# Anexo Group report significant growth in profits driven by increased cash collections

- Link: https://www.directorstalkinterviews.com/anexo-group-report-significant-growth-in-profits-driven-by-increased-cash-collections/4121064108
- Published: 2022-05-11T07:22:36+01:00
- Author: Giles

**Anexo Group plc** ([LON:ANX](https://www.directorstalkinterviews.com/company/anexo-group-plc/anx.l)),
the specialist integrated credit hire and legal services provider, has provided 
its final results for the year ended 31st December 2021.

| **Financial Highlights** | **2021** | **2020** | **% movement** | 
| Total revenues (£’000s) | 118,237 | 86,752 | +36.2% | 
| Operating profit (£’000s) | 27,350 | 18,050 | +51.4% | 
| Adjusted^(1) operating profit before exceptional items (£’000s) | 27,728 | 18,708 | +48.1% | 
| Adjusted^(1) operating profit margin (%) | 23.5 | 21.6 | +8.8% | 
| Profit before tax (£’000s) | 23,746 | 15,488 | +52.9% | 
| Adjusted^(1) profit before tax and exceptional items (£’000s) | 24,124 | 16,146 | +49.7% | 
| Adjusted^(2) basic EPS (pence) | 16.8 | 11.4 | +48.2% | 
| Total dividend for the year (pence) | 1.5 | 1.5 | – | 
| Equity attributable to the owners of the Company (£’000s) | 128,224 | 110,438 | +16.1% | 
| Net cash flow (£’000s) | -7,300 | +200 | **–** | 
| Net debt balance (£’000s) | 62,000 | 40,500 | +53.1% |

1. Adjusted operating profit and profit before tax: excludes share‑based payment
charges in 2020 and 2021. A reconciliation to reported (IFRS) results is included
in the Financial Review on page 19.

2. Adjusted EPS: adjusted PBT less tax at statutory rate divided by the weighted
number of shares in issue during the year.**
Financial and Operational KPIs

| ·     | During 2021, we saw the continued improvement in a number of key performance measures (detailed below). These have resulted in a significant improvement in financial performance for the Group during the period, notwithstanding the continuing issues faced during 2021 from COVID-19. Opportunities within the Credit Hire division have never been so strong, following the introduction of the Civil Liabilities Act 2021, and the Group has deployed increasing working capital facilities and reinvested significant levels of cash collections into the new case portfolio. Consequently, the number of new cases funded rose from 7,535 to 10,265, an increase of 36.2%. This investment is supported by growth in cash collections, which rose by 21.5% in the year to reach £119.0 million in 2021.  | 
| ·     | Our ability to fund growth in our core business has been supported by investment in legal staff. In 2021, the number of senior fee earners grew by 45% to reach 237 at the year end. This investment has driven increased cash collections in the year despite the challenges of the reduced operation of the court system. Much of the investment will start to impact during 2022 and beyond, reflecting the life cycle of a typical credit hire claim and the time a new starter takes to reach settlement maturity. |

| **KPI’s** | **2021** | **2020** | **% movement** | 
| Total revenues (£’000s) | 118,237 | 86,752 | +36.3% | 
| Gross profit (£’000s) | 91,481 | 67,952 | +34.6% | 
| Adjusted operating profit (£000’s) | 27,728 | 18,708 | +48.2% | 
| Adjusted operating profit margin (%) | 23.5% | 21.6% | +10.9% | 
| Vehicles on hire at the year-end (no) | 2,366 | 1,613 | +46.7% | 
| Average vehicles on hire for the year (no) | 1,834 | 1,515 | +21.1% | 
| Number of hire cases settled | 6,187 | 5,236 | +18.2% | 
| Cash collections from settled cases (£’000s) | 119,007 | 97,977 | +21.5% | 
| New cases funded (no) | 10,265 | 7,535 | +36.2% | 
| Legal staff at the period end (no) | 634 | 518 | +22.4% | 
| Average number of legal staff (no) | 590 | 498 | +18.5% | 
| Total senior fee earners at period end (no) | 237 | 163 | +45.4% | 
| Average senior fee earners (no) | 201 | 144 | +39.6% | 
| ** ** | ** ** | ** ** | ** ** | 
| ** ** | ** ** | ** ** | ** ** |

> **Commenting on the Final Results, Alan Sellers, Executive Chairman of Anexo Group
> plc, said:**
> 
> “I am pleased to report that the Group has had a successful 2021, building on
> the achievements of 2020. The results demonstrate the resilience of the Group’s
> business model, as we improved on last year’s cash collections, whilst still facing
> uncertainty due to the COVID-19 pandemic. Group revenues in 2021 increased by 
> over a third compared to the previous year.
> “Opportunities within the Credit Hire division have never been so strong. As a
> result, the Group has focused considerable resource here and has seen the number
> of new cases funded rise substantially.
> “The Board remains focused on long term growth, and we are confident that there
> are significant opportunities that exist in 2022 to build upon our successful 
> platform. The growth of our Housing Disrepair Division throughout 2021, as well
> as our already resilient business model, presents an exciting outlook for the 
> year ahead.”

**Chairman’s Statement**

On behalf of the Board, I am pleased to report a year of significant growth by the
Group in the face of considerable ongoing nationwide challenges. These results reflect
our continued focus on increasing cash settlements through the expansion of our 
Legal Services division, while using our working capital to maximum effect to ensure
growth in our Credit Hire division. This emphasis on facilitating growth led to 
significant increases in both cash collections and vehicle numbers, culminating 
in record numbers of vehicles on the road at the end of the year. We have continued
to invest in our advocacy practice, particularly through our Housing Disrepair Division,
and we believe the division will become a significant contributor to future revenues.

The Board continues its close monitoring of progress in our core divisions while
seeking to take advantage of the significant growth opportunities which are presenting
themselves as we emerge from the pandemic and believes that the Group is well positioned
for further strong performance in 2022 and beyond.

**
Group Performance

Anexo experienced strong growth in 2021, despite the ongoing disruption caused by
the ongoing COVID restrictions. Trading across our divisions has been robust and
our core business has proved extremely resilient.  As a result, Group revenues in
2021 increased by 36.2% to £118.2 million (2020: £86.8 million). Adjusted profit
before tax rose 49.7% to £24.1 million (2020: £16.1 million), reflecting the continued
investment in staff, IT and associated infrastructure costs associated with the 
headcount increase (investment in 2020: £6.5 million). The Group issued a trading
statement on 18 January 2022 stating that profit before tax would significantly 
exceed market expectations.

The Group’s focus on growth meant that 2021 was a period of cash absorption to take
advantage of the opportunities for new contracts, as well as the ongoing withdrawal
of a number of competitors from the market and the impact of the introduction of
the Civil Liabilities Act, which severely curtails the ability of personal injury
solicitors to recover substantial legal costs. To accommodate this growth the Group
increased its available working capital facilities and continued the expansion of
staff numbers and the necessary supporting infrastructure to support increased case
settlements.

_
Credit Hire division

The Group’s Credit Hire division, EDGE, saw further record performance in vehicle
provision during the year. The number of new vehicle hires continued to be impacted
by lockdowns in 2021. However, a large number of EDGE customers are classed as key
workers, including couriers (who have been extremely active throughout the pandemic)
as well as health professionals, teachers, nursery staff, emergency workers and 
supermarket personnel. As a consequence, and with the backdrop of a reduction in
competition in the market following changes implemented by the Civil Liabilities
Act 2021, vehicle numbers recovered strongly and reached record levels in the latter
part of 2021. The number of vehicles on hire at the end of 2021 rose 46.7% to 2,366(
2020: 1,613) and the average number of vehicles on hire throughout the financial
year rose 21.1% to 1,834 (2020: 1,515).

Revenues within the Credit Hire division grew by 38.2% to £71.3 million (2020: £
51.6 million). The Group maintains its claims acceptance strategy of deploying its
resources into the most valuable claims, thereby growing claims while preserving
working capital. The Group monitors its fleet size constantly, enabling it to respond
quickly to changes in demand and strategic priorities by deploying its vehicles 
appropriately with focus remaining firmly on McAMS, the motorcycle division.

_
Legal Services division

The Group’s Legal Services division, Bond Turner, has continued its focus on cash
collections and corresponding investment in staff to drive increased case settlements.
This strategy has had a significant positive impact on financial performance. Revenues
within the Legal Services division, which strongly correlates to cash, increased
by 33.2% to £46.9 million (2020: £35.2 million). The continued growth of the Bolton
office, which opened in December 2018, and the opening of the Leeds office at the
beginning of 2021 have provided considerable opportunities for recruitment. During
the pandemic, and following the implementation of the Civil Liabilities Act 2021,
the Group has seen a number of personal injury solicitors withdrawing from the market
and embarking on a run-off strategy. In addition, a number of high-quality staff
at competitor firms were placed on furlough. Taking advantage of these recruitment
opportunities has resulted in staff numbers rising at all levels, with the ability
to retrain personal injury solicitors in the field of credit hire for suitable placement
within Bond Turner. At the end of December staff numbers within Bond Turner stood
at 634, a 22.4% increase on the 2020 figure of 518. Of these, a total of 237 were
senior fee earners, up 46.3% (2020: 163).

_
MCE Insurance

Towards the end of 2021 we announced the signing of a major agreement with UK-based
broker MCE Insurance (‘MCE’) to offer post-accident claims services to all MCE’s
non-fault insurance customers. This follows motor insurer Sabre Insurance Group 
plc signing an agreement with MCE which will see it become the exclusive underwriter
of MCE’s motorcycle policies.

UK-based MCE is independently owned and since its foundation in 1975 has grown to
become one of the UK’s largest providers of motorcycle insurance. Under the terms
of the agreement, we will assume responsibility for dealing with claims from customers
of MCE who are victims of non-fault accidents. Replacement motorcycles will be provided
through our credit hire division, Edge, and customers will be supported in their
legal claims against the at-fault insurer by its legal services division, Bond Turner.
Where appropriate, claims will include personal injury and damage to possessions
and equipment as well as vehicle repair or replacement. Statistics show that motorcyclists
are particularly vulnerable to personal injury as a result of non-fault accidents.

The contract commenced in November 2021 and generated over 500 claims by the end
of the year. We anticipate that the contract will generate an increasing level of
credit hire opportunities for the Group during 2022, adding to our growth opportunities
within the core business.

_
VW Emissions Case

The pursuit of the class action against Volkswagen AG (‘VW’) and its subsidiaries(
the ‘VW Emissions Case’) has continued during 2021. A judgment announced in the 
High Court of Justice on 6 April 2020 found that VW had indeed subverted key air
pollution tests. VW was subsequently refused permission to appeal that judgment.
Time limitations for the case expired in September 2021, meaning that no more claims
can be brought against VW.

A court date for the case has now been scheduled for January 2023, prior to which
we will seek to negotiate settlement of the case.

Bond Turner is acting on behalf of a number of individuals who have registered claims
against VW and is currently actively engaged on approximately 13,000 cases. The 
marketing campaign has been largely conducted via social media channels as well 
as via the use of internal customer records with all marketing costs being written
off as incurred.

The Board believes that, in the event of a settlement, the percentage of potential
damages and associated costs accruing to Anexo would have a significant positive
impact on the Group’s expectations for profits and cash flow for the relevant accounting
period. There is no certainty that a settlement in favour of Bond Turner’s clients
will be reached, nor is there any guarantee that such a settlement would include
financial compensation. The timeline for progress towards a potential settlement
is also unclear and no assumptions as to revenue have been included in the Board’s
internal forecasts for 2022.

_Mercedes Benz Emissions Case_

Having undertaken our own internal research, which has been subsequently corroborated
by counsel, the Group is to start actively sourcing claims against Mercedes Benz,
as we have successfully done for VW. To support the case, the Group sourced an additional
£3.0 million of funding in November 2021 to cover the anticipated marketing costs.

_
Housing Disrepair

During the latter part of 2020 we created a new team within our legal services division,
Bond Turner, to deal with claims arising from housing disrepair. This team expanded
rapidly during 2021. During the year we successfully settled some 500+ claims. At
the end of the year, we had a portfolio of over 1,500 ongoing claims. With further
investment planned into 2022, the Housing Disrepair team is expected to generate
a significant contribution to earnings in 2022 and beyond.

**Dividends**

The Board is pleased to propose a final dividend of 1.0p per share, which if approved
at the Annual General Meeting to be held on 16 June 2022 will be paid on 24 June
2022 to those shareholders on the register at the close of business on 20 May 2022.
The shares will become ex-dividend on 19 May 2022. An interim dividend of 0.5p per
share was paid on 22 October 2021 (2020: total dividend 1.5p per share).

**Corporate Governance**

Anexo values corporate governance highly and the Board believes that effective corporate
governance is integral to the delivery of the Group’s corporate strategy, the generation
of shareholder value and the safeguarding of our shareholders’ long-term interests.

As Chairman, I am responsible for the leadership of the Board and for ensuring its
effectiveness in all aspects of its role.  The Board is responsible for the Group’s
strategic development, monitoring and achievement of its business objectives, oversight
of risk and maintaining a system of effective corporate governance.  I will continue
to draw upon my experience to help ensure that the Board delivers maximum shareholder
value.

**Our employees and stakeholders**

The strong performance of the Group reflects the dedication and quality of the Group’s
employees.  We rely on the skills, experience and commitment of our team to drive
the business forward. Their enthusiasm, innovation and performance remain key assets
of the Group and are vital to its future success.  On behalf of the Board, I would
like to thank all of our employees, customers, suppliers, business partners and 
shareholders for their continued support over the last year.

**COVID-19 Update**

The COVID-19 pandemic has inevitably caused some continued disruption to the Group’s
operations. The Group’s operations are, however, categorised as essential businesses
and as such have been exempted throughout from government restrictions.  Its businesses
supply and service a broad range of customers who are involved in a non-fault accident
and who would otherwise be unable to access the mobility they need.  Among these,
the Group provides replacement vehicles to many key workers, including couriers (
who have been increasingly active throughout the pandemic) and other customers such
as doctors, nurses, schoolteachers, nursery staff, emergency workers and supermarket
personnel.

The Group’s core businesses continued to be fully operational following the reintroduction
of a national lockdown at the end of 2020. Activity levels in the Credit Hire Division(
EDGE) have remained high.  The COVID-19 pandemic has led to a number of the Group’s
competitors withdrawing from the market and, as a result, Anexo has been approached
by a number of high-quality introducer garages looking for new partnerships.  The
Group has taken advantage of this unprecedented opportunity to expand its introducer
network. Notwithstanding the relaxation of restrictions, vehicles have continued
to be delivered and collected by staff who are protected in line with government
guidelines.  All returned vehicles are valeted as a matter of course before being
allocated to a new customer and comprehensive cleaning procedures are being rigorously
enforced.

The courts began to return to normal working practices during 2021, while remaining
open for remote working. A backlog of those cases requiring physical attendance 
has inevitably arisen, but the Group’s Legal Services division, Bond Turner, has
continued to reach case settlements via telephone and online hearings where possible.
The progression and settlement of cases was aided by moves from the Ministry of 
Justice (MOJ), supported by the Judiciary, to allow the remote operation of courts
through online and telephone hearings. All our staff returned to office working 
as quickly as practicable; social distancing guidelines have been observed in all
our office locations and extensive COVID safety measures have been implemented.

EDGE, the Group’s Credit Hire division, has also remained fully operational throughout
2021.

Due to the unprecedented global impacts of COVID-19, the Company has continually
re-assessed and analysed its business strategy with the key focus being minimising
the impact on critical work streams, ensuring business continuity and conserving
cash flows. As such, increased stakeholder engagement and open communication have
become increasingly important in decision making for the Board.

While the COVID-19 crisis has interrupted our regular physical face to face interactions
with various stakeholders internally and externally, we do consider them to be important
in maintaining open communications and team cohesion and will be reintroducing these
gradually, provided it is safe to do so in line with Government guidelines and the
needs of individual attendees. In the meantime, we have taken advantage of various
video conferencing platforms where appropriate.

**Current Trading and Outlook**

As our financial performance and KPI’s have demonstrated, the Group has continued
to perform throughout a period of significant uncertainly, improving vehicle numbers
and cash collections to record levels during 2021, demonstrating the strength and
resilience of the Group during the current COVID-19 crisis. Whilst others have made
redundancies, furloughed staff and withdrawn from the credit hire market, we have
continued recruitment throughout the period. This impacted our reported financial
performance in 2020 but these investments have resulted in the growth seen in 2021
and will continue to contribute to growth in 2022 and beyond.

As a Board we developed a plan for managing the Group during this ever-changing 
year and continue to react to take advantage of opportunities as they arise. The
expansion of the national vaccination programme and the relaxation of national lockdown
from April 2021 has resulted in an increase in opportunities and vehicles on the
road, consistent with the trends seen in 2020. As previously announced, however,
since year end the Group has modified its approach to vehicle funding. We have adopted
a targeted approach. This has led to a reduction in the number of vehicles on the
road since the beginning of FY22 to a level which best facilitates management of
the Group’s working capital requirements. The Group remains focused on quality claims,
high service standards and high success rates.

While uncertainties remain given the current environment, I continue to have great
confidence in the strategy post COVID and look to the future with continued optimism.

**Subsequent Events**

In March 2022, the Group secured an increase in facilities from Secure Trust Bank
plc, increasing the overall draw rate on the invoice discounting facility alongside
an increase in the overall facility limit to £43.0 million. In addition to this 
increase the Group secured a loan of £7.5 million from Blazehill Capital Finance
Limited. The loan, which is non amortising and is committed for a three year period
was also drawn in March 2022.

**Alan Sellers**

Executive Chairman

11^(th) May 2022

**
Financial Review

**Basis of Preparation**

As previously reported, Anexo Group Plc was incorporated on 27 March 2018, acquired
its subsidiaries on 15 June 2018, and was admitted to AIM on 20 June 2018 (the ‘
IPO’).  Further details are included within the accounting policies.

To provide comparability across reporting periods, the results within this Financial
Review are presented on an “underlying” basis, adjusting for the £0.7 million charge
recorded for share-based payments in 2020 and the £0.4 million charge for share-
based payments in 2021.

A reconciliation between adjusted and reported results is provided at the end of
this Financial Review. This Financial Review forms part of the Strategic Report 
of the Group.

**
New Accounting Standards

As reported on page 73 there have been a number of new UK IFRS accounting standards
applicable from 1 January 2021, none of which have resulted in adjustment to the
way in with the Group accounts or presents its financial information. 

**
Revenue

In 2021, Anexo successfully increased revenues across both its divisions, Credit
Hire and Legal Services, resulting in Group revenues of £118.2 million, representing
a 36.2% increase over the prior year (2020: £86.8 million). This growth is particularly
pleasing given the fact that we have all been operating under restrictions imposed
by the Government to limit the impact of the COVID-19 pandemic.

During 2021 EDGE, the Credit Hire division, provided vehicles to 10,265 individuals(
2020: 7,535) a significant increase on that seen in the prior year (36.2%). This
constitutes a strong performance given the restrictions imposed during the year.
Our strategy remains, as previously reported, to focus investment within the McAMS
business. This reflects the fact that, on average, a motorcycle claim has a similar
value to that of a car with a take-on cost significantly less, allowing the Group
to deploy its resources into the most valuable claims, thereby growing revenues 
whilst preserving working capital. This investment led to the award of our first
insurance contract in November 2021. The Group secured an exclusive contract with
MCE to support their non fault customers with replacement vehicles.

With the number of claims rising significantly in 2021, the strategy of deploying
capital into the most valuable claims to the Group resulted in revenues for the 
Credit Hire division increasing to £71.3 million in 2021, an increase of 38.2% over
2020 (£51.6 million).

With investment in staff continuing as other firms made redundancies and furloughed
staff, the Legal Services division reported significant revenue growth of 30.6%,
with revenues rising from £35.9 million in 2020 to £46.9 million in 2021.

Expansion of headcount in Bond Turner has been critical to increasing both revenues
and cash settlements within the Group and the continued growth of the Bolton office,
supported by expansion into Leeds, has provided a crucial platform for growth in
both factors. During 2021, the Group continued its recruitment campaign, as a number
of high-quality staff became available as a result of competitor firms either entering
a run-off plan or simply furloughing staff to remain viable.

We have taken advantage of these opportunities, taking the decision to continue 
to recruit throughout the year, thereby investing in the future settlement capacity
of the Group and consequently driving cash collections and the number of new cases
we can fund without the need for additional working capital facilities. By the end
of December 2021, we employed 634 staff in Bond Turner (December 2020: 518), of 
which 237 (December 2020: 163) were senior fee earners, an increase of 31.6%.

Investment in this new department, following the implementation of the Extension
of the Homes (Fitness for Human Habitation) Act 2019, expanded significantly in 
2021. With £1.7 million being invested in marketing for the generation of new claims,
we secured c 2,000 new claims in 2021, settling c 500 in an average of 180 to 200
days, significantly less than the working capital cycle of an average Credit Hire
claim. As such, and following the significant investment in staff in 2021, further
recruitment is planned into 2022 to enhance performance and improve cash flow for
the Group as a whole.

With the signing of the lease for the Leeds office, recruitment and associated training
has continued and as at the end of 2021 the office held 24 staff. Recruitment is
scheduled to continue throughout 2022 across all of our three office locations. 

**Gross Profits**

Gross profits are reported at £91.5 million (at a margin of 77.4%) in 2021, increasing
from £68.0 million in 2020 (at a margin of 78.3%). It should be noted, furthermore,
that staffing costs within Bond Turner are reported within Administrative Expenses.
Consequently, gross profit within Bond Turner is in effect being reported at 100%.

**Operating Costs**

Administrative expenses before exceptional items increased year-on-year, reaching
£55.1 million in 2021 (2020: £42.6 million), an increase of £12.5 million (29.3%).
This reflects the continued investment in staffing costs within Bond Turner to drive
settlement of cases and cash collections. Staffing costs for Bond Turner increased
to £20.5 million (2020: £16.6 million), an increase of £3.9 million (23.5%) which,
together with significant investment in staff within the Credit Hire division (2021:
£12.4 million, 2020: £8.1 million) to ensure we maintained our high standards of
service to an increasing number of clients, accounted for a total increase of £8.2
million. Following the establishment of our Housing Disrepair team in late 2020,
some £1.7 million was invested in marketing costs in 2021 (2020: £0.1 million), 
all of which has been expensed as incurred. The balance of the increase reflects
the investment in marketing and infrastructure to allow the Group to meet its growth
aspirations.

**Profit Before Tax**

Adjusted profit before tax reached £24.1 million in 2021, increasing significantly
from £16.1 million in 2020 (49.7%). To provide a better guide to underlying business
performance, adjusted profit before tax excludes share-based payments charged to
profit and loss.

The GAAP measure of the profit before tax was £23.7 million (2020: £15.5 million)
reflecting the non-cash share-based payment charge of £0.4 million (2020: £0.7 million).
Where we have provided adjusted figures, they are after the add-back of this item
and a reconciliation of the adjusted and reported results is included on page 19
of the Annual Report.

**Finance Costs**

Finance costs reached £3.6 million in 2021, increasing from £2.6 million in 2020(
38.5%), reflecting the increased level of financing facilities held within the Group
to support its growth strategy.

**EPS and Dividend**

Statutory basic EPS is 16.5 pence (2020: 10.8 pence). Statutory diluted EPS is 16.2
pence (2020: 10.6 pence). The adjusted EPS is 16.8 pence (2020: 11.4 pence). The
adjusted diluted EPS is 16.5 pence (2020: 11.2 pence). The adjusted figures exclude
the effect of share-based payments. The detailed calculation in support of the EPS
data provided above is included within Note 12 of the financial statements of the
annual report.

The Board is pleased to propose a final dividend of 1.0p per share, which if approved
at the Annual General Meeting to be held on 16 June 2022 will be paid on 24 June
2022 to those shareholders on the register at the close of business on 20 May 2022.
The shares will become ex-dividend on 19 May 2022. An interim dividend of 0.5p per
share was paid on 22 October 2021 (2020: total dividend 1.0p per share).

**Group Statement of Financial Position**

The Group’s net assets position is dominated by the balances held within trade and
other receivables. These balances include credit hire and credit repair debtors,
together with disbursements paid in advance which support the portfolio of ongoing
claims. The gross claim value of trade receivables totalled £325.3 million in 2021,
rising from £262.6 million in 2020. In accordance with our income recognition policies,
a provision is made to reduce the carrying value to recoverable amounts, the net
balance increasing to £146.4 million (2020: £119.6 million). This increase reflects
the recent trading activity and strategy of the Group and is in line with management
expectations given that throughout the majority of 2021 the legal services teams
have been operating within COVID-19 restrictions and there have been periods when
capacity within the court system has been significantly hampered. The increase has
been primarily funded from the significant rise in cash collections seen year on
year as well as additional facilities secured from our two principal working capital
funders.

In addition, the Group has a total of £39.4 million reported as accrued income (
2020: £27.1 million) which represents the value attributed to those ongoing hires
and claims at the year end, the number of vehicles on the road in particular increasing
significantly during the year.

The increases in both trade receivables and accrued income reflect an increase in
net volume of new cases funded which increased to 4,078 in 2021 (having funded 10,265
hire cases and settled 6,187 in the year) from 2,299 in 2020 (having funded 7,535
hire cases and settled 5,236 in that year).

Whilst activity levels have risen and fallen in line with the local and national
lockdowns, impacting the number of vehicles on the road and hence opportunities 
for new claims for the Group, further investment has been required and made in 2021
into the motorcycle fleet so as to meet the demand from our significant pool of 
introducers. Total fixed asset additions totalled £13.1 million in 2021 (2020: £
11.2 million), the fleet continues to be largely externally financed.

Trade and other payables, including tax and social security increased to £12.6 million
compared to £9.5 million at 31 December 2020, the Group utilising additional cash
availability to reduce the balance over and above the general increase in trading
activity.

Net assets at 31 December 2021 reached £128.2 million (2020: £110.4 million).

**Net Debt, Cash and Financing**

Net debt increased to £62.0 million at 31 December 2021 (31 December 2020: £40.5
million) and comprised cash balances at 31 December 2021 of £7.6 million (2020: 
£8.2 million), plus borrowings which increased during the year to fund the additional
working capital investment in the Group’s portfolio of claims, support the investment
by the Group in the VW and Mercedes Benz emissions claims and facilitate expansion
of the vehicle fleet.

The total debt balance rose from £48.7 million in 2020 to £69.6 million at the end
of 2021; these balances include lease liabilities recognised in line with IFRS16.
The Group has a number of funding relationships and facilities to support its working
capital and investment requirements, including an invoice discounting facility within
Direct Accident Management Limited (secured on the credit hire and repair receivables),
lease facilities to support the acquisition of the fleet and a revolving credit 
facility within Bond Turner Limited.

Subsequent to the year end, the group secured an increase in facilities from Secure
Trust Bank plc alongside a loan of £7.5 million from Blazehill Capital Finance Limited.
Secured Trust Bank plc increased both the overall draw rate on the invoice discounting
facility as well as the overall facility limit to £43.0 million. The loan from Blazehill
Capital Finance Limited is non amortising and committed for a three year period;
both were available to be drawn from March 2022.

Having considered the Group’s current trading performance, cash flows and headroom
within our current debt facilities, maturity of those facilities, the Directors 
have concluded that it is appropriate to prepare the Group and the Company’s financial
statements on a going concern basis. Further details are included on page 73 of 
the financial statements.

**
Cash Flow

Notwithstanding the impact of COVID-19 on the Business (further details provided
earlier), whilst other businesses have furloughed staff and made redundancies, particularly
within the personal injury legal market, we have continued to invest in talent and
grow our settlement capacity throughout Bond Turner. The number of senior fee earners
increased from 163 to 237 during 2021 (an increase of 45.4%) and continues to rise
across each of our offices, the third of which opened in Leeds in February 2021.

Cash collections for the Group (and excluding settlements for our clients), a key
metric for the Group, increased from £98.0 million in 2020 to £119.0 million in 
2021, an increase of 21.4%. This is a significant improvement, given the fact that
many of the new recruits will not reach settlement maturity until 2022. Furthermore,
with settlements impacted by the reduction in capacity within the court system arising
from the impact of COVID, this growth is testament to the quality of staff within
the Group. During 2020 and 2021, we have seen a number of competitors furlough staff
and withdraw from the market leading to increases in market opportunities; we have
sought to take advantage of this and increase market share. Despite the noticeable
decline in road traffic during the various periods of lockdown, with the overall
number of vehicles on the road visibly lower than in a typical year and many people
working from home, we have actually seen the average number of vehicles on the road
rise in 2021, reaching 1,834 (2020: 1,515). This contributed to the strong revenue
performance of the Credit Hire division.

This growth correspondingly impacted cash flows in the second half of the year with
vehicle numbers peaking at over 2,500 in the later part of the year, culminating
in the award of our first insurance contract with MCE (further details have been
provided above).

With such a raft of growth opportunities, the Board approved an increase in availability
of approximately £11.1 million of new debt, provided by an increase in facilities
from Secure Trust Bank plc (£3.6 million) and Blazehill Capital Finance Limited (
£7.5 million), to take advantage of these opportunities, whilst ensuring the relationship
between the number of new claims taken on within EDGE is balanced with the settlement
capacity of Bond Turner. These additional facilities were secured in March 2022.

As growth opportunities within the Credit Hire division expanded significantly during
2021, the Group reported an outflow from operating activities of £7.3 million (2020:
cash inflow of £0.2 million), this position being impacted not only from the significant
increase in hire cases funded (which increased by 2,730 (36.2%) to 10,265) but continued
delays and adjournments within the court system. However, we successfully reduced
the average working capital cycle from c520 days in 2020 to c460 days in 2021 as
the level of claims processed under protocol type arrangements with a number of 
at fault insurers increased to cover approximately 15% of our claims taken.

With a net cash inflow of £7.2 million resulting from financing activities, having
secured additional facilities from our two primary funders (Secure Trust Bank Plc
and HSBC Bank Plc) alongside an additional £3.0 million to fund the Mercedes Benz
emissions claim, (2020: net cash inflow of £4.9 million), the Group reported a net
cash outflow in 2021 of £0.7 million (2020: net cash inflow of £6.0 million).

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