Anexo (ANX ) has achieved its milestone of reaching net cash generation during the year ended 31 December 2020 after a period of ‘continued growth.’
The Group, which operates as a specialist integrated credit hire and legal services provider, said both of its business divisions remained fully operational in 2020 and into 2021. As a result, it reported a 10.5% revenue increase from £78.5m in FY19 to £86.8m in FY20.
Following the Company’s continued improvement, despite the disruption caused by the pandemic throughout the year, Anexo has proposed a final dividend of 1p per share giving a total dividend for the year of 1.5p per share (2019: 1.5p).
Adjusted profit before tax fell 29.9% to £16.1m (2019: £23m), which the Company said falls in line with market expectations, reflecting expenditure of £6.5m on investment in staff, the VW case acquisition and IT costs associated with the headcount rise.
In particular, the Group stated that its emphasis in early 2020 was on cash generation. During 2019, cash absorption reduced from £7m in the first half of the year to £1.5m in the second half. This trend continued over the first half of 2020 and at the interim stage Anexo was able to report an overall net cash inflow of £2.4m, a significant milestone for the Group.
Notwithstanding the impact of the two national lockdowns and investment expenditure, Anexo achieved a net cash inflow for the year of £0.2m (FY19: net cash outflow: £0.8m).
Excluding the £2.9m expenditure in the VW Emissions case in FY20, the Group’s core business generated a net cash inflow from operations of £3.1m in FY20 (2019: £0.1m).
In particular, the Group’s Credit Hire division, EDGE, saw record performance in vehicle provision during the year. While the number of vehicles initially saw a sharp decline during the first national lockdown, a large number of EDGE customers are classed as key workers.
As a consequence, vehicle numbers were able to recover strongly as well as reach record levels prior to the UK’s announcement of the second national lockdown in October 2020.
The number of vehicles on hire at the end of 2020 rose 23.3% to 1,613 (2019: 1,308) and the average number of vehicles on hire over the financial year rose 4.2% to 1,515 (2019: 1,454).
As a result, revenues within the Credit Hire division grew by 7.5% to £51.6m (2019: £48m).
“We continue to focus on increasing cash settlements through the expansion of our Legal Services division while using our working capital to underpin growth in our Credit Hire division. Vehicle numbers were very robust, particularly in the second half of the year, despite the pandemic,” commented Alan Sellers, Executive Chairman of Anexo Group on the results.
Meanwhile, Anexo hailed the strength of its Legal Services division – revenues for the division which strongly converts to cash, increased by 15.2% to £35.2m (2019: £30.5m).
Anexo said the Group has continued to perform throughout ‘a period of significant uncertainly, improving vehicle numbers and cash collections to record levels during 2020, demonstrating the strength and resilience of the Group during the current COVID-19 crisis.’
The Company noted that whilst others have made redundancies, furloughed staff and withdrawn from the credit hire market during the year, it has continued recruitment.
While an increase in recruitment has impacted its reported financial performance in 2020, it said these investments were made to support continued growth into 2021 and beyond.
Anexo highlighted that the expansion of the national vaccination programme as well as the relaxation of national lockdown from April 2021 has resulted in an increase in opportunities and vehicles on the road, which is said is consistent with the trends seen in 2020.
Sellers added, “Ongoing investment into our advocacy practice is forming a solid foundation for our strategy of building this into a major contributor to future revenues.”
He said, “The Board remains confident of its capacity for organic growth. We believe that we have proved the resilience of our business in the difficult circumstances we continue to experience. Given our strong financial position we believe that Anexo is well positioned to continue its growth trajectory and deliver profitable growth to our shareholders.”
View from Vox
Anexo achieved its stated milestone of net cash generation throughout FY20, a notable achievement given the disruption experienced over the period as a result of COVID-19.
Both the Company’s business divisions have remained fully operational throughout the 2020 and into 2021 while the Group believes its ongoing investment into its advocacy practice is forming “a solid foundation” for the business to generate new future revenues.
Analysts at Arden have reminded investors Anexo trades on 9.3x 2021 P/E and 6.6x EBITDA, but also only 1.2x P/BV which analysts believe this is too low considering the value stored in the 20,000 case backlog and the investments made in legal services to drive settlements.
Anexo’s accelerated investment in staff, while maintaining market expectations at the adjusted PBT level, is expected to add significant confidence to expectations in FY21.
Reasons to ANX
Anexo is an integrated credit hire & legal services group that provides replacement vehicles and associated legal services to customers who have been involved in a non-fault accident.
In November 2020, the company told investors that the COVID-19 pandemic had led to a number of its competitors withdrawing from the market and, as a result, Anexo had been approached by a number of high-quality introducer garages looking for new partnerships.
The Group said it has leveraged this ‘unprecedented opportunity’ to expand its introducer network; resulting in the number of vehicles on the road during H2 2020 ‘consistently exceeding internal targets’. As at 10 November 2020, road vehicles stood at 1,902.
The company said it plans to work closely with the international Asset Management firm, DBAY, in order to continue the expansion of its Credit Hire and Legal Services divisions.
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