Strategic
Resilient
Sustainable
2020
Annual
Report
2020
Contents
01 At a glance
03 Managing through a pandemic
04 Strategic Report
05 Our Business
06 NAHL Group plc
07 Consumer Legal Services
10 Critical Care
13 Key Performance Indicators
17 Our Culture, Our Business
23 Chair’s Review
27 Operating Review
41 Strategic Priorities
45 Principal Risks and Uncertainties
52
Section 172 Statement and Stakeholder
Engagement
55 Leadership and Governance
56 Board of Directors
58 Executive Management Team
59 Chair’s Introduction to Governance
60 Governance Statement
64 Audit and Risk Committee Report
68 Remuneration Committee Report
75 Directors’ Remuneration Policy
80 Directors’ Report
85 Financial Statements 2020
At a
glance
NAHL Group plc is a leader in the consumer legal services and
catastrophic injury markets, delivering products and services
to consumers and businesses through two autonomously
managed divisions, Consumer Legal Services and Critical Care.
Government in 2015, meant this model could not
be sustained as demand from the panel would fall.
This is what happened.
The reforms are finally going to be implemented on
31 May 2021 and are expected to remove £1.3bn of
value from low value RTA claims as compensation
tariffs are significantly reduced and claims worth
£5,000 or less are settled through the small claims
track with no awards for costs.
To prepare for these changes we have
transformed our Personal Injury business
from a claims management company (CMC)
into a modern, technologically-enabled law
firm, National Accident Law, regulated by
the Solicitors Regulatory Authority. National
Accident Law can process its own work thus
retaining 100% of the profit and cash from it,
or it can sell that work to a panel law firm.
2020 presented a unique set of challenges for our
businesses. The impact of the COVID-19 pandemic
on the Group was severe as the lockdown measures
resulted in 27% fewer consumers having accidents
in the year. This impacted revenues in both our
Personal Injury and Critical Care businesses.
This was a significant setback in our plans, but we
acted quickly to protect our staff and customers
and our business models proved to be sufficiently
resilient to weather this storm. Through focusing on
the short term in 2020 we generated a significant
increase in free cash flow (from an outflow of £1.7m
in 2019 to an inflow of £6.1m in 2020), reduced net
debt and de-risked the balance sheet.
Our Critical Care business, Bush & Co, holds
a leading position in the catastrophic injury
market. It is a long-cycle business and so
the impact of fewer accidents resulting from
COVID-19, and the delay in non-urgent medical
procedures, is expected to suppress profits
over several years. However, we do expect to
see profit improvement in 2021 compared to
2020 and the management team has advanced
initiatives that could, if successful, accelerate a
return to levels of pre-COVID profits by 2023.
Within Consumer Legal Services, our Personal
Injury business had historically been a simple,
short cycle business, providing marketing and
claim triage services to a panel of law firms for
cash. The regulatory changes to lower value road
traffic accident (RTA) claims, proposed by the
NAHL Group Plc Annual Report and Accounts 2020
1
This is a different business model but one that is
sustainable in the new environment, where many
CMCs and law firms are expected to exit the
market as they cannot make sufficient money from
low value RTA work which they have been reliant
on. This may further affect demand from our panel,
although we believe those firms will continue to
want non-RTA work that is largely unaffected by
the reforms.
Whilst a significant minority of our work is low value
RTA, most of it is non-RTA work. By processing an
increasing amount of non-RTA work, as well as all
the RTA work, through National Accident Law from
2021 we should have a sustainable and profitable
business, but with a longer profit and cash cycle.
The challenge will be scaling National Accident Law
to deal with an increasing volume of work, including
more complex cases, and balancing the amount of
work we place with the panel for in-year profit and
cash with the amount we process ourselves for
greater, but deferred, profit and cash.
We cannot be certain about the longer-term impact
of the reforms on the Personal Injury market, but
it seems likely that it will lead to consolidation and
result in a small number of large Personal Injury
firms dominating the market. We remain confident
that we can successfully deal with these
challenges and optimistic that in the future we
can be one such firm.
Overall, we were pleased with the way
that, each of our two divisions coped with
the challenges faced from COVID-19 in
2020 and generated £6m of free cash
enabling us to de-risk the balance sheet.
Assuming the ongoing success of the UK
vaccination programme and the relaxation
of lockdown measures proceed according to
the Government’s plan, we expect to continue
to generate cash in 2021 along with more profit
than in 2020.
Managing
through a
pandemic
1
Reaction
Month 0–1
3
Return
Month 6–18
Addressed immediate challenges
to our people, customers, business
partners and liquidity
Followed Government instructions and ensured
staff were safeguarded
Implemented business continuity plans, which
enabled remote working and uninterrupted
trading from Day 1
Implemented immediate cost containment
measures, including temporary voluntary pay
reductions for the Board and senior management
and cancelled planned pay increases
2
Resilience
Month 1–6
Addressed near-term cash
management, liquidity and resilience
challenges through lockdown
Stress tested cash flows
Agreed new banking covenants and extended
revolving credit facility with bank
Prioritised placement of personal injury enquiries
into panel to drive cash flow
Restructured to create our Consumer Legal
Services division
Identified over £1m annualised cost savings and
closed London office
Made use of Government Coronarvirus Job
Retention Scheme, claiming £0.4m from April to
December and furloughing up to a maximum of
82 staff during this period
Created a plan to return the business
to growth, scaling quickly as lockdown
eased and the longer-term impact
became clearer
Developed a flexible working proposition for staff
with suitable office space to facilitate hot-desking
and collaboration
Conducted a review of divisional strategies and
prioritisation of strategic projects in light of
market conditions
Progressed with planned investment in
technology in Consumer Legal Services and
Critical Care to support future growth from 2020
and create further operational efficiencies
Continued to flex our personal injury enquiry
placement model as volume recovered, retaining
flexibility to respond to future COVID-19
challenges and growing levels of self-processing
in National Accident Law
maximum of
82staff placed on furlough
during this period
2
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
3
Strategic
Report
Our
Business
4
NAHL Group Plc Annual Report and Accounts 2020
NAHL
Group
plc
NAHL Group plc operates in the consumer
legal services and catastrophic injury
markets, delivering products and services
to consumers and businesses through two
independently managed divisions – Consumer
Legal Services and Critical Care – supported
by a centralised Shared Services function.
Our two business models share common features:
the operation of leading brands in our sectors;
highly effective and efficient marketing activity;
deep and long-standing relationships with
customers and partners, and ongoing business
development;
leveraging the use of technology to improve
customer experience and increase efficiency;
underpinned by our people – a committed, agile,
proactive and highly engaged workforce, united in
our values;
strong, experienced and collaborative leadership
teams; and
predictable and highly visible cash-flows,
supported by a mix of near- and long-term cash
realisation opportunities.
The Group aims to create value for its shareholders
by delivering growth within its two divisions. Despite
the challenges presented by COVID-19 in the year,
the Board has maintained a sharp focus on its
long-term goals and made progress in developing
its strategies to grow these businesses, which are
explained in more detail on the following pages.
Strong
leadership
NAHL suffered a
significant setback as a
result of the COVID-19
pandemic, as the volume
of new non-fault accidents
fell causing a reduction in
our revenues and profits.
But, throughout this period
our businesses performed
with resilience and were
cash generative. Each has
an attractive investment
proposition in their own
right and are well placed
to recover as lockdown
measures ease.
James Saralis,
Chief Financial Officer
Consumer
Legal
Services
Our market
The Consumer Legal Services division focuses on
the Personal Injury and Residential Conveyancing1
sectors of the legal services market.
The market for Personal Injury legal services
is estimated at £4bn, with more than 800,000
individual claims registered in a typical year.
Within that market, we calculate that the share
represented by the fees earned by claimant-side
law firms comprises £1.6bn of the total. While
claim volumes have been in gradual decline over
the past five years, an increase in the value of
damages awarded, costs inflation and changes in
the type of claims made have largely offset any
reduction in the value of the market. The market
for legal services in the Residential Property sector
is estimated at £2.4bn, with more than 1 million
property transactions taking place each year
despite subdued activity levels in the market since
the 2015 changes to Stamp Duty and the 2016
Brexit vote.
Demand for the services offered by the Personal
Injury business ultimately stems from people who
suffer injury in an accident that was not their fault.
Consumers have the right to claim compensation
for the pain and loss of earnings associated with
such injuries, and seek legal representation to
ensure the best outcome from such a claim.
Our Consumer Legal
Services division is
a leading provider of
legal services to the UK
consumer with over 25
years’ experience in the
personal injury sector.
Simon Trott,
Chief Operating Officer
The COVID-19 pandemic led to a reduction in
personal injury claim volumes in 2020: social
restrictions and multiple lockdowns impacted
mobility from early spring, and with fewer people
attending workplaces, visiting hospitality, retail or
entertainment venues, and lower public transport
use, the number of accidents and subsequent
claims reduced significantly. Data secured by the
Association of Consumer Services Organisations
(ACSO) indicates that claim volumes fell by nearly
27% in 20202. We believe that the reduction
in non-RTA claims, which are the focus of our
business, is a temporary feature of the market
that will reverse once lockdown measures are
relaxed. The number of RTA claims are likely to
be adversely affected by the industry reforms
due to be implemented on 31 May 2021 because
the lower levels of compensation available in low
value whiplash claims will reduce the propensity
for victims of this type of accident to make a claim.
We are forecasting a 10% reduction in volume due
to this. However, we expect this will result in some
competitors exiting this segment of the market,
providing an opportunity for firms such as National
Accident Law to increase market share. We are
forecasting a <1% increase in market share for
National Accident Law to offset the reduction in
market volumes.
6
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
7
1 The division operates a residential conveyancing business, branded as Homeward Legal, which follows a similar business model to personal injury
by placing conveyancing instructions into a panel of third-party firms for processing. This business also provides consumers and third-party firms
with property searches through Searches UK.
2 Source: claims registered with the Claims Recovery Unit
We monetise qualified enquiries through our
flexible placement model. Enquiries either proceed
directly to our in-house processing law firm,
National Accident Law, or are dealt with by one
of the specialists on our panel of law firms. We no
longer place large volumes with our joint venture1
firms now that we have our own in-house firm, as
National Accident Law offers us a better return and
a simpler journey for the customer.
In general, enquiries processed through National
Accident Law generate the highest return on
investment, whilst enquiries passed to the panel
have the benefit of providing immediate cash flow.
National Accident Law represents consumers
under a ‘No Win, No Fee’ agreement, using our
customised technology platform to progress
claims to settlement efficiently and effectively.
We recognise revenue at the point at which
liability is admitted by the defendant and
receive payment of our fees at the point of
settlement. We have, therefore, high visibility
of future cash flows which, in turn, helps to
inform ongoing placement decisions.
National Accident Law will process all our RTA
claims, including RTA small claims which will have
lower margins after the small claim reforms are
implemented by the Government, from 31 May
2021, and an increasing number of non-RTA claims
from the second half of 2021.
We constantly assess market conditions, financial
performance and our own processing capacity to
guide our decisions on placement, investments into
brand-building and marketing activities, and further
investment in our claim processing capabilities.
This flexibility allows us to respond with agility to
market conditions and opportunities.
Our investment case and
business model
The Group’s personal injury business model is built
on three pillars:
1
2
3
a highly productive marketing engine,
powered by the sector’s most
trusted brand, National
Accident Helpline;
an efficient, technology-enabled
and purpose-built law firm, National
Accident Law, which is focused on the
consumer; and
an agile and scalable placement
model designed to balance the work
we place with our panel for in-year
profit and cash with the work we
process ourselves for greater, but
deferred, profit and cash.
The combined strengths of these pillars uniquely
position Consumer Legal Services to profitably
service high-volume segments of its market, whilst
enabling the division to optimise its returns from
higher-value segments of the claims market.
The division completed its three-year investment
programme in 2020, which laid the foundations for
the growth of our own law firm, National Accident
Law, and prepared the business for the market
reforms being implemented in May 2021. Over the
last year, this work has included: transitioning the
business from a claims management company to
a law firm regulated by the Solicitors Regulatory
Authority; upgrading its call centre technology and
implementing a ‘One-Call’ process that provides
a seamless customer journey and improved lead
conversion; and introducing a new digital tool
to enable standard RTA claims to be completed
entirely online.
The strong market awareness of our
National Accident Helpline brand and its
highly optimised website generates a high
volume of leads which we triage through our
customer contact centre to identify enquiries
with the greatest potential of success. Our
investments in digital customer journeys means
that an increasing number of enquiries are
generated entirely online at a reduced cost.
Our flexible business model
supports high returns by
processing claims ourselves
and also allows for options
to maximise cash flows
through partnership
with specialist firms.
3
Short-
Term
Profit and
Cash
Long-Term
Profit and
Cash
We have a predictable, cash
generative model, with a mix
of historical and near-term
contracts providing ongoing
cash flow.
5
t
n
e
m
e
m
Cash fro
P a nel plac
C
l
a
i
C
m
a
s
h
S
e
t
f
r
o
t
l
e
m
m
e
n
t
Lead to
enquiry
e
g
Tria
P
l
a
c
e
m
e
Cost
and
mix of
leads
G
e
L
n
e
e
a
r
d
a
t
i
o
n
Category-Leading
Branded Marketing
Engine
d v ertisin g
d A
n
a
B r
Brand
health
n
t i
n
t
o
N
a
ti
o
n
a
l
A
c
c
i
d
e
n
t L
a
w
Revenue
per win
Highly Efficient
In-House Legal
Processing
Enquiry
to claim
S
e
C
la
i
ttle
m
(
F
m
e
e
e
s
)
n
t
Claim
win rate
g
Claim
Processin
Our deep consumer
understanding and highly
developed marketing
engine helps us generate
sector-leading numbers
of leads across a wide
range of injury types.
2
1
Having invested over
£50m since inception,
National Accident Helpline
is the sector’s most
trusted brand with high
consumer awareness.
4
Our technology-
enabled, digital solution
is based around highly
customised software and
bespoke processes designed
to deliver high efficiency.
1. References to ‘joint venture’ law firm relate to our law firms Your Law LLP and Law Together LLP which we operate in partnership with a minority
member. The term ‘joint venture’ does not relate to the IFRS definition. These law firms are accounted for as subsidiary undertakings, see note 1 to
the financial statements for further details.
8
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
9
Critical
Care
Bush & Co is a leading
player in the £107m
Catastrophic Injury market
and has been providing
case management and
expert witness services
to solicitors and insurers
across the UK for 35 years.
Helen Jackson,
Managing Director, Bush & Co
Our market
Our Critical Care business, Bush & Co (Bush),
holds a leading position providing legal support
services in the Catastrophic Injury market,
itself a subset of the Medical Reporting &
Rehabilitation market. The Catastrophic Injury
market is defined as those cases involving the
most severe and life-changing injuries, with
settlement values of £500,000 and above.
We calculate that prior to the COVID-19 pandemic,
our target market was worth £107m, with around
6,500 catastrophic personal injury claims made
in a typical year. Whilst not all of these claims
are subject to the full suite of services provided
by the sector, most require the services of an
Expert Witness and around half will use a Case
Management service as part of their rehabilitation.
The market had grown steadily over the previous
five years, with a compound annual growth rate of
2%. Case numbers had remained broadly flat, with
a slight decline in the number of serious road traffic
accidents offset by modest growth in medical
negligence and workplace injuries.
COVID-19 saw the number of serious accidents
contract due to a reduction in vehicles on the
road, people in work and a delay in non-urgent
medical procedures. We believe this reduction to be
temporary and forecast that the number of serious
accidents will return to pre-COVID trends once the
Government’s lockdown measures end.
The complexity of catastrophic injuries results in
long case lifecycles, which makes the market more
resilient and predictable. Within Case Management,
instructions for Initial Needs Assessments are
typically made 3–4 months after an injury. Ongoing
case management support for rehabilitation has
an average lifecycle of over two years, meaning
that in any given year more than half of the cases
under management relate to accidents suffered
in previous years. Expert Witness instructions are
typically received once a case is well under way,
which is often more than three years from the dates
of the accident.
We believe that the 27% fall in the number of
personal injury claims overall will translate to a
similar reduction in catastrophic injury claims in
2020. Therefore, whilst the pandemic naturally led
to a reduction in Case Management instructions
in-year with a recovery following several months
after accident volumes return, the impact and
corresponding recovery in Expert Witness
instructions will be less pronounced and spread
over multiple years. The business has factored
these market features into its long-term planning.
Our investment case and
business model
Bush’s business model is built on three pillars:
1
2
3
strong and diverse customer
relationships with over 400 clients
across the legal, insurance, clinical
and charity sectors;
a wide range of competencies
and specialisms creating revenue
realisation opportunities throughout
the multi-year rehabilitation process;
focused investment in technological
innovation and expansion into
adjacent segments of the market,
steered by our Innovate – Optimise –
Grow strategic framework
Consequently, Bush delivers robust
and predictable financial performance with a mix of
new and recurring revenues providing high visibility
on cash flow over the multi-year life of a case.
Bush provides vital services to support individuals
who have suffered severe and life-changing
injuries whilst they pursue a compensation claim.
Typically appointed early in the case lifecycle by
a claimant’s representative (e.g. a law firm, or
insurer), we manage catastrophic injury cases
for claimants from injury to rehabilitation with an
average lifecycle of 26 months through our network
of Case Manager and Expert Witness Associates,
who are exclusive to Bush in this sector. We are
also engaged later in a case lifecycle (an average
of 36 months post-injury) by lawyers on either
the claimant or defendant side to provide expert
assessments and reports used by the court to
determine both liability and claim size. Through
the deep and long-term relationships that we have
built with our clients we command a prominent and
market-leading position in case management and
have grown to become one of three leading players
in the expert witness sector.
Through the combination of our core competencies
in case management and expert witness, and
the coverage this affords of the case lifecycle,
our business model provides a mix of immediate
and recurring revenue which in turn provides
predictable, highly visible cash flows. Investments
in marketing, technology and capability through
the Innovate – Optimise – Grow framework have
given the business a track record of strong top
line growth, consistent market share gains, and
operating margin expansion.
We have also identified significant growth
opportunities in expert witness and are seeking to
develop our capabilities in key specialisms.
400clients across the legal, insurance, clinical
and charity sectors
10
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
11
The Innovate – Optimise –
Grow Strategic Framework
Building long term
customer relationships
through business
development
New case management
defendant brand for the
insurance marketplace
Continue to maintain
and grow our brand:
Quality Service and Expertise
delivered to Clients
Grow
Expand Case
Management into high-value
Multi-Track claims
Optimise
Innovate
Expand adjacent
legal markets, leveraging
proprietry technology to
increase efficiency
State-of-the-art report
writing tool for Expert
Witness service
Improvements to core
processes to drive
operational efficiencies
Targeted recruitment
of experts to expand
capacity and
develop services
12
NAHL Group Plc Annual Report and Accounts 2020
Key
Performance
Indicators
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 several non-financial KPIs that help it
track progress in areas that are critical for the long-
term success of the Group. These are not directly
reflected in the Group’s financial statements but
are assessed on a regular basis and managed by
divisional management.
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 and from non-controlling interests.
The lockdown measures associated with the
COVID-19 pandemic caused fewer consumers to
have accidents in 2020, which resulted in fewer
enquiries being generated in our Personal Injury
business (KPI 3). To increase our liquidity, we
responded by flexing our placement model to place
fewer enquiries than planned into National Accident
Law and maximise enquiries placed in the panel,
thereby driving increased in-year cash flow. The
Group also benefitted from growth in settlements
relating to historical claims. These decisions
contributed to the Group generating £6.1m of free
cash flow but result in lower profits and cash flow in
National Accident Law in future years. (Please see
Operating Review on Page 28 for more details and
note 2 for a reconciliation of this figure to statutory
measures).
Free cash flow in the year (£’000)
2020
2019
(1,702)
2018
2,900
6,068
2 Profitability – underlying
earnings per share
(underlying EPS)
Underlying EPS excludes exceptional items
to derive a profit metric on a per share basis
that reflects the underlying performance of the
business. Underlying EPS has decreased in 2020
due to the impact of COVID-19 on enquiry volumes
in Consumer Legal Services and instruction levels
in Critical Care. (Please see Operating Review
on page 28 for more details and note 2 for a
reconciliation of this figure to statutory measures.)
Underlying EPS in the year (p)
2020 1.9
2019
2018
9.4
15.1
Underlying EPS for 2019 and 2018 has been
restated to take into account the changes in
presentation of non-underlying items. See note 30
for further details.
Personal injury enquiries generated in the year
(No.)
2020
2019
2018
36,214
56,256
65,468
3 Marketing services –
personal injury enquiries
generated
Our ability to generate personal injury enquiries
and balance these against market demand and
available working capital, are a core element of our
business model and a leading indicator of revenue.
The lockdown measures resulted in fewer accidents
which, in turn, resulted in a significant decline in
enquiry volumes generated through the National
Accident Helpline brand. (Please see Operating
Review on page 28 for more details).
4 Personal injury enquiry
placement – percentage
of enquiries placed in each
processing channel
The decisions taken on where we choose to place
the personal injury enquiries that we generate
will influence both the levels of profit and cash
flow in the current year, as well as in future years.
This is because an enquiry processed by National
Accident Law generates higher levels of profit
compared to those processed by our joint-venture
law firms or the panel; but placement into either
National Accident Law or the joint-venture law
firms requires us to wait until case settlement
for the cash derived from a successful claim.
Also, the volume of new claims placed in National
Accident Law is limited by levels of operational
capacity and available working capital.
Monthly placement levels are planned in our annual
budgetary process but can be flexed throughout
the year depending on the volume of enquiries
generated, the levels of capital available to allocate
to self-processing, panel demand and operational
capacity in National Accident Law.
In 2020, in response to the impact of the COVID-19
pandemic on the business, the Board made the
decision to flex its placement plans and allocate a
higher proportion of enquiries to the panel in order
to generate increased free cash flow in the year
(KPI 1). As a result, the proportion of enquiries
placed into the joint-venture law firms was reduced
as well as a modest reduction in enquiries placed
in National Accident Law compared to the start of
the year. Consequently, the Group ended the year
with a lower number of ongoing claims in its joint-
venture law firms and in National Accident Law than
originally planned (KPI 5), to develop into profit and
cash flow in future years.
Panel and other
Joint venture law firms
National Accident Law
2020
2019
2018
69.0%
21.0% 10.0%
66.6%
29.1%
4.3%
73.1%
26.9%
0.0%
14
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
15
5 Service provision –
ongoing claims / open
case management cases
Our ability to generate revenue on processing
personal injury claims is dependent on successfully
settling claims. Our ongoing claims represent
a store of value that will convert to revenue
and cash in future years as the claims progress
through the legal process and, ultimately,
settle. This year, we have rebased this KPI to
reflect only ongoing claims in National Accident
Law, as our strategy is to focus on these
claims where we retain 100% of the profits.
In Critical Care, we invoice on a monthly basis
for ongoing case management support provided
to clients. This year, the number of open case
management cases has not grown as much as
we would have anticipated, due to the impact of
COVID-19. This caused a decline in the number
of new cases, while the number of existing cases
coming to the end of their lifecycle continued
unaffected. (Please see Operating Review on page
28 for more details).
Ongoing claims in NAL 31 December (No.)
Ongoing case management cases at 31 December (No.)
2020
2019
2018
2020
2019
2018
–
1,641
1,208
1,294
1,110
2,975
6 Expert reports – critical
care reports issued
We charge fees for issuing expert witness reports
and initial needs assessments in Critical Care. We
have issued fewer reports this year due to less
demand from our law firm customers as a result of
productivity challenges caused by the COVID-19
pandemic and also because of patient access
challenges arising from the lockdown measures.
Reports issued in the year (No.)
2020
2019
2018
1,148
1,325
1,292
16
NAHL Group Plc Annual Report and Accounts 2020
Our culture,
our business
Our
culture,
our business
2020 presented a unique set of challenges for our business.
The national lockdowns resulted in 27% fewer
consumers having accidents in the year, reducing
demand for our services, and the ‘Stay at home’
order issued by the Government in March 2020
required a significant adjustment to our ways of
working. Our overriding priority was the continued
health, safety and wellbeing of our people and
supporting our customers and business partners
through those unprecedented times.
Initially we focused on the short-term challenges,
including transitioning over 250 staff members
from a predominantly office-based environment to
working from home. We swiftly implemented our
business continuity plans and our well supported
systems enabled staff to work remotely with
full support, ensuring uninterrupted service and
support to our customers.
Due to the reduced demand, and in order
to manage our costs, we chose to furlough
82 members of staff throughout the year
and utilised the Government’s Coronavirus
Job Retention Scheme (CJRS) on a flexible
basis. This action protected jobs and helped
us to prepare for a recovery in the business
once COVID-19 levels permitted.
Members of the Board and leadership team
voluntarily took temporary salary cuts and the
Group cancelled its annual salary review. We also
permanently closed our London office and merged
our Personal Injury and Residential Property
businesses to create a new division, Consumer
Legal Services.
Throughout all of these changes, our people
demonstrated great resilience, drive and positivity.
Their actions, underpinned by our strong company
culture and Values, have proved to be a significant
asset of the Group.
Our Values
The adaptability of our staff is testament to
our policy of recruiting, appraising, rewarding
and recognising against our company Values;
resulting in a committed and flexible team that
consistently performs to the highest standards.
This is exemplified through our company
Values, by staff who are:
Passionate
about the business and their role in it;
Driven
to maintain operational performance;
Unified
to do the best job possible; and
?
Curious
about how efficiency and efficacy can deliver
excellent performance
Strong, decisive leadership
and clear communications
Strong leadership was more important than ever
in the first quarter of 2020, when scale of the
COVID-19 pandemic became clear. In March, our
leaders created 4 principles to help guide their
decision making:
the safeguarding of the health and
security of our people is paramount
the need to be able to support our
people by ensuring we continue
to have a strong and sustainable
business
our commitment to following
Government/Public Health England
(PHE) advice, while seeking to
minimise any negative impact on our
business or people
our commitment to transparency and
openness throughout any period of
disruption
1
2
3
4
Transparent and open communications were
a theme throughout the year and our leaders
sought to replicate the presence they had enjoyed
when office-based by utilising numerous online
communication tools. This included two new
regular activities, each designed to improve staff
engagement and as a means to deliver important
messages. First, our monthly Biscuit Briefings were
held online, where all staff received updates on the
business from our leadership team and engaged
in Q&A sessions. Secondly, our Weekly Welcomes
were a Monday morning introduction to the week,
delivered by a member of the wider management
teams, providing detailed information on business
activities, advice and a challenge to inspire and
encourage our staff.
This is the best culture
I’ve worked in.
18
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
19
Keeping furloughed
colleagues engaged
For our colleagues on the CJRS, it was vital that
they continued to feel engaged with the Group
whilst furloughed. They were invited to attend the
Biscuit Briefings on an optional basis and received
a twice weekly Furlough News e-newsletter. We
also provided an opportunity for them to tell
their own stories through The Furlough Files – a
series of vlog episodes. These activities, alongside
regular contact from their managers ensured their
seamless reintegration into the business when
demand returned to our markets.
Staff wellbeing
As reflected in our first principle for operation, the
wellbeing of our colleagues is paramount and staff
were encouraged to share their status through
weekly check-in meetings with their managers
and colleagues. Regular reminders of the support
available from the Group, including access to an
Employee Assistance Programme, Mental Health
First Aiders and Wellness Action Plans were
delivered via a number of vlogs signposting staff to
any support they might need.
Online yoga and wellbeing sessions were
also introduced to support our staff’s
physical and mental wellbeing while
ensuring that they had regular opportunities
to take breaks away from work.
Seeing how our
company has coped
with COVID-19 has
demonstrated that we
are a business with a
great culture of trust
and care.
Bush & Co supported
their staff’s immediate
transition from office-
based to remote working
by keeping colleagues in
contact with each other
through its Postcards
From Home activity
– staff would submit
photographs and updates
about their remote
working experience and
these were shared across
the business.
e
m
o
H
m
o
r
f
s
d
r
a
c
t
s
o
P
0
2
0
2
n
o
i
t
i
d
E
e
v
i
t
s
e
F
POSTCARDS FROM
Home
POSTCARDS FROM
Home
S
D
R
A
C
T
S
O
P
O M
R
F
H o m e
20
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
21
Our resilient and engaged
workforce
As a group of businesses, we strive to
maintain an engaged workforce, underpinned
by a strong culture. This makes us resilient,
capable of adapting to change and more
likely to achieve our corporate objectives.
Despite the challenges of 2020, we were very
pleased with the results of our annual staff survey,
which showed that engagement levels remained
high at 77.2%1 for the year against a UK Gallup
average of 17%. This is the third consecutive year
we have scored over 75%, putting our people
amongst the most engaged in the UK.
I think the way that the
Group has handled the
pandemic and the way
employees have been
treated throughout
this difficult time is
really excellent and
won’t be forgotten.
Training and development
We regularly surveyed our staff throughout the
year and identified that many were not used to
remote work or managing remote teams and some
found this change challenging. In response, we
developed two training courses to support staff –
one focused on mental health and wellbeing and
the second, which we called Pokerface, to help
colleagues become more effective at working
remotely. It became clear over the ensuing months
that these courses had a significant impact on team
performance and wellbeing.
Recognition from
Investors in People
During the year the Group received recognition
for the leadership, support and development
of its people from Investors in People. We were
extremely proud that our Residential Property
business maintained its Silver status in the year
and our Critical Care business, Bush & Co, was
rewarded for its consistent improvement with Gold
status. This is in addition to the Gold status for our
Personal Injury business, awarded in 2018.
We were extremely proud to be awarded these
accolades that demonstrate we are an employer of
choice, and they are testament to the expertise and
dedication of our people.
We’ve gone through
tough times recently
with COVID-19, but the
company has really
shown that it truly lives its
values. Communication
has been transparent,
frequent and honest.
1. NAHL Group plc OwnIt! staff engagement survey results, June 2020.
22
NAHL Group Plc Annual Report and Accounts 2020
Chair’s
Review
Chair’s
Review
£4.7mreduction in net debt
This is my first report as Chair of the Board of NAHL Group plc,
having served as Non-Executive Director since 2016.
2020 was a year dominated by the challenges
presented by the COVID-19 global pandemic. Our
businesses faced lower demand in their markets
and had to quickly adapt their operations to
protect staff and customers. However, by flexing
our personal injury business model, carefully
managing costs and with a resilient performance
by our Critical Care division, the Group remained
profitable at the underlying operating profit level
in the year and was able to reduce its net debt by
nearly £5m.
2020 results
Group revenues decreased to £40.9m (2019:
£51.3m) in the year, largely due to reduced volumes
in our Personal Injury and Critical Care businesses.
Underlying operating profit declined to £5.7m
(2019: £10.4m). This reflects the reduction in
revenues but was partially mitigated by a reduction
in underlying costs of £5.7m from £40.9m to
£35.2m, including the in-year benefit of annualised
cost savings of £1.2m which were generated by
restructuring the Group in the first half of 2020.
The loss before tax decreased to £0.2m (2019:
£2.3m), largely as a result of the absence of last
year’s one-off impairment charge recognised in
respect of our Residential Property business. This
has not been repeated and a review of our goodwill
and intangible balances this year supports their
carrying value.
Underlying earnings per share decreased to
1.9p (2019: 9.4p) and basic earnings per share
increased to (0.5)p (2019: (6.4)p).
The Group delivered significantly improved levels
of cash generation in the year, in line with its near-
term strategic focus of reducing net debt, which
stood at £16.3m on 31 December 2020, down from
£21.0m the year before.
Strategic development
Despite the challenges presented by COVID-19
in the year, and the extensive due diligence
process undertaken as a result of the aborted
takeover bid in Q4 (see further details below),
the Board has remained focused on its
long-term goals and made good progress in
developing its strategies for the Consumer
Legal Services and Critical Care divisions.
Consumer Legal Services
In Consumer Legal Services, we aim to be the UK’s
leading technologically-enabled law firm, focusing
on high-volume personal injury claims. We have
made excellent progress with our personal injury
transformation, following the successful launch of
National Accident Law in April 2019.
During the year, we successfully transitioned
from being a claims management company
into a modern, technologically-enabled
law firm, with a market leading brand
that can process its own enquiries. This
transformation is essential to our future.
By the end of 2020 we had reduced the number
of claims being sent to our joint ventures, as we
can now make higher (although deferred) profits
processing claims in National Accident Law.
Alternatively, we can generate cash quicker by
sending claims to the panel.
The long-awaited regulatory reforms are due
to be implemented on 31 May 2021. This will
significantly reduce the processing and sales
value of most RTA claims, and is a key reason
why we have developed our wholly-owned law
firm National Accident Law. Fortunately, the
majority of our enquires are non-RTA, which will
be largely unaffected by the reforms, but the
changes will significantly impact the revenue
and profit we make from RTA enquiries.
The Group has worked extremely hard over several
years to ensure we are ready to embrace these
changes and deliver value post the reforms by
continuing to increase the proportion and number of
claims being processed through National Accident
Law. This should increase the average profit per
claim made by us, on a blended basis, across our
entire book. Our strategy, therefore, is to:
1. process all RTA claims in National Accident Law,
including all RTA small claims. Since January
2021, over 80% of new RTA claims have been
placed into National Accident Law and that
proportion will increase to 100% before 31 May.
2. process an increasing volume of non-RTA claims
in National Accident Law, generating a higher
return from these claims. To date only a small
number of non-RTA claims are being allocated
to National Accident Law but from the second
half of 2021 these numbers will grow ensuring
that all the profit from them is retained in the
business, rather than being shared. Panel firms
will continue to receive a substantial number
of non-RTA claims as these generate cash and
profit in-year, whereas these are deferred when
claims are sent to National Accident Law.
3. leverage investments in operations, people
and technology to improve both efficiency
and customer experience for all claim types.
To this end, key upgrades to the call centre
technology, digital journey and customer triage
processes were successfully implemented in
December 2020. These improvements should
increase conversion metrics and also facilitate
the efficient processing of RTA small claims by
National Accident Law after 31 May.
Critical Care
In Critical Care, Bush & Co are a leading player in
the catastrophic injury market, defined by personal
injury claims of over £500,000 in value and with
clients requiring extensive care. Bush provides vital
services to support individuals who have suffered
severe and life-changing injuries whilst they pursue
a compensation claim. It does this through its three
strategic pillars:
1. strong and diverse customer relationships with
over 400 clients across the legal, insurance,
clinical and charity sectors;
2. a wide range of competencies and specialisms
across our case management and expert
witness businesses, creating revenue realisation
opportunities throughout the multi-year
rehabilitation process;
3. underpinned by our Innovate – Optimise – Grow
strategic framework, focusing on technological
innovation and expansion into adjacent markets.
Good progress has been made over the last year
in developing the strategy for growth in Critical
Care. Our strategic choices follow our Innovate
– Optimise – Grow model, bringing innovative
services to market; optimising our operations; and
growing our footprint by expanding into adjacent
sectors and building market share.
Over the last year, we have made improvements
to our base technology platform, with further
enhancements planned for 2021 and 2022 to drive
efficiencies in our case management processes. We
also made excellent progress in the development of
a proprietary digital medico-legal report writing tool
for Expert Witness. This will enable us to improve
the efficiency of our report writing and allow our
existing consultants to process more reports each
month. This is currently being trialled and we plan a
wider roll out later this year.
24
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
25
We are expanding our very successful case
management business within its current market
through a differentiated proposition, designed
to expand our share with insurers and defendant
customers. This proposition should also provide a
launch-pad into the lower value, but higher volume
segment of the market, for claims with a value of
between £100,000 and £500,000.
We have also identified significant growth
opportunities in Expert Witness and are seeking to
develop our capabilities in key specialisms.
Aborted takeover bid
During the year, the Group was the target
of a reverse takeover bid by another AIM
company, Frenkel Topping Group plc (Frenkel
Topping). Despite the Board engaging in
extensive discussions aimed at concluding
a deal that was in the best interests of our
shareholders, Frenkel Topping eventually
decided not to make an offer for the Group.
Engagement with
shareholders
The Company is committed to maintaining good
communication with investors and since taking
the role of Chair in October 2020, I have sought
to engage with our major shareholders. These
discussions have been valuable in helping me
understand shareholders’ views and I look forward
to further engagement throughout 2021. I would
like to extend an invitation to all shareholders to
our Annual General Meeting, which is being held
on 29 June 2021. Further details will be posted
on our website and a formal invitation sent to
shareholders.
Governance and Board
changes
NAHL Group plc places great importance on
ensuring we have a strong and effective governance
and compliance culture and framework.
The Company saw several changes to the
composition of the Board last year. In June 2020,
we welcomed Brian Phillips to the Board as Non-
Executive Director. Brian has extensive experience
which has already proven valuable to us (see page
57). In September, Russell Atkinson stepped down
as Group CEO, having made a considerable impact
on the development of the Group over the eight
years that he served. This included taking the
business through the IPO, three acquisitions and
the transformation of the personal injury business
into a law firm. In October, Caroline Brown stepped
down from the role of Chair. I would like to thank
them for their contributions to the business and I
wish Russell and Caroline well for the future.
Since October, the Board has consisted of four
Non-Executive Directors and one Executive
Director, with clear separation between the roles
of Non-Executive and Executive Directors. As
Chair, I am responsible for the running of the
Board and have been working closely with James
Saralis (Group CFO), who has responsibility for
implementing the strategy agreed by the Board and
managing the day-to-day operations of the Group.
He is ably supported in this role by our Executive
Management Team (see page 58) and I consider
this structure appropriate to the Group’s current
circumstances, size and complexity.
Summary
The COVID-19 pandemic has had a significant
impact on our business. I am pleased with the fast
and effective response our divisions made to this
dislocation whilst continuing work on their longer-
term strategies.
Both divisions have developed a good
understanding of their respective paths to recovery
from the impact of COVD-19. Our Personal Injury
business has completed its transformation into a
law firm capable of processing its own enquiries in
good time to deal with the challenges presented
by the regulatory reforms. Critical Care has some
exciting plans to develop its market share and
improve efficiencies. The Board continues to
work with our advisers to examine each of our
businesses and how they can contribute to the
Group’s long-term performance. These discussions
have identified the potential to create near-term
value for shareholders through the sale of our
Residential Property business, which we will be
progressing in the months to come. We remain
optimistic about the future and, unless there are
any further setbacks with COVID-19, expect to see
profits in 2021 exceed those in 2020.
Finally, I would like to thank our people for their
unwavering focus on supporting our customers
during this unprecedented year, and our
shareholders for their continued support.
Tim Aspinall
Chair of the Board
4 June 2021
26
NAHL Group Plc Annual Report and Accounts 2020
Operating
Review
CASE STUDY
Keeping clients at the
heart of business
Within our Critical Care division, because
of the lockdown restrictions our Case
Management and Expert Witness associates
were unable to make in-person consultations.
Our teams quickly developed new working
practices to allow our associates to provide
consultations to our catastrophically injured
clients online. Where clients lacked the
required technology devices, Bush & Co
distributed tablet computers to where they
were most needed, providing continuity
of care and further cementing the clients’
place at the centre of its business.
i. We leveraged the flexibility in our Personal
Injury business model to prioritise placement of
enquiries into the panel to maximise cash flow.
ii. We implemented measures to reduce our costs,
including reducing property and lease costs,
introduced temporary voluntary pay reductions
for the Board and senior management, and
cancelled the planned pay increase across the
workforce.
iii. We restructured the Group, merging our
Personal Injury and Residential Property
businesses into the Consumer Legal Services
division and created a Shared Services function.
We identified and secured £1.2m of annualised
savings, including the closure of our London
office.
iv. We made use of Government support in the
form of the Coronavirus Job Retention Scheme
(CJRS) and the deferral of VAT payments.
At the peak of its usage in May, the Group
furloughed 82 staff (30% of total) and by
the end of the year this had reduced to two
staff members. In total we expect £0.4m will
have been claimed under the CJRS, which
helped to keep redundancies to a minimum.
Operating
Review
2020 was an extraordinary year, in which the business – indeed
the whole country – had to adapt and respond to the rapidly
evolving threat of COVID-19.
Overview
For us, COVID-19 posed a risk to our employees
and customers, many of whom are vulnerable. The
lockdown measures imposed by the Government
caused a 27% reduction in consumer accidents
in the year, which had a significant impact on
our revenues. This had the potential to cause
irreversible damage to our businesses.
I am pleased with our response to these threats,
which was swift and decisive. We implemented
our business continuity plans and transitioned
our staff to working from home using our recently
upgraded technology solutions. We continued to
provide uninterrupted support for our customers
and developed new ways of working with the
restrictions put in place. We restructured the Group
to cut costs and re-focusing on short-term tactics
to increase our liquidity. We adapted our business
models, generated over £6m in free cash flow,
reduced net debt and de-risked the balance sheet.
Whilst managing these challenges, the Group
continued to make progress with its long-term
objectives. The Consumer Legal Services division
completed much of its transformation into a
modern, technologically-enabled law firm and our
Critical Care division advanced initiatives that will
contribute to its recovery.
Despite the challenges that we faced, we have
continued to support our customers and in this
period we have helped over 36,000 customers with
new personal injury claims (2019: 56,000); issued
1,148 expert witness reports and initial needs
assessments (2019: 1,325); and provided over
1,200 clients with case management to support
their rehabilitation (2019: 1,294).
Response to COVID-19
The various lockdown measures introduced by
the Government had a dramatic effect on our
business. Throughout the pandemic, our priority
has been ensuring the wellbeing of our staff and
supporting our customers and business partners
through these unprecedented times. To that end, in
March, our IT and Operations teams implemented
continuity plans which enabled colleagues to work
safely from home and to provide remote access
to clients. Recent investments in technology
enhanced our ability to maintain high levels of
service under difficult conditions.
After the initial reaction to the pandemic,
we took a number of actions designed
to increase our resilience and liquidity,
summarised below and on page 3.
28
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
29
Financial performance
Review of the income statement
Consumer Legal Services
Critical Care
Revenue
Consumer Legal Services
Critical Care
Shared Services
Other items
Underlying operating profit
2020
£m
29.6
11.3
40.9
5.4
3.6
(1.9)
(1.4)
5.7
2019
£m
37.7
13.6
51.3
8.8
5.0
(1.6)
(1.8)
10.4
Change
£m
(8.1)
(2.3)
(10.4)
(3.4)
(1.4)
(0.3)
0.4
(4.7)
Change
%
-21.8
-16.4
-20.3
-38.5
-28.3
-17.2
+18.3
-45.7
The 2019 results have been restated to better reflect the structure of the Group as well as a revision to the presentation of the income statement
as explained below. Total revenue and underlying operating profit are unchanged. See note 30 to the financial statements for further details.
Revenue across the Group decreased in
the year by 20.3% from £51.3m to £40.9m,
largely as a result of reduced demand for
our services caused by fewer accidents. As
a result, underlying operating profit also
decreased, by 45.7% from £10.4m to £5.7m at
an underlying margin of 13.8% (2019: 20.3%).
£40.9m
revenue for the year
Changes to financial
reporting disclosures
During the year, the Directors, in conjunction with
the Group’s new external auditors, undertook a
review of NAHL’s financial reporting disclosures.
As a result of this assessment, the Directors
have simplified the presentation of the income
statement and amended the classification of
certain costs along with the definition of certain
alterative performance measures (APMs). In
addition, the Directors have determined that the
presentation of the non-controlling members’
interests in the profits of the Group’s ABS law firms
should be amended in the financial statements and,
as required by IAS 8, the Group has restated the
2019 comparatives to be consistent with this new
presentation. Further details are presented in note
30 and below.
The impact of these changes on the 2019 results is
as follows:
Impact on consolidated statement
of comprehensive income
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
Profit attributable to non-controlling
interest members in LLPs
Financial income
Financial expense
Profit/(loss) before tax
Taxation
2019 as
previously
reported
£000
51,314
(24,990)
26,324
(23,761)
12,192
(811)
(960)
(7,858)
2,563
–
202
(615)
2,150
(635)
Profit/(loss) and total comprehensive
income for the year
1,515
Profit and total comprehensive
income is attributable to:
Owners of the company
Non-controlling interests
Impact on statement of
financial position
Member capital and current
accounts (financial liability)
Total current liabilities
Total liabilities
Net assets
(2,959)
4,474
1,515
–
(17,766)
(42,488)
59,079
Capital and reserves attributable
to non-controlling interests
3,315
Adjustment 1 – Following the restructure of the
Group during the year, costs relating to the Group’s
call centre and lead triage operations have been
reclassified from administrative expenses to cost
of sales. This ensures consistency between the
Group’s Personal Injury and Residential Property
businesses. There is no change to the underlying
operating profit of Consumer Legal Services as a
result of this change.
Adjustment 1
£000
Adjustment 2
£000
Adjustment 3
£000
2019 as
restated
£000
51,314
(27,033)
24,281
(21,718)
10,421
–
–
(7,858)
2,563
(4,474)
202
(615)
(2,324)
(635)
–
–
–
–
–
–
–
–
–
(4,474)
–
–
(4,474)
–
(4,474)
(2,959)
–
(4,474)
(2,959)
–
(4,474)
(2,959)
(3,315)
(3,315)
(3,315)
(3,315)
(21,081)
(45,803)
(3,315)
55,764
(3,315)
–
–
(2,043)
(2,043)
2,043
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,771)
811
960
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Adjustment 2 – In line with best practice, the
Group has presented the costs of share-based
payments and amortisation of intangible assets
arising on business combinations within underlying
operating profit rather than as non-underlying
items. The Directors consider that this change will
result in greater comparability of the Group results
with other listed entities.
30
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
31
Adjustment 3 – Following a detailed review of
the LLP agreements in respect of the Group’s
joint-venture law firms, and in consultation
with the Group’s new auditors, the Directors
have determined that the non-controlling
member capital and current accounts previously
accounted for as equity in the consolidated
statement of financial position, meets the
definition of a financial liability under IAS32
and should be presented as such. There
is no change to the capital and reserves
attributable to the owners of the Company.
As a result, the profit attributable to non-controlling
interests has now been reclassified as an expense
in the statement of comprehensive income rather
than shown as an allocation of profits to a non-
controlling interest. This is in line with treatment
of income and returns on financial liabilities under
IAS 32. There is no change to the profit and total
comprehensive income attributable to the owners
of the Company.
The Directors believe that these changes to
presentation better reflect the nature of the costs
and the operations of the respective businesses.
Consumer Legal Services
performance
In the Consumer Legal Services division, revenue
contracted by 21.8% from £37.7m to £29.6m,
and underlying operating profit fell by 38.5% from
£8.8m to £5.4m.
At the start of 2020, the division was operating as
two distinct businesses and the Personal Injury
business had a solid start to the year. Lead volumes
were showing a positive trend, we were airing a new
TV campaign and our flexible placement strategy
was operating well and growing claim volumes in
National Accident Law. Our Residential Property
business also had an encouraging start to the year
as the first two months of 2020 saw clear signs of
growing optimism in the housing market with the
clarity provided by the outcome of the December
2019 General Election. We witnessed a sharp
increase in market activity and this, combined with
the market share wins delivered in 2019, resulted in
strong top line growth through the first quarter.
However, as it became clear in March that the
country was heading for the first national lockdown,
lead volumes and consumers’ propensity to
convert dropped dramatically. At its worst, in April,
personal injury enquiry volumes dropped to 30% of
2019 levels and Q2, in total, delivered 45% of 2019
volumes. As underlying demand dropped away,
our flexible business model allowed us to respond
quickly, eliminating any marketing spend rendered
inefficient by changes in consumer behaviour
and prioritising the placement of personal injury
enquiries into the panel to maximise cash flow.
Although we temporarily slowed placement of
enquiries into our law firms in 2020 to maximise
the cash opportunity from our panel, our law firms
continued to convert enquiries into ongoing claims
ahead of our target of 67%. Our wholly owned law
firm NAL and the Group’s joint venture law firms,
Your Law and Law Together, saw a 15% increase
in claims won in the year to 31 December 2021
and our estimate of the unrecognised profits
attributable to ongoing claims at 31 December
2020 increased by 85% to £6.1m from the prior
year (profit after deduction of processing costs and
minority interests), representing a store of value to
drive future growth.
Recognising the significance of the pandemic and
associated lockdown measures, we moved early
and quickly to execute a significant organisational
change programme designed to deliver over £1m
in annualised cost-savings, while supporting the
recovery and future growth prospects of the Group.
Our Personal Injury and Residential Property
businesses were merged into a new division,
Consumer Legal Services, combining marketing,
IT, finance and operations to streamline activities
and share expertise. The targeted £1m cost-savings
were exceeded through optimising staffing levels
under the new structure, closing our London office
and rationalising management teams.
Our extensive experience in managing change and
our culture of strong staff engagement ensured
that our people embraced these changes, setting
the division up for a recovery once lockdown
measures were relaxed.
Within the newly combined Consumer Legal
Services division, the Personal Injury business
benefitted from a reassuring recovery in demand
through the summer months and the number of no-
fault accidents naturally increased to 65% of 2019
levels across Q3. The subsequent imposition of
tiered restrictions and the eventual second national
lockdown saw a corresponding decrease in activity,
but at no point did lead volumes fall back to the
lows of Q2, and Q4 delivered 55% of 2019 levels.
Our business model once again proved its flexibility
during this period and, as volumes improved we
cautiously increased the proportion of our enquiries
into National Accident Law, helping to build
experience in the team and increase the number of
ongoing claims.
3. Thirdly, also in December, the business
introduced a new digital customer journey for
RTA claimants. Building on our digital-first
infrastructure on top of our previously launched
‘MyAccount’ self-service claim management
portal, the new digital tool provides customers
with a simple and intuitive online sign-up journey,
meaning that a standard RTA claim can now be
completed entirely online. Along with One Call,
these initiatives serve to improve the speed and
efficiency of the sign-up process and reduce the
time spent on a case, supporting our plans to
profitably process small claims at scale.
In addition, the division continued the turnaround
in the residential property business. With a robust
marketing engine now delivering increasing
numbers of leads, the team started work on
improvements to our triage and processing
capabilities, including a new customer proposition
and CRM system that builds on the technology
platform developed for National Accident Law. This
was subsequently delivered in Spring 2021.
With these initiatives delivered, and an optimised
team and organisational structure in place,
National Accident Law is well prepared to
process an increasing volume of self-generated
work from 2021, including RTA small claims.
The next objective will be scaling National
Accident Law to deal with this increased
volume and continuing to balance the working
capital investment required to process our own
work with cash generated from our panel.
The Residential Property business also rallied
strongly as some of the more onerous restrictions
on the housing market were relaxed in late spring.
Pent-up demand, coupled with the stimulus of the
Stamp Duty Land Tax (SDLT) holiday on properties
valued up to £500,000 and ongoing business
development successes, led to consistently strong
demand for our services throughout H2.
Despite the highly unusual circumstances, we
continued to make progress with our strategic
priorities during 2020. On 2 January 2020, the
Group terminated its partnership in its joint-venture
law firm, National Law Partners. In December,
we completed our three-year Personal Injury
investment programme to prepare us for the
forthcoming industry reforms. Following the launch
of National Accident Law in 2019, we had identified
three key enhancements that were required to
be ready for the implementation of reforms, now
scheduled for 31 May 2021.
1. Firstly, in June 2020, the Personal Injury
business merged its two distinct operating
units – a law firm regulated by the Solicitor’s
Regulation Authority (SRA) and a claims
management company (CMC) regulated by the
Financial Conduct Authority. These combined
to create a technologically-enabled law firm,
solely regulated by the SRA, with a market
leading brand and capable of processing
its own work. The move to one regulator,
and away from being a CMC, has brought
benefits of simplification, greater flexibility
in marketing and a significant cost-saving.
2. Secondly, in December, the National Accident
Law team implemented their ‘One Call’ process
to reduce the number of touchpoints required
to convert a lead into a claim. One Call offers
a seamless customer sign-up journey from
initial contact through to commencing the claim
process with National Accident Law and initial
results from One Call are encouraging and
suggest an increase in the Claim Underway
rate of c.10%.
32
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
33
Our Personal Injury transformation journey
2015
2016
2017
Proposed reforms to
whiplash claims and
the Small Claims limits
announced in Autumn
Statement
The Group commenced
planning for a ‘new
generation’ of personal
injury law firms.
Establishment of our
first joint-venture law
firms, Your Law LLP
and National Law
Partners; National
Accident Helpline
brand relaunched
2020
2019
2018
Final preparations for RTA
Reforms – One Regulator,
One Call, Digital Sign-Up
Journey. NAL winning cases
and growing processing
capability & volume
Launch of National Accident
Law in April 2019; launch
of ‘MyAccount’ claim
management portal; launch
of third joint-venture law
firm, Law Together LLP; re-
platform of National Accident
Helpline website
Development of
National Accident Law
begins – a greenfield
technology-enabled
law firm
Critical Care performance
The performance in Critical Care was more
resilient and revenue decreased by 16.4%
from £13.6m to £11.3m. Underlying operating
profit fell 28.3% from £5.0m to £3.6m at
a margin of 31.7% (2019: 37.0%).
The year started strongly, building on a successful
2019, with promising numbers of new Case
Management and Expert Witness instructions in Q1.
Whilst not immediately impacted by the COVID-19
pandemic, Bush & Co’s clients comprise of highly
vulnerable individuals with complex clinical needs,
and so it was inevitable that our business would be
affected. Initially difficulties arose from challenges
associated with providing rehabilitation services
and access to clients, but later instruction levels
reduced due to fewer accidents occurring.
As expected, Case Management services were
first to be affected, given the typical four to six-
week time lag between an individual suffering
a catastrophic injury and the start of their
rehabilitation. Our Expert Witness business proved
more resilient in the year and the impact is likely
to be felt over subsequent years, as the nature
of these reports means that they are generally
commissioned several years post-injury. There
were nevertheless delays in producing reports
through this period as many third-party providers,
such as insurers, the NHS, and defendant law
firms, faced their own challenges providing timely
information whilst dealing with the impact of the
pandemic on their own operations.
We demonstrated, once again, that Bush & Co is
a leader in its field with an innovative and forward-
looking response to the restrictions placed on
the business. As elsewhere in the Group, the
team seamlessly transitioned to remote working
in the early days of lockdown, but also led
industry thinking by quickly introducing online
assessment and consultations. In an industry-
first at this scale, we provided our clients with
tablet devices to enable them to remain in close
contact with their Case Manager throughout
lockdown – and beyond, in the case of those
needing to shield. Online assessments were
introduced to allow Expert Witness and Initial
Needs Assessments to continue throughout,
helping to support new business enquiries.
We also continued our track record of innovation
in B2B marketing, focusing our efforts on
strengthening relationships with clients, law
firms and associates. With the introduction of
remote case conferences and court hearings,
the team placed themselves at the forefront
of innovation in this area and were recognised
for a second consecutive year with the
prestigious ‘Supporting the Industry Award’ at
the Personal Injury Awards, highlighting their
added value to the industry and their clients.
As lockdown restrictions eventually eased, we
saw a gradual recovery in Case Management
enquiries in H2 and Expert Witness rebounded
strongly. Business development activity continued
uninterrupted and we strengthened support for our
charity partners, helping to raise money and build
new client relationships.
In such a busy and challenging year, the team
were honoured to be asked to produce a report to
support the Thalidomide Trust in their successful
bid to secure lifetime financial support for
Thalidomide survivors. This is a great example of
the value provided by our medico-legal reports
and we were thrilled to hear the announcement by
the Chancellor of the Exchequer in the March 2021
budget and to have been able to contribute to this
important work.
The division continued to make progress with
strategic initiatives that will support our recovery.
We continued with our technology transformation
and strengthened our management team with the
appointment of an experienced Operations Director
to lead this initiative. Project Svelte, our proprietary
report writing tool designed to streamline the
production of Expert Witness reports, progressed
at pace throughout the year ahead of being rolled
out in Q2 2021. Headway was also made with the
company’s insurer proposition, with the core IT
infrastructure completed and two associate Case
Managers deployed to work specifically in this area.
We also appointed a Head of Care Services
to support our ambition to be accredited for
Treatment, Disease, Disorder, Injury (TDDI)
cases with the Care Quality Commission. This
accreditation will allow the business to service
the needs of those requiring nurse-led care.
Progress was also made in implementing fixed-fee
Initial Need Assessments to support new client
acquisition and we expect this to lead to market
share growth.
In 2020, Bush & Co created
an innovative business
development campaign,
delivering regular mailings
to their customers’ homes.
These packs included
wellbeing items like sleep
masks and the ‘Cosy
Night In With Bush’ pack
consisted of popcorn
and other treats. These
mailings were extremely
well received, driving traffic
to Bush’s social media
accounts and keeping the
business front of mind with
key audiences.
Between May and
December it received 200
official compliments from
customers and its Net
Promotor Score (NPS – the
likelihood of the business
being recommended to
others) ended the year at
67 against a legal sector
average of 40.
34
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
35
Shared Services
performance
The costs of the Group’s Shared Services functions
increased in the year by £0.3m to £1.9m (2019:
£1.6m). The increase was due to one-off costs,
primarily from management changes.
ii. £0.4m in relation to the restructure of the
Consumer Legal Services division in the first half
of the year including closure of the London office.
iii. £0.3m of due diligence costs relating to the
takeover bid for the Group by Frenkel Topping.
This comprises all costs incurred by the Group in
connection with this transaction.
Government support
The Group made use of £0.4m of Government
support in the form of the CJRS. This
income is shown in the financial statements
in underlying operating profit as netted
off administration expenses within the
divisional results. We also deferred VAT
payments of £0.4m from 2020 to 2021.
At peak, the Group furloughed 82 members of staff
and this figure reduced to two staff by the end of
the year. The majority of these staff were in the
operations areas of our businesses, which were
overstaffed following the reduction in enquiries
due to the pandemic. Had the CJRS not been in
place then the Group would have undoubtedly been
forced to cut costs further and this is likely to have
involved additional redundancies. The Board was
pleased to have been able to utilise this scheme
and are in no doubt that it has enabled us to retain a
large proportion of our workforce.
Exceptional and non-
underlying items
The Group’s accounting 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 £1.4m (2019: £7.9m).
These include the following.
i. £0.6m of restructuring costs associated with the
strategic transformation of the Group’s personal
injury business. These costs relate to the activities
described above and as this transformation is now
complete, 2020 is the final year of such costs.
Taxation
The Group’s tax charge of £2,000 (2019:
£635,000) represents an effective tax rate of
(0.9)% (2019: (27.3)%). The effective tax rate
is lower than the standard corporation tax rate
of 19.0% for the reasons set out in note 9 to the
financial statements. The deferred tax credit
originates from temporary differences in intangible
assets acquired on business combinations.
Earnings per share (EPS)
and dividend
Underlying EPS for the year was 1.9p (2019: 9.4p).
Underlying EPS provides a better comparison year-
on-year as earnings have been adjusted to exclude
certain exceptional items (net of the standard rate
of corporation tax). This is explained in note 1 to the
financial statements.
Basic EPS for the year was (0.5)p (2019: (6.4)
p) and the diluted EPS was (0.5)p (2019: (6.4)p).
In line with IAS 33, as the Group has a negative
earnings per share, it is assumed that there are no
dilutive shares.
The fall in EPS is due to a reduction in volume
of enquiries in the personal injury business and
Critical Care division as a result of the measures
taken by the Government in response to the
COVID-19 pandemic. The effects of these measures
are explained in more detail above.
The Board does not believe it is appropriate to
reinstate dividends at this time and the Directors
have recommended that no final dividend be paid in
respect of 2020.
Net debt and bank
facilities
The Group carefully managed its cash resources
during the year and took a number of actions to
conserve cash. As a result, net debt at year-end
reduced from £21.0m at 31 December 2019 to
£16.3m at year-end. Net debt is defined in note 29
to the financial statements and is comprised of
£3.6m of cash (2019: £2.6m) offset by borrowings
of £19.9m (2019: £23.6m).
The borrowings represent a balance on the Group’s
revolving credit facility (RCF) with its lender,
Yorkshire/Clydesdale Bank. In last year’s Final
Results, the Group highlighted that it may breach
its banking covenants during 2020 and that it was
in positive discussions with its lender to remedy
this. On 23 July 2020, the Board announced that
these discussions had concluded successfully
and new covenants had been agreed. Importantly,
the Group remained in full covenant compliance
throughout the year and we expect this to continue
through to the end of the facility term. As part of
that agreement, Yorkshire/Clydesdale Bank also
agreed to extend the facility term for a further 12
months, through to 31 December 2022.
Reduction in net debt from
£21.0m to
£16.3m
Review of the statement of
financial position
In reviewing the statement of financial position, I
consider the significant items to be working capital,
defined as trade and other receivables less trade
and other payables, and net debt.
Working capital
Trade and other receivables less trade and other
payables totalled £16.7m at year-end, which is
£5.1m less than last year (2019: £21.8m after
adjusting for the disposal of NLP). I am pleased
with the reduction in working capital in the year,
which has been achieved by placing an increased
proportion of personal injury enquiries into the
panel to drive in-year cash flow, and by realising
growth in settlements relating to historical claims.
This has helped to increase cash flows and reduce
net debt.
Trade receivables and accrued income balances
related to the processing of personal injury claims
increased from £4.3m to £7.3m as the Consumer
Legal Services division increased the number of
new claims placed into its 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 work in progress recognised in our
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
law firms and by our panel. These assumptions are
updated with actual results as claims settle.
Through the flexibility provided by our business
model, we were able to offset this investment with
a significant reduction in trade receivables and
accrued income balances associated with our panel
relationships in the year. This reduced from £19.2m
at 31 December 2019 to £13.7m at 31 December
2020, largely through collecting cash on historical
deals with our panel members. Included within this,
is £2.9m (2019: £4.3m) of accrued income relating
to non-contingent future settlements relating to the
termination of the Group’s partnership in National
Law Partners. £1.4m of cash was received in 2020
in relation to this deal and the remaining amount is
due to be settled by the end of April 2022.
36
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
37
Our people and values
Our people have always been a source of strength
for the Group and in 2020 that strength translated
into improved business resilience. Our Group
Values have always been central to the way that
we do business and last year having a team that is
Driven, Unified, Passionate and Curious was more
important than ever.
In response to the pandemic, management
recognised the importance of visibility of
leadership and regular communications with
staff. A series of weekly briefings and monthly
‘town hall’ type events were all delivered remotely
and were extremely well received. These allowed
management to demonstrate their commitment
to open, honest and transparent communications,
even in the hardest of times, and was consistent
with the Group’s four principles of operation that
guided our COVID-19 response (page 19).
Conscious that at times throughout the year a
proportion of our staff was placed on furlough to
support the business needs, we ensured this group
were included in our communications and I was
pleased with how engaged the business remained. I
would like to thank everyone who spent some time
on furlough over the past year for the important
sacrifice they made for the success of the Group.
Staff wellbeing was a focus for our management
teams in 2020. A range of activities were delivered
such as ongoing training and yoga. These were
designed to stimulate and support staff who were
each going through their own personal challenges.
We were rewarded for our people culture with
incredibly high engagement scores in our annual
staff survey, far exceeding national benchmarks.
We were pleased to receive external validation
when Investors in People awarded its Silver status
to our Residential Property business as well as
Gold standard for Critical Care, adding to the same
award given to our personal injury business in 2019.
Review of the cash flow
statement
Free cash flow (FCF) is the Group’s KPI with
regards to cash flow (see page 14) and I am
pleased to report that the Group increased FCF
from £(1.7)m in 2019 to £6.1m in 2020. As noted
above, this increase was achieved by maximising
the placement of new personal injury claims into
the panel and by realising an increasing level
of settlements from historical claims, as well
as £0.4m of VAT deferred into 2021. Cash on
historical claims includes the £1.4m received in
the period in relation to the termination of our
partnership in National Law Partners.
The Group also monitors underlying cash
conversion, which increased to 228.9% in the year
(2019: 47.4%).
On a statutory basis, the Group increased cash
and cash equivalents by £1.0m in the year (2019:
£1.0m). This was primarily the result of an increase
in net cash generated from operating activities,
partially offset by a repayment of borrowings. Other
significant items include payments made to our
partners in the joint-venture ABS law firms and
the acquisition of intangible assets. Net cash from
operating activities increased from £1.5m in 2019
to £11.0m in 2020. A key factor influencing this was
the strong positive working capital movements
achieved in the year, which is discussed above.
Also, the reduction in profits last year resulted in
£1.0m less tax being paid in 2020 compared to the
previous year.
£3.2m (2019: £2.2m) of drawings were paid to
our partners in the joint-venture law firms during
the year under the terms of our agreements. This
increase year-on-year reflects the growth in claims
won and settled during the year. The Group also
acquired £0.8m of intangible assets in the year
(2019: £0.5m). These were linked to upgrades in
the call centre technology and digital journey in
our Consumer Legal Services division, as well as
technology improvements and the development of
our proprietary Expert Witness report writing tool in
Critical Care.
The Group repaid £3.8m of borrowings
in the year (2019: draw down of £6.5m
of borrowings) on its RCF.
Brands
The Group’s two divisions have a long history
of brand-building investment in their respective
markets (more than 25 years in the case of
National Accident Helpline and 35 years for
Bush & Co). Over the years this investment has
created high levels of brand equity amongst our
target customers, with National Accident Helpline
commanding a position amongst the very best-
known and most-trusted consumer brands in the
personal injury sector, and Bush & Co maintaining a
similarly strong position in the minds of client firms
in the catastrophic injury sector.
In the case of National Accident Helpline, this
underlying strength allowed us to make a
tactical choice to flex our brand marketing spend
through the year in line with anticipated return
on investment: when the market was functioning
normally at the start of the year, we aired new TV
adverts building on our established ‘when its wrong,
make it right’ campaign, but stopped advertising
as the volume of accidents reduced. A decision to
resume brand advertising will be made according
to the potential for positive returns as the market
opens up, the volume of potential customers
increases, and post-pandemic media consumption
patterns are established.
Bush & Co is predominantly a B2B brand, but the
strength and innovative marketing approaches of
the brand helped the business development team
nevertheless maintain and build client relationships
throughout lockdown.
Since the Group acquired Fitzalan Partners in 2015,
our residential property business has developed a
market leading organic search presence through
the use of several established websites. A project
was commenced in 2020 to streamline its brand
proposition to provide greater focus on the brand
that drives most of the volume and reduces the
cost of supporting a broad brand portfolio. This
culminated in the re-launch of our Homeward Legal
brand in Q1 2021, which enjoys strong support from
first-time buyers and is well placed to exploit the
paid search market in the future.
Diversity in our people
Key to the success of
our people agenda is
maintaining a positive
gender balance in our
leadership, management
and staff bodies. Our
gender balance statistics
at 31 December 2020
are as follows.
Board
male to female
60:40
(2019: 50:50)
All staff
male to female
34:66
(2019: 37:63)
In 2020, our Leadership Team concluded
that it wanted to promote increased diversity
across our workforce and it introduced a
series of initiatives, including formal training,
mentoring and an action group of influential
colleagues from across the Group, to develop
this objective and to enhance our culture. The
Group strongly believes that having a more
diverse workforce can help to attract and
retain the best talent and make an important
contribution to the success and sustainability
of our business.
38
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
39
From 31 May 2021, we will process all RTA enquiries
in National Accident Law and in the second half
of 2021, if conditions allow, we plan to process an
increasing number of non-RTA enquiries.
Looking further ahead, and assuming the continued
success of the UK vaccination programme and
the current timetable for bringing COVID-19
restrictions to an end, we anticipate a return to the
pre-pandemic trends in our markets in 2022. We
expect personal injury enquiry levels to increase
sequentially each quarter this year and to deliver
80–90% of 2019 levels by December 2021. In
Critical Care, we forecast the market will return
to pre-pandemic levels of catastrophic injuries
during 2022 with a similar delay between accident
and instruction as before, although expert witness
instruction will be subject to some longer-term
softening in market volumes resulting from
depressed volumes in the preceeding 14 months. If
these forecasts are correct, we would expect to see
growth in 2021 revenue and profit in both divisions
compared to 2020.
Finally, NAHL is a group built around a strong
values-based culture with talented and committed
people at its heart. This year has highlighted their
resilience and adaptability in the most extreme of
circumstances. I would like to thank them all for
their exceptional work during a challenging year.
James Saralis
Chief Financial Officer
4 June 2021
Potential sale of our
Residential Property
business
Over the last two years, the Group has completed
significant strides to reposition and streamline the
operations of its Residential Property business.
The business has performed well through the
pandemic and we believe is now positioned to
grow profitably in the years to come due to its
strong marketing and lead generation capabilities
and full suite search business. However, the
market for conveyancing and residential property
services continues to consolidate with several
large acquisitive platforms emerging. Having
observed these trends and in light of several in-
bound enquiries, the Board has decided to formally
investigate a potential sale of the Residential
Property business, and will be launching this
process in the coming weeks.
Conclusion and outlook
2020 saw the Group demonstrate its trading
resilience through a year of unprecedented market
change. The impact of the pandemic on our
businesses was severe but we remained profitable,
reduced net debt and de-risked the balance sheet.
In doing so, we delayed scaling National Accident
Law but we made progress with our personal injury
transformation and have created a new, sustainable
business model and we will be ready for the
industry reforms being introduced on 31 May 2021.
Since the year-end, the third national lockdown
in January 2021 caused another reduction in the
number of accidents, which again impacted our
business. The volume of personal injury enquiries
in Q1 2021 fell to 46% of 2019 (pre-COVID) levels,
albeit that this increased to 57% in April.
Revenue in the first four months of the year was
in line with the Board’s expectations at 19% below
2019, reflecting the impact of the third lockdown
on volumes but importantly also reflecting the
increased investment in processing enquiries in
National Accident Law . In this period in 2021,
over 1,600 enquiries were placed into National
Accident Law , including over 80% of all of our
self-generated RTA enquiries. In 2019 this figure
was just over 100 new claims demonstrating
how far the business has come in processing
its own claims. This investment will generate
profits and cash later in 2021 and beyond.
40
NAHL Group Plc Annual Report and Accounts 2020
Strategic
Priorities
202020192018 To drive value through our business model the division’s strategic priorities are:
Consumer Legal Services
Strategic Priority
Description
2020 Focus & Progress
2021 Focus
Strategic Priority
Description
2020 Focus & Progress
2021 Focus
Efficient
claim
processing
Our People
Underpinned by
our technology
platform and
investments
in processing
capability
which will give
us the option
to profitably
process a wide
range of claim
types
An agile,
proactive and
highly engaged
workforce
united in our
values
Further ramp-up
of NAL processing
capacity following
launch in April 2019.
Development of NAL capability
to process both RTA (including
small claims) and non-RTA
claims. This further increases
our placement options, per
our flexible business model.
Focused on safeguarding
our people, transitioning
to remote working and
maintaining engagement
whilst delivering the right
customer outcomes, solid
trading results in context
and progressing strategic
priorities.
Delivering the transition to a
post-pandemic operating model,
with a lower-cost blend of remote
and office-based working that
supports our people and our
customers, whilst maximising
value creation for shareholders.
Leading
trusted
brands
We operate well-
known brands
that are trusted
by consumers
and partners
New TV campaign aired
through Q1, paused for the
balance of 2020 as market
demand and Return on
Investment (ROI) dropped.
TV advertising investment is
constantly under review, pending
a recovery in market demand that
supports positive ROI from Above-
The-Line spend.
Optimal
enquiry
volume and
cost
We invest
in efficient
marketing
to attract
consumers to
our websites
and convert
visitors to leads
Optimising
customer
experience
We create
industry-leading
digital and
offline customer
journeys
Transitioning from a claims
management company to a
law firm.
Ongoing focus on SEO
that supported organic
enquiry volumes, resulting
in positive impact from
Google algorithm updates.
Continued Paid Search
Optimisation to balance
Cost per Enquiry with
Return on Advertising
Spend.
Conversion Rate
Optimisation (CRO) –
increasing the % of website
visitors opting to seek our
support.
Launch of improved
customer journey via:
One Call – a seamless
triage and sign-up call
for customers of NAL,
eliminating disruptive
handovers
New digital sign-
up journey for RTA
claimants, simplifying and
speeding up the process
for straightforward cases
Consolidation of multiple
Residential Property websites into
one core brand: Homeward Legal,
a proven asset in this market with
an established read Search Engine
Optimisation (SEO) profile.
Continued focus in all three areas,
including:
strengthening our in-house
content development team
to support organic search
performance
further increase use of first-
party data to improve search
performance
ongoing CRO programme to
maximise click-through rate,
visitor-to-lead and lead-to-
enquiry conversion
Further enhancements to include:
Updating the “MyAccount”
digital self-service portal to
facilitate seamless processing of
RTA Small Claims
Extending the digital sign-up
journey for claimants with non-
RTA cases, bringing the speed
and simplicity benefits to these
higher-value cases
New CRM software for the
Homeward Legal (Residential
Property) business
42
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
43
Critical Care
Strategic Priority
Description
2020 Focus & Progress
2021 Focus
A trusted,
high-quality
B2B brand
Defendant
proposition
Focus on
business
development
Leading
Associate
group
Developing
Technology
Our People
A leading B2B
brand with 35
years service to
the Catastrophic
Injury market
Moving into
lower value
claims within the
same market
We build
deep and
long-standing
relationships
across a broad
client base
We exclusively
work with
experienced,
highly regarded
Associate
Expert
Witnesses and
Case Managers
covering a
wide range of
specialisms
We develop
bespoke
technology
solutions to
support quality
and increase
efficiency for
clients and
Associates
An agile,
proactive and
highly engaged
team
Invested in CRM and,
integrated marketing and
business development,
Expansion of the brand
into adjacent sectors and
differentiated marketing across
personal injury and clinical
negligence.
Building relationships with
insurers.
Developing client and customer
portal and workflow.
Maintain relationships with
law firms and other sources
of instruction through
innovative B2B marketing.
Utilising JVs to build brand, and
host multi-customer events.
Supported Associates to
continue to deliver services
throughout lockdown
through innovative
technology solutions,
building the Bush & Co
brand amongst Case
Managers and Expert
Witnesses.
Launch Care Quality Commission
(CQC) accredited nurse-
led care service to support
catastrophically injured clients.
Build customised service to
Associates to further tailor to
client’s needs.
Online assessment and
case conferences
Technology projects
continued as planned.
Launch our new proprietary digital
medico-legal report writing tool
for Expert Witness in Q2.
Focused on safeguarding
our people, transitioning
to remote working and
maintaining engagement
whilst delivering the
right outcomes for the
people we support,
solid trading results in
context and progressing
strategic priorities.
Delivering the transition to a
post-pandemic operating model,
with a lower-cost blend of remote
and office-based working that
supports our people and our
customers, whilst maximising
value creation for shareholders.
44
NAHL Group Plc Annual Report and Accounts 2020
Principal
risks and
uncertainties
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, Executive
Directors and management.
Our risk management
framework
The Board maintains a risk management
framework (figure 1, page 48) 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.
Risk appetite
Every year, the Board reviews and sets the
Group’s appetite for risk. This is done by
attributing a score to each one of seven
separate risk categories that the Board has
identified. The categories are as follows.
1. Strategic
2. Transformation
3. Operational
4. Financial
5. People and culture
6. Regulatory
7. IT, systems and data security
They are scored on a scale of 1 (lowest risk) to 12
(highest risk) and a score of 1–3 is described as an
averse appetite; 4–6 is a cautious appetite; 7–9 is
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.
46
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
47
Figure 1 – Risk management framework
The principal risks identified are detailed below:
i
S
t
r
a
t
e
g
c
a
s
s
e
s
s
m
e
n
t
o
f
r
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
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
Divisional
management
Identifies, manages and reports local risks
Maintains local risk registers and mitigation plans
Regular assessments of emerging risks
Implements mitigation plans
Reports quarterly to Executive Directors on risk
g
n
i
t
r
o
p
e
r
d
n
a
n
o
i
t
a
c
i
f
i
t
n
e
d
i
k
s
i
R
Category
Financial
£
Risk
Appetite
Cautious
(6/12)
Description
Credit exposure
The Group has a number of
historic and ongoing arrangements
with law firm customers, some
of which involve deferred
payments, and which create a
credit risk in the event of their
insolvency or a dispute.
Financial
£
Cautious
(6/12)
Transformation
Balanced
(7/12)
Accuracy of business
model assumptions
(including impact of
COVID-19)
The Group’s business model
relies on several key assumptions
which, if not delivered, have a
material impact on financial
performance and strategy. Some
of these assumptions could be
impacted by an elongation of the
COVID-19 pandemic. These include
assumptions relating to:
Enquiry generation costs and
volumes
Case processing performance
Small claims processing efficiency
Volume of critical care instructions
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.
Mitigation
The Group’s Financial risk
appetite has reduced from
balanced to cautious. The Group
has processes to approve credit
limits and monitor exposures
and has adopted a more cautious
approach when considering
deferred terms for panel law
firms. Contractual provisions
such as set-off clauses are in
place to mitigate the risk for
material debts. Credit exposure
is not material in the Critical Care
division due to the dilution of risk
between multiple customers.
Model assumptions are
determined by management
with oversight from Executive
Directors and the Board.
Sensitivities are performed on
the key assumptions. The model
assumptions are scrutinised and
compared to actual results on a
regular basis. The 2021 budget
factored in assumptions relating
to an ongoing COVID-19 impact
on instruction volumes and other
key metrics across the Group .
Additional measures have been
taken to de-risk assumptions by
securing additional contractual
guarantees from key partners.
Oversight of strategic projects is
provided by the Executive Director
and the Board. Dedicated project
management resource is in place
to support delivery with a strong
focus from the management
teams. Progress is in line with plan
on all the Group’s key strategic
projects, including changes
required to process small claims
from 31 May 2021.
48
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
49
Category
Regulatory
Risk
Appetite
Cautious
(4/12)
Financial
Cautious
(6/12)
£
IT, systems and
data security
Cautious
(4/12)
Description
Regulatory Breaches
The Consumer Legal Services
division operates in a highly
regulated environment and
handles high volumes of sensitive
customer data including credit card
information & medical data. The
division also handles client money.
The Group’s law firms are regulated
by the Solicitors Regulation
Authority. Breaches of regulations
could result in regulatory action
against those businesses, directors
and compliance officers.
Critical care is required to be
audited by the CQC and any failings
could create reputational damage
and loss of customers.
Critical Care self-employed
associate model
New IR35 legislation requires
careful interpretation to ensure
arrangements do not breach tax
laws, resulting in unexpected tax
charges and fines.
Loss of key self-employed
associates and caseloads could
create a revenue impact if
associates are not replaced. A
consequence of this could be
disruption to the self-employed
model, a lack of associates willing
to provide specialist services and
potentially lost revenues if services
provided by associates cannot be
replaced.
IT Infrastructure and
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. The Group relies
on a number key IT suppliers and its
systems are increasingly automated
creating an increased exposure to
systems error.
Mitigation
Description
Key Person Dependency
Unavailability or loss of key
individuals could have a detrimental
impact on business performance.
Significant Intellectual property,
relationships and experience
is held by certain members of
management. If they became
unavailable there could be a
short-term impact on operational
performance and the progress of
key projects.
Working capital
management
The Group is investing 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. The
Group is also investing in strategic
change projects in both divisions in
order to generate future growth.
This is against the backdrop of
reduced revenues and enhanced
credit risk resulting from the
COVID-19 pandemic, for an
uncertain period of time. Whilst the
Group generated £6.1m of FCF in
2020, if this were to change and the
Group ran out of capital before the
book of claims matures then it could
fail to capitalise on the opportunity,
miss its financial forecasts and the
bank could demand repayment of
the debt facility
Both divisions employ dedicated
compliance resources
responsible for managing
compliance issues and reporting
directly to the Board.
External legal advice is taken,
including from leading counsel
where appropriate. Advice is
taken where new regulatory risks
arise from changes to internal
processes / structure or new
legalisation / regulation.
The Critical Care division employs
a clinical governance team which
reports monthly to divisional
management.
The Board has taken external
advice by a leading accountancy
and tax firm and made the
necessary status determinations
for each associate. These
decisions are supported by
contractual terms, operational
processes and working practices
currently in place. Bush & Co
regularly monitors compliance
with these processes and has
controls in place to ensure the
risk of a breach of the legislation
is low.
The Group takes data security
very seriously. The Board has
undertaken a review of processes
and controls relating to cyber
security during 2021.
The Group has robust policies
and procedures to ensure it
is compliant with the Data
Protection Act 2018 and
the General Data Protection
Regulations (GDPR).
Business Continuity plans are in
place, the Group’s employees are
provided with regular training and
the cyber security controls are
regularly stress tested.
Category
People &
Culture
Risk
Appetite
Balanced
(8/12)
Financial
£
Cautious
(6/12)
Mitigation
There is a succession plan in place
covering all key individuals and no
one person is responsible for any
key relationship. Bonus schemes
and share options are put in
place to support retention of
key employees and are regularly
reviewed by the Renumeration
Committee. There has been a
significant focus on staff wellbeing
in response to COVID-19
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
and reported to the Board.
The Board have suspended
dividend payments in order to
reduce debt and thereby reduce
this risk. Decisions around future
dividends will be made with
consideration to future capital
requirements.
50
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
51
Our customers
The Group’s customers fall into two distinct
categories covering both business-to-business
and business-to-consumer sectors and the Group
is committed 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,
technology providers, self-employed associates
and search agents and surveyors. Again, each
division has dedicated marketing and operations
teams who work closely with these suppliers to
ensure the successful delivery of these services for
both parties.
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 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 key decisions made by the Board during the
year were:
Flexing the placement of enquiries in personal
injury to focus on short term cash and profits
in order to safeguard the ability of the Group to
operate in the short term by meeting its debts
as they fall due and operating within its banking
covenants (see page 32 for further details)
Merging the personal injury and residential
property divisions to create a new Consumer
Legal Services division, identifying annualised
cost savings in the process of £1.2m which will
streamline operations and support the recovery
and future growth prospects of the Group (see
page 32 for more details)
Continuing with its strategic plans in personal
injury to transition from a claims management
company to a law firm in preparation for the
small claims reforms in May 2021, positioning
the division to be ready for small claims and
processing an increasing number of enquiries in
National Accident Law to generate higher profits
(see page 33 for more details).
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
Operating Review on page 28. Our trusted brands
(Operating Review, page 35), Industry awards
(Operating review, page 35) and Investors in People
(Operating Review, page 38) are all testament to
how the business strives to maintain its reputation
for high standards of business conduct.
The Board sees the value of building and
maintaining strong relationships with its key
stakeholders, who are identified below.
Our employees
The business is committed to open and transparent
communication with its staff, primarily through
the delivery of bi-monthly all-staff meetings where
strategic and performance updates are delivered by
the Executive Director 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
about our people, please see Our Culture, Our
Business on page 18.
52
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
53
100%clean energy at our Daventry office
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 engaging with investors through
our Annual General Meeting and meeting larger
shareholders during twice-yearly roadshows
following the announcement of the full year and
interim results. The Chair is 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 100%
clean energy and the Consumer Legal Services
main office using recycled refrigeration for its air
conditioning. Our employees remain committed to
their local communities.
Our employees remain committed to their local
communities and the Group supports organisations
both nationally, as with Paradance UK, and local
through Food Banks local to its office bases.
Our employees remain committed to their local
communities and the Group supports organisations
both nationally, as with Paradance UK, and local
through Food Banks local to its office bases.
This strategic report was approved by the Board on
4 June 2021 and signed on its behalf by:
Tim Aspinall
Chair
54
NAHL Group Plc Annual Report and Accounts 2020
2020
01 02 03 04 05 06 07
01 02 03 04 05 06 07
08 09 10 11 12 13 14
08 09 10 11 12 13 14
15 16 17 18 19 20 21
15 16 17 18 19 20 21
22 23 24 25 26 27 28
22 23 24 25 26 27 28
30
30
Leadership and
Governance
Board
of
Directors
Tim Aspinall
Gillian Kent
Brian Phillips
Non-Executive Director
Brian joined the Board on 25
June 2020 as a Non-Executive
Director.
He has had a long and
distinguished career in private
equity and in 2014 stepped back from full time
employment to build a portfolio of investments
using his own capital. He later used this experience
and extensive contacts in the field to start Ethos
Partners LLP in 2017, which is a private investment
office operating in the UK small cap and private
equity market.
During his executive career, Brian was previously
the Chief Investment Officer for Greenhill Capital
Partners in London where he was recruited to set
up a new private equity business for Greenhill &
Co., a listed US investment bank. Previous to this
he was Managing Director for L&G Ventures and a
Director at various firms including Bridgepoint and
Gartmore Private Capital.
Brian is a Chartered Accountant and member of the
Institute of Chartered Accountants of Scotland.
Non-Executive Chair
Tim Aspinall became Chair in
October 2020, having been a
Non-Executive Director since
June 2016. He sits on the
Group’s Remuneration and
Nomination Committees and attends Audit and
Risk Committee by invitation.
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 Kuro Health
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.
James Saralis
Chief Financial Officer
James Saralis is Chief Financial
Officer of the Group, which
he joined in January 2018.
His responsibilities include
implementing the strategy
agreed by the Board, managing the day-to-day
operations of the Group and liaising with the
Group’s investors and 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
Gillian Kent became Non-
Executive Director in November
2014 and is Chair of the Group’s
Remuneration Committee and
Nomination Committee. She
also sits on the Audit & Risk 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, Marketing
Director and Director of Strategy and Business
Development at Microsoft (MSN).
Sally Tilleray
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 digital agency Kagool, Chair
of marketing communications firm Cognito and
Senior Independent Non-Executive Director of
Mind Gym plc, the AIM listed psychology based
organisational 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.
56
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
57
Executive
Management
Team
Simon Trott
Chief Operating Officer
– Consumer Legal
Services
Simon is responsible for
the executive leadership &
operations of the Consumer
Legal Services division, which includes
National Accident law, encompassing the
National Accident Helpline brand, Searches
UK, Homeward Legal, Your Law, Law Together
& National Conveyancing Partners.
Over the last few years, Simon has been
leading the division’s transformation strategy,
including the successful launch of National
Accident Law in April 2019. This has comprised
transitioning from being a claims management
company into a modern, technologically-
enabled law firm, with a market leading brand
that is able to process its own enquiries.
Previously, Simon spent 20 years in senior
positions within the general insurance industry,
most recently at Towergate Partnership Group,
culminating in his roles as CEO of Towergate’s
Direct Division & RKH Group.
Will Herbertson
Director of Marketing
and Strategy –
Consumer Legal Services
Will joined the Group as Managing
Director of the Group’s Residential
Property division in September
2018, before leading the successful merger of this
area with the Personal Injury division during 2020.
In his current role as Director of Marketing
and Strategy, Will holds broad responsibility
for brand-building, lead generation, market
analysis, websites and customer journeys for
the combined Consumer Legal Services division,
and supports the divisional executive team and
Group board with strategy development.
Will brings extensive commercial, marketing and
digital leadership experience to the Group. Prior to
joining the Group, Will was a Commercial Director at
MoneySupermarket and held UK and international
sales and marketing positions at Procter & Gamble,
where he started his career.
Helen Jackson
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.
Marcus Lamont
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.
Chair’s
Introduction to
Governance
Shareholder engagement
An important part of the QCA code concerns
engagement and communication with our
shareholders. We welcome open and regular
dialogue with our shareholders and the Our
Investors section of our website explains how we
have sought to do this.
In 2020, due to the restrictions put in place by the
UK Government to limit the spread of COVID-19,
we were forced to hold our Annual General Meeting
as a closed meeting with the minimum number of
shareholders present to form a quorum. Despite
this, we sought to maintain engagement by
encouraging shareholders to listen to the meeting
via conference call and allowed them to submit
questions, which were answered by the Directors
during the meeting.
It is our hope that this year, in line with the
Government’s roadmap to ease COVID-19
restrictions, we will be permitted to return to a
face-to-face AGM and I would like to extend an
invitation to all shareholders to attend our AGM and
to engage with the Board and other members of our
senior leadership team who will be in attendance.
Tim Aspinall
Chair
Dear Shareholder,
On behalf of the Board, I am pleased to introduce
our Corporate Governance statement for the
year ended 31 December 2020. 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.
Compliance with the QCA
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. 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. The ten principles of the code are
set out in the table on page 63 and 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.
58
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
59
Governance
Statement
The Board
Board composition
The Board comprises the Non-Executive Chair,
three independent Non-Executive Directors and
one Executive Director. Their biographies can be
found on pages 56–57.
There is a clear separation of the roles of Non-
Executive Chair and Executive Director. The Chair,
Tim Aspinall, 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 Executive Director, James Saralis
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 other senior leaders in the Group.
As Company Secretary, James Saralis, 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. There is currently no Senior Independent
Non-Executive Director. The Board believes
this is appropriate give the size of the Board
and will review this practice as part of the Board
effectiveness review later in the year.
Members of the Board maintain membership
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.
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 46.
Meetings were attended virtually from March
2020 and the increase in the number of meetings
compared to prior years was a direct result of the
Group’s response to the COVID-19 pandemic as
well as the aborted offer for the Group towards the
end of 2020.
The Board met 16 times during 2020 and the
meetings last for approximately half a day. In
addition to this, all Directors attend the Group’s
Annual General Meeting. 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:
Table of Board attendance
Tim Aspinall
Caroline Brown1
Russell Atkinson2
James Saralis
Gillian Kent
Sally Tilleray
Brian Phillips3
Board
16/16
11/11
10/10
16/16
16/16
16/16
7/7
Audit
Remuneration
Nomination
5/5
N/A
N/A
N/A
5/5
5/5
N/A
3/3
2/2
N/A
N/A
3/3
3/3
N/A
2/2
2/2
N/A
N/A
2/2
2/2
N/A
1. Caroline Brown resigned from the Board on 7 October 2020
2. Russell Atkinson resigned from the Board on 4 September 2020
3. Brian Phillips was appointed to the Board on 23 June 2020
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 last undertook an evaluation of its
effectiveness in 2019 which was supervised by the
Nomination Committee with the assistance of the
Company Secretary. The approach taken was to
issue a questionnaire, covering topics including
Board composition and governance, Board
operations, strategy, stakeholder relations and
the performance of individual Directors and Board
Committees. This was followed by a discussion with
the full Board.
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 key areas of focus and subsequent actions
were presented in the Group’s financial statements
for the financial year to 31 December 2019.
the Group is provided with general accounting,
administrative and secretarial services as may
reasonably be required; and
The Board plans to conduct the next review into its
effectiveness in the second half of 2021. The results
of this review will be presented in the Group’s
financial statements for the financial year to 31
December 2021.
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
60
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
61
executives. The Remuneration Committee also has
responsibility for:
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
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 Executive Director.
No director or manager may be involved in any
discussions as to their own remuneration.
Nomination Committee
The Nomination Committee consists of:
Gillian Kent (Chair)
Tim Aspinall
Sally Tilleray
Brian Phillips
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 2020 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.
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
Brian Phillips
Tim Aspinall served on the Committee until his
appointment to the role of Chair of the Board on
7 October 2020. 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.
Remuneration Committee
The Remuneration Committee consists of:
Gillian Kent (Chair)
Tim Aspinall
Sally Tilleray
Brian Phillips
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
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
Business Models (pages 9 and 12) and Our
Businesses on pages 6–8 and pages 10–11
2. Seek to understand and meet shareholder needs
See Chair’s Introduction to Governance (page 59)
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 Section 172 Statement (page 52)
See Principal Risks and Uncertainties (page 46)
Governance principles
Reference
5. Maintain the Board as a well-functioning,
See Governance Statement (page 60)
balanced team led by the Chair
6. Ensure that between them the directors have
See Governance Statement (page 60)
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 60)
8. Promote a corporate culture that is based on
See Our Culture, Our Business (pages 18–22)
ethical values and behaviours
9. Maintain governance structures and processes
See Governance Statement (page 60)
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 60) and Section
172 Statement (page 52)
62
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
63
Audit and
Risk Committee
Report
Dear Shareholder,
I am pleased to present my report of the Audit &
Risk Committee for the year ended 31 December
2020.
The composition and responsibilities of the
Committee are set out on page 62. The Chair,
Chief Financial Officer, Group Financial Controller
and external auditors attend the Committee by
invitation, if required.
The main items of business considered by the
Committee during the year included:
Appointment of the
external auditor
The Committee considers a number of areas when
reviewing the engagement of the external auditor,
namely their performance in discharging the audit,
the scope of the audit and terms of engagement,
their independence and objectivity, and
remuneration. Whilst the Committee was satisfied
with the performance of PricewaterhouseCoopers
(PwC) and its audit of the financial statements
for the year ended 31 December 2019, following a
review of PwC’s proposals for this year’s audit, the
Committee concluded that the proposal did not
represent value for money for the Company.
Accordingly, the Committee launched a
competitive tender process which concluded
with Mazars LLP (Mazars) being appointed as the
Group’s new external auditor for the year ended 31
December 2020.
PricewaterhouseCoopers LLP resigned by notice to
the Company under section 516 of the Companies
Act 2006 and has confirmed that there were no
matters connected with it ceasing to hold office that
need to be brought to the attention of members
or creditors of the Group for the purposes of
section 519 of the Companies Act 2006.
Following the completion of this year’s audit, the
Committee has confirmed it is satisfied with the
independence, objectivity and effectiveness of
Mazars 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.
External audit process
The external auditor prepared a plan for its audit of
the full year financial statements, which, this year,
was presented to the Committee in March 2021.
This was later than the normal timescales due to
the aborted takeover offer of the Group by Frenkel
Topping Group plc. The audit plan set out the scope
of the audit, areas of significant risk for the external
auditor to focus their work on and audit timetable.
This plan was reviewed and agreed in advance by
the Audit & Risk Committee.
Following its review, the external 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.
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 a regulatory audit of
compliance with the Solicitors Accounting Rules in
National Accident Law.
Changes to financial
reporting disclosures
During the year, the Directors, in conjunction with
the Group’s new external auditors, undertook a
review of NAHL’s financial reporting disclosures.
As a result of this assessment, the Directors
have simplified the presentation of the income
statement and amended the classification of
certain costs along with the definition of certain
alterative performance measures (APMs). In
addition, the Directors have determined that the
presentation of the non-controlling members’
interests in the profits of the Group’s ABS law firms
should be amended in the financial statements and,
as required by IAS 8, the Group has restated the
2019 comparatives to be consistent with this new
presentation.
The impact of these changes on the 2019 results is
as follows:
Adjustment 1 – Following the restructure of the
Group during the year, costs relating to the Group’s
call centre and lead triage operations have been
reclassified from administrative expenses to cost
of sales. This ensures consistency between the
Group’s Personal Injury and Residential Property
businesses. There is no change to the underlying
operating profit of Consumer Legal Services as a
result of this change.
Adjustment 2 – In line with best practice, the
Group has presented the costs of share-based
payments and amortisation of intangible assets
arising on business combinations within underlying
operating profit rather than as non-underlying
items. The Directors consider that this change will
result in greater comparability of the Group results
with other listed entities.
Adjustment 3 – Following a detailed review of
the LLP agreements in respect of the Group’s
joint-venture law firms, and in consultation with
the Group’s new auditors, the Directors have
determined that the non-controlling member
capital and current accounts previously accounted
for as equity in the consolidated statement of
financial position, meets the definition of a financial
liability under IAS32 and should be presented as
such. There is no change to the capital and reserves
attributable to the owners of the Company.
As a result, the profit attributable to non-controlling
interests has now been reclassified as an expense
in the statement of comprehensive income rather
than shown as an allocation of profits to a non-
controlling interest. This is in line with treatment
of income and returns on financial liabilities under
IAS 32. There is no change to the profit and total
comprehensive income attributable to the owners
of the Company.
The Directors believe that these changes to
presentation better reflect the nature of the costs
and the operations of the respective businesses.
Further details are presented in note 30.
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 99. In
consideration of these judgements, the Committee
reviewed the recommendations of the finance
function and received reports from the external
auditors on their findings. These judgements
comprised the following:
The decision to consolidate the results and
net assets of two Limited Liability Partnership
(LLP) law firms in the financial statements. The
Committee considers that Your Law LLP and 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. Therefore, the Group is
64
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
65
correct in consolidating these entities within the
financial statements with a corresponding liability
recognised for our partner firms’ share of profit.
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 108). 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 99, 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 100), 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.
Having reviewed the assumptions used in the
calculation of carrying value, and the sensitivity
analysis performed, the Committee was satisfied
that sufficient headroom to the carrying value
existed. Accordingly, the Committee concluded
that this did not warrant disclosure under the key
estimates in note 1.
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.
The Group has access to a £25.0m revolving credit
facility (RCF) with its bankers and at the time of
writing, it has drawn £19.0m of this facility and has
cash of £3.5m. 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.
The Group’s RCF is subject to quarterly covenant
testing and all of the scenarios modelled suggest
that the Group will continue to operate within its
covenants for the foreseeable future.
The Group has modelled a worst case scenario,
assuming that volumes fall back to their 2020
levels, and has then considered the options it would
have available to mitigate against any shortfall in
profits and cash. Under this scenario, the Group
would be able to implement sufficient mitigating
actions in order to operate within its covenants. The
likelihood of this scenario occurring is considered
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
to be remote and therefore the directors consider
the Going Concern basis of accounting to be
appropriate.
The directors have also considered the ability of
the Group to refinance, given the loan term expires
on 31 December 2022, and are confident that the
Group will be able to secure future funding.
Further details of the going concern review are
given on page 98. Based on this review, the
Committee has a reasonable expectation that the
Company and Group has adequate resources to
continue in existence for the foreseeable future and
has concluded it is appropriate to adopt the going
concern basis of accounting in the preparation of
the financial statements.
New and forthcoming
accounting standards
There were no new accounting standards during
the year.
Risk Management
Framework and controls
The Audit & Risk Committee provides support
to the Board in its oversight of the Group’s risk
management framework, as set out on page 48
and monitors the effectiveness of risk management
through reporting and assurance.
During the year, the Committee commissioned a
review into cyber-security risks across the Group
in response to increased levels of fraud in the
legal industry and potential emerging risks arising
from the Group’s decision to ask its employees
to work from home during the periods of national
lockdown. The review was conducted by the Group
Legal & Compliance Director and the IT Director
and recommended a number of improvements to
processes and implemented enhanced training to
mitigate the risks.
The Committee reviewed the output of the
cyber-security review along with the wider risk
management framework and is satisfied that
appropriate mitigating controls are in place.
At present the Group does not have an internal
audit function, but the finance function conducts
a programme of review of the financial controls
operating within each of the businesses, identifying
areas to be improved and reporting the outcomes
to the Committee. The Committee believes that in
66
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
67
Remuneration
Committee
Report
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 2020, which
sets out the future Directors’ Remuneration Policy,
intended to take effect from the close of the 2021
Annual General Meeting and the Annual Report on
Remuneration.
Review of the 2020
financial year
2020 presented challenges to the business through
continued regulatory uncertainty and the COVID-19
global pandemic. The pandemic restrictions had
the effect of reducing volumes in our Personal
Injury and Critical Care divisions contributing to a
decline in Group revenue of 20.3% to £40.9m and
in underlying profit of 45.7% to £5.7m.
The Company accessed the Government’s
Coronavirus Job Retention Scheme from April to
December and focused on cost saving measures
throughout the year resulting in annualised savings
of £1.2m. Investment into the business was
targeted at essential capabilities and key strategic
initiatives and proactive steps were taken to
manage the Group’s balance sheet and maximise
liquidity, resulting in a year end net debt of £16.3m
(2019: £21.0m).
The Company was also the target of a reverse
takeover bid which involved extensive discussions
from September 2020 until they were drawn to a
close in January 2021 when an offer was not made.
The above informed and shaped the decisions
of the Committee during the year and in the
construction of the new Remuneration Policy.
New 2021 Remuneration Policy
Our previous Directors’ Remuneration Policy
was approved by an advisory vote at the
2018 Annual General Meeting and became
effective for three years from the close of
that meeting. The Committee has taken
the opportunity to review the executive
remuneration framework to ensure that it:
retains and motivates our Executive Directors and
wider management in order to provide the Group
with continuity and stability at the leadership level
is simple and transparent
takes into account market practice, shareholder
expectations and best practice governance
developments for AIM companies
Following consultation with major shareholders,
the following key changes have been agreed by
the Committee.
Restricted Share Plan (RSP)
The Committee agreed to replace the current
Performance Share Plan (PSP) with annual awards
of restricted shares. The Committee believes this
is the right approach for the Group as it provides
a simple retention and lock-in mechanism for our
CFO and wider management at a time when it is
critical to sustain a stable leadership team who
are focused on delivering the Group’s strategic
priorities and value to shareholders, especially
during an uncertain environment with factors
outside of the leadership team’s control, which
has been a key challenge for the Committee in
setting robust long-term targets when granting PSP
awards in recent years.
The design terms are:
Reduction in maximum award from 100%
of salary under the PSP to 50% of salary in
respect of a financial year under the RSP. This
50% reduction is in line with guidance from
shareholders and proxy voting agencies.
Three-year vesting period, subject to continued
employment and the Committee’s assessment of
overall business performance during the vesting
period (taking into account financial and share
price performance), with a two year clawback in
the event of material misstatement of the Group’s
financial results or if the participant has been
guilty of serious misconduct.
Awards will ordinarily be pro-rated for time served
in the event of a change of control, unless the
Committee determination, at its discretion, that
circumstances exist to disapply time pro-rating.
Other policy changes
Alignment of Executive Director employer
pension contribution (or cash allowance) with the
wider workforce (currently 3% of salary), from a
previous contribution of up to 10% of salary.
Flexibility to pay a transformation transaction
bonus to Executive Directors in addition to
the regular performance based bonus. The
transaction bonus is capped at 100% of
salary and will be determined at the discretion
of the Committee taking into account the
value generated for shareholders and the
Executive Director’s contribution to delivering
the transaction. There are no changes to the
maximum opportunity of the regular performance
based bonus of up to 100% of salary in respect of
a financial year.
A reduction of the notice period of the CEO role
from 9 months to 6 months in line with the CFO
role.
The full 2021 Remuneration Policy is found on
page 75.
Remuneration decisions in
respect of 2020
Board changes
On 7th September 2020, Russell Atkinson resigned
from the Board as CEO and left the Group on 30th
September 2020. He was paid 9 months’ salary,
benefits and pension in lieu of notice in line with his
contractual entitlements. He was treated as a ‘good
leaver’ for the purpose of the 2020 annual bonus
plan and for long-term incentive awards granted on
25th May 2018 and 18th April 2019, dependent on
the achievement of the performance conditions.
As noted below, no 2020 bonus was ultimately
payable to Russell Atkinson and his long-term
incentive awards granted on 25th May 2018 lapsed
in full as the threshold performance targets were
not achieved.
On 8th October 2020, Tim Aspinall was appointed
as Non-Executive Chair of the Group following the
immediate resignation of Caroline Brown from this
position. His fee was set at £80,000 per annum in
line with his predecessor’s fee.
Salary/Fees
It was proposed that the Executive Directors and
Non-Executive Directors would receive a 2%
increase to base salary and fees with effect from 1
March 2020, in line with the percentage increase
awarded to the wider workforce. However, in
response to the impact of COVID-19, this increase
was deferred and a decision was made not to apply
it in the year. Furthermore, the Board agreed to a
20% reduction in base salaries and fees for three
months (1 April to 30 June 2020) as part of the
cost-saving measures implemented in light of
COVID-19.
68
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
69
Annual bonus outcomes
The 2020 annual bonus was assessed against
underlying operating profit less profit attributable
to members’ non-controlling interests in LLPs.
(75% of the award) and individual objectives (25%
of the award). The threshold operating profit target
was not achieved and therefore the Executive
Directors were not eligible for a bonus payment.
Long-term incentives
On 25th May 2018, Russell Atkinson was granted
152,498 shares and James Saralis 91,463 shares in
the form of nominal cost share options which were
subject to EPS performance (50% of the award)
and absolute Total Shareholder Return (TSR)
performance (50% of award). The options have
now lapsed in full as the threshold performance
targets were not achieved.
No long-term incentive awards were granted to
Executive Directors during 2020. This was a result
of the Committee initially delaying the grant of
awards due to the impact of COVID-19 and then
subsequently the Group being subject to an offer
during the latter part of the year.
Implementation of
Directors’ Remuneration
Policy for 2021
Salary/Fees
The CFO was awarded a 20% temporary increase
in base salary from £170,000 to £204,000 per
annum, with effect from 1 March 2021 in recognition
of the additional responsibility involved in his role
in the absence of a Group CEO. For reference
Russell Atkinson’s base salary was set at £227,800
per annum prior to his resignation as CEO.
A proposed 2% increase in salary for the wider
workforce has been deferred in response to the
impact of COVID-19, and will be reviewed later on in
the year.
A proposed 2% increase in Non-Executive
Directors’ basic fee and the Chair’s fee has been
deferred in response to the impact of COVID-19 and
will be reviewed later in the year.
Annual bonus plan
The CFO’s annual bonus opportunity is
capped at 45% of salary which is subject to
stretching operating profit (post minority
interest) targets for 2021. For reference the
normal maximum bonus opportunity is 100%
of salary under the Remuneration Policy.
The performance targets are considered
commercially sensitive and will be disclosed in
next year’s Directors’ Remuneration Report.
Long-term incentives
A restricted share award was granted to the CFO on
23 April 2021 which comprised of two tranches:
an award equal to 50% of his 2020 salary which
will vest on the second anniversary of the grant
date subject to continued employment and a
business performance underpin.
an award equal to 50% of his 2021 salary which
will vest on the third anniversary of the grant date
subject to continued employment and a business
performance underpin.
This one-off award structure reflects that no long-
term incentive award was granted in 2020.
While the Company’s AGM is currently scheduled
for June 2021, technically, the restricted share
award was granted under the 2018 Remuneration
Policy. The Committee considered there to be
sufficient flexibility to grant restricted share awards
under such policy.
Conclusion
We are committed to a responsible and transparent
approach in respect of executive pay. The
Committee believes that the advisory vote provides
accountability and gives shareholders a say on
this important area of corporate governance.
We continue to welcome any feedback from
shareholders and hope to receive your support at
the 2021 AGM.
Gillian Kent
Chair of the Remuneration Committee
4 June 2021
Single figure of remuneration (audited)
The table below details the elements of remuneration receivable by each Director for the financial year
ended 31 December 2020 and the total remuneration receivable by each Director for that financial year and
for the financial year ended 31 December 2019.
Salary
and
fees5 Benefits
Termination
benefits Pension
Annual
bonus
Total
Remuneration
2020
Total
Remuneration
2019
£000
£000
£000
£000
£000
£000
£000
Executive Directors
J R Atkinson1
J D Saralis
Non-Executive Directors
C A Brown2
T J M Aspinall3
G D C Kent
B Phillips4
S P Tilleray
159
162
62
58
47
23
48
13
16
–
–
–
–
–
179
–
–
–
–
–
–
2
2
–
–
–
–
–
–
–
–
–
–
–
–
353
180
62
58
47
23
48
246
185
84
55
50
–
22
1. J R Atkinson resigned from the Board as CEO on 7th September 2020
2. C A Brown resigned from the Board as Non-Executive Chair on 8th October 2020
3. T J M Aspinall was appointed Senior Independent Director on 30th January 2020 with an additional fee of £5,000 per annum in light of the additional responsibility and
was appointed Non-Executive Chair on 8th October following the resignation of C A Brown with a fee of £80,000 per annum
4. B Phillips was appointed as a Non-Executive Director on 25th June 2020
5. The Board agreed to a 20% reduction in base salaries and fees for three months (1 April to 30 June 2020) as part of the cost-saving measures implemented in light of
COVID-19. The salaries and fees above are shown after the reduction.
The taxable benefits received during the financial year ended 31 December 2020 are principally car
allowance and private medical insurance.
Individual elements of remuneration
Base salary and fees
The base salaries for 2020 and 2021 are as set out below:
J D Saralis1
2020
base salary
£000
170
2021
base salary1
£000
204
% increase
20%
1. As noted on page 70, J D Saralis has been awarded a temporary increase in base salary from 1st March 2021 in recognition of his additional responsibilities.
Details of Non-Executive Directors’ fees for 2020 and 2021 are as set out below:
Chair’s fee
Non-Executive Director’s fee
Senior Independent Director
Chair of the Audit & Risk Committee
Chair of the Remuneration Committee
2020
fee
£000
80
45
5
5
5
2021
fee
£000
80
45
5
5
5
% increase
0%
0%
0%
0%
0%
70
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
71
Annual bonus plan
The maximum annual bonus opportunity for the CEO was 100% of salary and for the CFO was 80% of salary
in respect of the year ended 31 December 2020. 75% of the annual bonus was assessed against underlying
operating profit performance (after profit attributable to non-controlling members’ interests in LLPs) and
25% was assessed against individual objectives.
The threshold operating profit target was not achieved and therefore 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 J R Atkinson
Performance measure
Operating profit1
Proportion of bonus
determined by measure
Performance
Bonus earned
£000
75% Operating profit threshold of £8.7m
was not achieved.
–
–
Personal objectives2
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 strategy
development of
Critical Care, Investor
relations and personal
leadership development
CFO J D Saralis
Performance measure
Operating profit1
Personal objectives2
Proportion of bonus
determined by measure
75%
25%
Bonus earned
£000
–
–
Performance
Operating profit threshold
of £8.7m was not achieved.
These included supporting
development of the divisional
strategies, including the
re-engineering of the Personal
Injury business, investor relations
and supporting 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 members’ interests in LLPs.
2. No bonus was payable against the individual element as the operating profit threshold was not achieved.
Long-term incentives
On 25th May 2018, J R Atkinson was granted 152,498 shares and J D Saralis 91,463 shares in the form of
nominal cost share options which were subject to EPS performance (50% of the award) and absolute TSR
performance (50% of award).
The options lapsed in full as the threshold performance targets were not achieved as illustrated below.
EPS for the year ending 31 December 2020
Vesting2 (% maximum)
Less than 17.1p
17.1p
18.7p
19.6p
Actual
Vesting
TSR1
Less than 201p
201p
234p
Actual
Vesting
0%
50%
80%
100%
(0.5)p
0%
Vesting2 (% maximum)
0%
25%
100%
57p
0%
1. TSR defined as the average mid-market closing share price for the month to 24 May 2021 plus total dividends declared between the grant date
and 24 May 2021.
2. Vesting percentages accrue on a straight-line basis between 50% – 100% and 25% – 100%.
No long-term incentive awards were granted during the year ended 31 December 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 2020 (or the date of resignation from the Board if earlier) and as at 31 December 2019 were as
follows:
Executive Directors
J R Atkinson1
J D Saralis
Non-Executive Directors
C A Brown2
T J M Aspinall
G D C Kent
B Phillips
S P Tilleray
1. J R Atkinson resigned from the Board as CEO on 7th September 2020
2. C A Brown resigned from the Board as Non-Executive Chair on 8th October 2020
31 December
2020
31 December
2019
0.84%
0.1%
0.00%
0.02%
0.00%
0.00%
0.00%
1.15%
0.06%
0.00%
0.02%
0.00%
n/a
0.00%
72
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
73
The interests of each Executive Director of the Company as at 31 December 2020 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
during the performance
measures
year
Total as at
performance 31 December
2020
measures
J R Atkinson
LTIP (nominal cost options) –
–
185,175
EMI
SAYE
–
–
J D Saralis
LTIP (nominal cost options) –
EMI (nominal cost options) –
SAYE
–
124,999
–
–
–
–
–
–
–
110,568
–
–
–
–
–
185,175
124,999
–
–
110,568
10,514
–
10,514
Consideration by the
Directors of matters
relating to Directors’
remuneration
During the year ended 31 December 2020, the
Committee was composed of the Company’s
independent Non-Executive Directors, Gillian Kent
(Chair), Tim Aspinall, Caroline Brown (resigned 8th
October 2020) and Sally Tilleray. Brian Phillips was
appointed to the Committee on the 25th January
2021.
Executive Directors only attend meetings by
invitation.
The Committee’s key responsibilities are:
reviewing the ongoing appropriateness and
relevance of remuneration policy including a new
three year policy for 2021;
reviewing and approving the remuneration
packages of the Executive Directors;
the grant of 2021 restricted share awards for
Executive Directors and senior management and
the outturn of prior long-term incentive awards;
monitoring the level and structure of
remuneration of the senior management; and
production of the Annual Report on the Directors’
remuneration.
Advisors
During the year ended 31 December 2020, 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.
Director Remuneration
Report voting at the 2020
AGM
The table below sets out the voting outcome
at the Group’s AGM held on 25 June 2020 in
respect of the resolution to approve the Directors’
Remuneration Report contained in the Group’s
2019 Annual Report and Accounts.
Votes for
% for Votes against
% against
Total votes
cast
Votes
withheld
(abstentions)
26,257,048
97.42
694,903
2.58%
26,951,951
–
Approval of
Directors’
Remuneration
report
Directors’
Remuneration
Policy
This section sets out the Company’s Directors’ Remuneration Policy, which will apply from the date of the
2021 Annual General Meeting. The Policy is determined by the Committee of the Company.
Policy table for Executive Directors
Operation
Maximum opportunity
Component
Base salary
Purpose and
link to strategy
Core element
of fixed
remuneration
to provide a
competitive
base salary
for the market
in which the
Company
operates
to attract
and retain
Executive
Directors of a
suitable calibre.
Salaries are reviewed
annually taking into
account:
underlying Group
performance;
role, experience and
individual performance;
competitive salary levels
and market forces; and
pay and conditions
elsewhere in the Group.
Benefits
To provide
a market
competitive
benefits
package as
part of total
remuneration.
Executive Directors receive
benefits in line with market
practice, and these include
principally life insurance,
private medical insurance
and a car allowance.
Other benefits may
be provided based on
individual circumstances.
Performance
metrics
Not applicable.
Not applicable.
Although there is no
overall maximum, salary
increases are normally
reviewed in the context
of the salary increases
across the wider Group.
The Committee may
award salary increases
above this level to take
account of individual
circumstances such as:
Increase in scope and
responsibility;
Increase to reflect the
Executive Director’s
development and
performance in the
role; or
Alignment to market
level.
Whilst the Committee
has not set an absolute
maximum on the level
of benefits Executive
Directors receive, the
value of the benefit
is at a level which the
Committee considers
appropriate against the
market and provides
sufficient level of benefit
based on individual
circumstances.
74
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
75
Component
Retirement
benefits
Purpose and
link to strategy
To provide an
appropriate
level of
retirement
benefit.
SAYE Plan
Annual
bonus
Promote share
ownership
and provide
alignment with
shareholders’
interests.
Rewards
performance
against annual
targets which
support the
strategic
direction of the
Company.
Operation
Maximum opportunity
Executive Directors are
eligible to participate in
the Company’s defined
contribution pension
plan (or receive a cash
allowance equivalent).
Executive Directors are
entitled to participate in
a HMRC tax qualifying all
employee SAYE Plan.
The maximum employer
pension contribution
(or cash allowance
equivalent) is aligned
with the level available
to the majority of
the wider workforce
(currently 3% of salary).
Participation limits are
those set by the UK tax
authorities.
Awards are based on
annual performance
against key financial
targets and/or the delivery
of strategic/personal
objectives.
The normal maximum
annual bonus
opportunity is up to
100% of base salary in
respect of a financial
year.
The Committee has
discretion to amend
the pay-out should any
formulaic output not
reflect the Committee’s
assessment of overall
business performance.
For up to two years
following the determination
of a bonus pay-out the
Committee has the right to
recover some or all of the
bonus pay-out in the event
of a material misstatement
of the Group’s financial
results or if the participant
has been guilty of gross
misconduct.
An additional bonus
opportunity of up to
100% of base salary
may be awarded
in the event of a
transformational
transaction. Such bonus
will be determined
at the discretion
of the Committee
taking into account
the value generated
for shareholders
and the Executive
Director’s contribution
to delivering the
transaction.
Performance
metrics
Not applicable.
Not subject to
performance
metrics in line
with HMRC
practice.
Targets are
set annually
reflecting the
Company’s
strategy and
aligned with
key financial,
strategic and/or
individual targets.
At least 50%
of the bonus
is assessed
against financial
performance
metrics of the
business and the
balance is based
on strategic/
personal
objectives.
Stretching
targets are
required for
maximum pay-
out.
Component
Restricted
share
awards
Purpose and
link to strategy
Support
retention,
promote share
ownership
and provide
alignment with
shareholders’
interests
Performance
metrics
Although no
performance
metrics will apply
to restricted
share awards, the
Committee will
have discretion
to amend the
vesting outcome
should the
amount vesting
not reflect the
Committee’s
assessment of
overall business
performance
Operation
Maximum opportunity
The normal maximum
restricted share award
opportunity is up to
50% of base salary in
respect of a financial
year.
Under the LTIP and EMI
Plan rules the overall
combined maximum
award that may be
granted in respect of a
financial year is 300%
of base salary. Awards
above 50% of base
salary would only be
granted in exceptional
circumstances and
would be subject to
performance metrics.
The Group operates a
nominal cost LTIP and
Enterprise Management
Incentive (EMI) Plan,
collectively the ‘LTIP
schemes’.
Under the nominal cost
LTIP, awards may be
granted in the form of
nil or nominal cost share
options, or contingent
rights to receive shares.
Under the EMI Plan,
awards may be granted
in the form tax qualifying
share options or non-tax
qualifying share options.
Awards will be granted with
vesting subject, ordinarily,
to continued employment,
normally over at least a
three year period.
The Committee may
reduce an unvested award
in the event of a material
misstatement of the
Group’s financial results or
if the participant has been
guilty of gross misconduct.
For up to two years
following the determination
of the vesting outcome of
an award, the Committee
has the right to cancel
the award if it has not
been exercised, or require
repayment of some or all
of the award in the event
of a material misstatement
of the Group’s financial
results or if the participant
has been guilty of gross
misconduct.
76
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
77
Payments for loss of office
The principles on which the determination of payments for loss of office will be approached are set out
below:
Payment in lieu of
notice
Annual bonus
Share awards
Policy
In line with the provisions of the Executive Directors’ service contracts.
At the discretion of the Committee dependent upon the circumstances of departure
and contribution to the business during the bonus period.
The extent to which any unvested award will vest will be determined in accordance
with the rules of the LTIP and EMI Plan. Unvested awards will normally lapse on
cessation of employment, other than when the individual is considered to be a “good
leaver”.
Other payments
In appropriate circumstances, payments may also be made in respect of accrued
holiday, outplacement, legal fees and under the terms of the SAYE Plan.
Statement of consideration of shareholder views
The Committee considers shareholder feedback received on remuneration matters, including issues
arising in relation to the AGM, as well as any additional comments received during any other meetings with
shareholders. The Committee will seek to engage directly with major shareholders and their representative
bodies should any material changes be made to the Directors’ Remuneration Policy.
Non-Executive Directors
Purpose and link to
strategy
Sole element of Non-
Executive Director
remuneration, set at
a level that reflects
market conditions
and is sufficient to
attract individuals with
appropriate knowledge
and experience.
Approach of the Company
Fees are normally reviewed annually.
Fees paid to Non-Executive Directors for their services are approved by
the Committee. Fees may include a basic fee and additional fees for further
responsibilities (for example, chairmanship of Board committees).
Non-Executive Directors do not participate in any of the Company’s
share options schemes or annual bonus scheme nor do they
receive any pension contributions. Non-Executive Directors may be
eligible to receive benefits such as the use of secretarial support,
travel costs or other benefits that may be appropriate.
Actual fee levels are disclosed in the Annual Report on Remuneration for the
relevant financial year.
Explanation of
performance metrics
chosen
The performance metrics under the annual bonus
will be selected annually to reflect the Group’s
key financial and strategic priorities for the year.
Stretching performance targets are set, taking into
account a number of different reference points,
which may include the Group’s business plans
and strategy and the economic environment. Full
pay-out will only occur for what the Committee
considers to be stretching performance.
The Committee retains the ability to adjust or set
different performance targets if events occur which
cause the Committee to determine that the targets
are no longer appropriate and that amendment is
required so that they achieve their original purpose.
Awards and options may be adjusted in the event of
a variation of share capital in accordance with the
rules of the LTIP and EMI Plan.
Name
J Saralis
T J M Aspinall
G D C Kent
B Phillips
S P Tilleray
Policy for the
remuneration of
employees more generally
Remuneration arrangements are determined
throughout the Group based on the same principle
that reward should be achieved for delivery of
the business strategy and should be sufficient to
attract, retain and motivate high-calibre employees.
The Company operates a HMRC tax qualifying
SAYE Plan and invites all employees to participate
at the discretion of the Committee, therefore
encouraging wider workforce share ownership.
There is no consultation with employees regarding
Director’s remuneration.
Service contracts
James Saralis’ service contract is on a rolling basis
and may be terminated on six months’ notice by
the Company or the Executive.
All Non-Executive Directors have initial fixed-term
agreements with the Company of no more than
three years.
Details of the Directors’ service contracts and
notice periods are set out below:
Commencement
Normal notice
period
4 January 2018
six months
1 June 2016
three months
1 November 2014
three months
25 June 2020
three months
19 July 2019
three months
78
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
79
Directors’
Report
The Directors of NAHL Group plc present their Annual Report
and audited consolidated financial statements for the year
ended 31 December 2020.
Results and dividend
The Group’s loss after tax for the year was £0.2m
(2019: loss of £3.0m).
The Directors do not propose a final dividend (2019:
0.0p per share).
A review of the business, including future
developments, is included in the Strategic Report
on pages 4–54.
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.
Post balance sheet events
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:
Lombard Odier Asset Management 19.12%
Schroder Investment Management 16.68%
Harwood Capital 13.31%
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 receivables, interest-bearing loans and trade
and other payables. Further details on financial
instruments are given in note 24 to the financial
statements.
Directors
The Directors of the Company who were in office
during the year and up to the date of signing the
financial statements were:
T J M Aspinall (Independent Non-Executive, Chair
from 8 October 2020)
C A Brown (Chair, resigned 8 October 2020)
J R Atkinson (Chief Executive Officer, resigned 7
September 2020)
J D Saralis (Chief Financial Officer)
G D C Kent (Independent Non-Executive)
S P Tilleray (Independent Non-Executive)
B Phillips (Independent Non-Executive, appointed
25 June 2020)
Biographies of the present Directors of the
Company are listed on pages 56–57.
Details of the remuneration of the Directors is
disclosed in the Remuneration Report on pages
68–74.
Political donations
No political donations were made during the year or
the previous year.
Statement on engagement
with employees
For information on how the Group has engaged
with employees during the year, see Our Culture,
Our Business on pages 18–22.
Statement of relationships
with suppliers, customers
and others
For information on how the Group has maintained
relationships with suppliers, customers and others,
see Section 172 statement on pages 52–54.
Group’s policy concerning
employment of disabled
persons
NAHL Group plc is committed to providing
equal opportunities for all and taking action on
unlawful discrimination. We seek to recruit, train
and promote based on experience, skills and
performance and provide our employees with the
necessary tools and equipment to allow them to
perform their duties to the best of their abilities.
Auditor
Mazars LLP was appointed as Auditor during
the year 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
4–54 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 126.
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.
The Board have considered detailed financial
forecasts of future trading, profits and cash
flows covering a range of potential scenarios that
account for any further impacts 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.
80
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
81
The Group has access to a £25.0m revolving credit
facility (RCF) with its bankers and at the time of
writing, it has drawn £20.0m of this facility and has
cash of £3.6m. 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.
The Group’s RCF is subject to quarterly covenant
testing and all of the scenarios modelled suggest
that the Group will continue to operate within its
covenants for the foreseeable future.
The Group has modelled a worst case scenario,
assuming that volumes fall back to their 2020
levels, and has then considered the options it would
have available to mitigate against any shortfall in
profits and cash. Under this scenario, the Group
would be able to implement sufficient mitigating
actions in order to operate within its covenants. The
likelihood of this scenario occurring is considered
to be remote and therefore the directors consider
the Going Concern basis of accounting to be
appropriate.
The directors have also considered the ability of
the Group to refinance, given the loan term expires
on 31 December 2022, and are confident that the
Group will be able to secure future funding.
Considering the above, 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.
Energy and Carbon
Reporting
This is the first year the Group has been required
to comply with the Streamline Energy and Carbon
Reporting (SECR) legislation and therefore
comparative information has not been provided.
Methodology
The report follows the SECR guidance and the GHG
Reporting Protocol – Corporate Standard as the
accepted methodology to meet the mandatory
requirements. No additional optional elements
have been included. The UK Government’s
greenhouse gas conversion factors have been
used to calculate the carbon emissions. The
below table demonstrates the GHG Emissions and
Energy Usage Data for the financial year ended
31 December 2020. For offices where electricity
is part of a service charge, usage has been
estimated based on adjusting the bills received
for other offices around the Group. No data has
been included for business mileage as this was
immaterial for 2020 (<1% of the overall total).
Energy consumption used
to calculate emissions
(electricity/mWh)
Energy consumption used to
calculate emissions (gas/mWh)
Emissions from purchased gas
tCO2e (scope 1)
Emissions from purchased
electricity tCO2e (scope 2)
Intensity measurement (tonnes
CO2e per employee)
All energy use is in the UK.
260.84
214.42
39.4
66.0
0.42
Intensity measurement
The Group has chosen tonnes of gross CO2e per
employee as the reported SECR intensity metric.
This is considered to be the most appropriate basis
for an office based operation that relies heavily on
its workforce to provide services to its customers.
This is a relevant and common business metric and
will serve as a consistent comparative for reporting
purposes going forwards.
Energy efficiency actions
taken
The Group operates from several locations around
the UK and its workforce is largely office-based. As
an office-based operation, the Group considers its
largest carbon footprint to come from the use of
energy used in an office environment e.g. light, heat
and computer usage and therefore it has focused
its efficiency actions around this area. During
2020 the Group rationalised its operations and
closed its Chancery Lane office, generating both
cost and energy savings. The Group also moved
its offices in both Daventry and Kettering and took
this opportunity to review its energy suppliers,
opting for greener alternatives. As of February
2020, the Daventry office was using 100% green
energy and as of January 2021, the Kettering office
also made the switch to a green energy supplier.
Given that most of the Group’s workforce were
homebased throughout 2020, there was limited
scope to implement energy savings initiatives in
the offices and so choosing green suppliers was
considered the best alternative. As part of these
office moves, initiatives such as switching to LED
lightbulbs was factored into the office re-fits and air
conditioning provision is being made using recycled
refrigeration.
Group response to Modern
Slavery Act 2015
1. Organisational structure and
recruitment processes
The Group’s organisational structures
include the Board, Senior Management
teams across two divisions. A contact centre
at one of the three locations and standard
support functions across all sites.
Recruitment processes include the monitoring
of passport documentation, with all new recruits
expected to show their passport as a proof
of identity. The Group also reviews shared
addresses. In addition, the Group monitors the
ongoing wellbeing of its employees through line
management relationships and 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.
2. 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 and legal
services in Personal Injury and specialist associates
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.
3. 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 Accounting Standards in conformity
with the requirements of the Companies Act 2006
and Company financial statements in accordance
with International Accounting Standards in
conformity with the requirements of the Companies
Act 2006. 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
82
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
83
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.
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
4 June 2021
84
NAHL Group Plc Annual Report and Accounts 2020
Financial
Statements
2020
to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these
requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independent auditor’s
report to the members
of NAHL Group Plc
Opinion
We have audited the financial statements of
NAHL Group plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31
December 2020 which comprise the Consolidated
Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the
Consolidated Statement of Changes in Equity,
the Consolidated Cash Flow Statement, the
Company Statement of Financial Position, the
Company Statement of Changes in Equity, the
Company Cash Flow Statement and notes to
the financial statements, including a summary
of significant accounting policies. The financial
reporting framework that has been applied in their
preparation is applicable law and international
accounting standards in conformity with the
requirements of the Companies Act 2006 and,
as regards to the parent company financial
statements, as applied in accordance with the
provisions of the Companies Act 2006.
Conclusions relating to
going concern
In auditing the financial statements, we have
concluded that the directors’ use of the going
concern basis of accounting in the preparation of
the financial statements is appropriate.
Our audit procedures to evaluate the directors’
assessment of the group’s and the parent
company’s ability to continue to adopt the going
concern basis of accounting included but were not
limited to:
In our opinion, the financial statements have been
prepared in accordance with the requirements of
the Companies Act 2006 and:
give a true and fair view of the state of the group’s
and of the parent company’s affairs as at 31
December 2020 and of the group’s loss for the
year then ended; and
have been properly prepared in accordance with
international accounting standards in conformity
with the requirements of the Companies Act 2006
and, as regards to the parent company financial
statements, as applied in accordance with the
provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the “Auditor’s responsibilities for the audit of
the financial statements” section of our report.
We are independent of the group in accordance
with the ethical requirements that are relevant to
our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied
Undertaking an initial assessment at the planning
stage of the audit to identify events or conditions
that may cast significant doubt on the group’s and
parent company’s ability to continue as a going
concern;
Obtaining and reviewing management’s going
concern assessment;
Evaluating the directors’ method to assess the
group’s and parent company’s ability to continue
as a going concern;
Applying our own sensitivity analysis and
assessing management’s ability to take mitigating
actions;
Reviewing the terms of financing agreements
and assessing the forecasted results against
covenants in place to ensure these will not be
breached;
Evaluating the impact of the need to re-finance by
December 2022 and the likelihood of being able to
continue to secure required funding, as explained
on page 98 of the financial statements;
Evaluating the key assumptions used and
judgements applied by the directors in forming
their conclusions on going concern; and
Evaluating the appropriateness of the directors’
disclosures in the financial statements.
Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that, individually
or collectively, may cast significant doubt on
the group’s and the parent company’s ability to
continue as a going concern for a period of at least
twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the responsibilities of
the directors with respect to going concern are
described in the relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance
in our 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) we identified, including those
which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team.
These matters were addressed in the context of our
audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key Audit Matter
Valuation of trade receivables
and accrued income (Group)
The group’s accounting policy for financial
assets and liabilities, which include trade
receivables and accrued income, is set out
in the accounting policy notes on page 107.
The group enters into contracts with
customers on varied terms. The nature
of the industry in which the group
operates in can sometimes result
in long lead times between revenue
recognition and cash generation, due
to the time taken to settle cases.
Following a review of the year-end trade
receivables and accrued income balance
of £26.7m (2019: £29.0m), we identified
specific aged or individually significant
balances totaling £22.3m where there is a
risk these balances may not recoverable.
We identified the valuation of these
specific balances as a significant risk and
key audit matter, given the subjectivity
involved in assessing recoverability.
How our scope addressed this matter
Depending on the facts and circumstances of the
respective balances, our audit procedures included,
but were not limited to:
Assessing the aging of the receivables balances, and
performing a retrospective review against prior year
balances to understand aging profiling to identify any
potential issues related to recoverability;
Assessing the level of cash receipts during the year and
post year end against our expectation based on signed
payment agreements.
Recalculating accrued income balances based on
contractual fees and the number of enquiries with
customers;
Obtaining third party confirmation from customers of the
number of outstanding enquiries passed to them.
Assessing the adequacy of the work of one component
auditor in respect of £5.2m of trade receivables and
accrued income balances; and
Considering management’s methodology for IFRS 9
Expected Credit Losses, with reference to the level of debt
write-offs during the year.
Our observations
Based on the procedures performed, we are satisfied that
the carrying value of the trade receivables and accrued
income in the financial statements is reasonable.
86
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
87
Key Audit Matter
Carrying Value of Goodwill
(Group)
The Group’s accounting policies in respect
of goodwill and impairment are set out in
the accounting policy notes on pages 105
and 108 respectively.
The carrying value of goodwill is £55.5m
(2019: £55.5m). In assessing the
recoverability of goodwill, management
prepare value in use calculations across
their two cash generating units, Critical
Care and Consumer Legal Services, which
involves assumptions, such as future cash
flows and the discount rate to apply to
those.
Due to the subjectivity involved in
estimating future performance and the
significance of the carrying value of
goodwill, we identified this as a significant
risk and key audit matter.
Valuation of investments
(Parent company)
The group’s accounting policies in respect
of impairment of investments is set out in
the accounting policy notes on page 135.
The carrying value of NAHL Group Plc’s
investments in subsidiaries is £52.7m
(2019: £52.7m) and is the most significant
balance in the parent company statement
of financial position. Given this, we
identified it as a significant risk and key
audit matter.
How our scope addressed this matter
Our audit procedures included, but were not limited to:
Obtaining and reviewing management’s goodwill
impairment assessment;
Assessing and challenging the reasonableness of key
assumptions in the value in use calculations, and reviewing
the directors’ sensitivity analysis to assess the impact of
potential changes in assumptions;
Applying our own severe sensitivities to the models to
further assess the potential for impairment and assessing
management’s potential mitigating actions;
Engaging with our internal valuation experts to assess the
reasonableness of the Weighted Average Cost of Capital
(WACC) rate used; and
Evaluating the reasonableness of the disclosures made in
the financial statements in relation to the carrying value of
goodwill.
Our observations
Based on the procedures performed, we are satisfied that
the carrying value of the goodwill in the financial statements
is reasonable.
Our audit procedures included, but were not limited to:
Obtaining and reviewing management’s assessment of the
valuation of investments;
Assessing and challenging the reasonableness of
underlying assumptions to ensure these are reasonable;
Engaging with our internal valuation experts to assess the
reasonableness of the Weighted Average Cost of Capital
(WACC) rate used;
Reviewing the carrying value with specific reference to the
year end market capitalisation of the group; and
Evaluation the reasonableness of the disclosures made in
the financial statements in relation to the carrying value of
investments.
Our observations
Based on the procedures performed, we are satisfied
that the carrying value of the investments in the financial
statements is reasonable.
Our application of materiality and an overview of the
scope of our audit
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 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 Group financial statements £497k
Parent company financial statements £841k
Where items in the parent company financial statements were included in the group
financial statements, materiality was restricted to that applied to the group.
How we
determined it
Group materiality has been calculated by reference to adjusted profit before tax, of
which it represents 7%.
Parent company materiality has been calculated by reference to total assets, of
which it represents 1%.
Rationale for
benchmark
applied
Profit before tax (adjusted for net financing costs, share based payments,
amortization and other exceptional items) has been identified as the principal
benchmark within the group financial statements due this being the primary focus of
shareholders.
Total assets has been identified as the principal benchmark within the parent
company financial statements as it is considered to be the focus of shareholders due
to being a holding company with no trade.
Performance
materiality
Performance materiality is set to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements in the financial
statements exceeds materiality for the financial statements as a whole.
The performance materiality applied in our audit was:
Group financial statements £323k
Parent company financial statements £546k
Reporting
threshold
We agreed with the directors that we would report to them misstatements identified
during our audit above £15k for the group financial statements and £25k for the
parent company financial statements, as well as misstatements below these
amounts that, in our view, warranted reporting for qualitative reasons.
88
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
89
As part of designing our audit, we assessed the
risk of material misstatement in the financial
statements, whether due to fraud or error, and
then designed and performed audit procedures
responsive to those risks. In particular, we looked at
where the directors made subjective judgements,
such as making assumptions on significant
accounting estimates.
We tailored the scope of our audit to ensure that
we performed sufficient work to be able to give
an opinion on the financial statements as a whole.
We used the outputs of a risk assessment, our
understanding of the group and parent company,
their environment, controls and critical business
processes, to consider qualitative factors in order
to ensure that we obtained sufficient coverage
across all financial statement line items.
Our group audit scope included an audit of
the group and the parent company financial
statements of NAHL Group Plc. Based on our
risk assessment, the parent company and five
components of the group were subject to full
scope audit and two components were subject to
specific audit procedures on certain key balances.
For the remaining components, in addition to
desktop analytical review, we performed analysis
at an aggregated group level to re-examine our
assessment that there were no significant risks of
material misstatement within these.
The parent company and those components of
the group which were subject to full scope audit
or specific audit procedures accounted for the
following percentages of the group’s results for the
year ended 31 December 2020:
Number of
components
Total group revenue
Total profits and losses
that make up group
profit before tax
Total group
assets
Full scope
audits
Specific
scope audits
Total
6
2
8
81%
15%
96%
91%
0%
91%
97%
2%
99%
One full scope audit was performed by a
component auditor. For that entity, the group
engagement team issued group instructions
to the component auditor to direct their work.
Group reporting appendices were returned by
the component auditor and we reviewed their
working papers to assess whether sufficient and
appropriate audit procedures had been performed.
Meetings were held with the component auditor
at the planning and completion stage, to ensure
the work was sufficiently directed by the group
engagement team. The audit work for all other
components was completed by the group
engagement team.
At the parent level we also tested the consolidation
process and carried out analytical procedures
to confirm our conclusion that there were no
significant risks of material misstatement of the
aggregated financial information.
Other information
The directors are responsible for the other
information. The other information comprises the
information included in the annual report, other
than the financial statements and our auditor’s
report thereon. Our opinion on the financial
statements does not cover the other information
and, except to the extent otherwise explicitly
stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other
adequate accounting records have not been kept
by the parent company, or returns adequate for
our audit have not been received from branches
not visited by us; or
the parent company financial statements are not
in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.
Responsibilities of
Directors
As explained more fully in the directors’
responsibilities statement set out on page 83, the
directors are responsible for the preparation of the
financial statements and for being satisfied that
they give a true and fair view, and for such internal
control as the directors 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
parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related
to going concern and using the going concern basis
of accounting unless the directors either intend to
liquidate the group or the parent company or to
cease operations, or have no realistic alternative
but to do so.
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 such
material inconsistencies or apparent material
misstatements, we are required to determine
whether there is a material misstatement in 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 in this regard.
Opinions on other
matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
the information given in the Strategic Report and
the Directors’ Report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
the Strategic Report and the Directors’ Report
have been prepared in accordance with applicable
legal requirements
Matters on which we are
required to report by
exception
In light of the knowledge and understanding of
the group and the parent company and their
environment obtained in the course of the audit, we
have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report to you if,
in our opinion:
90
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
91
Auditor’s responsibilities
for the audit of the
financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s 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.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect
of irregularities, including fraud.
Based on our understanding of the group and its
industry, we identified that the principal risks of
non-compliance with laws and regulations related
to the Companies Act 2006, UK tax legislation, and
the group’s use of Covid-19 government support
schemes, and we considered the extent to which
non-compliance might have a material effect on the
financial statements.
In identifying and assessing risks of material
misstatement in respect to irregularities including
non-compliance with laws and regulations, our
procedures included, but were not limited to:
At the planning stage of our audit, gaining
an understanding of the legal and regulatory
framework applicable to the group and the parent
company, the industry in which they operate
and considered the risk of acts by the group and
the parent company which were contrary to the
applicable laws and regulations;
Discussing with the directors and management
the policies and procedures in place regarding
compliance with laws and regulations;
Discussing amongst the engagement team the
identified laws and regulations, and remaining
alert to any indications of non-compliance; and
During the audit, focusing on areas of laws and
regulations that could reasonably be expected
to have a material effect on the financial
statements from our general commercial and
sector experience and through discussions with
the directors (as required by auditing standards),
from inspection of the group’s and the parent
company’s regulatory and legal correspondence
and review of minutes of directors’ meetings in
the year.
We evaluated the directors’ and management’s
incentives and opportunities for fraudulent
manipulation of the financial statements (including
the risk of override of controls) and determined that
the principal risks were related to posting manual
journal entries to manipulate financial performance,
management bias through judgements and
assumptions in significant accounting estimates
including goodwill impairment, investment
valuation and recoverability of trade receivables
and accrued income, significant one-off or unusual
transactions, and revenue recognition in relation to
cut-off.
Our audit procedures in relation to fraud included
but were not limited to:
Making enquiries of the directors and
management on whether they had knowledge of
any actual, suspected or alleged fraud;
Gaining an understanding of the internal controls
established to mitigate risks related to fraud;
Discussing amongst the engagement team the
risks of fraud; and
Addressing the risks of fraud through
management override of controls by performing
journal entry testing.
Our audit procedures in relation to fraud through
revenue recognition specific to cut-off included, but
were not limited to:
Assessing management’s revenue recognition
policy; and
Agreeing a sample of revenue transactions pre
and post year end, to ensure they have been
recognised in the appropriate period.
The primary responsibility for the prevention
and detection of irregularities including fraud
rests with both those charged with governance
and management. As with any audit, there
remained a risk of non-detection of irregularities,
as these may involve collusion, forgery,
intentional omissions, misrepresentations
or the override of internal controls.
The risks of material misstatement that
had the greatest effect on our audit,
including fraud, are discussed under “Key
audit matters” within this report.
A further description of our responsibilities
for the audit of the financial statements is located
on the Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of the audit report
This report is made solely to the company’s
members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state
to the company’s members those matters we are
required to state to them in an auditor’s report
and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the company
and the company’s members as a body for our
audit work, for this report, or for the opinions we
have formed.
Stephen Brown
(Senior Statutory Auditor) for and on behalf
of Mazars LLP
Chartered Accountants and Statutory Auditor
The Pinnacle
160 Midsummer Boulevard
Milton Keynes
MK9 1FF
4 June 2021
92
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
93
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Underlying operating profit
Exceptional items
Operating profit
Profit attributable to members’ non-controlling interests in LLPs
Financial income
Financial expense
Loss before tax
Taxation
Loss and total comprehensive income for the year
Earnings per share (p)
Basic earnings per share
Diluted earnings per share
2020
£000
40,875
(21,602)
19,273
(14,964)
5,659
(1,350)
4,309
(4,115)
168
(585)
(223)
(2)
(225)
2020
p
(0.5)
(0.5)
Note
1,2
3
1
4
2
30
7
8
9
Note
23
23
20191
restated
£000
51,314
(27,033)
24,281
(21,718)
10,421
(7,858)
2,563
(4,474)
202
(615)
(2,324)
(635)
(2,959)
2019
p
(6.4)
(6.4)
1. During the year, the Group undertook a review of its accounting treatment and presentation of several significant items that resulted in the
restatement of its 2019 results. See note 30 for further details.
All profits and losses and total comprehensive income are attributable to the owners of the Company.
All profits and losses relate to continuing operations.
The notes on pages 98–132 form part of these financial statements.
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AT 31 DECEMBER 2020
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 £7,828,000 (2019:
£8,279,000) due in more than one year)
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Member capital and current accounts
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
Note
13
15
16
17
10
18
20
17
17
19
11
21
2020
£000
55,489
4,557
367
2,761
14
63,188
34,285
3,609
37,894
101,082
(17,547)
(248)
(4,177)
(126)
20191
restated
£000
55,489
5,082
267
264
30
61,132
37,871
2,564
40,435
101,567
(17,216)
(187)
(3,315)
(363)
(22,098)
(21,081)
(2,195)
(19,901)
(826)
(22,922)
(45,020)
(60)
(23,594)
(1,068)
(24,722)
(45,803)
56,062
55,764
115
3,912
14,595
(66,928)
104,368
115
3,389
14,595
(66,928)
104,593
Capital and reserves attributable to the owners of NAHL Group plc
56,062
55,764
1. During the year, the Group undertook a review of its accounting treatment and presentation of several significant items that resulted in the
restatement of its 2019 results. See note 30 for further details.
The notes on pages 98–132 form part of these financial statements.
These financial statements on pages 94–132 were approved by the Board of Directors on 4 June 2021 and
were signed on its behalf by:
J D Saralis
Director
Company registered number: 08996352
94
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
95
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
capital
£000
Share
option
Share
reserve premium
£000
£000
Merger
reserve
£000
Note
Capital and
reserves
Non-
attributable to
the owners of controlling
interest
Retained
earnings NAHL Group plc
£000
£000
£000
Total
equity
£000
Balance at 1 January
2019 as previously
reported
Adjustment to presentation
of members’ non-controlling
interests in LLPs1
Balance at
1 January 2019 as
restated
115
2,578 14,595 (66,928) 111,384
61,744
947 62,691
–
–
–
–
–
–
(947)
(947)
115
2,578 14,595 (66,928) 111,384
61,744
– 61,744
Total comprehensive income for the year
Loss for the year
–
Total comprehensive
income
–
–
–
–
–
Transactions with owners, recorded directly in equity
Share-based payments 22
–
Dividends paid
–
27
811
–
–
–
–
(2,959)
(2,959)
–
(2,959)
–
(2,959)
(2,959)
–
(2,959)
–
–
–
(3,832)
811
(3,832)
–
–
811
(3,832)
Total transactions with owners, recorded
directly in equity
–
811
–
–
(3,832)
(3,021)
–
(3,021)
Balance at
31 December 2019
115
3,389 14,595 (66,928) 104,593
55,764
– 55,764
Total comprehensive income for the year
Loss for the year
–
Total comprehensive
income
–
–
–
–
–
Transactions with owners, recorded directly in equity
Issue of share capital 26
–
Share-based
payments
523
22
–
–
–
–
Total transactions with owners, recorded
directly in equity
–
523
–
–
–
–
–
–
(225)
(225)
(225)
(225)
–
–
–
–
523
523
–
–
–
–
–
(225)
(225)
–
523
523
Balance at
31 December 2020
Cash flows from operating activities
Profit for the year
Adjustments for:
Profit attributable to members’ non-controlling interests in LLPs
Property, plant and equipment depreciation
Right of use asset depreciation
Amortisation of intangible assets
Impairment of goodwill and intangible assets
Financial income
Financial expense
Share-based payments
Taxation
Decrease/(Increase) in trade and other receivables
Increase in trade and other payables
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
Interest received
Disposal of subsidiary net of cash disposed of1
Net cash used in investing activities
Cash flows from financing activities
(Repayment of)/Proceeds from borrowings
Facility arrangement fees
Principal element of lease payments
Dividends paid
Drawings (paid to)/capital receipts from LLP members
Net cash (used in)/generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Note
2020
£000
2019
£000
(225)
(2,959)
16
17
15
7
8
4,115
169
430
1,345
–
(168)
585
523
2
6,776
2,223
2,945
11,944
(469)
(450)
11,025
(269)
(820)
10
(1,273)1
(2,352)
(3,750)
(121)
(558)
–
(3,199)
(7,628)
1,045
2,564
3,609
4,474
147
419
1,332
5,322
(202)
615
811
635
10,594
(8,880)
1,836
3,550
(529)
(1,479)
1,542
(219)
(463)
9
–
(673)
6,500
–
(465)
(3,832)
(2,106)
97
966
1,598
2,564
115
3,912 14,595 (66,928) 104,368
56,062
– 56,062
1. The entity disposed of its interest in National Law Associates LLP on 2 January 2020 and de-consolidated its results from this point
1. During the year, the Group undertook a review of its accounting treatment and presentation of several significant items that resulted in the
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
restatement of its 2019 results. See note 30 for further details.
The notes on pages 98–132 form part of these financial statements.
96
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
97
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 Bevan House, Kettering Parkway, Kettering,
Northants, England, NN15 6XR.
The Consolidated Financial Statements for the
year ended 31 December 2020 have been prepared
in accordance with International Accounting
Standards in conformity with the requirements of
the Companies Act 2006.
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.
The Board have considered detailed financial
forecasts of future trading, profits and cash
flows covering a range of potential scenarios that
account for any further impacts 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.
The Group has access to a £25.0m revolving credit
facility (RCF) with its bankers and at the time of
writing, it has drawn £19.0m of this facility and has
cash of £3.5m. 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.
The Group’s RCF is subject to quarterly covenant
testing and all of the scenarios modelled suggest
that the Group will continue to operate within its
covenants for the foreseeable future.
The Group has modelled a worst case scenario,
assuming that volumes fall back to their 2020
levels, and has then considered the options
it would have available to mitigate against
any shortfall in profits and cash. Under this
scenario, the Group would be able to implement
sufficient mitigating actions in order to operate
within its covenants. The likelihood of this
scenario occurring is considered to be remote
and therefore the directors consider the Going
Concern basis of accounting to be appropriate.
The directors have also considered the ability of
the Group to refinance, given the loan term expires
on 31 December 2022, and are confident that the
Group will be able to secure future funding.
Considering the above, 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 Consumer Legal Services division
the Group has interests in two Limited Liability
Partnerships (LLPs) in conjunction with third
party law firms. The LLPs are called Your Law
LLP and 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 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 liability recognised for the
other member firms’ share of profit.
Key sources of estimation uncertainty
Revenue recognition – provision of legal
services
There is a significant element of estimation 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 contract asset
balances of £5,046,000 (2019: £4,134,000)
calculated using this estimation technique.
98
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
99
1 Accounting policies continued
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 debt on extended credit terms.
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
£673,000 (2019: £554,000) calculated using this
method. The percentages applied to each grouping
of debtors ranged from 0.5% to 35% with the final
provision equating to 2.5% of the total gross trade
receivables and accrued income balances.
New standards and amendments adopted by
the Group
There are no new or amended standards applicable
for the current reporting period.
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.
Profit attributable to members’ non-controlling
interests in LLPs
Profit attributable to member’s non-controlling
interests in LLPs represents the operating profit
for the year which is attributable to minority
members in our LLP subsidiaries under the terms
of the partnership agreements. It is presented as a
separate expense outside of the operating profit of
the Group for the year.
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 101. The principles to identify
adjusting items have been adjusted from 2019 to
remove the IFRS 2 share based payment charge
and the amortisation charge arising on intangibles
acquired as part of business combinations. Further
details on this adjustment can be found in note 30.
The key adjusting items in arriving at the APMs are
as follows:
Exceptional items are non-recurring items
that are material by nature and separately
identified to allow for greater comparability of
underlying Group operating results year-on-year.
Examples of exceptional items in the current
and/or previous years include reorganisation
and restructuring costs; revaluation of liability
associated with legacy ATE products; and
acquisition related costs. Exceptional costs
are separately identified to allow for greater
comparability of underlying Group operating
results year-on-year.
Nature of
measure
Related IFRS
measure
Related IFRS
source
Definition
Use/relevance
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
profit
Operating
profit
Consolidated
income
statement
Based on the related IFRS
measure but excluding
exceptional items.
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 (excluding any
disposals of subsidiaries)
less payments made to
partner LLP members
and less principal element
of lease payments.
100
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
101
1 Accounting policies continued
Nature of
measure
Related IFRS
measure
Related IFRS
source
Definition
Use/relevance
Underlying
Basic EPS
Basic EPS
Consolidated
income
statement
Based on the related IFRS
measure but calculated
using underlying profit
after tax.
Working
capital
Consolidated
statement of
cash flows
Movement in
receivables
and
movement
in payables
Net cash/
(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
Underlying operating profit
2020
£000
4,309
1,350
5,659
2019
£000
2,563
7,858
10,421
Underlying operating cash flow and underlying cash conversion:
2020
Underlying
operations
£000
2020
Exceptional
items
£000
2019
2019
2020 Underlying Exceptional
items
Total
£000
£000
operations
£000
2019
Total
£000
Operating profit
Share-based payments
Depreciation and amortisation
Impairment of goodwill and intangible assets
Decrease/(increase) in trade/other receivables
Increase in trade/other payables
5,659
523
1,944
–
2,223
2,607
(1,350) 4,309
10,421
(7,858)
2,563
–
–
–
–
338
523
1,944
–
2,223
2,945
811
1,898
–
(10,027)
1,836
–
–
5,322
1,147
–
811
1,898
5,322
(8,880)
1,836
Underlying operating cash flow
12,956
(1,012) 11,944
4,939
(1,389)
3,550
228.9%
Operating cash conversion
Interest paid
Tax paid
Net cash generated from operating activities
Net cash used in investing activities
(excluding disposals of subsidiaries)
Lease payments
Facility arrangement fees
Payments to non-controlling interests
Free cash flow
Underlying basic EPS:
IFRS measure – loss for the year attributable to shareholders
Exceptional items
Tax effect of the above
Underlying profit for the year attributable to shareholders
47.4%
(469)
(450)
11,025
(1,079)
(558)
(121)
(3,199)
6,068
2020
£000
(225)
1,350
(257)
868
(529)
(1,479)
1,542
(623)
(465)
–
(2,156)
(1,702)
2019
£000
(2,959)
7,858
(567)
4,332
Weighted average number of shares (note 23)
46,238,878
46,178,716
Underlying basic EPS (pence)
1.9p
9.4p
Working capital:
Working capital movements for 2020 take into account the disposal
of National Law Partners on 1 January 2020
Movement in trade and other receivables
Movement in trade and other payables
Working capital
Movement in interest accruals
Movement in corporation tax debtor
Movement in financing accruals
IFRS measure – movement in trade and other receivables
less movement in trade and other payables
Net debt is defined in note 29.
2020
£000
2,223
2,945
5,168
(158)
15
110
5,135
2019
£000
(8,880)
1,836
(7,044)
(114)
(103)
–
(7,261)
102
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
103
1 Accounting policies continued
Revenue
Marketing services
Consumer Legal Services – Solicitor income
(personal injury)
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.
Consumer Legal Services – Conveyancing and
surveyor instructions (residential property)
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
Consumer Legal services – provision of
resource (residential property)
Income from the outsourcing of employees
who provide services to process conveyancing
transactions for homebuyers and sellers in
England and Wales. Management consider
there to be one performance obligation being
the completion of the transaction as until
this point there is no entitlement to revenue.
The full transaction price being the agreed
upon fee is recognised at this point.
Consumer Legal Services – 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. These
milestones are 1. Admission of liability and 2.
Settlement of the case. No revenue is recognised
up until the first milestone, admission of liability,
has been achieved as it is at this point that it
becomes highly probable that recognising revenue
would not lead to a reversal in the future.
Critical Care – Case management services
Case management support within the medico-legal
framework for multi-track cases. Management
consider that the performance obligation is the
provision of case management support and as the
service is simultaneously delivered and consumed
by the customer then revenue is measured over
time based on an input approach being the hours
worked by each consultant. The transaction price,
being the contractually agreed upon hourly fee rate,
is allocated on a per hour basis. Revenue is invoiced
monthly based on the hours worked in that month
and recognised at this point.
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. Where the terms of the contract allow for
recoverability of work performed to date should a
customer terminate this contract, an adjustment is
made at each month end to accrue for revenue on
any such reports in progress. This is subsequently
reversed and the full transaction price recognised
on provision of the final report.
Consumer Legal Services – 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
Consumer Legal services – 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 Panel Law Firm 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.
Government grants
As a result of the economic impact of the
COVID-19 pandemic, the Group made use of the
Government’s Coronavirus Job Retention Scheme.
Income from this scheme has been accounted
for under IAS 20: Government Grants and is
included within the consolidated statement of
comprehensive income as a deduction from the
corresponding expense.
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
Software
–
–
–
–
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.
104
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
105
1 Accounting policies continued
Property, Plant and Equipment
Property, plant and equipment are measured at
cost less accumulated depreciation.
Depreciation
Depreciation is calculated to write off the cost,
less estimated residual value, of property, plant
and equipment by equal instalments over their
estimated useful economic lives as follows:
Fixtures and fittings – 3 to 10 years
Lease assets
The Group as a lessee
For any new contracts entered into on or after 1
January 2020, 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
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.
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 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.
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.
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 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.
Disbursement payables and receivables are
recognised initially at fair value and subsequent
to initial recognition, are stated at amortised cost
using the effective interest method.
Member capital and current accounts
Member capital and current accounts represent
the balances owed to non-controlling members’
in the LLPs. These consist of any capital advances
and unpaid allocated profits as at the year end.
Members capital and current accounts are
classified as financial liabilities and are recognised
initially at fair value. Subsequent to initial
recognition, members capital and current accounts
are stated at amortised cost using the effective
interest method.
106
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
107
1 Accounting policies continued
Employee share schemes
The share option plans allow employees of the
Group to acquire shares of the Company. The
fair value of options granted is recognised as an
employee expense with a corresponding increase in
equity. The fair value is measured at grant date and
spread over the period during which the employees
become unconditionally entitled to the options. The
fair value of the options granted is measured using
an option pricing model, taking into account the
terms and conditions upon which the options were
granted. The amount recognised as an expense
is adjusted to reflect the actual number of share
options that are expected to vest except where
forfeiture is only due to share prices not achieving
the threshold for vesting.
Exceptional items
Exceptional items are non-recurring items that
are material by nature and separately identified
to allow for greater comparability of underlying
Group operating results year-on-year. Examples of
exceptional items in the current and/or previous
years include reorganisation and restructuring
costs; revaluation of liability associated with legacy
ATE products; and acquisition related costs.
Exceptional costs are separately identified to allow
for greater comparability of underlying Group
operating results year on year.
Impairment
The carrying amounts of the Group’s non- financial
assets, other than deferred tax assets, are reviewed
at each reporting date to determine whether there
is any indication of impairment.
If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill, and
intangible assets that have indefinite useful lives or
that are not yet available for use, the recoverable
amount is estimated each year at the same time.
The recoverable amount of an asset or CGU is
the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their
present value using a pre-tax discount rate that
reflects current market assessments of the time
value of money and the risks specific to the asset.
For the purpose of impairment testing, assets
that cannot be tested individually are grouped
together into the smallest group of assets that
generates cash inflows from continuing use that
are largely independent of the cash inflows of other
assets or groups of assets (the Cash Generating
Unit or CGU). The goodwill acquired in a business
combination, for the purpose of impairment testing,
is allocated to CGUs. For the purposes of goodwill
impairment testing, CGUs to which goodwill has
been allocated are aggregated so that the level
at which impairment is tested reflects the lowest
level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that
are expected to benefit from the synergies of the
combination.
An impairment loss is recognised if the carrying
amount of an asset or its CGU exceeds its
estimated recoverable amount. Impairment losses
are recognised in the statement of comprehensive
income. Impairment losses recognised in respect
of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the units, and
then to reduce the carrying amounts of the other
assets in the unit (group of units) on a pro rata
basis.
An impairment loss in respect of goodwill is not
reversed. In respect of other assets, impairment
losses recognised in prior periods are assessed at
each reporting date for any indications that the loss
has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the
estimates used to determine the recoverable
amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not
exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
Pensions
The Group operates a stakeholder 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 in the Group’s financial
statements in the period in which the dividends are
approved by the Company’s shareholders or, in the
case of interim dividends, when paid.
Member drawings
Drawings are made to members in line with the
provisions as stated in the partnership agreements.
Members may draw an amount not in excess of
their profit share for the relevant accounting period
and drawings may be limited depending on the cash
requirements of the LLP. Drawings are recognised
once paid.
Share option reserve
The share option reserve is the corresponding
charge to equity in respect of the IFRS 2 share base
payment charge.
Merger reserve
The merger reserve represents the excess of
the fair value of shares acquired through share
for share exchange. In 2014 NAHL Group plc
declared a bonus issue of a single deferred share
of £0.0001 (a Deferred Share) with a share
premium of £50,000,000. This transaction
resulted in £50,000,000 of the merger reserve
being transferred to the share premium account.
In 2015 a further amount standing to the credit
of the Company’s merger reserve in the sum of
£16,928,000 was capitalised by way of a bonus
issue of newly created Capital Reduction Shares.
Financial income and expenses
Interest income and interest payable is recognised
in the consolidated statement of comprehensive
income as it accrues, using the effective interest
method. Issue costs of borrowings are initially held
on balance sheet within the fair value of interest
bearing borrowings and are subsequently expensed
to the statement of comprehensive income over
the contractual life of the associated borrowings.
108
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
109
2 Operating segments
Year ended
31 December 2020
Consumer
Legal Services
£000
Critical
Care
£000
Revenue
Depreciation and
amortisation
Operating profit/
(loss)
Profit attributable to
non-controlling
interest members
in LLPs
Financial income
Financial expenses
Profit/(Loss)
before tax
Trade receivables
Total assets1
Segment liabilities1
Capital expenditure
(including intangibles)
Year ended
31 December 2019
Revenue
Depreciation and
amortisation
Operating profit/
(loss)
Profit attributable to
non-controlling
interest members
in LLPs
Financial income
Financial expenses
Profit/(Loss)
before tax
Trade receivables
Total assets1
Segment liabilities1
Capital expenditure
(including intangibles)
Other
items
£000
Underlying Exeptional
operations
£000
items Eliminations2
£000
£000
Group
£000
–
29,537
11,338
–
40,875
(636)
(137)
(247)
(924)
(1,944)
–
–
5,407
3,594
(1,895)
(1,447)
5,659
(1,350)
(4,115)
161
(1)
–
6
(8)
–
1
(576)
–
–
–
(4,115)
168
(585)
–
–
–
Total
£000
40,875
(1,944)
4,309
(4,115)
168
(585)
–
–
–
–
–
–
3,592
(2,470)
1,452
–
4,870
3,422
32,859
5,990 79,739
(19,001) (1,232) (3,934)
(1,447)
–
–
–
1,127
8,292
118,588
(24,167)
(1,350)
–
–
–
–
–
(17,506)
–
(223)
8,292
101,082
(24,167)
540
244
305
–
1,089
–
–
1,089
37,748
13,566
–
–
51,314
(781)
(152)
(5)
(960)
(1,898)
–
–
8,796
5,013
(1,617)
(1,771)
10,421
(7,858)
(4,474)
201
(7)
–
–
(10)
–
1
(598)
–
–
–
(4,474)
202
(615)
–
–
–
–
–
–
–
–
–
51,314
(1,898)
2,563
(4,474)
202
(615)
4,516
5,057
35,180
(19,086)
(2,214)
5,003
5,143
4
6,297 77,596
(517)
(1,175)
(1,771)
–
–
–
5,534
10,204
119,073
(20,778)
(7,858)
–
–
–
–
–
(17,506)
–
(2,324)
10,204
101,567
(20,778)
457
181
44
–
682
–
–
682
2 Operating segments continued
Significant customers
No customers account for greater than 10% of the
total Group revenue (2019: no customers).
Geographic information
All revenue and assets of the Group are based in
the UK.
Critical Care – Revenue from the provision of
expert witness reports and case management
support within the medico-legal framework for
multi-track cases.
Shared services – Costs that are incurred in
managing Group activities or not specifically
related to a product.
Other items – Other items represent share-based
payment charges and amortisation charges on
intangible assets recognised as part of business
combinations.
Exceptional items – items that are non-recurring
and 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.
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. In the previous year management reported
5 separate segments being Personal Injury,
Residential Property, Critical Care, Group and
Other items. During June 2020 the Board took
the decision to merge the Personal Injury and
Residential Property divisions in a Consumer Legal
Services Division and to rename the Group division
to Shared Services. The segmental reporting has
been adjusted accordingly. Whilst the sub-totals
shown as underlying operations remain unchanged,
the comparatives have been restated on a
consistent basis.
Consumer Legal services – Revenue is split
along 3 separate streams being: a) Panel –
revenue from the provision of personal injury
and conveyancing enquiries to the Panel Law
Firms, based on a cost plus margin model b)
Products – consisting of commissions received
from providers for the sale of additional products
by them to the Panel Law Firms, surveys and
the provision of conveyancing searches and c)
Processing – in the case of our ABSs and self-
processing operations, revenue receivable from
clients for the provision of legal services.
1. Total assets and segment liabilities exclude intercompany loan balances as these are not included in the segment results reviewed by the chief
operating decision maker.
2. Eliminations represents the difference between the cost of subsidiary investments included in the total assets figure for each segment and the
value of goodwill arising on consolidation.
During the year, the Group undertook a review of its accounting treatment and presentation of several
significant items that resulted in the restatement of its 2019 results. See note 30 for further details.
110
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
111
3 Administrative expenses and auditor’s remuneration
5 Staff numbers and costs
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 charge/(release)
Government Grants
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Fees payable to the Company’s auditors for the audit of
parent company and consolidated financial statements
Fees payable to the Company’s auditors for other services:
SRA audit
Taxation advice
Tax compliance services
4 Exceptional items
Exceptional items included in the income statement are summarised below:
Group strategic and reorganisation costs1
Group restructure2
Due diligence costs3
Termination of strategic partnership4
Impairment of Residential Property goodwill and intangible assets5
2020
£000
169
430
421
924
119
(410)
125
2019
£000
147
419
372
960
(355)
–
195
2020
£000
2019
£000
120
162
5
–
–
–
10
23
2020
£000
613
399
338
–
–
1,350
2019
£000
1,297
–
–
1,239
5,322
7,858
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. Group restructure costs largely relate to redundancy costs and other one-off costs associated with the closure of the Chancery Lane office and
merger of the residential property and personal injury businesses into a new Consumer Legal Services division.
3. Due diligence costs consisting of legal and advisory costs in respect of a potential offer made for the Group during the year.
4. The decision was made in December 2019 to terminate the relationship in respect of National Law Associates LLP. As part of this agreement, a
one-off provision of £1.1m was required along with £0.1m of legal and advisory fees incurred.
5. In light of the 2019 trading performance of the Residential Property division and the emerging global risk of COVID-19 at that time, 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. The assets were therefore written off in full.
The average number of persons employed by the Group (including Directors) during the year,
analysed by category, was as follows:
Directors
Others
Number of Employees
2020
2
253
255
2019
2
237
239
The Group also has an average of 4 Non-executive directors (2019: 4) who provided services to the Group
under service contracts.
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
Statutory Directors’ emoluments
Statutory Directors’ emoluments
Year ended 31 December 2020
Executive Directors
J R Atkinson1
J D Saralis
Non-Executive
C Brown3
T J M Aspinall
G D C Kent
S P Tilleray4
B Phillips5
2020
£000
9,364
523
909
307
2019
£000
8,331
811
867
338
11,103
10,347
2020
£000
771
2019
£000
649
Salary
and fees
£000
Benefits
£000
Annual
bonus
£000
Pension
£000
Total
£000
159
162
62
58
47
48
23
13
16
–
–
–
–
–
559
29
–
–
–
–
–
–
–
–
2
2
–
–
–
–
–
4
174
180
62
58
47
48
23
592
J R Atkinson received £179,000 for compensation for loss of office during the year.
112
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
113
6 Directors’ emoluments continued
9 Taxation
Salary
and fees
£000
Benefits
£000
Annual
bonus
£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
Year ended 31 December 2019
Executive Directors
J R Atkinson1
J D Saralis
Non-Executive
R S Halbert2
C Brown3
G D C Kent
T J M Aspinall
T J S P Tilleray4
1. J R Atkinson resigned from the Board on 7 September 2020.
2. R S Halbert resigned from the Board on 30 January 2019.
3. C Brown resigned from the Board on 8 October 2020.
4. S Tilleray was appointed to the Board on 19 July 2019.
5. Brian Phillips was appointed to the Board on 25 June 2020.
The Group contributed £4,000 to pension schemes in respect of Directors during the year (2019: £3,000).
The emoluments of the highest paid Director were £353,000 (2019: £246,000).
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
Other income1
2020
£000
10
158
168
1 Other income relates to financing income on debtors and accrued income expected to be settled within greater than 12 months.
8 Financial expense
Interest on bank loans
Amortisation of facility arrangement fees
Interest on lease liabilities
2020
£000
469
88
28
585
2019
£000
9
193
202
2019
£000
529
77
9
615
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
Loss for the year
Total tax expense
Loss before taxation
2020
£000
202
26
228
(226)
(226)
2
2
2020
£000
(225)
2
(223)
2019
£000
883
(121)
762
(127).
(127)
635
635
2019
£000
(2,959)
635
(2,324)
Tax using the UK corporation tax rate of 19.00% (2019: 19.00%)
(42)
(441)
Non-deductible expenses
Adjustments in respect of prior years
Share scheme deductions
Short-term timing differences for which no deferred tax is recognised
Total tax charge
100
26
(11)
(71)
2
1,189
(121)
–
8
635
Changes in tax rates and factors affecting the future tax charge
The UK Government announced in the 2021 budget that from 1 April 2023, the rate of corporation tax in the
United Kingdom will increase from 19% to 25%. This was not substantively enacted at the reporting date
and so the effects are not included within these financial statements.
114
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
115
10 Deferred tax asset
12 Acquisitions and disposals
At beginning of year
Recognised in statement of comprehensive income (see note 9)
Reclassified to liability
Deferred tax asset at end of year
2020
£000
30
(16)
–
14
The asset for deferred taxation consists of the tax effect of temporary differences in respect of:
At 1 January 2019
Reclassified to deferred tax liability
Recognised in statement of comprehensive income
At 31 December 2019
Recognised in statement of comprehensive income (see note 9)
At 31 December 2020
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
Property,
plant &
equipment
£000
Bad debt
provision
£000
12
(7)
12
17
(3)
14
165
–
(152)
13
(13)
–
2020
£000
1,068
–
(242)
826
The liability for deferred taxation consists of the tax effect of temporary differences in respect of:
At 1 January 2019
Reclassified from deferred tax asset
Recognised in statement of comprehensive income
At 31 December 2019
Recognised in statement of comprehensive income
At 31 December 2020
Property,
plant & equipment
£000
–
(7)
37
30
8
38
Intangible
assets
acquired on
business
combinations
£000
1,342
–
(304)
1,038
(250)
788
826
2019
£000
177
(140)
(7)
30
Total
£000
177
(7)
(140)
30
(16)
14
2019
£000
1,342
(7)
(267)
1,068
Total
£000
1,342
(7)
(267)
1,068
(242)
During 2019 the Group incorporated a new wholly-owned subsidiary, National Conveyancing Partners
Limited which began trading in 2020. There were no acquisition costs involved.
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.
On 2 January 2020 the Group terminated its partnership in respect of National Law Associates LLP and
relinquished its interest for nil consideration, recognising neither a profit or loss on disposal.
13 Goodwill
Cost
At 1 January 2019
At 31 December 2019
At 31 December 2020
Impairment
At 1 January 2019
Recognised in the year
At 31 December 2019
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
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
Total
£000
60,362
60,362
60,362
–
–
–
–
–
(4,873)
(4,873)
(4,873)
–
(4,873)
(4,873)
(4,873)
39,897
39,897
15,592
15,592
–
–
55,489
55,489
In 2019, in light of the losses incurred by the Residential Property CGU and the continued uncertainty in the
market, the directors undertook an impairment review by considering the CGU’s value in use compared to
its recoverable amount and concluded that there were insufficient cash flows to support the recoverable
value of goodwill attributable to the Residential Property CGU. As such, an impairment loss of £4,873,000
was recognised in the statement of comprehensive income in 2019.
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 WACC of 8.4% for
Critical Care (2019: 7.4%) and 9.3% (2019: 8.4%) for Personal Injury. 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.
116
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
117
13 Goodwill continued
The operating profit compound annual growth rate assumptions for years one to five are as follows:
The balances owed to the non-controlling members’ of these LLPs at the end of the year and movements
during the year are as follows:
Personal Injury
Critical Care
2020
49.8%
14.5%
2019
16.6%
9.0%
The key factor influencing the Personal Injury
growth assumptions is the long business cycle
of National Accident Law. A high proportion of
profits generated from 2021 onwards relate to the
settlement of claims first converted by National
Accident Law in previous years. These forecasts
are based on detailed financial models using
assumptions such as lead to enquiry conversion,
claim underway rate, claims win rate and average
settlement values. These assumptions are based
on the company’s knowledge and experience on
how cases settle gained from prior experience.
A growth rate that is higher than the long-term UK
average growth rate of c. 2% has been applied to
the Critical Care CGU. This is based on the recent,
pre-COVID trading performance of the division over
the past three years, the anticipated recovery from
COVID and takes into account the strategic plans
for the division over the coming years.
The operating profits have been adjusted for
working capital movements to arrive at the
operating cashflows. These working capital
movements have been based on historic trends
and adjusted for changes in the business model 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 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 – 4.4%
Critical Care – 54.8%
14 Non-controlling interests
The Group has the following investments in non-wholly owned subsidiaries:
Name of subsidiary
Your Law LLP
Law Together LLP
Country of incorporation
and principal place
of business
Nature of interest
Principal activity
2020
2019
United Kingdom
United Kingdom
LLP member
LLP member
Personal injury lawyers
Personal injury lawyers
75%
50%
75%
50%
Ownership
The ownership percentage is based on the proportion of capital contribution advanced by each of the
corporate members. Profit share allocations and control are not determined by reference to this ownership
percentage. 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.
Balance at start of the year
Profit allocation for the year
Disposal of interest in LLP
Drawings paid
Capital advances
Balance at the end of the year
2020
£000
3,315
4,115
(54)
(3,199)
–
4,177
2019
£000
947
4,474
–
(2,156)
50
3,315
15 Other Intangible assets
Technology Contract
related
£000
related
£000
Brand
names Software
£000
£000
Assets
under
construction
£000
Total
£000
Cost
At 1 January 2020
Additions
Reclassifications
At 31 December 2020
Amortisation and impairment
At 1 January 2020
Amortisation charge for the year
Amortisation charge on business combinations
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
167
–
–
8,466
–
–
885
–
–
1,815
633
7
167 8,466
885 2,455
37
187
(7)
11,370
820
–
217
12,190
167
–
–
4,381
–
825
740
–
99
1,000
421
–
167
5,206
839
1,421
–
–
–
–
6,288
421
924
7,633
–
4,085
145
815
– 3,260
46
1,034
37
217
5,082
4,557
118
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
119
15 Other Intangible assets continued
Technology Contract
related
£000
related
£000
Brand
names Software
£000
£000
Assets
under
construction
£000
Total
£000
Cost
At 1 January 2019
Additions
Reclassifications
At 31 December 2019
Amortisation
At 1 January 2019
Amortisation charge for the year
Amortisation charge on business combinations
Impairment charge on business combinations
167
–
–
8,466
–
–
167 8,466
82
–
20
65
3,440
–
841
100
885
–
–
885
641
–
99
–
1,222
426
167
1,815
344
372
–
284
At 31 December 2019
167
4,381
740
1,000
167
37
(167)
37
10,907
463
–
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
37
6,400
5,082
In the statement of comprehensive income, the amortisation charge 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 2020
Additions
Disposals
At 31 December 2020
Depreciation and impairment
At 1 January 2020
Depreciation charge for the year
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
Fixtures & fittings
&total
£000
1,936
269
–
2,205
1,669
169
1,838
267
367
Cost
At 1 January 2019
Additions
At 31 December 2019
Depreciation and impairment
At 1 January 2019
Depreciation charge for the year
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
17 Leases
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
2020
£000
2,699
62
2,761
2020
£000
248
2,195
Additions to right of use assets of £2,801,000 (2019: £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 2020 was £558,00 (2019: £465,000).
2020
£000
404
26
430
28
–
120
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
Fixtures &
fittings &
total
£000
1,717
219
1,936
1,522
147
1,669
195
267
2019
£000
180
84
264
2019
£000
187
60
2019
£000
395
24
419
9
–
121
18 Trade and other receivables
20 Trade and other payables
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
2020
£000
7,493
799
11,398
7,029
14
703
88
6,761
34,285
2019
£000
9,556
648
11,205
7,631
1,045
1,144
103
6,539
37,871
A provision against trade receivables and accrued income of £673,000 (2019: £554,000) 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
2020
£000
2019
£000
20,000
(99)
19,901
23,750
(156)
23,594
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
2020
£000
Carrying
amount
2020
£000
Fair
value
2019
£000
Carrying
amount
2019
£000
Bank loan1
GBP
1.25%–1.75% above Libor 2022
19,901
19,901
23,594
23,594
19,901
19,901
23,594
23,594
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. The facility was extended in July 2020 and this facility is now due to terminate on 31 December
2022. Interest is payable at between 1.25%– 1.75% above LIBOR per annum.
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 (2019: 46,178,716) ‘A’
Ordinary Shares of £0.0025 each
Issued during the year: 61,506 ‘A’ Ordinary shares of £0.0025 each
Closing: 46,240,222 ‘A’ Ordinary Shares of £0.0025 each
Shares classified in equity
Opening shares classified in equity
Issued during the year
Closing balance
2020
£000
3,201
6,001
1,791
5,849
705
17,547
2019
£000
3,935
5,835
835
5,742
869
17,216
2020
2019
46,178,716
61,506
46,178,716
–
46,240,222
46,178,716
£000
£000
115
–
115
115
–
115
115
–
115
115
–
115
The holders of ’A’ Ordinary shares are entitled to one vote per share at the meetings of the Company and to
dividends as declared in proportion to the amounts paid up on the ordinary shares.
22 Share based payments
The Group operates three employee share plans as follows:
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).
122
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
123
22 Share based payments continued
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
EMI Equity-settled award to 6
employees granted by the parent
company on 11 December 2014
SAYE Equity-settled award to 49
employees granted by the parent
company on 23 October 2018
EMI Equity-settled award to 11
employees granted by the parent
company on 18 April 2019
240,713 ordinary
shares
Performance-
based
1 December 2021
750,298 ordinary
shares
Performance-
based
Vesting period and
maximum life of
options
Third anniversary of
Date of Grant
On determination
of performance
criteria (as soon as
practicable after 31
December 2021)
Third anniversary of
Date of Grant
EMI Equity-settled award to 1
employee granted by the parent
company on 18 April 2019
48,780 ordinary
shares
Performance-
based
The number and weighted average exercise prices of share options are as follows
Outstanding at the beginning of 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
Exercised during the year
2020
2019
Weighted
average
exercise price
£
0.23
–
(0.86)
(0.0025)
(1.21)
(0.22)
0.20
1.92
0.0025
Number of
options
No.
2,040,920
–
(143,830)
(530,868)
(65,160)
(261,271)
1,039,791
648,491
61,506
Weighted
average
exercise price
£
0.30
0.0025
–
(0.0025)
(0.0025)
(0.42)
0.23
1.81
–
Number of
options
No.
1,826,738
818,980
–
(368,112)
(61,506)
(175,180)
2,040,920
644,837
–
A charge of £523,000 (2019: £811,000) 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 £0.0025 (2019: not applicable). For shares outstanding at the year
end, these are exercisable at a range of exercise prices of between £0.0025–£0.86 and have a weighted
average remaining life of 363 days.
There were no share options issued in 2020. The fair value of each employee share option issued prior to
2020 has been measured using the Black-Scholes formula where an expected volatility of 65.0% has been
used as well as a risk-free interest rate (based on government bonds) of between 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 2020 is based on loss attributable to ordinary
shareholders of the parent company of £(225,000) (2019: loss £2,959,000) and a weighted average
number of Ordinary Shares outstanding of 46,238,878 (2019: 46,178,716).
Loss attributable to ordinary shareholders
£000
Loss for the year attributable to the shareholders
Weighted average number of ordinary shares
2020
(225)
2019
(2,959)
Number
Issued Ordinary Shares at 1 January
Weighted average number of Ordinary Shares at 31 December
Note
21
2020
2019
46,178,716
46,178,716
46,238,878
46,178,716
Basic Earnings per share (p)
Group
2020
(0.5)
2019
(6.4)
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
2020
(0.5)
2019
(6.4)
124
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
125
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
Disbursements (note 18)
Total financial assets
Financial liabilities measured at amortised cost
Other interest-bearing loans and borrowings (note 19)
Lease liabilities (note 17)
Trade payables (note 20)
Disbursements payable (note 20)
Other payables and accruals (note 20)
Carrying
amount
2020
£000
3,609
21,288
6,761
31,658
19,901
2,443
3,201
6,001
5,849
Fair
value
2020
£000
3,609
21,288
6,761
31,658
19,901
2,443
3,201
6,001
5,849
Total financial liabilities measured at amortised cost
37,396
37,396
Carrying
amount
2019
£000
2,564
25,951
6,539
35,054
23,594
247
3,935
5,835
5,742
39,353
Fair
value
2019
£000
2,564
25,951
6,539
35,054
23,594
247
3,935
5,835
5,742
39,353
(b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.
Exposure to credit risk
The maximum exposure to credit risk at the balance sheet date by class of financial instrument was:
Trade receivables
Accrued income
2020
£000
8,292
12,981
21,319
2019
£000
10,204
14,702
24,906
Management consider the credit risk to be mitigated as a result of a) the holding of deposits for all
significant panel law firm customers and b) only offering significant deferred terms to those panel law firms
with whom we hold strategic partnerships and after satisfactory credit checks have been obtained. As at
31 December 2020 these deposits reflect 8.5% (2019: 8.6%) of the balance of trade receivables. At each
balance sheet date, the amount of deposit held was:
Customer deposits
2020
£000
705
2019
£000
869
Credit quality of financial assets and impairment losses
The aging of trade receivables at the balance sheet date was:
Not past due
Past due (1 – 30 days)
Past due (30 – 120 days)
Past due (Over 120 days)
Gross:
Gross:
Standard Deferred
Terms
2020
£000
Terms Impairment
2020
2020
£000
£000
Gross:
Standard
Terms
2019
£000
Total
2020
£000
2,441
986
926
2,431
1,683
43
45
222
(100) 4,024 3,362
545
1,003
835
945
1,438
(333) 2,320
(26)
(26)
Gross:
Deferred
Terms
2019
£000
3,994
168
105
67
Impairment
2019
£000
Total
2019
£000
(34) 7,322
701
(12)
898
(42)
1,283
(222)
6,784
1,993
(485) 8,292 6,180
4,334
(310) 10,204
The Group offers standard credit terms of between 30–60 days to the majority of its customers. Deferred
terms of between 12–24 months are offered to those panel law firms or customers with whom we hold
strategic partnerships.
36.2% of standard terms trade receivables are 120 days or more past due (2019: 23.3%). These receivables
arise primarily in Critical Care and Your Law where our standard credit terms are 30 days. 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.
Accrued income balances of £12,981,000 (2019: 14,702,000) represent amounts contractually due from
customers that have not yet been invoiced but where there is a contractual obligation to settle funds once
they become due. All accrued income of this nature is granted on extended credit terms of up to 36 months
and none is yet due for payment.
The movement in the allowance for impairment in respect of trade receivables and accrued incom during the
year was as follows:
Balance at 1 January
Allowance released
Allowance utilised
Balance at 31 December
2020
£000
554
119
–
673
2019
£000
909
(203)
(152)
554
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.
126
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
127
24 Financial instruments continued
(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:
2020
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
5 years or more
2019
Carrying amount
Contractual cash flows:
1 year or less
1 to 2 years
2 to 5 years
Secured
bank loans
£000
Lease
liabilities
£000
Trade and
other
payables
£000
Total
£000
(20,000)
(2,443)
(16,843)
(39,286)
(400)
(20,400)
–
–
(20,800)
(287)
(295)
(853)
(1,306)
(2,741)
(10,842)
(6,001)
–
–
(11,529)
(26,696)
(853)
(1,306)
(16,843)
(40,384)
Secured
bank loans
£000
Lease
liabilities
£000
Trade and
other
payables
£000
Total
£000
(23,750)
(247)
(16,347)
(40,344)
(570)
(24,320)
–
(24,890)
(188)
(61)
–
(249)
(10,512)
(5,835)
–
(11,270)
(30,216)
–
(16,347)
(41,486)
(d) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and
equity prices will affect the Group’s income or the value of its holdings of financial instruments.
Market risk – foreign currency risk
The Group has no foreign currency risk as all transactions are in Sterling.
Market risk – interest rate risk
Profile
The Group is exposed to interest rate risk from its use of interest-bearing financial instruments. This is a
market risk that the future cash flows of a financial instrument will fluctuate because of changes in interest
rates.
At the balance sheet dates, the only interest-bearing financial asset is cash. Cash is held to meet liabilities as
they fall due and is not held for investment purposes, therefore there is not considered to be an interest rate
risk associated with cash.
Variable rate instruments
Financial liabilities
Total interest-bearing financial instruments
2020
£000
2019
£000
20,000
20,000
23,750
23,750
The Group manages the interest rate risk arising from its financial liabilities by monitoring its interest rates
and the general market and consulting with its bankers to find the best way to mitigate any movements if it
anticipates any significant changes to interest rates.
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
2020
£000
100
(100)
2019
£000
119
(119)
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 2020 is 0.3:1.0 (2019: 0.4:1.0). The balance
of the Group’s capital as at 31 December 2020 was £80,239,000 comprising equity of £60,239,000 and
bank loans of £20,000,000. The Group is subject to quarterly covenant testing against its bank loans.
These covenants include minimum EBITDA and minimum free cash flow. The Group adhered to both these
covenants in 2020 and is forecasting compliance for the foreseeable future.
25 Commitments
Capital commitments
At 31 December 2020 the Group had capital commitments of £nil (2019: £261,000).
128
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
129
26 Transactions with owners, recorded directly in equity
Exercise of share options
During the year 61,506 share options were exercised which resulted in the issue of 61,506 new Ordinary
Shares with a par value of £0.0025. The exercising of these options raised funds of £154 for the Group.
There were no transactions with owners recorded directly in equity in 2019.
27 Dividends
No dividends were paid in 2020. On 31 May 2019 the Group paid final dividends in respect of 2018 of
£2,631,000 which represented a dividend per share of 5.7p. On 31 October 2019 the Group paid interim
dividends in respect of 2019 of £1,201,000 which represented a dividend per share of 2.6p. The Directors
did not recommend a final dividend in respect of 2019.
28 Related parties
Transactions with key management personnel
Key management personnel in situ at the 31 December 2020 and their immediate relatives control 0.3%
(2019: 1.6%) 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 Law Limited, Fitzalan Partners Limited, Bush & Company Rehabilitation Limited and any other
management serving as part of the executive team. Detailed below is the total value of transactions with
these individuals.
Short-term employment benefits
Termination benefits
29 Net debt
2020
£000
1,897
179
2,076
2019
£000
2,032
–
2,032
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
Lease liabilities
2020
£000
3,609
(19,901)
(16,292)
2019
£000
2,564
(23,594)
(21,030)
(2,443)
(247)
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 (release of)/increase to prepaid loan
arrangement fees
Net debt at beginning of period
Net debt at end of period
2020
£000
1,045
3,750
4,795
(57)
(21,030)
(16,292)
Set out below is a reconciliation of movements in lease liabilities arising from financing activities:
Net outflow from decrease in lease liabilities
Movement in lease liabilities resulting from cash flows
Non-cash movements arising from initial recognition of new
lease liabilities, revisions and interest charges
Non-cash movements arising from initial recognition on adoption of IFRS 16
Lease liabilities at beginning of period
Lease liabilities at end of period
2020
£000
558
558
(2,754)
–
(247)
(2,443)
2019
£000
966
(6,500)
(5,534)
28
(15,524)
(21,030)
2019
£000
465
465
(39)
(673)
–
(247)
30 Prior period adjustments
During the year, the Group undertook a review of its accounting treatment and presentation of several
significant items. The result of this was that the following adjustments have been made to the presentation
of gross profit, underlying profit and balances previously identified as non-controlling interests:
1. As part of the restructure of its Consumer Legal Services division in the year ended 31 December 2020
the Group reclassified the costs of its call centre and lead triage operations from administrative expenses
to cost of sales. The Directors believe this better reflects the nature of the costs and the operations of the
respective businesses. Accordingly, cost of sales, gross profit and administrative expenses for 2019 have
been restated to reflect the reallocation of these costs on the same basis to allow for greater comparability
year on year.
2. The Group undertook a review of its non-underlying items. In line with best practice, the Group has
decided that the IFRS 2 share based payment charge and amortisation of intangible assets arising on
business combinations will now be presented within operating profit rather than as non-underlying items.
This change will result in greater comparability of the Group results with other listed entities.
3. During the year the Group undertook a review of its contracts in relation to its ABS LLP law firms. As part
of this review, it identified that member capital, previously accounted for as equity under IAS 32, met the
definition of a financial liability rather than as an equity instrument under this standard. Given the materiality
of these balances, in line with IAS 8, the Group has restated the 2019 financial statements as a result of
this. The impact of this adjustment is that balances previously accounted for as non-controlling interests
within equity have been reclassified to financial liabilities within the statement of financial position. This has
reduced the Group’s net assets by £3,315,000 as at 31 December 2019. There is no impact on the overall
profit and total comprehensive income attributable to the owners of the company but the profit attributable
to non-controlling interests has now been reclassified as an expense in the statement of comprehensive
income in line with treatment of income and returns on financial liabilities under IAS 32, rather than shown
as an allocation of profits to a non-controlling interest.
130
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
131
30 Prior period adjustments continued
The impact of these adjustments on the financial statements is as follows:
COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2020
Adjustment 1
£000
Adjustment 2
£000
Adjustment 3
£000
Impact on consolidated statement
of comprehensive income
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
Profit attributable to non-controlling
interest members in LLPs
Financial income
Financial expense
Profit/(loss) before tax
Taxation
2019 as
previously
reported
£000
51,314
(24,990)
26,324
(23,761)
12,192
(811)
(960)
(7,858)
2,563
–
202
(615)
2,150
(635)
Profit/(loss) and total comprehensive
income for the year
1,515
Profit and total comprehensive
income is attributable to:
Owners of the company
Non-controlling interests
Impact on statement of
financial position
Member capital and current
accounts (financial liability)
Total current liabilities
Total liabilities
Net assets
(2,959)
4,474
1,515
–
(17,766)
(42,488)
59,079
Capital and reserves attributable
to non-controlling interests
3,315
–
(2,043)
(2,043)
2,043
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,771)
811
960
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2019 as
restated
£000
51,314
(27,033)
24,281
21,718
10,421
–
–
(7,858)
2,563
(4,474)
202
(615)
(2,324)
(635)
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
Shareholders’ funds
Note
2020
£000
2019
£000
2
3
5
52,700
52,700
31,933
84,633
31,410
84,110
115
3,912
14,595
66,011
84,633
115
3,389
14,595
66,011
84,110
The Company profit for the year was £nil (2019: £22,000,000).
The notes on pages 135–139 form part of these financial statements.
These financial statements were approved by the Board of Directors on 4 June 2021 and were signed on its
behalf by:
–
–
–
–
–
–
–
–
–
(4,474)
–
–
(4,474)
–
(4,474)
(2,959)
Company registered number: 08996352
J D Saralis
Director
–
(4,474)
(2,959)
–
(4,474)
(2,959)
(3,315)
(3,315)
(3,315)
(3,315)
(21,081)
(45,803)
(3,315)
55,764
(3,315)
–
132
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
133
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
capital
£000
Note
Share
option
reserve
£000
Share
premium
£000
Merger
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2019
115
2,578
14,595
–
47,843 65,131
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
Balance at 31 December 2019
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
7
–
–
–
–
–
–
811
–
–
–
–
–
115
3,389
14,595
–
–
–
–
–
–
–
–
523
–
–
–
–
–
–
Balance at 31 December 2020
115
3,912
14,595
–
22,000 22,000
– 22,000 22,000
–
–
–
–
–
–
–
–
–
–
811
(3,832) (3,832)
66,011 84,110
–
–
–
–
–
–
–
–
523
–
66,011 84,633
COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flows from operating activities
Profit for the year
Adjustments for:
Share based payments
Increase 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
2020
£000
2019
£000
–
22,000
523
523
(523)
–
–
–
–
–
–
–
811
22,811
(18,979)
3,832
–
(3,832)
(3,832)
–
–
–
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
Financial Statements
The Financial Statements for the year ended 31
December 2020 have been prepared in accordance
with International Accounting Standards in
conformity with the requirements of the Companies
Act 2006.
The financial information has been prepared on a
going concern basis and under the historical cost
convention. The company has taken advantage
of the exemption allowed under Section 408 of
the Companies Act 2006 and has not presented
its own income statement in these financial
statements. The Group profit includes a profit
after tax for the parent company of £nil (2019:
£22,000,000).
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.
New standards and amendments adopted by
the Company
The Company has not adopted any new standards
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
£84,633,000 (2019: £84,110,000) and
net current assets of £31,933,000 (2019:
£31,410,000) 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 98.
Employee share schemes
The share option plans allow employees of the
Group to acquire shares of the Company. The
fair value of options granted is recognised as an
employee expense with a corresponding increase in
equity. The fair value is measured at grant date and
spread over the period during which the employees
become unconditionally entitled to the options. The
fair value of the options granted is measured using
an option pricing model, taking into account the
terms and conditions upon which the options were
granted. The amount recognised as an expense
is adjusted to reflect the actual number of share
options that vest except where forfeiture is only
due to share prices not achieving the threshold
for vesting. The share-based payment charge
represents the charge in respect of the employees
of the Group.
Impairment
The carrying amounts of the Company’s non-
financial assets are reviewed at each reporting date
to determine whether there is any indication of
impairment. If any such indication exists then the
asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying
amount of an asset exceeds its estimated
recoverable amount. Impairment losses are
recognised in the income statement. Impairment
losses recognised in prior periods are assessed
at each reporting date for any indications that
the loss has decreased or no longer exists. An
impairment loss is reversed if there has been
a change in the estimates used to determine
the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying
amount that would have been determined,
net of depreciation or amortisation, if no
impairment loss had been recognised.
134
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
135
2 Investments
The Company has the following investments in subsidiaries:
Country of
incorporation
and principal place
of business
Class of
shares held
Principal activity
Ownership
2020
2019
United Kingdom Ordinary Holding company
100%
100%
United Kingdom Ordinary
Critical care services
100%
100%
United Kingdom Ordinary
United Kingdom Ordinary Holding company
United Kingdom Ordinary Holding company
Agency services for solicitors
100%
100%
100%
100%
100%
100%
Name of subsidiary
Consumer Champion
Group Limited2
Bush & Company
Rehabilitation Limited2
Homeward Legal Limited
(previously Fitzalan
Partners Ltd)2
NAH Holdings Limited2
NAH Group Ltd2
NAHL Support Services
Limited2 (previously National
Accident Helpline Limited)
United Kingdom Ordinary
Provision of shared services
to the Group
Dormant
Dormant
Dormant
Dormant
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
Lawyers Agency Services
Limited
Accident Helpline Limited
NAH Support Services
Limited
Tiger Claims Limited
National Accident Helpline
Limited (previously Your
United Kingdom Ordinary
Law 1 Limited)
NAH Legal Services Limited United Kingdom Ordinary
Searches UK Limited2
United Kingdom Ordinary
United Kingdom Ordinary
Inside Eye Limited
Project Jupiter Limited2
United Kingdom Ordinary Holding company
Your Law LLP1
United Kingdom n/a
National Accident
Law Limited2
Law Together LLP1
National Conveyancing
Partners Ltd2
United Kingdom Ordinary
United Kingdom n/a
United Kingdom Ordinary Outsourcing of staff
Personal Injury lawyers
Personal Injury lawyers
Personal Injury lawyers
Dormant
Dormant
Agency services for solicitors
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
75%
100%
50%
100%
50%
100%
100%
At 31 December 2020 the value of the investment in Consumer Champion Group Limited, its only directly
owned subsidiary, was as follows:
Valuation
At 1 January 2020 and 31 December 2020
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 2020 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 9.3%.
The key assumptions under this basis are the WACC and operating profits of each subsidiary. More details
on how these have been calculated are given in note 13, Goodwill, to the consolidated financial statements.
Under this basis the carrying value of assets is below the recoverable amount valued on a value in use basis
and therefore there would be no impairment required.
Sensitivity analysis has been performed that indicates that no reasonable changes to assumptions would
result in an impairment to the investment.
3 Trade and other receivables
Amounts due from Group undertakings
2020
£000
31,933
2019
£000
31,410
Amounts due from Group undertakings are interest free and repayable upon demand.
1. Your Law LLP and Law Together LLP are Limited Liability Partnerships. 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 Bevan House, Kettering Parkway, Kettering,
Northamptonshire, NN15 6XR.
The registered office of Your Law LLP is Helmont House, Churchill Way, Cardiff, CF10 2HE.
The registered office of Law Together LLP is Castlefield House, Liverpool Road, Manchester, M3 4SB.
136
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
137
6 Share based payments
The Company operates three employee share plans. Details of these can be
found in note 22 to the Group accounts.
7 Staff costs and numbers
During the year the Company employed no members of staff and incurred no
staff costs.
8 Related parties
Details of transactions with key management personnel can be found in note
28 to the Group accounts.
4 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
2020
£000
Fair
value
2020
£000
Carrying
amount
2019
£000
Fair
value
2019
£000
Amounts due from Group undertakings
31,933
31,933
31,410
31,410
Total financial assets
31,933
31,933
31,410
31,410
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 2020 was £84,633,000.
5 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 (2019: 46,178,716) ‘A’
Ordinary Shares of £0.0025 each
Issued during the year: 61,506 ‘A’ Ordinary shares of £0.0025 each
Closing: 46,240,222 ‘A’ Ordinary Shares of £0.0025 each
Shares classified in equity
Opening shares classified in equity
Issued during the year
Closing balance
2020
2019
46,178,716
61,506
46,178,716
–
46,240,222
46,178,716
£000
£000
115
–
115
115
–
115
115
–
115
115
–
115
The holders of ’A’ Ordinary shares are entitled to one vote per share at the meetings of the Company and to
dividends as declared in proportion to the amounts paid up on the ordinary shares.
138
NAHL Group Plc Annual Report and Accounts 2020
NAHL Group Plc Annual Report and Accounts 2020
139
Notes
CBP007163
NAHL Group Plc has balanced through World Land Trust
the equivalent of 6kg of carbon dioxide.
Printed (ISO 14001 compliant) using vegetable inks on
FSC accredited stock.
© NAHL Group Plc 2021
Design and production: Navig8
www.navig8.co.uk
Planning
for the
future