NAHL : Final Results RNS Statement March 2023

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

22 March 2023

NAHL Group plc

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

Final Results

Realising returns on strategic investments and building solid foundations for future growth

NAHL, a leading UK marketing and services business focused on the consumer legal services market, announces its Final Results for the year ended 31 December 2022.

Financial Highlights

• Group Revenue increased by 6.4% to £41.4m (2021: £38.9m), reflecting good progress made across the Group
• Cash received from settled claims in National Accident Law (NAL) increased by 67% to £3.5m (2021: £2.1m)
• Significant reduction in net debt at 31 December 2022 to £13.3m (2021: £15.5m)
• Strong levels of cash generation resulting in free cash flow increasing from £0.8m in 2021 to £2.2m
• Operating profit increased to £4.8m (2021: £4.2m) in line with recently upgraded market expectations
• Profit before tax increased to £0.6m (2021: £0.2m) due to lower-than-expected profit attributable to non-controlling interests in our LLPs, offset by an increase in borrowing costs due to higher UK interest rates
• Basic EPS of 0.8p (2021: 0.3p)

Operational Highlights

• Both the Consumer Legal Services and Critical Care divisions advanced their respective growth strategies in the year
• Continued to rapidly scale NAL and grew headcount to 147 people (2021: 129 people)

1. NAL won 1,894 claims, 60% more than the prior year (2021: 1,187)

• 1. At 31 December 2022, NAL had grown its book of ongoing claims by 37% to 10,860 (2021: 7,918) o These claims have an estimated future cash value to NAL (before processing costs) of £11.2m,
     and an estimated future revenue of £8.2m
• National Accident Helpline (NAH), generated 34,905 personal injury enquiries in the year, an increase of 9% over 2021 despite the wider market remaining subdued, further evidence of its strong brand and effective marketing strategy
• NAH also successfully returned to TV advertising in June 2022 and exited the year with its highest share of the non-RTA market since early 2020
• Critical Care increased the number of Expert Witness reports it issued by 10%, whilst investments in marketing and business development resulted in a 14% increase in the number of new instructions for Initial Needs Assessments (INA)
• Further encouraging results in Bush Care Solutions, which was launched in 2021 and delivered revenue growth of 24% to £0.4m in 2022
• Critical Care recruited 61 new associates in 2022 to support its growth and enhance its proposition

Outlook

• The Group entered 2023 with momentum and the Board are cautiously optimistic that the Group is well placed to continue its growth and strong cash generation
• In Personal Injury, following a successful return to TV advertising in 2022, the Board plan on increasing advertising investment in 2023 to gain further market share
• In the first two months of 2023:

1. enquiry numbers are 3% higher than the equivalent period in 2022, after excluding tariff-only RTA enquiries which are no longer targeted

1. NAL has collected £0.6m cash from settlements, 89% more than the same period last year

1. Critical Care Expert Witness and INA reports issued were 27% and 9% ahead of the same period

last year respectively

• 1. Expert Witness instructions were 21% higher and INA instructions were flat compared to the same period last year, due to a slow start in January
• Given the persistently high levels of inflation in the UK, the Board expects UK interest rates to remain at higher levels in 2023 leading to higher borrowing costs for the Group
• In response, the Group plans to accelerate cash collection and further reduce net debt by utilising its flexible placement model, its maturing book of claims in NAL and the strong levels of cash originating from its joint ventures and Critical Care division

James Saralis, CEO of NAHL, commented:

"I am pleased with the financial performance of the Group in 2022. To deliver a significant reduction in net debt, return our Personal Injury business to profit and continue our growth in Critical Care, despite the wide-ranging macroeconomic factors working against both our sector and the economy is testament to our people and the investments we have made over the last few years.

"In line with our strategy, we continued to grow our book of claims in NAL, which now stand at 10,860, 37% ahead of the same time last year. The Group also collected £3.5m of cash from settlements during the year, up from £2.1m in 2021, illustrating the growing maturity of our claims book. These maturing claims along with the flexibility of our placement model were instrumental in the Group being able to reduce its net debt during the year.

"Simultaneously, Critical Care recruited 61 new associates in 2022 to support its growth and further enhance its offering whilst also investing in its new proposition Bush Care Solutions which will access adjacent markets and be a key growth enabler for the future.

"Finally, I would like to reiterate my gratitude to our employees for their hard work, support and commitment throughout the year. Without their unwavering dedication, we would not have had the successes we did in 2022 and I very much look forward to 2023 as we continue to build on the strong foundations we have set for future growth."

The Annual Report and notice of Annual General Meeting will be available by the end of April 2023.

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

• Consumer Legal Services provides outsourced marketing services to law firms through National Accident Helpline and Homeward Legal; and claims processing services to individuals through Your Law, Law Together and National Accident Law. In addition, it also provides property searches through Searches UK.
• Critical Care provides a range of specialist services in the catastrophic and serious injury market to both claimants and defendants through Bush & Co.

More information is available at www.nahlgroupplc.co.uk,www.national-accident-helpline.co.ukand

www.bushco.co.uk

Throughout this document, references to 'joint venture' law firm relate to our law firms Your Law LLP and Law Together LLP which we operate in partnership with a minority member. The term 'joint venture' does not relate to the UK-adopted International Accounting Standards (IFRS) definition. These law firms are accounted for as subsidiary undertakings.

CHAIR'S REPORT

The Group returned to growth in 2022 and delivered results in line with recently upgraded market expectations, despite a challenging macro-economic environment. We saw good progress across the Group with increased revenues and profit and a further reduction in debt in 2022. Significantly our Personal Injury business started repaying the investment we have made in its transformation, and not only returned to growth but was cash positive and grew market share.

We completed the year with revenues of £41.4m (2021: £38.9m), a profit before tax of £0.6m (2021: £0.2m), and a

further reduction in debt to £13.3m (31 December 2021: £15.5m).

Consumer Legal Services

Overall, revenues in the Consumer Legal Services division grew by 6% to £28.3m and operating profit by 12% to £4.2m.

These results were driven by a strong performance in our Personal Injury business which was profitable and cash positive again following several years of investment into our own law firm National Accident Law (NAL). NAL now employs 147 people (2021: 129 people) and remains central to the Group's future success by enabling us to process claims ourselves and keep more of the profit from those claims. It is beginning to pay back on the investment we have made in it and for the first time we were able to fund the working capital cost of NAL from cash generated in the Personal Injury business itself.

Settlements and the resulting cash receipts in NAL increased in 2022 as claims, started in earlier years, matured. NAL collected £3.5m in cash from settlements made during the year, compared with £2.1m in 2021, representing a 67% increase.

NAL has not yet reached maturity, when the number of cases starting broadly equals the number of cases concluding in any year, and we continue to invest in it. During 2022, 8,760 new enquiries went into NAL which was an increase of 6% compared with 2021.

These new enquiries represent a future pipeline of value for NAL. By the end of 2022, NAL had increased the volume of ongoing claims by over 37% to 10,860. These claims have an estimated future cash value to NAL (before processing costs) of £11.2m, and an estimated future revenue of £8.2m. Putting more enquiries into NAL also has the effect of reducing future payments to our Joint Venture partners.

Most of the enquiries that did not go to NAL went to our panel firms who pay for them. This placement model enables us to manage our cash requirements flexibly as evidenced by our strong reduction in net debt during the period.

Overall, the Personal Injury business increased the number of enquiries it generated by around 9% to 34,905 despite the number of Personal Injury claims in the market remaining flat. This was achieved through our strong brand and effective marketing, and our return to television advertising in 2022 after an absence of over two years due to COVID-19. Our market share in non-RTA enquiries (the majority of our book) rose to 16.8%, its highest level since 2020, and although our share of RTA enquiries remained relatively flat at 1.3%, we saw an increasing proportion of higher value claims in that mix.

Our Residential Property business was impacted by the widely reported slowdown in the property market due to higher interest rates, but still contributed a small profit for the year.

Critical Care

Bush & Co (Bush) has continued to invest in its back office and technology. This investment cycle is coming to an end and these enhancements should see efficiency gains and margin improvements in the future as well as providing a more resilient platform for growth. Bush has also strengthened its marketing and business development offering.

Case management remains the largest revenue stream in Critical Care providing support to individuals who have suffered catastrophic personal injuries. The number of ongoing cases grew by 11% during 2022 and Bush increased the number of employed case managers to help drive margin improvement. Expert witness services also saw strong revenue growth in 2022 and now accounts for 36% of our total revenue compared to 32% in 2019.

Bush Care Solutions was created in 2021 to offer nurse-led care management services. This is an adjacent market to case management and enables us to offer a fully managed solution. Revenues grew by 24% in 2022 to £0.4m. Although still relatively small, Bush Care Solutions offers significant opportunity for further growth in this adjacent market.

Overall revenues in Bush grew by 6% to £13.1m and its operating profit by 4% to £3.4m.

Summary

I would like to thank all our employees for their continued commitment and hard work over the last year. Our people and our culture are essential to our future success. I would also like to congratulate Chris Higham who was appointed as a director of the Company and Group Chief Financial Officer (CFO) during the year, having previously been acting CFO since August 2021.

I believe we are making good progress across the Group with an increase in revenue and profit and a further reduction in debt. The Personal Injury business has returned to growth, is cash positive and winning more market share. NAL is beginning to pay back on the investment we have made and at the end of 2022 had nearly 11,000 cases underway that represent a strong pipeline of future value. Critical Care continues to grow revenues and profit and has invested to drive future margin improvement. Bush Care Solutions is not yet two years old but is already showing its potential, offering the opportunity for growth in an adjacent market.

The Group has created a platform for success and is on track to build a sustainable and profitable business in the medium term.

Tim Aspinall

Chair

CEO REPORT

2022 was an important year for NAHL and I'm proud to report on the progress that our team has delivered.

Overview

Despite the well-documented headwinds across the economy and specific challenges within our own markets, NAHL achieved its financial goals in 2022 and returned to growth. The Group increased revenues by 6% and operating profit by 14%, and we continued to invest for the future. We have strengthened our financial position, reducing our debt which ended the year at £13.3m. This was a priority given the challenging and unpredictable macro-economic environment in the UK.

Both our Consumer Legal Services and Critical Care divisions advanced their strategies in the year. Our Personal Injury business returned to profit and was cash generative in 2022 - an important milestone in our plans. We continue to grow market share in Personal Injury and our law firm, National Accident Law, is demonstrating signs of growing maturity. In our Critical Care division, we have developed our services in the year, added new specialisms and experienced encouraging early growth in our new care proposition, Bush Care Solutions.

Whilst these successes demonstrate good progress made in 2022, there is more to do and we must stay on track if we are to deliver on our ambitions and build a more sustainable and profitable business over the next few years. Our strategy for each of our divisions remains on track and unchanged and we will continue to invest for future growth.

Financial performance

Group revenue increased by 6% in the year to £41.4m (2021: £38.9m) following growth in both of our trading

divisions. Operating profit grew 14% during the year to £4.8m (2021: £4.2m) and was in line with recently upgraded market expectations. Our Consumer Legal Services division grew operating profit by 12% and our Critical Care division by 4%. As we started to realise the benefit of past investments in our Personal Injury business, the Group's operating profit margin increased by 0.8 ppts from 10.7% in 2021 to 11.5% during the period.

Profit before tax was £0.6m (2021: £0.2m), which was in line with recently upgraded market expectations, albeit from a low base. This was due to lower-than-expected profit attributable to non-controlling interests in LLPs but offset by an increase in borrowing costs due to the higher UK interest rates.

Pleasingly, the Group generated strong levels of cash flow throughout the year with free cash flow increasing from £0.8m in 2021 to £2.2m in the year. As a result, the Group has reduced net debt from £15.5m at 31 December 2021 to £13.3m at 31 December 2022, which was in line with recently upgraded market expectations.

The Board does not believe that it is appropriate to reinstate dividends at this time and the Directors have recommended that no final dividend payment be made in respect of 2022.

Consumer Legal Services

Financial performance

Our Consumer Legal Services division performed well during the year, delivering a 6% increase in revenues to £28.3m (2021: £26.6m) and operating profit increased by 12% to £4.2m (2021: £3.7m). This result was driven by a strong performance in our Personal Injury business, which grew its revenues by 14% to £24.0m (2021: £21.0m) and operating profit by 17% to £3.9m (2021: £3.4m).

Whilst not a statutory measure, it was particularly pleasing to see the Personal Injury business return a profit after deducting members' non-controlling interests in LLPs, which was £0.4m in 2022 compared to a loss of £0.1m in the prior year. I believe that this clearly demonstrates the sustainability of this business and the positive progress that the team have made over the past 18 months.

Market conditions

The UK personal injury market was subdued through the COVID-19 pandemic and this continued into 2022.

According to industry data from the Claims Recovery Unit of the Ministry of Justice (CRU) and the Official Injury Claim portal for small claims (OIC), the number of claims registered in 2022 for road traffic accidents (RTAs) was down 7% compared to the prior year at c. 371,000 claims, and down 43% compared to the last full year prior to the pandemic (2019). Our internal analysis estimates the claimant-side personal injury market to be worth £1.1bn in 2021/22 compared with an estimated value of £1.6bn in 2019/201.

This reduction contrasts with traffic volumes on the roads, which moved closer to pre-pandemic levels in 2022. Government estimates2 show motor vehicles travelled 318.6bn vehicle miles in Great Britain for the year ended March 2022, which was 30% more than that in the year ended March 2021, but still 6% lower than pre-pandemic levels (year ended December 2019). Whilst the equivalent data for the remainder of 2022 is yet to be released, it is likely that traffic levels had gone on to exceed pre-pandemic levels by the end of the year. For non-RTA claims, such as employers' liability, public liability, and occupiers' liability, claim volumes registered with the CRU in 2022 were broadly flat compared to that in 2021 at c.95,000 claims (-2%), which was 42% lower than 2019.

We believe that the cause of this trend of lower claim numbers is due to the following three factors, which have fundamentally reset the size of the market during the past 24 months:

1. Firstly, the COVID-19 pandemic resulted in significant behavioural changes amongst the UK population. This included changes to working practices and transport usage, including many more people choosing to work remotely or on a hybrid basis for part of the week. This has contributed to fewer accidents occurring during travel time, in workplaces, surrounding shops and urban areas.
2. Secondly, the implementation of the Civil Liability Act 2018 (Whiplash Reforms) significantly reduced compensation tariffs for most RTA claims worth £5,000 or less and eliminated cost awards for successful claims. Rather than encouraging victims to manage their own claims through the OIC portal, the overly complex and burdensome portal resulted in fewer than 10% of litigants pursuing a claim themselves and for those relying on a solicitor to support them, the legislation removed most of the value for the firm, resulting in many firms withdrawing from the market. We believe that the significant reduction in compensation combined with the difficulty of the process has resulted in a lower appetite from accident victims to make such a claim.
3. Thirdly, research that we commissioned in December indicated that at least £1.4bn3 of potential personal injury settlements were unclaimed in 2022 because of people's reluctance to make a claim. An independent organisation spoke to 2,500 members of the public, of which 500 people had suffered an accident in the last three years, and the results were very insightful:

While 11% of people had suffered a no-fault accident in the last three years, only 50% of these attempted to make a claim and only half of those went ahead. We found that a quarter of those who could have made a claim had 'no idea' they were entitled to compensation, while a similar number did not pursue a claim because they thought the process 'felt too complicated'. Other reasons for not claiming included the cost of making a claim, the stigma associated with claiming and worries about the process and any potential impact on their job.

We believe that this reluctance to make a claim and the lack of understanding surrounding the claim process is a result of a reduction in advertising by firms since the start of the pandemic.

Our analysis of these three factors leads us to conclude that whilst the size of the market is smaller now than before the pandemic, the opportunity remains very significant and there is a large latent demand that could be unlocked by a firm who can stimulate the market, educate customers on their rights and change the perception of claiming.

Strategic progress

Our strategy to succeed in the personal injury market is to grow the number of accident victims that we can support by leveraging the strength of the National Accident Helpline brand and processing an increasing number of those enquiries through our own consumer-focused law firm, National Accident Law. This will enable us to develop a sustainable, higher margin business. We will fund this through our agile and scalable placement model which is