Source - RNS
RNS Number : 7269L
Anexo Group PLC
10 September 2019
 

For immediate release

10 September 2019

 

Anexo Group plc

('Anexo' or the 'Group')

 

Interim Results

 

'Successful investment in Legal Services driving case settlement and cash collection'

 

Anexo Group plc (AIM: ANX), the specialist integrated credit hire and legal services provider, is pleased to report its Interim Results for the six months ended 30 June 2019 ('H1 2019' or the 'period').  The Board is pleased to report another successful six months of strong growth with management confident in meeting current market expectations for FY 2019.

 

Financial Highlights


H1 2019

H1 2018

Movement

 

Revenue

£36.7 million

£23.6 million

+55.5%

Adjusted operating profit1

£11.8 million

£7.3 million

+61.6%

Adjusted profit before tax1

£11.0 million

£6.8 million

+62.6%

Net assets

£82.9 million

£68.6 million

+20.8%

Cash collection

£36.6 million

£28.2 million

+29.8%

Basic EPS

7.6 pence

4.1 pence

+85.4%

 

·      

Adjusted1 operating profit margin increased to 32.2% (H1 2018: 30.9%)

·      

Net cash outflow from operating activities2 to fund growth of £3.3 million (H1 2018: net cash inflow £0.5 million)

·      

Proposed interim dividend of 1 penny per share (H1 2018: Nil)

·      

Net debt balance at 30 June 2019 stood at £23.4 million (30 June 2018: net debt post listing of £2.4 million)

·      

Post period end, Anexo successfully renegotiated its working capital facilities, securing considerable improvements in its financing arrangements, and agreed new terms with fleet insurance providers to deliver enhanced savings in remainder of FY 2019 and in 2020

·      

Anexo on track to meet FY 2019 market expectations of adjusted profit before tax of £23.0 million

 

1 Adjusted results exclude certain expenses incurred as part of the AIM listing, share based payments and the transition to IFRS 16 - Leases.

2 Cash flows from operations exclude movements in directors' loans and the impact of IFRS 16.

 

Operational Highlights

 

·      

Fully stand-alone new legal office in Bolton achieved break even point within four months. The Bolton office increased headcount to 63 by 30 June 2019, of which 28 were experienced litigators, increasing the Group's ability to settle cases and generate cash. As at 30 June 2019, a further 10 experienced litigators had accepted positions and not yet started

·      

Following a period of significant growth across the Group, the expansion of the vehicle fleet has been more measured as the Group seeks to optimise margin and cash collections, thus underpinning an improvement in financial performance

 

KPIs

 

H1 2019

H1 2018

Movement

Number of vehicles on hire at the period end

1,571

1,240

+26.7%

Average number of vehicles on hire for the period

1,496

912

+64.0%

Number of hire cases settled

2,066

1,730

+19.4%

Cash collections from settled cases (£'000s)

36,628

28,230

+29.7%

Number of new cases funded

3,392

2,588

+31.1%

Legal staff employed at period end

344

215

+60.0%

Number of senior fee earners at period end

109

74

+47.3%

Average number of senior fee earners

98

71

+38.0%

 

Commenting on the Interim Results, Alan Sellers, Executive Chairman of Anexo Group plc, said:

 

"We are pleased to report another strong set of results, with all key financial metrics and KPIs ahead of the comparative period last year.  At the time of our AIM IPO in June 2018, we outlined a number of key objectives such as expanding the vehicle fleet, opening a regional office and further legal recruitment and I am delighted to report that a year later we have made excellent progress on these objectives which is reflected in these half year results.

 

Anexo remains extremely well positioned to grow its market share and take advantage of the opportunities available to it.  The Board views the current financial year and beyond with considerable optimism."

 

- Ends -

 

Analyst meeting

A meeting for analysts will be held at 09.30am today, 10 September 2019, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN.  A copy of the Interim Results presentation is available at the Company's website www.anexo-group.com

An audio webcast of the analysts meeting will be available after 12pm today: https://webcasting.buchanan.uk.com/broadcast/5d381ed948a6d52f84f6b009

 

For further enquiries:

Anexo Group plc

+44 (0) 151 227 3008

www.anexo-group.com

Alan Sellers, Executive Chairman

Mark Bringloe, Chief Financial Officer

Nick Dashwood Brown, Head of Investor Relations

 

Arden Partners plc

(Nominated Adviser and Broker)


John Llewellyn-Lloyd / Benjamin Cryer (Corporate)

Fraser Marshall (Equity Sales)

+44 (0) 20 7614 5900

www.arden-partners.co.uk

 

Buchanan

(Financial Communications)

 

 

Henry Harrison-Topham / Steph Watson / Hannah Ratcliff

+44 (0) 20 7466 5000

[email protected]

 

Notes to Editors:

 

Anexo is a specialist integrated credit hire and legal services provider.  The Group has created a unique business model by combining a direct capture Credit Hire business with a wholly owned Legal Services firm.  The integrated business targets the impecunious not at fault motorist, referring to those who do not have the financial means or access to a replacement vehicle.

 

Through its dedicated Credit Hire sales team and network of over 1,100 active referrers around the UK, Anexo provides customers with an end-to-end service including the provision of Credit Hire vehicles, assistance with repair and recovery, and claims management services.  The Group's Legal Services division, Bond Turner, provides the legal support to maximise the recovery of costs through settlement or court action as well as the processing of any associated personal injury claim.

 

The Group was admitted to trading on AIM in June 2018 with the ticker ANX.

 

For additional information please visit: www.anexo-group.com. To subscribe to our investor alert service and receive all press releases, financial results and other key shareholder messages as soon as they become available, please visit: https://www.anexo-group.com/content/investors/alert.asp.

Executive Chairman's Statement

 

On behalf of the Board, I am pleased to introduce Anexo's results for the six month period ended 30 June 2019, a period during which the Board has concentrated firmly on moving the Group towards the inflexion point which achieves net cash generation.  Anexo's strategy in the period has been to target a more measured growth in credit hire in order to focus on the Group's continued success in the recruitment of high quality litigators, thereby increasing its ability to settle cases and improve cash generation.  Anexo has performed strongly in H1 2019, with significant growth in both divisions compared to H1 2018.  The solid platform which has been established since the Group's AIM IPO in June 2018 provides the Board with considerable confidence in the strong prospects for the Group for the remainder of FY 2019 and beyond.

 

The Group has adopted IFRS 16 (effective 1 January 2019) in these interim results (for further detail see Note 7 in the Notes to the Interim Statements).

 

H1 2019 Group performance

 

Anexo delivered a strong performance across all key Group financial metrics and KPIs in its first financial year on AIM, and this has continued into H1 2019.  Group revenues in H1 2019 increased by 55.5% to £36.7 million (H1 2018: £23.6 million) and adjusted profit before tax for the period increased by 62.6% to £11.0 million (H1 2018: £6.8 million).

 

As announced on 6 August 2019, Anexo successfully renegotiated its working capital facilities and secured favourable financing arrangements from both new and existing providers.

 

Credit Hire division

 

As previously reported, Anexo deployed an element of the funds raised at IPO to expand its fleet.  The average number of vehicles on the road reached 1,496 in H1 2019 (H1 2018: 912), a 64.0% increase on the prior year.  The Board has not sought to further increase the number of vehicles on hire in the last six months, in order to allow the Group to concentrate on the development of the litigation division and increasing the Group's rate of cash collections.  However, the like for like increase in vehicles on the road has resulted in growth in Credit Hire revenue of 80.3%, rising from £12.9 million in H1 2018 to £23.2 million in H1 2019.  Profit before tax in the Credit Hire division rose by 152% to £8.3 million in H1 2019 (H1 2018: £3.3 million).

 

In particular, the Group has witnessed considerable growth in its motorcycle business, facilitated by the Board's strategic investment in the fleet.  We have also sought to target the most valuable claims for the Group, the effect of which has been to improve individual claim performance and thus further drive growth in revenues and profitability over and above the number of vehicles on the road.

 

As announced on 6 August 2019, the Group agreed new terms with its existing fleet insurance provider which will continue to deliver enhanced savings against original forecasts for the remainder of FY 2019 and throughout FY 2020.

 

Legal Services division

 

A significant portion of the IPO funds was targeted at increasing capacity within Bond Turner, the Group's legal services business.  This was to facilitate increased cash generation, which continues to improve month on month.  Cash collections increased by £8.4 million or 29.7% between H1 2018 and H1 2019, rising to £36.6 million from £28.2 million.  This strong trend continued post period end with cash collections in July 2019 going on to be a monthly record for the Group.

 

Revenues for the Legal Services division, which strongly converts to cash, showed an increase of 26.2%, reaching £13.5 million in H1 2019 (H1 2018: £10.7 million).  Profit before taxation declined to £2.3 million (H1 2018: £3.8 million), reflecting the significant investment in the new Bolton office and associated staff recruitment costs.  Within the working capital cycle of a typical case and the timeline for settlement inherent in the court process, an experienced litigator will not reach capacity from a settlement and cash collection position for at least nine to twelve months.  Consequently, the considerable benefits to cash collections from the Group's investment in recruitment are expected to be realised in late FY 2019 and into FY 2020.

 

The Board's focus in 2019 has been to expand capacity at Bond Turner, with the opening of the Bolton office being key to this strategy.  Both in number and quality of litigators targeted for recruitment, Bolton has out-performed management's expectations.  At 30 June 2019, the number of highly skilled and experienced litigators has increased within the Group from 74 at 30 June 2018 to 89 at 31 December 2018, and to 109 by the end of H1 2019, an increase of 38% from that seen at 30 June 2018.

 

With further investment planned for the remainder of FY 2019, these additional staff are expected to continue to drive an increase in the number of cases settled and ultimately the level of cash recovered from Bond Turner's considerable portfolio of cases.  

 

As previously outlined at the time of the Group's AIM IPO, Bond Turner also operates an in-house advocacy and specialist litigation team which handles complex professional and clinical negligence claims. Many of these constitute high value and high profile cases, some of which have been ongoing for many years; one example is the class action concerning historic abuse at Aston Hall psychiatric hospital. The Board intends to expand this specialist team in H2 2019 and FY 2020 and is exploring opportunities to secure new business in professional and compensation claims through both targeted recruitment and digital marketing and direct capture.

 

Dividends

 

The Board stated at the time of the Group's AIM IPO that its intention was to adopt a progressive dividend policy and commenced this with the payment of final dividend of 1.5 pence per share for the period from Admission to 31 December 2018.  The Board is therefore pleased to propose an interim dividend of 1 penny per share which will be paid on 23 October 2019 to those shareholders on the register at the close of business on 20 September 2019.  The shares will become ex-dividend on 19 September 2019.

 

Trading Outlook

 

The outlook for the remainder of FY 2019 is positive and the Board remains confident that the decision to hold steady the number of vehicles on the road within the Credit Hire division, as the Group continues to expand its Legal Services division, will allow Anexo to demonstrate its ability to generate yet further cash from its significant case portfolio.

 

Recruitment continues to progress better than anticipated within the Legal Services division and the Group has recently finalised the terms of a lease for a further floor in Bolton, doubling the office space to 19,490 sq.ft.  The Board is also considering additional locations for a further regional office and will make a separate announcement as and when appropriate. The additional capacity secured to date has already positively impacted cash collections and settlement numbers and rates.  The Board will continue to review this strategy to ensure that Anexo continues to leverage its case book and consequently realises the potential of the investment as a significant cash generating asset.

 

Anexo remains extremely well positioned to grow its market share and take advantage of the opportunities available to it.  The Board views the current financial year and beyond with considerable optimism.

 

 

Alan Sellers

Executive Chairman

10 September 2019

 

 



 

Consolidated Statement of Comprehensive Income

For the unaudited period ended 30 June 2019

 



Unaudited

Unaudited

Audited



Half year

ended

Half year

ended

Year ended



Jun-19

Jun-18

Dec-18


Note

£'000s

£'000s

£'000s






Revenue


36,717

23,588

56,505

Cost of sales


(7,225)

(6,880)

(16,168)

Gross profit


29,492

16,708

40,337






Depreciation


(1,192)

(606)

(1,574)

Depreciation on right of use assets


(2,849)

-

-

Administrative expenses


(13,638)

(8,801)

(21,594)

Operating profit before exceptional items


11,813

7,301

17,169






Share based payment charges


(329)

-

(384)

Non-recurring administrative expenses


-

(1,438)

(1,411)

Operating profit


11,484

5,863

15,374






Finance costs


(762)

(525)

(1,090)

Lease finance costs


(292)

-

-

Total finance costs


(1,054)

(525)

(1,090)






Profit before tax


10,430

5,338

14,284

Taxation


(2,045)

(790)

(2,879)

Profit and total comprehensive income for the year attributable to the owners of the company


8,385

4,548

11,405






Earnings per share





Basic earnings per share (pence)

7.6

4.1

10.4





Diluted earnings per share (pence)

7.4

4.1

10.2

 

The above results were derived from continuing operations.

 

 



 

Consolidated Statement of Financial Position

Unaudited at 30 June 2019

 



Unaudited

Unaudited

Audited



Half Year

Half Year




Ended

ended

Year Ended



Jun-19

Jun-18

Dec-18

Assets


£'000s

£'000s

£'000s

Non-current assets





Property, plant and equipment


3,233

1,918

3,270

Right-of-use assets


9,815

-

-



13,048

1,918

3,270

Current assets





Trade and other receivables


116,841

81,174

101,445

Cash and cash equivalents


491

11,121

5,532



117,332

92,295

106,977






Total assets


130,380

94,213

110,247






Equity and liabilities





Equity





Share capital


55

55

55

Share premium


9,235

9,310

9,235

Share based payment reserve


713

-

384

Retained earnings


72,862

59,191

66,127

Equity attributable to the owners of the Group

82,865

68,556

75,801






Non-current liabilities





Other interest-bearing loans and borrowings


-

5,566

870

Lease liabilities


5,150

-

-

Deferred tax liabilities


20

20

-



5,170

5,586

870






Current liabilities





Bank overdraft


14,532

5,080

12,536

Other interest-bearing loans and borrowings


9,382

2,835

9,402

Lease liabilities


4,927

-

-

Trade and other payables


9,118

6,439

7,223

Corporation tax liability


4,386

5,717

4,415



42,345

20,071

33,576






Total liabilities


47,515

25,657

34,446






Total equity and liabilities


130,380

94,213

110,247






 

 



 

Consolidated Statement of Changes in Equity

For the unaudited period ended 30 June 2019

 



Share capital

Share

premium

Share based payment reserve

Retained

earnings

Total

 



£'000s

£'000s

£'000s

£'000s

£'000s

 








 

At 1 January 2019


55

9,235

384

66,127

75,801

 

Profit for the year and total comprehensive income

-

-

 

-

8,385

8,385

 

Share based payments


-

-

329

-

329

 

Dividends


-

-

-

(1,650)

(1,650)

 








 

At 30 June 2019


55

9,235

713

72,862

82,865

 








 

At 1 January 2018


50

40

-

55,542

55,632

 

Profit for the year and total comprehensive income

-

-

 

-

4,548

4,548

 

Issue of share capital


5

-

-

-

5

 

Increase in share premium

-

9,270

-

-

9,270

 

Adjustment


-

-

-

(79)

(79)

 

Dividends


-

-

-

(820)

(820)

 








 

At 30 June 2018


55

9,310

-

59,191

68,556

 

Profit for the year and total comprehensive income

-

-

 

-

6,857

6,857

 

Movement in share premium

-

(75)

-

-

(75)

 

Creation of share based payments reserve


-

-

 

384

-

384

 

Adjustment

-

-

-

79

79

 








 

At 31 December 2018


55

9,235

384

66,127

75,801

 








 



 

Anexo Group Plc

Consolidated Statement of Cash Flows

For the unaudited period ended 30 June 2019



Unaudited

Unaudited




Half year

ended

Half year

ended

Audited

Year ended



Jun-19

Jun-18

Dec-18



£'000s

£'000s

£'000s

Cash flows from operating activities





Profit for the year


8,385

4,548

11,405

Adjustments for:





Depreciation and amortisation


4,041

606

1,574

Financial expense


1,054

525

1,090

Taxation


2,045

795

2,879



15,525

6,474

16,948

Working capital adjustments





Increase in trade and other receivables


(15,211)

(1,012)

(20,524)

Increase in trade and other payables


2,225

1,581

1,466

Cash generated from operations


2,539

7,043

(2,110)






Interest paid


(762)

(525)

(1,090)

Tax paid


(2,240)

(1,013)

(4,738)

Net cash from operating activities


(463)

5,505

(7,938)






Cash flows from investing activities





Proceeds from sale of property, plant and equipment


195

104

170

Acquisition of property, plant and equipment

(1,349)

(1,107)

(3,493)

Net cash from investing activities


(1,154)

(1,003)

(3,323)






Cash flows from financing activities





Net proceeds from the issue of

share capital


-

9,325

9,250

Proceeds from new loan


-

609

4,016

Dividends


(1,650)

(1,015)

(820)

Repayment of borrowings


(210)

(81)

(1,931)

Lease payments


(2,879)

-

-

Payment of finance lease liabilities


(681)

(524)

(1,362)

New finance lease arrangements


-

712

2,590

Net cash from financing activities


(5,420)

9,026

11,743






Net increase / (decrease) in cash and cash equivalents

(7,037)

13,528

482

Cash and cash equivalents at 1 January


(7,004)

(7,486)

(7,486)

Cash and cash equivalents at period end


(14,041)

6,042

(7,004)








 

 

Anexo Group Plc

Notes to the Interim Statements

For the unaudited period ended 30 June 2019

 

1.         Basis of preparation and significant accounting policies

 

The condensed consolidated financial statements are prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard ('IAS') 34, 'Interim Financial Reporting'.

 

The information for the year ended 31 December 2018 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on these accounts was not qualified and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

 

The condensed unaudited financial statements for the six months to 30 June 2019 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

 

The condensed consolidated financial statements have been prepared under the going concern assumption.

 

The Directors have assessed the future funding requirement of the Group, and have compared them to the levels of available cash and funding resources.  The assessment included a review of current financial projections to December 2020.  Having undertaken this work, the Directors are of the opinion that the Group has adequate resources to finance its operations for the foreseeable future and accordingly, continue to adopt the going concern basis in preparing the Interim Report.

 

New accounting standards

 

The Group has adopted IFRS 16 (effective 1 January 2019) in these interim financial statements (for further details see Note 7).

 

The results presented are after the adoption of IFRS 16 - Leases, effective 1 January 2019, which fundamentally altered the classification and measurement of operating leases for lessees, removing the distinction between operating and finance leases.  The effect on the Group's reported results is to enhance gross profit as the lease costs associated with the vehicle fleet are effectively removed and replaced by an increase in depreciation and interest costs.  The resulting net effect on profit before taxation is modest.  A detailed reconciliation of the Group's primary financial statements is provided in Note 7 below.

 



 

 

2.         Segmental Reporting

 

The Group's reportable segments are as follows:

 

·      the provision of credit hire vehicles to individuals who have had a non-fault accident, and

·      associated legal services in the support of the individual provided with a vehicle by the Group and other legal service activities, and

·      Group and central costs.

 

Management monitors the operating results of business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance.

 

Half year ended 30 June 2019

 


Credit Hire

Legal Services

Group and Central Costs

Consolidated


£'000s

£'000s

£'000s

£'000s

Revenues





Third party

23,197

13,520

-

36,717

Total revenues

23,197

13,520

-

36,717






Profit before taxation

8,348

2,322

(240)

10,430






Depreciation

3,693

348

-

4,041






Segment assets

89,785

40,498

97

130,380






Capital expenditure

1,007

342

-

1,349






Segment liabilities

31,940

15,295

280

47,515










 

Half year ended 30 June 2018

 


Credit Hire

Legal Services

Group and Central Costs

Consolidated


£'000s

£'000s

£'000s

£'000s

Revenues





Third party

12,865

10,723

-

23,588

Total revenues

12,865

10,723

-

23,588






Profit before taxation

3,318

3,830

(1,809)

5,338






Depreciation

568

38

-

606






Segment assets

52,894

33,750

7,569

94,213






Capital expenditure

995

112

-

1,107






Segment liabilities

12,873

12,686

98

25,657






 



 

Year ended 31 December 2018

 


Credit Hire

Legal Services

Group and Central Costs

Consolidated


£'000s

£'000s

£'000s

£'000s

Revenues





Third party

34,042

22,463

-

56,505

Total revenues

34,042

22,463

-

56,505






Profit before taxation

10,889

4,988

(1,593)

14,284






Depreciation

1,489

85

-

1,574






Segment assets

73,896

35,164

1,187

110,247






Capital expenditure

3,005

488

-

3,493






Segment liabilities

21,346

12,539

561

34,446






 

 



 

 

3.         Property, Plant and Equipment

 



  Fixtures,





Property

fittings &

Motor

Office



improvement

equipment

vehicles

equipment

Total


£'000s

£'000s

£'000s

£'000s

£'000s

Cost or valuation






At 1 January 2018

341

308

2,234

669

3,552

Additions

-

110

972

25

1,107

Disposals

-

-

(103)

-

(103)

At 30 June 2018

341

418

3,103

694

4,556

Additions

-

376

1,973

37

2,386

Disposals

-

-

(619)

-

(619)

At 31 December 2018

341

794

4,457

731

6,323

Additions

-

338

983

28

1,349

Disposals

-

-

(751)

(30)

(781)

At 30 June 2019

341

1,132

4,689

729

6,891







Depreciation






At 1 January 2018

248

180

1,008

596

2,032

Charge for year

5

28

551

22

606

Eliminated on disposal

-

-

-

-

-

At 30 June 2018

253

208

1,559

618

2,638

Charge for the year

5

38

901

24

968

Eliminated on disposal

-

-

(553)

-

(553)

At 31 December 2018

258

246

1,907

642

3,053

Charge for the year

5

84

1,086

17

1,192

Eliminated on disposal

-

-

(559)

(28)

(587)

At 30 June 2019

263

330

2,434

631

3,658













Carrying amount






At 30 June 2019

78

802

2,255

98

3,233







At 31 December 2018

83

548

2,550

89

3,270







At 30 June 2018

88

210

1,544

76

1,918







 



 

 

4.         Trade and Other Receivables

 



Jun-19

Jun-18

Dec-18



£'000s

£'000s

£'000s






Trade receivables


193,971

163,257

165,195

Provision for impairment of trade receivables

(104,039)

(101,996)

(89,205)

Net trade receivables


89,932

61,261

75,990

Prepayments and accrued income


24,868

18,126

22,989

Other debtors


2,041

1,787

2,466








116,841

81,174

101,445






The Group's exposure to credit and market risks, including impairments and allowances for credit losses, relating to trade and other receivables is disclosed in the financial risk management and impairment of financial assets note.

 

Trade receivables stated above include amounts due at the end of the reporting period for which an allowance for doubtful debts has not been recognised as the amounts are still considered recoverable and there has been no significant change in credit quality.

 

 



 

5.         Borrowings

 

 




 



Jun-19

Jun-18

Dec-18



£'000s

£'000s

£'000s

Non-current loans and borrowings





Bank loans and overdrafts


-

5,000

-

Obligations under finance lease and hire purchase contracts

-

491

851

Other borrowings


-

75

19

Lease Liabilities


5,150

-

-



5,150

5,566

870



 

Current loans and borrowings





Bank loans and overdrafts


14,532

5,080

12,536

Revolving credit facility

5,000

-

5,000

Obligations under finance lease and hire purchase contracts

2,337

997

1,640

Other borrowings


2,045

1,838

2,762

Lease Liabilities


4,927

-

-



28,841

7,915

21,938






 

The company uses an invoice discounting facility which is secured on the trade debtors of Direct Accident Management Limited.  The revolving credit facility is secured by way of a fixed charge dated 25 January 2017, over all present and future property, assets and rights (including uncalled capital) of Bond Turner Limited.  The loan is structured as a revolving credit facility which is committed until July 2020, with no associated repayments due before that date.  Interest is charged at 3.75 per cent. over LIBOR.

 

6.         Obligations under Lease and Hire Purchase Agreements

 

Finance leases

The total future value of minimum lease payments under finance leases and hire purchase contracts are as follows:

 



Jun-19

Jun-18

Dec-18



£'000s

£'000s

£'000s






Not later than 1 year


7,264

997

1,640

Later than 1 and not later than 5 years


3,905

491

851

Over 5 years


1,245

-

-








2,337

1,488

2,491

 



 






7.         Effect of changes in accounting policies

 

IFRS 16 Leases

 

A new accounting standard has been issued, IFRS 16 Leases, which replaced IAS 17 Leases, effective from 1 January 2019.  The new standard fundamentally altered the classification and measurement of operating leases for lessees, removing the distinction between operating and finance leases.

 

This new standard has had the following impact on the Group's accounts:

 

•       The Group currently holds two contractual arrangements deemed to satisfy the conditions of a lease, and which do not fall into the exceptions of the standard.  These are the contractual arrangements in relation to rental of the vehicle fleet and the rental of various office and other buildings.

 

•       Previously these leases were accounted for in the income statement on an accruals basis under IAS 17.  Under the new standard, these two assets are now held on the balance sheet as "right of use" assets measured at cost (deemed to be the initial measurement of the lease liability plus any set up costs).  The lease has initially been measured as the total payments required under the terms of the lease, discounted by the incremental borrowing rate (as per the contract) to account for time value of money.

 

•       This cost includes the lease element only, excluding any maintenance costs.  Maintenance costs remain in the income statement, as under the previous treatment.

 

•       The payments made under the lease contracts are no longer charged to the income statement; instead they are offset against the liabilities on the balance sheet.

 

•       Monthly depreciation of the assets is charged to the income statement.

 

•       Interest on the liabilities, calculated at the incremental borrowing rates (vehicle fleet: 7.00%, office and other properties: 3.50%), is charged to the income statement monthly.  Upon transition to IFRS 16, the Group applied the modified retrospective approach and will therefore not restate comparative information in the 2019 financial statements.

 

A reconciliation between the reported results for the half year ended 30 June 2019, having been adjusted for IFRS 16, and before the adjustment is provided below.  As the Group has applied the modified retrospective approach there are no adjustments to the results reported for either the half year ended 30 June 2018 or the year ended 31 December 2018.

 

 



 

 

Impact of IFRS 16 on the Consolidated Statement of Comprehensive Income

Unaudited at 30 June 2019







Half year ended


 


Reported

IFRS 16

Pre IFRS 16


Year ended

 


Jun-19

Jun-19

Jun-19

Jun-18

Dec-18

 


£'000s

£'000s

£'000s

£'000s

£'000s

 







 

Revenue

36,717

-

36,717

23,588

56,505

 

Cost of sales

(7,225)

(2,573)

(9,798)

(6,880)

(16,168)

 

Gross profit

29,492

(2,573)

26,919

16,708

40,337

 







 

Depreciation

(1,192)

-

(1,192)

(606)

(1,574)

 

Depreciation on right of use assets

(2,849)

 

2,849

-

-

-

 

Administrative expenses

(13,638)

(306)

(13,944)

(8,801)

(21,594)

 

Operating profit before exceptional items

11,813

(30)

11,783

7,301

17,169

 







 

Share based payment charges

(329)

-

(329)

-

(384)

 

Non-recurring administrative expenses

-

-

-

(1,438)

(1,411)

 

Operating profit

11,484

(30)

11,454

5,863

15,374

 







 

Finance costs

(762)

-

(762)

(525)

(1,090)

 

Lease finance costs

(292)

292

-

-

-

 

Total finance costs

(1,054)

292

(762)

(525)

(1,090)

 







 

Profit before tax

10,430

262

10,692

5,338

14,284

 

Taxation

(2,045)

-

(2,045)

(790)

(2,879)

 

Profit after tax

8,385

262

8,647

4,548

11,405

 







 

Earnings per share (pence)






 

Basic earnings per share

 

7.6

 

N/A

7.9

4.1

10.4

 

Diluted earnings per share

 

7.4

 

N/A

7.7

4.1

10.2

 

 

 

 



 

Impact of IFRS 16 on the Consolidated Statement of Financial Position

Unaudited at 30 June 2019

 




IFRS 16

Pre IFRS 16



As reported

Adjustments

adoption

Assets


£'000s

£'000s

£'000s

Non-current assets





Property, plant and equipment


3,233

-

3,233

Right-of-use assets


9,815

(9,815)

-



13,048

(9,815)

3,233

Current assets





Trade and other receivables


116,841

-

116,841

Cash and cash equivalents


491

-

491



117,332

-

117,332






Total assets


130,380

(9,815)

120,565






Equity and liabilities





Equity





Share capital


55

-

55

Share premium


9,235

-

9,235

Share based payment reserve


713

-

713

Retained earnings


72,862

262

73,124

Equity attributable to the owners of the Group

82,865

262

83,127






Non-current liabilities





Other interest-bearing loans and borrowings


-

-

-

Lease liabilities


5,150

(5,150)

-

Deferred tax liabilities


20

-

20



5,170

(5,150)

20






Current liabilities





Bank overdraft


14,532

-

14,532

Other interest-bearing loans and borrowings


9,382

-

9,382

Lease liabilities


4,927

(4,927)

-

Trade and other payables


9,118

-

9,118

Corporation tax liability


4,386

-

4,386



42,345

(4,927)

37,418






Total liabilities


47,515

(10,077)

37,438






Total equity and liabilities


130,380

(9,815)

120,565






 



 

 

Impact of IFRS 16 on the Consolidated Statement of Cash Flows

For the unaudited period ended 30 June 2019









IFRS 16

Pre IFRS 16



As reported

Adjustments

adoption


Note

£'000s

£'000s

£'000s

Cash flows from operating activities





Profit for the year


8,385

262

8,647

Adjustments for:





Depreciation and amortisation


4,041

(2,849)

1,192

Financial expense


1,054

(292)

762

Taxation


2,045

-

2,045



15,525

(2,879)

12,646

Working capital adjustments





Increase in trade and other receivables


(15,211)

-

(15,211)

Increase in trade and other payables


2,225

-

2,225

Cash generated from operations


2,539

(2,879)

(340)






Interest paid


(762)

-

(762)

Tax paid


(2,240)

-

(2,240)

Net cash from operating activities


(463)

(2,879)

(3,342)






Cash flows from investing activities





Proceeds from sale of property, plant and equipment


195

-

195

Acquisition of property, plant and equipment

(1,349)

-

(1,349)

Net cash from investing activities


(1,154)

-

(1,154)






Cash flows from financing activities





Net proceeds from the issue of

share capital


-

-

-

Proceeds from new loan


-

-

-

Dividends


(1,650)

-

(1,650)

Repayment of borrowings


(210)

-

(210)

Lease payments


(2,879)

2,879

-

Payment of finance lease liabilities


(681)

-

(681)

New finance lease arrangements


-

-

-

Net cash from financing activities


(5,420)

2,879

(2,541)






Net increase / (decrease) in cash and cash equivalents

(7,037)

-

(7,037)

Cash and cash equivalents at 1 January


(7,004)

-

(7,004)

Cash and cash equivalents at period end


(14,041)

-

(14,041)






 

- Ends -


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