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24 September 2024

NAHL Group plc

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

Interim Results

First half performance in line with management's expectations - continued reduction in net debt whilst remaining profitable and cash generative

NAHL (AIM: NAH), a leading marketing and services business focused on the UK consumer legal market, announces its unaudited interim results for the six months ended 30 June 2024 (the "Period").

Financial Highlights

Operational Highlights

Consumer Legal Services

Critical Care

Outlook

James Saralis, CEO of NAHL, commented:

"I am pleased with the first half performance of the Group. Despite the challenges presented by a volatile personal injury market, the Group was profitable and cash generative and we made further progress in reducing our net debt. In Critical Care, Bush & Co. performed very strongly in the first six months delivering double digit growth in revenue and profits. NAH faced a more difficult, highly competitive market in the Period but we continue to take steps to improve performance in this area and we expect to make progress in the second half. As a result, the Board is confident in delivering a full year outturn in line with market expectations and I would like to take this opportunity to thank our fantastic team for their continued hard work and commitment.

"The Board is encouraged that negotiations for the potential sale of Bush & Co. are progressing well and it believes now is the right time to consider the potential strategic options and future strategy for the remainder of the Group. While this is at an early stage the Board will keep shareholders updated with further announcements as appropriate."

For further information:

Notes to Editors

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

·      Consumer Legal Services provides outsourced marketing services to law firms through National Accident Helpline and claims processing services to individuals through National Accident Law, Law Together and Your 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.

Interim Management Statement

I am pleased to report NAHL's Interim Results for the six months ended 30 June 2024.

Overview

NAHL made good progress with its strategic priorities in the first half of 2024.  Performance in the Group's fully integrated law firm, National Accident Law (NAL), has continued to improve, driving growth in settlements and cash generation.  The Group's Critical Care business, Bush & Co., had an exceptional six months, delivering double digit growth in revenue and profits.  However, as previously outlined, the Group's Personal Injury lead generation business, National Accident Helpline (NAH), faced a more challenging market environment that was highly competitive in the Period. We continue to take steps to improve results in this area and we anticipate making progress in the second half.

The Board have also made good progress in exploring the future structure and strategy for the Group.

Group results

As previously guided, revenue for the Period was £19.4m, 7% lower than last year (H1 2023: £21.0m).  The reduction was due to lower revenues in the Group's Consumer Legal Services division, which has been addressing challenges in lead generation and lower levels of panel placement in its Personal Injury business.  The Group's Critical Care division grew revenues by 11%, with a strong performance across all service lines.

Operating profit for the Period was £1.8m, in line with last year (H1 2023: £1.8m).  In Consumer Legal Services, operating profit was £0.8m, which was lower than last year (H1 2023: £1.1m) due to fewer Personal Injury enquiries being placed into the panel and a higher average enquiry acquisition cost.  Operating profit in Critical Care grew by 13%, with particularly strong growth from the division's expert witness service.

Profit attributable to members' non-controlling interests in LLPs fell by a third to £0.9m (H1 2023: £1.4m), reflecting the continued run-off of the Group's first joint venture LLP, Your Law.  The Group's only remaining joint venture LLP, Law Together, has continued to perform well.

Borrowing costs on the Group's revolving credit facility fell by 10% in the Period, reflecting the reduction in borrowings as a result of the Group's continued strong cash generation.  In February 2024, the Group reduced the size of its revolving credit facility from £20m to £15m and we aim to continue reducing our net debt and borrowing costs.

Profit before tax increased to £0.5m (H1 2023: £(0.0)m) and was almost as high as for the whole of the previous year (FY 2023: £0.6m).  After taxation of £0.2m (H1 2023: £0.0m) the Group returned a profit and total comprehensive income for the Period of £0.3m, £0.4m higher than last year.

The Group delivered free cash flow of £0.7m in the Period (H1 2023: £1.8m) and operating cash conversion continued to be very strong at 134% (H1 2023: 270%). 

Due to this strong cash generation, net debt at the half year was £9.0m, down 7% from £9.7m at 31 December 2023 and down 22% from 30 June 2023. In H2, net debt at 30 August 2024 reduced to £8.2m. 

Consumer Legal Services

In our Consumer Legal Services division, revenue decreased by 17% to £11.4m in the Period, from £13.7m.  This was due to a 20% reduction in revenues from the Personal Injury businesses, whilst Residential Property grew by 6%. 

Operating profit decreased by 25% to £0.8m (H1 2023: £1.1m).  Operating profit in Personal Injury was £0.6m, which was £0.5m lower than last year (H1 2023: £1.1m). This reduction was due to challenges in lead generation in NAH, while NAL performed well in the Period.  Residential Property delivered growth in operating profit from approximately breakeven in H1 2023, which included the contribution from Homeward Legal up until its disposal in April 2023, to a profit of £0.2m in the Period. 

The division generated £1.5m of cash from operations in the Period (H1 2023: £3.0m), and after deduction of drawings paid to LLP partners both the Personal Injury (H1 2024: £0.4m; H1 2023: £0.7m) and Residential Property (H1 2024: £0.2m; H1 2023: £0.2m) businesses were cash generative.  Cash conversion was179% (H1 2023: 274%), although this measure is before drawings paid to LLP members. 

Our strategy for growth in the personal injury market remains unchanged and is to increase the number of customer enquiries that we attract through our National Accident Helpline brand and then process more of those enquiries through our own integrated law firm, NAL. By doing this we are creating a higher margin, sustainable business and we can fund our growth through our agile and scalable placement model.  This is designed to balance the work we place with our panel of third-party law firms and joint venture partners for in-year profit and cash, with the work we process ourselves for greater, but deferred profit and cash. 

Market conditions made progress difficult in the first half as the UK personal injury market contracted further.  According to statistics from the Claims Compensation Recovery Unit of the Ministry of Justice and the Official Injury Claim portal for small claims, the number of road traffic accident ("RTA") claims in the preceding 12 months was 4% lower by the end of the Period, and the number of employer's, public and occupier liability claims ("non-RTA") fell by 5%.  It is, however, worth noting that since the end of the first half, there was some improvement in the July figures for RTA claims.

During the Period and as previously reported, Google completed a significant organic search algorithm change.  Whilst NAH adapted well to the change and held its search ranking position, several competitors responded by investing heavily in paid search.  This led to an extremely competitive paid search environment which made lead acquisition disproportionally expensive, and as a result NAH acquired fewer enquiries and experienced significantly elevated enquiry acquisition costs.  The paid search environment remains competitive albeit there have been some signs of improvement.

In total, NAH generated 11,304 enquiries in the Period (H1 2023: 17,559).  The mix of work comprised 28% RTA (H1 2023: 25%), 43% non-RTA (H1 2023: 48%) and 29% specialist (H1 2023: 27%). 

Of these enquiries, 3,072 were passed to NAL for processing.  Whilst this represented a slightly higher proportion of the total than last year, the number of enquiries was lower overall (H1 2023: 4,555) due to fewer total enquiries being generated.  As announced in our 2023 Final Results, we continued to experience a reduction in panel demand in the Period, which resulted in lower in-year profits and cash.  Excluding specialist claim types, 3,011 enquiries were placed into the panel in the Period (H1 2023: 7,007).  However, demand from Law Together LLP, our joint venture law firm, remained strong and we increased placement to 1,946 enquiries in the Period (H1 2023: 1,234 enquiries). 

NAL performed well during the first half.  The 3,072 claims acquired cost £1.1m in marketing (H1 2023: £1.4m).  Whilst many of these enquiries will not translate into winning claims this financial year, they further strengthen the embedded value of NAL's book of claims, which will lead to future profits and cash.  We estimate that these enquiries will be worth £2.9m in future revenues and cash by the time they mature (H1 2023: 4,555 enquiries worth an estimated £3.4m).

NAL settled 1,911 claims in the Period, which was 10% more than last year (H1 2023: 1,738).  Our teams continue to deliver improvements in performance, reducing processing timescales and increasing productivity.  These settled claims generated £4.0m of cash for NAL, which was 46% higher than last year (H1 2023: £2.7m).

At 30 June 2024, NAL was processing 9,033 ongoing claims (30 June 2023: 10,611 ongoing claims).  These claims represent an embedded value to the business, being the future profits and cash to be generated by processing them through to settlement.  We estimate that after expensing the marketing costs to generate these claims and the processing costs to date, our book of ongoing claims will generate future revenues of £8.6m, future gross profits of £7.3m and future cash of £12.8m.

In light of the challenging market conditions which have impacted the revenues generated by the Personal Injury business, we have implemented certain cost saving measures in the Period.  This includes £0.9m of annualised savings of which £0.4m will benefit FY24 (net of implementation costs). These savings are primarily in the NAH business and we continue to explore further cost saving opportunities that will lead to further operating efficiencies.

Critical Care

Our Critical Care division has continued to trade well.  Revenues increased by 11% in the Period to £8.0m (H1 2023: £7.3m), of which around 46% was recurring.  Operating profit increased by 13% to £2.6m (H1 2023: £2.3m) and operating profit margins increased from 31.2% last year to 31.8% (FY 2023: 30.0%).  The business generated £2.1m of cash from operations in the Period (H1 2023: £2.6m).

Expert witness services had another strong half year with revenue growth of 18% versus last year.  The number of expert witness reports completed and issued to customers increased by 10% to 636 (H1 2023: 580 reports).  Bush & Co. continued to generate a strong pipeline of future work and new instructions for expert witness reports increased by 22% to 687 instructions (H1 2023: 562 instructions).

In case management services, revenues were 5% higher than last year.  The business delivered 261 initial needs assessment reports ("INAs") in the Period, which was broadly in line with last year, and 238 new instructions (H1 2023: 275).  The business is also servicing 1,388 ongoing case management clients (H1 2023: 1,369) that generate recurring revenue.

Bush & Co. Care Solutions also delivered another impressive performance, growing revenues by 34%.  This service provides a range of support solutions for clients who directly employ support workers or care nurses and it has grown consistently since its launch in 2021. The number of ongoing care packages, which result in monthly recurring income, increased from 14 at 30 June 2023 to 28 at the end of the Period. 

Last year, the business made a strategic investment in its recruitment processes which resulted in a significant growth in the number of associates that choose to work with us, and I am pleased to report that this benefit has carried forward into the first half of 2024.  In the Period, we increased the number of expert witness associates by 13% and case management associates by 9%.  We also added three new employed case managers to the team.  We will maintain our focus on attracting talented healthcare professionals to support our growth in the second half.

Our people

We employed 282 people at 30 June 2024 which was broadly in line with the end of 2023 (December 2023: 280). 

Our focus on making NAHL a great place to work was recognised in July with our best ever results in our annual staff engagement survey, which returned an overall engagement score of 82% (2023: 81%).  This was significantly higher than Gallup's UK average of 10%, and the 70% average across their best-practice organisations.

Update on potential sale of Bush & Co and Group strategy

As announced in April 2024, the Board is continuing to explore a potential sale of Bush & Co. Whilst there can be no certainty that a sale will occur, the Board has experienced strong levels of interest from a wide variety of potential buyers and is currently negotiating terms with a select number of highly engaged parties. The Board hopes to conclude these discussions before the end of the year and will update shareholders as appropriate.

In light of these negotiations, the Board is now considering the potential strategic options and future strategy for the remainder of the Group should a disposal of Bush & Co proceed.  With support from its advisers, the Board will explore all the options available to the Company to maximise value from the Consumer Legal Services division, including, without limitation, the medium to long term strategy to scale NAL and an evaluation of assets, structure and market outlook. This review is at an early stage and further announcements will be made as appropriate.

Summary and outlook

In summary, the results for the first half of the year were in line with the Board's revised expectations.  Despite the challenges caused by a volatile personal injury market, the Group was profitable and cash generative in the Period.  Our Critical Care business, Bush & Co., traded particularly well and delivered double digit growth in revenue and profit.

In Consumer Legal Services, trading during Q3 to date in NAH has been broadly in line with Q2 albeit the average acquisition cost in July and August was marginally lower than in the previous quarter.  Cash from settlements in NAL continued to grow, with £1.4m collected in July and August compared to £1.0m in the equivalent period last year. 

In Critical Care, the number of expert witness reports issued in July and August was 19% ahead of the equivalent period last year.  The number of INA reports issued was broadly flat.  Instruction levels and engagement with our customers remains high and we are pleased with the strong trading delivered to date.

Cash generation has been strong in H2 to date with net debt at 31 August 2024 reduced to £8.2m (30 June 2024: £9.0m). 

Based on these results, the Board remains confident in delivering a full year outturn for the Group in line with market expectations.

James Saralis

Chief Executive Officer

1.   Free cash flow is defined as net cash generated from operating activities less net cash used in investing activities less payments made to partner LLP members and less principal element of lease payments. This measure 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.

2.   Operating cash conversion is calculated as cash generated from operations divided by operating profit. This measure allows management to monitor the conversion of underlying operating profit into operating cash.

3.   Net debt is defined as cash and cash equivalents less interest-bearing borrowings:

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2024