Anexo confident of strong second half recovery

Alan Sellers

Half year revenues and pre-tax profits both fell at Liverpool-based Anexo Group, the specialist integrated credit hire and legal services provider.

Releasing unaudited accounts for the six months to June 30, today, the group revealed interim sales of £36.625m, compared with £36.717m in the same period last year.

Pre-tax profits of £6.344m had fallen from £10.43m in 2019.

The interim dividend of 0.5p per share is down from last year’s 1p per share payout.

However, the group said it expects second half underlying profit before tax – before investment in its VW emissions case acquisition – to recover strongly.

In June the business, which operates its legal arm Bond and Turner from Bolton, reported record annual results as revenues in the year to December 31, 2019, jumped by 38.9% to £78.51m, while pre-tax profits of £22.4m represented a 57% improvement.

In May it raised £7.5m through a share placing to expand the business, including recruitment of new staff and increased marketing in its legal case involving car maker Volkswagen.

A specialist team within the legal services division, Bond Turner, is acting on behalf of around 8,000 individuals who have registered their intention to pursue an emissions claim against VW.

Today’s update revealed an overall net cash inflow – excluding the recent fundraise – of £2.4m, against a net cash outflow of £7m in the same period last year.

There was also an overall reduction of £4m in adjusted operating profit, largely as a result of a £2.6m investment in staff to drive settlements and cash receipts in fiscal year 2021, £700,000 investment in the VW case acquisition, and office and IT costs associated with the headcount increase of £500,000.

During the reporting period the group raised an additional £2.1m from a litigation funder to allow capital to continue to be deployed into client acquisition in relation to the VW emissions case without detracting from the core business.

The group has further increased its capital base with £5m drawn from the Government’s CBILS scheme in July.

It said the COVID-19 impact on activity levels in the credit hire division was particularly evident in the first half of 2020 and affected revenue generation, but the number of the group’s vehicles on the road as it enters the second half of the year is ahead of its own internal targets and currently stands at 1,575 vehicles as at August 12.

As anticipated, as a result of the COVID-19 pandemic there was a reduction in settlement efficiency for the legal services division as staff were transitioned to working from home.

This, combined with the costs associated with opening the second floor in the Bolton office and associated staff investment and recruitment, have led to both a reduction in cash receipts and fee income and an increased cost base.

But as high-quality new lawyers reach case maturity and staff return to the office, Anexo expects a return to previous efficiencies and increases in settlements and cash collections in the second half of 2020.

Alan Sellers, executive chairman, said: “I am pleased to report that Anexo has hit its target of becoming cash generative in the period.

“As we set out at IPO in 2018, our strategy was to invest and expand the group’s legal services division in order to increase the number of cases settled and, therefore, boost cash collections and maximise the value from the extensive backlog of cases in our portfolio.

“Our ability to deliver on the strategy sends a clear message about Anexo’s ability to deliver results to our shareholders, and will give confidence in the group as we look to expand our unique business model and make the most of the significant market opportunity.”

He added: “The COVID-19 pandemic has, undoubtedly, impacted the group in the first six months of the year, but as we see activity levels for our credit hire division returning to normal, and the case portfolio of our expanded legal services division matures and case settlement efficiency improves, we are confident that both revenue generation and earnings growth should return in the second half.

“As we continue to offer dividends to our shareholders and reinstate market guidance, we look forward to the future with confidence.”