Anexo Group plc

('Anexo' or the 'Group')

Interim Results for the six months ended 30 June 2023

"Significant revenue and profit growth with unchanged outlook for the year"

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 2023 ('H1 2023' or the 'period').

Financial Highlights

Operational Highlights

·           The Group has shown robust growth within legal services, driving the increase seen in cash collections. HDR continues to be an ever-increasing element, with revenues increasing by over 25%. The HDR division settled 884 claims in H1 2023 (H1 2022: 556) and now has a portfolio of 3,291 claims (H1 2022: 2,218).

·           The results for the period include the agreement reached in the VW emissions case. The terms of the agreement are subject to confidentiality restrictions. The Group announced on 5 June 2023 that the agreement had resulted in a net positive cash position to Anexo of £7.2 million.

·           The Group continued its investment in litigation concerning the Mercedes Benz Emissions Claim, with a total of over 12,000 claimants now forming part of the group action.

·           Vehicle numbers continued to be carefully managed to maximise efficient use of working capital, supporting the significant reduction in Net Debt. Strong growth is forecast for H2 2023 resulting from a steady increase in vehicle numbers.

•          The average number of Group vehicles on the road in H1 2023 reached 1,634, some 20% below that seen in H1 2022 (2,034). Vehicle numbers at 18 August 2023 totalled 1,795.

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

"The Board has been focused on delivering a meaningful reduction in net debt and increasing cash collections during the first half of the year. The results presented here are testament to the quality of our people, the ever-increasing diversity of the Group's activities and our commitment to investment into future growth and opportunities for the business.

"We are immensely proud to be able to offer social justice and full legal support to our clients and members of the public. Anexo provides assistance to people who find themselves in an invidious position through no fault of their own, whether through being deprived of an essential vehicle or through living in substandard housing conditions, along with the other problems which may be exacerbated by such situations. We remain committed to providing help to those who might otherwise be unable to obtain redress.

"Having demonstrated our ability to drive the business for cash generation, we are expecting growth in vehicle numbers, revenues and profits in the second half of the year, without the need to fund this growth from our current debt facilities. As cash collections continue to increase, we will be able to invest further and drive growth across all our divisions including HDR and emissions claims.

"The strong progress being made in HDR and group emissions litigation underpins the forecast growth in the core business. The Board remains confident of meeting market expectations for the year."

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Results Conference Call

An analyst conference call will be held at 09:30 BST today, 22 August 2023. Retail investors will also be able to listen to the call but will not be eligible to ask questions. A copy of the Interim Results presentation is available at the Group's website: https://www.anexo-group.com/. Please contact Nick Dashwood Brown, Head of Investor Relations, at nick@anexo-group.com if you would like to join the call.

An audio webcast of the conference call with analysts will be available after 12:00 BST today on the Company's website: www.anexo-group.com

For further enquiries:

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 1,100 plus active introducers 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

Executive Chairman's Statement

On behalf of the Board, I am pleased to announce Anexo's results for the six-month period ended 30 June 2023. The Group has continued to demonstrate the effectiveness of its business model, concentrating firmly on the transition of the Group to a cash generative position and the achievement of a reduction in net debt. Vehicle numbers within the credit hire division have been actively managed, while increased case settlements within the legal services division, including HDR, have driven the rise in cash collections.

The strong performance in the first half of the year will enable the Group to continue accepting an increased number of claims in the second half leading to an improvement in both revenues and profitability without the need to increase debt.

H1 2023 Group Performance

Anexo has actively managed the business to attain its stated goals of reducing net debt and improving the conversion of profits to free cash. The Group has delivered a strong performance across all key financial metrics and KPIs over the first six months of the year. Having increased case settlements alongside the VW Emissions agreement, Group revenues in H1 2023 increased by 13% to £77.8 million (H1 2022: £68.6 million) and profit before tax rose by 11% to £15.2 million (H1 2022: £13.6 million).

Legal Services Division

Credit Hire

The Group remains committed to its strategy of increasing its claim settlement capacity, thereby maximising cash collections. The number of senior fee earners remained broadly unchanged during the period, standing at 243 as at 30 June 2023. The overall number of legal staff rose by 9% to 690 (H1 2022: 633).

Investment during 2022 has underpinned continued growth in cash collections, which rose 14% in H1 2023 to a total of £77.4 million (H1 2022: £67.9 million), excluding any value from the VW Emissions agreement. Revenues from the Legal Services division, which strongly converts to cash, more than doubled in the period to £43.0 million in H1 2023 (H1 2022: £21.4 million), this figure includes the proceeds from the VW agreement. Profit before taxation increased sharply from £1.2 million in H1 2022 to £11.6 million in H1 2023, reflecting an improvement in the core business activities and the VW Emissions agreement in the period.

Housing Disrepair

The Group's HDR division continues to show significant growth. The number of ongoing claims currently stands at approximately 3,300. HDR is now cash generative as the value of fee income generated from settled claims exceeds the investment in staff and marketing costs for the generation of new claims. Net cash generation totalled £0.4 million in H1 2023 (H1 2022: Net cash outflow £0.3 million). The current claims portfolio is expected to contribute to an improvement in performance in the second half of the year and beyond.

With an increase in revenues, HDR reported a profit of £2.6 million in the period (H1 2022: £2.4 million) having invested £2.2 million in new claims (H1 2022: £1.7 million). These marketing costs continue to be written off as incurred.

Emissions Litigation

The advocacy team reached an agreement in the claim against VW and its subsidiaries. The terms of the agreement are subject to confidentiality restrictions; the Group announced on 5 June 2023 that the agreement had resulted in a net positive cash position to Anexo of £7.2 million.

The Group continues to pursue litigation in other emissions cases, particularly in relation to Mercedes Benz. The Group currently has approximately 12,000 Mercedes cases (H1 2022: approximately 4,000 Mercedes cases).

Management believes there is a significant continued opportunity for investment in emissions claims against specific vehicle manufacturers. Accordingly, the Group has earmarked a continued ongoing level of investment for the second half of the year and beyond. Investment for the current year is being funded from an additional £2.8 million, provided to the Group in part by certain of the principal shareholders and directors of the Group.

Credit Hire Division

Whilst demand for vehicles has remained strong throughout the period, the Group has actively managed the number of new claims accepted to levels which maximise the conversion of profitability to operating cash flow whilst supporting funding into other group activities such as HDR and emissions. This also provides a strong and diverse platform for future opportunities including credit hire opportunities.

Having increased cash collections month on month to new record levels, the Group has increased the number of claims funded throughout H1 2023; vehicle numbers increased to 1,961 at 30 June 2023, some 20% above the average levels seen in the first half. Vehicle numbers are fundamental to managing revenues and profits, and this increase supports the Group's expectation of strong growth in the second half of the year.

Against the backdrop of strong demand, the considered careful management of the fleet has seen a consequent decline in Credit Hire revenue, reported at £28.9 million in H1 2023 (H1 2022: £42.5 million), and a resultant reduction in profit before tax to £2.2 million. Completed vehicle hires reduced to 4,689 in H1 2023 (H1 2022: 5,501) but with vehicle numbers now approaching 2,000, the expectation is that activity levels will rise driving a significant improvement in performance for the Credit Hire Division in the second half of the year.

Dividend

The Group continues to invest heavily in future opportunities including HDR and Emissions and the Board has therefore resolved that the interests of the Group and its shareholders would be best served by considering the position with regards to payment of a dividend following the preparation of the Group's full year results.

Outlook

The focus in the first half of 2023 has been firmly on the conversion of profits to operating cash flows. The Group has shown robust growth during the period and plans to continue to optimise cash generation in the second half, whilst increasing activity levels within the Credit Hire division to levels previously seen in the first half of 2022.

Growth in cash collections allows the Group to increase activity, including continued investment in HDR and additional emissions claims, without the need for increases in net debt. The focus for the second half is to ensure this investment is self-funded. Management has confidence in meeting market expectations for the year.

Alan Sellers

Executive Chairman

22 August 2023

Consolidated Statement of Comprehensive Income

For the unaudited period ended 30 June 2023

The above results were derived from continuing operations.

Consolidated Statement of Financial Position

Unaudited at 30 June 2023

Consolidated Statement of Changes in Equity

For the unaudited period ended 30 June 2023

Anexo Group Plc

Consolidated Statement of Cash Flows

For the unaudited period ended 30 June 2023

Anexo Group Plc

Notes to the Interim Statements

For the unaudited period ended 30 June 2023

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 2022 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 2023 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 2024.  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.

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.

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

Other Legal Services and Housing Disrepair, are subsets of Legal Services. We have however, distinguished the performance of Housing Disrepair from within Legal Services as this division of the Legal Services segment is an area where the Group is investing heavily, is a focus for the Group at present and into the future and allows readers of the financial statements to understand the contribution Housing Disrepair has to the overall Group performance.  The Housing Disrepair division continues to grow and as the results become more significant to the overall Group performance this division may well become a segment in its own right, this could be reported in the 2023 financial statements.

Half year ended 30 June 2023

Half year ended 30 June 2022

Year ended 31 December 2022

3.                  Property, Plant and Equipment

4.         Trade and Other Receivables

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

Direct Accident Management Limited uses an invoice discounting facility which is secured on the trade receivables of that company. Security held in relation to the facility includes a debenture over all assets of Direct Accident Management Limited dated 11 October 2016, extended to cover the assets of Anexo Group Plc and Edge Vehicles Rentals Group Limited from 20 June 2018 and 28 June 2018 respectively, as well as a cross corporate guarantee with Professional and Legal Services Limited dated 21 February 2018.

In July 2020 Direct Accident Management Limited secured a £5.0 million loan facility from Secure Trust Bank Plc, under the Government's CLBILS scheme. The loan was secured on a repayment basis over the three year period, with a three month capital repayment holiday, this loan was fully repaid by 30 June 2023.

Direct Accident Management Limited is also party to a number of leases which are secured over the respective assets funded.

The revolving credit facility is secured by way of a fixed charge dated 26 September 2019, over all present and future property, assets and rights (including uncalled capital) of Bond Turner Limited, with a cross company guarantee provided by Anexo Group Plc. The loan is structured as a revolving credit facility which is committed for a three-year period, until 13 October 2024, with no associated repayments due before that date. Interest is charged at 3.25% over the Respective Rate.

In July 2020 Anexo Group Plc secured a loan of £2.1 million from a specialist funder to support the investment in marketing costs associated with the VW Emissions Class Action. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity three years from the date of receipt of funding with an option to repay early without charge. In addition to the interest charges the loan attracts a share of the proceeds to be determined by reference to the level of fees generated for the Group. Having reached agreement in the VW Emissions Class Action, this loan was fully repaid in the period to 30 June 2023.

In November 2021 a further £3.0 million loan was sourced from certain of the principal shareholders and directors of the Group to support the marketing investment in 2022 in the Mercedes Benz Emissions Claim. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity two years from the date of receipt of funding with an option to repay early without charge. In addition to the interest charges the loan attracts a share of the proceeds to be determined by reference to the level of fees generated for the Group. Having reached an agreement in the VW Emissions Class Action, this loan was partially repaid in the period to 30 June 2023 with any residual amount due upon successful conclusion of the Mercedes Benz Emissions Claim.

In March 2022 the Group secured a loan of £7.5 million from Blazehill Capital Finance Limited, with an additional £7.5 million drawn in September 2022, the total balance drawn at 30 June 2023 was £15.0 million. The loan is non amortising and committed for a three year period. Interest is charged and paid monthly at 13% above the central bank rate. The facility is secured by way of a fixed charge dated 29 March 2022, over all present and future property, assets and rights (including uncalled capital) of Direct Accident Management Limited, with a cross company guarantee provided by Anexo Group Plc.

In June 2023 a loan of £2.8 million was sourced from certain of the principal shareholders and directors of the Group to support further marketing in the Mercedes Benz Emissions Claim and other emissions opportunities. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity two years from the date of receipt of funding with an option to repay early without charge. In addition to the interest charges the loan attracts a share of the proceeds generated for the Group from the Mercedes Benz Emissions Claim.

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