Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

27 September 2022

NAHL Group plc

("NAHL", the "Company" or the "Group")

Interim Results

Continued progress on strategic objectives; trading in line with expectations    

NAHL, the leading UK marketing and services business focused on the UK consumer legal market, announces its interim results for the six months ended 30 June 2022 (the "Period").

Financial Highlights

·     Revenue increased 6% to £20.7m (H1 2021: £19.5m)

·     Cash received from settled claims in the Group's fully integrated law firm, National Accident Law ("NAL"), increased by 50% to £1.5m

·     Operating profit decreased by 8% to £2.3m reflecting planned investment in scaling NAL

·     Profit before tax decreased to £0.1m, in line with expectations (H1 2021: £0.6m)

·     Basic earnings per share were 0.0p (H1 2021: 1.0p).

·     Net debt further reduced by £1.0m to £14.5m from £15.5m at 31 December 2021

Operational Highlights

·     Continued to progress strategy of creating a higher margin, integrated law firm underpinned by a flexible business model which will drive higher returns in the medium and long-term

·     4,531 new enquiries placed into NAL, a 61% increase on H1 2021

·     NAL had a book of 9,884 ongoing claims at 30 June 2022, 25% more than at 31 December 2021 and 132% ahead of 30 June 2021

·     Ongoing claims in NAL expected to convert over the next few years into £9.8m of future cash, £7.5m of future revenue and future gross profit of £6.5m

·     The Group's market-leading brand, National Accident Helpline, generated nearly 18,000 new enquiries in the Period, an increase of 27% on H1 2021

·     Increase in enquiry numbers was achieved through market share gains, and we estimate that at Period-end National Accident Helpline held a 19% share of the non-road traffic accident ("non-RTA") market, comprising employers', public and occupier liability claims

·     This performance gave management confidence to return to TV advertising in June 2022, when a new campaign was launched to strengthen National Accident Helpline's brand position and contribute to future volume growth

·     Critical Care increased the number of expert witness reports it issued by 11% and Initial Needs Assessment ("INA") reports by 12%, whilst maintaining a strong book of ongoing case management clients

·      Critical Care increased its pipeline of new work, generating 11% growth in instructions for expert witness reports and 19% growth in instructions for INA reports

·      Critical Care recruited 41 new associates in key specialisms and now works with 96 case managers and 115 expert witnesses across the UK

Outlook

·     Despite the current macroeconomic uncertainty, the Group continues to trade in line with market expectations and is on track to meet full year forecasts

·     We continue to maintain a tight control over costs and discretionary spend whilst progressing our investments in both divisions

·     The Consumer Legal Services division delivered an encouraging 4% growth in personal injury enquiry numbers in July and August compared to last year

·     In Critical Care, in July and August:

o  The number of INA reports issued was 26% ahead of last year

o  The number of expert witness reports issued was 24% lower than last year, however, this shortfall was largely down to the timing of issuing reports over the summer holiday period and we anticipate a return to growth for the remainder of the year

·     The Group remains committed to managing net debt and anticipate it reducing further this year

James Saralis, CEO of NAHL, commented:

"The performance of the Group in the first half of the year was in line with our expectations and we are pleased with the progress we have made in both of our divisions. In Consumer Legal Services, NAL increased both the number of new enquiries by 61% and cash from settlements by 50% during the Period. These metrics clearly illustrate the growing maturity of our law firm and give us confidence that we are on track to build a more sustainable and profitable business in the medium-term. Our market leading brand, National Accident Helpline, generated 27% more enquiries than H1 last year and this was achieved through market share gains which have grown consistently over the last 18 months and gave us confidence to return to TV advertising in June.

"Our Critical Care division had a strong start to the year and continued to make good progress on its strategic priorities. We continue to see good results from our business development initiatives as we look to grow Bush & Co.'s market share by appealing to a broader customer base and leveraging the use of technology. The business recruited 41 new associates in key specialisms in the Period and at 30 June 2022 was working with 96 case managers and 115 expert witnesses across the UK.

"Based on our performance in H1, and early indications in H2, the Board believes that it can navigate this period of macroeconomic uncertainty and deliver a full year outturn in line with market expectations. "

Enquiries:

Notes to Editors

NAHL Group plc (AIM: NAH) is a leader in the Consumer Legal Services ("CLS") market. The Group provides services and products to individuals and businesses in the CLS market through its two divisions:

·   Consumer Legal Services provides outsourced marketing services to law firms through National Accident Helpline and Homeward Legal; and claims processing to individuals through Your Law, Law Together and National Accident Law.  In addition, it also provides property searches through Searches UK.

·   Critical Care provides a range of specialist services in the catastrophic and serious injury market to both claimants and defendants through Bush & Co.

More information is available at www.nahlgroupplc.co.uk, www.national-accident-helpline.co.uk, www.national-accident-law.co.uk and www.bushco.co.uk

Use of alternative performance measures

The commentary in the Interim Management Statement includes alternative performance measures, which are not defined by International Financial Reporting Standards.  Definitions of these measures can be found in note 1 of the half year results.  The measures provide additional information for users on underlying business trends and performance.

Interim Management Statement

I am pleased to report NAHL's Interim Results for the six months ended 30 June 2022.

Overview

The financial results are in line with the Board's expectations.  During the Period we continued to make progress on our strategic objectives, growing the number of personal injury enquiries that we generated, increasing the number of claims being processed in NAL, collecting more cash from settlements in NAL and developing our capability and pipeline of work in Bush & Co.

Summary of results

Revenue was £20.7m, which was 6% higher than the first half of last year (H1 2021: £19.5m), and 7% higher than the second half (H2 2021: £19.4m).  Both of our divisions delivered revenue growth, with Consumer Legal Services growing by 4% and Critical Care by 12% in the Period. 

Operating profit was £2.3m, which was 8% lower than last year due to the planned investment in scaling the Group's fully integrated law firm, NAL.  At 10.9%, the operating profit margin was lower than the first half of last year (12.6%) but has recovered by 2.2 ppts compared to the 8.7% achieved in the second half of last year.

At a divisional level, operating profit in Consumer Legal Services was 14% lower than last year at £2.1m (H1 2021: £2.4m).  This was net of a £1.4m investment in the cost of generating new enquiries into NAL (H1 2021: £1.0m).  Many of these enquiries will not translate into winning claims this year but go towards building the embedded value of NAL's book of claims, which will lead to future profits and cash.  At 30 June 2022, NAL had increased the number of ongoing claims by 25% since 31 December 2021.  We estimate that NAL's book of claims is worth £7.5m of future revenue and £6.5m of future gross profits, neither of which have yet been recognised in the profit and loss account.     

Operating profit in Critical Care was 2% lower than last year at £1.6m, reflecting the Group's continued investment in business development, people and systems.  

The profit attributable to members' non-controlling interests in our joint venture LLPs was £1.9m (H1 2021: £1.7m).  This reflects increased settlements of historical claims in the Group's two joint venture partnerships, Law Together LLP and Your Law LLP.

Profit before tax decreased to £0.1m (H1 2021: £0.6m) and basic earnings per share (EPS) were 0.0p (H1 2021: 1.0p).

The Group generated £1.0m of free cash flow ("FCF") in the Period, which was £0.4m less than the equivalent period last year because of our investment in new claims in NAL.  Operating cash conversion was strong at 150% (H1 2021: 136%).  NAL collected £1.5m of cash from settlements in the Period, which was 50% more than last year.  We estimate that the ongoing claims in NAL will convert over the next few years into £9.8m of future cash, on settlement.

The Board remains committed to managing net debt and at 30 June 2022 net debt was £14.5m, down 6% from £15.5m at 31 December 2021.

Consumer Legal Services

In our Consumer Legal Services division, revenue increased by 4% from £13.6m to £14.1m, and operating profit fell by 14% to £2.1m (H1 2021: £2.4m).  

Our strategy to succeed in the personal injury market is to create a higher margin, integrated law firm underpinned by our flexible business model.  We will achieve this by growing enquiry volumes, using our National Accident Helpline brand, and by processing an increasing number of those enquiries through our own consumer-focused law firm, National Accident Law.  Our agile and scalable placement model is designed to balance the work we place with our panel, and joint venture partners, for in-year profit and cash with the work we process ourselves for greater, but deferred profit and cash. 

In the first half of 2022, we continued to build momentum in delivering this strategy.   

External data from the Claims Portal and Official Injury Claim Portal shows that the number of new claims in the UK personal injury market remained subdued in the Period.  This is due to the combined impact of COVID-19 related changes in consumer behaviour and the implementation of the Civil Liability Act 2018 ("CLA"), which have fundamentally reset the size of the market in the past 24 months.  This picture is consistent with Google mobility data, which appears to have plateaued since the start of the year.  Unfortunately, these changes have also resulted in a lack of stimulation of the market as the largest law firms and claims management companies reduce their marketing spend to manage their profits.  We estimate this market to now be worth £1.1bn annually.  We continue to believe that consumer behaviour will change, investment levels will increase, and consequentially the number of new claims will increase from current levels.   

National Accident Helpline generated 17,933 enquiries in the Period, which was an increase of 27% on last year.  This number would have been higher had we not taken the decision to stop processing tariff-only road traffic accident ("RTA") claims, which we announced in February, to focus our resources on processing higher value enquiries.

Our increase in enquiry numbers was achieved through market share gains, and we estimate that at Period-end National Accident Helpline held a 19% share of the non-RTA market, comprising employers', public and occupier liability claims.  This has grown consistently over the last 18 months, which gave us confidence to return to TV advertising in June 2022, when we launched a new campaign to strengthen our brand position and contribute to future volume growth. 

The brand and our website performed well during the Period, contributing to an improvement in the number of leads, including more organic (unpaid) leads and a lower cost of acquisition, after adjusting for tariff-only claims.  Since Period-end, the early indications are that the TV campaign is also having a positive effect.      

25% of our total enquiries were placed into NAL during the Period, with 68% going to the panel and 7% to our joint ventures.  Demand from the panel has remained strong throughout the Period and this distribution channel continues to provide us with good options for short-term profit and cash generation.

The 4,531 new enquiries placed into NAL represents an increase of 61% on H1 2021.  We estimate that these enquiries are worth £2.9m in future revenues. NAL won 626 claims in the Period, which generated £1.5m of cash from settlements for NAL.  This was 50% more than the same period last year, further proving the model.

At 30 June 2022, NAL had a book of 9,884 ongoing claims, 25% more than at 31 December 2021 (31 December 2021: 7,918 claims; 30 June 2021: 4,268 claims).  This book of existing, ongoing claims has an embedded value, being the future profits and cash anticipated to be generated by processing those claims through to settlement.  At 30 June 2022, after already expensing marketing costs relating to these claims and costs incurred on processing up to that date, we anticipate that these ongoing claims will generate future revenue of £7.5m and future gross profit of £6.5m.

The Group's Residential Property businesses, comprising Homeward Legal and Searches UK, generated revenues of £2.4m (H1 2021: £3.3m) and operating profit before shared costs of £0.3m (H1 2021: £0.5m).  These businesses experienced a slowdown in Q2, in line with the wider market, although Searches UK proved more resilient and attracted several new customers.  The market slowdown follows two years of increased activity fuelled by the stamp duty land tax holiday and sustained low interest rates.

Critical Care

In our Critical Care division, revenue increased by 12% from £6.0m to £6.7m, and operating profit was 2% lower at £1.6m (H1 2021: £1.7m).  This reflects our continued investment in business development, people and systems.  

Our strategy in Bush & Co remains to grow our market share by appealing to a broader customer base, extending our competencies and specialisms and to be more efficient at what we do through the use of technology. 

The business operates in the catastrophic injury market, with most of the work arising from serious RTA injuries and medical negligence.  Both of these types of claims suffered a temporary reduction in volume during the COVID-19 pandemic, but data from the Department for Transport suggests that serious RTA injuries have returned to their long-term trend of a slow decline; and data from IRN Research shows that the number of medical negligence claims reported to NHS Resolution grew by 8% in 2020/21.  The growth in revenue in Bush & Co. gives us confidence that the business has grown market share in the Period.

In the first half of 2022, we continued to make progress in our recovery from the effects of the pandemic. 

Our expert witness business performed strongly, with revenue 20% higher than H1 2021.  The number of expert witness reports completed and issued to customers increased by 11%.  The number of new instructions for expert witness reports was also up by 11%, reflecting our focus on business development and creating a strong pipeline of work for the future. 

Our case management business has adapted to new ways of working since the pandemic, with a mix of face-to-face and online work required by clients.  Our teams delivered 12% growth in the number of initial needs assessments ("INAs") completed in the Period and maintained a strong book of ongoing case management clients generating recurring monthly revenue, but revenues were 3% lower because online work is charged at a lower rate.  We continue to benefit from a strong pipeline of new work and instructions numbers for INAs grew by 19% in the Period. 

The division also made good progress on many of its strategic priorities in the first half of the year.  Bush Care Solutions, which provides nurse-led care management services, was launched in August 2021 and has been growing the number of ongoing clients resulting in monthly recurring revenue.  This initiative complements our case management proposition and whilst it is currently a modest, albeit profitable, contributor to the divisional results, the early progress made gives us confidence that it can be a driver of more significant growth in the future. 

The business has also recruited 41 new associates in key specialisms in the Period and at 30 June 2022 was working with 96 case managers and 115 expert witnesses across the UK.  This recruitment included adding to our competencies in the specialised care of Children and Young People, which we identified last year as a growth opportunity.  I've been particularly pleased with the level of associate recruitment that the business has achieved so far this year, which demonstrates the high regard in which Bush & Co. is held in the industry.    

Our people

On 15 September 2022, the Board announced that Chris Higham had been appointed as a director of the Company, in the role of Group CFO, having been appointed acting CFO on 17 August 2021.  Chris has held a variety of roles at NAHL since 2006 and has proven himself to be a real asset to the Group.

At the same time, the Board announced that Gillian Kent had decided to step down as non-executive director after eight years on the Board in order to pursue other business interests. This follows Gillian's recent appointment to the Board of THG plc as a Non-Executive Director.  I'd like to thank Gillian for her contribution and support during this period and wish her well for the future.

With three independent non-executive directors and two executive directors, the Board believes that its current composition provides the skills and experience necessary to meet the Group's needs, given its size and nature.

On behalf of the Board, I want to thank all our people for their diligence and dedication to our customers during the Period.  Their continually high levels of engagement, skill and empathy allow us to deliver our strategy and support more victims of accidents and medical negligence. 

We employed 278 people at 30 June 2022, an increase of 8% from the end of 2021, with this growth reflecting our commitment to investing in the continued success of NAL and Bush & Co.  Despite the challenging labour market, our People Team have done a great job in supporting our recruitment and retention needs across the Group, which has been aided by the increased prevalence of remote working, allowing us to access highly skilled candidates across the country. 

To support our proposition, I am proud to say that we have built a Group with a strong purpose, an inclusive and supportive culture and clear leadership.  Our focus on employee engagement was rewarded in June with another set of excellent results in our annual engagement survey, in which we improved on last year with overall engagement score of 78% (2021: 75%).  This remains significantly higher than the UK average of 14%, and our results buck the trend which has seen UK average engagement scores fall over each of the last three years. 

Throughout the Period, our people have participated in numerous initiatives in support of our local communities, charities, and the environment.  This has included donating to food banks, community garden projects, a local RSPCA rescue centre and the Rockinghorse children's charity, in Sussex.  We also proudly supported national and international causes, including Stoke Mandeville Spinal Research, the DEC's Ukraine Humanitarian Appeal and the Child Brain Injury Trust.

Summary and outlook

The results for the first half of 2022 were in line with the Board's expectations and saw the Group deliver an operating profit, generate cash and reduce net debt. 

We continued the momentum we have generated in our Personal Injury business, increasing the number of enquiries while growing the value of NAL's book of claims.  In Critical Care, we have offset the erosion in case management average revenue caused by COVID-19, by growing our expert witness services and developing Bush Care Solutions, as well as recruiting 41 new associates in key specialisms.

As we anticipated, our profits are reduced in the short-term, as we continue our investment in NAL, but the results we are achieving gives me confidence that we are on track to build a more sustainable and profitable business in the medium and long-term.

In July and August, our Consumer Legal Services division delivered 4% growth in personal injury enquiry numbers compared to last year.  Whilst we are yet to see any sustained growth in claim numbers in the market, we expect to be in a better position to judge the market's medium-term prospects early next year.  Cash from settlements in NAL has continued to grow, and £0.6m was collected across July and August (H1 2021: £0.3m). 

In Critical Care, the number of INA reports issued in July and August was 26% ahead of last year, but the number of expert witness reports issued was 24% lower than last year.  This shortfall was largely down to the timing of issuing reports during the summer holiday period and we anticipate a return to growth for the remainder of the year.  The business has continued to enjoy robust instruction levels.  

We continue to maintain a tight control over costs and discretionary spend whilst progressing our investments in both divisions.  And whilst we expect that interest rates will remain above the historical lows that we have seen over recent years, leading to an increase in the cost of our borrowings, we are carefully managing the Group's net debt and anticipate it reducing further this year.

In summary, we have made good progress and I am pleased with the results the Group achieved in the first half of the year.  Based on our performance in H1, and early indications in H2, the Board believes that it can navigate this period of macroeconomic uncertainty and deliver a full year outturn in line with market expectations. 

James Saralis

Chief Executive Officer

27 September 2022

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2022

Consolidated statement of financial position

At 30 June 2022