Statements and given that the Group has overall control, the results and net assets of
the LLPs have been consolidated within these financial statements with a corresponding non-controlling interest recognised for the other
member firms’ share of profit, total comprehensive income and net assets.
62
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Key sources of estimation uncertainty
Revenue recognition – provision of legal services
There is a significant element of judgement in determining the transaction price for revenue in relation to the provision of legal services for
personal injury claims. Due to the nature of personal injury claims, the revenue the Group earns from a case is variable and dependent upon a)
the stage at which a claim settles as this will determine the fixed fee and b) the final damages awarded to the client, of which the Group recognises
a percentage as revenue. The Group must therefore estimate the revenue it expects to earn from a case once the first milestone is achieved
(admission of liability). This estimation is based on an expected value method and assumes that cases can be grouped into categories of a similar
nature (i.e. RTA vs. Non-RTA) that have similar characteristics. This assumption is considered appropriate as ultimately all cases follow one of a
number of routes in the claims process. Management uses historical experience of the likelihood of claims settling at each stage and the average
fee earned when a claim settles at each stage to estimate the transaction price. This estimate is revised as a claim moves through the process.
No revenue is recognised until the first milestone is reached, being admission of liability, as it is at this point that it becomes highly probable that a
case will succeed and therefore there is less risk of significant revenue write-offs in the future. Profits and losses arising from the differences in
the estimated fee and the final fee are recognised on settlement of a case.
At the year-end, the Group has accrued revenue balances of £1,379,000 calculated using this estimation technique.
Recoverability of trade receivables
Trade receivables are reflected net of an estimated provision for impairment losses. In line with IFRS 9, the Group uses an expected credit loss
model to determine the provision for doubtful debts and also specific provisions for balances for which it has specific concerns over
recoverability. The expected credit loss model involves segmenting debtors into groups and applying specific percentages to each of these
debtor groupings. The Group has considered the profile of its debtor balance and has determined that a grouping based on credit terms is
considered to be appropriate given the significant level of deferred debt. These groupings are based on those debtors due on standard terms,
6-12 month terms, 12-18 month terms and 18-24 month terms with higher percentages being applied the longer the term with the view that
there is a greater risk of unforeseen circumstances arising the further away the settlement date. Standard debtors are also then reviewed for
those past due and a percentage applied to those that are current, between 30-60 days, 60-90 days and 90+ days overdue. See notes 17 and
23 for further information. At the year end, the Group had provisions for receivables of £909,000 (2017: 1,115,000) calculated using this
method. The percentages applied to each grouping of debtors ranged from 1.4% to 20.0% with the final provision equating to 3.8% of the total
gross trade receivables and accrued income balances. If the percentages used for each grouping were to be increased/decreased by one
percentage point, this would result in an increase/decrease to the bad debt provision of £102,000.
New standards and amendments adopted by the Group
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2018:
¡ IFRS 9 Financial Instruments
¡ IFRS 15 Revenue from Contracts with Customers
In light of these new standards, the Group revised its accounting policies and made the necessary opening balance adjustments following
the adoption of IFRS 9 and IFRS 15. The changes as a result of adopting IFRS 9 are disclosed in note 30. The adoption of IFRS 15 did not
have any significant impact on the amounts recognised in prior periods.
New standards, interpretations and amendments not yet effective
The Group has not applied the following new and revised IFRS that have been issued but are not yet effective:
¡ IFRS 16 Leases – Effective for annual reporting periods beginning on or after 1 January 2019.
A review of IFRS 16 Leases has been conducted to determine its impact on the Group. The standard will affect the accounting for the
Group’s operating leases. As at 31 December 2018, the Group has non-cancellable operating lease commitments of £980,000 (see note
24). In transitioning to IFRS 16 the Group expects to recognise right-of-use assets of approximately £0.6m on 1 January 2019 and lease
liabilities of approximately £0.6m. Overall net current assets will be approximately £0.4m lower due to the presentation of a portion of the
liability as a current liability. The Group expects that there will be no material impact on the net profit after tax for 2019 as a result of
adopting the new rules. Operating cash flows will increase and financing cash flows decrease by approximately £0.4m as repayment of the
principal portion of the lease liabilities will be classified as cash flows from financing activities.
The Group will apply the standard from its mandatory adoption date of 1 January 2019. The Group intends to apply the simplified transition
approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets for property leases will be
measured on transition as if the new rules had always been applied.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or
future reporting periods and on foreseeable future transactions.
Statutory and non-statutory measures
The financial statements contain all the statutory measures and disclosures required under IFRS, which is the financial reporting
framework adopted by the Group. In addition to these measures, management monitors a number of non-statutory, alternative
performance measures (APMs) as part of its internal performance monitoring and when assessing the future impact of operating
decisions. The APMs allow a year-on-year comparison of the underlying performance of the business by removing the impact of items
occurring either outside the normal course of operations or as a result of intermittent activities, such as acquisitions or strategic projects.
NAHL Group plc Annual Report and Accounts 2018
63
CSR NOTES CONTINUED
1 Accounting policies continued
Statutory and non-statutory measures continued
The Directors have presented these APMs in the Strategic Report because they believe they provide additional useful information for
shareholders on underlying business trends and performance. As these APMs are not defined by IFRS, they may not be directly
comparable to other companies’ APMs. They are not intended to be a substitute for, or superior to, IFRS measurements and the Directors
recommend that the IFRS measures should also be used when users of this document assess the performance of the Group.
The APMs used in the Strategic Report are defined in the table below and the principles to identify adjusting items have been applied on a
basis consistent with previous years. The key adjusting items in arriving at the APMs are as follows:
¡ Exceptional revenues – Included within the balance sheet is a liability for upfront commissions received from insurance providers 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, the remaining liability is being unwound through revenue as historic cases are settled. Due to the
discontinued nature of this revenue stream, the Directors consider it appropriate to identify this revenue separately where it results in a
material release during the year in order to allow users of the financial statements to separately identify the revenue generated from the
continuing operations of the Group.
¡ IFRS 2 Share-based Payments – This is the charge for share-based payments calculated in line with IFRS 2. 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. The calculation behind the charge can fluctuate year-on-year as new grants are made depending on inputs such
as the expected volatility, the share price, exercise price etc. and therefore the charge can vary with little correlation to the underlying
trading activities. For example, in the five years since the Group’s flotation on AIM, the IFRS 2 charge has been as low as £182,000 and
as high as £1,052,000. Management therefore believe it is appropriate to exclude this charge from the underlying operating profit to
allow for greater comparability of the underlying core trading performance of the Group year-on-year.
¡ IFRS 3 (Revised) Business Combinations – This is the amortisation charge for intangible assets arising on acquisitions and expenditure
arising from acquisition activity. Under IFRS 3 all acquisition costs are required to be expensed in the Group Income Statement and
intangible assets arising on acquisition are required to be amortised over their useful economic life. Management believes that it is
useful to separately identify these costs due to their materiality to the Group results and due to the fact that the amortisation is
calculated on a straight-line basis, it therefore has little correlation to the trading activities of the acquired entity in any particular year.
To allow for greater comparability of the trading results year-on-year, this charge is therefore excluded from underlying operating profit.
¡ Exceptional items are non-recurring items that are material by nature and separately identified to allow for greater comparability of
underlying Group operating results year on year. Examples of exceptional items in the current and/or previous years include
reorganisation and restructuring costs; revaluation of liability associated with legacy ATE products; and acquisition related costs.
Exceptional costs are separately identified to allow for greater comparability of underlying Group operating results year-on-year.
Nature of
measure
Related IFRS
measure
Related IFRS
source
Definition
Use/relevance
Underlying
operating
profit
Operating
profit
Consolidated
income
statement
Based on the related IFRS measure
but excluding exceptional items, IFRS
2 share-based payment charges and
amortisation of intangible assets
acquired on business combinations.
Allows management and users of the financial
statements to assess the underlying trading results
after removing material, non-recurring items that are
not reflective of the core trading activities and allows
comparability of core trading performance year-on-
year.
Underlying
operating
cash flow
Cash flow
from
operating
activities
Consolidated
cash flow
statement
Based on the related IFRS measure
but excluding cash flows in respect of
the items excluded from underlying
operating profit as described above.
Underlying
cash
conversion
Not defined
by IFRS
n/a
Free cash
flow
Not defined
by IFRS
n/a
Calculated as underlying operating
cash flow divided by underlying
operating profit.
Calculated as net cash generated
from operating activities less net cash
used in investing activities less
payments made to non-controlling
interests.
Underlying
EPS
Basic EPS
Consolidated
income
statement
Based on the related IFRS measure
but calculated using underlying profit
after tax.
Provides management with an indication of the amount
of cash available for discretionary investing or financing
after removing material non-recurring expenditure that
does not reflect the underlying trading operations and
allows management to monitor the conversion of
underlying profit into cash.
Allows management and users of the financial
statements to assess the underlying trading results
after removing material, non-recurring items that are
not reflective of the core trading activities. It also allows
comparability of core trading performance year-on-
year.
64
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Nature of
measure
Working
capital
Related IFRS
measure
Related IFRS
source
Definition
Use/relevance
Consolidated
statement of
cash flows
Movement in
receivables
and
movement
in payables
Working capital is not defined by
IFRS. This is defined by management
as being the cash movement in trade
and other receivables less the cash
movement in trade and other
payables.
Allows management to assess the short-term cash
flows from movements in the more liquid assets.
Net debt
Not defined
by IFRS
Consolidated
cash flow
statement
Net debt is defined as cash and cash
equivalents less interest-bearing
borrowings net of loan arrangement
fees.
Allows management to monitor the overall level of debt
in the business. As stated in the strategic report, loan
funding is key to the Group’s future strategy as an
increasing proportion of profits and cash flows are
deferred until case settlement.
A reconciliation of each measure is provided as follows:
Underlying operating profit:
IFRS measure – operating profit
Exceptional items including Pre-LAPSO ATE revenue/costs
IFRS 2 share-based payment charge
Amortisation of intangible assets acquired on business combinations
Underlying operating profit
Underlying operating cash flow, underlying cash conversion and free cash flow:
2018
£000
10,020
385
457
1,270
12,132
2017
£000
12,602
400
182
1,307
14,491
12 months ended 31 December 2018
Operating profit
Amortisation of intangible assets acquired on business
combinations
Equity-settled share-based payments
Underlying operating profit
Depreciation and amortisation
IFRS 9 provision movements
Increase in trade/other receivables
Increase/(Decrease) in trade/other payables
Decrease in liabilities relating to Pre-LASPO ATE product
Underlying operating cash flow
Operating cash conversion
Interest paid
Tax paid
Net cash generated from operating activities
Net cash used in investing activities
Payments to/from non-controlling interests
Free cash flow
2018
Underlying
operations
£000
2018
Exceptional
items
£000
2018
Total
£000
2017
Underlying
operations
£000
2017
Exceptional
items
£000
2017
Total
£000
10,405
(385)
10,020
13,002
(400)
12,602
1,270
457
12,132
360
206
(7,564)
2,825
-
7,959
65.6%
-
-
(385)
-
-
-
(50)
(375)
(810)
1,270
457
11,747
360
206
(7,564)
2,775
(375)
1,307
182
14,491
301
-
(11,974)
5,120
-
-
-
(400)
-
-
-
(157)
(1,236)
1,307
182
14,091
301
-
(11,974)
4,963
(1,236)
7,149
7,938
(1,793)
6,145
54.8%
(474)
(2,202)
4,473
(708)
(865)
2,900
(178)
(3,139)
2,828
(379)
(25)
2,424
NAHL Group plc Annual Report and Accounts 2018
65
CSR
NOTES CONTINUED
1 Accounting policies continued
Underlying EPS:
IFRS measure – profit for the year attributable to shareholders
Exceptional items including Pre-LAPSO ATE revenue/costs net of tax
IFRS 2 share-based payment charge
Amortisation of intangible assets acquired on business combinations net of deferred tax
Underlying profit for the year attributable to shareholders
Weighted average number of shares (note 22)
Underlying EPS
Working capital:
Movement in trade and other receivables
IFRS 9 provision movement
Movement in trade and other payables
Working capital
IFRS 9 opening balance adjustment
Movement in interest accruals
IFRS measure - movement in trade and other receivables less movement in trade and other payables
Net debt is defined in note 29.
2018
£000
6,674
312
457
950
8,393
2017
£000
9,876
323
182
987
11,368
46,160,172 45,548,243
18.2
25.0
2018
£000
(7,564)
206
2,775
(4,583)
1,002
(268)
(3,849)
2017
£000
(11,974)
-
4,963
(7,011)
-
(179)
(7,190)
Revenue
Marketing services
Personal Injury – Solicitor income (traditional)
Marketing services resulting in the provision of enquiries to Panel Law Firms. Management have determined that there is a single
performance obligation being the provision of marketing services. As the Group undertakes this service on behalf of its customers, the
service is considered to be simultaneously delivered and consumed by the customer and so it is considered to be satisfied over time. The
transaction price is set for each customer based on a cost plus margin model and is allocated to the performance obligation using the
input method based on the costs incurred of providing the service. Invoices are raised monthly for the services provided in that month and
the revenue for that month is recognised at this point. This results in no change to revenue recognition versus the previous accounting
policy where revenues were recognised on a monthly basis based on the services provided in that month.
Personal Injury – Solicitor income (profit share)
Marketing services resulting in the provision of enquiries to certain Panel Law Firms where we receive variable consideration based on the
ultimate case outcome. As with solicitor income (traditional), management have determined that there is a single performance obligation
being the provision of marketing services. The only difference to the solicitor income (traditional) recognition is that the transaction price
is variable as the Group receives a share of the profit from the successful outcome of a case from the Panel Law Firm. The transaction
price is estimated on an expected value method approach using historical rates provided by the partner Panel Law Firm. This results in no
change to revenue recognition versus the previous accounting policy.
Residential Property – Conveyancing and surveyor instructions
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. Management consider there to be one performance obligation being the
delivery of instructions to the Panel Law Firms and surveyors. Revenue is recognised at a point in time being the transfer of instruction to
the Panel Law Firm or surveyor as it is at this point at which the Group has no further obligations in respect of the instruction and so control
of the instruction passes to the customer. The full transaction price being the contractually agreed upon fixed fee per instruction is
recognised as revenue at this point. This is consistent with the prior revenue recognition policy.
Service provision
Personal Injury – Provision of legal services
Income from the provision of legal services for personal injury claims on a ‘no win – no fee’ arrangement. Management consider that this
service comprises a single distinct performance obligation, being the provision of legal services to the customer and the transaction price
is allocated to this single performance obligation. Revenue is recognised once control of the service is passed to the customer which is
considered to be over time as the customer simultaneously receives and consumes the service provided.
The transaction price is variable in nature as on settlement of a successful case the Group will be entitled to a fixed fee recoverable from
the liable third party (which is variable dependent upon which stage in the claims process the claim settles at) and a percentage of
awarded damages. As these amounts are unknown at the outset of a case, management estimate the transaction price based on an
expected value method. The expected value is based on prior and historical knowledge and experience of case settlement and is
considered appropriate as all cases follow the same process.
66
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
Management consider that it is appropriate to allocate the transaction price and recognise revenue on an output basis using milestones.
Due to the nature of personal injury claims, the revenue receivable from progressing a case is not directly attributable to the hours worked
as a case can still fail despite hours being worked on it. Due to the no-win, no-fee arrangement, no revenue would be receivable if the case
fails despite the hours worked. An input method is therefore considered to be inappropriate. An output approach based on key milestones
to progress a case is therefore considered to be appropriate as it best reflects the value of the service to the customer. No revenue is
recognised up until the first performance obligation, admission of liability, has been achieved as it is at this point that it becomes highly
probable that recognising revenue would not lead to a reversal in the future.
Critical Care – Case management services
Case management support within the medico-legal framework for multi-track cases. Management consider that the performance
obligation is the provision of case management support and as the service is simultaneously delivered and consumed by the customer
then revenue is measured over time based on an input approach being the hours worked by each consultant. The transaction price, being
the contractually agreed upon hourly fee rate, is allocated on a per hour basis. Revenue is invoiced monthly based on the hours worked in
that month and recognised at this point. This is consistent with the prior revenue recognition policy.
Expert Reports
Critical Care – Expert witness revenue
Provision of expert witness reports. In line with IFRS 15, revenue is measured on satisfaction of the performance obligation when control of
the report is passed to the customer. Management consider there to be one performance obligation which is the provision of the expert
witness report and as the customer has no control over the report until it is delivered in its final form, revenue is measured at the point in
time when the report is delivered. The entire transaction price, being the contractually agreed fixed fee, is recognised as revenue on
completion and delivery of the report. This is consistent with the prior revenue recognition policy.
Residential Property – Search reports
Provision of search reports. Management consider there to be one performance obligation being the delivery of the search report.
Revenue is recognised at a point in time being the transfer of the report to the customer. The full transaction price being the contractually
agreed upon fixed fee per report is recognised as revenue at this point. This is consistent with the prior revenue recognition policy.
Product provision
Personal Injury and Residential Property – Product income
Commissions received from product providers for the sale of additional products to the Panel Law Firms. Revenue is recognised at a point
in time on satisfaction of the performance obligation being the sale of the product to a PLF with provisions in place for clawbacks. This is
consistent with the prior revenue recognition policy.
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. This is consistent with the prior revenue recognition policy.
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. Software assets are measured at the cost of bringing the asset into use. This may include externally
incurred consultant costs or a proportion of internal time and salary where internal resources have been used to build the asset. Internally
allocated time is based on hours spent bringing the asset into use multiplied by hourly salary rates. Technology related intangibles,
contract related intangibles and brand names were acquired through business combinations. These were independently valued and
determined to be separately identifiable from goodwill as explained under critical accounting judgements.
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
No amortisation is charged on assets under construction until the point they are brought into use.
5 to 10 years
3 to 10 years
3 to 10 years
3 to 5 years
–
–
–
–
NAHL Group plc Annual Report and Accounts 2018
67
CSR
NOTES CONTINUED
1 Accounting policies continued
Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation.
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
3 to 5 years
–
Operating leases
Operating lease rentals are charged to the income statement on a straight-line basis over the period of the lease.
Taxation
Tax on the statement of comprehensive income 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.
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.
Financial assets and liabilities
The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables
and interest bearing borrowings.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition, trade and other receivables are stated at
amortised cost using the effective interest method, less any impairment losses calculated in line with IFRS 9.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition, trade and other payables are stated at
amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Cash and cash equivalents are repayable on demand and are recognised at their
carrying amount.
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.
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
68
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
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 are expected to vest except where forfeiture is only due to share prices not achieving the
threshold for vesting.
Exceptional items
Exceptional items are non-recurring items that are material by nature and separately identified to allow for greater comparability of
underlying Group operating results year on year. Examples of exceptional items in the current and/or previous years include
reorganisation and restructuring costs; revaluation of liability associated with legacy ATE products; and acquisition related costs.
Exceptional costs are separately identified to allow for greater comparability of underlying Group operating results year-on-year.
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 Cash Generating Unit or CGU). The goodwill acquired in a business combination, for
the purpose of impairment testing, is allocated to CGUs. 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.
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.
Pensions
The Group operates a stakeholder pension scheme for employees. The assets of the scheme are held separately from those of the
Company. The annual contributions payable are charged to the statement of comprehensive income.
Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
the dividends are approved by the Company’s shareholders or, in the case of interim dividends, when paid.
Member drawings
Drawings are made to members in line with the provisions as stated in the partnership agreements. Members may draw an amount not in
excess of their profit share for the relevant accounting period and drawings may be limited depending on the cash requirements of the LLP.
Drawings are recognised once paid.
Share option reserve
The share option reserve is the corresponding charge to equity in respect of the IFRS 2 share base payment charge.
Merger reserve
The merger reserve represents the excess of the fair value of shares acquired through share for share exchange. In 2014 NAHL Group plc
declared a bonus issue of a single deferred share of £0.0001 (a Deferred Share) with a share premium of £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.
Financial income and expenses
Interest income and interest payable is recognised in the consolidated statement of comprehensive income as it accrues, using the
effective interest method. Issue costs of borrowings are initially held on balance sheet within the fair value of interest bearing borrowings
and are subsequently expensed to the statement of comprehensive income over the contractual life of the associated borrowings.
NAHL Group plc Annual Report and Accounts 2018
69
CSR
NOTES CONTINUED
2 Operating segments
Personal
Injury
£000
Critical
Care
£000
Residential
Property
£000
Group
£000
Underlying
operations
£000
Pre-LASPO
ATE
£000
Other
items
£000
Elimi-
nations
£000
Total
£000
Year ended 31 December 2018
Revenue
Depreciation and amortisation
Operating profit/(loss)
Financial income
Financial expenses
Profit/(loss) before tax
Trade receivables
Total assets3
Segment liabilities3
Capital expenditure (including intangibles)
Year ended 31 December 2017
Revenue
Depreciation and amortisation
Operating profit/(loss)
Financial income
Financial expenses
Profit/(loss) before tax
Trade receivables
Total assets3
Segment liabilities3
Capital expenditure (including intangibles)
29,522
(195)
8,4241
191
–
8,615
10,200
24,528
(13,254)
245
12,383
(48)
4,5201
30
(5)
4,545
5,036
5,800
(1,137)
188
6,388
(117)
7281
–
–
728
598
1,269
(364)
352
– 48,293
(360)
–
12,132
(1,540)
222
1
(470)
(465)
11,884
(2,004)
15,834
–
110,171
78,574
(15,111)
(356)
785
–
31,660
(178)
11,0331
143
(1)
11,175
11,442
18,139
(10,453)
53
11,037
(49)
3,8821
5
(4)
3,883
4,386
4,785
(806)
47
8,340
(74)
1,3851
–
–
1,385
419
961
(507)
191
–
–
(1,809)
2
(326)
(2,133)
–
79,747
(600)
–
51,037
(301)
14,491
150
(331)
14,310
16,247
103,632
(12,366)
291
664
–
589
–
–
589
–
–
(301)2
–
875
–
800
–
–
800
–
–
(726)2
–
–
(1,270)
(2,701)
–
–
(2,701)
–
–
–
–
–
–
–
–
–
–
–
(12,633)
48,957
(1,630)
10,020
222
(470)
9,772
15,834
97,538
– (15,412)
785
–
–
(1,307)
(2,689)
–
–
(2,689)
–
–
–
–
–
–
–
–
–
–
–
51,912
(1,608)
12,602
150
(331)
12,421
16,247
(12,633) 90,999
(13,092)
291
–
–
1 These are the respective underlying operating profits of the division.
2 Pre-LASPO ATE liabilities include the balance of commissions received in advance that are due to be paid back to the insurance provider of £301,000
(2017: £676,000) and accruals for associated costs of £nil (2017: £50,000).
3 Total assets and segment liabilities exclude intercompany loan balances as these do not form part of the operating activities of the segment.
Significant customers
Revenues of approximately £9.0m (2017: £9.5m) are derived from a single external customer. These revenues are attributable to the Personal
Injury and Critical Care segments.
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 are consistent with those reported last year.
Personal Injury – Revenue from the provision of enquiries to the Panel Law Firms, based on a cost plus margin model, plus commissions received
from providers for the sale of additional products by them to the Panel Law Firms and in the case of the ABSs, revenue receivable from clients for
the provision of legal services.
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 Panel Law Firms 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.
Pre-LASPO ATE – Revenue is 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. 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.
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NAHL Group plc Annual Report and Accounts 2018
Strategic Report
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Financial Statements
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.
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
IFRS 9 provision release
Operating leases
Auditor’s remuneration
2018
£000
173
187
1,270
206
388
142
2017
£000
171
130
1,307
-
426
130
During the year the Group (including its subsidiaries) obtained the following services from the Company’s auditors and its associates:
Fees payable to the Company's auditors and its associates for the audit of parent company and consolidated
financial statements
Fees payable to the Company’s auditors and its associates for other services:
The audit of the Company’s subsidiaries
Tax compliance services
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
Residential Property reorganisation costs3
2018
£000
2017
£000
46
74
22
2018
£000
(589)
816
158
385
43
68
19
2017
£000
(800)
1,200
–
400
1 Previously recognised liabilities for pre-LASPO ATE commissions received in advance of £664,000 (2017: £875,000) have been released into revenue in the year as
a result of more favourable settlements. These have been offset by associated costs of £75,000 (2017: £75,000).
2 Personal Injury reorganisation costs relate to costs associated with one-off projects that are not related to the core operations of the business.
3 Costs of management reorganisation in the Residential Property division.
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:
Directors
Others
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Share-based payments (see note 21)
Social security costs
Other pension costs
Number of Employees
2018
5
216
221
2018
£000
7,840
457
830
245
9,372
2017
5
201
206
2017
£000
7,541
182
793
80
8,596
NAHL Group plc Annual Report and Accounts 2018
71
CSR NOTES CONTINUED
6 Directors’ emoluments
Statutory Directors’ emoluments
Statutory Directors’ emoluments
Year ended 31 December 2018
Executive Directors
J R Atkinson
J Saralis1
Non-Executive
R S Halbert
C Brown2
G D C Kent
T J M Aspinall
Year ended 31 December 2017
Executive Directors
J R Atkinson
S Dolton1
Non-Executive
R S Halbert
G D C Kent
T J M Aspinall
2018
£000
598
2017
£000
1,476
Salary
and fees
£000
Benefits
£000
Annual
bonus
£000
Long-term
incentives
£000
Pension
£000
Total
£000
223
150
87
4
49
48
561
17
17
–
–
–
–
34
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
1
–
–
1
–
3
Salary
and fees
£000
Benefits
£000
Annual
bonus
£000
Long-term
incentives
£000
Pension
£000
218
175
85
48
43
569
17
16
–
–
–
33
76
–
–
–
–
76
477
320
–
–
–
797
1
–
–
–
–
1
241
168
87
4
50
48
598
Total
£000
789
511
85
48
43
1,476
1 S Dolton resigned from the Board on 1 January 2018 and J Saralis was appointed to the Board on 1 January 2018.
2 C Brown was appointed to the Board on 18 December 2018.
The Group contributed £3,000 to pension schemes in respect of Directors during the year (2017: £1,000).
The emoluments of the highest paid Director were £241,000 (2017: £789,000).
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 leadership team who are not statutory directors in addition to the main
Board. Disclosure of transactions with key management is detailed in note 28.
7 Financial income
Bank interest income
Investment income
Other income
8 Financial expense
Interest on bank loans
Amortisation of facility arrangement fees
72
NAHL Group plc Annual Report and Accounts 2018
2018
£000
2
29
191
222
2018
£000
395
75
470
2017
£000
6
5
139
150
2017
£000
257
74
331
Strategic Report
Governance
Financial Statements
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 statement of comprehensive income
Total tax charge
Reconciliation of effective tax rate
Profit for the year
Total tax expense
Profit before taxation
2018
£000
1,824
(160)
1,664
(275)
(275)
1,389
1,389
2018
£000
8,383
1,389
9,772
2017
£000
2,690
25
2,715
(248)
(248)
2,467
2,467
2017
£000
9,954
2,467
12,421
Tax using the UK corporation tax rate of 19.00% (2017: 19.25%)
1,856
2,391
Income disallowable for tax purposes
Non-deductible expenses
Adjustments in respect of prior years
Share scheme deductions
Non-controlling interest share of tax
Short-term timing differences for which no deferred tax is recognised
Total tax charge
(6)
100
(160)
(18)
(324)
(59)
(1)
48
25
–
–
4
1,389
2,467
Changes in tax rates and factors affecting the future tax charge
A reduction in the UK corporation tax rate from 19.0% 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) were substantively enacted on 6 September 2017. This will reduce the
Group’s future current tax charge accordingly. The deferred tax assets and liabilities at 31 December 2018 have been calculated based on
these rates.
10 Deferred tax asset
At beginning of year
Recognition of deferred tax on IFRS 9 provision for trade receivables
Recognised in statement of comprehensive income (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 2017
Recognised in statement of comprehensive income
At 31 December 2017
Recognition of deferred tax on IFRS 9 provision for trade receivables
Recognised in statement of comprehensive income
At 31 December 2018
2018
£000
34
188
(45)
177
Property,
plant &
equipment
£000
Bad debt
provision
£000
21
(8)
13
-
(1)
12
17
4
21
188
(44)
165
2017
£000
38
-
(4)
34
Total
£000
38
(4)
34
188
(45)
177
NAHL Group plc Annual Report and Accounts 2018
73
CSR
NOTES CONTINUED
11 Deferred tax liability
At beginning of year
Recognised in statement of comprehensive income (see note 9)
Deferred tax liability at end of year
The liability for deferred taxation consists of the tax effect of temporary differences in respect of:
At 1 January 2017
Recognised in statement of comprehensive income
At 31 December 2017
Recognised in statement of comprehensive income
At 31 December 2018
2018
£000
1,662
(320)
1,342
2017
£000
1,914
(252)
1,662
Intangible
assets
acquired on
business
acquisitions
£000
1,914
(252)
1,662
(320)
Total
£000
1,914
(252)
1,662
(320)
1,342
1,342
12 Acquisitions
During 2017, the Group incorporated two new ABSs through joint partnerships with members of its Panel Law Firms. 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 2017
At 31 December 2017
At 31 December 2018
Impairment
At 1 January 2017
At 31 December 2017
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
Personal
Injury
£000
39,897
39,897
Critical
Care
£000
Residential
Property
£000
Total
£000
15,592
15,592
4,873
4,873
60,362
60,362
39,897
15,592
4,873
60,362
–
–
–
–
–
–
–
–
–
–
–
–
39,897
39,897
15,592
15,592
4,873
4,873
60,362
60,362
Where goodwill arose as part of a business combination, 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 being Personal Injury, Critical Care and
Residential Property, is the appropriate level at which to test, as this represents the lowest level at which independent cash flows are
generated.
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NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
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. These cash flows are calculated using the latest budget data for the coming year, extrapolated at a forecast growth rate for
four years for Critical Care and Residential Property and the five year forecast for Personal Injury with no growth into perpetuity. The cash
flows are discounted at a range of pre-tax WACCs of between 8.2%–8.9% (2017: 7.5%–8.4%). The range of WACCs represents the
different risk profiles of each CGU.
We include a terminal value within each forecast which represents the cash flows of the CGU into perpetuity with 0% growth assumed, as
permitted under IAS36 Impairment of assets.
Management has determined that the recoverable amount calculations are most sensitive to changes in the assumptions of the discount
rates, growth rates used to extrapolate the cash flows beyond the budget period and operating cash flow percentages (to take into account
changes in working capital).
The operating profit compound annual growth rate assumptions for years one to five are as follows:
Personal Injury
Critical Care
Residential Property
2018
10.7%
7.5%
0.0%
2017
(1.4)%
7.5%
0.0%
The key factor in the Personal Injury growth assumptions is the impact of National Accident Law. This plays a significant role in the profits
generated from 2021 onwards as the profits from enquiries passed to it in earlier years start to realise. The forecast operating profits
arising from the impact of National Accident Law have been based on detailed financial models and using knowledge and experience on
how cases settle gained from our prior experience.
We have applied a growth rate to Critical Care which is higher than the expected UK average growth rate of c. 2%. This is based on the
recent trading performance of the division over the past three years and does not take into account the strategic plans for the division over
the coming years which are higher than 7.5%.
Operating cash flow percentages of between 60% and 90% have been applied to take into account changes in working capital
movements. These percentages have been based on historic rates and adjusted as appropriate to take into account an improvement to the
cash flows as deferred terms offered in prior years start to settle (Personal Injury) and increased deferred terms are offered (Critical Care).
Using the assumptions set out above, each CGU has headroom in excess of 40%. Management have performed sensitivity analysis on the
key assumptions (WACC, growth rate, operating cash flows) and have determined that there is ample headroom under the value in use
calculation to determine that no significant changes to key assumptions would affect the overall judgement as to whether the CGU is
impaired.
NAHL Group plc Annual Report and Accounts 2018
75
CSR NOTES CONTINUED
14 Non-controlling interests
The Group has the following investments in non-wholly owned subsidiaries:
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
2018
n/a
n/a
2017
n/a
n/a
The ownership % is deemed to be not applicable as the investments are LLPs. The Group, through its 100% owned subsidiary Project
Jupiter Limited, is entitled to appoint 60% of the members to the Management Board of each LLP. Profit and net assets are shared
between members based on the provisions of the partnership agreements.
Non-Controlling Interests
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the Group. The
amounts disclosed for each subsidiary are before inter-company eliminations.
£’000
Summarised Balance Sheet:
Current assets
Current liabilities
Net assets
Drawings paid to Non-Controlling Interest
Carrying amount of Non-Controlling Interest
Summarised Statement of Comprehensive Income:
Revenue
Profit after tax
Other comprehensive income
Total comprehensive income
Profit allocated to Non-Controlling Interest
Other comprehensive income allocated to Non-Controlling Interest
Summarised cash flows:
Cash flows from operating activities
Cash flows from investment activities
Cash flows from financing activities
Net increase in cash and cash equivalents
15 Other Intangible assets
Cost
At 1 January 2018
Additions
Reclassifications
At 31 December 2018
Amortisation
At 1 January 2018
Amortisation charge for the year
Amortisation charge on business combinations
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
76
NAHL Group plc Annual Report and Accounts 2018
Technology
related
£000
Contract
related
£000
Brand
names
£000
167
–
–
167
62
–
20
82
105
85
8,466
–
–
8,466
2,363
–
1,077
3,440
6,103
5,026
885
–
–
885
468
–
173
641
417
244
Other
£000
670
196
356
1,222
157
187
–
344
513
878
2018
Your Law
LLP
5,019
(3,763)
1,256
(865)
956
3,565
2,127
–
2,127
1,708
–
1,108
–
(1,080)
28
Total
£000
10,267
640
–
10,907
3,050
187
1,270
4,507
Assets
under
construction
£000
79
444
(356)
167
–
–
–
–
79
167
7,217
6,400
Strategic Report
Governance
Financial Statements
Cost
At 1 January 2017
Additions
At 31 December 2017
Amortisation
At 1 January 2017
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
16 Property, plant and equipment
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
Assets
under
construction
£000
20
59
79
–
–
–
–
20
79
Other
£000
549
121
670
27
130
–
157
522
513
Cost
At 1 January 2018
Additions
Disposals
At 31 December 2018
Depreciation and impairment
At 1 January 2018
Depreciation charge for the year
Disposals
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
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
Total
£000
10,087
180
10,267
1,613
130
1,307
3,050
8,474
7,217
Fixtures &
fittings &
total
£000
1,783
145
(211)
1,717
1,516
173
(167)
1,522
267
195
Fixtures &
fittings &
total
£000
1,672
111
1,783
1,345
171
1,516
327
267
NAHL Group plc Annual Report and Accounts 2018
77
CSR NOTES CONTINUED
17 Trade and other receivables
Trade receivables: receivable in less than one year
Trade receivables: receivable in more than one year
Accrued income: receivable in less than one year
Accrued income: receivable in more than one year
Other receivables
Prepayments
Recoverable disbursements
2018
£000
13,234
2,600
4,359
4,003
308
24,504
673
3,629
28,806
2017
£000
8,967
7,280
4,568
–
150
20,965
437
859
22,261
A provision against trade receivables and accrued income of £909,000 (2017: £1,115,000) is included in the figures above.
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.
Non-current liabilities
Revolving credit facility
Less facility arrangement fees
Total other interest-bearing loans and borrowings
2018
£000
2017
£000
17,250
(128)
13,125
(203)
17,122
12,922
The revolving credit facility is secured by a fixed and floating charge over the assets of the Group.
Terms and debt repayment schedule
Currency Nominal interest rate
Year of
maturity
Fair
value
2018
£000
Bank loan1
GBP 1.25%–1.65% above Libor
2021
17,122
Carrying
amount
2018
£000
17,122
Fair
value
2017
£000
12,922
Carrying
amount
2017
£000
12,922
17,122
17,122
12,922
12,922
1 The Company renewed its banking facilities in September 2017 by taking out a revolving 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%–1.65% above LIBOR per annum.
19 Trade and other payables
Trade payables
Other taxation and social security
Other payables, accruals and deferred revenue
Customer deposits
2018
£000
6,205
1,028
6,907
971
15,111
2017
£000
2,808
1,059
7,515
1,033
12,415
78
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
20 Share capital
Number of shares
Opening: ‘A’ Ordinary Shares of £0.0025 each
Issued during the year
Closing: ‘A’ Ordinary Shares of £0.0025 each
Allotted, called up and fully paid
Opening: 46,061,090 (2017: 45,349,629) ‘A’ Ordinary Shares of £0.0025 each
Issued during the year
Closing: 46,178,716 ‘A’ Ordinary Shares of £0.0025 each
Shares classified in equity
Opening shares classified in equity
Issued during the year
Closing balance
21 Share-based payments
The Group operates three employee share plans as follows:
2018
2017
46,061,090 45,349,629
711,461
117,626
46,178,716 46,061,090
£000
£000
115
–
115
115
–
115
113
2
115
113
2
115
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. The SAYE scheme is open to all employees of the Group once they have passed their
probationary period. The scheme runs over three years with employees choosing to save between £0 - £500 per month, the proceeds of
which can then be used to purchase the shares under option.
EMI Scheme
Options may be granted as tax-favoured enterprise management incentive options (EMI Options) or non-tax favoured Options. 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).
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
Vesting period
SAYE Equity-settled award to 31 employees granted
by the Parent Company on 29 November 2017
SAYE Equity-settled award to 63 employees granted
by the Parent Company on 23 October 2018
EMI Equity-settled award to 6 employees granted
by the Parent Company on 11 December 2014
EMI Equity-settled award to 1 employee granted
by the Parent Company on 31 October 2016
EMI Equity-settled award to 11 employees granted
by the Parent Company on 31 October 2017
107,508 Ordinary Shares Performance-based
1 January 2021
475,164 Ordinary Shares Performance-based
1 December 2021
583,331 Ordinary Shares Performance-based
61,506 Ordinary Shares Performance-based
370,107 Ordinary Shares Performance-based
EMI Equity-settled award to 1 employee granted
by the Parent Company on 11 January 2018
33,898 Ordinary Shares Performance-based
EMI Equity-settled award to 14 employees granted
by the Parent Company on 24 May 2018
778,555 Ordinary Shares Performance-based
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
On determination of
performance criteria
(as soon as practicable
after 31 December 2019)
On determination of
performance criteria
(as soon as practicable
after 31 December 2019)
On determination of
performance criteria
(as soon as practicable
after 31 December 2020)
NAHL Group plc Annual Report and Accounts 2018
79
CSR NOTES CONTINUED
21 Share-based payments continued
All of the above options have a maximum term of 10 years in which they can be exercised following the vesting period.
The number and weighted average exercise prices of share options are as follows
2018
2017
Weighted
average
exercise price
£
Number of
options
No.
Weighted
average
exercise price
£
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Cancelled during the year
Lapsed during the year
Vested during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
1.14 1,008,894
(117,626)
1,778,577
–
(359,740)
–
(483,367)
(0.82)
0.52
–
(2.46)
–
(1.12)
0.3
2.00
1,826,738
583,331
Number of
options
No.
2,310,822
(711,461)
407,129
(157,182)
(124,999)
(583,331)
(132,084)
1.53
(0.0025)
0.0025
(3.18)
(2.00)
(2.00)
(2.84)
1.14
1.78
1,008,894
815,268
A charge of £457,000 (2017: £182,000) has been made through the statement of comprehensive income in the current year in relation to
the IFRS 2 share option charge. The weighted average share price of those shares exercised during the year was £1.56. For shares
outstanding at the year end, these are exercisable at a range of exercise prices of between £0.0025 - £2.90 and have a weighted average
remaining life of 725 days.
The fair value of each employee share option has been measured using the Black-Scholes formula where an expected volatility of 65.0%
(2017: 65.0%) has been used as well as a risk-free interest rate (based on government bonds) of between 0.5%–0.9% (2017: 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 2018 is based on profit attributable to Ordinary Shareholders of the
Parent Company of £6,674,000 (2017: £9,876,000) and a weighted average number of Ordinary Shares outstanding of 46,160,172
(2017: 45,548,243).
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
2018
6,674
2017
9,876
Note
2018
2017
20 46,061,090 45,349,629
46,160,172 45,548,243
2018
14.5
2017
21.7
The Group has in place share-based payment schemes to reward employees. At 31 December 2018, 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 454,169 (2017: 205,303). There are no other diluting items.
Diluted earnings per share (p)
Group
80
NAHL Group plc Annual Report and Accounts 2018
2018
14.3
2017
21.6
Strategic Report
Governance
Financial Statements
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 credit risk, liquidity risk and market risk (specifically interest rate 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.
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:
Fair value
hierarchy
Carrying
amount
2018
£000
Fair
value
2018
£000
Carrying
amount
2017
£000
Fair
value
2017
£000
Financial assets measured at amortised cost
Cash and cash equivalents
Trade and other receivables (note 17)
Disbursements (note 17)
Total financial assets
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 18)
Trade payables (note 19)
Other taxation and social security (note 19)
Other payables, accruals and deferred revenue (note 19)
1,598
24,504
3,629
1,598
24,504
3,629
29,731
29,731
17,122
6,205
1,028
6,907
17,122
6,205
1,028
6,907
858
20,965
859
22,682
12,922
2,808
1,059
7,515
858
20,965
859
22,682
12,922
2,808
1,059
7,515
Total financial liabilities measured at amortised cost
31,262
31,262
24,304
24,304
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.
Exposure to credit risk
The maximum exposure to credit risk at the balance sheet date by class of financial instrument was:
Trade receivables
Accrued income
2018
£000
15,834
8,362
24,196
2017
£000
16,247
4,568
20,815
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 Panel Law Firms with whom we hold strategic partnerships and after satisfactory credit checks
have been obtained. As at 31 December 2018 these deposits reflect 6.1% (2017: 6.4%) of the balance of trade receivables. At each balance
sheet date, the amount of deposit held was:
Customer deposits
2018
£000
971
2017
£000
1,033
NAHL Group plc Annual Report and Accounts 2018
81
CSR NOTES CONTINUED
23 Financial instruments continued
Credit quality of financial assets and impairment losses
The aging of trade receivables at the balance sheet date was:
Not past due
Past due (1-30 days)
Past due (30-120 days)
Past due (over 120 days)
Gross:
Standard
Terms
2018
£000
2,335
769
862
1,257
5,223
Gross:
Deferred
Terms
2018
£000
10,780
52
116
75
11,023
Impairment
2018
£000
(197)
(22)
(67)
(126)
(412)
Total
2018
£000
12,918
799
911
1,206
15,834
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
24.1% of standard terms trade receivables are 120 days or more past due (2017: 13.0%). These receivables arise primarily in Critical Care
where our standard credit terms are 30 days. As mentioned in the 2017 Strategic Report increasing cost pressures on solicitors 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
IFRS 9 adjustment to opening balances
Allowance recognised/(released)
Balance at 31 December
2018
£000
114
1,001
(206)
909
2017
£000
104
-
10
114
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 its revolving credit facility 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:
2018
Non-derivative financial instruments
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
2017
Non-derivative financial instruments
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
82
NAHL Group plc Annual Report and Accounts 2018
Secured
bank loans
£000
Trade and
other
payables
£000
Total
£000
(17,250)
(14,140)
(31,390)
(380)
(380)
(17,630)
(10,452)
(3,688)
–
(10,832)
(4,068)
(17,630)
(18,390)
(14,140)
(32,530)
Secured
bank loans
£000
Trade and
other
payables
£000
Total
£000
(13,125)
(11,382)
(24,507)
(295)
(295)
(13,420)
(11,382)
–
–
(11,677)
(295)
(13,420)
(14,010)
(11,382)
(25,392)
Strategic Report
Governance
Financial Statements
(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 future cash
flows of a financial instrument will fluctuate because of changes in interest rates.
At the balance sheet dates, the only interest-bearing financial asset is cash. There is not considered to be an interest rate risk associated
with cash. The interest rate profile of the Group’s interest-bearing financial liabilities was:
Variable rate instruments
Financial liabilities
Total interest-bearing financial instruments
2018
£000
2017
£000
17,250
17,250
13,125
13,125
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
2018
£000
86
(86)
2017
£000
(66)
66
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 fair value
through profit or loss or other comprehensive income.
(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. The Group’s debt/equity ratio as at 31 December 2018 is 0.3:1.0 (2017: 0.2:1.0). The
Group is subject to quarterly covenant testing against its bank loans. These covenants include leverage and interest cover. The Group
adhered to both these covenants in 2018 and is forecasting to be in compliance with these throughout 2019 and 2020.
24 Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
2018
£000
444
536
980
2017
£000
402
491
893
The Group leases a number of office buildings under operating leases. During the year £388,000 was recognised as an expense in the
statement of comprehensive income in respect of operating leases (2017: £426,000).
NAHL Group plc Annual Report and Accounts 2018
83
CSR NOTES CONTINUED
25 Commitments
Capital commitments
At 31 December 2018 the Group had no capital commitments (2017: £nil).
26 Transactions with owners, recorded directly in equity
Exercise of share 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.
During 2018 117,626 share options were exercised which resulted in the issue of 117,626 new Ordinary Shares with a par value of £0.0025.
The exercising of these options raised funds of £88,356 for the Group.
27 Dividends
On 31 May 2018 the Group paid final dividends in respect of 2017 of £4,895,000 (2017: final dividends in respect of 2016 of £5,759,000)
which represented a dividend per share of 10.6p (2017: 12.7p). On 31 October 2017 the Group paid interim dividends in respect of 2018
of £1,478,000 (2017: interim dividends in respect of 2017 of £2,412,000) which represented a dividend per share of 3.2p (2017: 5.3p).
The Directors have recommended a final dividend in respect of 2018 of 5.7p providing a total dividend for the year of 8.9p.
28 Related parties
Transactions with key management personnel
Key management personnel in situ at the 31 December 2018 and their immediate relatives control 2.9% (2017: 4.5%) 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
29 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 increase/(decrease) in cash and cash equivalents
Cash and cash equivalents net inflow from increase in debt and debt financing
Movement in net borrowings resulting from cash flows
Non-cash movements (release of)/increase to prepaid loan arrangement fees
Net debt at beginning of period
Net debt at end of period
2018
£000
2,188
100
2,288
2017
£000
3,291
32
3,323
2018
£000
2017
£000
1,598
(17,122)
858
(12,922)
(15,524)
(12,064)
2018
£000
740
(4,125)
(3,385)
(75)
(12,064)
2017
£000
(3,956)
(1,875)
(5,831)
42
(6,275)
(15,524)
(12,064)
84
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
30 Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the
financial statements.
IFRS 9 Financial instruments
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial
liabilities, de-recognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 Financial Instruments from 1 January 2018 resulted in changes in accounting policies and adjustments to the
amounts recognised in the financial statements. The new accounting policies are set out in note 1. In accordance with the transitional
provisions in IFRS 9(7.2.15) and (7.2.26), comparative figures have not been restated.
The total impact on the Group’s retained earnings as at 1 January 2018 is as follows:
Closing retained earnings 31 December 2017 – IAS 39/IAS 18
Increase in provision for trade receivables (net of £188,000 deferred tax)
Opening retained earnings 1 January 2018 – IFRS 9
i) Reclassification of financial instruments on adoption of IFRS 9
On the date of initial application, 1 January 2018, the financial instruments of the Group were as follows:
2018
£000
111,893
(814)
111,079
Current Assets
Cash
Trade receivables
Current liabilities
Trade payables
Non-current liabilities
Revolving credit facility
ii) Impairment of financial assets
Measurement Category
Carrying amount
Original (IAS 30)
New (IFRS 9)
Original (IAS 30)
New (IFRS 9)
Amortised cost Amortised cost
858
858
Amortised cost Amortised cost
20,815
19,814
Amortised cost Amortised cost
6,205
6,205
Amortised cost Amortised cost
12,922
12,922
The Group has the following financial assets that are subject to the IFRS 9 new expected credit loss (ECL) model:
a) Trade receivables – the Group applied the simplified approach to measuring ECL which uses a lifetime expected loss allowance
for all trade receivables. This resulted in an increase of the loss allowance on 1 January 2018 of £509,000 (net of £103,000 deferred
tax) for trade receivables. The loss allowance decreased by £200,000 during the current reporting period.
b) Accrued income – as with trade receivables, the Group applied the simplified approach to measuring ECL which uses a lifetime
expected loss allowance for all trade receivables. This resulted in an increase of the loss allowance on 1 January 2018 of £493,000
(net of £84,000 deferred tax) for trade receivables. The loss allowance decreased by £6,000 during the current reporting period.
IFRS 15 Revenue from Contracts with Customers
The Group has reviewed its revenue recognition policies and determined that there are no adjustments to revenues in either the current or
prior year as a result of adopting IFRS 15. Details of the new revenue recognition policy are given in note 1.
At the end of 2017, in preparation for the implementation of IFRS 15 in 2018, the directors undertook a detailed review of the revenue
streams described in note 1. This involved considering each revenue stream with respect to the five stage approach as prescribed in IFRS
15. These are: identification of the contract; identification and satisfaction of the performance obligations; determination of the
transaction price; and the allocation of the transaction price to the performance obligation. After this review took place, the Executive
Directors prepared an IFRS impact assessment paper that documented the proposed revenue recognition policy for each revenue stream
under IFRS 15 and compared the new policy to the previous recognition policy, under IAS 18, to determine the overall impact. This paper
was reviewed by the Audit Committee and the new policy was adopted.
NAHL Group plc Annual Report and Accounts 2018
85
CSR COMPANY BALANCE SHEET
AT 31 DECEMBER 2018
Non-current assets
Investments
Current assets
Trade and other receivables
Net assets
Equity
Share capital
Share option reserve
Share premium
Retained earnings at start of year
Comprehensive income for the year
Retained earnings at end of year
Dividends paid
Total equity
Note
2018
£000
2017
£000
2
3
5
52,700
52,700
12,431
65,131
18,259
70,959
115
2,578
14,595
54,216
–
47,843
115
2,121
14,507
62,387
–
54,216
(6,373)
(8,171)
65,131
70,959
The notes on pages 89 to 94 form part of these financial statements.
These financial statements were approved by the Board of Directors on 18 March 2019 and were signed on its behalf by:
J D Saralis
Director
Company registered number: 08996352
86
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Balance at 1 January 2017
Transactions with owners, recorded directly in
equity
Issue of new Ordinary Shares
Share-based payments
Dividends paid
Balance at 31 December 2017
Transactions with owners, recorded directly in
equity
Issue of new Ordinary Shares
Share-based payments
Dividends paid
Balance at 31 December 2018
Note
9
6
9
6
The notes on pages 89 to 94 form part of these financial statements.
Share
capital
£000
113
Share
option
reserve
£000
1,939
Share
premium
£000
14,507
Retained
earnings
£000
62,387
Total
£000
78,946
2
–
–
–
182
–
–
–
–
–
–
(8,171)
2
182
(8,171)
115
2,121
14,507
54,216
70,959
–
–
–
–
457
–
88
–
–
–
–
(6,373)
88
457
(6,373)
115
2,578
14,595
47,843
65,131
NAHL Group plc Annual Report and Accounts 2018
87
CSR COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Cash flows from Operating activities
Result for the year
Adjustments for:
Share-based payments
Decrease in trade and other receivables
Net cash generated 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
2018
£000
–
457
457
5,828
6,285
2017
£000
–
182
182
7,987
8,169
88
(6,373)
(6,285)
2
(8,171)
(8,169)
–
–
–
–
–
–
88
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Financial statements
The financial statements for the year ended 31 December 2018 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 (2017:
£nil).
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements and estimates that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates are based on past
experience and other reasonable assessment criteria. Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the year in which the estimates are
revised and in any future years affected.
In accordance with IAS 1 the Group is required to disclose critical accounting judgements and key sources of estimation uncertainty.
Judgements
In applying the Company’s accounting policies, management have not made any judgements that have a significant impact on the
amounts recognised in the financial statements.
Estimates
In applying the Company’s accounting policies, management have not made any estimates that have a significant impact on the amounts
recognised in the financial statements.
New standards and amendments adopted by the Company
The Company has applied the following standards and amendments for the first time for their annual reporting period commencing
1 January 2018:
¡ IFRS 9 Financial Instruments
The adoption of the above standard did not have any impact on the amounts recognised in the prior or current periods.
New standards, interpretations and amendments not yet effective
The Company has not applied the following new and revised IFRS that have been issued but are not yet effective:
¡ IFRS 16: Leases – Effective for annual reporting periods beginning on or after 1 January 2019.
The Company has no leases and there will be no impact as a result of the above.
NAHL Group plc Annual Report and Accounts 2018
89
CSR NOTES CONTINUED
1 Accounting policies continued
Going concern
The Company had net assets of £65,131,000 (2017: £70,959,000) and net current assets of £12,431,000 (2017: £18,259,000) 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 include the impact of
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.
Investments
Investments are initially recognised at cost. Investments are reviewed for impairment at least annually and subsequently measured at cost
less any provisions for impairment.
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. The share-based payment charge represents the charge in respect of the employees of the Group.
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
Class of
shares held
Consumer Champion Group Limited
United Kingdom
Bush & Company Rehabilitation Limited United Kingdom
United Kingdom
Fitzalan Partners Ltd
United Kingdom
NAH Holdings Limited
United Kingdom
NAH Group Ltd
United Kingdom
National Accident Helpline Limited
United Kingdom
Lawyers Agency Services Limited
United Kingdom
Accident Helpline Limited
United Kingdom
NAH Support Services Limited
United Kingdom
Tiger Claims Limited
United Kingdom
Your Law 1 Limited
United Kingdom
NAH Legal Services Limited
United Kingdom
Searches UK Limited
United Kingdom
Inside Eye Limited
United Kingdom
Project Jupiter Limited
Your Law LLP1
United Kingdom
National Law Associates LLP1
United Kingdom
United Kingdom
National Accident Law Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
n/a
n/a
Ordinary
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
Personal Injury lawyers
Ownership
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
n/a
100%
2017
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
n/a
100%
1 Your Law LLP and National Law Associates LLP are Limited Liability Partnerships. The ownership % is deemed to be not applicable as the investments are LLPs. The
Group, through its 100% owned subsidiary Project Jupiter Limited, is entitled to appoint 60% of the members to the Management Board of each LLP. Profit and net
assets are shared between members based on the provisions of the partnership agreements.
90
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
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 (trading as National Law Partners) is 43 Queen Square, Bristol, United Kingdom, BS1
4QP.
At 31 December 2018 the value of the investment in Consumer Champion Group Limited, its only directly owned subsidiary, was as follows:
Valuation
At 1 January 2018 and 31 December 2018
Total
£000
52,700
The Directors have determined that due to the net assets of NAHL Group plc being in excess of the market capitalisation of the Group
headed by NAHL Group plc as at 31 December 2018 then an indication of impairment exists.
The recoverable amount of the investment has been assessed on a value in use basis using the below assumptions behind each valuation
technique. A value in use valuation is considered to be appropriate as the investment is being held for its long-term profit potential.
Value in use
On a value in use basis the future cash flows from the investment have been assessed. The future cash flows are considered to be the
future dividends that could be generated by each CGU (i.e. future retained earnings generated by each of the trading subsidiaries) using
the latest budget data for the coming year extrapolated at an annual growth rate for four years and no growth in perpetuity, discounted at a
pre-tax WACC of 8.9%. The key assumptions under this basis are the WACC and operating profits of each subsidiary. More details on how
these have been calculated are given in note 13, Goodwill, to the consolidated financial statements.
Under this basis the carrying value of assets is below the recoverable amount valued on a value in use basis and therefore there would be
no impairment required.
Sensitivity analysis has been performed that indicates that no reasonable changes to assumptions would result in an impairment to the
investment.
3 Trade and other receivables
Amounts due from Group undertakings
2018
£000
12,431
12,431
2017
£000
18,259
18,259
NAHL Group plc Annual Report and Accounts 2018
91
CSR NOTES CONTINUED
4 Financial instruments
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.
Financial assets measured at amortised cost
Amounts due from Group undertakings
Total financial assets
5 Share capital
Number of shares
‘A’ Ordinary Shares of £0.0025 each
Allotted, called up and fully paid
At 1 January 2018: 46,061,090 ‘A’ Ordinary Shares of £0.0025 each
Issued during the year (note 9)
At 31 December 2018: 46,178,716 ‘A’ Ordinary Shares of £0.0025 each
Shares classified in equity
At 1 January 2018
Issued during the year (note 9)
At 31 December 2018
Fair
value
hierarchy
Carrying
amount
2018
£000
12,431
12,431
Fair
value
2018
£000
12,431
12,431
Carrying
amount
2017
£000
18,259
18,259
Fair
value
2017
£000
18,259
18,259
2018
2017
46,178,716 46,061,090
46,178,716 46,061,090
£000
£000
115
–
115
115
–
115
113
2
115
113
2
115
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NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
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. The SAYE scheme is open to all employees of the Group once they have passed their
probationary period. The scheme runs over three years with employees choosing to save between £0 - £500 per month, the proceeds of
which can then be used to purchase the shares under option.
EMI scheme
Options may be granted as tax-favoured enterprise management incentive options (EMI Options) or non-tax favoured Options. 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).
Nominal cost 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 31 employees granted
by the Parent Company on 29 November 2017
SAYE Equity-settled award to 63 employees granted
by the Parent Company on 23 October 2018
EMI Equity-settled award to 6 employees granted
by the Parent Company on 11 December 2014
EMI Equity-settled award to 1 employee granted
by the Parent Company on 31 October 2016
EMI Equity-settled award to 11 employees granted
by the Parent Company on 31 October 2017
107,508 Ordinary Shares Performance-based
1 January 2021
475,164 Ordinary Shares Performance-based
1 December 2021
583,331 Ordinary Shares Performance-based
61,506 Ordinary Shares Performance-based
370,107 Ordinary Shares Performance-based
EMI Equity-settled award to 1 employee granted
by the Parent Company on 11 January 2018
33,898 Ordinary Shares Performance-based
EMI Equity-settled award to 14 employees granted
by the Parent Company on 24 May 2018
778,555 Ordinary Shares Performance-based
All of the above options have a maximum term of 10 years in which they can be exercised following the vesting period.
The number and weighted average exercise prices of share options are as follows:
2018
2017
Weighted
average
exercise price
£
Number of
options
No.
Weighted
average
exercise price
£
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Cancelled during the year
Lapsed during the year
Vested during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
1.14 1,008,894
(117,626)
1,778,577
–
(359,740)
–
(483,367)
(0.82)
0.52
–
(2.46)
–
(1.12)
0.3
2.00
1,826,738
583,331
NAHL Group plc Annual Report and Accounts 2018
93
Third anniversary of
Date of Grant
Third anniversary of
Date of Grant
On determination of
performance criteria
(as soon as practicable
after 31 December 2019)
On determination of
performance criteria
(as soon as practicable
after 31 December 2019)
On determination of
performance criteria
(as soon as practicable
after 31 December 2020)
Number of
options
No.
2,310,822
(711,461)
407,129
(157,182)
(124,999)
(583,331)
(132,084)
1.53
(0.0025)
0.0025
(3.18)
(2.00)
(2.00)
(2.84)
1.14
1.78
1,008,894
815,268
CSR NOTES CONTINUED
6 Share-based payments continued
A charge of £457,000 (2017: £182,000) 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 weighted average share price of those shares
exercised during the year was £1.56. For shares outstanding at the year end, these are exercisable at a range of exercise price of between
£0.0025 - £2.90 and have a weighted average remaining life of 725 days.
The fair value of each employee share option has been measured using the Black-Scholes formula where an expected volatility of 65.0%
(2017: 65.0%) has been used as well as a risk-free interest rate (based on government bonds) of 0.5% to 0.9 % (2017: 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.
7 Staff costs and numbers
During the year the Company employed no members of staff and incurred no staff costs.
8 Commitments
Capital commitments
At 31 December 2018 the Company had no capital commitments (2017: £nil).
9 Transactions with owners, recorded directly in equity
Exercise of share 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.
During 2018 117,626 share options were exercised which resulted in the issue of 117,626 new Ordinary Shares with a par value of £0.0025.
The exercising of these options raised funds of £88,356 for the Group.
10 Related parties
Transactions with key management personnel
Key management personnel in situ at 31 December 2018 and their immediate relatives control 2.9% (2017: 4.5%) 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
2018
£000
2,188
100
2,288
2017
£000
3,291
32
3,323
94
NAHL Group plc Annual Report and Accounts 2018
Strategic Report
Governance
Financial Statements
ADVISORS
Company registration number:
08996352
Auditors:
PricewaterhouseCoopers LLP
Exchange House
Central Business Exchange
Midsummer Boulevard
Milton Keynes
MK9 2DF
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
NAHL Group plc Annual Report and Accounts 2018
95
CSR
GLOSSARY
ABS
APM
AGM
AIM
Bush
CC
CGU
CMC
CMR
CMRU
CODM
CQC
Alternative Business Structure
Alternate performance measure - an alternative method to generally accepted accounting
principles used to measure the financial performance
Annual General Meeting
Alternative Investment Market, part of the London Stock Exchange
Bush & Company Rehabilitation
Critical Care
Cash Generating Unit
Claims Management Companies
Claims Management Regulator
Claims Management Regulation Unit
Chief Operating Decision Maker
Care Quality Commission
EMI Options
Enterprise Management Incentive Options
EPS
FCA
Fitzalan
FRC
Group
ICO
IFRS
KPIs
LASPO
Earnings Per Share
Financial Conduct Authority
Fitzalan Partners
Financial Reporting Council
NAHL Group plc
Information Commissioner’s Office
International Financial Reporting Standards
Key performance idicators
Legal Aid, Sentencing and Punishment of Offenders Act 2012 (enacted 01 April 2013)
Legal Support Centre
First point of contact for consumers with a potential claim staffed by NAH's legal support advisors
LIBOR
LTIP
Medico-Legal
Multi-Track
NAH
NCI
NIHL
Non-RTA
PI
PLF
Post-LASPO
Pre-LASPO
QCA
RCF
RP
RTA
SAYE
Searches
SRA
TSR
London Interbank Offered Rate
Long-term Incentive Plan
A claim or similar involving both medical and legal aspects
Claims over £25,000 or complex points of law/evidence.
National Accident Helpline
Non-controlling interests
Noise Induced Hearing Loss
Non-Road Traffic Accidents (includes employer, occupier and public liability)
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
Revolving Credit Facility
Residential Property
Road Traffic Accidents (also, non-RTA - non-Road Traffic Accidents)
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 UK
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
WACC
Working capital
Weighted average cost of capital
Trade and other receivables less trade and other payables
96
NAHL Group plc Annual Report and Accounts 2018
NAHL Group plc
1430 Montagu Court
Kettering Parkway
Kettering
Northamptonshire
NN15 6XR
T: +44 (0) 1536 527 500
E: investors@nahl.co.uk