Anexo Group (ANX ) says its final year results demonstrate “the resilience of its business model” in the year to 31 December 2021, as it reports revenues up by over a third from the prior year.
The integrated credit hire and legal services provider said the continued improvement in a number of key performance measures resulted in “a significant improvement” in financial performance in FY21, notwithstanding the continuing issues faced in 2021 from COVID-19.
Anexo reported strong growth over the period despite the challenges faced. It said trading across all of its divisions has been robust with its core business proving “extremely resilient.” As a result, revenues in FY21 increased by 36.2% to £118.2m, up from £86.8m in FY20.
Anexo’s adjusted profit before tax rose 49.7% to £24.m, up from £16.1m reported in FY20 and reflecting “the continued investment in staff, IT and associated infrastructure costs associated with the headcount increase,” compared to its previous investment of £6.5m in the prior year.
Cash collections (excluding settlements for its clients), a key metric for Anexo, rose from £98m in 2020 to £119m in 2021, a rise of 21.4%; it considers this a significant improvement, given the fact that many of the new recruits will not reach settlement maturity until 2022.
The Board also announced that it has proposed a final dividend of 1.0p per share, which if approved at the AGM which is being held on 16 June 2022, will be paid on 24 June 2022.
Commenting on the final results, Alan Sellers, Executive Chairman of Anexo Group said today’s set of results demonstrate the resilience of Anexo’s business model, as it improved on last year’s cash collections, whilst still facing uncertainty due to the COVID-19 pandemic.
The introduction of the Civil Liabilities Act in 2021 has benefitted the growth of Anexo’s Credit Hire division: the company said opportunities within the division “have never been so strong.” Revenues within the Credit Hire division grew by 38.2% to £71.3m, up from £51.6m in FY20.
As a result of this continued growth, Sellers said Anexo Group “has focused considerable resources here” and has also “seen the number of new cases funded rise substantially.”
Having deployed increasing working capital facilities and reinvested significant levels of cash collections into the new case portfolio, the number of new cases funded rose from 7,535 to 10,265 in the year to 31 December 2021 - that’s an increase of 36.2% on FY20, it reported.
Anexo also explained to investors that this investment has been supported by growth in cash collections, which rose by 21.5% in the financial year to reach a total of £119.0 million in 2021.
In particular, the company stated that its ability to fund growth within its core business has been supported by investment in legal staff and during 2021, the number of senior fee earners grew by 45% to reach 237 at the year end.
Anexo said this investment drove increased cash collections in the year despite the challenges of the reduced operation of the court system.
It said much of the investment will start to impact in 2022 and beyond, “reflecting the life cycle of a typical credit hire claim and the time a new starter takes to reach settlement maturity.”
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, a strategy which the group said has had “a significant positive impact” on the division’s financial performance.
Revenues within the company’s Legal Services division, which Anexo Group said strongly correlates to cash, increased by 33.2% to £46.9m, up from £35.2m in the previous year.
After signing a major agreement with MCE Insurance in November 2021 to offer post-accident claims services, Anexo Group said it generated over 500 claims by the end of the year alone.
It anticipates that the contract will generate an increasing level of credit hire opportunities for the company during 2022, adding to its growth opportunities within the core business, it said.
Meanwhile, the pursuit of the class action against Volkswagen AG (‘VW’) and its subsidiaries in the ongoing ‘VW Emissions Case’ continued throughout 2021. A court date for the case has been scheduled for January 2023, prior to which Anexo will seek to negotiate a settlement.
The Board said it believes that, in the event of a settlement, the percentage of potential damages and associated costs accruing to Anexo Group would have “a significant positive impact” on its expectations for profits and cash flow for the relevant accounting period.
Anexo added that a timeline for progress towards a potential settlement remains unclear and no assumptions as to revenue have been included in the Board’s internal forecasts for 2022.
“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.
He added: “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.”
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In the last year, it seems Anexo Group’s growth strategy has been supported by a sustained recovery in its core business amid the easing of the second national lockdown in March 2021.
In fact, the number of vehicles on the road within the company’s credit hire division, EDGE, reached ‘record numbers’ in the second half of 2021 (‘2H21’), peaking at around 2,500 in December 2021, while the number of vehicles on the road currently stands at 2,300.
This strong performance has been underpinned by a number of factors, including strong growth in the motorcycle courier market and the withdrawal of competitors due to Covid.
Importantly, the implementation of the Civil Liability Act in May 2021 as well as the deal with MCE previously announced on 25 November 2021 has also contributed to revenue growth.
Beyond this, continued growth has also permeated the company’s other divisions. Just last month, Anexo Group said its legal division, Bond Turner, was continuing to benefit from the re-opening of the court system, a trend that is expected to continue throughout the year.
Notably, the re-opening enabled litigators to increase case settlements and cash collection to support more investment in new cases, the specialist integrated credit hire and legal services provider told investors. Anexo said cash collections are therefore running “at record levels.”
Following the successful launch of the MCE insurance contract back in November 2021, the Company has also modified its approach to vehicle funding with its new strategy including a sustained continued focus on quality claims, high service standards and high success rates.
Anexo’s new Housing Disrepair team also continues to perform strongly; it is currently dealing with approximately 1,800 cases and since inception it has settled approximately 850 cases.
As a result, the Board believes the prospects for growth within this division are very positive and it expects the division to become “a significant contributor” to future company revenues.
In a morning research note, analysts at Arden Research reiterated Anexo as a ‘buy’ stock with a current target price of 280p. The stock’s performance to date, together with a favourable market backdrop, under-pins the broker’s FY22 forecasts, “with an upward bias to FY23.”
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