FOCUSED
ON THE
FUTURE
Annual Report
and Accounts
2019
CONTENTS
2
3–4
5–6
7–8
9–10
11–12
13–14
15–18
19–24
25–26
27–28
29–34
35–38
39–42
43–44
45–46
47–52
53–54
THE YEAR IN REVIEW
2019 Overview
At a glance
YEAR OVERVIEW
2019 Key achievements
Timeline
OUR BUSINESS
Market Overview
Our Business Model and KPIs
STRATEGIC REPORT
Chair’s Report
Chief Executive’s Report
Chief Financial Officer’s Report
Personal Injury Divisional Overview
Critical Care Divisional Overview
Residential Property Divisional Overview
Principal Risks and Uncertainties
Section 172 Statement and Stakeholder Engagement
55–56 OUR CULTURE
57–58
59–62
63–64 Our Customers
65–66
Driven by Our Values
Investing in our People
Trust in our Business
67–68
69–70
71–72
73–74
75–79
80–82
83–90
91–93
LEADERSHIP AND GOVERNANCE
Board of Directors
Executive Management Team
Chair’s Introduction to Governance
Governance Statement
Audit and Risk Committee Report
Remuneration Committee Report
Directors’ Report
Independent Auditors’ Report
94–151 FINANCIALS
95–102
103–151 Financial Statements
Advisors
152
Looking to the Future
153
NAHL Group Plc Annual Report and Accounts 2019
NAHL Group Plc Annual Report and Accounts 2019
1
1
Info and Summary THE YEAR IN REVIEW
The Group faced
challenging market
conditions this year but we
have continued to make
good progress with our
strategic change agenda.
Our supply of personal injury enquiries in 2019 was
impacted by competitive markets which resulted
in high acquisition costs; and the demand from
our panel of law firms fluctuated throughout the
year. Despite these challenges, we were able to
grow underlying operating profit in Personal Injury,
albeit these factors have an impact on our future
profits as our Alternative Business Structure
(ABS) law firms now have fewer enquiries to
process than we had originally planned.
2019 saw us launch two new ABS law firms and
we terminated our partnership in another, National
Law Partners, in January 2020. We now move
forward with three firms which continue to scale
and add value to the Group. Of these, National
Accident Law is our wholly-owned ABS law firm,
which was launched in April 2019. This is a key
element of our strategy for growth and, to date,
we have been encouraged by its performance.
We continue to face challenging markets, not
only with delays in personal injury reforms
causing uncertainty but also with a housing
market in the UK that proved very difficult
in 2019. Our Residential Property business
gained market share during 2019 but this
also came at a higher than planned lead
cost and the division made a small loss.
Since the end of the year the residential
property market has been further
impacted by the emergence of COVID-19
and we are yet to see the full impact of this.
We were particularly pleased with the
performance of our Critical Care division,
which continues to grow its market share and
profits. New branding and investment in the
functionality of its website has led to a growth in
its pipeline of work and we look forward to more of
the same in 2020.
This backdrop has been difficult but whilst we
continue to navigate challenging markets and
regulatory reform we remain confident that
our strategy is the right one to deliver the best
proposition for our customers and long-term
growth in value for our shareholders.
2
2
NAHL Group Plc Annual Report and Accounts 2019
NAHL Group Plc Annual Report and Accounts 2019
Info and Summary 2019 OVERVIEW
Financial Highlights
Revenue increased by 4.8% to
£51.3m
(2018: £49.0m)
Underlying operating profit maintained at
£12.2m
(2018: £12.1m)
Profit before tax decreased to
£2.2m
(2018: £9.8m), a result of previously announced exceptional costs in Personal
Injury and an impairment charge of £5.3m recognised in respect of the Residential
Property division
Underlying EPS (before NAL start-up losses) of
14.4p
(2018: 18.2p)
Net debt at 31 December 2019
£21.0m
(2018: £15.5m)
NAHL Group Plc Annual Report and Accounts 2019
3
Info and Summary Operational highlights
Continued progress made in transforming and positioning
Personal Injury business for long-term growth, including
launch of National Accident Law, on time and on budget in
April 2019
Launch of fourth ABS law firm, Law Together LLP, in
October 2019
and agreement reached to terminate the Group’s relationship in National
Law Partners with effect from 2 January 2020
Claim volumes in Group’s ABS law firms increased by
46.0%
Critical Care achieved growth in
underlying operating profit of
10.9%
This is the fourth consecutive year of growth since acquisition in 2015
NAH recognised by the Sunday Times as one of the
Top 100 Best Small Companies To Work For 2019
4
NAHL Group Plc Annual Report and Accounts 2019
Info and Summary AT A GLANCE
Trust in our vision
NAHL Group plc stands alongside consumers at key stages
of their lives – when it really matters. Whether moving house,
recovering from an injury or coming to terms with sustaining
a life changing trauma, our customers need to know that
the people they use to support them are capable and
trustworthy.
Every business within our three divisions is
committed to delivering the best possible
consumer experience, giving great service to
their consumers, clients and customers as
well as their legal and specialist care partners.
Our Personal Injury division is breaking new
ground in how people who sustain an injury
that wasn’t their fault are treated – from
its technologically-enabled and easy to use
platform to the empathic and customer-driven
processes it champions, it leads the way in
ethical marketing practices.
When I got the settlement,
it was such a relief. I
got the confidence to
go back to the gym,
I started to feel like
myself again. I couldn’t
have asked for a better
experience.
Amelia, a National Accident Helpline customer
125,811
customers supported
NAHL Group Plc Annual Report and Accounts 2019
5
Info and Summary Our mission
Our mission
To provide exceptional
service to our consumers
and customers by being
outstanding at everything
we do.
Our values
Our values
• We are curious
• We are driven
• We are passionate
• We are unified
Our vision
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
Personal
Injury
Attracting customers via
its market leading brand,
sympathetically validating the
legitimacy of their claim and
connecting to an appropriate
expert law firm or our
own self-processing
operations.
Critical Care
Market leading provider
of case managers and
expert witnesses to solicitors
and insurance companies in
support of clients who have
sustained serious and
catastrophic injuries.
Residential
Property
Provide support and
information for consumers
seeking conveyancing,
searches and survey services,
customers are then connected
to a member of our carefully
selected panel of law
firms, conveyancers
and solicitors.
£31.7m
Revenue
£9.1m
Underlying
Operating Profit
£13.6m
Revenue
£5.0m
Underlying
Operating Profit
£6.0m
Revenue
£(0.3)m
Underlying
Operating Loss
6
NAHL Group Plc Annual Report and Accounts 2019
Info and Summary YEAR
NAHL Group Plc Annual Report and Accounts 2019
7
Year Overview 2019–2020 Whilst the Group faced challenging
market conditions, made more
difficult by uncertainty around the
forthcoming personal injury reforms,
our businesses continued to make
good progress with our strategic
change agenda. The Personal Injury
division launched its first wholly-
owned ABS law firm; our Critical Care
division strengthened its customer
relationships delivering further
growth; and despite a contracting
market, our Residential Property
division increased its market share.
8
NAHL Group Plc Annual Report and Accounts 2019
Year Overview 2019–2020 2019 KEY
ACHIEVEMENTS
2019 was another year of political and market uncertainty.
Rather than waiting for events to happen the Group has
proactively developed a strategy for growth that will enable it to
take advantage of the new regulatory landscape as it emerges.
The Sunday Times
100
Best Small
Companies to
Work For
Personal Injury –
delivering more value
from a claim
Key to our strategy has been the launch of the
Group’s first wholly-owned ABS law firm, National
Accident Law (NAL), providing customers with
a technologically-enabled means of progressing
their claim. Complementing the division’s existing
business model of panel law firms and joint
venture ABS law firms, NAL is already making
progress towards its ambition of becoming a
market leading provider. This was coupled later in
the year with the launch of a further ABS law firm,
Law Together, which is operated in partnership
with Horwich Cohen Coghlan Solicitors. This
enhances the division’s processing capacity while
moving ever closer to the customer.
The division’s vision and culture were recognised
at the beginning of the year when it was placed in
The Sunday TimesTop 100 Best Small Companies
to Work For list – an exceptional achievement.
NAHL Group Plc Annual Report and Accounts 2019
9
Year Overview 2019–2020 A bold new look for
Critical Care
Bush & Co has performed strongly again this
year and has continued its growth trajectory. The
launch of its new branding not only provided a
bold, refreshed look but a website with enhanced
functionality, that gives customers the ability
to find exactly the right case manager or expert
witness for them from Bush’s roster of professional
consultants.
Behind the scenes, Bush has begun the process
of upgrading its technology platform to further
improve performance and in January 2020 the
business completed a move to new offices that will
support its growth plans.
Bush & Co prides itself on its exceptional customer
care and its commitment to delivering great support
and value to the industry. This was recognised at
the Personal Injury Awards in 2019 where it won the
Supporting the Industry award, further enhancing
its reputation in the market.
Growing market share in
Residential Property
Despite the well-documented challenges in the
housing market during 2019, the Residential
Property division was successful in growing
market share through a number of initiatives,
including the development of strategic
relationships with other market participants; and
the launch of The Conveyancing Exchange, a
platform targeted at estate agents.
The division also invested in re-platforming its
websites and strengthened its management
team to create a strong base for future growth.
Unfortunately, the growth in market share came
at a higher cost of acquisition than envisaged and
the division made a small loss for the year.
10
NAHL Group Plc Annual Report and Accounts 2019
Year Overview 2019–2020 TIMELINE
External
LASPO
April 2013
Legal Aid Sentencing and Punishment
of Offenders Act 2012 (LASPO) came
into force
2013
Strategic
2014
FLOATED NAHL GROUP PLC
ON AIM
May 2014
2015
ACQUIRED FITZALAN PARTNERS
February 2015
Entering the residential property market
ACQUIRED BEST VALUE
CONVEYANCING
July 2015
ACQUIRED BUSH & COMPANY
REHABILITATION
October 2015
Entering the catastrophic injury market
WHIPLASH /SMALL CLAIMS LIMIT
REFORMS ANNOUNCED
November 2015
GOVERNMENT ANNOUNCED
CHANGES TO STAMP DUTY AND
SECOND HOME OWNERSHIP
April 2016
2016
ACQUIRED SEARCHES UK
January 2016
UK VOTES TO EXIT THE
EUROPEAN UNION
June 2016
NAHL Group Plc Annual Report and Accounts 2019
11
Year Overview 2019–2020 External
PERSONAL INJURY REFORM
CONSULTATION PERIOD OPENED
November 2016–January 2017
2017
GOVERNMENT ANNOUNCED
INTENTION TO BRING PERSONAL
INJURY REFORMS INTO EFFECT
February 2017
Strategic
NATIONAL ACCIDENT
HELPLINE REBRANDS
June 2017
Refocus on making it right for people who
have suffered an injury that wasn’t their fault
ESTABLISHED YOUR LAW LLP,
OUR FIRST ABS LAW FIRM
July 2017
The Group’s first involvement in Personal
Injury claims processing
ESTABLISHED SECOND ABS LAW FIRM,
NATIONAL LAW ASSOCIATES LLP
November 2017
Trading as National Law Partners, a partnership
that came to an end in January 2020
2018
ESTABLISHED SELF-PROCESSING
PROJECT TEAM
March 2018
In preparation for launch of National Accident Law
GENERAL ELECTION
December 2019
2019
LAUNCH NATIONAL
ACCIDENT LAW
April 2019
Our first wholly-owned ABS law firm, a key
development for the Group in its response
to the incoming legal reforms
BUSH & CO BRAND REFRESH
May 2019
LAUNCH LAW TOGETHER,
OUR FOURTH ABS LAW FIRM
October 2019
PERSONAL INJURY REFORMS
DELAYED TO APRIL 2021 BUT KEY
DETAILS REMAIN UNKNOWN
April 2020
2020
12
NAHL Group Plc Annual Report and Accounts 2019
Year Overview 2019–2020 OUR
NAHL Group Plc Annual Report and Accounts 2019
13
Our Business 2019–2020 The Group operates across three
sectors of the UK Legal Services
Market which are valued at over
£7bn. Our markets are evolving and in
recent years have been challenged by
political and regulatory uncertainties
that have increased the risks we face.
Our strategy is to leverage our brands,
technology and deep understanding
of our markets to deliver the best
outcomes for our customers and
maximise value for our shareholders.
14
NAHL Group Plc Annual Report and Accounts 2019
Our Business 2019–2020 MARKET OVERVIEW
Our evolving sectors
The markets that the Group operates in are
constantly changing as external factors continue
to impact customer behaviour. During 2019, the
business experienced considerable volatility due
to challenging conditions in the markets in which it
operates. (Please see Chief Executive’s Report on
page 29 for more details).
UK Legal Services is a large market, estimated at
over £37bn in size, that grew at 3.9% in the last
year1. The Group operates in three sectors of UK
Legal Services corresponding to its three divisions.
UK Legal Services:
• The personal injury market has been impacted
by regulatory change with the latest set of
reforms recently delayed again. The Government
was targeting an implementation date of August
2020, however, with the COVID-19 crisis taking
hold, this date will now be April 2021.
• In recent years the UK residential property
market has been declining and this decline
accelerated during 2019 with the delays to the
UK’s exit from the European Union creating
uncertainty as homeowners and would-be
homeowners deferred decision making. The
COVID-19 outbreak brought the residential
property market to a standstill in the first
quarter of 2020 and we expect the continuing
impact of this to be seen for much of the year.
• The catastrophic injury market is a sub-set of
the medical reporting/rehabilitation market
which has been less affected by regulatory or
political factors and in recent years has grown
broadly in line with inflation.
£7.2bn
Market Value of UK Legal
Services sector serviced by
NAHL Group plc companies
NAHL Group Plc Annual Report and Accounts 2019
15
Our Business 2019–2020 UK Legal Services Market by Key Practice Area,
2019 (£bn)¹
Total market
37.2
12.7 Corporate/commercial work
4.3 Commercial property
4.0 Personal injury/clinical negligence
2.6
Family law
2.4 Residential conveyancing
2.5
2.1
Employment law
Probate, wills and trusts
1.6 Crime
4.2 Other
0.8 Medical reporting/rehabilitation²
Total market: 37.2
Number of personal injury cases registered to the
CRU (Compensation Recovery Unit)
2017/18
2018/19
Claim type
2017/18
2018/19
Clinical Negligence
Employer
Motor
Public
Other*
Liability not known
*Not an area of focus for the Group
853,615
862,356
17,400
16,809
69,230
89,461
650,019
660,608
96,067
85,472
19,172
7,614
1,727
2,392
1 Source: IRN Research, UK Legal Services Market Report, February 2020
2 Source: IRN Medico-Legal Insurance Services Report, May 2019
16
NAHL Group Plc Annual Report and Accounts 2019
Our Business 2019–2020
MARKET OVERVIEW
Personal Injury
The Personal Injury market saw a small increase of
1% in claims registered with the Claims Recovery
Unit (CRU) in 2018/19 with a total of 862,356
claims registered, providing a total market value of
£4bn. Road Traffic Accidents (RTA) claim volumes
have seen a return to modest growth in 2018/19.
Political uncertainty has led to a delay in the
publication of the detail behind critical elements to
the Government’s personal injury reforms which
will now take effect in April 2021. This continued
uncertainty has led to ongoing volatility in panel
demand and we expect further contraction in
the volume of enquiries going to our panel. In
addition, the large direct players who have not
traditionally formed part of our panel, continue to
compete heavily for enquiries driving our cost of
acquisition up. We expect both these factors to be
a continued feature of the market until the reforms
are implemented.
Critical Care
The catastrophic injury market is a subset of the
medical reporting/rehabilitation market that
we estimate to be £85m–£90m in size. It is a
relatively mature market and in recent years it has
been growing at an inflationary rate.
The market continues to be highly fragmented,
with numerous small-scale operations focused
on providing a local service. We anticipate larger
organisations with scale and procurement agility
to grow market share by leveraging their national
reach and formalised relationships with customers
and insurers. Opportunity also exists for providers
to expand their service offering into adjacent
areas, thereby increasing the size of their
available market.
The market for qualified consultants remains
competitive with case management companies
looking to attract the best talent. Successful
providers remain focused on offering this group
the best possible resources and support to deliver
against their shared goals and to support their
ongoing professional development.
Personal Injury Market
£4.0bn
Critial Care Market
£0.8bn
NAHL Group Plc Annual Report and Accounts 2019
17
Our Business 2019–2020 Residential Property
The residential property market in the UK
contracted during 2019 as the uncertainty and
delay stemming from the country’s exit from the
European Union affected consumer confidence.
Since the General Election in December 2019,
there had been early signs of recovery in the
market, however, this was prior to the emergence
of COVID-19 in the UK in February 2020 which,
subsequently, brought the property market to
a standstill.
Residential Property Market
£2.4bn
18
NAHL Group Plc Annual Report and Accounts 2019
Our Business 2019–2020 Our Business 2019–2020
OUR
MODEL
NAHL Group Plc Annual Report and Accounts 2019
19
Our Business 2019–2020
Our Business 2019–2020
Our business model has our
customers at its heart. Using our
market leading brands and reputation
we generate leads for our expert
services and products. These are
delivered by our skilled, empathic
and expert colleagues and our
technologically-enabled processes.
Guided by our strong culture and
Values set, our experienced, visionary
and responsible leaders draw on
our history of transformational
action to seek creative and industry
disruptive solutions.
20
NAHL Group Plc Annual Report and Accounts 2019
Our Business 2019–2020
OUR
BUSINESS
MODEL
Marketing
Capability
Generating
claims
Instructions
Expert
Reports
Service
Provision
Processing
claims
Case
management
Product
Provision
Customers
Trusted when it
matters
KPI 4
KPI 5
KPI 3
WHAT WE DO
P63–64
P59–62
Employees
Providing a great
place to work and
opportunities to
grow
Partners
Developing
strong
relationships to
facilitate mutual
growth
P59–60
VALUE
DERIVED
FOR
STAKEHOLDERS
OUR
CUSTOMERS
P39–46
KEY
RESOURCES
KPI 1 & 2
HOW WE
DO IT
P39–46
P39–46
Trusted
brands
Shareholders
Developing
sustainable
businesses to
create long-term
value
P55–66
P11–12
P69–72
Technologically
enabled process
Guided by
strong culture
and values
Experienced,
visionary and
responsible
leadership team
Transformation
capability – history
of responding
positively to
regulatory
changes
NAHL Group Plc Annual Report and Accounts 2019
21
Highly skilled,
empathic
people
Technical
expertise in
our markets
Our Business 2019–2020
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 include
alternative performance measures where they provide
additional insight into performance from the perspective
of shareholders and other stakeholders.
In addition to the Group’s financial KPIs,
the Board has identified a number of non-
financial KPIs that help it track progress
in areas that are critical for the long-term
success of the Group. These 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.
1 Cash generation
Free cash flow
Free cash flow comprises the cash
that the Group has generated from
operations less amounts invested in capital
items, lease payments and payments to/
from non-controlling interests. The reduction
of free cash flow is as a result of a delay in
receiving amounts due from the Group’s
partners in National Law Partners. Following
a settlement reached in December 2019,
£5m will be paid to the Group in this regard
over the next three years. (Please see CFO
Report on page 35 for more details and note
2 for a reconciliation of this figure to statutory
measures).
Free cash flow (£’000)
2019 (1,702)
2018
2017
2,900
2,424
2
Profitability
Underlying
Earnings per
share (EPS)
Underlying EPS excludes the non-controlling
interests’ share of profits along with
exceptional items and certain one-off costs,
to derive a profit metric on a per share basis
that reflects the underlying performance of
the business. Underlying EPS has decreased
year on year due to a higher proportion of
profits being attributable to non-controlling
interests (2019: £4.5m, 2018: £1.7m). (Please
see CFO Report on page 35 for more details
and note 2 for a reconciliation of this figure to
statutory measures.)
Underlying Earnings per share (p)
2019
2018
2017
14.4
18.2
25.0
3
Marketing services
Enquiries/
Instructions
generated
Our ability to generate
personal injury enquiries and conveyancing
instructions and balance these against
market demand and available working
capital, are a core element of our
transforming business model. These
represent leading indicators of our ability
to generate revenue. Competitive pressure
in the personal injury market and panel
volatility led to a decline in enquiry volumes
in National Accident Helpline whilst
Residential Property were able to grow
enquiry volume, albeit at an increased cost
of acquisition. (Please see Chief Executive’s
Report on page 29 for more details).
National Accident Helpline
Residential Property
2019
2018
2017
2019
2018
2017
56,256
65,468
66,457
35,248
48,526
48,171
5
Expert reports
Reports issued
– Critical Care/
Residential
Property
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.
Critical Care
Residential Property
1,325
1,292
1,175
92,097
88,696
95,397
2019
2018
2017
2019
2018
2017
24
Our Business 2019–2020
4
Service provision
Ongoing claims/
Open case
management
cases
Our ability to generate revenue on
processing personal injury claims is
dependent on successful settlement of
claims. Our ongoing claims represents a
store of value that will convert to revenue in
future years as the claims progress through
the legal process and, ultimately, settle. In
Critical Care, we invoice on a monthly basis
for support provided to clients. The growth
in ongoing claims in ABSs is expected
to grow in the mid-term as our two new
ABSs launched in 2019 (National Accident
Law and Law Together) continue to scale.
Critical Care continues to grow case
management cases organically. (Please
see Chief Executive’s Report on page 29 for
more details).
Open case management cases in Critical Care
Ongoing claims in ABSs
2019
2018
2017
2019
2018
15,108
10,274
2017
3,884
1,294
1,110
1,047
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020
REPORT
NAHL Group Plc Annual Report and Accounts 2019
25
Strategic Report 2019–2020
Our businesses continued to prepare
for legal reforms and changes in their
markets, increasing market share
and reshaping their business models
for growth.
Alternative performance measures
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
2 to the financial statements.
26
NAHL Group Plc Annual Report and Accounts 2019
CHAIR’S REPORT
2019 has been a challenging year for NAHL Group plc and
its Board and has tested the resilience of the operations and
the adaptability of the team. 2020 is presenting a new set of
challenges related to the spread of COVID-19.
Our Critical Care business continued its impressive
growth trajectory in the year, achieving revenues
of £13.6m (2018: £12.4m) and delivering 10.9%
annual growth in underlying operating profit
(2019: £5.0m; 2018: £4.5m). During the year, the
business continued to invest in the development of
its core markets, increasing its market share and
growing its pipeline of work.
The Personal Injury division grew revenues to
£31.7m (2018: £29.5m) and whilst underlying
operating profit grew to £9.1m (2018: £8.4m), the
amount of profit attributable to non-controlling
interests in our joint venture ABS law firms
increased to £4.5m (2018: £1.7m). Our business
transformation continued with the successful
launch of our wholly-owned ABS law firm, National
Accident Law, and the establishment of a new joint
venture ABS law firm, Law Together.
We experienced reduced supply in the market
for personal injury enquiries and higher costs
to acquire them amidst competitive pressures,
together with declining processing appetite from
our panel law firms.
Results in our Residential Property division,
particularly in the second half, disappointed with
revenues of £6.0m (2018 £6.4m) and an underlying
operating loss of £0.3m (2018 profit £0.7m). In
light of the obvious weaknesses in the UK housing
market, further evidenced by the recent impact
of COVID-19, the Directors have decided to book
an impairment provision against the goodwill and
other intangible assets relating to this division.
Please see Chief Executive’s Report on page 29 and
divisional reports on pages 39–46 for more details
on divisional performance.
Operating cash flows were adversely impacted
by the specific commercial challenges seen in the
Personal Injury division. However, the previously
announced negotiated settlement with a former
joint venture partner will result in the Group
receiving £5m over the next three years. Year end
net debt was higher than anticipated at £21.0m;
we will work to reduce this in 2020 whilst investing
carefully in processing claims in our ABS law
During the year, continued political and regulatory
uncertainties in our markets have increased the
risks faced by the Group. Please see Principal Risks
and Uncertainties on page 47 for more details.
The residential property sector experienced
depressed market conditions in 2019 and the
personal injury market experienced challenges in
both supply and demand. In light of a challenging
set of circumstances, management has sought to
mitigate operating risks during the year, including
the slowing of investment in work in progress, with
some success. The Group as a whole has fallen
short of the financial targets set by the Board
despite good performances from some of our
businesses, most notably Critical Care.
2019 results
Group revenues increased to £51.3m (2018:
£49.0m) and we made notable progress in
delivering the Group’s strategy. Despite this
progress, underlying operating profit was flat at
£12.2m (2018: £12.1m) due to difficult conditions
in the residential property market. Profit before
tax declined to £2.2m (2018: £9.8m) as a result
of exceptional costs in Personal Injury and an
impairment charge recognised in respect of the
Residential Property division. Basic earnings per
share declined to (6.4)p (2018: 14.5p) and year
end net debt was £21.0m (2018: £15.5m). Please
see CFO Report on page 35 for further details.
NAHL Group Plc Annual Report and Accounts 2019
27
Strategic Report 2019–2020 Group revenues
increased to
(2018: £49.0m)£51.3m
Underlying operating profit
(2018: £12.1m)£12.2m
Critical Care annual growth
in underlying operating profit
10.9%
Following a Board
evaluation in the first half
of 2019, we took steps to
strengthen the Board in
terms of experience and
governance.
firms. Despite the Personal Injury division facing
its challenges, it was nonetheless pleasing to see
growth in the number of ongoing claims in our legal
services business. This represents a store of value,
which we are confident will deliver growth in future
years, as the claims are realised in full.
Governance
Following an evaluation in the first half of 2019,
we took steps to strengthen the Board in terms
of experience and governance. In July, Sally
Tilleray, a finance specialist and Non-Executive
Director, joined the Board. She became Chair
of the Audit & Risk Committee in September. In
early 2020, we appointed Tim Aspinall as Senior
Independent Director. He is a seasoned legal
professional who has served on our Board since
June 2016. Please see Governance Statement on
page 75 for more details.
Dividend
The Group had paid an interim dividend for the
year ended 31 December 2019 of 2.6p per share
(2018: 3.2p). As previously announced, in early
2020 the Board took the difficult decision to
suspend the dividend and not to propose a final
dividend. This decision allows us to reduce net
debt and de-risk the balance sheet.
Summary
The resulting 2019 outturn, together with continued
regulatory uncertainty, has meant that the financial
returns from the strategic transformation of our
Personal Injury business model are taking longer
than expected to be realised. We remain committed
to our strategy of maximising the value of the
work that we generate through a combination of
self-processing and the application of consumer-
focused technological solutions.
I want to express the Board’s appreciation to all
our customers, employees and partners working
with the Group as we navigate what are now
extremely challenging market conditions in light
of the COVID-19 global pandemic. Our Group has
a strong purpose and I am extremely grateful for
our employees’ enthusiasm and dedication. Finally,
I would like to thank our shareholders for their
patience whilst the Board takes the necessary steps
to deliver value and a sustainable business model.
Caroline Brown
Chair
27 April 2020
28
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 CHIEF EXECUTIVE’S
REPORT
We made solid strategic
progress across the Group
successfully implementing
several key initiatives
including the launch of
National Accident Law, our
wholly-owned Personal
Injury processing unit and
a new ABS partnership,
Law Together.
Additionally, I am delighted with the progress that
we have made in Critical Care which has, once
again, delivered double-digit profit growth.
Results
The Group delivered underlying operating profit of
£12.2m from revenue of £51.3m for the year. This
was lower than the Board’s original expectations
caused mainly by the changing business mix and
exceptional costs in the Personal Injury division
and the Residential Property division returning a
modest loss. Residential Property operates in a
UK market that has been dominated by political
uncertainty and which contracted in 2019. On
a more positive note Critical Care had another
strong year of underlying operating profit growth.
Toward the end of the year, as previously
announced, the Group reached an agreement to
terminate its relationship in respect of National
Law Partners, one of its ABS law firm partnerships.
As part of this agreement the Group will receive
£5m over three years in payment for historic panel
enquiries while registering a one-off provision
Navigating change in
complex markets
Overview
2019 was undoubtedly a challenging trading year
for the Group. The markets in which we operate
were volatile and competitive, while the long-
awaited clarification of the timing and nature of the
regulatory reforms in the personal injury market
failed to materialise. This resulted in continued
uncertainty amongst our key customer base. We
also faced some commercial challenges as we
sought to optimise our ABS law firm processing
operations. The ongoing funding of work within our
Personal Injury business impacts short-term profit
recognition and cash conversion and this is clearly
reflected in our year-on-year comparisons.
However, we made solid strategic progress across
the Group successfully implementing several key
initiatives including the launch of National Accident
Law, our wholly-owned Personal Injury processing
unit and a new ABS law firm partnership, Law
Together. These initiatives were delivered on time
and on budget and represent the fundamental
building blocks of the future growth of the business.
NAHL Group Plc Annual Report and Accounts 2019
29
Strategic Report 2019–2020 recognised in exceptional costs amounting to
£1.2m in the 2019 financial year. This settlement
avoided a protracted dispute and the prospect of
complex and time-consuming litigation between
the parties.
The Group continues to carefully manage its
balance sheet and net debt as we transform the
Personal Injury business to take advantage of
market opportunity and invest in Critical Care to
underpin its future growth.
Market overview
The Group operates leading brands in the large
and fragmented UK legal services market with
a focus on personal injury, medical reporting/
rehabilitation and residential conveyancing.
The overall personal injury market peaked at a
level of just over one million claims in 2013 and
since that point volumes have decreased primarily
as a result of reductions in Road Traffic Accident
(RTA) claims. The main claim types that make up
the personal injury division’s focus, non-RTA, have
remained broadly static with any reductions taking
place in sectors such as travel sickness claims
which are not part of our core personal injury
target market.
Law firms are feeling the cumulative impact
of previous legislation and the prospect of the
forthcoming reforms. The increase in the small
claims limit to £5,000 in RTA (£2,000 in non-
RTA) removes the prospect of legal fees for a
large proportion of their work which, combined
with a significant reduction in damages for
consumers, will have a material impact on law
firm revenue. This has led many traditional panel
firms to question the long-term viability of their
business model in personal injury. Overall, market
conditions reduce demand for the type of enquiries
we provide. Our anticipation of this has been the
driving force behind our strategy to build our own
processing capability. However, in addition to long
term reductions in panel demand, we have seen
some of the larger players in the field continue to
compete aggressively as they build their book of
work prior to reform implementation.
From a regulatory perspective the Civil Liabilities
Bill received Royal Assent in December 2018 and,
until recently, implementation was planned for
August 2020. However, with the emergence of
the COVID-19 epidemic, the Ministry of Justice
recently announced that this will now take effect
in April 2021.
Our Critical Care division trading as Bush & Co. is
the brand leader in the catastrophic injury segment
of the medical reporting and rehabilitation market,
where we provide expert witness and case
management services. This market is growing at
between 1 and 2%1 per annum and is not directly
affected by the personal injury reforms.
Residential Property operates within the UK
residential housing market and as such the division
has been directly impacted by well-documented
challenges facing this sector. The decline in
transaction volumes accelerated during the year
as political uncertainty drove caution amongst
buyers and sellers. Despite making gains in market
share during the year the overall decline created
challenges for the division.
Strategic development
Personal Injury
As already mentioned, the core of our Personal
Injury strategy has been driven by significant
structural change in the market. Whilst the
continuing delays and uncertainties surrounding
the timing and implementation of the reforms
have made navigating the transformation of our
Personal Injury business challenging, we have
nevertheless made excellent progress. In April we
launched National Accident Law (NAL) our wholly-
owned ABS law firm focused on processing our
own enquiries in a post-reform environment. We
have been very pleased by early trading at NAL and
are confident that we have created an efficient,
technologically-enabled business unit that will be
a leading processor of personal injury claims in the
post-reform world and, in particular, those claims
that will be defined as small claims.
In addition, we are happy with continued progress
and delivery from the Group’s wider legal services
strategy. Our first and largest ABS, Your Law LLP,
continues to perform well and is profitable in its
own right. We are also encouraged by the early
results from our new partnership, Law Together.
These self-processing operations continue to scale
up and we have significantly increased the number
of cases we are handling.
The Group’s Personal Injury business now
comprises the following:
National Accident Helpline (the UK’s most
trusted personal injury brand)
National Accident Law (wholly-owned
ABS law firm)
1. Management Estimate
30
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 At the end of 2019 we
had, since inception:
Over
cases already won.5,000
claims underway.27,000
£19.3m
in damages recovered for individuals who have
been a victim of someone else’s negligence.
Your Law (joint venture ABS law firm)
Law Together (joint venture ABS law firm)
During 2019 Personal Injury faced a competitively
challenging market and continued panel volatility.
This required us to manage volumes carefully and
optimise placement throughout the year resulting
in a lower overall volume of enquiries than planned
with fewer going into NAL. However, we did grow
the overall book of cases by 46.0%. This careful
management of working capital to balance risk and
reward is a continuing feature of our business as
we progress through the transition period.
Critical Care
In Critical Care we are examining the opportunities
provided by both our core market and adjacent
markets. We can use the skill sets we possess to
expand our market share and to provide products
and services in areas such as Court of Protection
and Care which will underpin our continued growth
over future years.
Residential Property
In Residential Property we are conducting a
small-scale test on processing our own work in
conjunction with a partner. Unlike personal injury
claims, conveyancing instructions do not require
any significant working capital investment but
should enable us, over time, to offer consumers a
better end-to-end service which will strengthen our
marketing proposition.
1. Gallup – State of the Global Workplace Report 2017
* Underlying earnings is based on profit attributable to shareholders of NAHL (i.e. excluding profits attributable to non-controlling interests)
before the deduction of non-underlying costs.
NAHL Group Plc Annual Report and Accounts 2019
31
Strategic Report 2019–2020 Brands
The National Accident Helpline (NAH) brand
remains the most trusted on the market¹ and
during 2019 we continued our investment in
TV advertising which underpins our significant
commitment to digital marketing and Search
Engine Optimisation. As we have already
mentioned we faced ongoing competitor activity
throughout the period which required us
to continually review and alter our
volumes and we adjusted our TV
investment to be always on air
which helps the brand remain
front of mind for consumers.
During the final quarter we
began work to refresh the
NAH campaign to ensure it
continues to cut through in
a busy TV advertising market.
Bush & Co once again grew
its market share and following
a full marketing audit launched a
brand refresh which included upgrading
our websites and developing the capability to
receive enquiries digitally. Our centrepiece annual
clinical conference was again a great success,
bringing together up to 200 lawyers, consultants
and partners from across the industry. As well as
this, we were pleased to receive the Supporting the
Industry award at 2019’s Personal Injury Awards.
Within Residential Property work commenced
on a project to streamline its brand proposition
providing greater focus on those brands that
drive volume and value and reduce the costs of
supporting a broad brand portfolio.
Operations and IT
A fundamental building block of our strategic
transformation in Personal Injury is the technology
that supports our processing. In order to create
our own ABS law firm we invested in a new case
management platform. This has enabled us to
build our own bespoke interfaces and develop a
consumer journey that is optimised for the new
market realities as well as being highly efficient.
This was launched on time and to budget and has
been operating well since NAL commenced trading
in April 2019.
We have also made excellent progress on our small
claims proposition although, as we have stated,
we require the MoJ to finalise several important
matters prior to completing the operating system.
We will also upgrade our legal support centre
software during 2020 to enhance our ability to
offer a seamless process for consumers.
During 2019 we also transitioned our NAH
website moving it onto a new platform, which
has enhanced loading speeds by up to 50%
and improved the consumer experience. We
also conducted a similar exercise in Residential
Property which has improved our ability to adapt
our messages in a timely fashion.
In addition, we have begun the process of
upgrading our systems in Critical Care. We will
be upgrading our core case management and
office packages and developing a state-of-the-art
reports tool that will enable our consultants to
work more efficiently.
These investments support the continued growth
of the Group and enable us to better adapt to the
continually changing market circumstances that
we face.
1. Independently researched by The Nursery Research & Planning Ltd – November 2019
32
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 People and values
Delivering the transformation agenda across the
Group against a backdrop of challenging market
conditions requires a talented and committed team
who can support our customers with a first-class
service. Our values are central to the way that we
do business and we are delighted with the way our
people have supported the Group through this
period of great change. We have continued to make
significant progress with our people initiatives:
Employee engagement scores that continue to
significantly outperform the national average
(79.5% against a UK average of 11%1)
17 staff undertaking training through our Pathway
to Leadership Programme
Investors in People Silver awarded to Residential
Property to go alongside our Silver award in
Critical Care and Gold in NAH;
NAH being recognised by The Sunday Times as
one of the Top 100 Best Small Companies To
Work For 2019; and
Extending our in-house learning academy to
benefit employees across the Group.
Our people and values make us who we are and
our staff body (now in excess of 250 people and
growing) is the cornerstone of our future growth.
Key to this is ensuring a positive gender balance
in our leadership, management and staff bodies.
This is evidenced by the following male/female
gender split:
Group Board
50%
Male
50%
Female
Senior
Management
50%
Male
50%
Female
Staff
37%
Male
63%
Female
1. OwnIt! survey results/Gallup State of the Workforce Report 2017
NAHL Group Plc Annual Report and Accounts 2019
33
Strategic Report 2019–2020 Outlook
As we started 2020, we were confident that the
continued transformation of our Personal Injury
division was progressing well; that Critical Care
would continue to grow; and that Residential
Property would gain market share and return a
modest profit.
However, during March 2020 the emergence of
COVID-19 in the UK and its potential impact on our
business became our primary focus. In common
with most other businesses, we are facing a major
economic challenge which has the potential to
severely disrupt demand for our offerings, erode
confidence in our markets and create ongoing
issues with delivering service. Our priority is the
wellbeing of our employees and supporting our
customers and business partners through these
unprecedented times.
In response to this challenge, we have been
developing and implementing business continuity
plans that allow us to continue to trade and our
well-supported systems are enabling home working
and remote access for the vast majority of our
teams. This has enabled us to continue to support
customers and clients across our three divisions.
We have developed several scenarios to help
us model the potential financial impacts on
our business, although at present it is difficult
to predict the broader and ongoing economic
ramifications of the situation.
In our Personal Injury business, whilst we have
seen a significant reduction in new enquiries our
ABS law firms continue to process historic claims,
agree settlements and generate cash. In order
to manage our cash position during this period
of uncertainty, the management are controlling
enquiry volumes and placement decisions and
reducing costs including adjusting marketing
spend. However, these measures are expected
to result in a reduction in volume of new claims
placed into our ABS law firms which will impact
future profits.
Since mid-March, the Group’s Critical Care
division has remained resilient with only a modest
impact noted to date and this is expected to
continue in the short to medium term. However,
in adapting to new Government restrictions,
conducting virtual expert witnesses and case
management assessments may result in lower
revenues per case. We have been able to utilise
our newly developed technology to enable remote
working which, when combined with the flexibility
of our workforce, is enabling us to continue to
support our clients through this difficult time.
In Residential Property, market volumes have
been significantly impacted with any nascent
housing market recovery failing to materialise as
property viewings are cancelled, impacting both
conveyancing activity and search volumes.
We have proactively taken measures to reduce
our costs across the Group and ensure we have
sufficient liquidity to operate the business through
this period. We will continue to evaluate
and implement further measures
as necessary to optimise the
structure of the business,
maximise savings, reduce
property and lease costs,
leverage IT to support
broader based home
working and delay
capital expenditure.
Our aim is to ensure
the sustainability of
our business and to
position it to benefit
from the recovery in
confidence that will follow.
After the initial shock, during
which the business adapted
quickly, I expect the recovery will
be a gradual process. Our experience in
managing change in difficult markets should hold
us in good stead.
NAHL Group plc is a resilient business with
talented and committed people who are working
through the impacts of this rapidly changing
environment and I am confident that we can
navigate the weeks and months ahead, emerging
with our long term growth strategy in place.
Russell Atkinson
Chief Executive Officer
27 April 2020
34
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 CHIEF FINANCIAL
OFFICER’S REPORT
We invested in working capital during the year
to facilitate growth in our ABS law firms and this
required an increase in our net debt to £21.0m
at year-end. The actions that the Board took in
January 2020 to slow the deployment of working
capital and suspend the dividend were aimed at
de-risking the business. In light of COVID-19, we
are carefully monitoring our balance sheet and
believe that the Group will be able to manage net
debt within the current headroom.
Review of income
statement
2019
£m
31.7
13.6
6.0
2018
£m
29.5
12.4
6.4
Personal Injury
Critical Care
Residential
Property
Pre-LASPO ATE
-
0.7
Revenue
51.3
49.0
Growth
%
7.4
9.6
(5.3)
-
4.8
Personal Injury
– Excluding NAL
start-up losses
Personal Injury
– NAL start-up
losses
Personal Injury
Critical Care
Residential
Property
Group Costs
Underlying
operating profit
10.0
8.4
19.1
(0.9)
-
-
9.1
5.0
(0.3)
(1.6)
12.2
8.4
4.5
0.7
(1.5)
12.1
8.1
10.9
(142.4)
5.0
0.5
Revenue
Revenue increased in the year by 4.8% from
£49.0m to £51.3m, compared to a decrease of
5.7% in 2018.
Overview
The Group faced a number of challenges in
2019, including a weak residential property
market; competitive pressures in personal injury
exacerbated by uncertainty around the forthcoming
Government reforms; and instability in some of
its partner relationships. Although this led to a set
of financial results that were lower than originally
planned, it is clear that there are also some
positives to draw out.
From an operational perspective, the Group
grew revenue by 4.8% in 2019 and delivered
£2.2m of profit before tax (2018: £9.8m). Our
Critical Care division had another strong year,
delivering growth in underlying operating profit of
10.9% and our Personal Injury division delivered
marginally ahead on the Board’s underlying
operating profit expectation. In addition to this,
the Group has built up claim volumes in its ABS
law firms (including National Law Partners) from
10,274 ongoing claims at the start of the year to
15,005 at the end of the year (a growth of 46.0%).
This represents a store of value, much of which
has yet to be recognised in the financial results but
will deliver growth in future years.
2019 was an important year strategically for the
Group. We launched two new ABS law firms in the
year, including our wholly-owned ABS, National
Accident Law (NAL), on time and on budget
in April 2019. We also continue to make good
progress with our small claims proposition and
started a programme of investment in technology
and building new propositions in Critical Care as
we look to develop our track record of growth in
this business.
NAHL Group Plc Annual Report and Accounts 2019
35
Strategic Report 2019–2020 The Group has grown
claim volumes in its ABS
law firms by 46.0% during
the year. These represent
a store of value that will
contribute to growth in
future years.
The Personal Injury division grew revenue by 7.4%
from £29.5m to £31.7m in 2019. This compares
with a contraction in revenue of 6.8% last year.
As anticipated, revenue from Panel Law Firms
continued to decline but this was offset by strong
growth in legal services revenue as the Group’s
ABS law firm strategy started to deliver a material
contribution. Our revenue recognition policy for
the provision of legal services is set out in note 1 to
the financial statements. Revenue in the law firms
is recognised in milestones such that no revenue
is recognised until liability for a claim is admitted
by the defendant and much of the 2019 revenue
relates to claims commenced in prior years.
As planned, Critical Care delivered another good
performance, growing revenue 9.6% (2018:
12.2%) from £12.4m to £13.6m. It was pleasing to
see both the case management and expert witness
parts of the business performing strongly, with the
former delivering 12.0% revenue growth.
Unfortunately, Residential Property faced
significant market challenges as the number of
transactions in the UK property market contracted
further in 2019. As a result, revenues in this
division fell by 5.3%.
An analysis of revenue by division is set out in the
operating segments note on page 120. Further
commentary on the performance of each division is
included in the Chief Executive’s Report on page 29.
Underlying operating profit
Underlying operating profit increased in the year
by 0.5% from £12.1m to £12.2m at an underlying
margin of 23.8% (2018: 24.8%).
Despite the cost of enquiry acquisition remaining
higher than anticipated due to high levels of
competition in the market, the Personal Injury
division delivered growth in underlying operating
profit of 8.1% from £8.4m to £9.1m. This was after
deducting £0.9m of start-up losses in the Group’s
wholly-owned law firm, National Accident Law.
Whilst these do not meet the Group’s
definition of exceptional items,
they are one-off in nature.
Before these losses, the
increase in underlying
operating profit was
19.1%.
The Critical Care
division traded
strongly in the
year and the
organic revenue
growth translated
into increased
underlying
operating profit,
which rose by
10.9% from £4.5m
to £5.0m. The
division invested in
business development
and technology but
maintained its strong margin
(2019: 37.0%; 2018: 36.5%).
Underlying operating profit in the
Residential Property division fell as a result
of the revenue challenge and the business made
a small loss of £0.3m (2018: £0.7m profit).
Group costs were flat year-on-year at £1.6m
(2018: £1.5m).
Exceptional and non-underlying items
The Group’s policy, set out in note 1 to the
financial statements, is to separately identify
exceptional and non-underlying items and exclude
them from underlying performance measures to
provide readers of the financial statements with a
consistent basis on which to track the core trading
performance.
The Group incurred a number of exceptional
items in the year which are set out in note 4 to
the financial statements totalling £7.9m (2018:
£0.4m). These include £1.3m of restructuring
costs associated with the Group’s strategic
transformation, a £1.2m write-down relating
to the termination of its partnership in National
Law Associates LLP and a £5.3m impairment
charge in respect of Residential Property.
Share-based payments and amortisation
of intangible assets acquired on business
combinations were in line with plan.
Taxation
The Group’s tax charge of £0.6m (2018: £1.4m)
represents an effective tax rate of 29.5% (2018:
36
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 14.2%). The effective tax rate is higher 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 the
non-taxable impairment of goodwill and intangible
assets and that the Group does not account for
the non-controlling interests’ share of tax within
its ABS law firms. This results in a reduction in
effective tax rate of 11.4% (2018: 3.3%) which is
significantly higher than the previous year due to
the growth in the ABS law firm profits attributable
to non-controlling interests. The deferred tax
expense originates from temporary differences
in intangible assets acquired on business
combinations and bad debt provisions.
Earnings per share and dividend
Basic earnings per share (Basic EPS) for the year
was (6.4)p (2018: 14.5p) and the diluted EPS was
(6.4)p (2018: 14.3p). The dilution in EPS in 2018
derived from share options schemes which are
explained in note 22 to the financial statements.
In order to compare EPS year-on-year, earnings
have been adjusted to exclude certain exceptional
items, amortisation of intangible assets acquired
on business combinations and share-based
payments (net of the standard rate of corporation
tax). This is explained in note 1 to the financial
statements. On this basis, underlying EPS (before
NAL start-up losses) was 14.4p (2018: 18.2p).
The fall in EPS is due to a greater proportion
of profits being attributable to non-controlling
interests (NCI) and reducing the profit attributable
to shareholders of the parent company. (In 2019
NCI was £4.5m and in 2018 it was £1.7m).
The Group paid an interim dividend of 2.6p per
share in May 2019 (3.2p in May 2018). The Board
is not recommending a final dividend in respect of
2019 (2018: 5.7p).
Review of the statement
of financial position
In reviewing the statement of financial position,
I consider the significant items to be goodwill
and intangible assets, working capital, defined as
trade and other receivables less trade and other
payables, and net debt.
Goodwill and intangible assets
Goodwill and other intangible assets amounted
to a combined total of £60.6m (2018: £66.8m).
The movement since last year is shown in notes 13
and 15 to the financial statements and comprises
£0.5m of new other intangible assets less £1.3m
of amortisation and less a £5.3m impairment. The
amortisation is consistent with our accounting
policy to amortise intangible assets over their
estimated useful lives.
Goodwill is tested annually for impairment. In
undertaking the review in the current year, the
Directors gave careful consideration to the levels
of uncertainty in the UK housing market at the end
of 2019 and the disappointing performance of the
Residential Property division in the year. Further
evidence of this market weakness was provided by
the impact of the COVID-19 virus in March 2020.
Accordingly, the Directors have concluded that it
is appropriate to book an impairment of £5.3m to
the goodwill and other intangible assets attributed
to this division in the financial statements. No
impairment to goodwill relating to the other
divisions was deemed necessary. Refer to the
Audit & Risk Committee report on page 80 and
note 13 to the financial statements on page 127 for
further details of this review.
Working capital
Trade and other receivables less trade and
other payables totalled £20.7m at year-end
(2018: £13.7m).
As anticipated, the increase primarily arose in the
Personal Injury division as the Group progressed
its transition to a model of increasing self-
processing in its ABS law firms. This is a more
capital-intensive model, particularly in the early
years of these firms before they build up a mature
book of work-in-progress (WIP), but it will generate
higher returns on investment over the case
settlement cycle.
At 31 December 2019, the Group had accrued
income balances totalling £18.8m (2018: £8.4m).
Of this amount, £4.1m (2018: £1.4m) relates to
WIP recognised on personal injury claims in the
ABS law firms. These claims are yet to reach
the settlement stage but have all had liability
admitted by the defendant, in line with the Group’s
accounting policy for legal services revenue in note
1 to the financial statements.
There is a significant element of uncertainty
in estimating the WIP recognised in the ABS
law firms, as discussed further 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 ABS law firms and by our panel. These
assumptions are updated with actual results as
claims settle.
NAHL Group Plc Annual Report and Accounts 2019
37
Strategic Report 2019–2020 A further £4.3m of accrued income relates to
non-contingent future settlements relating to the
termination of the Group’s partnership in National
Law Partners which are due to be settled by the
end of April 2022.
Net debt
The Group had net debt at year-end of £21.0m
(2018: £15.5m). This is defined in note 29 to the
financial statements and comprised of £2.6m
of cash (2018: £1.6m) offset by borrowings of
£23.6m (2018: £17.1m).
The borrowings represent a balance on the
Group’s revolving credit facility (RCF). This
facility, with Yorkshire/Clydesdale Bank, expires
in December 2021 and provides up to £25m of
credit at a reasonable interest rate of up to 1.65%
over LIBOR. The growth in the usage of the facility
during the year has been due to investment in
working capital, payment of the dividend and
a delay in the receipt of amounts due from the
Group’s partners in National Law Partners.
Review of the cash
flow statement
The Group increased cash and cash equivalents by
£1.0m in the year (2018: £0.7m). The significant
items in the consolidated cash flow statement are
net cash from operating activities; non-controlling
interest drawings; dividends paid to shareholders;
and new borrowings.
Net cash from operating activities is primarily
driven by operating profit and working capital
movements, both of which are discussed above.
The Group made £3.8m of dividend payments to
shareholders during the year (2018: £6.4m), which
represented the 2018 final dividend and the 2019
interim dividend paid in October 2019.
£2.2m (2018: £0.9m) of drawings were paid to
the ABS law firm partners during the year under
the terms of our agreements. This increase year-
on-year reflects the growth in claims won during
the year.
The Group drew down £6.5m (2018: £4.1m) on
its RCF during the year to fund working capital
investments and dividend payments.
Free cash flow (FCF) is the Group’s KPI with
regards to cash flow (see page 23). FCF in 2019
was £(1.7)m compared to £2.9m in 2018. The
primary reason for the reduction was a delay
in receiving amounts due from the Group’s
partners in National Law Partners. As part of
the termination agreement, these amounts are
now due in future years. The Group anticipates
returning to higher levels of FCF in 2020 as the
ABS law firms mature. The Group also monitors
underlying cash conversion, which was lower than
the Board expected at 40.5% (2018: 65.6%) for
the same reasons.
New accounting standards
The Group has adopted one new accounting
standard during the year – IFRS 16 Leases –
from 1 January 2019.
As was anticipated in last year’s financial
statements, the adoption of IFRS 16 did not
result in a fundamental change on the financial
statements, as the Group does not have many
high value leases and those it has do not have long
to run. Therefore, in adopting this standard, the
Board decided to take the modified retrospective
approach permitted by IFRS 16 whereby
comparative information is not restated.
The full details of the change are presented
in note 31, but in summary this required a
change in the accounting policy
and the recognition of a right of
use asset of £640,000 and a
lease liability for all operating
leases of £673,000. The
rent expense in the income
statement is replaced with
a depreciation charge on
the asset and an interest
charge on the liability.
Conclusion
In conclusion, despite facing
a number of market and
commercial challenges in 2019, the
Group has made substantial progress on
its strategic transformation programme. Whilst
2020 brings a fresh challenge in the form of
COVID-19, the decisions we have taken to protect
cash, reduce costs and ensure there is sufficient
liquidity to run the business through a prolonged
period of disruption give me confidence in the
Group’s ability to emerge from this period as a
sustainable business.
James Saralis
Chief Financial Officer
27 April 2020
38
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 PERSONAL INJURY
DIVISIONAL OVERVIEW
Creating a platform for growth
Our ambition is simple and clear – we aim to be the leading
personal injury services provider in the UK with a strategy that
capitalises on the opportunity provided by regulatory change and
creates a platform for growth. 2019 was an important year for us
in this journey and whilst there is more to do, we are pleased with
the progress we have made with our change agenda.
Growing in a
changing market
The next stage of our transformation – our small
claims proposition – will be ready to launch in Q3
of this year.
We plan to continuously improve the customer
journey, provide a technologically-enabled and
easy-to-use online portal for large parts of the
claims process as well as bringing the post-reform
Road Traffic Accident (RTA) enquiries we generate
exclusively into our new ABS law firm, National
Accident Law (NAL).
The launch of our first wholly-owned ABS law
firm was a focus in 2019 and will be pivotal to the
delivery of our strategy. NAL began trading in
April 2019, on time and to budget and is already
delivering for our customers.
Continuing to invest
in our brand
The National Accident Helpline (NAH) brand
continues to perform well and we will continue to
invest in this key asset. In 2019 we brought more
of our marketing provision in-house by enhancing
our team and ensuring our intellectual property
remains within the business.
In 2019 we invested in NAH’s website by moving
it to a new platform. This significant piece of work
aims to reduce page loading speed times by up
to 50% and deliver a much-improved customer
experience. At the start of 2020, we launched
a new advertising campaign, focusing on our
national reach while developing the core principles
of our brand.
NAHL Group Plc Annual Report and Accounts 2019
39
Strategic Report 2019–2020 Increasing options for
lead distribution
The launch of National Accident Law has enabled
the division to adapt its distribution of leads and
potential claims. Our panel of law firms, while
contracting in size, has remained a core element
of our offering, especially for non-RTA claims.
The panel is complemented by our joint venture
ABS law firms, with Your Law, as the more mature
of these, operating well. Once the anticipated
personal injury reforms go live Your Law will work
exclusively on non-RTA claims.
In October 2019 we launched a further joint
venture ABS law firm, Law Together, in partnership
with Horwich Cohen Coghlan Solicitors and its
early metrics are encouraging.
One business,
one regulator
From Q2 of 2020 all marketing, contact centre and
legal processing activity conducted in the division
will be regulated by the Solicitor’s Regulation
Authority (SRA). This move provides a number
of opportunities for our business. It will improve
our ability to generate high quality personal
injury enquiries while better managing our costs.
The division will benefit from customer journey
improvements and efficiencies as our legal support
centre will be able to manage a larger element of
the claim process. It will also provide significant
brand benefits by allowing us to position ourselves
as a law firm. National Accident Helpline working
in the same regulatory authority as our panel firms
will also provide consistency of approach and
greater opportunities to collaborate.
National Accident Law –
Showing great promise
The Group launched National Accident Law in
April 2019 on time and to budget. We are pleased
with operational performance metrics to date
which are line with our expectations. Following the
introduction of the Personal Injury reforms, we
anticipate that, National Accident Law will process
and manage all the division’s RTA work. Whilst the
business is still in its formative stages, significant
progress is being made and we are confident that
it will provide the platform to seize the opportunity
the upcoming reforms will provide.
In a world where there is an ongoing drive for
an improved customer journey and efficiencies
in every area, we continue to invest in new
technology to support this. In addition, we
are looking at ways to bring National
Accident Helpline and National
Accident Law closer together –
beginning with a move to operate
under one regulator.
40
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020
Embracing and thriving
in change
While the personal injury market remains tough
and competitive we are confident that by pursuing
our ambitious change agenda and business model
we can take full advantage of the opportunities
that the next five years will present us with.
Personal Injury division
in numbers:
In 2019:
Customers were supported
94,941
43
Number of law firm relationships
Since inception:
Over
Cases won by ABS law firms including NAL
5,000
£19.3m
Damages recovered by ABS law firms
including NAL
Over
NAHL Group Plc Annual Report and Accounts 2019
41
Strategic Report 2019–2020 CASE STUDY
Strategic Report 2019–2020
A young woman
scarred for life
Claire* sustained a painful and
damaging chemical burn at
work. For a young girl, this was
psychologically damaging as
well as physically challenging.
With skin grafts not a viable
option, Your Law arranged
for Claire to have a 2-hour
consultation with an expert in
cosmetic camouflage.
Claire learned about the make-up, brushes and
sponges that she would need, as well as the
practical life skill of how to apply the make-up
for maximum coverage. The damages awarded
covered the future cost of all these items that she
would need for the rest of her life.
*Name changed for confidentiality purposes
Making it right
Simon Rees, solicitor for Your Law said
This was a really
interesting and unusual
case for us. It wasn’t just
a matter of receiving a
lump sum of money, it
was about giving Claire
the skills to cover up her
injury. This has, in turn,
increased her confidence
which was impacted by
sustaining an injury of this
kind at such a young age.
42
NAHL Group Plc Annual Report and Accounts 2019
CRITICAL CARE
DIVISIONAL OVERVIEW
Enhancing our
strategic partnerships
Bush has continued to invest in and grow its
partnerships in 2019, celebrating its first year
working with the Child Brain Injury Rehabilitation
Service and Spinal Injuries Association Case
Management. During 2019, these new partnerships
have continued to provide the very best case
management to customers and clients. These
services leverage the capability and expertise
of Bush & Co alongside two of the UK’s largest
charities in child brain injury and spinal cord injury.
2019 also saw Bush launch a new partnership with
Barclaycare, a specialist provider in nurse-led care
packages. This venture allows Bush to develop
enhanced services for clients who require support
workers and nurses to care for them in their home
following injury.
The Thalidomide Trust continues to work closely
with Bush to support the future needs of its
beneficiaries and make arrangements to help them
access care and equipment.
Investment and growth
2019 has been a year of investment and further
growth for Bush & Co. The business capitalised on
investment in business development, deepening
its relationship with customers through focused
networking, better developed marketing channels
and more interaction with the insurance sector.
This delivered an 8% increase in the number
of clients supported across all services. Bush’s
UK-wide network of expert witnesses grew,
introducing new specialisms to expand its portfolio
including dermatology, dietetics, sonography and
cosmetic surgery nursing experts.
Bush & Co refreshed its brand during the
year and unveiled a new look that reflects the
professionalism and expertise for which it is best
known. It developed new marketing collateral and
a website with integrated live chat functionality
that has made it even easier for customers to do
business with Bush & Co.
Investing in staff,
processes and collateral
2019 also saw the Group invest in Bush’s
effectiveness through the introduction of a new
Customer Relationship Management (CRM)
system to support its customer relationships and
growing networks with enhanced management
information. Bush has maintained its IS09001:
2015 accreditation, further recognising its ability
to consistently provide products and services that
meet customer needs and regulatory requirements.
We invested in the business capability by recruiting
a new Client Director, a Partnership Liaison
Manager, a Clinical Governance Co-ordinator
and two new Operations Managers. We also
doubled the size of our Behaviour Service Team in
preparation for further expansion in 2020.
Bush’s strong clinical leadership team will
continue to support case managers through their
newly introduced case clinics which bring new
perspective to clinical challenges.
NAHL Group Plc Annual Report and Accounts 2019
43
Strategic Report 2019–2020 Giving back
Throughout the year Bush has continued to
support Para Dance UK, raising over £5,000 to
provide specialist wheelchairs for athletes to train
and compete in Para Dance global championships.
It has also continued its relationship with the
Rugby Football Union Injured Players Foundation
where it supports players who have sustained a
catastrophic injury with their onward rehabilitation
and return to work.
Looking ahead
In 2020 we will continue to invest in developing
our capability and the proposition of Bush & Co.
We are upgrading our case management systems
and exploring how technology can make us more
efficient and improve our processes for producing
expert reports. We are also exploring opportunities
in adjacent markets and how we can use our core
competencies to provide services to customers in
areas such as Court of Protection and care.
We are pleased with the progress Bush & Co has
made in the year and look forward to another strong
performance in 2020.
Breaking the stigma
Bush led the way in 2019 with its annual
conference which concentrated on breaking down
barriers and stigmas by focusing on topics that
are rarely spoken of. The event was attended by
almost 200 professionals. It shared best practice
and knowledge on neurological, psychological and
practical challenges for clients and led the thinking
on how the sector can keep the conversation going
and bring real value to it.
Award-winning Bush & Co
Bush was proud to win the prestigious Supporting
the Industry title at the Personal Injury Awards
during the year. The judges commended
Bush’s commitment to customers and clients
in recognition of the ongoing development of
its services, proving the value of its continued
investment in this area. Bush was also delighted
when one of its team of case management experts,
Spencer Rathbone, won the CMSUK Vocational
Case Manager of the Year award. This fiercely
contested award recognised Spencer’s experience
and expertise in supporting a young adult client
to regain their independence and return to the
workplace following injury.
Law firm relationships416
Care experts193
44
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 RESIDENTIAL PROPERTY
DIVISIONAL OVERVIEW
Conditions in the UK property market continued to prove
difficult through 2019. Uncertainty, caused by the political
delays in Britain’s exit from the European Union, resulted in
many prospective sellers delaying the listing of their houses,
and buyers being cautious about making a new purchase. Lower
market transaction levels drove the need to create new sources
for instructions which increased the cost of acquisition.
Increase instructions
Despite the challenging market conditions, we
succeeded in helping more people with their
conveyancing requirements and increasing our
market share in 2019. This was achieved as a
result of our refocus on digital marketing and
affiliate partnerships, which generated increased
enquiry volume, albeit, at a higher unit price than
previous years.
Against this backdrop, the division continued to
build a foundation for future growth to ensure it
is in a stronger position to take advantage of any
improvements in the market when they come.
We have been with
SearchesUK for, in
excess of, 10 years. Their
standard of service is
excellent. We cannot
fault them in any way.
Bob Bastian, Stephen Rimmer Solicitors
NAHL Group Plc Annual Report and Accounts 2019
45
Strategic Report 2019–2020 A new business to
business proposition
In 2019 the division established a clear vision
to become a leading player in the conveyancing
market, with the objective of leveraging technology
to improve the conveyancing process for
home-movers and stakeholders alike. The team
established a strategy and action plan to achieve
these goals, and changes were made across a
number of key business areas including marketing,
digital capability, product management and
business development.
The strategy began to take effect with the
appointment of a new Head of Marketing and
the re-platforming of the division’s web estate
to deliver a better customer experience and
increase customer acquisition. The division also
realised a key pillar of the strategy with the launch
of a business-to-business proposition targeting
estate agents, independent financial advisors and
mortgage brokers in order to capture a greater
share of this market. The Conveyancing Exchange
was launched in Q1, with distribution growing
steadily through the year.
Investing in people
The division has also invested in its people and
reputation in 2020 by embarking on its first
ever Investors in People assessment leading to
it being awarded Silver status. This is not only a
great achievement in its own right but provides a
blueprint for further improvements over the next
two years.
Looking Ahead
Although there were signs of an improving
market at the beginning of 2020, the emergence
of the global pandemic of COVID-19 in February
has brought the wider UK property market to
a standstill. Since then the division has seen a
significant decline in activity and is reducing its
cost base in line with the current level of demand.
The focus for 2020 has shifted from gaining
market share and returning the division to growth
to minimising the financial impact of the decline
in trading and ensuring we have a sustainable
business model to see us through these
challenging times.
46
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020
PRINCIPAL RISKS
AND UNCERTAINTIES
The Board is mindful of the detrimental impact that the Group’s
principal risks and uncertainties could have on its ability to
deliver on its strategic priorities. It seeks to identify, assess and
manage these risks through its risk management framework
and regular reporting and review, combined with additional
assurance work. Whilst the Board has ultimate responsibility
for risk, it is supported by the Audit & Risk Committee and
Executive Directors.
Our risk management
framework
The Board has implemented a risk management
framework (figure 1) that combines a top-down
strategic assessment of risk with a bottom-up
operational identification and reporting process.
The regular review of existing risks and
identification of emerging risks is managed
through quarterly risk reviews between divisional
management and Executive Directors. Once
risks are identified and the Group’s appetite for
each risk determined, risks are prioritised and
mitigating actions implemented.
NAHL Group Plc Annual Report and Accounts 2019
47
Strategic Report 2019–2020 Figure 1 – Risk management framework
i
S
t
r
a
t
e
g
c
a
s
s
e
s
s
m
e
n
t
o
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i
s
k
a
n
d
p
r
i
o
r
i
t
i
s
a
t
i
o
n
Board
Ultimate responsibility for risk management
Sets strategic priorities
Agrees the Group’s appetite for each risk category
Top down risk identification
Delegates authority
Audit & Risk
Committee
Monitors effectiveness of risk management
through reporting and assurance
Sets scope of external audit
Monitors internal controls through internal reviews
Reviews critical accounting judgements and estimates
Executive
Directors
Divisional
management
Monitor performance and changes
in key risk
Provide regular reports and updates to the Board
Report to the Board and Audit & Risk Committee on
key risks
Provide guidance and advice to divisional management
through quarterly risk reviews
Identifies, manages and reports local risks
Maintains local risk registers and mitigation plans
Makes regular assessments of emerging risks
Implements mitigation plans
Reports quarterly to Executive Directors on risk (this role
is replicated by the Executive Directors for risks that sit
at the Group level)
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n
i
t
r
o
p
e
r
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o
i
t
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e
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i
k
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i
R
48
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020
Risk appetite
Every year, the Board reviews and sets the Group’s
appetite for risk. This is done by scoring each
of the seven risk categories that the Board has
identified (figure 2) on a scale of 1 (lowest risk)
to 12 (highest risk). A score of 1–3 is described
as an averse appetite; 4–5 is a cautious appetite;
7–9 is a balanced appetite; and 10–12 is an
entrepreneurial appetite. Individual risks are
allocated a category and the associated risk
appetite then informs management’s approach to
mitigating that risk.
Risk identification
and reporting
Divisional management conducts an ongoing
process of identification and assessment of key
risks (both financial and non-financial) faced by
their division. This includes the identification of
emerging risks, whether from structural changes
in their markets or transformation activity within
the business.
Risks are collated on a risk register along with
mitigating actions that reduce the residual risk to
an acceptable level, with reference to the Board’s
appetite. Residual risks are assessed according to
their likelihood of occurrence and potential impact
on the profitability and cash flow of the Group.
Divisional risk registers are reviewed quarterly by
the Executive Directors and risks are prioritised
across the Group. The highest rated risks are
denoted principal risks and are reported by the
Executive Directors to the Audit & Risk Committee
and the Board. The Audit & Risk Committee
developed a new risk management framework
during the year.
Figure 2 – Risk categories
Transformation
Strategic
Financial
Operational
People and
culture
IT, systems
and data
security
Regulatory
NAHL Group Plc Annual Report and Accounts 2019
49
Strategic Report 2019–2020 The principal risks it identified differ from the prior year and are detailed below:
Category
Financial
£
Appetite
Mitigation
Balanced
The Group has processes
to approve credit limits and
monitor exposures. Contractual
provisions are put in place, such
as financial disclosure obligations
and set-off clauses to mitigate
the risk for material debts. All
material deals are subject to
Board approval.
Strategic
Balanced Model assumptions are
determined by management
with oversight from Executive
Directors and the Board.
Sensitivities are performed
on the key assumptions. The
assumptions are regularly
scrutinised with reference
to management information
provided by ABS law firm
partners and from National
Accident Law.
Transformation
Balanced Dedicated project management
resource is in place to support
delivery with a strong focus
from management. Oversight is
provided by Executive and Non-
Executive directors and specialist
or backfill resource is contracted
in where necessary.
Principal risk
Credit exposure
The Group has a number of historic
and ongoing arrangements with
panel law firms, some of which
involve deferred payments, and
which create a credit risk in the
event of partner insolvency or
dispute.
Accuracy of
business model
assumptions
The Personal Injury business model
relies on several key assumptions
which remain unproven and which,
if not delivered, have a material
impact on financial performance
and strategy. These include
assumptions relating to:
Enquiry generation
Case processing performance
Small claims processing.
Delivery of key
strategic projects
The Group has several key strategic
projects underway and a delay
or failure to deliver any of these
could have a material impact on
its financial plan. These projects
include:
Small claims processing
Regulatory consolidation
Improving call handling efficiency
Insurer and product deals
IT infrastructure and
systems changes.
50
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 Principal risk
Demand for
consultants
An inability to attract and retain
relationships with high quality self-
employed consultants in Bush & Co
could result in the Group missing its
financial and strategic objectives.
Adapting to new
markets
The Group’s chosen strategy in
Critical Care includes leveraging our
core competencies to move into
adjacent markets. As we are less
familiar with these markets, there
is a heightened risk that we will not
be successful and fail to deliver our
strategic and financial targets.
Cyber security
Many of the Group’s interactions
with its customers are online and
we are reliant on our IT systems
to capture and protect valuable
customer data obtained in the
normal course of business. Theft,
loss and misappropriation of
digital assets and data could result
in reputational damage and/or
regulatory fines.
Category
Appetite
Mitigation
Operational
Balanced Clear demonstration of our
Strategic
Balanced
IT, systems and
data security
Balanced
value proposition to our
consultants, including access
to clinical specialists and
administrative support, good
levels of fees, access to training
and networking opportunities
with their peers. Once engaged,
strong contracts are put in place
to protect both parties.
The Group is partnering with
established providers in new
markets to help us learn and
gain traction. Where possible
we are looking to exploit existing
relationships in new markets and
minimise set-up costs.
The Group takes data security
very seriously and has put
in place robust policies and
procedures to ensure it is
compliant with the Data Security
act 1998, GDPR and other
relevant regulations, including
regular penetration testing. It
also has a disaster recovery
plan, which is regularly tested,
to protect its operations.
NAHL Group Plc Annual Report and Accounts 2019
51
Strategic Report 2019–2020 Category
Appetite
Mitigation
Operational
Balanced
The Group is investigating ways
to reduce risk in this area.
Financial
Balanced
£
The Board closely monitors the
use of capital and uses short and
medium-term forecasts to plan
future requirements. Day-to-
day capital is provided through
the Group’s revolving credit
facility (RCF) with Yorkshire/
Clydesdale Bank and levels of
utilisation and compliance with
the debt covenants is reviewed on
a monthly basis by the Executive
Directors. Board decisions
around capital allocation
and dividends are made with
consideration to future capital
requirements.
Operational and
financial
£
Balanced Management has developed
a set of plans to mitigate the
potential impact on our staff
and customers. These include
the ability to work remotely
using existing technology. We
are working closely with key
suppliers and strategic partners
to safeguard continuity of service;
and, having stress-tested our
financial models, we are adapting
our plans to delay discretionary
spend and capital expenditure
until the outlook becomes
more clear.
Principal risk
Reliance on third-
party suppliers
The Group uses a third-party
system for customers to order
residential property search packs.
Any interruption in the service
of this system would result in
disruption and loss of revenue.
Working capital
management
The Group is currently in a period
of net investment in working capital
as it builds its book of personal
injury claims in its ABS law firms.
These claims can take up to 2–3
years to process and it is at the
settlement point of each successful
claim that cash is received. If the
Group has insufficient working
capital then it could fail to capitalise
on the opportunity and miss its
financial forecasts.
Impact of COVID-19
The COVID-19 outbreak continues
to develop, with impacts felt
globally across all business sectors.
Detailed risks for our business
include the health and availability
of our people to run the business,
in particular key individuals;
accessibility of our customers
and their appetite for our services
during the peak of the outbreak; the
resilience of suppliers and partners;
the resilience of our systems and
the ability of our people to work
from alternative locations. In
addition to operational risks, there
are financial risks stemming from
the potential for delayed receipts
of cash if customers and partners
start to preserve their own cash;
and the impact of a downturn in our
revenues on our RCF headroom.
52
NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 SECTION 172
STATEMENT AND
STAKEHOLDER
ENGAGEMENT
Section 172 of the Companies Act 2006 requires a Director of
a company to act in the way he or she considers, in good faith,
would be most likely to promote the success of the company for
the benefit of its members as a whole. In doing this, Section 172
requires a Director to have regard, among other matters, to:
the likely consequences of any decision
in the long-term;
The stakeholders the Board has identified
with regard to this are:
the interests of the company’s employees;
the need to foster the company’s business
relationships with suppliers, customers
and others;
the impact of the company’s operations on
the community and the environment;
the desirability of the company maintaining
a reputation for high standards of business
conduct; and
the need to act fairly with members of
the company.
The Directors give careful consideration to the
factors set out above in discharging their duties
under Section 172. Further detail on the long-
term strategy and the Board’s decision-making
driving this can be found in the Chair’s
Report and Chief Executive’s Report
on pages 27 and 29 respectively.
Our trusted brands (Chief
Executive’s Report page 32),
industry awards (Critical Care
Divisional Overview page
43) and Investors in People
commitment (Investing in
Our People, page 59) are
all testament to how the
business strives to maintain its
reputation for high standards of
business conduct.
OUR EMPLOYEES
OUR CUSTOMERS
AND PARTNERS
OUR SUPPLIERS
OUR INVESTORS
OUR COMMUNITIES AND
THE ENVIRONMENT
The Board sees the value of building and
maintaining strong relationships with these
stakeholders and is committed to delivering
regular and sustained ways of doing so, with a
view to this activity providing an exceptional
customer experience as well as delivering long-
term value for shareholders.
NAHL Group Plc Annual Report and Accounts 2019
53
Strategic Report 2019–2020 Our Employees
The business is committed to open and
transparent communication with its
staff, primarily through the delivery of quarterly all
staff meetings where strategic and performance
updates are delivered by company directors
and the senior management team and two-way
communication is encouraged.
In addition to gathering feedback throughout the
year through regular meetings, the company also
encourages employees to share their views via
its annual staff survey, the results of which are
shared and actions taken as a result. Colleagues
are invited to invest directly into the company’s
performance through its Save As You Earn share
schemes which are open to all employees. For
more information please see Investing in Our
People on page 59.
Our customers
The Group’s customers fall into two
distinct categories covering both
business-to-business and business-to-consumer
sectors and the company is committed to
servicing them both effectively. Our business-to-
business customers are supported by dedicated
partnership and business development teams who
work to ensure that all parties are satisfied with the
management of the relationship and its results.
Our business-to-consumer customers benefit
from the empathic expertise of our teams of
highly trained employees. The Group further
invests in its technologies with a view to ensuring
that this customer base has a market-leading
consumer experience.
Our Suppliers
The Group works with a number of
key suppliers, primarily providers
of marketing support services, self-employed
consultants and search agents and surveyors.
Again, each division has a dedicated marketing
and operations team who work closely with these
suppliers to ensure the successful delivery of these
services for both parties.
Our investors
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 (www.nahlgroupplc.co.uk/investors)
explains how we have sought to do this, including
meeting investors at our annual general meeting
and twice yearly roadshows following the
announcement of the full year and interim results.
The Chair and Senior Independent Director are
available to meet investors as required.
The Board seeks to manage investor expectations
whilst striving to make the right decisions as it
navigates the ever-changing markets in which
it operates; aiming to strike a balance between
long-term shareholder value and short-term
business needs.
Our communities and
the environment
While our businesses have limited
direct impact on the environment we are mindful
of our responsibility in this regard. To this end,
a staff body has been developed to look at ways
that our businesses can limit their impact on the
environment. Recent successes include the Critical
Care division’s new offices using 96% clean energy
and plans in the Personal Injury division for electric
car charging points.
Our employees remain committed to their local
communities with senior staff offering their skills
and experience to local schools and academies in a
mentoring capacity through Dragon’s Den events
and similar. Staff also take part in regular fundraising
activities including sleep outs, organising fundraising
lunches and fundraising for and contributing to their
chosen, business-related charities.
This strategic report was approved by the Board
on 27 April 2020 and signed on its behalf by:
Caroline Brown
Chair
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NAHL Group Plc Annual Report and Accounts 2019
Strategic Report 2019–2020 OUR
NAHL Group Plc Annual Report and Accounts 2019
55
Our Culture 2019–2020 Our Values and our belief in trust
continue to inspire what we do and
how we do it. Our customers are at the
heart of what we do while our people
remain our most important asset.
2019 was a year of further investment
in our people – both in terms of
their personal and professional
development. National Accident
Helpline joined the ranks of The
Sunday Times Top 100 Best Small
Companies to Work For, Critical Care
continued its work with Investors in
People, having secured Silver status
in 2017 and the Residential Property
division attained Silver status too at its
first assessment.
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NAHL Group Plc Annual Report and Accounts 2019
Our Culture 2019–2020 DRIVEN BY OUR
VALUES
Our Group Values have been in place since 2014 and are
designed to provide inspiration for staff throughout the
business whilst giving every colleague a blueprint for who
we are both as a business and as people. They have become
an integral part of how our businesses operate.
Our Values are
We are
Curious
We are
Driven
We are
Passionate
We are
Unified
We question the
status quo, seek
to understand our
customers and
resolve how we
could do things
better for them.
We value achieving
results, we strive to
make them happen,
we want to build
something meaningful
and have fun while
we’re doing it.
We care about
what we do and
how we do it, we
empathise with
our customers
and keep our
promises.
We are one team
committed to integrity,
taking individual
responsibility for our
actions whilst trusting
and respecting each
other.
Values deliver
business benefits
Our colleagues have taken these Values to heart
and this has led to great developments in the
culture and operations of our businesses. Keeping
our Values front and centre isn’t just about making
our businesses great places to be, it also has
important business benefits.
For example, one colleague in the Personal Injury
division noticed a potential process improvement.
Curious to know why the process happened in
the way it did and Driven to find a solution, she
researched the issue and presented a different
methodology. This was adopted by the business
and resulted in increased efficiencies while
providing a much-improved customer journey.
Keen to learn,
delivering impact
We love to hear our staff asking why? Why is this
done that way? Why does it work the way it does?
If our colleagues are asking why it’s because they
have a Curious mind which means
they are both keen to learn and
have an impact. This, in turn,
means that the other Values
flow from it.
NAHL Group Plc Annual Report and Accounts 2019
57
Our Culture 2019–2020 Our dynamic and
exciting culture
Our Values Champions are colleagues who, during
the course of the year, have truly excelled on their
demonstration of our Values. This is the high point
of our Values-driven recognition scheme.
We’re extremely proud of our people-centred and
Values-driven approach to our businesses which
form the bedrock of our dynamic and exciting
Group culture. It is this strong, embedded culture
that underpins our strategy and enhances our
ability to meet our short and long-term goals.
Our Values – making
change happen
The creation of our first wholly owned ABS law
firm involved utilising all the Values to deliver
this important project in a short time frame.
Bringing together a team of some of the brightest
minds in the division, some of whom may never
have worked closely together before and shared
the same Values-set ensured the project was
successfully delivered.
Being Unified in vision, Driven in determination to
make it happen, Passionate in making National
Accident Law a really different kind of law firm
operationally and culturally and being Curious
about how that could be done most effectively
meant that this project created something
genuinely different. This endeavor will benefit both
customers and our Group for years to come.
Award-winning,
Values-driven
recognition strategy
In recent years, our Values have become a focus
for our Employee Value Proposition, which drives
how we attract, recruit and retain staff to our
business. This has been recognised by a number
of industry awards and, even more importantly,
our staff engagement scores. Our recognition
and reward strategy begins with e-cards that
colleagues send one another for excellent
performance and behaviours and goes all the way
to the awarding of our Values Champions at the
end of the Year.
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NAHL Group Plc Annual Report and Accounts 2019
Our Culture 2019–2020 INVESTING IN OUR
PEOPLE
As previously mentioned, our staff are our number one asset
and this is evidenced in the way that we support and invest in
them. In 2019 we have done this to a greater level than ever
before – in both their personal and professional development.
Continuing our Investors
in People journey
2019 has seen us strengthen our commitment to
Investors in People. Building on the Silver award
attributed to Bush & Co in 2017 and the Gold
award attributed to National Accident Helpline in
2018, our Residential Property division has now
also been awarded Silver status.
Bush & Co is continuing to build on its Silver
award and is engaging staff to drive forward
continuous improvements in preparation for its
re-assessment in 2020.
The Sunday Times Top
100 Best Companies to
Work For Success
We started the year by celebrating National
Accident Helpline being placed in The Sunday
Times Top 100 Small Companies to Work For. To
have broken into this prestigious and exclusive
group of businesses at its first time of trying was
an extraordinary achievement. Competition for
these places is high and results are based entirely
on staff feedback, making this achievement all the
more pleasing.
As it’s our people that make our businesses tick,
we celebrated by taking 16 colleagues to the
awards evening in London and prepared further
celebrations at the office after the event.
CEO of the Personal Injury division, Simon Trott, said:
Our teams work so hard to
ensure that our customers
who have suffered an injury
that wasn’t their fault are
able to make it right so to
know that, in return, we’re
providing them with a great
culture, one that recognises
their skills and their
achievements; that we’ve
made it right for them, is
hugely satisfying.
NAHL Group Plc Annual Report and Accounts 2019
59
Our Culture 2019–2020 Succession planning
While turnover for our leadership team has
remained low throughout the transformation
period, succession planning is vital in ensuring
future stability for our business.
Each of our senior leaders has now completed a
development plan and there is a succession plan in
place for each of their roles. Of the vacancies filled
in this category in 2019, over a third were filled by
internal candidates, showing that the process is
already beginning to deliver benefits.
Diversity is vital for any business to be successful.
By the end of 2019 a total of 50% of our top tier
positions were held by women, a number that has
been steadily increasing over the last two years.
Our Group Board is similarly well-balanced with
a 50/50 gender split.
Raising up new leaders
Investing in our people in order to develop future
leaders comprises a considerable part of our
business culture and 2019 saw this commitment
continue to grow. Building on the previous year,
2019 saw a cohort of 12 colleagues take part in the
Pathway to Leadership programme. This year-
long development opportunity instils business
and leadership essentials across six training days.
The topics covered at these sessions included
Performance Management, Presentation Skills,
Communications and Influencing as well as a study
of what leadership is. Each delegate also had the
benefit of receiving a minimum of six mentoring
sessions from the most senior leaders from across
the business, which is incredibly well received and
appreciated by all the delegates.
Ben Needham-Holmes, Operations
Manager at Bush & Co said:
Pathway to
Leadership was an
excellent year of study
and self-reflection. I found
the mentoring sessions
invaluable. They provided
me with an opportunity
to really explore where I
wanted my career to go.
Accelerated
learning through the
Leadership School
In May, 13 graduates from 2018’s Pathway to
Leadership cohort continued their professional
development with the Group through an intensive
3-day residential retreat known as The Leadership
School. This accelerated opportunity gave each
delegate the chance to further embed and
develop their learnings to date.
Hannah Banks, General Manager at
SearchesUK said:
This was a fantastic
opportunity to learn and
develop really relevant skills
which will help me in my
role as a people manager
for many years to come.
The school was intrinsically
linked to trust. I really
believe that any manager
who has the opportunity
to learn more about this
should jump at the chance!
Our apprentices
Where many businesses bring new staff into
their companies via apprenticeship schemes the
Personal Injury division has seen the opportunity
to invest in existing staff and develop their
roles whilst equipping them for their long-term
futures. In 2019 we saw 10 colleagues take this
opportunity to receive training in specialisms
that include business administration, customer
service and paralegal training. These courses
give our colleagues a great grounding in their
chosen specialism while enabling them to put
their learning into immediate practice and we’ll be
looking to develop this across the Group in 2020.
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NAHL Group Plc Annual Report and Accounts 2019
Our Culture 2019–2020 Working towards more
sustainable business
environments
2019 saw the launch of the Passionate Planet
People (3P) team – a small, enthusiastic group-
wide panel of like-minded colleagues who are
dedicated to identifying the small (and sometimes
bigger) changes that we can make in each location
to be more sustainable while educating colleagues
about the choices they can make to be more
sustainable in their own lives.
Investing in staff wellbeing
Complementing the investment we make in our
staff’s professional performance is the support
we give to their wellbeing. With one in four people
living with mental health challenges at any given
time, it’s important that our staff have the support
that they need on hand when they need it. To this
end, we trained 7 staff across all our businesses
to be Mental Health First Aiders, enabling them
to support staff in a crisis and signpost them to
further help. We also trained all our line managers
in mental health, making them aware of the kinds
of challenges their staff could be dealing with and
how they can best support them.
Of course, prevention is better than cure, so we
have also run a number of self-confidence training
workshops to help staff identify their skills and to
encourage them to be confident in who they are.
We’re certain that this training can help to prepare
staff for possible career advancement. More
importantly, it’s the right thing to do and it enables
colleagues to be the best they can be.
This commitment to the personal and professional
development of our people has had a direct impact
on colleague’s satisfaction at work, as evidenced in
our OwnIt! staff survey results where the number
of staff who feel they have access to activities and
opportunities that develop them increased by over
23% in a two year period.
Question
My personal
growth is
important to
my manager
Question
I have access
to activities and
opportunities
that develop me
53.8% 2017
70.4% 2018
74.5% 2019
53.8% 2017
77.8% 2018
77.0% 2019
NAHL Group Plc Annual Report and Accounts 2019
61
Our Culture 2019–2020 Preparing our people for
exciting futures
The success of our ambitious strategies across all
our businesses will depend greatly on our people
and their capacity to deliver. We are confident
that we have the right people in place to rise to
these challenges. We are, therefore, committed to
developing their personal and professional skills to
ensure that they are well-prepared for the exciting
futures that lie ahead for them and our company.
89%
of staff value the
interaction they have
with colleagues
Creating communities
In a world where it can be hard to find real-life
community with others, our businesses have
established ways to provide this for staff both on
and offline. Our online communications platform,
SourceIt! and our closed Facebook Group for staff,
SourceIt! Social, give colleagues the chance to
send one another e-cards for a job well done and
share best practice and stories of what’s going on
in their particular team.
Each business in the Group has its own sense
of community, influenced by our Values and
brought to life by our people. Our development
opportunities create supportive communities for
those, for example, on the Pathway to Leadership
and Leadership School programmes with each
cohort having its own WhatsApp group where
the development continues as colleagues share
videos, books and podcasts that will help their
ongoing study.
A further community of self-learners has started a
book club where participants read a development
book together and share the learnings they
are taking from it and implementing into their
lives. These staff-led special interest groups are
improving staff morale and fostering a real sense
of connectedness across the businesses with a
recent survey saying that 89% of staff value the
interaction they have with colleagues and 79%
saying that coming to work makes them feel part
of a community.
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NAHL Group Plc Annual Report and Accounts 2019
Our Culture 2019–2020 Our Culture 2019–2020
OUR CUSTOMERS
Our business depends on our customers and our ground-
breaking changes have our customers at their heart – delivering
the best possible customer experience, whilst ensuring we
provide the help that they need. Our customers in our different
divisions have varying requirements and our highly skilled and
empathic staff ensure that these needs are met.
Our Personal
Injury division
For our Personal Injury division customers,
someone who is knowledgeable and who
understands and empathises with their
vulnerability is vital. When Martin was hit by a car
on the school run he couldn’t work and struggled
to make ends meet.
Our Critical Care division
When you suffer a catastrophic, life-changing
injury it’s not just the physical aspects of your
accident that can take their toll. For Mark, his
loss of confidence and subsequent PTSD after he
sustained a spinal cord injury playing rugby, was
affecting his ability to deal with his new reality.
Our Residential
Property division
As well as supporting the conveyancing, survey
and searches needs of its own customers, our
Residential Property division supplies search
packs to other industry professionals. The division
has an excellent reputation in the field.
Martin’s story:
Martin was collecting his son from
school when he was hit by a car,
tearing two ligaments in his knee.
His injury meant he couldn’t work
for weeks and struggled with his
everyday tasks as a parent.
Money was a worry, too – Martin had
to take his car off the road and try to cope
financially without an income.
Martin contacted us and we introduced him
to a specialist solicitor who handled his case.
When his compensation was paid, Martin was
able to pay his rent up to date, get his car back
on the road, and move on with his life.
Every bill that you
pay off with that
compensation when it
comes through is just
a reminder that the
system works. It was
a sigh of relief, like a
weight had been lifted
off my shoulders.
NAHL Group Plc Annual Report and Accounts 2019
63
Our Culture 2019–2020
Mark’s* story:
Mark is 33 and was 18 when he sustained a
spinal cord injury playing rugby. His injury
left him with limited functionality in his hands
alongside problems with his bladder and bowel
function and an increased susceptibility to
urinary tract infections.
Mark suffered with anxiety and
depression, showed signs of PTSD
and was disengaging with society.
Spencer, a Bush & Co case
manager, worked with Mark to
set some short- and medium-term
goals and secured him a volunteering
role with a local sports partnership for
two days a week. This role became a four-
year workplace business degree opportunity,
allowing him to work and study at the same
time, giving him a renewed sense of purpose
and some much needed independence.
This is the first time
since my injury that I can
see a future for myself.
*name changed for confidentiality purposes
Having worked with
SearchesUK for around
5 years, we know
they are a company
who have expertise
and knowledge in the
property market. Offering
and understanding a full
range of professional
conveyancing services,
they have a true
commercial standing
within the UK, and
always work with
professionalism and
a personal touch.”
Andrew Crawshaw,
Strategic Account Manager at GroundSure
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NAHL Group Plc Annual Report and Accounts 2019
TRUST IN OUR
BUSINESS
As we learn to navigate a world experiencing an extraordinary
level and speed of change, attitudes are changing. Power is
no longer the most important factor in the supplier/customer
relationship, trust is. Customers have an innate sense of right
and wrong and they passionately believe in the businesses they
support doing the right thing.
The Group has been able to absorb this change
better than most, due to its commitment to its
firmly held company Vales and, in recent years,
its adoption of the practice of The Trusted
Executive programme.
Our trust framework
The Group’s Values of Passionate, Curious,
Driven and Unified are not ideas that employees
hear about at induction and never again. They
are the bedrock of our business. They are in
the language we use, the way we attract, recruit,
retain, reward and recognise our colleagues.
They inspire and influence all our decision-making.
Since 2017, these Values have been complemented
by the practice of the Habits and Pillars of The
Trusted Executive programme.
This model turns organisational leadership on
its head – basing business success on the three
Pillars of integrity, ability and benevolence and the
nine leadership behaviours that underpin them:
Coach, Be Consistent, Be Honest, Be Open, Be
Humble, Evangelise, Be Brave, Be Kind and Deliver.
The framework promotes deeper thinking by
leaders about how they operate, how they process
their thoughts, and how they act as individuals.
Be Consistent
Be Honest
Coach
Be Open
Deliver
Be Humble
Be Kind
Evangelise
Be Brave
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65
Our Culture 2019–2020 Being consistent is crucial
in a values-led organisation.
It’s no use being driven
80% of the time or being
‘Unified’ on Tuesdays
and Fridays, but not on
a Monday, Wednesday
or Thursday. Leaders
adopting a consistent
approach means people
know what’s expected and
it helps to engender trust in
the working environment.
Adam Nabozny, MD, Legal Services
Rapid and frequent
change – managing
our response
The world we operate in now sees business
success as dependent upon how it responds to
the increased frequency and speed of change and
responding in the right way – ethically. The future
success of the Group depends on how we continue
to equip ourselves to manage change and to do it
in the right way – because it’s the right thing to do.
When organisations lose public trust individual
reputations are lost and it’s extremely difficult,
even impossible, for businesses to re-establish
themselves as authoritative voices in their fields.
What’s more, no organisation is immune.
In 2019 our commitment to ensuring our
businesses are trusted and trustworthy
progressed as we continued to embed the
Habits and Pillars of The Trusted Executive into
our business culture. The programme forms
a component part of our Leadership School
for middle managers and our current senior
executives use the framework to pursue their
own improvement in their practice of the Habits.
These behaviours are now endemic throughout the
business and sit alongside our company Values.
Dr John Blakey, founder of the Trusted Executive
said “There are few businesses that have taken
on the principles of The Trusted Executive to the
degree that NAHL Group plc has. These are now
firmly embedded within its leadership team and
communicated throughout the organisation. I’m
confident that this commitment will really impact
the bottom line of these companies as well as
provide an exceptional culture for its staff.”
At a time when trust is a rare commodity in all
areas of public life, we will continue to highlight our
focus on trust as a differentiator for NAHL Group
plc. It is an important part of who we are and we do
it simply because it’s the right thing to do.
I’m confident that this
commitment will really
impact the bottom line of
these companies as well
as provide an exceptional
culture for its staff.
Dr John Blakey
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NAHL Group Plc Annual Report and Accounts 2019
Our Culture 2019–2020 AND GOVERNANCE
NAHL Group Plc Annual Report and Accounts 2019
67
Leadership and Governance 2019–2020 Good corporate governance is
vital to support long-term growth
in shareholder value. To support
this, we have an efficient, effective
and dynamic management
framework accompanied by clear
communication in order to promote
confidence and trust.
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NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 BOARD OF DIRECTORS
Caroline Brown
Russell Atkinson
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.
Caroline sits on the Remuneration Committee
and Nomination Committee and chaired the Audit
Committee until July 2019.
She has delivered business strategy across EMEA,
the Americas, former-CIS, India and the Far East in
commercial leadership roles for FTSE 100 groups,
mid-cap companies, and innovative small and
medium sized enterprises.
Caroline is also a Non-Executive Director of
Georgia Capital plc, Luceco plc & IP Group 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 holds an MBA.
Chief Executive Officer
Russell Atkinson became
Chief Executive Officer of the
Group, following its admission
to AIM in 2014.
He joined National Accident
Helpline in 2012 as Managing Director and had a
pivotal role in implementing its strategy following
regulatory change in 2013.
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 degree
from Leicester Polytechnic and a diploma in
marketing from The Chartered Institute of
Marketing and is a Fellow of the Institute of
Directors.
Tim Aspinall
Non-Executive
Director and Senior
Independent Director
Tim Aspinall became Non-
Executive Director in June
2016 and sits on the Audit &
Risk, Remuneration and Nomination Committees.
In January 2020 Tim was appointed Senior
Independent Director.
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.
Tim is a qualified solicitor and 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.
NAHL Group Plc Annual Report and Accounts 2019
69
Leadership and Governance 2019–2020 James Saralis
Sally Tilleray
Chief Financial Officer
James Saralis is Chief Financial
Officer of the Group, which he
joined in January 2018.
His responsibilities include
the overall management of
the finance function and liaising with the Group’s
investors and the banks.
James brings with him a wealth of experience both
operationally and of the AIM market. Previously,
he spent over 10 years in the general insurance
industry, most recently as CFO of the Direct &
Partnerships and Employee Benefit divisions of
Jelf, part of Marsh & McLennan Companies.
James has also held various finance roles in
Clearspeed Technology plc, HBOS plc and RAC plc.
He is a Chartered Accountant and a fellow of the
ICAEW, having been a member since 2003. He
holds a Bachelor of Science from the University
of Bristol.
Non-Executive Director
Sally Tilleray became Non-
Executive Director on 19 July
2019 and is Chair of the Group’s
Audit & Risk Committee, as well
as sitting on the Remuneration
and Nomination Committees.
Sally founded her own consulting business and is
currently Chair of Cognito Media, an integrated
communications consulting firm. She is also a
Non-Executive Director of Mind Gym plc, the AIM
quoted behavioural science training and business
improvement group.
In her executive career, Sally was previously
joint Group Chief Operating Officer and Finance
Director at Huntsworth plc, the international
healthcare and communications firm, where
she was responsible for the Group’s worldwide
financial functions and day to day operations. Prior
to this, she served as CFO Europe for Predictive
Inc., a technology consulting business which
listed on Nasdaq in 2000. She is a member of the
Chartered Institute of Management Accountants.
Gillian Kent
Non-Executive Director
Gillian Kent became Non-
Executive Director in November
2014 and is Chair of the Group’s
Remuneration Committee.
She also sits on the Audit &
Risk Committee and
Nomination committee.
Gillian is also an independent Non-Executive
Director at Ascential plc, Mothercare plc and SIG
plc. 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).
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NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 EXECUTIVE
MANAGEMENT TEAM
Simon Trott
Will Herbertson
Chief Executive Officer
– Personal Injury
Simon is responsible for the
Personal Injury division’s
executive leadership and
business operations, including
National Accident Helpline and the ABS law firms
Your Law, Law Together and 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 National Accident Helpline
brand and developed enhancements in the
consumer journey.
Previously, Simon spent 20 years in senior
positions in the general insurance industry,
most recently at Towergate Partnership Group,
culminating in his roles as CEO of Towergate
Direct Division & RKH Group.
Managing Director –
Residential Property
Will Herbertson joined the
Group as Managing Director of
its Residential Property division
in September 2018.
Will is responsible for managing the Fitzalan
Partners Ltd (conveyancing and surveys)
and SearchesUK 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.
NAHL Group Plc Annual Report and Accounts 2019
71
Leadership and Governance 2019–2020 Helen Jackson
Marcus Lamont
Managing Director –
Critical Care
Helen was appointed as
Managing Director at Bush & Co
in July 2016 having spent four
years as Group HR Director.
Responsible for overall strategy and leadership
within the division as well as business
development, quality and clinical independence,
Helen has driven a number of business
improvements.
More recently of note Helen led Bush in launching
two industry leading ventures with the Spinal
Injuries Association and Child Brain Injury Trust.
These are both prominent charities in the sector,
reinforcing the company’s market positioning
as the leader in catastrophic injury in case
management and building on Bush’s 30 years of
success within the Critical Care sector.
Previously, Helen held HR leadership roles at
Everest, BUPA and Tesco.
Group HR Director
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.
72
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 CHAIR’S INTRODUCTION
TO GOVERNANCE
Board effectiveness
The Board is an important part of our governance
framework and I am pleased to say that it has been
strengthened this year by the addition of a further
Non-Executive Director. The Board comprises
four Non-Executive Directors and, in line with best
practice, three of these are independent. It also
has two Executive Directors, allowing it to be well
balanced with individuals possessing a diverse
range of experience and skills and from a variety
of backgrounds. This provides independent,
effective and entrepreneurial leadership within
the framework of a strong company purpose and
values-led culture. This was confirmed by the
results of a Board evaluation exercise conducted in
2019, through an internal process which is further
described on page 76. The internal evaluation
made a number of recommendations which have
now been implemented.
Corporate
Governance Code
Companies listed on AIM are required to adopt
a recognised corporate governance code. The
Board has adopted 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. It is appropriate for the needs and
circumstances of small and mid-sized quoted
companies on a public market. It is based around
a set of ten principles to which the Group must
either comply or explain why it has chosen not to.
Dear Shareholder,
On behalf of the Board, I am pleased to introduce
our Corporate Governance statement for the
year ended 31 December 2019. 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. To achieve
this, companies require an efficient, effective
and dynamic management framework that is
accompanied by clear communication, promoting
confidence and trust.
NAHL Group Plc Annual Report and Accounts 2019
73
Leadership and Governance 2019–2020 Compliance with the
QCA Corporate
Governance Code
The ten principles of the code are set out in the
table on page 79. 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
in June 2020 and to engage with the Board and
other members of our senior leadership team who
will be in attendance.
Caroline Brown
Chair
We believe that good
corporate governance
is vital to support
long-term growth in
shareholder value.
74
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 GOVERNANCE
STATEMENT
The Nomination Committee is responsible
for considering the make up 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 this in the Principal
Risks and Uncertainties section of the Annual
Report on page 47.
The Board met 10 times during 2019 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 30
September 2019, 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.
The following table shows the Directors’
attendance at Board and Committee meetings
during the year:
The Board
Board composition
The Board comprises the Non-Executive Chair,
three independent Non-Executive Directors and
two Executive Directors. Their biographies can be
found on pages 69–70.
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. Tim Aspinall is the Senior Indepedent
Non-Executive Director. 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 and attendance at
high level leadership programmes. In addition,
they receive individual support for specific and
identified development needs to ensure they are
kept up to date on relevant legal developments or
changes in best practice.
NAHL Group Plc Annual Report and Accounts 2019
75
Leadership and Governance 2019–2020 Table of Board attendance
Caroline Brown
Steve Halbert1
Russell Atkinson
James Saralis
Gillian Kent
Tim Aspinall
Sally Tilleray2
Board
Audit
Remuneration
Nomination
9/9
1/1
9/9
9/9
9/9
8/9
4/4
1/1
N/A
N/A
N/A
2/3
3/3
2/2
3/3
N/A
N/A
N/A
3/3
3/3
1/1
1/1
N/A
N/A
N/A
1/1
1/1
N/A
1. Steve Halbert resigned from the Board on 30 January 2019.
2. Sally Tilleray was appointed to the Board on 19 July 2019.
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 undertook an evaluation of its
effectiveness in 2019 which was supervised by
the Nomination Committee with the assistance of
the Company Secretary. It was decided that the
approach taken would be to issue a questionnaire,
followed by a discussion with the full Board.
The questionnaire consisted of 118 questions split
into 15 sections, including Board composition
and governance, Board operations, strategy,
stakeholder relations and the performance of
individual Directors and Board Committees.
Following completion of the questionnaire, the
results were evaluated, and the following key areas
of focus and subsequent actions were agreed by
the Board:
i. Developing the next stage of the
Group’s strategy
The Board held a strategy day in September 2019
and it was agreed that the Board should review
its current strategy in 2020, in light of regulatory
developments in the personal injury market, the
state of the UK residential property market and
the levels of competition in all of the Group’s key
markets. This process will be led by the CEO.
ii. Scope of the Audit Committee and
the recruitment of an independent
Chair of the Audit Committee
The Audit Committee developed and managed an
enhanced risk framework for the Group which can
be seen on page 47. This process was developed
by the CFO. As a result, a new independent Non-
Executive Director was appointed to chair the
Committee, which has been renamed the Audit &
Risk Committee. The Report of the Audit & Risk
Committee for the year can be found on page 80.
iii. Whether the Board should appoint
a Senior Independent Director (SID)
The Nomination Committee recommended
that the Board appoint a SID, whose role will
be to support the Chair in her role; to act as an
intermediary for other non-executive directors
when necessary; to lead the non-executive
Directors in the oversight of the Chair; and to
ensure there is a clear division of responsibility
between the Chair and Chief Executive. Following
a process run by the Nomination Committee, the
Board appointed Tim Aspinall to the role of SID on
30 January 2020.
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
76
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020
Remuneration Committee
The Remuneration Committee consists of:
Gillian Kent (Chair)
Caroline Brown
Tim Aspinall
Sally Tilleray
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
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 and each Executive Director
(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.
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, although the Group
finance team has implemented a series of internal
control reviews and reports the outcomes of these
to the Audit & Risk Committee.
Board committees
To assist in carrying out its duties the Board has
set up a number of committees, including the Audit
& Risk Committee, the Remuneration Committee
and the Nomination Committee. Each committee
has formally delegated duties and responsibilities
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 the committees is set out below
and the terms of reference can be downloaded
from our website.
Audit & Risk Committee
The Audit & Risk Committee consists of:
Sally Tilleray (Chair)
Gillian Kent
Tim Aspinall
Caroline Brown chaired the committee during 2019
until Sally Tilleray’s appointment on 19 July 2019.
The Audit & Risk Committee is expected to meet
formally at least three times 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.
NAHL Group Plc Annual Report and Accounts 2019
77
Leadership and Governance 2019–2020 Nomination Committee
The Nomination Committee consists of:
Caroline Brown (Chair)
Gillian Kent
Tim Aspinall
Sally Tilleray
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.
Accountability and stakeholders
The Board considers that the 2019 Annual
Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders to
assess the Company’s position and performance,
business model and strategy. Details of how
we do this are also explained in the Audit &
Risk Committee report.
78
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 How we have complied with the QCA Corporate
Governance Code
Deliver growth
Governance principles
Reference
1. Establish a strategy and business model which
promote long-term value for shareholders
See Our Business Model (page 21) and divisional
overviews (pages 39–46)
2. Seek to understand and meet shareholder
See Chair’s Introduction to Governance (page 73)
needs and expectations
3. Take into account wider stakeholder and social
responsibilities and their implications for long-
term success
4. Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
Maintain a dynamic management framework
See Our Business Model (page 21) and Section 172
Statement (page 53)
See Principal Risks and Uncertainties (page 47)
Governance principles
Reference
5. Maintain the Board as a well-functioning,
See Governance Statement (page 75)
balanced team led by the Chair
6. Ensure that between them the directors have
See Governance Statement (page 75)
the necessary up-to-date experience, skills and
capabilities
7. Evaluate board performance based on clear
and relevant objectives, seeking continuous
improvement
See Governance Statement (page 75)
8. Promote a corporate culture that is based on
See Our Culture (pages 55–66)
ethical values and behaviours
9. Maintain governance structures and processes
See Governance Statement (page 75)
that are fit for purpose and support good
decision-making by the Board
Build trust
Governance principles
Reference
10. Communicate how the company is governed
and is performing by maintaining a dialogue
with shareholders and other relevant
stakeholders
See Governance Statement (page 75) and Section
172 Statement (page 53)
NAHL Group Plc Annual Report and Accounts 2019
79
Leadership and Governance 2019–2020 AUDIT AND RISK
COMMITTEE REPORT
Re-appointment of
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.
PricewaterhouseCoopers LLP (PwC) were first
appointed as the Group’s external auditor in 2018
and conducted the audit of the Group’s financial
statements for the financial year to 31 December
2018. At the Annual General Meeting in May 2019
PwC were re-appointed for 2019.
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 to the financial
statements. The non-audit fees relate to tax advice
and 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.
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 109. 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:
Dear Shareholder,
I am pleased to present my report of the Audit &
Risk Committee for the year ended 31 December
2019. This is my first such report since my
appointment as independent Chair of the Audit &
Risk Committee in July 2019.
The composition and responsibilities of the
Committee are set out on page 77. The Chair,
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:
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 & Risk Committee.
Following its review, the Auditor presented
its findings to the Audit & Risk 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.
80
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 The decision to consolidate the results and
net assets of three Limited Liability Partnership
(LLP) law firms in the financial statements.
The Committee considers that Your Law LLP,
National Law Associates LLP, trading as National
Law Partners, and Law Together LLP 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 classification and disclosure of exceptional
items. In order to provide additional useful
information for shareholders on underlying
business trends and core trading performance,
the Board uses alternative performance
measures and classifies certain items of
expenditure as exceptional items. The
classification of such items involves judgement
as to what is meant by exceptional and the Board
has therefore developed an accounting policy for
such items (see note 1 on page 118). Given that
this a presentational judgement which does not
affect the reported amounts of assets, liabilities,
income and expenses, the Committee has
determined that is does not warrant disclosure in
note 1 as a critical accounting judgement.
The Committee has also considered the key
sources of estimation uncertainty set out in note
1 to the financial statements on page 109, which
comprises the following:
The revenue recognition on provision of legal
services. The Group recognises revenue in its
ABS law firms 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 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.
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 109), and is satisfied that the provision is
appropriately valued.
Impairment of goodwill and parent company
investment. 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, in particular the £0.3m loss in
Residential Property and the levels of uncertainty
in the UK housing market throughout the year.
Further evidence of this market weakness was
provided by the impact of the COVID-19 virus
in March 2020. Accordingly, the Directors have
concluded that it is appropriate to book an
impairment of £5.3m to the goodwill and other
intangible assets attributed to this division
in the financial statements. The Committee
agreed with this assessment and is satisfied
that no impairment to goodwill relating to the
other divisions was deemed necessary. 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
for Personal Injury and Critical Care and that
for Residential Property, no significant changes
in assumptions would change the impairment
conclusion reached. Accordingly, the Committee
concluded that this did not warrant disclosure
under the key estimates in note 1.
In summary, the Committee is satisfied that the
judgements and estimates made by management
are appropriate.
Going Concern
The Audit & Risk Committee has reviewed
the Going Concern assessment prepared by
management. The assessment includes detailed
financial forecasts covering a range of potential
scenarios that account for the impact of COVID-19
on the business. The going concern assessment
focuses on two key areas being the ability of the
Group to meet its debts as they fall due and being
able to operate within its banking facility.
NAHL Group Plc Annual Report and Accounts 2019
81
Leadership and Governance 2019–2020 The Group has access to a £25.0m revolving credit
facility (‘RCF’) with its bankers and at the time of
writing, it has drawn £23.8m of this facility and has
cash of £2.7m. In all of the scenarios the Group has
modelled it would have sufficient liquidity within its
current RCF to meet its liabilities as they fall due
and would not need to access additional funding.
However, the Group’s RCF is subject to quarterly
covenant testing and the scenarios modelled
suggest that the Group may exceed its leverage
covenant from Q2 2020. The Group are currently
in supportive discussions with the bank to secure a
relaxation of the covenant.
Further details of the going concern review are
given on page 92.
The impact of COVID-19 on the potential covenant
breach indicates the existence of a material
uncertainty which may cast significant doubt
about the Company’s and the Group’s ability to
continue as a going concern. The Company and
Group financial statements do not include the
adjustments that would result if the Company and
Group were unable to continue as a going concern.
Notwithstanding this material uncertainty, the
Directors have a reasonable expectation that the
Company and Group has adequate resources to
continue in existence for the foreseeable future
and have concluded it is appropriate to adopt
the going concern basis of accounting in the
preparation of the financial statements.
New and forthcoming
accounting standards
As was planned last year, the Group has adopted
one new accounting standard during the year,
namely IFRS 16 Leases. 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 this standard
has been appropriately applied in the financial
statements. This change in accounting does
not have any impact on the Group’s financial
covenants associated with its borrowing facility.
Risk Management
Framework and controls
One of the recommendations of the Board
effectiveness review, which was
conducted during 2019, was that
the Audit Committee should
develop and manage an
enhanced risk framework
for the Group and to reflect
this change the committee
should be renamed the
Audit & Risk Committee.
This change has been
made and an increased
focus on risk management
has been adopted by the
Committee.
To that end, the Committee
has been developing a new
risk framework during the year
which is described on page 47 of
the Strategic Report. This process
was led by the CFO and overseen by the
Committee. During the first quarter of 2020, the
Committee has reviewed the framework and is
satisfied that appropriate mitigating actions are
in place.
At present the Group does not have an internal
audit function, but the finance function conducts
quarterly reviews of the financial controls
operating within each of the businesses, identifies
areas to be improved and reports the outcomes
to management and the Executive Directors. The
planning for this process for 2020 was overseen
by the Committee and the finance function will
now also report an overview of their findings for
the year to the Committee in September.
The Committee believes that in view of the current
size and nature of the Group’s businesses, this
approach is sufficient to enable the Committee
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.
Sally Tilleray
Chair of the Audit & Risk Committee
82
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 REMUNERATION
COMMITTEE REPORT
Review of the 2019
financial year
2019 has been a challenging year with continued
political and regulatory uncertainty impacting
our business. The Personal Injury division
faced difficult market conditions with increased
competitive pressures for enquiries and volatility
among our panel law firms. Against this backdrop,
they continued to make significant progress on the
business transformation with our third ABS law
firm, and the launch of our new wholly-owned ABS
law firm, National Accident Law (NAL), both of
which launched well. While the division performed
marginally ahead of Board expectations for 2019,
the mix of enquiry placements during the year will
delay the growth in case processing within NAL.
Our Residential Property division was significantly
impacted by the depressed conditions of the
UK property market, however our Critical Care
division continued to trade well with good organic
and market share growth.
The Group closed with revenue of £51.3m for
the year ended 31 December 2019 and profit
before tax of £2.2m. The 2019 annual bonus was
assessed against underlying operating profit less
non-controlling interest as regards 75% of the
award and individual objectives as regards 25%
of the award. The target threshold for underlying
operating profit after deduction of non-controlling
interests of £9.6m for 2019 was not achieved and
in line with the rules of the annual bonus scheme,
no bonus was payable against the individual
objectives. Overall the Executive Directors were
not eligible for a bonus.
Long Term Incentive Plan (LTIP) awards granted
on 31 October 2017 in the form of nominal cost
share options were subject to EPS and TSR
performance measures (weighted equally) over
the three-year period ended 31 December 2019.
Overall 0% of the award vested. Further details are
set out on page 87.
Dear Shareholder,
On behalf of my colleagues on the Remuneration
Committee and the Board, I am pleased to present
the Directors’ Remuneration Report for the
financial year ended 31 December 2019.
The composition and responsibilities of the
Committee are set out on page 77.
We presented the 2018 Directors’ Remuneration
Report which was subject to an advisory vote
by shareholders at the Annual General Meeting
(AGM) in May 2019. The Directors’ Remuneration
Policy was approved in May 2018 and the
Committee believes that the Policy remains
appropriate and will continue to apply it in 2020.
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 on our website.
The Annual Report on Remuneration provides
details of the amounts earned in respect of the
year ended 31 December 2019 and how the
Directors’ Remuneration Policy will be operated for
the year commencing 1 January 2020.
NAHL Group Plc Annual Report and Accounts 2019
83
Leadership and Governance 2019–2020 Conclusion
We are committed to a responsible and
transparent approach in respect of executive pay
and as a result the Annual Report on Remuneration
will be subject to an advisory vote at the
forthcoming 2020 AGM. The Committee believes
that the advisory vote provides accountability
and gives shareholders a say on this important
area of corporate governance. The Committee will
continue to monitor the Directors’ Remuneration
Policy to ensure it remains aligned to business
strategy and delivery of shareholder value.
The Directors’ Remuneration Policy is due for
renewal in 2021 and we will be reviewing it during
the year to ensure it remains aligned to the
business strategy and delivery of shareholder
value. We continue to welcome any feedback from
Shareholders and hope to receive your support at
the 2020 AGM.
Gillian Kent
27 April 2020
Board changes
On 30 January 2019, the Board appointed Caroline
Brown to succeed Steve Halbert as Non-Executive
Chair. On the 19 July 2019, the Board appointed
Sally Tilleray to the position of independent
Non-Executive Director and Chair of the Group’s
Audit & Risk Committee. Sally took on the
responsibilities of Chair of the Audit Committee
from Caroline Brown.
Outlook for the 2020
financial year
Details in relation to the application of the Directors’
Remuneration Policy in 2020 are set out on page
89 however, the key elements will be as follows:
The CEO and CFO have been awarded a 2%
increase in base salary with effect from 1 March
2020, in line with the percentage increase in
base salary awarded to the wider workforce.
In response to the impact of COVID-19, this
increase has been deferred and will be reviewed
on an ongoing basis.
The CEO’s annual bonus opportunity for 2020
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 2020 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 2020, details of the
size of the awards and the performance measures
attaching to the awards will be disclosed at the
time of grant and in the Company’s 2020 Annual
Report on Remuneration.
Non-Executive Directors’ basic fees were
increased by 2% with effect from 1 March 2020.
In response to the impact of COVID-19, this
increase has been deferred and will be reviewed
on an ongoing basis.
On 30 January 2020 the Board appointed Tim
Aspinal to the position of Senior Independent
Director with a fee of £5,000 per annum to
reflect the increased remit in his role and
responsibilities.
As of April 2020, the Board has taken a 20%
reduction in salaries or fees for an initial 3
months as part of the cost-saving measures
implemented in light of the COVID-19 crisis. This
reduction will be reviewed on an ongoing basis.
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NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 Single figure of remuneration (audited)
The table below details the elements of remuneration receivable by each Director for the financial year
ended 31 December 2019 and the total remuneration receivable by each Director for that financial year
and for the financial year ended 31 December 2018.
Salary and
fees Benefits
Annual
Bonus
Pension
Total
Remuneration
2019
Total
Remuneration
2018
£000
£000
£000
£000
£000
£000
Executive Directors
J R Atkinson
J D Saralis
Non-Executive Directors
C A Brown1
T J M Aspinall2
G D C Kent
S A Tilleray3
R S Halbert4
226
167
84
55
50
22
7
18
17
–
–
–
–
–
–
–
–
–
–
–
–
2
1
–
–
–
–
–
246
185
84
55
50
22
7
241
168
4
48
50
–
87
1. C A Brown was appointed to the Board on 18 December 2018 and appointed to Non-Executive Chair on 30 January 2019
2. T J M Aspinall received a fee of £10,000 as Chair of the Personal Injury Law Firm Governance Committee in 2019. This forms part of the £55,000
disclosed above
3. S A Tilleray was appointed as a Director on 19 July 2019
4. R S Halbert resigned and stepped down from the Board on 30 January 2019
The taxable benefits received during the financial year ended 31 December 2019 are principally car
allowance and private medical insurance.
Individual elements of remuneration (audited)
Base salary and fees
The base salaries for 2019 and 2020 are as set out below:
J R Atkinson
J D Saralis
2019
base salary
£000
226
2020
base salary1
£000
231
% increase
2%
170
173
2%
Details of Non-Executive Directors’ fees for 2019 and 2020 are as set out below:
Chair’s fee2
Non-Executive Director’s fee
Senior Independent Director3
Chair of the Audit & Risk Committee
Chair of the Remuneration Committee
1. Salary/Fee increase with effect from 1 March 2020.
2019
fee
£000
80
45
–
5
5
2020
fee1
£000
82
46
5
5
5
% increase
2%
2%
n/a
2%
2%
2. The proposed salary increase for the Chair’s fee in March 2019 did not take effect and the Chair’s fee was maintained at £80,000 throughout 2019
3. A supplementary fee of holding office of Senior Independent Director has been introduced to reflect the work and responsibility of the role.
NAHL Group Plc Annual Report and Accounts 2019
85
Leadership and Governance 2019–2020
Annual bonus plan (audited)
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 2019. 75% of the annual bonus was assessed against
underlying operating profit performance and 25% was assessed against individual objectives. 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
Operating profit1
Proportion of bonus
determined by measure
Performance
Bonus earned
£000
75% Operating profit threshold of £9.6m
was not achieved.
0
0
Bonus earned
£000
0
0
Personal objectives2
25%
CFO James Saralis
Performance measure
Operating profit1
Personal objectives2
Proportion of bonus
determined by measure
75%
25%
These included the strategic
development of the Group,
divisional strategy support
including the re-engineering of
the Personal Injury division, and
strategy and operational
planning in Residential
Property and Critical Care,
Investor relations and personal
leadership development
Performance
Operating profit threshold
of £9.6m was not achieved.
These included development
of the finance function, ensuring
a smooth transition to new auditors
and a new Chair of the Audit & Risk
Committee, investor relations,
supporting the re-engineering
of the Personal Injury division,
and Residential Property and
Critical Care in the delivery
of their plans
1. Operating profit is defined as underlying operating profit less profit attributable to non-controlling interests.
2. No bonus was payable against the individual element as the operating profit threshold was not achieved.
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NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020
Long-term incentives (audited)
On 31 October 2017, J R Atkinson was granted 87,552 shares in the form of nominal cost share options
which were subject to the following performance conditions:
50% of the award was subject to the Company’s underlying EPS performance for the year ended 31
December 2019. These targets were underlying EPS of 15.7p (at which level 60% of the EPS element would
vest) and 17.3p for maximum performance. The Company’s underlying EPS as at 31 December 2019 was
14.4p therefore 0% of this element of the award vested.
50% of the award was subject to the Company’s absolute TSR performance for the year ended 31
December 2019. These targets were TSR of £2.20 (at which level 25% of the TSR element would vest) and
£2.50 for maximum performance. The Company’s absolute TSR performance was £1.39 therefore 0% of
this element of the award vested.
No 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 18th April 2019
Director
Date of grant
J R Atkinson
18 April 2019
J D Saralis
18 April 2019
Type of award
Percentage Number
of salary of shares
Face value
at grant1
Performance
period
Nominal cost
share option
Nominal cost
share option
100%
185,175
227,765
3 years
80%
110,568
135,999
3 years
1. The mid-market closing share price on the date immediately prior to the grant date (£1.23) was used to determine the face value of the awards.
75% of the award vests subject to EPS performance and 25% of the award vests subject to free cash flow
performance. The Committee decided to replace TSR with free cash flow as it is a key area of focus for the
Group and is a metric which Executive Directors and other LTIP participants consider they have greater
control over compared to TSR. The targets are as follows:
Underlying EPS for the year ending 31 December 2021
Vesting (% maximum)
Less than 16.5p
16.5p
17.2p
18.1p or more
0%
25%
50%
100%
Free Cash Flow for the year ending 31 December 20211
Vesting (% maximum)
Less than £6.3m
£6.3m
£7.7m
£8.1m or more
0%
25%
50%
100%
1. Free Cash Flow is defined as the cash that the Group has generated from operations less net cash used in investing activities, less payments
made to non-controlling interests and less principal elements of lease payments. See note 2 of the financial statements for further details.
NAHL Group Plc Annual Report and Accounts 2019
87
Leadership and Governance 2019–2020
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 2019 and as at 31 December 2018 were as follows:
Executive Directors
J R Atkinson
J D Saralis
Non-Executive Directors
C A Brown
T J M Aspinall
G D C Kent
S A Tilleray
R S Halbert
31 December
2019
31 December
2018
1.15%
0.06%
0.00%
0.02%
0.00%
0.00%
n/a
1.12%
0.00%
0.00%
0.02%
0.00%
0.00%
1.39%
The interests of each Executive Director of the Company as at 31 December 2019 in the Company’s share
schemes were as follows:
Director
Plan
Vested but Unvested and Unvested and
subject to not subject to
Exercised unexercised
during the
year
year
during the performance
measures
Total as at
performance 31 December
2019
measures
J R Atkinson
LTIP (nominal cost options) –
–
337,673
EMI
SAYE
–
–
J D Saralis
LTIP (nominal cost options) –
EMI (nominal cost options) –
SAYE
–
124,999
–
–
–
–
–
–
–
202,031
–
–
14,913
–
–
337,673
124,999
14,913
–
202,031
10,514
–
10,514
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NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020
Implementation of
Directors’ Remuneration
Policy for the financial year
commencing 1 January
2020
Information on how the Company intends to
implement the Directors’ Remuneration Policy for
the financial year commencing on 1 January 2020
is set out below:
Salary/Fees
The CEO and CFO were awarded a 2% increase
to base salary, with effect from 1 March 2020,
in line with the percentage increase awarded to
the wider workforce. In response to the impact of
COVID-19, this increase has been deferred and will
be reviewed on an ongoing basis.
Non-Executive Directors’ basic fee and the
Chair’s fee were increased during the year by 2%,
with effect from 1 March 2020. In response to
the impact of COVID-19, this increase has been
deferred and will be reviewed on an ongoing basis.
Annual bonus plan
The maximum bonus opportunity for the CEO will
be 100% of salary and the CFO 80% of salary for
the 2020 financial year.
75% of the annual bonus will be assessed against
underlying 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 will be focused around the key areas
of the strategic development and leadership
of the Group and the strategic and operational
planning and delivery in each division. The actual
performance targets are not disclosed as they are
considered to be commercially sensitive at this
time. The targets will be disclosed in next year’s
Directors’ Remuneration Report or at such point
that the Committee considers that the performance
targets are no longer commercially sensitive.
Long-term incentives
LTIP awards are made to Executive Directors on
an annual basis to ensure they are appropriately
incentivised and aligned with shareholder’s
interests over the longer term. The Committee has
yet to determine details of the awards to be made
to Executive Directors for 2020. Full details of the
size of the awards and the performance measures
attaching to the awards will be disclosed at the
time of grant and in the Company’s 2020 Annual
Report on Remuneration.
Consideration by the
Directors of matters
relating to Directors’
remuneration
The Remuneration Committee is composed of the
Company’s independent Non-Executive Directors,
Gillian Kent (Chair), Tim Aspinall, Caroline Brown
and Sally Tilleray (appointed 19 July 2019).
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.
NAHL Group Plc Annual Report and Accounts 2019
89
Leadership and Governance 2019–2020 Director Remuneration Report voting at the
2019 AGM
The table below sets out the voting outcome at the Group’s AGM held on 21 May 2019 in respect of the
resolution to approve the Directors’ Remuneration Report contained in the Group’s 2018 Annual Report
and Accounts.
Votes for
% for
Votes
against
% against
Total votes
cast
Votes
withheld
(abstentions)
23,510,797
97.34%
642,469
2.66% 24,153,266
0
Approval of
Directors’
Remuneration
report
Approval
This report was approved by the Board on 27 April 2020 and signed on its behalf by:
Gillian Kent
90
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 DIRECTORS’ REPORT
The Directors of NAHL Group plc present their Annual Report and
audited consolidated financial statements for the year ended 31
December 2019.
Results and dividend
The Group’s profit after tax for the year was £1.5m
(2018: £8.4m).
receivables, interest-bearing loans and trade and other
payables. Further details on financial instruments are
given in note 24 to the financial statements.
The Directors do not propose a final dividend (2018:
5.7p per share).
A review of the business, including future
developments, is included in the Strategic Report on
pages 25–54.
Post balance sheet events
On 2 January 2020 the Group terminated its
partnership in respect of National Law Associates
LLP and relinquished its interest for no consideration.
Exceptional costs of £1.2m were recognised in the
2019 results as part of the termination agreement.
There are no other significant events affecting the
Company and the Group since the statement of
financial position date.
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 16.70%
Lombard Odier Asset Management 14.97%
Directors’ third party indemnity
provisions
The Company maintained during the year 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
21 of the consolidated financial statements. The
Group has employee share option plans in place,
full details of which can be found in note 22 to the
financial statements.
Financial instruments
The Group’s principal financial instruments
comprise cash and cash equivalents, trade and other
Directors
The Directors of the Company who were in office
during the year and up to the date of signing the
financial statements were:
C A Brown (Chair from 30 January 2019)
J R Atkinson (Chief Executive Officer)
J D Saralis (Chief Financial Officer)
G D C Kent (Independent Non-Executive)
T J M Aspinall (Senior Independent Non-Executive)
S A Tilleray (Independent Non-Executive, appointed
19 July 2019)
R S Halbert (Chair to 30 January 2019, Resigned 30
January 2019)
Biographies of the present Directors of the Company
are listed on pages 69–70.
Details of the remuneration of the Directors is
disclosed in the Remuneration Report on pages
83–90.
Political donations
No political donations were made during the year or
the previous year.
Auditor
PricewaterhouseCoopers LLP has been re-
appointed as Auditor and have expressed their
willingness to continue in office as Auditor and a
resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
Other information
An indication of likely future developments in the
business and particulars of significant events which
have occurred since the end of the year have been
included in the Strategic Report on pages 25–54
along with information regarding employee matters.
Information regarding the Group’s financial risk
management objectives and policies is included in
note 24 to the financial statements on page 136.
NAHL Group Plc Annual Report and Accounts 2019
91
Leadership and Governance 2019–2020 Going concern
In determining the appropriate basis of
preparation of the financial statements, the
Directors are required to consider whether the
Company and Group can continue in operational
existence for the foreseeable future.
In addition to the normal process of producing
detailed forecasts of future trading, profits and
cash flows on a CGU basis the Board have also
considered the potential impact of COVID-19 on
the cash flows of the Group for a period in excess
of 12 months from the date of signing the financial
statements. This has been done by modelling the
financial impact of a range of potential COVID-19
scenarios on the business, resulting in a best-case,
worst-case and most probable scenario.
Since mid-March, the Group’s Critical Care business
has remained resilient with only a modest level of
impact to date. However, the Group’s Personal
Injury division has seen a more significant impact
with a reduction in new enquiries and activity in the
Residential Property division has materially reduced
in line with the UK property market which has come
to a standstill. We expect that these challenges will
impact the business in both the short and longer-
term but given the rapidly evolving Government
response, it is too early to quantify the full impact
with any degree of certainty. For further details refer
to the Chief Executive’sReport.
The Board has implemented several cash saving
measures including reducing property and lease
costs, leveraging IT to support broader based
home working, delaying capital expenditure
and optimising the structure of the business to
maximise efficiencies. Members of the Group’s
leadership team have voluntarily taken a
temporary salary cut of between 10% and 20%;
the Board has taken a 20% reduction in salaries
or fees; and the Group has deferred its annual
salary review. The Group is also making use of
the Government Job Retention Scheme and has
furloughed approximately one third of staff.
As a result of the recent restructuring of the
Group’s Personal Injury operations, a significant
proportion of the Group’s cash receipts planned
for this year are derived from historic enquiries,
whether panel firms benefiting from deferred
terms, or settlement of claims in the Group’s ABS
law firms. In the short-term, there is therefore
less reliance on current enquiry levels to generate
cash. The Directors note that there is a risk over
recoverability of debts from the Group’s customers,
as these customers may themselves be impacted
by COVID-19. The Directors have conducted an
assessment of the recoverability of these balances
and reflected the results in the scenarios.
The ability of the Group to operate as a going concern
relies on it being able to meet its debts as they fall
due and being able to operate within its financial
covenants. The Group has access to a £25.0m
revolving credit facility (‘RCF’) with its bankers which
expires in December 2021 and at 31 December 2019,
has net debt of £21.0m. In the scenarios the Group
has modelled, including estimates regarding the
impact of COVID-19, the Group expects to retain
sufficient headroom within its current RCF to meet
its liabilities as they fall due and does not foresee the
need to access additional funding.
However, the Group’s RCF is subject to quarterly
covenant testing and the scenarios modelled suggest
that the Group would breach its leverage covenant
from Q2 2020. The Group are currently in supportive
discussions with the bank to secure a relaxation of
the covenant, however at the date of approving the
financial statements the covenant relaxation has not
been approved in writing by the bank.
If the potential breach was not remedied then
the Group has a number of mitigating options
it could consider, including operating more
aggressive cost saving exercises to increase
profitability and seeking alternative funding, such
as the Government’s Coronavirus Large Business
Interruption Loan Scheme.
The impact of COVID-19 on the potential covenant
breach indicates the existence of a material
uncertainty which may cast significant doubt
about the Company’s and the Group’s ability to
continue as a going concern. The Company and
Group financial statements do not include the
adjustments that would result if the Company and
Group were unable to continue as a going concern.
Notwithstanding this material uncertainty, the
Directors have a reasonable expectation that the
Company and Group have adequate resources to
continue in existence for the foreseeable future
and have concluded it is appropriate to adopt
the going concern basis of accounting in the
preparation of the financial statements.
Group response to Modern
Slavery Act 2015
Organisational structure and
recruitment processes
The Group’s organisational structures include the
Board, Senior Management teams across all three
organisational divisions, Contact Centres at two of
the four locations and standard support functions
across all sites.
Recruitment processes include the monitoring
of passport documentation, with all new recruits
expected to show their passport as a proof
of identity. The Group also reviews shared
92
NAHL Group Plc Annual Report and Accounts 2019
Leadership and Governance 2019–2020 addresses. In addition, the Group monitors the
ongoing wellbeing of its employees through line
management relationships and operates 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 UK field based service providers in regular
contact with their operational management teams.
The Group’s supply chain in relation to services
consists on the whole of marketing services in
Personal Injury and specialist consultants in
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.
Statement of Directors’
Responsibilities
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 of the ultimate parent Company
are responsible for the maintenance and integrity
of the ultimate parent 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 Parent Company auditors are aware; 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
Parent Company 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.
On behalf of the Board
James Saralis
Chief Financial Officer
27 April 2020
NAHL Group Plc Annual Report and Accounts 2019
93
Leadership and Governance 2019–2020 94
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 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 2019 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
(IFRSs) 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
2019 (the “Annual Report”), which comprise: the
consolidated and company statements of financial
position as at 31 December 2019; 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.
Material uncertainty related to
going concern
In forming our opinion on the financial statements,
which is not modified, we have considered the
adequacy of the disclosure made in note 1 to the
financial statements concerning the group’s and
company’s ability to continue as a going concern.
The scenarios modelled by the directors to take
account of the potential impact of COVID-19 suggest
that the Group would breach its leverage covenant
on its revolving credit facility from Q2 2020. This
condition, along with the other matters explained
in note 1 to the financial statements, indicates the
existence of a material uncertainty which may cast
significant doubt about the group’s and company’s
ability to continue as a going concern. The financial
statements do not include the adjustments that
would result if the group and company were unable
to continue as a going concern.
What audit procedures we performed
In concluding there is a material uncertainty, we
performed the following procedures:
Evaluated the directors’ forecast scenarios,
including challenging key assumptions being the
profile of forecast cash flows and variability of the
cost base;
Checked the integrity of the directors’ model,
as well as agreeing underlying data to source
documents;
NAHL Group Plc Annual Report and Accounts 2019
95
Financials 2019–2020 Assessed whether the directors’ mitigating
actions are reasonably achievable based on our
understanding of the business, including the
nature of its cost base;
Evaluated forecast covenant compliance
calculations;
Evaluated the directors’ assessment of customer
credit risk; and
Obtained evidence to support disclosures
within the financial statements and checked
that the disclosures within the annual report are
consistent with the financial statements and
knowledge gained on the audit.
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.
Our audit approach
Overview
Overall group materiality: £479,000 (2018:
£505,000), based on 5% of profit before tax
before exceptional items.
Overall company materiality: £841,000 (2018:
£651,310), based on 1% of total assets.
We performed full scope audits over five
financially significant components as well as
NAHL Group plc entity. The audit of these
components provided coverage of 85% revenue,
71% profit before tax and 58% total assets.
In addition, we performed testing over significant
balances within a further three non-significant
components. Testing over financial statement
line items which are managed at head office were
audited in full, including goodwill, tax, external
borrowings, and directors’ emoluments.
Going concern (Group and Company – refer to
Material uncertainty section above)
Recoverability of trade receivables and accrued
income (Group)
Carrying value of goodwill (Group) and
investments (Company)
Presentation and disclosure of exceptional items
(Group)
Impact of COVID-19 (Group and Company)
Materiality
Audit scope
Key audit matters
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NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 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. In
addition to going concern, described in the material
uncertainty related to going concern section above,
we determined the matters described below to
be the key audit matters to be communicated in
our report. This is not a complete list of all risks
identified by our audit.
Key audit matter
Recoverability of trade receivables and accrued
income (Group)
A provision of £0.6m is recognised against trade
receivables and accrued income of £29.0m. The
provision involves judgement in determining the
expected credit loss for the Group.
The Group enters into contracts with the
customers on varied credit terms, some of which
are extended terms up to two years. There is a risk
that customers are unable to meet their payment
obligations over this time.
In addition, accrued income includes an element
of revenue recognised based on estimated final
damages to be awarded to the client, therefore
involving judgement.
Refer to the Audit and Risk Committee Report
on page 81 and the Accounting Policies note 1 for
details of this critical accounting estimate.
How our audit addressed the key audit matter
We performed a combination of targeted and non-
statistical sampling across customer balances to
obtain evidence to support both their existence and
valuation. Procedures performed were specific for
each customer, and included a combination of one
or more of the tests below:
Obtaining independent confirmation from the
customer of their balance;
Obtaining a copy of signed agreement confirming
the balance will be settled over an agreed period;
Vouching subsequent cash receipts post year end
to the bank statement;
Confirming payments made during the year to
agreed payment plans and tracing those to bank
statements to support timeliness of settlement;
Agreeing guaranteed amounts per claim to
contracts;
Recalculating accrued income balances based
on total enquiries passed to customers, agreed
fees, and historical success rates to determine
estimated recoverable amounts; and
Performing a look back test comparing actual
collections and write offs against prior year
receivables and accrued income amounts in order
to assess the director’s estimate of the expected
credit loss provision.
We found the recoverability of trade receivables
and accrued income balances at the year-end date
to be consistent with the evidence obtained.
NAHL Group Plc Annual Report and Accounts 2019
97
Financials 2019–2020 Key audit matter
Carrying value of goodwill (Group) and investments
(Company)
The carrying value of goodwill in the consolidated
statement of financial position is £55.5m (2018:
£60.4m), and the carrying value of investments in
the company balance sheet is £52.7m (£52.7m).
An impairment charge of £4.9m has been
recognised in the year against the Residential
Property division goodwill.
An annual impairment review is performed in
order to assess the recoverability of these
assets. The directors apply value-in-use (‘VIU’)
methodology, and this calculation includes
assumptions such as future cash flows, discount
rate and long term growth rate. The VIU is
inherently judgemental as it is based on future
forecasts and a change in assumptions can result
in a material change in the valuation.
Refer to the Audit and Risk Committee Report
on page 81, note 13 Goodwill to the consolidated
financial statements, and note 3 Investments to the
company financial statements for further details.
How our audit addressed the key audit matter
The valuation methodology used for impairment
assessment has been reviewed to ensure that
it is compliant with the requirements of IAS 36
Impairment of assets.
We obtained the directors’ value in use model for
each cash generating unit (’CGU’). These were
recalculated to ensure the mathematical accuracy
of the model.
Key assumptions were tested as follows:
For each CGU, cash flow forecasts were agreed
to Board approved budgets and reviewed in order
to ensure that only cash flows relating to the
asset at the balance sheet date were included.
We performed a look back analysis to determine
the directors’ forecasting accuracy over the last
four years and used this in performing sensitivity
analysis;
Discount rates were recalculated with each input
traced to supporting market available data. We
inquired of our valuations experts in order to
ensure the discount rate assumptions were in line
with expectations; and
We considered the long term growth rate used in
the model and compared this with the long term
growth rate for the UK economy.
We performed sensitivity analyses on the Personal
Injury and Critical Care models, adjusting for
downside in cash flows, historic budgeting
accuracy, and changes to discount and long term
growth rates. This was used to determine the
change in assumptions which would be required in
order to create an impairment charge.
We performed sensitivity analysis on the
Residential Property model, adjusting for downside
in cash flows, historic budgeting accuracy, and
changes to discount and long term growth rates.
We verified that the forecast value in use within this
model resulted in a full impairment of the goodwill
to a nil carrying value.
We have reviewed the directors’ disclosure in
note 13 including the assumptions used and
sensitivities.
We found the carrying value of goodwill and
investments at the year end date, and the
impairment of goodwill within Residential Property,
to be consistent with the evidence obtained.
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NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 Key audit matter
Presentation and disclosure of exceptional items
(Group)
The financial statements include certain items
which are disclosed as exceptional items, and
therefore adjusted for in the reconciliation of
accounting profit to the adjusted measure,
underlying operating profit.
The nature of exceptional items is set out in
the group accounting policy and includes non-
recurring items that are material by nature, for
example reorganisation and restructuring costs,
and acquisition related costs.
In the year, exceptional items are recognised in
relation to group strategic and reorganisation
costs (£1.3m), termination of strategic partnership
(£1.2m) and impairment of goodwill and intangible
assets (£5.3m).
We focus on this area as judgement is required by
the directors in determining whether items classify
as exceptional.
Refer to the Audit and Risk Committee Report on
page 81 and note 4 to the consolidated financial
statements for further details.
How our audit addressed the key audit matter
We assessed the appropriateness of the group’s
accounting policy for exceptional items with
reference to accounting standards.
We considered whether the items presented as
exceptional in the current year were consistent
with the accounting policy and the treatment of
exceptional items in prior years.
For group strategic and reorganisation costs, we
verified a sample of costs to invoices, payroll and
other supporting documentation.
For termination of strategic partnership costs, we
agreed these costs to the supporting calculations,
signed settlement agreement and accounting
records.
For impairment of goodwill and intangible assets,
we performed the testing outlined in the Key Audit
Matter above in respect of the carrying value of
goodwill and investments.
We considered whether there are any other
one-off or notable credits or charges recognised
in underlying earnings to ensure consistent
treatment.
We found the presentation and disclosure of
exceptional items to be consistent with the
evidence obtained.
Impact of COVID-19 (Group and Company)
The emergence of Coronavirus (“COVID-19”)
during Q1 2020 has impacted all businesses, both
financially and operationally. The directors have
performed a detailed assessment of the potential
impact of COVID-19, specifically in respect of the
preparation of the financial statements on a Going
Concern basis.
The work we performed and our conclusion
in respect of going concern is included in the
“Material uncertainty related to going concern”
section above.
We assessed the directors’ view that COVID-19
represents a non-adjusting post balance sheet
event and agreed with this view. We are satisfied
that the related disclosures are appropriate.
The directors believe that COVID-19 is a non-
adjusting post balance sheet event.
Refer to Note 1 Accounting Policies - Going
Concern for further details.
NAHL Group Plc Annual Report and Accounts 2019
99
Financials 2019–2020 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 five wholly owned trading
subsidiaries, three controlled but not wholly owned
trading subsidiaries, and a number of intermediate
holding companies. We defined a component to
be an individual entity for which management
prepares financial information. Accordingly,
the parent company and each subsidiary is a
component.
We identified five financially significant
components based on their contribution to the
group’s profit for the year. A full scope audit was
performed over each of these, as well as over
the parent company. Significant balances were
identified in three remaining components and
therefore testing on specific financial statement
line items was performed to obtain audit
evidence in support of those balances within the
consolidated accounts. The remaining unaudited
entities were subject to a desktop review.
In addition we performed audit procedures at a
group level over financial statement line items
which are managed at head office, including
goodwill, tax, external borrowings, and directors’
emoluments.
One financially significant component was
audited by a non-PwC component auditor. We
have instructed them, held calls during the audit
process, performed a review of working papers
with particular focus on the audit of areas of
heightened audit risk, and received reporting from
them. Based on our involvement in the component
auditor’s work, sufficient appropriate evidence
has been obtained in support of the group audit.
Other than this one component, all audit work was
performed by the group engagement team.
The audit of the financially significant components
provided coverage of 85% revenue, 71% profit
before tax and 58% total assets. The audit of the
significant balances in the remaining components
increased the coverage of revenue to 96% and
total assets to 97%, and also increased the
coverage of profit before tax due to testing of
further income and expenses within the group.
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:
Overall materiality
£479,000 (2018: £505,000).
£841,000 (2018: £651,310).
Group financial statements
Company financial statements
How we determined it
Rationale for benchmark
applied
5% of profit before tax before
exceptional items.
Profit before tax before
exceptional items is a
key measure used by the
shareholders in assessing the
performance of the Group,
and is a generally accepted
adjusted profit benchmark. We
have applied a rule of thumb of
5% of this benchmark which is
appropriate for a profit oriented
listed entity.
1% of total assets.
NAHL Group plc is an investment
holding company with no trading
operations. The benchmark for
this entity is total assets as this is
the primary value recognised in
the financial statements for the
Company. We have applied a rule
of thumb of 1% which is standard
for this benchmark.
100
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
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 £100,000 and £400,000.
We agreed with the Audit Committee that we
would report to them misstatements identified
during our audit above £25,000 (Group audit)
(2018: £25,250) and £42,000 (Company audit)
(2018: £32,570) as well as misstatements below
those amounts that, in our view, warranted
reporting for qualitative reasons.
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.
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 2019 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, 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
NAHL Group Plc Annual Report and Accounts 2019
101
Financials 2019–2020 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
27 April 2020
102
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
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 107–142 form part of these financial statements.
Note
1,2
3
1
22
15
4
2
7
8
9
Note
23
23
2019
£000
51,314
(24,990)
26,324
(23,761)
12,192
(811)
(960)
(7,858)
2,563
202
(615)
2,150
(635)
1,515
(2,959)
4,474
1,515
2019
p
(6.4)
(6.4)
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
NAHL Group Plc Annual Report and Accounts 2019
103
Financials 2019–2020
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AT 31 DECEMBER 2019
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right of use assets
Deferred tax asset
Current assets
Trade and other receivables (including £8,279,000 (2018:
£6,603,000) due in more than one year)
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Other payables relating to legacy pre-LASPO ATE product
Current tax liability
Non-current liabilities
Lease 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 107–142 form part of these financial statements.
Note
2019
£000
2018
£000
13
15
16
17
10
18
20
17
2
17
19
11
21
55,489
5,082
267
264
30
61,132
37,871
2,564
40,435
101,567
(17,216)
(187)
–
(363)
(17,766)
(60)
(23,594)
(1,068)
(24,722)
(42,488)
59,079
115
3,389
14,595
(66,928)
104,593
55,764
3,315
59,079
60,362
6,400
195
–
177
67,134
28,806
1,598
30,404
97,538
(15,111)
–
(301)
(975)
(16,387)
–
(17,122)
(1,342)
(18,464)
(34,851)
62,687
115
2,578
14,595
(66,928)
111,380
61,740
947
62,687
These financial statements on pages 103–142 were approved by the Board of Directors on 27 April 2020
and were signed on its behalf by:
J D Saralis
Director
Company registered number: 08996352
104
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
£000
Share
option
Share
reserve premium
£000
£000
Merger
reserve
£000
Note
Capital and
reserves
attributable to
Non-
the owners of controlling
interest
Retained
earnings NAHL Group plc
£000
£000
£000
Total
equity
£000
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
–
–
–
–
–
–
6,674
6,674
1,709 8,383
–
6,674
6,674
1,709 8,383
Transactions with owners, recorded directly in equity
Issue of new
Ordinary Shares
Member drawings
Share-based payments 22
Dividends paid
27
–
–
457
–
88
–
–
–
–
–
–
–
26
–
–
–
–
–
–
–
(6,373)
88
–
457
(6,373)
–
88
(865)
(865)
457
–
– (6,373)
Total transactions with owners, recorded
directly in equity
–
457
88
–
(6,373)
(5,828)
(865) (6,693)
Balance at
31 December 2018
Adjustment on initial
application of
IFRS 16, net of tax
Restated balance at
1 January 2019
115 2,578 14,595 (66,928) 111,380
61,740
947 62,687
31
–
–
–
–
4
4
–
4
115 2,578 14,595 (66,928) 111,384
61,744
947 62,691
Total comprehensive income for the year
Profit for the year
–
Total comprehensive
income
–
–
–
–
–
Transactions with owners, recorded directly in equity
–
Member capital
–
Member drawings
Share-based
payments
Dividends paid
811
–
22
27
–
–
–
–
–
–
–
–
14
–
(2,959)
(2,959)
4,474
1,515
–
(2,959)
(2,959)
4,474
1,515
–
–
–
–
–
–
–
–
50
50
(2,156) (2,156)
–
(3,832)
811
(3,832)
–
811
– (3,832)
Total transactions with owners, recorded
directly in equity
–
811
–
–
(3,832)
(3,021) (2,106) (5,127)
Balance at
31 December 2019
115 3,389 14,595 (66,928) 104,593
55,764
3,315 59,079
The notes on pages 107–142 form part of these financial statements.
NAHL Group Plc Annual Report and Accounts 2019
105
Financials 2019–2020
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Note
2019
£000
2018
£000
Cash flows from operating activities
Profit for the year
Adjustments for:
Property, plant and equipment depreciation
Right of use asset depreciation
Amortisation of intangible assets (not relating to business combinations)
Amortisation of intangible assets relating to business combinations
Impairment of goodwill and intangible assets
Financial income
Financial expense
Share-based payments
Taxation
16
17
15
15
7
8
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
Proceeds from borrowings
Principal element of lease payments
Dividends paid
Non-controlling interest drawings
Net cash generated from/(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
14
1,515
8,383
147
419
372
960
5,322
(202)
615
811
635
10,594
(8,880)
1,836
–
3,550
(529)
(1,479)
1,542
(219)
(463)
–
9
50
(623)
–
6,500
(465)
(3,832)
(2,156)
47
966
1,598
2,564
173
–
187
1,270
–
(222)
470
457
1,389
12,107
(7,358)
2,775
(375)
7,149
(474)
(2,202)
4,473
(145)
(640)
42
35
–
(708)
88
4,125
–
(6,373)
(865)
(3,025)
740
858
1,598
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
106
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Consolidated Financial Statements
NAHL Group plc (the “Company”) is a public
company limited by shares registered,
incorporated and domiciled in England and
Wales. The registered number is 08996352 and
the registered address is 1430 Montagu Court,
Kettering Parkway, Kettering, Northants, England,
NN15 6XR.
The Consolidated Financial Statements for
the year ended 31 December 2019 have been
prepared in accordance with International
Financial Reporting Standards as adopted by the
European Union (IFRS) and with those parts of
the Companies Act 2006 applicable to companies
reporting under IFRS.
The consolidated financial information has been
prepared on a going concern basis and under the
historical cost convention.
The following accounting policies have been
applied consistently year on year except where
new policies have been adopted as stated below.
Going concern
In determining the appropriate basis of
preparation of the financial statements, the
Directors are required to consider whether the
Company and Group can continue in operational
existence for the foreseeable future.
In addition to the normal process of producing
detailed forecasts of future trading, profits and
cash flows on a CGU basis the Board have also
considered the potential impact of COVID-19 on
the cash flows of the Group for a period in excess
of 12 months from the date of signing the financial
statements. This has been done by modelling the
financial impact of a range of potential COVID-19
scenarios on the business, resulting in a best-case,
worst-case and most probable scenario.
Since mid-March, the Group’s Critical Care business
has remained resilient with only a modest level of
impact to date. However, the Group’s Personal
Injury division has seen a more significant impact
with a reduction in new enquiries and activity in the
Residential Property division has materially reduced
in line with the UK property market which has come
to a standstill. We expect that these challenges will
impact the business in both the short and longer-
term but given the rapidly evolving Government
response, it is too early to quantify the full impact
with any degree of certainty. For further details refer
to the Chief Executive’s Report.
The Board has implemented several cash saving
measures including reducing property and lease
costs, leveraging IT to support broader based
home working, delaying capital expenditure
and optimising the structure of the business to
maximise efficiencies. Members of the Group’s
leadership team have voluntarily taken a
temporary salary cut of between 10% and 20%;
the Board has taken a 20% reduction in salaries
or fees; and the Group has deferred its annual
salary review. The Group is also making use of
the Government Job Retention Scheme and has
furloughed approximately one third of staff.
As a result of the recent restructuring of the
Group’s Personal Injury operations, a significant
proportion of the Group’s cash receipts planned
for this year are derived from historic enquiries,
whether panel firms benefiting from deferred
terms, or settlement of claims in the Group’s ABS
law firms. In the short-term, there is therefore
less reliance on current enquiry levels to generate
cash. The Directors note that there is a risk
over recoverability of debts from the Group’s
customers, as these customers may themselves
be impacted by COVID-19. The Directors have
conducted an assessment of the recoverability
of these balances and reflected the results in the
scenarios.
The ability of the Group to operate as a going
concern relies on it being able to meet its debts
as they fall due and being able to operate within
its financial covenants. The Group has access to
a £25.0m revolving credit facility (‘RCF’) with its
bankers which expires in December 2021 and at
31 December 2019, has net debt of £21.0m. In
the scenarios the Group has modelled, including
estimates regarding the impact of COVID-19, the
Group expects to retain sufficient headroom within
its current RCF to meet its liabilities as they fall due
and does not foresee the need to access additional
funding.
However, the Group’s RCF is subject to quarterly
covenant testing and the scenarios modelled suggest
that the Group would breach its leverage covenant
NAHL Group Plc Annual Report and Accounts 2019
107
Financials 2019–2020 from Q2 2020. The Group are currently in supportive
discussions with the bank to secure a relaxation of
the covenant, however at the date of approving the
financial statements the covenant relaxation has not
been approved in writing by the bank.
If the potential breach was not remedied then the
Group has a number of mitigating options it could
consider, including operating more aggressive
cost saving exercises to increase profitability;
and seeking alternative funding, such as the
Government’s Coronavirus Large Business
Interruption Loan Scheme.
The impact of COVID-19 on the potential covenant
breach indicates the existence of a material
uncertainty which may cast significant doubt
about the Company’s and the Group’s ability to
continue as a going concern. The Company and
Group financial statements do not include the
adjustments that would result if the Company and
Group were unable to continue as a going concern.
Notwithstanding this material uncertainty, the
Directors have a reasonable expectation that the
Company and Group have adequate resources to
continue in existence for the foreseeable future
and have concluded it is appropriate to adopt
the going concern basis of accounting in the
preparation of the financial statements.
Basis of consolidation
The financial statements represent a consolidation
of the Company and its subsidiary undertakings as
at the Statement of Financial Position date and for
the year then ended. In accordance with IFRS 10
the definition of control is such that an investor has
control over an investee when: a) it has power over
the investee, b) it is exposed, or has the rights,
to variable returns from its involvement with the
investee and c) has the ability to use its power to
affect its returns. All three of these criteria must
be met for an investor to have control over an
investee. All subsidiary undertakings 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 three Limited Liability Partnerships
(LLPs) in conjunction with third party law firms.
The LLPs are called Your Law LLP, National Law
Associates LLP which trades as National Law
Partners and Law Together LLP. 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
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NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 1 Accounting policies continued
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.
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 £4,134,000 (2018: £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 18 and 24 for further information. At the year
end, the Group had provisions for receivables of
£554,000 (2018: 909,000) calculated using this
method. The percentages applied to each grouping
of debtors ranged from 0.5% to 35% with the final
provision equating to 1.9% 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 £135,000.
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 2019:
IFRS 16 Leases – Effective for annual reporting
periods beginning on or after 1 January 2019.
In light of this new standard, the Group revised
its accounting policies and made the necessary
NAHL Group Plc Annual Report and Accounts 2019
109
Financials 2019–2020 opening balance adjustments following the
adoption of IFRS 16. The changes as a result of
adopting IFRS 16 are disclosed in note 31.
New standards, interpretations and
amendments not yet effective
There are no new standards, interpretations and
amendments that are not yet effective and that
would be expected to have a material impact
on the Group 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.
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 on page 111 and the principles
to identify adjusting items have been applied on
a basis consistent with previous years with the
exception of exceptional revenues arising from
the release of the pre-LASPO ATE liability. Given
the magnitude of the pre-LASPO ATE liability,
it is no longer considered to be a material item
and therefore from 1 January 2019 the Directors
have made the decision to no longer include
revenues related to the release of this liability as
an exceptional item. The key adjusting items in
arriving at the APMs are as follows:
• 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 six 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.
110
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 1 Accounting policies continued
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.
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.
Underlying
operating
cash flow
Cash
flow from
operating
activities
Consolidated
cash flow
statement
Underlying
cash
conversion
Not defined
by IFRS
n/a
Free Cash
Flow
Not defined
by IFRS
n/a
Based on the related
IFRS measure but
excluding cash flows
in respect of the items
excluded from underlying
operating profit as
described above.
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 and
less principal element of
lease payments.
NAHL Group Plc Annual Report and Accounts 2019
111
Financials 2019–2020 Nature of
measure
Related IFRS
measure
Related IFRS
source
Definition
Use/relevance
Basic EPS
Consolidated
income
statement
Based on the related
IFRS measure but
calculated using
underlying profit for
the year attributable to
shareholders.
Underlying
Basic EPS
(before
NAL start-
up losses)
Working
capital
Consolidated
statement of
cash flows
Movement
in
receivables
and
movement
in payables
Net debt
Not defined
by IFRS
Consolidated
cash flow
statement
Working capital is not
defined by IFRS. This is
defined by management
as being the movement
in trade receivables less
the movement in trade
payables.
Net debt is defined
as cash and cash
equivalents less interest
bearing borrowings net
of loan arrangement fees.
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.
Allows management to
assess the short-term cash
flows from movements in the
more liquid assets.
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
Share-based payments
Amortisation of intangible assets acquired on business combinations
Underlying operating profit
2019
£000
2,563
7,858
811
960
12,192
2018
£000
10,020
385
457
1,270
12,132
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NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
1 Accounting policies continued
Underlying operating cash flow and underlying cash conversion:
12 months ended 31 December 2019
Operating profit
Amortisation of intangible assets acquired
on business combinations
Share-based payments
Underlying operating profit
Depreciation and amortisation
(excluding amortisation on intangible
assets acquired on business combinations)
Impairment of goodwill and intangible assets
Increase in trade/other receivables
Increase in trade/other payables
Decrease in liabilities relating to
Pre-LASPO ATE product
2019
Underlying
operations
£000
2019
Exceptional
items
£000
2018
2018
2019 Underlying Exceptional
items
Total
£000
£000
operations
£000
2018
Total
£000
10,421
(7,858) 2,563
10,405
(385) 10,020
960
811
–
–
960
811
12,192
938
(7,858) 4,334
938
–
1,270
457
12,132
360
–
–
(385)
–
1,270
457
11,747
360
–
(10,027)
1,836
5,322
5,322
1,147 (8,880)
1,836
–
–
(7,358)
2,825
–
–
(50)
–
(7,358)
2,775
–
–
–
–
(375)
(375)
Underlying operating cash flow
4,939
(1,389) 3,550
7,959
(810)
7,149
Underlying operating cash conversion
Interest paid
Tax paid
Net cash generated from operating activities
Net cash used in investing activities
Lease payments1
Payments to/from non-controlling interests
Free cash flow
40.5%
65.6%
(529)
(1,479)
1,542
(623)
(465)
(2,156)
(1,702)
1. In the prior year payments made in respect of leases were included within operating cash flows.
Underlying basic EPS (before NAL start-up losses):
IFRS measure – (loss)/profit for the year attributable to shareholders
Exceptional items
Start-up losses associated with NAL
Share-based payments
Amortisation of intangible assets acquired on business
combinations
Tax effect of the above
Underlying profit for the year attributable to shareholders
2019
£000
(2,959)
7,858
926
811
960
(962)
6,634
(474)
(2,202)
4,473
(708)
–
(865)
2,900
2018
£000
6,674
385
–
457
1,270
(393)
8,393
Weighted average number of shares (note 23)
46,178,716
46,160,172
Underlying basic EPS (before NAL start-up losses) (pence)
14.4p
18.2p
Working capital:
Movement in trade and other receivables
Movement in trade and other payables
Working capital
IFRS 9 opening balance adjustment
Movement in interest accruals
Corporation tax debtor
IFRS measure – movement in trade and other receivables
less movement in trade and other payables
2019
£000
(8,880)
1,836
(7,044)
–
(114)
(103)
2018
£000
(7,358)
2,775
(4,583)
1,002
(268)
–
(7,261)
(3,849)
NAHL Group Plc Annual Report and Accounts 2019
113
Financials 2019–2020
Net debt is defined in note 29.
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.
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.
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.
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.
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
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Financials 2019–2020 1 Accounting policies continued
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.
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.
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.
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.
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.
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.
Amortisation
Intangible assets are amortised on a straight-line
basis over their estimated useful lives as follows:
Technology related
intangibles
Contract related
intangibles
Brand names
Other intangible assets
–
–
–
–
5 to 10 years
3 to 10 years
3 to 10 years
3 to 5 years
No amortisation is charged on assets under
construction until the point they are brought into
use.
NAHL Group Plc Annual Report and Accounts 2019
115
Financials 2019–2020
Property, Plant and Equipment
Property, plant and equipment are measured at
cost less accumulated depreciation.
the right-of-use asset or the end of the lease term.
The Group also assesses the right-of-use asset for
impairment when such indicators exist.
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
Lease assets
The Group as a lessee
For any new contracts entered into on or after
1 January 2019, the Group considers whether a
contract is, or contains a lease. A lease is defined
as ‘a contract, or part of a contract, that conveys
the right to use an asset (the underlying asset) for
a period of time in exchange for consideration’. To
apply this definition the Group assesses whether
the contract meets three key evaluations which
are whether:
• the contract contains an identified asset, which
is either explicitly identified in the contract or
implicitly specified by being identified at the time
the asset is made available to the Group
• the Group has the right to obtain substantially
all of the economic benefits from use of the
identified asset throughout the period of use,
considering its rights within the defined scope of
the contract
• the Group has the right to direct the use of the
identified asset throughout the period of use.
The Group assesses whether it has the right to
direct ‘how and for what purpose’ the asset is
used throughout the period of use.
Measurement and recognition of leases
as a lessee
At lease commencement date, the Group
recognises a right-of-use asset and a lease liability
on the balance sheet. The right-of-use asset is
measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct
costs incurred by the Group, an estimate of any
costs to dismantle and remove the asset at the
end of the lease, and any lease payments made in
advance of the lease commencement date (net of
any incentives received).
The Group depreciates the right-of-use assets on a
straight-line basis from the lease commencement
date to the earlier of the end of the useful life of
At the commencement date, the Group measures
the lease liability at the present value of the lease
payments unpaid at that date, discounted using
the interest rate implicit in the lease if that rate
is readily available or the Group’s incremental
borrowing rate. Lease payments included in the
measurement of the lease liability are made up
of fixed payments (including in substance fixed),
variable payments based on an index or rate,
amounts expected to be payable under a residual
value guarantee and payments arising from
options reasonably certain to be exercised.
Subsequent to initial measurement, the liability
will be reduced for payments made and increased
for interest. It is remeasured to reflect any
reassessment or modification, or if there are
changes in in-substance fixed payments. When the
lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset, or
profit and loss if the right-of-use asset is already
reduced to zero.
The Group has elected to account for short-term
leases and leases of low-value assets using the
practical expedients. Instead of recognising a
right-of-use asset and lease liability, the payments
in relation to these are recognised as an expense
in profit or loss on a straight-line basis over the
lease term.
Taxation
Tax in 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
116
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 1 Accounting policies continued
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.
Recoverable disbursements and
Disbursements payable
Disbursement payables represent the balance
of disbursements incurred in the processing of
personal injury claims. These disbursements will
ultimately be billed on settlement of a case or
recovered from insurance if a case should fail and
so the recoverable disbursements represents the
value of disbursements still to be billed.
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 are expected to vest
except where forfeiture is only due to share prices
not achieving the threshold for vesting.
NAHL Group Plc Annual Report and Accounts 2019
117
Financials 2019–2020 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 defined
contribution 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.
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
118
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 1 Accounting policies continued
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.
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.
NAHL Group Plc Annual Report and Accounts 2019
119
Financials 2019–2020 2 Operating segments
Year ended 31
December 2019
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 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)
Personal
Injury
£000
Critical Residential
Property
£000
Care
£000
Underlying Pre-LASPO
ATE
£000
Group operations
£000
£000
Other
Items4 Eliminations
£000
£000
Total
£000
31,701 13,566
6,047
–
51,314
(425)
(152)
(356)
(5)
(938)
–
–
–
– 51,314
(960)
– (1,898)
9,1051 5,0131
–
(10)
201
(4)
(309)1 (1,617)
1
(598)
–
(3)
12,192
202
(615)
– (9,629)
–
–
–
–
– 2,563
202
–
(615)
–
9,302 5,003
4,439 5,143
34,157 6,297
(15,371) (1,175)
(312) (2,214)
4
618
11,779
10,204
1,023 77,596 119,073
(517) (17,463)
(400)
– (9,629)
– 2,150
– 10,204
–
–
– (17,506) 101,567
–
–
–
– (17,463)
381
181
76
44
682
–
–
–
682
29,522 12,383
6,388
– 48,293
664
–
– 48,957
(195)
(48)
(117)
–
(360)
–
(1,270)
– (1,630)
8,4241 4,5201
30
(5)
191
–
7281
–
–
(1,540)
1
(465)
12,132
222
(470)
589
–
–
(2,701)
–
–
– 10,020
222
–
(470)
–
8,615 4,545
10,200 5,036
24,528 5,800
(13,254) (1,137)
728
598
(2,004)
–
1,269 78,574
(356)
(364)
11,884
15,834
110,171
(15,111)
589
–
–
(301)2
(2,701)
–
–
–
– 9,772
– 15,834
(12,633) 97,538
– (15,412)
245
188
352
–
785
–
–
–
785
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
£nil (2018: £301,000).
3. Total assets and segment liabilities exclude intercompany loan balances as these do not form part of the operating activities of the segment.
4. Other items include all non-underlying items (exceptional items, IFRS 2 share-based payment charges and amortisation of intangible assets
acquired on business combinations).
120
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
2 Operating segments continued
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. As explained in
note 1, given the magnitude of the pre-LASPO ATE
liability, it is no longer considered to be a material
item and therefore, from 1 January 2019, the
directors have made the decision not to separately
disclose this item.
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.
Significant customers
Revenues of approximately £8.3m are derived
from two external customers (2018: £9.0m from a
single 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.
NAHL Group Plc Annual Report and Accounts 2019
121
Financials 2019–2020 3 Administrative expenses and auditors’ remuneration
Included in the consolidated statement of comprehensive income are the following:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets (not relating to business combinations)
Amortisation of intangible assets relating to business combinations
IFRS 9 provision release
Operating leases – land and buildings
Auditors’ remuneration
The analysis of auditors’ remuneration is as follows:
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
Taxation advice
Tax compliance services
4 Exceptional items
Exceptional items included in the income statement are summarised below:
Group strategic and reorganisation costs1
Termination of strategic partnership2
Impairment of Residential Property goodwill and intangible assets3
Release of pre-LASPO ATE liability and associated costs4
Residential Property reorganisation costs5
2019
£000
147
419
372
960
(355)
–
195
2018
£000
173
–
187
1,270
(206)
388
142
2019
£000
2018
£000
162
46
–
10
23
74
–
22
2019
£000
1,297
1,239
5,322
–
–
7,858
2018
£000
816
–
–
(589)
158
385
1. Group strategic and reorganisation costs relate to project costs to implement fundamental strategic plans that fall outside of the core trading
operations of the business.
2. The decision was made in December 2019 to terminate the relationship in respect of NLP. As part of this agreement, a one-off provision of
£1.1m has been required along with £0.1m of legal and advisory fees incurred.
3. In light of the 2019 trading performance of the Residential Property division and the emerging global risk of COVID-19, the directors conducted
an impairment review of the Residential Property division and concluded that there are insufficient future cash flows to support the carrying
value of goodwill and intangible assets attributable to the division. These assets have therefore been written off in full.
4. Previously recognised liabilities for pre-LASPO ATE commissions received in advance of £nil (2018: £664,000) have been released into
revenue in the year as a result of more favourable settlements. These have been offset by associated costs of £nil (2018: £75,000). As explained
in note 1, given the magnitude of the pre-LASPO ATE liability, it is no longer considered to be a material item and therefore from 1 January 2019
the Directors have made the decision to no longer include revenues related to the release of this liability as an exceptional item.
5. Costs of management reorganisation in the Residential Property division.
122
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
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 22)
Social security costs
Other pension costs
6 Directors’ emoluments
Number of Employees
2019
6
237
243
2019
£000
8,331
811
867
338
10,347
2018
5
216
221
2018
£000
7,840
457
830
245
9,372
2019
£000
649
2018
£000
598
Statutory Directors’ emoluments
Statutory Directors’ emoluments
Year ended 31 December 2019
Executive Directors
J R Atkinson
J D Saralis
Non-Executive
R S Halbert1
C Brown2
G D C Kent
T J M Aspinall
S Tilleray3
Salary
and fees
£000
Benefits
£000
Annual
bonus
£000
Long-term
incentives
£000
Pension
£000
Total
£000
226
167
7
84
50
55
22
611
18
17
–
–
–
–
–
35
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
1
–
–
–
–
–
3
246
185
7
84
50
55
22
649
NAHL Group Plc Annual Report and Accounts 2019
123
Financials 2019–2020
Year ended 31 December 2018
Executive Directors
J R Atkinson
J D Saralis
Non-Executive
R S Halbert1
C Brown2
G D C Kent
T J M Aspinall
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
241
168
87
4
50
48
598
1. R S Halbert resigned from the Board on 30 January 2019
2. C Brown was appointed to the Board on 18 December 2018.
3. S Tilleray was appointed to the Board on 19 July 2019.
The Group contributed £3,000 to pension schemes in respect of Directors during the year (2018: £3,000).
The emoluments of the highest paid Director were £246,000 (2018: £241,000).
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
Interest on lease liabilities
2019
£000
9
–
193
202
2019
£000
529
77
9
615
2018
£000
2
29
191
222
2018
£000
395
75
–
470
124
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
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 credit
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
2019
£000
883
(121)
762
(127)
(127)
635
635
2019
£000
1,515
635
2,150
2018
£000
1,824
(160)
1,664
(275)
(275)
1,389
1,389
2018
£000
8,383
1,389
9,772
Tax using the UK corporation tax rate of 19.00% (2018: 19.00%)
409
1,856
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
–
1,189
(121)
–
(850)
8
635
(6)
100
(160)
(18)
(324)
(59)
1,389
Changes in tax rates and factors affecting the future tax charge
In the Spring Budget 2020 the Government announced that from 1 April 2020 the corporation tax
rate would remain at 19% (rather than reducing to 17% as previously announced). This new law
was substantively enacted on 17 March 2020. As the proposal to keep the rate at 19% had not been
substantively enacted at the balance sheet date, the effects are not included within these financial
statements. However, it is likely that the overall effect of the change, had it been substantively enacted by
the balance sheet date, would be immaterial to both the tax expense for the period and to the balance of
the deferred tax asset and liability at the balance sheet date.
NAHL Group Plc Annual Report and Accounts 2019
125
Financials 2019–2020
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)
Reclassified to liability
Deferred tax asset at end of year
2019
£000
177
–
(140)
(7)
30
The asset for deferred taxation consists of the tax effect of temporary differences in respect of:
Property,
plant &
equipment
£000
Bad debt
provision
£000
At 1 January 2018
Recognition of deferred tax on IFRS 9 provision for trade receivables
Recognised in statement of comprehensive income
At 31 December 2018
Reclassified to deferred tax liability
Recognition of deferred tax on IFRS 9 provision for trade receivables
Recognised in statement of comprehensive income
At 31 December 2019
13
–
(1)
12
(7)
–
12
17
21
188
(44)
165
–
–
(152)
13
30
11 Deferred tax liability
At beginning of year
Reclassified from deferred tax assets
Recognised in statement of comprehensive income (see note 9)
Deferred tax liability at end of year
2019
£000
1,342
(7)
(267)
1,068
The liability for deferred taxation consists of the tax effect of temporary differences in respect of:
At 1 January 2018
Recognised in statement of comprehensive income
At 31 December 2018
Reclassified from deferred tax asset
Recognised in statement of comprehensive income
At 31 December 2019
Property,
plant & equipment
£000
–
–
–
(7)
37
30
Intangible
assets
acquired on
business
combinations
£000
1,662
(320)
1,342
–
(304)
1,038
1,068
2018
£000
34
188
(45)
–
177
Total
£000
34
188
(45)
177
(7)
–
(140)
2018
£000
1,662
–
(320)
1,342
Total
£000
1,662
(320)
1,342
(7)
(267)
126
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
12 Acquisitions
During 2018 the Group incorporated a new wholly-owned ABS law firm, National Accident Law, which
began trading in 2019. In 2019 the Group acquired an interest in Law Together LLP through the election
of its 100% subsidiary, Project Jupiter Limited, as a member of the LLP. Member capital of £50,000 was
advanced to Law Together LLP. There were no other acquisition costs involved.
13 Goodwill
Cost
At 1 January 2018
At 31 December 2018
At 31 December 2019
Impairment
At 1 January 2018
At 31 December 2018
Recognised in the year
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
Personal
Injury
£000
39,897
39,897
39,897
–
–
–
–
Critical
Care
£000
Residential
Property
£000
15,592
15,592
15,592
4,873
4,873
4,873
–
–
–
–
–
–
(4,873)
(4,873)
Total
£000
60,362
60,362
60,362
–
–
(4,873)
(4,873)
39,897
39,897
15,592
15,592
4,873
–
60,362
55,489
Where goodwill arose as part of a business acquisition, it forms part of the CGU’s asset carrying value
which is tested for impairment annually. The Group has determined that for the purposes of impairment
testing, each segment being Personal Injury, Critical Care and Residential Property, is the appropriate
level at which to test, as this represents the lowest level at which the goodwill is monitored for internal
management reporting.
The recoverable amounts for the CGUs are based on value in use which is calculated on the operating
cash flows expected to be generated by the division using the latest budget data for the coming year and
extrapolated at a forecast growth rate for five years. These cash flows are discounted at a range of pre-tax
WACCs of between 7.4% - 8.4% (2018: 8.2%–8.9%). 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 flows.
Personal Injury and Critical Care
The operating profit compound annual growth rate assumptions for years one to five are as follows:
Personal Injury
Critical Care
2019
16.6%
9.0%
2018
10.7%
7.5%
NAHL Group Plc Annual Report and Accounts 2019
127
Financials 2019–2020
impaired. The impairment calculations are most
sensitive to changes in assumptions regarding the
cash flow forecasts and WACC. If the WACC were
to increase by 25% the following decreases in
cash flows would be needed in order to reduce the
available headroom to nil:
Personal Injury – 17.0%
Critical Care – 67.2%
Residential Property
In light of the losses incurred in 2019 and the
continuing uncertainty around the residential
property market which has been further impacted
by recent developments of the COVID-19 situation,
the revised forecasts for Residential Property
indicate that there are insufficient cash flows to
support the recoverable value of goodwill for this
CGU. As such, an impairment loss of £4,873,000
has been recognised in the consolidated statement
of comprehensive income in relation to goodwill
and a further impairment loss of £449,000
has been recognised against intangible assets
(technology, software and contract-based). The
full impairment loss of £5,322,000 is included
within exceptional items.
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 takes into account the strategic
plans for the division over the coming years.
Operating cash flow percentages of 90% have
been applied to take into account changes in
working capital movements. This assumption
has been based on historic rates and adjusted for
changes in the business models in Personal Injury.
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
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
2019
Your Law LLP
United Kingdom
National Law Associates LLP United Kingdom
United Kingdom
Law Together LLP
LLP member
LLP member
LLP member
Personal injury lawyers
Personal injury lawyers
Personal injury lawyers
n/a
n/a
n/a
Ownership
2018
n/a
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.
128
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
Non-Controlling Interests
Management consider that only Your Law LLP has a material non-controlling interest. The following table
summarises information in relation to Your Law LLP before intra-group eliminations:
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
2019
Your Law LLP
£’000
10,226
(6,338)
3,888
(2,156)
3,197
8,003
5,290
–
5,290
4,397
–
2,762
–
(2,659)
103
Technology Contract
related
£000
related
£000
Brand
names
£000
Cost
At 1 January 2019
Additions
Reclassifications
At 31 December 2019
Amortisation and impairment
At 1 January 2019
Amortisation charge for the year
Amortisation charge on business combinations
Impairment
167
–
–
8,466
–
–
167 8,466
82
–
20
65
3,440
–
841
100
885
–
–
885
641
–
99
–
Other
£000
1,222
426
167
1,815
344
372
–
284
At 31 December 2019
167
4,381
740
1,000
Assets
under
construction
£000
Total
£000
167
37
(167)
10,907
463
–
37
11,370
–
–
–
–
–
4,507
372
960
449
6,288
Net book value
At 31 December 2018
At 31 December 2019
85
5,026
– 4,085
244
145
878
815
167
6,400
37
5,082
NAHL Group Plc Annual Report and Accounts 2019
129
Financials 2019–2020
Cost
At 1 January 2018
Additions
Reclassifications
Technology Contract
related
£000
related
£000
Brand
names
£000
167
–
–
8,466
–
–
885
–
–
Assets
under
construction
£000
Total
£000
79
444
(356)
10,267
640
–
Other
£000
670
196
356
At 31 December 2018
167 8,466
885
1,222
167
10,907
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
62
–
20
2,363
–
1,077
82 3,440
468
–
173
641
157
187
–
344
–
–
–
–
3,050
187
1,270
4,507
105
6,103
85 5,026
417
244
513
878
79
167
7,217
6,400
In the statement of comprehensive income, the amortisation charge on business combinations is included
in ‘amortisation of intangible assets acquired on business combinations’ and the amortisation charge for
the year (on other assets) is included within ‘operating expenses’.
16 Property, plant and equipment
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Depreciation and impairment
At 1 January 2019
Depreciation charge for the year
Disposals
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
Fixtures & fittings
&total
£000
1,717
219
–
1,936
1,522
147
–
1,669
195
267
130
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
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
17 Leases
Fixtures &
fittings &
total
£000
1,783
145
(211)
1,717
1,516
173
(167)
1,522
267
195
This note provides information for leases where the Group is a lessee.
Amounts recognised in the balance sheet
Right of use assets
Buildings
Office equipment
Lease liabilities
Current
Non-current
2019
£000
180
84
264
2019
£000
187
60
In the previous year the group only recognised lease assets and lease liabilities that were classified as
‘finance leases’ under IFRS 17 leases. For adjustments recognised on adoption of IFRS 16 on 1 January
2019, please refer to note 31. Additions to right of use assets of £136,000 were made during the year.
The statement of comprehensive income includes the following amounts relating to leases:
Depreciation charge of right of use assets
Buildings
Office equipment
Interest expense
Expenses relating to leases of low value assets
The total cash outflow for leases in 2019 was £465,000.
NAHL Group Plc Annual Report and Accounts 2019
2019
£000
395
24
419
9
–
2018
£000
–
–
–
2018
£000
–
–
2018
£000
–
–
–
–
–
131
Financials 2019–2020
18 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
Corporation tax
Recoverable disbursements
2019
£000
9,556
648
11,205
7,631
1,045
30,085
1,144
103
6,539
37,871
2018
£000
13,234
2,600
4,359
4,003
308
24,504
673
–
3,629
28,806
A provision against trade receivables and accrued income of £554,000 (2018: £909,000) is included in
the figures above.
19 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 24.
Non-current liabilities
Revolving credit facility
Less facility arrangement fees
Total other interest-bearing loans and borrowings
2019
£000
2018
£000
23,750
(156)
23,594
17,250
(128)
17,122
The revolving credit facility is secured by a fixed and floating charge over the assets of the Group.
Terms and debt repayment schedule
Currency
Year of
Nominal interest rate maturity
Fair
value
2019
£000
Carrying
amount
2019
£000
Fair
value
2018
£000
Bank loan1
GBP
1.25%–1.65% above Libor
2021
23,594
23,594
17,122
23,594
23,594
17,122
Carrying
amount
2018
£000
17,122
17,122
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.
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NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
20 Trade and other payables
Amounts due within one year:
Trade payables
Disbursements payable
Other taxation and social security
Other payables, accruals and deferred revenue
Customer deposits
Total trade and other payables
21 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: 46,178,716 (2018: 46,061,090) ‘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
22 Share based payments
The Group operates three employee share plans as follows:
2019
£000
3,935
5,835
835
5,742
869
17,216
2018
£000
2,493
3,712
1,028
6,907
971
15,111
2019
2018
46,178,716
–
46,061,090
117,626
46,178,716
46,178,716
£000
£000
115
–
115
115
–
115
115
–
115
115
–
115
SAYE plan
Options may be satisfied by newly issued Ordinary Shares, or by the transfer of Ordinary Shares held in
treasury. The SAYE scheme is open to all employees of the Group. 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).
NAHL Group Plc Annual Report and Accounts 2019
133
Financials 2019–2020
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, 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
583,331 ordinary
shares
Performance-
based
Vesting period and
maximum life of
options
Third anniversary of
Date of Grant
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
SAYE Equity-settled award to 22
employees granted by the parent
company on 29 November 2017
EMI Equity-settled award to 12
employees granted by the parent
company on 24 May 2018
61,506 ordinary
shares
Performance-
based
Third anniversary of
Date of Grant
88,125 ordinary
shares
Performance-
based
1 January 2021
716,049 ordinary
shares
Performance-
based
SAYE Equity-settled award to 49
employees granted by the parent
company on 23 October 2018
EMI Equity-settled award to 12
employees granted by the parent
company on 18 April 2019
417,766 ordinary
shares
Performance-
based
770,200 ordinary
shares
Performance-
based
On determination of
performance criteria
(as soon as
practicable after 31
December 2020)
1 December 2021
On determination
of performance
criteria (as soon as
practicable after 31
December 2021)
EMI Equity-settled award to 1
employee granted by the parent
company on 18 April 2019
48,780 ordinary
shares
Performance-
based
Third anniversary of
Date of Grant
The number and weighted average exercise prices of share options are as follows
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Cancelled during the year
Lapsed during the year
Vested during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2019
2018
Weighted
average
exercise price
£
0.30
–
0.0025
–
(0.0025)
(0.0025)
(0.42)
Number of
options
No.
1,826,738
–
818,980
–
(368,112)
(61,506)
(175,180)
0.23
1.81
2,040,920
644,837
Weighted
average
exercise price
£
1.14
(0.82)
0.52
–
(2.46)
–
(1.12)
0.30
2.00
Number of
options
No.
1,008,894
(117,626)
1,778,577
–
(359,740)
–
(483,367)
1,826,738
583,331
134
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
A charge of £811,000 (2018: £457,000) 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 not applicable for 2019 (2018: £1.56). For shares outstanding
at the year end, these are exercisable at a range of exercise prices of between £0.0025–£1.21 and have a
weighted average remaining life of 585 days.
The fair value of each employee share option has been measured using the Black-Scholes formula where
an expected volatility of 65.0% (2018: 65.0%) has been used as well as a risk-free interest rate (based on
government bonds) of between 0.5%–0.9% (2018: 0.5%–0.9%). The weighted average share price used
in the model is £1.23 and a dividend yield of between 7.0%–7.2% has been assumed. 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.
23 Earnings per share
The calculation of basic earnings per share at 31 December 2019 is based on loss attributable to ordinary
shareholders of the parent company of £(2,959,000) (2018: profit £6,674,000) and a weighted average
number of Ordinary Shares outstanding of 46,178,716 (2018: 46,160,172).
Profit attributable to ordinary shareholders
£000
(Loss)/profit for the year attributable to the shareholders
Weighted average number of ordinary shares
2019
(2,959)
2018
6,674
Number
Issued Ordinary Shares at 1 January
Weighted average number of Ordinary Shares at 31 December
Note
21
2019
2018
46,178,716
46,061,090
46,178,716
46,160,172
Basic Earnings per share (p)
Group
2019
(6.4)
2018
14.5
In line with IAS 33, as the Group has a negative earnings per share, it is assumed that there are no dilutive
shares.
Diluted Earnings per share (p)
Group
2019
(6.4)
2018
14.3
NAHL Group Plc Annual Report and Accounts 2019
135
Financials 2019–2020
24 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:
Financial assets measured at amortised cost
Cash and cash equivalents
Trade and other receivables (note 18)
Disbursements (note 18)
Total financial assets
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 19)
Trade payables (note 20)
Disbursements payable (note 20)
Other payables and accruals (note 20)
Carrying
amount
2019
£000
2,564
30,085
6,539
39,188
23,594
3,935
5,835
5,742
Total financial liabilities measured at amortised cost
39,106
Fair
value
2019
£000
2,564
30,085
6,539
39,188
23,594
3,935
5,835
5,742
39,106
Carrying
amount
2018
£000
1,598
24,504
3,629
29,731
17,122
2,493
3,712
6,907
Fair
value
2018
£000
1,598
24,504
3,629
29,731
17,122
2,493
3,712
6,907
30,234
30,234
(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.
136
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
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
2019
£000
10,204
18,836
29,040
2018
£000
15,834
8,362
24,196
Management consider the credit risk to be mitigated as a result of a) the holding of deposits for all
significant customers and b) only offering significant deferred terms to those PLFs with whom we hold
strategic partnerships and after satisfactory credit checks have been obtained. As at 31 December 2019
these deposits reflect 8.6% (2018: 6.2%) of the balance of trade receivables. At each balance sheet date,
the amount of deposit held was:
Customer deposits
Credit quality of financial assets and impairment losses
The aging of trade receivables at the balance sheet date was:
2019
£000
869
2018
£000
971
Gross:
Gross:
Standard Deferred
Terms
2019
£000
Terms Impairment
2019
£000
2019
£000
Gross:
Standard
Terms
2018
£000
Total
2019
£000
Gross:
Deferred
Terms
2018
£000
Impairment
2018
£000
Total
2018
£000
Not past due
Past due (1 – 30 days)
Past due (30 – 120 days)
Past due (Over 120 days)
3,362 3,994
168
105
67
545
835
1,438
(34)
(12)
(42)
(222)
7,322
701
898
1,283
2,335 10,780
52
116
75
769
862
1,257
(197) 12,918
799
(22)
911
(67)
1,206
(126)
6,180 4,334
(310) 10,204
5,223
11,023
(412) 15,834
23.3% of standard terms trade receivables are 120 days or more past due (2018: 24.1%). These
receivables arise primarily in Critical Care where our standard credit terms are 30 days. As mentioned
in the 2018 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 released
Allowance utilised
Balance at 31 December
2019
£000
909
–
(203)
(152)
554
2018
£000
114
1,001
(206)
–
909
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.
NAHL Group Plc Annual Report and Accounts 2019
137
Financials 2019–2020
(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:
2019
Non-derivative financial instruments
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
2018
Non-derivative financial instruments
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
Secured
bank loans
£000
Trade and
other
payables
£000
Total
£000
(23,750)
(16,347)
(40,097)
(570)
(24,320)
–
(10,512)
(5,835)
–
(11,082)
(30,155)
–
(24,890)
(16,347)
(41,237)
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)
–
(18,390)
(14,140)
(10,832)
(4,068)
(17,630)
(32,530)
(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.
138
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
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
2019
£000
2018
£000
23,750
23,750
17,250
17,250
Sensitivity analysis
A change of 0.5% in interest rates at the balance sheet date would increase/(decrease) profit or loss in
the following year by the amounts shown below. This calculation assumes that the change occurred at the
balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables remain constant and considers the effect of financial
instruments with variable interest rates. The analysis is performed on the same basis for the comparative
periods.
Profit for the year
Increase
Decrease
2019
£000
119
(119)
2018
£000
86
(86)
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 2019 is 0.4:1.0 (2018: 0.3:1.0). The balance of the
Group’s capital as at 31 December 2019 was £82,829,000 comprising equity of £59,079,000 and bank
loans of £23,750,000. 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 2019 but is
forecasting a breach from Q2 2020. Please see Going Concern in the Directors’ Report for more details.
25 Commitments
Capital commitments
At 31 December 2019 the Group had capital commitments of £261,000 (2018: £nil).
NAHL Group Plc Annual Report and Accounts 2019
139
Financials 2019–2020
26 Transactions with owners, recorded directly in equity
Exercise of share options
There were no transactions with owners recorded directly in equity in 2019.
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 2019 the Group paid final dividends in respect of 2018 of £2,631,000 (2018: final dividends
in respect of 2017 of £4,895,000) which represented a dividend per share of 5.7p (2018: 10.6p). On 31
October 2019 the Group paid interim dividends in respect of 2019 of £1,201,000 (2018: interim dividends
in respect of 2018 of £1,478,000) which represented a dividend per share of 2.6p (2018: 3.2p). The
Directors have not recommended a final dividend in respect of 2019.
28 Related parties
Transactions with key management personnel
Key management personnel in situ at the 31 December 2019 and their immediate relatives control 1.6%
(2018: 2.9%) 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, Bush & Company Rehabilitation Limited,
National Accident Law 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
2019
£000
2,032
–
2,032
2018
£000
2,188
100
2,288
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
2019
£000
2,564
(23,594)
(21,030)
2018
£000
1,598
(17,122)
(15,524)
140
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
Set out below is a reconciliation of movements in net debt during the period.
Net increase in cash and cash equivalents
Net inflow from increase in debt and debt financing
Movement in net borrowings resulting from cash flows
Non-cash movements – net increase to/(release of) prepaid loan
arrangement fees
Net debt at beginning of period
Net debt at end of period
2019
£000
966
(6,500)
(5,534)
28
(15,524)
(21,030)
2018
£000
740
(4,125)
(3,385)
(75)
(12,064)
(15,524)
30 Post balance sheet events
On 2 January 2020 the Group terminated its partnership in respect of National Law Associates LLP
and relinquished its interest for nil consideration. At 31 December 2019, net assets after intra-group
eliminations of £431,000 in respect of National Law Associates LLP were recognised within the
consolidated balance sheet of the Group.
31 Changes in accounting policies
The Group has adopted the modified retrospective approach with the right of use asset measured as if
IFRS 16 had been applied since the commencement date of a lease using a discount rate based on the
Group’s incremental borrowing rate at the date of initial application and the lease liability at transition
date as the present value of the remaining lease payments, discounted using the Group’s incremental
borrowing rate at the date of initial application, adjusted by any prepayments or lease incentives
recognised immediately before the date of initial application. Under the modified retrospective transition
approach, the comparative information is not restated.
The Group has elected to apply a single discount rate to assets with similar characteristics. The Group
has also elected not to recognise right of use assets and lease liabilities for short-term leases or low-value
assets. The Group will continue to expense the lease payments associated with these leases on a straight-
line basis over the lease term.
Leases
The Group leases property and certain items of office equipment.
Balance at 1 January 2019
Balance at 31 December 2019
Property
£000
531
180
Office
equipment
£000
109
84
Total
£000
640
264
NAHL Group Plc Annual Report and Accounts 2019
141
Financials 2019–2020
Impact on Financial Statements
1) Impact on transition
On transition to IFRS 16, the Group recognised additional right of use assets and lease liabilities
recognising the difference in retained earnings. This impact on transition is summarised below.
Right of use assets
Lease liabilities
Release of rent-free period adjustments and adjustments to dilapidations provisions
Impact on retained earnings
2) Impacts for the period
Total
£000
640
(673)
37
4
As a result of applying IFRS 16, in relation to the leases that were previously classified as operating leases,
the Group recognised £264,000 of right of use assets and £247,000 of lease liabilities as at 31 December
2019.
Also, in relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs,
instead of operating lease expense. During the twelve months ended 31 December 2019, the Group
recognised £419,000 of depreciation charges and £9,000 of interest costs from those leases.
142
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2019
Non-current assets
Investments
Current assets
Trade and other receivables
Net assets
Equity
Share capital
Share option reserve
Share premium
Retained earnings at end of year
Total equity
Note
2019
£000
2018
£000
3
4
6
52,700
52,700
31,410
84,110
12,431
65,131
115
3,389
14,595
66,011
84,110
115
2,578
14,595
47,843
65,131
The notes on pages 146 to 151 form part of these financial statements.
These financial statements were approved by the Board of Directors on 27 April 2020 and were signed on
its behalf by:
J D Saralis
Director
Company registered number: 08996352
NAHL Group Plc Annual Report and Accounts 2019
143
Financials 2019–2020
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
£000
Note
Share
option
reserve
£000
Share
premium
£000
Merger
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2018
115
2,121
14,507
–
54,216 70,959
Transactions with owners, recorded
directly in equity
Issue of new Ordinary Shares
Share based payments
Dividends paid
10
7
–
–
–
–
457
–
88
–
–
Balance at 31 December 2018
115
2,578
14,595
Total comprehensive income for the year
Profit for the year
Total comprehensive income
Transactions with owners, recorded
directly in equity
Share based payments
Dividends paid
7
–
–
–
–
–
–
811
–
–
–
–
–
Balance at 31 December 2019
115
3,389
14,595
–
–
–
–
–
–
(6,373)
88
457
(6,373)
47,843 65,131
– 22,000 22,000
– 22,000 22,000
–
–
–
–
811
(3,832) (3,832)
66,011 84,110
144
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Profit for the year
Adjustments for:
Share based payments
Increase/(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
2019
£000
22,000
811
22,811
(18,979)
3,832
–
(3,832)
(3,832)
–
–
–
2018
£000
–
457
457
5,828
6,285
88
(6,373)
(6,285)
–
–
–
NAHL Group Plc Annual Report and Accounts 2019
145
Financials 2019–2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
New standards and amendments adopted by
1 Accounting policies
the Company
Basis of preparation
The Company has not adopted any new standards
Financial Statements
or amendments.
New standards, interpretations and
amendments not yet effective
There are no new standards, interpretations and
amendments that are not yet effective and that
would be expected to have a material impact on
the Company in the current or future reporting
periods and on foreseeable future transactions.
Going concern
The Company had net assets of £84,110,000 (2018:
£65,131,000) and net current assets of £31,411,000
(2018: £12,431,000) as at each year end.
Details of the Directors’ going concern assessment
for the Group and Company can be found under
‘Going Concern’ in note 1 to the Group financial
statements on page 107.
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.
The Financial Statements for the year ended 31
December 2019 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 £22,000,000 (2018:
£nil).
Critical accounting judgements and key
sources of estimation
The preparation of financial statements in
conformity with IFRSs requires management
to make judgements and estimates that affect
the application of accounting policies and the
reported amounts of assets, liabilities, income and
expenses. 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.
146
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 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 Taxation
Recognised in the consolidated statement of comprehensive income
Current tax expense
Current tax on income for the year
Total current tax
Total tax charge
Reconciliation of effective tax rate
Profit for the year
Total tax expense
Profit before taxation
Tax using the UK corporation tax rate of 19.00% (2018: 19.00%)
Income disallowable for tax purposes
Total tax charge
2019
£000
2018
£000
–
–
–
2019
£000
22,000
–
22,000
4,180
(4,180)
–
–
–
–
2018
£000
–
–
–
–
–
–
Changes in tax rates and factors affecting the future tax charge
In the Spring Budget 2020 the Government announced that from 1 April 2020 the corporation tax rate would
remain at 19% (rather than reducing to 17% as previously announced). This new law was substantively
enacted on 17 March 2020. As the proposal to keep the rate at 19% had not been substantively enacted at
the balance sheet date, the effects are not included within these financial statements. However, it is likely
that the overall effect of the change, had it been substantively enacted by the balance sheet date, would be
immaterial to the tax expense for the year.
NAHL Group Plc Annual Report and Accounts 2019
147
Financials 2019–2020
3 Investments
The Company has the following investments in subsidiaries:
Name of subsidiary
Country of
incorporation
and principal place
of business
Class of
shares held
Principal activity
United Kingdom Ordinary Holding company
United Kingdom Ordinary Critical care services
United Kingdom Ordinary Agency services for solicitors
United Kingdom Ordinary Holding company
United Kingdom Ordinary Holding company
United Kingdom Ordinary Agency services for solicitors
United Kingdom Ordinary Dormant
United Kingdom Ordinary Dormant
Consumer Champion
Group Limited2
Bush & Company
Rehabilitation Limited2
Fitzalan Partners Ltd2
NAH Holdings Limited2
NAH Group Ltd2
National Accident
Helpline Limited2
Lawyers Agency Services
Limited
Accident Helpline Limited
NAH Support Services
United Kingdom Ordinary Dormant
Limited
United Kingdom Ordinary Dormant
Tiger Claims Limited
Your Law 1 Limited
United Kingdom Ordinary Dormant
NAH Legal Services Limited United Kingdom Ordinary Dormant
Searches UK Limited2
Inside Eye Limited
Project Jupiter Limited2
Your Law LLP1
National Law
Associates LLP1
National Accident
Law Limited2
Law Together LLP1
National Conveyancing
Partners Ltd
United Kingdom Ordinary Dormant
United Kingdom n/a
United Kingdom Ordinary Agency services for solicitors
United Kingdom Ordinary Dormant
United Kingdom Ordinary Holding company
United Kingdom n/a
Personal Injury lawyers
Personal Injury lawyers
United Kingdom Ordinary Personal Injury lawyers
Personal Injury lawyers
United Kingdom n/a
Ownership
2019
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
100%
100%
100%
100%
100%
100%
100%
n/a
n/a
n/a
100%
n/a
100%
n/a
100%
n/a
1. Your Law LLP, National Law Associates LLP and Law Together 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.
2. The above 100% subsidiaries have taken the exemption from audit under section 479a of the Companies Act 2006.
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, BS1 4QP.
The registered office of Law Together LLP is Castlefield House, Liverpool Road, Manchester, M3 4SB.
148
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
At 31 December 2019 the value of the investment in Consumer Champion Group Limited, its only directly
owned subsidiary, was as follows:
Valuation
At 1 January 2019 and 31 December 2019
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 2019 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 8.4%. 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.
4 Trade and other receivables
Amounts due from Group undertakings
2019
£000
31,410
2018
£000
12,431
Amounts due from Group undertakings are interest free and repayable upon demand.
NAHL Group Plc Annual Report and Accounts 2019
149
Financials 2019–2020
5 Financial instruments
a) 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.
Carrying
amount
2019
£000
Fair
value
2019
£000
Carrying
amount
2018
£000
Fair
value
2018
£000
Amounts due from Group undertakings
31,410
31,410
12,431
12,431
Total financial assets
31,410
31,410
12,431
12,431
b) Capital management
The Company’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 Company’s
equity, i.e. share capital including preference shares, share premium, own shares and retained earnings.
The balance of the Company’s capital as at 31 December 2019 was £84,110,000.
6 Share capital
Number of shares
‘A’ Ordinary Shares of £0.0025 each
Allotted, called up and fully paid
At 31 December 2018: 46,178,716 ‘A’ Ordinary Shares
of £0.0025 each
Issued during the year
At 31 December 2019: 46,178,716 ‘A’ Ordinary Shares
of £0.0025 each
Shares classified in equity
At 31 December 2018
Issued during the year
At 31 December 2019
2019
2018
46,178,716
46,178,716
46,178,716
46,178,716
£000
£000
115
–
115
115
–
115
115
–
115
115
–
115
150
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020
7 Share based payments
The Company operates three employee share
plans. Details of these can be found in note 22 to
the Group accounts.
8 Staff costs and numbers
During the year the Company employed no
members of staff and incurred no staff costs.
9 Commitments
Capital commitments
At 31 December 2019 the Company had no capital
commitments (2018: £nil).
10 Transactions with
owners, recorded directly
in equity
Details of transactions with owners recorded
directly in equity can be found in note 26 to the
Group accounts.
11 Related parties
Details of transactions with key management
personnel can be found in note 28 to the Group
accounts.
NAHL Group Plc Annual Report and Accounts 2019
151
Financials 2019–2020
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
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
152
NAHL Group Plc Annual Report and Accounts 2019
Financials 2019–2020 Financials 2019–2020
LOOKING TO
THE FUTURE
Our number one priority is the safety, wellbeing and
health of our people across the business, along with
our customers and partners. Since the emergence
of the virus in the UK, we have taken various
measures to reduce our costs and ensure we have
sufficient liquidity to run the business through a
prolonged period.
We would like to thank all colleagues for their
commitment and flexibility during what will be a
testing period. Our experience in navigating change
in difficult markets stands us in good stead to
emerge from this as a sustainable business poised
to benefit from the recovery that will follow.
Having started 2020
with confidence that the
Group’s strategic growth
plans were progressing
well and early signs of
market improvement in
Residential Property, we
have completely switched
our focus on channelling
our resources to tackle
the business challenges
posed by the spread of the
COVID-19 virus.
NAHL Group Plc Annual Report and Accounts 2019
153
Annual Report
and Accounts
2019
NAHL Group Plc
1430 Montagu Court, Kettering Parkway,
Kettering, Northamptonshire, NN15 6XR
Tel: +44 (0) 1536 527 500
Email: investors@nahl.co.uk
Web: www.nahlgroupplc.co.uk